<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 1997
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------
MATTEL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-1567322 5092
(STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY STANDARD
JURISDICTION OF IDENTIFICATION NO.) INDUSTRIAL
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
333 CONTINENTAL BOULEVARD
EL SEGUNDO, CALIFORNIA 90245-5012
310-252-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
BARNETT ROSENBERG, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
333 CONTINENTAL BOULEVARD
EL SEGUNDO, CALIFORNIA 90245-5012
310-252-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
COPY TO:
<TABLE>
<S> <C> <C>
JOEL M. HANDEL, ESQ. R. MICHAEL KENNEDY, JR., ESQ. ANDREW R. BROWNSTEIN, ESQ.
BAER MARKS & UPHAM LLP TYCO TOYS, INC. WACHTELL, LIPTON, ROSEN & KATZ
805 THIRD AVENUE,20TH FLOOR 6000 MIDLANTIC DRIVE 51 WEST 52ND STREET
NEW YORK, NEW YORK 10022 MT. LAUREL, NEW JERSEY 08054 NEW YORK, NEW YORK 10019
(212) 702-5700 (609) 234-7400 (212) 403-1000
</TABLE>
--------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement and the effective time of the Merger, as defined and described in
the Agreement and Plan of Merger, dated as of November 17, 1996, by and among
Tyco Toys, Inc., Truck Acquisition Corp. and the Registrant, attached as Annex
A, and the amendment thereto dated as of November 22, 1996, attached as Annex
B, to the Proxy Statement-Prospectus forming a part of this registration
statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED AMOUNT
AMOUNT MAXIMUM MAXIMUM OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE(2) FEE(2)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $1.00 par
value (including the
preferred stock purchase
rights attached
thereto)(3).............. 19,198,818(4) (5) $424,781,694 $146,476
- -----------------------------------------------------------------------------------------
Series C Mandatorily
Convertible Redeemable
Preferred Stock, $1.00
par value (including the
related depositary
shares, each representing
1/25th interest
therein(6)............... 772,800 (5) $188,370,000 $ 64,955
- -----------------------------------------------------------------------------------------
Total................... $613,151,694 $211,431(7)
</TABLE>
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(1) This Registration Statement covers the maximum number of shares of (i)
common stock, par value $1.00 ("Mattel Common Stock"), of Mattel, Inc.
("Mattel") and (ii) Series C Mandatorily Convertible Redeemable Preferred
Stock, par value $1.00 ("Mattel Series C Preferred Stock"), of Mattel
(including the related depositary shares, each representing a 1/25th
interest therein) which are issuable, or to be reserved for issuance, in
the Merger described herein, including shares of Mattel Common Stock
issuable upon exercise of Tyco Toys, Inc. ("Tyco") employee stock options
or pursuant to Tyco employee benefit plans.
(2) Estimated solely for the purpose of calculation of the registration fee.
Pursuant to Rules 457(f)(1) and 457(c), the registration fee is based upon
the average of the high and low sales prices of the securities to be
cancelled in the Merger described herein (37,549,763 shares of common
stock, par value $.01, of Tyco ("Tyco Common Stock") and 19,320,000
Depositary Shares (each representing a 1/25th interest in Series C
Mandatorily Convertible Redeemable Preferred Stock, par value $.01, of
Tyco)) on the New York Stock Exchange Composite Transactions tape on
February 11, 1997 ($11.3125 and 9.75, respectively).
(3) One preferred stock purchase right attaches to and will be distributed
without charge with respect to each share of Mattel Common Stock
registered hereby.
(4) Represents the number of shares of Mattel Common Stock issuable in the
Merger described herein assuming all options to purchase Tyco Common Stock
are exercised prior to the consummation of the Merger and that all shares
of Tyco Common Stock contingently issuable prior to the consummation of
the Merger pursuant to Tyco employee benefit plans are issued prior to the
consummation of the Merger. In addition, an indeterminate number of shares
of Mattel Common Stock as may be issuable upon or in connection with the
conversion or redemption of Series B Voting Convertible Exchangeable
Preferred Stock, par value $1.00, of Mattel and Mattel Series C Preferred
Stock are being registered hereby.
(5) Not applicable.
(6) The Mattel Series C Preferred Stock will be represented by depositary
shares as evidenced by depositary receipts issued pursuant to a deposit
agreement with the depositary. The depositary receipts represent
fractional interests in shares of Mattel Series C Preferred Stock. Shares
of Mattel Series C Preferred Stock will be issued to the depositary under
the deposit agreement.
(7) $132,276 of the Registration Fee was previously paid in connection with
Tyco's Preliminary Proxy Statement filed with the Commission on Schedule
14A on December 10, 1996, and, pursuant to the Rule 457(b), is not
remitted herewith.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO
SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
[LOGO OF TYCO TOYS, INC. APPEARS HERE]
February 14, 1997
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Tyco Toys, Inc. ("Tyco") to be held at 10:00 a.m. on Tuesday, March 18, 1997,
at 200 Fifth Avenue, Room 350, New York, New York.
At the Special Meeting, you will be asked to approve and adopt an Agreement
and Plan of Merger, dated as of November 17, 1996, by and among Mattel, Inc.
("Mattel"), a wholly owned subsidiary of Mattel and Tyco (the "Merger"), as
amended as of November 22, 1996 (as so amended, the "Merger Agreement") to
provide for the merger of Tyco directly into Mattel. Following consummation of
the Merger, Tyco will cease to exist and the combined company will be named
Mattel, Inc. In the Merger, (i) each outstanding share of Tyco common stock
will be converted into the right to receive common stock of Mattel ("Mattel
Common Stock") (or cash in lieu of fractional shares otherwise deliverable in
respect thereof) having a value of $12.50, as determined pursuant to a formula
described more particularly in the accompanying Proxy Statement/Prospectus,
provided that, as more fully described in the accompanying Proxy
Statement/Prospectus, the number of shares to be issued is subject to a
"collar" mechanism such that no more than .51129 or less than .37791 of a
share of Mattel Common Stock will be issued for each share of Tyco Common
Stock; (ii) each outstanding share of Series B Voting Convertible Exchangeable
Preferred Stock of Tyco ("Tyco Series B Preferred Stock"), will be converted
into the right to receive one share of Series B Voting Convertible
Exchangeable Preferred Stock of Mattel with economic terms as nearly
equivalent as possible to, and with the same voting and other rights as
correspond to, Tyco Series B Preferred Stock; and (iii) each outstanding share
of Tyco Series C Mandatorily Convertible Redeemable Preferred Stock ("Tyco
Series C Preferred Stock") will be converted into the right to receive one
share of Series C Mandatorily Convertible Redeemable Preferred Stock of Mattel
("Mattel Series C Preferred Stock"), having substantially the same rights and
preferences as the Tyco Series C Preferred Stock (and the Mattel Series C
Preferred Stock will be traded as depositary shares with each depositary share
representing one twenty-fifth of a share of Mattel Series C Preferred Stock
(as is currently the case with the Tyco Series C Preferred Stock)). Because of
the "collar" mechanism, if the "Measurement Price" of Mattel Common Stock
pursuant to the formula described in the accompanying Proxy
Statement/Prospectus were less than $24.44796, the Exchange Ratio would be
.51129 (even if the value of the shares delivered pursuant to such ratio were
less than $12.50), and if the "Measurement Price" were greater than $33.07666,
the Exchange Ratio would be .37791 (even if the value of the shares delivered
pursuant to such ratio were greater than $12.50). Pursuant to the Merger
Agreement, changes in Mattel's stock price do not give rise to any
termination, walk-away, resolicitation or other rights for either Tyco or
Mattel. For more information on the collar and its consequences, see "The
Merger--Merger Consideration: Effects and Consequences of the Collar
Mechanism" in the accompanying Proxy Statement/Prospectus. The closing sales
price of a share of Mattel Common Stock on the NYSE Composite Tape on February
12, 1997 was $25.875. The average of the high and low sales prices for the ten
trading days up to and including February 12, 1997 was $26.99375. TYCO
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT PRICE QUOTATION FOR SHARES OF
MATTEL COMMON STOCK PRIOR TO CASTING THEIR VOTES IN CONNECTION WITH THE
SPECIAL MEETING. STOCKHOLDERS CAN OBTAIN A CURRENT QUOTATION FOR MATTEL COMMON
STOCK FREE OF CHARGE BY CALLING 1-800-624-4296 AT ANY TIME PRIOR TO THE
SPECIAL MEETING.
Approval of the Merger Agreement requires the affirmative vote of a majority
of the voting power of the outstanding shares of Tyco Common Stock, Tyco
Series B Preferred Stock and Tyco Series C Preferred Stock, voting together as
a class.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, TYCO AND ITS STOCKHOLDERS. YOUR BOARD HAS UNANIMOUSLY APPROVED
THE TERMS OF THE MERGER AND RECOMMENDS THAT YOU VOTE TO APPROVE AND ADOPT THE
MERGER AGREEMENT.
The accompanying Proxy Statement/Prospectus provides detailed information
concerning the proposed Merger and additional information, which we encourage
you to read carefully.
<PAGE>
BECAUSE OF THE SIGNIFICANCE OF THE PROPOSED MERGER TO TYCO, YOUR
PARTICIPATION IN THE SPECIAL MEETING, IN PERSON OR BY PROXY, IS ESPECIALLY
IMPORTANT. AN ABSTENTION OR FAILURE TO EITHER ATTEND AND VOTE AT THE SPECIAL
MEETING OR TO SUBMIT A PROXY WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
MERGER AGREEMENT. ACCORDINGLY, PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY
PROMPTLY IN THE POSTAGE-PAID ENVELOPE THAT HAS BEEN PROVIDED TO YOU FOR YOUR
CONVENIENCE. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
Sincerely yours,
Richard E. Grey,
Chairman
<PAGE>
TYCO TOYS, INC.
6000 MIDLANTIC DRIVE
MT. LAUREL, NJ 08054-1516
---------------------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 18, 1997
---------------------------------------------
To the Stockholders of Tyco Toys, Inc.:
A Special Meeting of Stockholders of Tyco Toys, Inc., a Delaware corporation
("Tyco"), will be held at 200 Fifth Avenue, Room 350, New York, New York, at
10:00 a.m. on Tuesday, March 18, 1997 for the purpose of approving and
adopting an Agreement and Plan of Merger, dated as of November 17, 1996, as
amended as of November 22, 1996 (as so amended, the "Merger Agreement"), among
Tyco, Mattel, Inc. ("Mattel") and Truck Acquisition, Corp. ("Sub"), a wholly
owned subsidiary of Mattel. A copy of the Merger Agreement is attached as an
Annex to the Proxy Statement/Prospectus accompanying this Notice. Pursuant to
the Merger Agreement (i) Tyco will be merged into Mattel (the "Merger") and
the separate corporate existence of Tyco will cease; (ii) each outstanding
share of Tyco Common Stock, $0.01 par value per share, will be converted into
the right to receive common stock of Mattel ("Mattel Common Stock") (or cash
in lieu of fractional shares otherwise deliverable in respect thereof) having
a value of $12.50, as determined pursuant to a formula described more
particularly in the enclosed proxy statement/prospectus, provided that no more
than .51129 or less than .37791 of a share of Mattel Common Stock will be
issued for each share of Tyco Common Stock; (iii) each outstanding share of
Series B Voting Convertible Exchangeable Preferred Stock of Tyco ("Tyco Series
B Preferred Stock"), will be converted into the right to receive one share of
Series B Voting Convertible Exchangeable Preferred Stock of Mattel with
economic terms as nearly equivalent as possible to, and with the same voting
and other rights as correspond to, Tyco Series B Preferred Stock; and (iv)
each outstanding share of Series C Mandatorily Convertible Redeemable
Preferred Stock of Tyco ("Tyco Series C Preferred Stock"), will be converted
into the right to receive one share of Series C Mandatorily Convertible
Redeemable Preferred Stock of Mattel ("Mattel Series C Preferred Stock")
having substantially the same rights and preferences as the Tyco Series C
Preferred Stock (and the Mattel Series C Preferred Stock will be traded as
depositary shares with each depositary share representing one twenty-fifth of
a share of Mattel Series C Preferred Stock (as is currently the case with the
Tyco Series C Preferred Stock)). One preference share purchase right will
attach to and be issued with each share of Mattel Common Stock issued in the
Merger or upon conversion of preferred stock.
The Board of Directors has fixed the close of business of February 7, 1997
as the record date for the determination of the holders of Tyco Common Stock,
Series B Preferred Stock and Series C Preferred Stock entitled to notice of,
and to vote at, the meeting. The affirmative vote of a majority of the voting
power of the outstanding shares of Tyco Common Stock, Tyco Series B Preferred
Stock and Tyco Series C Preferred Stock, voting together as a class, is
necessary for approval and adoption of the Merger Agreement. The Merger and
other related matters are more fully described in the accompanying Joint Proxy
Statement/Prospectus, and the annexes thereto, which form a part of this
notice.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. TO ENSURE YOUR
REPRESENTATION AT THE MEETING, HOWEVER, YOU ARE URGED TO COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A POSTAGE-PREPAID
ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER ATTENDING THE MEETING
MAY VOTE IN PERSON EVEN IF THAT STOCKHOLDER HAS RETURNED A PROXY.
By order of the Board of Directors
R. Michael Kennedy Jr.
Secretary
Mt. Laurel, New Jersey
Dated: February 14, 1997
PLEASE DO NOT SEND IN ANY CERTIFICATES
FOR YOUR SHARES AT THIS TIME
<PAGE>
MATTEL, INC. TYCO TOYS, INC.
PROSPECTUS PROXY STATEMENT
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being
furnished in connection with the solicitation of proxies by the Board of
Directors of Tyco Toys, Inc. ("Tyco") to be used at a Special Meeting of
Stockholders of Tyco to be held on March 18, 1997, and at any and all
adjournments or postponements thereof (the "Special Meeting"), and relates to
the proposed merger (the "Merger") of Tyco with and into Mattel, Inc., a
Delaware corporation ("Mattel"), pursuant to an Agreement and Plan of Merger,
dated as of November 17, 1996 (the "Initial Merger Agreement"), by and among
Mattel, Truck Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Mattel ("Sub"), and Tyco, as amended by an Amendment Agreement,
dated as of November 22, 1996 (the "Amendment Agreement"), by and among
Mattel, Sub and Tyco. The Initial Merger Agreement and the Amendment Agreement
together constitute the "Merger Agreement."
At the Special Meeting, holders of common stock, par value $0.01 per share,
of Tyco ("Tyco Common Stock"), Series B Voting Convertible Exchangeable
Preferred Stock, par value $.10 per share, of Tyco ("Tyco Series B Preferred
Stock") and Series C Mandatorily Convertible Redeemable Preferred Stock, par
value $.10 per share, of Tyco ("Tyco Series C Preferred Stock"), voting
together as a class, will consider and vote upon a proposal to approve and
adopt the Merger Agreement. The Depositary (as defined herein) will vote the
shares of Tyco Series C Preferred Stock in accordance with the instructions of
the holders of outstanding $0.4125 Depositary Shares of Tyco (each, a "Tyco
Series C Depositary Share"), each of which represents one twenty-fifth of a
share of Tyco Series C Preferred Stock, and each of which is entitled to one
vote per share. The Tyco Common Stock, Tyco Series B Preferred Stock and Tyco
Series C Preferred Stock are sometimes referred to herein as the "Tyco Capital
Stock."
In the Merger, (i) each outstanding share of Tyco Common Stock (other than
shares owned by Tyco as treasury stock or by its subsidiaries or by Mattel or
its subsidiaries, all of which shall be canceled) will be converted into the
right to receive a number of shares of common stock, par value $1.00 per share
("Mattel Common Stock"), of Mattel (together with the associated Mattel Rights
(as defined herein)) equal to the Exchange Ratio (as defined herein); (ii)
each outstanding share of Tyco Series B Preferred Stock will be converted into
the right to receive one share of Series B Preferred Stock, par value $1.00
per share, of Mattel ("Mattel Series B Preferred Stock") with economic terms
as nearly equivalent as possible to, and with the same voting and other rights
as correspond to Tyco Series B Preferred Stock; and (iii) each outstanding
share of Tyco Series C Preferred Stock will be converted into the right to
receive a share of Series C Mandatorily Convertible Redeemable Preferred
Stock, par value $1.00 per share, of Mattel ("Mattel Series C Preferred
Stock"), with substantially the same rights and preferences as correspond to
the Tyco Series C Preferred Stock as contemplated by Section III(E) of the
Certificate of Designations for the Tyco Series C Preferred Stock. The Tyco
Series C Preferred Stock is currently traded as Tyco Series C Depositary
Shares, each of which represents one twenty-fifth of a share of Tyco Series C
Preferred Stock. Following the Merger, Mattel Series C Preferred Stock will
also be traded as depositary shares with each depositary share (each, a
"Mattel Series C Depositary Share") representing one twenty-fifth of a share
of Mattel Series C Preferred Stock. Mattel Common Stock, Mattel Series B
Preferred Stock and Mattel Series C Preferred Stock are sometimes herein
referred to collectively as "Mattel Capital Stock." As described in greater
detail under "Summary--The Merger--Merger Consideration" and "The Merger
Agreement--Conversion of Tyco Capital Stock," the Exchange Ratio is based upon
the average of the high and low sales prices of Mattel Common Stock on each of
the ten trading days prior to the fifth trading day prior to closing (such
period, the "Measurement Period," and such price, the "Measurement Price"). As
long as the Measurement Price is between $24.44796 and $33.07666, holders of
Tyco Common Stock will receive shares of Mattel Common Stock having a value of
$12.50 for each share of Tyco Common Stock converted, as measured during the
Measurement Period; if, however, the Measurement Price is less than $24.44796,
the Exchange Ratio will be .51129 and the shares delivered pursuant to such
ratio will have a value less than $12.50 (as measured during the Measurement
Period), and if the Measurement Price is greater than $33.07666, the Exchange
Ratio will be .37791 and the shares delivered pursuant to such ratio will have
a value greater than $12.50 (as measured during the Measurement Period).
Pursuant to the Merger Agreement, changes in the price of Mattel Common Stock
do not give rise to any termination, walk-away, resolicitation or other rights
for either Tyco or Mattel (see "The Merger--Merger Consideration: Effects and
Consequences of the Collar Mechanism").
The closing sales price of a share of Mattel Common Stock on the NYSE
Composite Tape on February 12, 1997 was $25.875. The average of the high and
low sales prices for the ten trading days up to and including February 12,
1997 was $26.99375. TYCO STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT PRICE
QUOTATION FOR SHARES OF MATTEL COMMON STOCK PRIOR TO CASTING THEIR VOTES IN
CONNECTION WITH THE SPECIAL MEETING. STOCKHOLDERS CAN OBTAIN A CURRENT
QUOTATION FOR MATTEL COMMON STOCK FREE OF CHARGE BY CALLING 1-800-624-4296 AT
ANY TIME PRIOR TO THE SPECIAL MEETING.
This Proxy Statement/Prospectus also constitutes the Prospectus of Mattel
with respect to (i) up to 19,198,818 shares of Mattel Common Stock (including
the associated Mattel Rights) issuable in connection with the Merger, (ii) up
to 772,800 shares of Mattel Series C Preferred Stock to be issued in
connection with the Merger (along with up to 19,320,000 Mattel Series C
Depositary Shares each representing one twenty-fifth of a Mattel Series C
Preferred Stock), and (iii) an indeterminate number of shares of Mattel Common
Stock issuable upon conversion of Mattel Series B Preferred Stock and
<PAGE>
Mattel Series C Preferred Stock. Mattel Common Stock is traded on the New York
Stock Exchange, Inc. (the "NYSE") under the symbol "MAT" and the Mattel Series
C Depositary Shares will be traded on the NYSE under a symbol that has not yet
been designated.
All information contained in this Proxy Statement/Prospectus with respect to
Tyco has been provided by Tyco. All information contained in this Proxy
Statement/Prospectus with respect to Mattel and Sub has been provided by
Mattel.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to stockholders of Tyco on or about February 14, 1997. A
stockholder who has given a proxy may revoke it at any time prior to its
exercise. See "The Special Meeting--Record Date; Voting Rights; Proxies."
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is February 14, 1997.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESEN-
TATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES OFFERED BY THIS
PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION OF AN OFFER, OR PROXY SOLICITATION IN SUCH JURISDICTION.
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
THIS PROXY STATEMENT/PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATE-MENTS
WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF
MATTEL AND TYCO, INCLUDING STATEMENTS UNDER THE CAPTION "RECENT DEVELOPMENTS"
AND INCLUDING OTHER STATEMENTS RELATING TO THE COST SAVINGS, REVENUE
ENHANCEMENTS AND MARKETING AND OTHER ADVANTAGES THAT ARE EXPECTED TO BE
REALIZED FROM THE MERGER, AND THE EXPECTED IMPACT OF THE MERGER ON MATTEL'S
FINANCIAL PERFORMANCE (SEE "THE MERGER--RECOMMENDATION OF THE TYCO BOARD;
TYCO'S REASONS FOR THE MERGER", "--OPINION OF TYCO'S FINANCIAL ADVISOR" AND
"--MATTEL'S REASONS FOR THE MERGER"). SUCH FORWARD-LOOKING STATEMENTS INVOLVE
CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH
RISKS AND UNCERTAINTIES INCLUDE, WITHOUT LIMITATION: (1) EXPECTED COST SAVINGS
FROM THE MERGER CANNOT BE FULLY REALIZED; (2) COSTS OR DIFFICULTIES RELATED TO
THE INTEGRATION OF THE BUSINESSES OF MATTEL AND TYCO ARE GREATER THAN
EXPECTED; (3) MATTEL'S AND TYCO'S DEPENDENCE ON THE TIMELY DEVELOPMENT,
INTRODUCTION AND CUSTOMER ACCEPTANCE OF NEW PRODUCTS; (4) POSSIBLE WEAKNESS OF
INTERNATIONAL MARKETS; (5) THE IMPACT OF COMPETITION ON REVENUES AND MARGINS;
(6) THE EFFECT OF CURRENCY FLUCTUATIONS ON REPORTABLE INCOME; AND (7) OTHER
RISKS AND UNCERTAINTIES AS MAY BE DETAILED FROM TIME TO TIME IN MATTEL'S
AND/OR TYCO'S PUBLIC ANNOUNCEMENTS AND COMMISSION FILINGS.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
INDEX OF DEFINED TERMS..................................................... v
WHERE YOU CAN FIND MORE INFORMATION........................................ vii
SUMMARY.................................................................... 1
The Companies............................................................ 1
The Special Meeting...................................................... 1
Surrender of Stock Certificates.......................................... 2
Recommendation of the Tyco Board......................................... 3
The Merger............................................................... 3
Merger Consideration: Effects and Consequences of the Collar Mechanism... 5
The Stockholders Agreement............................................... 5
Opinion of Tyco's Financial Advisor...................................... 5
Interests of Certain Persons in the Merger............................... 6
Certain United States Federal Income Tax Consequences.................... 6
COMPARATIVE PER SHARE PRICES AND DIVIDENDS................................. 7
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA.................. 9
RECENT DEVELOPMENTS........................................................ 13
GENERAL INFORMATION........................................................ 14
THE SPECIAL MEETING........................................................ 14
Purpose of the Special Meeting........................................... 14
Record Date; Voting Rights; Proxies...................................... 14
Solicitation of Proxies.................................................. 15
Quorum................................................................... 15
Required Vote............................................................ 15
THE MERGER................................................................. 16
Background of the Merger................................................. 16
Recommendation of the Tyco Board; Tyco's Reasons for the Merger.......... 17
Mattel's Reasons for the Merger.......................................... 19
Opinion of Tyco's Financial Advisor...................................... 19
Merger Consideration: Effects and Consequences of the Collar Mechanism... 24
Interests of Certain Persons in the Merger............................... 25
Certain United States Federal Income Tax Consequences.................... 27
Accounting Treatment..................................................... 27
Effect on Employee Benefits Plans........................................ 28
Certain Legal Matters.................................................... 30
Resales of Mattel Capital Stock Received in the Merger................... 30
Stock Exchange Listing................................................... 31
Dividend................................................................. 31
Appraisal Rights......................................................... 32
Supplement to Tyco Rights Agreement...................................... 32
THE MERGER AGREEMENT....................................................... 32
General.................................................................. 32
The Merger............................................................... 32
Effective Date........................................................... 32
Conversion of Tyco Capital Stock......................................... 32
Fractional Shares........................................................ 33
Surrender and Payment.................................................... 33
Conditions to Consummation of the Merger................................. 34
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Representations and Warranties.......................................... 36
Conduct of Business Pending the Merger.................................. 36
Covenants............................................................... 37
Effect on Tyco Stock Options, Restricted Stock and Employee Benefit
Plans.................................................................. 39
No Solicitation......................................................... 40
Indemnification......................................................... 40
Termination; Fees and Expenses.......................................... 40
Amendment; Waiver....................................................... 42
THE STOCKHOLDERS AGREEMENT................................................ 43
SPECIAL CONSIDERATIONS.................................................... 43
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS............... 45
CAPITALIZATION OF MATTEL AND TYCO......................................... 54
DESCRIPTION OF CAPITAL STOCK OF MATTEL.................................... 55
General................................................................. 55
Common Stock............................................................ 55
Preferred and Preference Stock.......................................... 55
Mattel Series B Voting Convertible Exchangeable Preferred Stock......... 55
Mattel Series C Mandatorily Convertible Redeemable Preferred Stock...... 56
Mattel Series C Depositary Shares....................................... 63
COMPARISON OF STOCKHOLDER RIGHTS.......................................... 67
Classification of Board of Directors; Cumulative Voting................. 67
Stockholder Vote Required for Certain Transactions...................... 67
Special Meetings of Stockholders; Stockholder Action by Written Con-
sent................................................................... 68
Notice of Stockholder Nominations of Directors.......................... 69
Stockholder Proposal Procedures......................................... 69
Rights Plans............................................................ 70
TRADEMARK MATTERS......................................................... 70
OTHER MATTERS............................................................. 70
LEGAL MATTERS............................................................. 70
EXPERTS................................................................... 71
STOCKHOLDER PROPOSALS..................................................... 71
</TABLE>
ANNEX A--Initial Merger Agreement
ANNEX B--Amendment Agreement
ANNEX C--Opinions of Allen & Company Incorporated
iv
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Acquisition Proposal................................................... 40
Affiliate.............................................................. 30
Allen & Company........................................................ 5
Amendment Agreement.................................................... i
Antitrust Division..................................................... 30
Antitrust Laws......................................................... 38
APB Opinion No. 16..................................................... 4
Bonus Plan............................................................. 26
Call Price............................................................. 58
Certificates........................................................... 33
Certificates of Designations........................................... 55
CIDs................................................................... 30
Code................................................................... 6
Commission............................................................. vii
Consents............................................................... 35
Continuing Directors................................................... 67
Corporate Partners..................................................... 18
Current Market Price................................................... 59
Deadlines.............................................................. 24
Deferred Compensation Plan............................................. 29
Deloitte & Touche...................................................... 4
Deposit Agreement...................................................... 63
Depositary............................................................. 63
Depositary Receipts.................................................... 63
DGCL................................................................... 4
Directors Plan......................................................... 29
Disney................................................................. 43
EBIT................................................................... 22
EBITDA................................................................. 22
Effective Date......................................................... 2
Engagement Letter...................................................... 23
Enterprise Value....................................................... 21
EPS.................................................................... 23
Equity Value........................................................... 21
Excess Mattel Shares................................................... 33
Exchange Act........................................................... 31
Exchange Agent......................................................... 2
Exchange Collar........................................................ 21
Exchange Ratio......................................................... 3
Excise Tax Payment..................................................... 26
First Call Date........................................................ 58
Fisher-Price........................................................... 11
FTC.................................................................... 30
GAAP................................................................... 4
HSR Act................................................................ 30
I&P Agreement.......................................................... 43
Initial Merger Agreement............................................... i
Interested Stockholder................................................. 67
Junior Stock........................................................... 57
</TABLE>
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
LTM.................................................................... 22
Mandatory Conversion Date.............................................. 56
Mandatory Conversion Rate.............................................. 58
Material Adverse Effect................................................ 35
Mattel................................................................. i
Mattel Board........................................................... 19
Mattel Breakup Fee..................................................... 41
Mattel Bylaws.......................................................... 32
Mattel Capital Stock................................................... i
Mattel Charter......................................................... 32
Mattel Common Stock.................................................... i
Mattel Governing Documents............................................. 67
Mattel Right........................................................... 3
Mattel Rights Agreement................................................ 3
Mattel Series B Preferred Stock........................................ i
Mattel Series C Depositary Share....................................... i
Mattel Series C Preferred Stock........................................ i
Mattel Series E Preference Shares...................................... 55
Measurement Period..................................................... i
Measurement Price...................................................... i
Merger................................................................. i
Merger Agreement....................................................... i
Notice Date............................................................ 59
NYSE................................................................... i
Option Plan............................................................ 28
Optional Rate.......................................................... 58
Other Tax.............................................................. 26
Parity Preferred Stock................................................. 57
Per Share Value........................................................ 21
Permitted Cash Dividends............................................... 60
Price Waterhouse....................................................... 4
Proxy Statement/Prospectus............................................. i
Record Date............................................................ 2
Registration Statement................................................. vii
Retention Plan......................................................... 26
Rule 144............................................................... 30
Rule 145............................................................... 30
Second Request......................................................... 30
Securities Act......................................................... 30
Series C Directors..................................................... 62
Significant Transaction................................................ 67
Special Meeting........................................................ i
Stockholders........................................................... 43
Stockholders Agreement................................................. 5
Sub.................................................................... i
Theme Parks Agreements................................................. 43
Transaction............................................................ 61
Tyco................................................................... i
Tyco Breakup Fee....................................................... 41
</TABLE>
v
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Tyco Board............................................................. 3
Tyco Bylaws............................................................ 14
Tyco Capital Stock..................................................... i
Tyco Charter........................................................... 26
Tyco Common Stock...................................................... i
Tyco Governing Documents............................................... 67
Tyco Holder............................................................ 2
Tyco Restricted Stock Unit............................................. 28
Tyco Right............................................................. 70
Tyco Rights Agreement.................................................. 32
Tyco Series B Preferred Stock.......................................... i
Tyco Series C Depositary Share......................................... i
Tyco Series C Preferred Stock.......................................... i
Tyco Stock Options..................................................... 28
Unit Plan.............................................................. 26
</TABLE>
vi
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Mattel and Tyco file annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"). You may read and copy any reports, statements or other
information we file at the Commission's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. Our
Commission filings are also available to the public from commercial document
retrieval services and at the web site maintained by the Commission at
"http://www.sec.gov." In addition, Mattel's and Tyco's filings can be inspected
at the offices of the NYSE, 20 Broad Street, New York, New York 10005, and
Mattel's filings can be inspected at the Pacific Stock Exchange Incorporated,
301 Pine Street, Eighth Floor, San Francisco, California 94104.
Mattel filed a Registration Statement on Form S-4 (the "Registration
Statement") to register with the Commission the Mattel Common Stock and Mattel
Series C Preferred Stock to be issued to Tyco stockholders in the Merger. This
Proxy Statement/Prospectus is a part of that Registration Statement and
constitutes a prospectus of Mattel in addition to being a proxy statement of
Tyco for the Special Meeting. As allowed by Commission rules, this Proxy
Statement/Prospectus does not contain all the information contained in the
Registration Statement or in the exhibits to the Registration Statement.
The Commission allows us to "incorporate by reference" information into this
Proxy Statement/Prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the Commission. The information incorporated by reference is deemed to be part
of this Proxy Statement/Prospectus, except for any information superseded by
information in this Proxy Statement/Prospectus. This Proxy Statement/Prospectus
incorporates by reference the documents set forth below that we have previously
filed with the Commission. These documents contain important information about
our companies and their finances.
MATTEL'S FILINGS WITH THE COMMISSION (FILE NO. 1-05647):
1. Annual Report on Form 10-K for the year ended December 31, 1995;
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996,
June 30, 1996 and September 30, 1996;
3. Current Reports on Form 8-K dated January 24, 1996, January 26, 1996,
February 1, 1996, February 2, 1996, February 7, 1996, April 3, 1996,
April 11, 1996, April 12, 1996, April 16, 1996, July 2, 1996, July 17,
1996, July 18, 1996, July 22, 1996, August 8, 1996, August 22, 1996,
October 15, 1996, November 17, 1996 and November 22, 1996;
4. The description of Mattel's common stock contained in Mattel's Current
Report on Form 8-K dated July 22, 1996;
5. The description of Mattel's Preference Share Purchase Rights contained
in Mattel's Registration Statement on Form 8-A filed with the Commission
on February 13, 1992, as amended by Amendment No. 1 to the Form 8-A filed
with the Commission on March 9, 1992;
TYCO'S FILINGS WITH THE COMMISSION (FILE NO. 1-09357, UNLESS OTHERWISE NOTED):
1. Registration Statement on Form S-3 (File No. 333-3301) filed with the
Commission on May 8, 1996.
2. Annual Report on Form 10-K for the year ended December 31, 1995, as
amended;
vii
<PAGE>
3. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996,
June 30, 1996 (as amended) and September 30, 1996;
4. Current Reports on Form 8-K dated April 4, 1996 and November 22, 1996;
and
5. The description of Tyco's Preferred Stock Purchase Rights contained in
Amendment No. 1 and Amendment No. 2 to Tyco's Registration Statement on
Form S-1 (File No. 33-24222) filed with the Commission on November 17,
1988 and November 30, 1988, respectively.
We are also incorporating by reference additional documents that we file
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended, with the Commission between the date of this Proxy
Statement/Prospectus and the Effective Date, in the case of Mattel, and the
Special Meeting, in the case of Tyco.
Mattel has supplied all information contained or incorporated by reference in
this Proxy Statement/Prospectus relating to Mattel and Sub, and Tyco has
supplied all such information relating to Tyco.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the
Commission. Documents incorporated by reference are available from us without
charge, excluding all exhibits unless we have specifically incorporated by
reference an exhibit in this Proxy Statement/Prospectus. Stockholders may
obtain documents incorporated by reference in this Proxy Statement/Prospectus
by requesting them in writing or by telephone from the appropriate party at the
following address:
Mattel, Inc. Tyco Toys, Inc.
333 Continental Boulevard 6000 Midlantic Drive
El Segundo, California Mt. Laurel, New Jersey
90245-5012 08054-1516
Tel: 310-252-2000 Tel: 609-840-1384
If you would like to request documents from us, please do so by March 4, 1997
to receive them before the Special Meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT
IS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY
STATEMENT/PROSPECTUS IS DATED FEBRUARY 14, 1997.
viii
<PAGE>
SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Proxy Statement/Prospectus and the Annexes hereto. This summary does
not contain a complete statement of all material information relating to the
Merger Agreement and the Merger and is subject to, and is qualified in its
entirety by, the more detailed information and financial statements contained
or incorporated by reference in this Proxy Statement/Prospectus. Stockholders
of Tyco should read carefully this Proxy Statement/Prospectus in its entirety.
Certain capitalized terms used in this summary are defined elsewhere in this
Proxy Statement/Prospectus. See "Index of Defined Terms."
THE COMPANIES
Tyco. Tyco is engaged in the design, development, manufacture and
distribution of a broad range of toy products worldwide. Tyco markets more than
800 products to over 7,000 customers in approximately 80 countries. Measured in
terms of 1995 worldwide net sales, Tyco is the third largest toy manufacturer
in the United States. Tyco, together with its predecessors, has conducted
business in the toy industry for more than 60 years and markets a wide variety
of well-known branded products.
Tyco's core product lines consist of toys that generally have demonstrated a
product life cycle of greater than three years and, in many cases, toys that
have sold for much longer. Core categories and product lines include Matchbox
toys and playsets; View-Master 3-D viewers, reels and projectors; Magna Doodle
drawing toys and accessories; Tyco radio control vehicles and electric racing
sets and accessories; Tyco Classic Game; activity and board games; Children's
Television Workshop-licensed Sesame Street and other infant and preschool toys;
Tyco large dolls; miniature diecast kitchen toys designed for dolls; and an
electronic Tyco VideoCam product.
Tyco was incorporated in Delaware in 1985.
As used herein, the term "Tyco" refers to Tyco Toys, Inc. and its
subsidiaries, unless the context otherwise requires. The principal executive
offices of Tyco are located at 6000 Midlantic Drive, Mt. Laurel, NJ 08054-1516
and the telephone number at that address is (609) 234-7400.
Mattel. Mattel is a leading worldwide designer, manufacturer and marketer of
toys. Mattel's four core brands are Barbie fashion dolls and doll clothing and
accessories; Fisher-Price toys and juvenile products, including the Power
Wheels line of battery-powered, ride-on vehicles; Mattel's Disney-licensed
toys; and die cast Hot Wheels vehicles and playsets. Additional product lines
consist of large dolls, including Mattel's Cabbage Patch Kids dolls and
accessories, licensed by Original Appalachian Artworks; preschool toys,
including See 'N Say talking toys; the Uno and Skip-Bo card games; and the
Scrabble game, which Mattel owns in markets outside of the United States and
Canada.
Mattel was incorporated in California in 1948 and reincorporated in Delaware
in 1968.
As used herein, the term "Mattel" refers to Mattel, Inc. and its
subsidiaries, unless the context otherwise requires. The principal executive
offices of Mattel are located at 333 Continental Boulevard, El Segundo,
California 90245-5012 and the telephone number at that address is (310) 252-
2000.
THE SPECIAL MEETING
Time, Place and Date
The Special Meeting of the stockholders of Tyco will be held at 200 Fifth
Avenue, Room 350, New York, New York on Tuesday, March 18, 1997, at 10:00 a.m.,
New York time.
1
<PAGE>
Purpose of the Special Meeting
At the Special Meeting, holders of Tyco Common Stock, Tyco Series B Preferred
Stock and Tyco Series C Depositary Shares, voting together as a class, will
consider and vote upon a proposal to approve and adopt the Merger Agreement,
providing for the Merger of Tyco into Mattel.
Votes Required; Record Date
Approval of the Merger Agreement requires the affirmative vote of a majority
of the voting power of the outstanding shares of Tyco Common Stock, Tyco Series
B Preferred Stock and Tyco Series C Preferred Stock, voting together as a
class.
Holders of Tyco Common Stock are each entitled to one vote per share, holders
of Tyco Series B Preferred Stock are entitled to 105 votes per share, and
holders of the Tyco Series C Preferred Stock are entitled to 25 votes per
share. The Depositary, as the holder of the shares of Tyco Series C Preferred
Stock represented by the Tyco Series C Depositary Shares, will vote the shares
of Tyco Series C Preferred Stock in accordance with the instructions of the
holders of the Tyco Series C Depositary Shares, each of which is entitled to
one vote per depositary share. Only holders of Tyco Common Stock, Tyco Series B
Preferred Stock and Tyco Series C Preferred Stock who are holders at the close
of business on February 7, 1997 (the "Record Date") will be entitled to notice
of and to vote at the Special Meeting. Only holders of Tyco Series C Depositary
Shares who are holders on the Record Date will be entitled to notice of and to
attend the Special Meeting and to instruct the Depositary as to the voting of
the shares of Tyco Series C Preferred Stock represented by such holder's Tyco
Series C Depositary Shares. See "The Special Meeting." As of the Record Date,
directors and executive officers of Tyco and their affiliates were beneficial
owners of approximately 9.7% of the outstanding shares of Tyco Common Stock,
Tyco Series B Preferred Stock and Tyco Series C Preferred Stock.
As of the Record Date, a total of 59,800,308 votes were eligible to be cast
at the Special Meeting, in respect of the outstanding shares of Tyco Common
Stock, Tyco Series B Preferred Stock and Tyco Series C Preferred Stock, 58.3%
of which were entitled to be cast by holders of Tyco Common Stock, 9.4% of
which were entitled to be cast by holders of Tyco Series B Common Stock and
32.4% of which were entitled to be cast by the holders of Tyco Series C
Preferred Stock.
Pursuant to the Stockholders Agreement (as defined herein), the holders of
all outstanding shares of Tyco Series B Preferred Stock have agreed to vote
their shares in favor of the Merger Agreement. See "--The Stockholders
Agreement" and "The Stockholders Agreement."
SURRENDER OF STOCK CERTIFICATES
As soon as practicable after the effective date of the Merger (the "Effective
Date"), The First National Bank of Boston, or another person designated by
Mattel and reasonably acceptable to Tyco, in its capacity as exchange agent for
the Merger (the "Exchange Agent"), will send a transmittal letter to each
holder of Tyco Capital Stock, Tyco Stock Options (as defined herein) or Tyco
Restricted Stock Units (as defined herein) (each, a "Tyco Holder"). The
transmittal letter will contain instructions with respect to the surrender of
Certificates (as defined herein) representing Tyco Capital Stock, Tyco Stock
Options or Tyco Restricted Stock Units to be exchanged for Mattel Common Stock,
Mattel Series B Preferred Stock or Mattel Series C Preferred Stock, as the case
may be. In connection with the Merger, Mattel will deposit with the Depositary
shares of Mattel Series C Preferred Stock in exchange for the shares of Tyco
Series C Preferred Stock then on deposit with the Depositary, and thereafter
each Tyco Series C Depositary Share shall represent an interest in one twenty-
fifth of a share of Mattel Series C Preferred Stock. In addition, Mattel will
succeed Tyco as a party to the Deposit Agreement (as defined herein), and
depositary receipts representing Tyco Series C Depositary Shares will be
exchanged for depositary receipts representing Mattel Series C Depositary
Shares. See "The Merger Agreement--Surrender and Payment."
2
<PAGE>
TYCO HOLDERS SHOULD NOT FORWARD CERTIFICATES FOR TYCO CAPITAL STOCK, TYCO
STOCK OPTIONS OR TYCO RESTRICTED STOCK UNITS TO THE EXCHANGE AGENT UNTIL THEY
HAVE RECEIVED TRANSMITTAL LETTERS. TYCO HOLDERS SHOULD NOT RETURN CERTIFICATES
WITH THE ENCLOSED PROXY.
RECOMMENDATION OF THE TYCO BOARD
The Board of Directors of Tyco (the "Tyco Board") believes that the Merger is
advisable and fair and in the best interests of Tyco stockholders and has
unanimously approved the Merger Agreement and the related transactions. THE
TYCO BOARD UNANIMOUSLY RECOMMENDS THAT TYCO STOCKHOLDERS APPROVE AND ADOPT THE
MERGER AGREEMENT. See "The Merger--Background of the Merger," "--Recommendation
of the Tyco Board; Tyco's Reasons for the Merger," "--Mattel's Reasons for the
Merger" and "--Interests of Certain Persons in the Merger."
THE MERGER
The Merger
At the Effective Date, Tyco will be merged with and into Mattel, with Mattel
continuing as the surviving corporation in the Merger. As a result of the
Merger, the separate corporate existence of Tyco will cease.
Merger Consideration
As a result of the Merger, (i) each outstanding share of Tyco Common Stock
will be converted into the right to receive a number of shares of Mattel Common
Stock equal to the Exchange Ratio (as defined herein); (ii) each outstanding
share of Tyco Series B Preferred Stock will be converted into the right to
receive one share of Mattel Series B Preferred Stock; and (iii) each
outstanding share of Tyco Series C Preferred Stock will be converted into the
right to receive one share of Mattel Series C Preferred Stock (and the Mattel
Series C Preferred Stock will be traded as depositary shares with each
depositary share representing one twenty-fifth of a share of Mattel Series C
Preferred Stock (as is currently the case with the Tyco Series C Preferred
Stock)). The "Exchange Ratio" is the number (rounded to the nearest 1/100,000)
obtained by dividing (i) $12.50 by (ii) the Measurement Price (the average of
the high and low sales prices of Mattel Common Stock as reported on the NYSE
Composite Tape on each of the ten consecutive trading days immediately
preceding the fifth trading date prior to the Effective Date), provided that if
the Measurement Price is below $24.44796, the Exchange Ratio will be fixed at
.51129, and if the Measurement Price is above $33.07666, the Exchange Ratio
will be fixed at .37791. One nonvoting preference share purchase right issuable
pursuant to the Rights Agreement, dated as of February 7, 1992 (the "Mattel
Rights Agreement"), between Mattel and The First National Bank of Boston or any
other purchase right issued in substitution thereof (each a "Mattel Right")
will be issued together with and will attach to each share of Mattel Common
Stock issued in the Merger or upon conversion of Mattel Series B or Mattel
Series C Preferred Stock. See "The Merger Agreement--Conversion of Tyco Capital
Stock."
Treatment of Tyco Stock Options and Restricted Stock
As a result of the Merger, (i) each Tyco Stock Option will be converted into
and become the right to receive a number of shares of Mattel Common Stock equal
in value to the fair value of such Tyco Stock Option as of the Effective Date,
as mutually agreed upon between Mattel and Tyco, and (ii) each Tyco Restricted
Stock Unit vested as of the Effective Date will be converted into and become
the right to receive a number of shares of Mattel Common Stock equal to the
Exchange Ratio, and each Tyco Restricted Stock Unit which has not vested as of
the Effective Date will be converted into and become the right to receive a
number of shares of Mattel Common Stock equal the product of (A) .3272 and (B)
the Exchange Ratio, which Mattel and Tyco have determined to be the fair value
of each such unit. As of the Record Date, there were 1,685,975 Tyco Stock
Options outstanding, of which 480,109 were unvested, and there were 918,699
Tyco Restricted Stock Units outstanding, all of which were unvested. See "The
Merger--Effect on Employee Benefits Plans," "The Merger Agreement--Conversion
of Tyco Capital Stock" and "--Effect on Tyco Stock Options, Restricted Stock
and Employee Benefit Plans."
3
<PAGE>
Conditions to the Merger; Termination
The obligations of Mattel and Tyco to consummate the Merger are subject to
various conditions, including, but not limited to: (i) obtaining requisite
stockholder and governmental approvals; (ii) receipt of opinions of counsel at
the closing of the Merger in respect of certain federal income tax consequences
of the Merger; and (iii) receipt of accountants' letters relating to the
availability of pooling of interests accounting treatment (see "--Anticipated
Accounting Treatment"). See "The Merger Agreement--Conditions to Consummation
of the Merger."
The Merger Agreement may be terminated at any time prior to the Effective
Date, whether before or after approval of the matters presented in connection
with the Merger by the stockholders of Tyco, under certain circumstances,
including: (i) by either Mattel or Tyco if the Merger shall not have been
consummated on or before August 17, 1997 (unless such date is extended, at
Mattel's election under certain circumstances, to November 17, 1997); (ii) by
Mattel if (a) the Tyco Board shall have withdrawn, modified in a manner adverse
to Mattel, or refrained from making its favorable recommendation concerning the
Merger, or shall have disclosed its intention to change such recommendation, or
(b) Tyco shall have entered into an agreement with a third party (other than a
customary confidentiality agreement) with respect to an Acquisition Proposal
(as defined herein); or (iii) by Tyco under certain circumstances if Tyco shall
have entered into an agreement with respect to an Acquisition Proposal,
provided that, prior to such termination, Tyco shall have paid to Mattel the
Tyco Breakup Fee (as defined herein). See "The Merger Agreement--Termination;
Fees and Expenses."
Listing
It is a condition to the Merger that the shares of Mattel Common Stock and
Mattel Series C Depositary Shares to be issued in the Merger be authorized for
listing on the NYSE, subject to official notice of issuance.
Appraisal Rights
Under the General Corporation Law of the State of Delaware (the "DGCL"), the
holders of Tyco Common Stock, Tyco Series B Preferred Stock and Tyco Series C
Preferred Stock are not entitled to any appraisal rights with respect to the
Merger. See "The Merger--Appraisal Rights."
Anticipated Accounting Treatment
The Merger is expected to qualify as a pooling of interests for accounting
and financial reporting purposes. Prior to the execution of the Initial Merger
Agreement and subsequent to the execution of the Amendment Agreement, Mattel
received reports from Price Waterhouse LLP ("Price Waterhouse"), its
independent accountant, to the effect that, assuming the Merger is consummated
in the manner contemplated by the Merger Agreement, the Merger would properly
be accounted for as a pooling of interests in conformity with generally
accepted accounting principles ("GAAP"). Prior to the execution of the Initial
Merger Agreement, Tyco received an opinion from Deloitte & Touche LLP
("Deloitte & Touche"), its independent auditors, which addressed the ability of
Tyco to enter into a transaction to be accounted for as a pooling of interests
in accordance with GAAP. Deloitte & Touche's opinion was limited to specific
criteria of Accounting Principles Board Opinion No. 16 Business Combinations
("APB Opinion No. 16") that relate to actions of Tyco up to the date of the
related opinion. Such opinion concluded that with regard to the specific
criteria considered and related solely to prior actions of Tyco, such actions
would not preclude Tyco from entering into a transaction accounted for as a
pooling of interests in accordance with GAAP. It is a condition to the
obligation of each of Mattel and Tyco to consummate the Merger that Mattel and
Tyco receive a report from Price Waterhouse and Deloitte & Touche,
respectively, confirming the assertions contained in the respective reports of
Price Waterhouse and Deloitte & Touche described above. See "The Merger--
Accounting Treatment."
4
<PAGE>
MERGER CONSIDERATION: EFFECTS AND CONSEQUENCES OF THE COLLAR MECHANISM
As described under "The Merger Agreement -- Conversion of Tyco Capital
Stock," each share of Tyco Common Stock will be converted into the right to
receive a number of shares of Mattel Common Stock equal to $12.50 divided by
the Measurement Price (the average of the high and low sales prices of Mattel
Common Stock during the Measurement Period), except that (1) if the Measurement
Price is below $24.44796, holders of Tyco Common Stock will receive .51129 of a
share of Mattel Common Stock for each share of Tyco Common Stock converted, an
amount which would have a market value less than $12.50 (as measured during the
Measurement Period), and (2) if the Measurement Price is above $33.07666,
holders of Tyco Common Stock will receive .37791 of a share of Mattel Common
Stock for each share of Tyco Common Stock converted, an amount which would have
a market value greater than $12.50 (as measured during the Measurement Period).
The pricing mechanism described above, in which the exchange ratio becomes
fixed if the Measurement Price rises above or falls below a range of prices is
referred to as a "collar." Mattel and Tyco believe that a collar mechanism is
not an uncommon feature of transactions like the Merger. Mattel and Tyco agreed
to include a collar for the exchange ratio because each believed a collar would
provide valuable protection for its respective stockholders in the event of a
significant increase (in the case of Tyco stockholders) or significant decrease
(in the case of Mattel stockholders) in the price of Mattel Common Stock prior
to closing. PURSUANT TO THE MERGER AGREEMENT, CHANGES IN MATTEL'S STOCK PRICE
DO NOT GIVE RISE TO ANY TERMINATION, WALK-AWAY, RESOLICITATION OR OTHER RIGHTS
FOR EITHER TYCO OR MATTEL. See "The Merger Agreement--Termination; Fees and
Expenses." The closing sales price of a share of Mattel Common Stock on the
NYSE Composite Tape on February 12, 1997 was $25.875. The average of the high
and low sales prices for the ten trading days up to and including February 12,
1997 was $26.99375. See "Comparative Per Share Prices and Dividends."
TYCO STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT PRICE QUOTATION FOR SHARES OF
MATTEL COMMON STOCK PRIOR TO CASTING THEIR VOTES IN CONNECTION WITH THE SPECIAL
MEETING. STOCKHOLDERS CAN OBTAIN A CURRENT QUOTATION FOR MATTEL COMMON STOCK
FREE OF CHARGE BY CALLING 1-800-624-4296 AT ANY TIME PRIOR TO THE SPECIAL
MEETING.
Both Tyco and Mattel negotiated the Exchange Ratio determination mechanism
and the collar and approved the Merger with the understanding that the
Measurement Price could be above or below the collar range. See "The Merger--
Background of the Merger." FOR FURTHER DISCUSSION REGARDING THE EFFECTS AND
CONSEQUENCES OF THE COLLAR, INCLUDING WITH RESPECT TO CERTAIN FIDUCIARY
OBLIGATIONS OF THE TYCO BOARD, SEE "THE MERGER-- MERGER CONSIDERATION: EFFECTS
AND CONSEQUENCES OF THE COLLAR MECHANISM."
THE STOCKHOLDERS AGREEMENT
In connection and concurrently with its entering into of the Initial Merger
Agreement, Mattel entered into an agreement, dated as of November 17, 1996,
with the holders of all of the outstanding shares of Tyco Series B Preferred
Stock (the "Stockholders Agreement"). The Stockholders Agreement generally
provides that the Stockholders (as defined herein) (i) will vote their shares
of Tyco Series B Preferred Stock in favor of the Merger Agreement at the
Special Meeting, (ii) will not transfer, sell or otherwise dispose of their
shares of Tyco Series B Preferred Stock prior to the Effective Date, and (iii)
will not solicit or hold discussions or negotiations concerning any Acquisition
Proposal relating to Tyco. The Stockholders Agreement also constitutes the
consent of the Stockholders to the treatment of their shares of Series B
Preferred Stock provided for in the Merger Agreement (see "The Merger
Agreement--Conversion of Tyco Capital Stock"). See "The Stockholders
Agreement."
OPINION OF TYCO'S FINANCIAL ADVISOR
On November 17, 1996, Allen & Company Incorporated ("Allen & Company"),
Tyco's financial advisor, delivered its oral opinion, subsequently confirmed in
writing, to the effect that, as of such date, the consideration
5
<PAGE>
to be received by holders of Tyco Common Stock, Tyco Series B Preferred Stock
and Tyco Series C Preferred Stock in connection with the Merger was fair to
such holders from a financial point of view. Subsequent to the execution of the
Amendment Agreement, Allen & Company confirmed in writing its opinion that the
consideration to be received by holders of Tyco Common Stock, Tyco Series B
Preferred Stock, and Tyco Series C Preferred Stock in connection with the
Merger, as modified with respect to Tyco Series C Preferred Stock by the
Amendment Agreement, was fair to such holders from a financial point of view.
For information on the assumptions made, matters considered and limits of the
review by Allen & Company, see "The Merger--Opinion of Tyco's Financial
Advisor." Stockholders are urged to read in their entirety the opinion of Allen
& Company and the subsequent confirmation which together are attached as Annex
C to this Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Tyco Board with respect to the
Merger Agreement and the transactions contemplated thereby, stockholders should
be aware that certain members of Tyco management and the Tyco Board have
certain interests in the Merger that are in addition to the interests of
stockholders of Tyco generally. These interests arise from, among other things,
certain employee benefit and bonus plans, indemnification and insurance
arrangements and other matters which Mattel will assume or has agreed to
provide after the Merger, including executive termination agreements and
employment agreements amendments between Tyco and certain members of its senior
management. As a result of the Merger, Richard E. Grey, Chairman of Tyco, Gary
S. Baughman, President and Chief Executive Officer of Tyco, and Harry J.
Pearce, Vice Chairman and Chief Financial Officer of Tyco, will receive, in
addition to their benefits which have previously vested not in connection with
the Merger, benefits aggregating $11.7 million, consisting of payments
triggered by the change of control provisions of their respective employment
agreements, payments under the Retention Plan (as defined herein) and the
benefits of the exchange of restricted stock and unvested stock options in the
Merger. See "The Merger--Interests of Certain Persons in the Merger," "--Effect
on Employee Benefits Plans" and "The Merger Agreement--Effect on Tyco Stock
Options, Restricted Stock and Employee Benefit Plans."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
Except as more fully described under "The Merger--Certain United States
Federal Income Tax Consequences," no gain or loss will be recognized by Tyco
stockholders except with respect to cash received in lieu of fractional shares
and no gain or loss will be recognized by Mattel, Tyco, or Sub. Consummation of
the Merger is conditioned upon the delivery of opinions of counsel dated as of
the Effective Date to the effect that the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). See "The Merger--Certain United States
Federal Income Tax Consequences."
6
<PAGE>
COMPARATIVE PER SHARE PRICES AND DIVIDENDS
Mattel Common Stock and Tyco Common Stock are listed on the NYSE. The
following table sets forth the high and low closing prices per share of the
Mattel Common Stock and Tyco Common Stock as reported on the NYSE Composite
Tape, and the dividends paid on such Mattel Common Stock, for the quarterly
periods indicated, which correspond to the companies' respective quarterly
fiscal periods for financial reporting purposes.
<TABLE>
<CAPTION>
MATTEL TYCO
COMMON STOCK(a) COMMON STOCK(b)
---------------------- ---------------
HIGH LOW DIVIDEND HIGH LOW
------ ------ -------- ---------------
<S> <C> <C> <C> <C> <C>
1994:
First Quarter.......................... $17.20 $13.20 $0.031 $ 9.75 $ 8.38
Second Quarter......................... 17.44 14.88 0.038 9.00 6.63
Third Quarter.......................... 18.40 16.32 0.038 8.50 6.75
Fourth Quarter......................... 18.88 15.68 0.038 8.13 5.38
1995:
First Quarter.......................... 19.80 15.76 0.038 5.75 4.50
Second Quarter......................... 22.20 18.20 0.048 7.38 4.63
Third Quarter.......................... 24.50 20.30 0.048 7.13 5.25
Fourth Quarter......................... 24.90 21.20 0.048 5.88 4.25
1996:
First Quarter.......................... 28.30 23.90 0.048 6.63 4.00
Second Quarter......................... 28.88 24.38 0.060 6.00 4.88
Third Quarter.......................... 29.13 22.13 0.060 5.88 4.25
Fourth Quarter......................... 31.50 24.63 0.060 11.88 5.75
1997:
First Quarter (through February 12).... 29.25 25.75 0.060 11.75 11.38
</TABLE>
- --------
(a) Mattel per share data reflect the retroactive effect of stock splits
distributed to stockholders in March 1996, January 1995 and January 1994.
(b) Tyco did not pay cash dividends on its common stock during the periods
presented.
The following table sets forth the closing sales price of Mattel Common Stock
and Tyco Common Stock as reported on the NYSE Composite Tape, and the
equivalent per share price of Tyco Common Stock giving effect to the Merger, on
November 15, 1996 (the last trading day prior to the public announcement of the
proposed Merger) and February 12, 1997 (the latest practicable trading day
prior to the printing of this Proxy Statement/Prospectus).
<TABLE>
<CAPTION>
CLOSING SALES PRICE
---------------------------
TYCO
MATTEL TYCO EQUIVALENT(a)
------ ------ -------------
<S> <C> <C> <C>
Price per share:
November 15, 1996........................... $30.63 $ 7.00 $12.50
February 12, 1997........................... $25.88 $11.63 $12.50
</TABLE>
- --------
(a) Because the Exchange Ratio is subject to minimum and maximum values, the
Tyco equivalent value could be less than or greater than $12.50 under
certain circumstances. See "Summary--The Merger--Merger Consideration."
The Tyco Series C Depositary Shares were first offered to the public on June
24, 1996 at a price to the public of $5.00 per share. During the period from
June 24, 1996 through the date hereof, the highest closing price per Tyco
Series C Depositary Share was $10.38 and the lowest closing price per share was
$5.00. On November 15, 1996, the last trading day prior to the public
announcement of the proposed Merger, the closing sales price of a Tyco Series C
Depositary Share was $7.13.
7
<PAGE>
Stockholders are advised to obtain current market quotations for Mattel
Common Stock, Tyco Common Stock and Tyco Series C Depositary Shares. No
assurance can be given as to the market price of Mattel Common Stock, Tyco
Common Stock or Tyco Series C Depositary Shares at the Effective Date, or
Mattel Common Stock or Mattel Series C Depositary Shares after the Effective
Date. Because the Exchange Ratio is subject to minimum and maximum values and
because the market price of the Mattel Common Stock is subject to fluctuation,
the value of the shares of Mattel Common Stock that holders of Tyco Capital
Stock will receive in the Merger may increase or decrease prior to and
following the Merger. See "The Merger--Merger Consideration: Effects and
Consequences of the Collar Mechanism."
8
<PAGE>
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
The following table presents selected historical financial data for Mattel
and Tyco, and selected pro forma combined financial data after giving effect
to the Merger under the pooling of interests method of accounting. Mattel's
historical financial data for each of the annual periods presented have been
derived from its audited consolidated financial statements previously filed
with the Commission. Tyco's historical financial data for each of the annual
periods presented also have been derived from its financial statements
previously filed with the Commission. The selected historical financial data
for both companies for the nine-month periods ended September 30, 1995 and
1996 have been prepared in accordance with GAAP applicable to interim
financial information and, in the opinions of Mattel's and Tyco's respective
managements, include all adjustments necessary for a fair presentation of
results for such interim periods.
The selected pro forma combined financial data have been derived from, or
prepared on a basis consistent with, the unaudited pro forma condensed
combined financial statements included herein. This data is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred or that will occur
after consummation of the Merger.
THE INFORMATION IN THIS SECTION SHOULD BE READ IN CONJUNCTION WITH THE
COMPANIES' HISTORICAL AND PRO FORMA COMBINED FINANCIAL STATEMENTS AND NOTES
THERETO, EITHER INCORPORATED BY REFERENCE OR INCLUDED HEREIN. SEE "UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
9
<PAGE>
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF OR FOR THE
AS OF OR FOR THE YEAR ENDED NINE MONTHS ENDED
---------------------------------------------- --------------------
SEPTEMBER SEPTEMBER
1991 1992 1993 1994 1995 30, 1995 30, 1996
-------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
MATTEL, INC. --
HISTORICAL:
NET SALES(A)............ $2,046.5 $2,563.5 $2,704.4 $3,205.0 $3,638.8 $2,483.5 $2,595.4
Income from continuing
operations applicable
to common shares(a).... 128.6 179.9 131.0 251.1 354.5 242.5 264.2
Net income applicable to
common shares(a)(b).... 123.4 179.9 112.3 251.1 354.5 242.5 264.2
Income per common
share--primary(c):
Income from continuing
operations............ 0.56 0.67 0.49 0.90 1.26 0.86 0.95
Net income............. 0.54 0.67 0.42 0.90 1.26 0.86 0.95
Income per common
share--fully
diluted(c):
Income from continuing
operations............ 0.55 0.65 0.48 0.89 -- -- --
Net income............. 0.53 0.65 0.42 0.89 -- -- --
Dividends declared per
common share(c)........ 0.05 0.09 0.12 0.15 0.19 0.14 0.18
Total assets(a)......... 1,564.8 1,712.7 2,000.1 2,459.0 2,695.5 3,062.5 3,086.3
Long-term
liabilities(a)......... 353.6 434.9 399.0 457.5 572.6 570.2 480.8
Shareholders'
equity(a)(d)........... 664.0 748.4 817.8 1,085.7 1,275.2 1,283.3 1,349.8
Book value per common
share(c)(e)............ -- -- -- -- 4.63 -- 5.00
TYCO TOYS, INC. --
HISTORICAL:
NET SALES............... $ 548.7 $ 768.6 $ 730.2 $ 753.1 $ 709.1 $ 494.0 $ 492.7
Income (loss) from
continuing operations
applicable to common
shares(f).............. 19.2 18.0 (69.9) (35.1) (30.4) (12.3) (6.0)
Net income (loss)
applicable to common
shares(f)(g)........... 18.4 18.0 (69.9) (35.1) (30.4) (12.3) (6.0)
Income (loss) per common
share--primary(f)(h):
Income (loss) from
continuing
operations............ 1.14 0.60 (2.08) (1.01) (0.87) (0.35) (0.17)
Net income (loss)...... 1.10 0.60 (2.08) (1.01) (0.87) (0.35) (0.17)
Income per common
share--fully
diluted(f)(h):
Income from continuing
operations............ 0.97 -- -- -- -- -- --
Net income............. 0.94 -- -- -- -- -- --
Dividends declared per
common share(h)........ -- 0.10 0.08 -- -- -- --
Total assets(f)......... 390.3 749.2 715.2 670.6 615.1 741.0 779.1
Long-term
liabilities(f)......... 93.0 202.3 181.2 149.0 149.1 149.7 149.1
Shareholders'
equity(f).............. 181.2 335.2 277.5 296.2 265.3 285.1 353.4
Book value per common
share(i)............... -- -- -- -- 6.05 -- 5.76
PRO FORMA COMBINED(J):
NET SALES............... -- -- $3,434.6 $3,958.1 $4,347.9 $2,977.5 $3,088.1
Income from continuing
operations applicable
to common shares....... -- -- 61.8 219.6 328.2 232.9 258.2
Income per common share
from continuing
operations(k).......... -- -- 0.22 0.74 1.11 0.79 0.87
Dividends declared per
common share(l)........ -- -- 0.12 0.15 0.19 0.14 0.18
Total assets............ -- -- 2,716.4 3,134.3 3,319.4 3,810.9 3,870.9
Long-term liabilities... -- -- 580.2 606.5 721.7 719.9 629.9
Shareholders' equity.... -- -- 1,096.4 1,386.6 1,549.3 1,575.8 1,752.7
Book value per common
share(m)............... -- -- -- -- 5.14 -- 5.54
TYCO PRO FORMA
EQUIVALENTS (N):
Income per common share
from continuing
operations............. -- -- 0.10 0.32 0.48 0.34 0.38
Dividends declared per
common share........... -- -- 0.05 0.07 0.08 0.06 0.08
Book value per common
share.................. -- -- -- -- 2.23 -- 2.41
</TABLE>
10
<PAGE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
(a) Mattel's consolidated financial information for 1991, 1992 and 1993 has
been restated retroactively for the effects of the November 1993 merger of
Fisher-Price, Inc. ("Fisher-Price") into a wholly owned subsidiary of
Mattel, accounted for as a pooling of interests. The results of operations
for Fisher-Price are excluded prior to July 1, 1991, when its business was
operated as a division of The Quaker Oats Company. For 1993 and 1994,
income from continuing operations applicable to common shares includes
pre-tax restructuring charges of $115.0 million in connection with
Mattel's merger with Fisher-Price, and $72.0 million in connection with
the consolidation of manufacturing operations and the reduction of
headquarters expense and support functions worldwide. In May and July
1994, Mattel acquired Kransco and J.W. Spear, respectively. These
acquisitions have been accounted for under the purchase method and,
accordingly, the results of their operations have been included since the
date of their respective acquisitions.
(b) Mattel's net income applicable to common shares for 1991 includes the
effect of extraordinary losses of $5.2 million, or $0.02 per primary
share, related to the early extinguishment of long-term debt obligations.
Net income applicable to common shares for 1993 reflects a charge of $4.0
million, or $0.02 per primary share, representing the net cumulative
effect of adopting Statements of Financial Accounting Standards Nos. 109
and 106 as of January 1, 1993, and an extraordinary charge of $14.7
million, or $0.05 per primary share, related to the early extinguishment
of long-term debt in connection with Mattel's merger with Fisher-Price.
(c) Mattel's per share data reflect, as appropriate, the retroactive effect of
stock splits distributed to shareholders in November 1991, June 1992,
January 1994, January 1995, and March 1996 and the mergers with
International Games, Inc. and Fisher-Price in 1992 and 1993, respectively.
Fully diluted income per share is not presented where the results are
anti-dilutive.
(d) Effective December 26, 1987, Mattel implemented a "quasi-reorganization"
and revalued its assets and liabilities to their fair values as of that
date.
(e) Mattel's book value per common share represents Mattel's shareholders'
equity divided by the outstanding number of common shares.
(f) Tyco's income from continuing operations applicable to common shares for
1991 includes a $6.9 million nonrecurring charge in connection with the
termination of a related party arrangement. In June and October 1992, Tyco
acquired Illco Toy Co., U.S.A. and Universal Matchbox Group, respectively.
These acquisitions have been accounted for under the purchase method and,
accordingly, the results of their operations have been included since the
date of their respective acquisitions. Income from continuing operations
applicable to common shares for 1992, 1993, 1994, and 1995 includes pre-
tax restructuring charges of $2.8 million, $28.2 million, $4.7 million,
and $8.9 million, respectively. For the nine months ended September 30,
1995, income from continuing operations applicable to common shares
includes a $4.9 million pre-tax restructuring charge.
(g) Tyco's net income applicable to common shares for 1991 reflects a charge
of $0.8 million, or $0.04 per primary share, related to the early
extinguishment of long-term debt.
(h) Tyco's share and per share data for 1991 reflect the retroactive effect of
a two for one stock split distributed to shareholders in June 1992. Fully
diluted loss per share is not presented where the results are anti-
dilutive.
(i) Tyco's book value per common share represents Tyco's shareholders' equity,
adjusted for the liquidation value of Tyco Series B Preferred Stock and
Tyco Series C Preferred Stock, divided by the outstanding number of common
shares.
(j) The pro forma combined income from continuing operations applicable to
common shares excludes: (i) the positive effects of potential cost savings
which may be achieved upon combining the resources of Mattel and Tyco;
(ii) transaction costs of approximately $60 million to $70 million,
including investment banking, legal and accounting fees, and contractual
termination and incentive benefits. Additionally, Mattel expects to
restructure the combined operations, resulting in additional nonrecurring
charges. The amount of such charges cannot be reasonably estimated until
an analysis of the newly combined operations is completed and a
restructuring plan developed. Pro forma combined shareholders' equity and
book value per common share as of September 30, 1996 do include, in
accordance with Commission reporting rules, the impact of
11
<PAGE>
transaction costs related to the Merger and tax benefits relating to
certain net operating losses of Tyco which can be reasonably estimated and
should be reflected as of that date.
(k) Pro forma combined income per share from continuing operations is based
upon the combined historical weighted-average number of shares
outstanding, after adjustment of Tyco's historical number of shares by the
Exchange Ratio (estimated to be 0.43459 for purposes of this analysis).
(l) Pro forma dividends declared per common share are assumed to be the same
as the historical cash dividend declarations of Mattel. Mattel has no
present intention to alter its current quarterly dividend subsequent to
the Merger. However, any determination to increase or decrease the per
share cash dividend amount is at the discretion of Mattel's Board of
Directors, subject to restrictions which may be imposed by law or
contract. See "Description of Capital Stock of Mattel."
(m) The pro forma combined book value per common share represents the pro
forma combined shareholders' equity, adjusted for the liquidation value of
Tyco Series B Preferred Stock and Tyco Series C Preferred Stock, divided
by the pro forma combined number of common shares outstanding.
(n) Tyco's pro forma equivalents represent the pro forma combined per share
amounts for income per common share from continuing operations, dividends
declared per common share and book value per common share multiplied by
the Exchange Ratio (estimated to be 0.43459 for purposes of this
analysis).
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth Mattel's unaudited ratio of earnings to
combined fixed charges and preferred stock dividends for the periods
indicated:
<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS ENDED DECEMBER 31,(a) NINE MONTHS ENDED
--------------------------------------- -------------------
SEPT. 30, SEPT. 30,
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
combined fixed charges
and preferred stock
dividends(b)(c)....... 3.71 4.25 3.94 6.43 6.76 6.54 7.01
</TABLE>
- --------
(a) The consolidated ratio of earnings to combined fixed charges and preferred
stock dividends for 1993, 1992 and 1991 has been restated for the effects
of the November 1993 merger of Fisher-Price into a wholly-owned subsidiary
of Mattel, accounted for as a pooling of interests. Fisher-Price was
excluded from periods prior to July 1, 1991, while its business was
operated as a division of The Quaker Oats Company.
(b) The ratio of earnings to combined fixed charges and preferred stock
dividends is computed by dividing income before taxes, extraordinary
items, cumulative effect of changes in accounting principles, fixed
charges, minority interest and undistributed income of less-than-majority-
owned affiliates by the sum of fixed charges plus dividends on Mattel's
outstanding shares of preferred stock during the indicated period. Fixed
charges are the sum of interest costs (whether expensed or capitalized)
and the portion of aggregate rental expense (one-third) which is estimated
to represent the interest factor in such rentals.
(c) Until July 1, 1991, Mattel was a guarantor of certain foreign bank lines
of credit extended to less-than-majority-owned joint ventures. Performance
by Mattel pursuant to these guarantees was deemed unlikely, thus the
associated fixed charges have been excluded from computation of the ratio
of earnings to fixed charges. The portion of fixed charges paid by less-
than-majority-owned joint ventures for which Mattel was guarantor was
approximately $4.5 million in 1991.
12
<PAGE>
RECENT DEVELOPMENTS
Mattel announced on January 6, 1997 that, in response to concerns related to
its Snacktime Kids dolls, it would provide cash refunds to consumers who had
purchased the dolls, and would voluntarily withdraw all product from retail
shelves.
On February 5, 1997, Mattel reported that income per share for the full-year
1996, before an accrual related to the Snacktime Kids refunds and returns and
a special accounting charge, increased 14 percent on a 4 percent increase in
sales.
Net income was $378 million or $1.36 per share, after a $.03 impact from the
Snacktime Kids accrual and the $.05 special accounting charge. In 1995, net
income was $358 million or $1.26 per share. Net sales for 1996 totaled $3.79
billion, versus $3.64 billion in 1995.
Before the impact of the accrual and charge, income for the 1996 fourth
quarter was up 22 percent on a 4 percent increase in sales. After these items,
net income for the quarter was $113 million, versus $112 million in 1995, and
net sales were $1.19 billion, compared with $1.16 billion in the prior year.
The special accounting charge of $15.1 million after-tax was taken in
connection with discussions with the Commission staff concerning Mattel's
method of accounting for certain royalties and participation fees related to
prior periods. See "Special Considerations."
Also on February 5, 1997, Tyco reported net sales of $721 million for the
year ended December 31, 1996, compared to $709 million for 1995. The net loss
for 1996 was $16 million ($.46 per share), including approximately $7 million
($.20 per share) for merger-related expenses. This compares to a net loss in
1995 of $30 million ($.87 per share), including restructuring charges of $9
million ($.25 per share) and a one-time gain of approximately $2.5 million
($.07 per share). The 1996 results also include $7 million ($.21 per share) in
preferred dividends, compared to $3 million ($.09 per share) in 1995.
For the fourth quarter ended December 31, 1996, Tyco reported net sales of
$228 million compared to $215 million for the same period in 1995. The net
loss for the fourth quarter, including the approximate $7 million in merger-
related expenses, was $10 million ($.29 per share), compared to a net loss of
$18 million ($.52 per share) including a $4 million ($.12 per share)
restructuring charge in 1995. The 1996 fourth quarter results include $3
million ($.08 per share) in preferred dividends, compared to $0.8 million
($.02 per share) in 1995.
Based upon recent discussions between Mattel and Tyco with respect to their
respective businesses and general conditions in the toy industry and the
economy as a whole, Mattel currently expects that the combined net sales of
Mattel and Tyco for the first full fiscal year of combined operations after
the Merger (assumed to be the fiscal year ending December 31, 1998) will be $5
billion. Such estimate assumes that the overall net sales of each of Mattel
and Tyco will grow at an average rate of 7% per year from their combined
historical base. The foregoing projection is based upon management's best
estimate of future performance based upon the information available to it at
this time; however, such projection is based upon numerous assumptions with
respect to industry performance, general business, financial, market and
economic conditions and other matters, many of which are beyond the control of
Mattel or Tyco. Investors are strongly cautioned not to attribute undue
certainty to management's projections. Mattel has no present intention to
update the foregoing projection.
13
<PAGE>
GENERAL INFORMATION
This Proxy Statement/Prospectus is being furnished to stockholders of Tyco
in connection with the solicitation of proxies by and on behalf of the Tyco
Board for use at the Special Meeting. The Special Meeting will be held at 200
Fifth Avenue, Room 350, New York, New York, at 10:00 a.m. on March 18, 1997.
This Proxy Statement/Prospectus and the related form of proxy are first being
mailed to stockholders on or about February 14, 1997.
THE SPECIAL MEETING
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, holders of Tyco Common Stock, Tyco Series B
Preferred Stock and Tyco Series C Depositary Shares, voting together as a
single class, will consider and vote upon a proposal to approve and adopt the
Merger Agreement.
THE BOARD OF DIRECTORS OF TYCO HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
RECORD DATE; VOTING RIGHTS; PROXIES
The Tyco Board has fixed the close of business on February 7, 1997 as the
Record Date for determining holders entitled to notice of and to vote at the
Special Meeting. Only holders of Tyco Common Stock, Tyco Series B Preferred
Stock and Tyco Series C Preferred Stock who are holders at the close of
business on the Record Date will be entitled to notice of and to vote at the
Special Meeting. Only holders of Tyco Series C Depositary Shares who are
holders on the Record Date will be entitled to notice of and to attend the
Special Meeting and to instruct the Depositary as to the voting of the shares
of Tyco Series C Preferred Stock represented by such holder's Tyco Series C
Depositary Shares.
As of the Record Date, there were 34,849,053 shares of Tyco Common Stock
issued and outstanding, each of which entitles the holder thereof to one vote
per share, 53,631 shares of Tyco Series B Preferred Stock issued and
outstanding, each of which entitles the holder thereof to 105 votes per share,
and 772,800 shares of Tyco Series C Preferred Stock issued and outstanding,
each of which entitles the holder thereof to 25 votes per share. The
Depositary, as the holder of the shares of Tyco Series C Preferred Stock
represented by the Tyco Series C Depositary Shares, will vote the shares of
Tyco Series C Preferred Stock in accordance with the instructions of the
holders of Tyco Series C Depositary Shares, each of which is entitled to one
vote per depositary share. Shares of Tyco Common Stock held in the treasury of
Tyco or any of its subsidiaries are not to be considered outstanding.
All shares of Tyco Common Stock, Tyco Series B Preferred Stock and Tyco
Series C Preferred Stock represented by properly executed proxies will, unless
such proxies have been previously revoked, be voted in accordance with the
instructions indicated in such proxies.
IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES OF TYCO COMMON STOCK, TYCO
SERIES B PREFERRED STOCK AND TYCO SERIES C PREFERRED STOCK (INCLUDING THOSE
REPRESENTED BY TYCO SERIES C DEPOSITARY SHARES) WILL BE VOTED IN FAVOR OF THE
MERGER.
Pursuant to Tyco's bylaws (the "Tyco Bylaws"), no business may be brought
before the Special Meeting other than the matters set forth in the Notice of
Special Meeting. A stockholder who has given a proxy may revoke it at any time
prior to its exercise by giving written notice thereof to the Secretary of
Tyco, by signing and returning a later dated proxy, or by voting in person at
the Special Meeting; however, mere attendance at the Special Meeting will not
in and of itself have the effect of revoking the proxy.
14
<PAGE>
Votes cast by proxy or in person at the Special Meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether
or not a quorum is present. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval
of any matter submitted to the stockholders for a vote. If a broker indicates
on the proxy that it does not have discretionary authority as to certain
shares to vote on a particular matter, those shares will not be considered as
present and entitled to vote with respect to that matter.
SOLICITATION OF PROXIES
Tyco will bear its own cost of solicitation of proxies. Brokerage houses,
fiduciaries, nominees and others will be reimbursed for their out-of-pocket
expenses in forwarding proxy materials to beneficial owners of stock held in
their names. In addition, Shareholder Communications Corporation has been
engaged by Tyco to act as proxy solicitors and will receive fees estimated at
$10,000, plus reimbursement of out-of-pocket expenses.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares entitled to vote at the Special
Meeting (Tyco Common Stock, Tyco Series B Preferred Stock and Tyco Series C
Preferred Stock) is necessary to constitute a quorum at the Special Meeting.
REQUIRED VOTE
The approval of the Merger Agreement requires the affirmative vote of the
holders of a majority of the voting power of the outstanding shares of Tyco
Common Stock, Tyco Series B Preferred Stock and Tyco Series C Preferred Stock,
voting together as a single class. As of the Record Date, a total of
59,800,308 votes were eligible to be cast at the Special Meeting, in respect
of the outstanding shares of Tyco Common Stock, Tyco Series B Preferred Stock
and Tyco Series C Preferred Stock, 58.3% of which were entitled to be cast by
holders of Tyco Common Stock, 9.4% of which were entitled to be cast by
holders of Tyco Series B Common Stock and 32.4% of which were entitled to be
cast by holders of Tyco Series C Preferred Stock. If fewer shares of Tyco
Common Stock, Tyco Series B Preferred Stock and Tyco Series C Preferred Stock
are voted in favor of approval and adoption of the Merger Agreement than the
number required for such approval and adoption, it is expected that the
Special Meeting will be adjourned or postponed in order to allow additional
time for obtaining additional proxies or votes; provided, however, that no
proxy which is voted "against" the proposal to approve and adopt the Merger
Agreement will be voted in favor of any such adjournment or postponement. At
any subsequent reconvening of the Special Meeting, all proxies obtained prior
to such adjournment or postponement will be voted in such manner as such
proxies would have been voted at the original convening of the Special Meeting
(except for any proxies which previously have been effectively revoked or
withdrawn), notwithstanding that they may have been effectively voted on the
same or any other matter at a previous meeting. Because approval of the Merger
Agreement requires the affirmative vote of a majority of the voting power of
the Tyco Capital Stock outstanding, failures to vote and abstentions will have
the same effect as a vote "against" approval of the Merger Agreement. In
addition, under the rules of the NYSE, brokers who hold shares in street name
for customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote shares held for such customers with respect to the
approval of the Merger Agreement without specific instructions from such
customers. The failure of such customers to provide specific instructions with
respect to their shares of Tyco Common Stock to their broker will have the
same effect as a vote "against" the approval of the Merger Agreement.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF TYCO. ACCORDINGLY, STOCKHOLDERS ARE URGED TO READ
AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT/
PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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THE MERGER
BACKGROUND OF THE MERGER
During the past several years, Tyco has studied and reviewed a variety of
strategic options and alternatives, including seeking strategic investors or
joint venture partners, and has received unsolicited proposals for the sale of
one or more of its lines of business. From time to time, discussions have been
held with interested potential investors or partners, and with potential
purchasers of lines of business; none of such discussions advanced past the
preliminary, informal stage.
On or about September 27, 1996, Gary S. Baughman, the President and Chief
Executive Officer of Tyco, met with Jill E. Barad, the President and Chief
Operating Officer of Mattel. The meeting, which had been requested by Mattel
in a phone call a few days earlier, took place in New York City. At the
meeting, Ms. Barad expressed on behalf of Mattel an interest in entering into
discussions about a possible combination of Tyco and Mattel.
Several conversations were held among the members of the Executive Committee
of the Tyco Board as a result of this expression of interest. In addition,
several telephone conversations took place between Mr. Baughman and Ms. Barad
between September 27 and October 11, 1996. These telephone conversations
included the expression of a definite interest by Mattel in a potential
transaction with Tyco, the range of price levels at which Mattel and Tyco
might each have an interest in a possible transaction, the provision of
limited due diligence information and the scheduling of a meeting for specific
discussions of a possible transaction.
On October 14, 1996, representatives of the two companies met again in New
York City, and representatives of Allen & Company attended this meeting. At
this meeting, Mattel and Tyco entered into a confidentiality agreement
providing for the exchange of certain confidential information, and Tyco
delivered to Mattel financial information. During this meeting, the
representatives of the two companies reviewed their respective businesses,
exchanged information relevant to the conduct of due diligence and discussed
the benefits that could result from a combination.
On October 22, 1996, a meeting of the Tyco Board was held in Mt. Laurel, New
Jersey, at which meeting the discussions held were reviewed with the Tyco
Board.
Representatives of Mattel, Tyco and Allen & Company next met in New York
City on October 29, 1996. At this meeting, additional discussion occurred
concerning the business plans of Tyco, the possibility that a business
combination could produce savings in overhead and other expenses, and the
price range at which a transaction might be possible.
On November 3, 1996, Ned Mansour, Mattel's President for Corporate
Operations, reached Mr. Baughman by telephone and communicated a proposal
relating to a proposed merger between Mattel and Tyco. After several
additional calls and negotiations with respect to price, a preliminary
understanding was reached to pursue more detailed discussions concerning a
proposed tax-free, pooling of interests merger at $12.50 in Mattel Common
Stock, subject to Mattel's and Tyco's satisfaction with continued due
diligence of each other and to further negotiations relating to an appropriate
"collar" for the exchange ratio, allocation of various regulatory and other
risks among the parties and the definitive documentation for the transaction.
On November 4, 1996, representatives of Tyco and Allen & Company met at the
offices of counsel to Tyco to discuss the terms of the proposed Merger and the
scope and nature of Tyco's due diligence investigation of Mattel. At the end
of this meeting, further confidentiality agreements were delivered.
After a number of further telephone conversations between representatives of
Mattel and Allen & Company, the ongoing discussions were considered during a
telephonic meeting of the Executive/Finance Committee of Mattel's Board of
Directors, held on November 7, 1996. The Executive/Finance Committee approved
a continuation of the discussions and the due diligence investigation.
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An initial meeting of the parties and their respective advisors took place
on November 10, 1996. This meeting lasted for several hours and focused on the
structure of the proposed Merger, the "collar" for the exchange ratio, the
proposed accounting treatment of the Merger, the consents of third parties
needed for the Merger, the regulatory analysis of the Merger, and the
treatment of Tyco's employee benefit plans (including its stock option,
restricted stock and bonus plans). Mattel and Tyco agreed to include a collar
for the exchange ratio because each believed a collar would provide protection
for its respective stockholders in the event of a significant increase (in the
case of Tyco stockholders) or significant decrease (in the case of Mattel
stockholders) in the price of Mattel stock prior to closing. Tyco and Mattel
negotiated the Exchange Ratio determination mechanism and the collar with the
understanding that the Measurement Price used to determine the Exchange Ratio
could be above or below the collar range, and that changes in the price of
Mattel Common Stock prior to the consummation of the Merger would not give
rise to any termination or walk-away rights for either Tyco or Mattel.
Thereafter, Mattel continued its due diligence of Tyco, Tyco conducted due
diligence of Mattel, and the parties commenced to draft and negotiate the
terms of the proposed Initial Merger Agreement. These negotiations culminated
in meetings of the Boards of Directors of Tyco and Mattel on November 17,
1996, at which the Initial Merger Agreement, the Stockholders Agreement and
related matters were approved by each of the Mattel Board and the Tyco Board.
Later that evening, the Initial Merger Agreement and the Stockholder Agreement
were signed. The terms of the Merger were announced in a joint press release
that was issued before the opening of the markets on November 18, 1996.
Under the Initial Merger Agreement, shares of Tyco Series C Preferred Stock
would have been converted into Mattel Common Stock at the prescribed
conversion ratio but holders of such stock would have lost the benefit of
their liquidation preference and the dividend rate associated with the Tyco
Series C Preferred Stock and would have been entitled to vote on the Merger
separately as a class. Mattel and Tyco became aware of market and press
reports that some holders of the Tyco Series C Preferred Stock objected to the
Merger because of the potential loss of their preference and dividend
benefits. To respond to such concerns, on November 21, 1996, Mattel and Tyco
determined to amend the Initial Merger Agreement in order to change the form
of the Merger and the consideration to be received by the holders of Tyco
Series C Preferred Stock. On November 22, 1996, based upon the unanimous
approval of each of the Tyco Board and the Mattel Board, the parties executed
the Amendment Agreement pursuant to which Tyco Series C Preferred Stock will
be converted into the right to receive one share of Mattel Series C Preferred
Stock having substantially the same rights and preferences as the Tyco Series
C Preferred Stock. As a result, no such class vote is required and the Tyco
Series C Preferred Stock will vote together as a single class with Tyco Common
Stock and Tyco Series B Preferred Stock.
RECOMMENDATION OF THE TYCO BOARD; TYCO'S REASONS FOR THE MERGER
The Tyco Board has approved unanimously the Merger Agreement, has determined
unanimously that the Merger is advisable and fair and in the best interests of
Tyco and its stockholders and recommends unanimously that holders of shares of
Tyco Common Stock, Tyco Series B Preferred Stock and Tyco Series C Preferred
Stock vote "for" approval and adoption of the Merger Agreement.
In reaching its decision to approve the Merger Agreement and to recommend
that Tyco's stockholders vote to approve and adopt the Merger Agreement, the
Tyco Board considered, among other things, the following factors: (i) its
knowledge of the business, operations, properties, assets, financial condition
and operating results of Tyco, which provided the background and context for
its deliberations and determinations; (ii) considerations of the strategic
alternatives available to Tyco; (iii) results of Tyco's recent
financing/capitalization efforts, and the impact of such efforts on its
operations; (iv) judgments as to Tyco's future prospects; (v) discussions of
Tyco's results of operations and outlook and of the proposed transaction by
members of management at the November 17, 1996 meeting of the Tyco Board,
which indicated that Tyco's businesses could be expected to face a stronger
future as part of a larger, more diversified entity with a stronger balance
sheet; (vi) the presentation by Allen & Company, Tyco's financial advisor,
with respect to Tyco and Mattel; (vii) the opinion of Allen & Company as to
the fairness, from a financial point of view, of the consideration to be
received by
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stockholders of Tyco in the Merger (see "The Merger--Opinion of Tyco's
Financial Advisor"); (viii) the terms of the Initial Merger Agreement and the
Amendment Agreement (including the Exchange Ratio and the collar (and the
potential effects and consequences thereof as described under "--Merger
Consideration: Effects and Consequences of the Collar Mechanism"), the
Deadlines (as defined herein), the provisions for a tax-free transaction to be
accounted for as a pooling of interests, the provisions requiring Mattel to
compensate Tyco in the event the Merger is not consummated due to an inability
to satisfy certain antitrust-related conditions (see "--Certain Legal
Matters") or an inability of the Merger to be accounted for as a pooling of
interests, and the conditions to the obligations of Mattel to consummate the
Merger, which the Tyco Board believes to be relatively limited for a
transaction of the size of the Merger), which were the products of extensive
arm's-length negotiations (see "The Merger Agreement"); (ix) the historical
trading prices and dividend rates for Tyco Common Stock and Tyco Series C
Depositary Shares, on the one hand, and Mattel Common Stock, on the other,
which together indicated that the relative trading prices used to determine
the Exchange Ratio were within historically reasonable ranges; (x) the
compatibility of the respective product lines and business strategies of
Mattel and Tyco; and (xi) the opportunity for Tyco stockholders to
participate, as holders of Mattel Common Stock, in a larger, more diversified
company of which Tyco would become a significant part, and to do so by means
of a transaction which is designed to be tax-free to Tyco's stockholders. In
addition, the Tyco Board considered Tyco's recent operating performance, the
impact on Tyco after its restructuring efforts and the successful public
offering earlier in 1996 of the Tyco Series C Preferred Stock. The Tyco Board
believes these factors significantly improved Tyco's operating prospects over
the long term; however, the Tyco Board concluded that the offer embodied in
Mattel's proposal, including the opportunity to continue to participate in the
upside potential of the combined entity, provide Tyco and its stockholders
with greater value and a more certain and stronger future.
In reaching the conclusion that the holders of Tyco Common Stock, Tyco
Series B Preferred Stock and Tyco Series C Preferred Stock will receive fair
value in the Merger, in shares of Mattel Common Stock, Mattel Series B
Preferred Stock and Mattel Series C Preferred Stock, respectively, the Tyco
Board considered the financial analyses described under "--Opinion of Tyco's
Financial Advisor," its knowledge of Tyco's businesses and discussions with
Tyco's management of their views concerning the businesses, financial
condition and prospects of Mattel. The analyses and opinion of Tyco's
financial advisor were important elements of the Tyco Board's evaluation of
the financial terms of the proposed transaction and its conclusion that those
terms are fair to Tyco stockholders. The Tyco Board, with the assistance of
Tyco's financial advisor, also considered recent and current market prices of
the Mattel Common Stock, on which the Exchange Ratio for the Merger was based,
and concluded that Mattel Common Stock was trading in a reasonable range prior
to announcement of the transaction. Additional potential for increased value
of the Mattel shares to be received by Tyco stockholders in the Merger was
seen in the strengthening and diversification of the combined Mattel/Tyco
product lines, as compared to those of either Mattel or Tyco alone, and in the
possibility of efficiencies in and cost savings to the combined Mattel/Tyco
operations from the Merger which, if realized, could be expected to contribute
to higher future earnings per share for the combined company. In addition, the
Tyco Board considered that the Merger would be tax-free to Tyco stockholders
for United States federal income tax purposes (other than in respect of cash
received in lieu of fractional shares), with the result that Tyco stockholders
will not experience any current tax consequences and that Tyco Stockholders
(other than those with an unrecognized tax-loss with respect to their
investment in Tyco) will receive a greater net after-tax value in the Merger
for their investment in Tyco than they would have received in a taxable
transaction, and that the Merger would be treated as a pooling of interests
from an accounting standpoint, with the result that the creation of goodwill,
the amortization of which would otherwise be expected to have a negative
impact on the future per share earnings of the combined company, will not be
required.
During 1993 and 1994, Allen & Company was actively engaged on behalf of Tyco
to raise capital in a private placement, an effort that culminated in the $50
million investment made in April of 1994 by affiliates of Corporate Partners,
L.P. ("Corporate Partners"). In 1995 and 1996, Tyco requested Allen & Company
to contact a targeted group of potential strategic partners capable of
enhancing the development, marketing or distribution of Tyco's products. As a
result of this effort, from time to time Tyco held discussions with interested
potential
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investors or partners; however, none of such discussions advanced past the
preliminary, informal stage. Based on Allen & Company's activities on behalf
of Tyco, the facts that none of the discussions resulting from these efforts
advanced past the preliminary, informal stages, that Tyco's financial
condition and performance were well publicized during this time, and that the
potential strategic buyers for whom Tyco as a whole might be attractive were
aware of Tyco's position, the Tyco Board determined that none of the few
potential buyers for whom Tyco as a whole might be attractive was likely to
offer a premium equal to or greater than that offered by Mattel and,
therefore, the Tyco Board elected not to solicit other bids for Tyco as a
whole. Furthermore, management concluded, and the Tyco Board and Allen &
Company agreed, that selling individual product lines of Tyco would likely
generate values significantly lower than the transaction proposed by Mattel.
As of the date of Tyco's receipt of Mattel's offer, Tyco had not received any
other proposals, and, therefore, the decision of whether or not Tyco should
enter into the Merger Agreement and the related transactions was the only
matter before the Tyco Board at the meetings described in "--Background of the
Merger."
The foregoing discussion addresses all of the material information and
factors considered by the Tyco Board in its consideration of the Merger. In
view of the variety of factors and the amount of information considered, the
Tyco Board did not find it practicable to and did not make specific
assessments of, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. The determination was made
after consideration of all of the factors as a whole. In addition, individual
members of the Tyco Board may have given different weights to different
factors. For a discussion of the interests of certain members of Tyco's
management and the Tyco Board in the Merger, see "--Interests of Certain
Persons in the Merger."
THE TYCO BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF TYCO COMMON STOCK,
TYCO SERIES B PREFERRED STOCK AND TYCO SERIES C DEPOSITARY SHARES VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
MATTEL'S REASONS FOR THE MERGER
On November 17, 1996, the Board of Directors of Mattel (the "Mattel Board")
met to consider the advisability of the proposed Merger, the Initial Merger
Agreement and the other legal documentation to be executed in connection
therewith. The Mattel Board concluded that the Merger is advisable and in the
best interests of Mattel and its stockholders because the Mattel Board
believes that the Merger will further Mattel's long-term strategic objectives,
which include expanding and strengthening its core product lines and
maximizing the world-wide potential of Mattel's well-known brands. The Mattel
Board's conclusions are based on its expectations that (i) the Merger will
likely result in significant cost savings resulting from the integration of
Mattel's and Tyco's manufacturing and international distribution networks,
(ii) Tyco's established, well-known product lines, including Matchbox, Tyco
Radio Control, Sesame Street toys, Magna Doodle and View-Master, will
diversify and strengthen Mattel's core product portfolio, and (iii) Mattel's
international marketing and distribution strengths will present opportunities
for increased international sales of Tyco's well-known brands.
There can be no assurance that any of the expectations set forth in the
preceding paragraphs will be fulfilled or that any of the expected benefits of
the Merger will be realized.
OPINION OF TYCO'S FINANCIAL ADVISOR
At the meeting of the Tyco Board on November 17, 1996, Allen & Company
delivered its oral opinion, subsequently confirmed in writing, to the effect
that, as of such date, the consideration to be received by holders of Tyco
Common Stock, Tyco Series B Preferred Stock and Tyco Series C Preferred Stock
in connection with the Merger was fair to such holders from a financial point
of view. Subsequent to the execution of the Amendment Agreement, Allen &
Company confirmed its opinion that the consideration to be received by holders
of Tyco Common Stock, Tyco Series B Preferred Stock, and Tyco Series C
Preferred Stock in connection with the Merger, as modified with respect to the
Tyco Series C Preferred Stock by the Amendment Agreement, was fair to such
holders from a financial point of view.
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The full text of the written opinion, dated November 17, 1996, and the
supplemental confirmation, dated November 22, 1996, of Allen & Company are set
forth together as Annex C to this Proxy Statement/Prospectus and describe the
assumptions made, matters considered and limits on the review undertaken. TYCO
STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY. ALLEN & COMPANY'S
OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF
THE CONSIDERATION WHICH THE HOLDERS OF OUTSTANDING TYCO COMMON STOCK, TYCO
SERIES B PREFERRED STOCK AND TYCO SERIES C PREFERRED STOCK WOULD RECEIVE IN
THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION OF THE MERGER OVER OTHER
COURSES OF ACTION THAT MAY BE AVAILABLE TO TYCO OR CONSTITUTE A RECOMMENDATION
TO ANY TYCO STOCKHOLDER CONCERNING HOW SUCH HOLDER SHOULD VOTE WITH RESPECT TO
THE PROPOSALS. The summary of the opinion of Allen & Company set forth in this
Proxy Statement/Prospectus is qualified in its entirety by reference to the
full text of such opinion.
In arriving at its opinion, Allen & Company (i) reviewed the terms and
conditions of the Merger Agreement; (ii) reviewed trends in the toy
manufacturing industry; (iii) analyzed publicly available historical business
and financial information relating to Tyco and Mattel, as presented in
documents filed with the Commission; (iv) reviewed selected non-public
financial and operating data of Tyco and Mattel; (v) reviewed certain
financial estimates and other data provided to Allen & Company by Mattel
relating to Mattel's business for its 1996 fiscal year and reviewed certain
financial budgets and forecasts provided to Allen & Company by Tyco relating
to Tyco's 1996, 1997 and 1998 fiscal years; (vi) conducted discussions with
certain members of the senior managements of Tyco and Mattel with respect to
the financial condition, business, operations, strategic objectives and
prospects of Tyco and Mattel, respectively; (vii) reviewed and analyzed public
information, including certain stock market data and financial information
relating to selected public companies which Allen & Company deemed generally
comparable to Tyco and Mattel; (viii) reviewed the trading histories of Mattel
Common Stock and Tyco Common Stock, including their performance in comparison
to market indices and to selected comparable companies in the toy industry;
(ix) reviewed the trading history of Tyco Series C Preferred Stock; (x)
reviewed public financial and transaction information relating to merger and
acquisition transactions Allen & Company deemed to be generally comparable to
the Merger; (xi) reviewed publicly available reports and estimates of Wall
Street analysts for fiscal 1996, 1997 and 1998 for Tyco and Mattel; and (xii)
conducted such other financial analyses and investigations as Allen & Company
deemed necessary or appropriate for the purposes of the opinion expressed
therein.
In connection with its review, Allen & Company assumed and relied on the
accuracy and completeness of the information it reviewed for the purposes of
its opinion and did not assume any responsibility for independent verification
of such information or for any independent evaluation or appraisal of the
assets of Tyco or Mattel. With respect to Tyco's and Mattel's financial
estimates and forecasts, Allen & Company assumed that they had been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the management teams of Tyco and Mattel, respectively, and Allen
& Company expressed no opinion with respect to such forecasts or the
assumptions on which they were based. Allen & Company's opinion was
necessarily based upon business, market, economic and other conditions as they
existed on, and could be evaluated as of, the date of its opinion. Allen &
Company's opinion does not imply any conclusion as to the likely trading range
of Mattel's Common Stock following the consummation of the Merger, which may
vary depending on, among other factors, changes in interest rates, dividend
rates, market conditions, general economic conditions and other factors that
generally influence the price of securities.
The following is a summary of the presentation made by Allen & Company to
the Tyco Board in connection with the rendering of Allen & Company's fairness
opinion:
Prior to delivering its written opinion to the Tyco Board, Allen & Company
reviewed certain information with the Tyco Board relating to Tyco and Mattel,
including the information reviewed and analyzed in connection with rendering
their opinion, the financial terms of the Merger Agreement, the consideration
to be received by holders of Tyco Common Stock and the financial analyses
summarized below.
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Allen & Company noted that the proposed transaction represents a strong
strategic fit between Tyco and Mattel with opportunities to improve combined
revenues and reduce manufacturing and operating expenses. Allen & Company also
noted that the proposed transaction represents an opportunity for Tyco's
stockholders to have a continuing interest in the ongoing combined entity in a
tax-efficient manner.
Allen & Company reviewed the recent price performance of Mattel Common Stock
and Tyco Common Stock and compared their respective performance to the price
performance of the S&P 500 and of indices comprised of comparable toy
manufacturers. Allen & Company also reviewed the recent volume trading history
of Mattel Common Stock and Tyco Common Stock, at a series of price ranges over
a range of dates.
Allen & Company noted that the Merger Agreement provides that each
outstanding share of Tyco Common Stock will be exchanged in the Merger for a
number of shares of Mattel Common Stock determined by the Exchange Ratio,
which is to be determined on the Effective Date by dividing (i) $12.50 by (ii)
the average of the high and low sales prices of Mattel Common Stock as
reported on the NYSE Composite Tape on each of the ten consecutive trading
days immediately preceding the fifth trading day prior to the Effective Date
such that the Exchange Ratio is not more than 0.51129 or less than 0.37791.
The Exchange Ratio also determines the range within which the consideration
paid per share remains at $12.50 (the "Exchange Collar"). In addition, each
outstanding share of Tyco Series C Preferred Stock will be converted into one
share of Mattel Series C Preferred Stock and each outstanding share of Tyco
Series B Preferred Stock will be converted into one share of Mattel Series B
Preferred Stock.
Allen & Company presented a sensitivity analysis of the value per share of
Tyco Common Stock of the Merger consideration based on the Exchange Collar and
a range of determination prices for Mattel Common Stock upon the Effective
Date. The Exchange Collar represents a 15% decrease and a 15% increase,
respectively, from the Exchange Collar midpoint price of $28.76 fixed on
November 17, 1996. Allen & Company noted that within the Exchange Collar range
the value per share received for each share of Tyco Common Stock would be
$12.50 (the "Per Share Value"), and that above the Exchange Collar range the
value would exceed $12.50 and below the Exchange Collar range the value would
be less than $12.50. Allen & Company's analysis indicated that, based on an
illustrative range of determination prices at the Effective Date for Mattel
Common Stock of $18.70 to $38.83, the value per Tyco common share of the
Merger consideration would range from $9.56 to $14.68, respectively, and the
resulting premium, based on Tyco Common Stock price on November 15, 1996,
would range from 37% to 110%, respectively.
Allen & Company analyzed the implied valuation of Tyco based on the Merger
consideration on a public market basis. The valuation analysis involved
determining the equity value (the "Equity Value") of Tyco based on the product
of (i) the $12.50 Per Share Value and (ii) the sum of (a) the number of
outstanding shares of Tyco Common Stock, (b) the total number of options
outstanding, (c) the number of shares of restricted stock units and restricted
shares outstanding, (d) the number of shares of Tyco Common Stock represented
by the conversion of Tyco Convertible Subordinated Notes, and (e) the number
of shares of Tyco Common Stock represented by the conversion of Tyco Series B
Preferred Stock plus the number of shares of Tyco Common Stock represented by
the conversion of Tyco Series C Preferred Stock. Adjusting the Equity Value by
adding Tyco's long-term debt less cash less estimated proceeds from the
exercise of options yielded an implied enterprise value (the "Enterprise
Value") for Tyco. The valuation analysis of Allen & Company derived a public
market Equity Value of Tyco of $756 million and a public market Enterprise
Value of Tyco of $831 million.
Allen & Company noted that, based on the closing price of Tyco Common Stock
of $7.00 on November 15, 1996, the Merger consideration represented a premium
of 79% based on consideration of $12.50 per share of Tyco Common Stock.
Allen & Company performed a valuation multiple analysis of Tyco based on the
Merger consideration and noted that the Equity Value represented valuation
multiples of book value at June 30, 1996, estimated book value at December 31,
1996 and estimated net income for 1997 that were greater than the same
respective multiples using the price of Tyco Common Stock on November 15,
1996. Allen & Company also noted that Enterprise Value represented valuation
multiples of last 12 months revenue, estimated 1996 revenue, estimated 1997
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revenue, last 12 months earnings before interest expense, income taxes,
depreciation and amortization ("EBITDA"), estimated 1996 EBITDA, estimated
1997 EBITDA, estimated 1996 earnings before interest expense and income taxes
("EBIT") and estimated 1997 EBIT that were generally higher than the same
respective multiples using the price of Tyco Common Stock on November 15,
1996.
Allen & Company analyzed the Enterprise Value represented by the
consideration to be received by Tyco stockholders in the Merger based upon the
$12.50 Per Share Value as multiples of various financial performance criteria,
including estimated 1996 revenue (1.1x), estimated 1996 EBITDA (12.3x) and
estimated 1996 EBIT (20.4x), and compared such figures to the market trading
multiples of selected publicly traded toy companies (Mattel; Hasbro, Inc.;
Lewis Galoob Toys, Inc.; Russ Berrie and Company, Inc. and Toy Biz Inc.).
Allen & Company noted such multiples of financial performance criteria for the
selected group of comparable companies ranged from 0.9x to 2.3x and averaged
1.6x for the estimated 1996 revenues, ranged from 6.5x to 17.7x and averaged
9.1x for estimated 1996 EBITDA and ranged from 8.3x to 18.2x and averaged
11.5x for estimated 1996 EBIT.
Allen & Company also analyzed the Enterprise Value represented by the
consideration to be received by Tyco stockholders in the Merger based upon the
$12.50 Per Share Value as a multiple of latest twelve month ("LTM") revenue
(1.2x) and EBITDA (20.1x) and compared such amounts to those derived from
selected comparable merger and acquisition transactions that occurred in the
toy industry during the period from 1984 through November 1996. Allen &
Company looked at transactions over a 13 year time period in order to include
enough comparable transactions in the sample to make comparison meaningful.
Allen & Company noted that the amount of EBIT for the LTM period resulted in a
multiple of Enterprise Value as a multiple of LTM EBIT that was not meaningful
for comparative purposes. Allen & Company noted that the multiples of
Enterprise Value among all transactions ranged from 0.4x to 1.9x and averaged
1.0x for LTM revenue and ranged from 5.6x to 19.0x and averaged 9.4x for LTM
EBITDA and ranged from 6.2x to 14.3x and averaged 10.6x for LTM EBIT and for
the transactions over $200 million ranged from 0.7x to 1.9x and averaged 1.2x
for LTM revenue and ranged from 6.7x to 13.3x and averaged 8.3x for LTM EBITDA
and ranged from 8.1x to 19.5x and averaged 12.0x for LTM EBIT. In addition,
Allen & Company compared the Equity Value represented by the consideration to
be received by Tyco stockholders in the Merger based upon the $12.50 Per Share
Value as a multiple of LTM Book Value (2.2x) to the same comparable merger and
acquisition transactions and noted that the multiple of Equity Value among all
transactions averaged 5.4x LTM Book Value and for transactions over $200
million averaged 2.4x LTM Book Value. Allen & Company noted that the
consideration to be received by Tyco's stockholders based on a multiple of LTM
Book Value was below the average multiples paid for all transactions and for
transactions greater than $200 million but was within the range of multiples
paid for such transactions. Allen & Company also analyzed the Equity Value
represented by the consideration of $12.50 per share to be received by Tyco
stockholders as a premium to Tyco's closing trading price one day prior to the
announcement of the Merger (79%), one week prior to the announcement (82%) and
four weeks prior to the announcement (104%) and compared such premiums to
those paid in comparable all-stock merger and acquisition transactions that
occurred between November 1994 and November 1996 that ranged from $500 million
to $1 billion in transaction value and that excluded all transactions in the
financial services industry. Allen & Company noted that in these selected all-
stock transactions, the premium paid to the acquiree's stock price one day
prior to announcement ranged from -7% to 119% and averaged 35%, for one week
prior to announcement ranged from -6% to 135% and averaged 39% and for four
weeks prior to announcement ranged from 1% to 192% and averaged 55%.
Allen & Company prepared pro forma merger analyses of the financial impact
of the Merger on Tyco and the resulting effects to the stockholders of Tyco
based on various scenarios. These analyses, which were based on Tyco's
internal estimates for 1997 and 1998, Wall Street analysts' estimates for
Mattel for 1997 and 1998 and Tyco's management's estimates of potential
expense savings that could result from the combination of the two companies,
indicated that the Merger would result in accretion to the earnings per share
of the post-Merger combined entity (of which current Tyco stockholders will
become stockholders in the Merger) in 1997 and 1998, compared to Wall Street
analysts' estimates for Mattel for 1997 and 1998 under all such scenarios,
excluding all
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restructuring and transaction expenses. Allen & Company noted that, because
current Tyco stockholders would become stockholders of the post-Merger
combined entity, Tyco stockholders would benefit from the accretion to the
post-Merger combined entity's earnings, including from the higher stock price
that would result if the stock of the post-Merger combined entity were to
trade at the same price-to-earnings ratio as Mattel's stock does now.
Allen & Company also performed an analysis to estimate the potential time it
would take for Tyco's hypothetical independent public market valuation to
reach the $12.50 Per Share Value. Allen & Company's analysis assumed the
current EBITDA trading multiple of 8.7x for Tyco and the mean earnings per
share ("EPS") multiple for the companies listed above that were deemed
comparable by Allen & Company. The analysis considered Tyco's EBITDA estimates
as well as publicly available Wall Street estimates for the same respective
periods. Under the assumptions used, this analysis indicated that Tyco's
hypothetical independent public market valuation would not likely reach the
$12.50 Per Share Value until 1998. In addition, Allen & Company analyzed the
pro forma combination of Tyco and Mattel based on current market trading
multiples for Mattel, which analysis suggested that the value of Tyco
shareholders' ownership of Mattel after the transaction could be higher than
the hypothetical independent market value of Tyco.
No company used in the comparable company analyses summarized above is
identical to Tyco, and no transaction used in the comparable transaction
analysis summarized above is identical to the Merger. Accordingly, any such
analysis of the value of the consideration to be received by the holders of
Tyco Common Stock pursuant to the Merger involves complex considerations and
judgments concerning differences in the potential financial and operating
characteristics of the comparable companies and transactions and other factors
in relation to the trading and acquisition values of the comparable companies.
The preparation of a fairness opinion is not susceptible to partial analysis
or summary description. Allen & Company believes that its analyses and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete view of the processes
underlying the analysis set forth in its opinion. Allen & Company has not
indicated that any of the analyses which it performed had a greater
significance than any other.
In determining the appropriate analyses to conduct and when performing those
analyses, Allen & Company made numerous assumptions with respect to industry
performance, general business, financial, market and economic conditions and
other matters, many of which are beyond the control of Tyco or Mattel. The
analyses which Allen & Company performed are not necessarily indicative of
actual values or actual future results, which may be significantly more or
less favorable than suggested by such analyses. Such analyses were prepared
solely as part of Allen & Company's analysis of the fairness, from a financial
point of view, of the consideration which the holders of Tyco Common Stock
would receive pursuant to the Merger. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be sold
or the prices at which any securities may trade at the present time or at any
time in the future.
Allen & Company is a nationally recognized investment banking firm that is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive bids, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
Tyco retained Allen & Company based on such qualifications as well as its
familiarity with Tyco.
Tyco first engaged Allen & Company in 1993 to advise Tyco on the raising of
working capital funds (which resulted in the placement of the Tyco Series B
Preferred Stock), and later to advise Tyco with regard to the exploration of
strategic options and alternatives. Tyco entered into a letter agreement with
Allen & Company dated February 6, 1995, as amended through and on November 17,
1996 (the "Engagement Letter"), pursuant to which Allen & Company continued
its engagement as Tyco's financial advisor. Pursuant to the Engagement Letter,
Tyco agreed to pay Allen & Company a fee in the event of a transaction, and in
connection with the Engagement Agreement, Allen & Company was asked by Tyco to
evaluate the fairness, from a financial point of view, of the consideration to
be received by holders of Tyco Common Stock, Tyco Series B Preferred Stock and
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Tyco Series C Preferred Stock pursuant to the Merger. Pursuant to the
Engagement Letter, Allen & Company shall be paid a fee of $12 million in cash
upon consummation of the Merger. Tyco has agreed, pursuant to the Engagement
Letter, to reimburse Allen & Company for all its reasonable out-of-pocket
expenses, including the fees and disbursements of its counsel, incurred in
connection with its engagement by Tyco and to indemnify Allen & Company
against certain liabilities and expenses in connection with its engagement.
MERGER CONSIDERATION: EFFECTS AND CONSEQUENCES OF THE COLLAR MECHANISM
As described under "The Merger Agreement--Conversion of Tyco Capital Stock,"
each share of Tyco Common Stock will be converted into the right to receive a
number of shares of Mattel Common Stock equal to $12.50 divided by the
Measurement Price (the average of the high and low sales prices of Mattel
Common Stock during the Measurement Period), except that (1) if the
Measurement Price is below $24.44796, holders of Tyco Common Stock will
receive .51129 of a share of Mattel Common Stock for each share of Tyco Common
Stock converted, an amount which would have a market value of less than $12.50
(as measured during the Measurement Period), and (2) if the Measurement Price
is above $33.07666, holders of Tyco Common Stock will receive .37791 of a
share of Mattel Common Stock for each share of Tyco Common Stock converted, an
amount which would have a market value of greater than $12.50 (as measured
during the Measurement Period). The pricing mechanism described above, in
which the exchange ratio becomes fixed if the Measurement Price rises above or
falls below a range of prices is referred to as a "collar." Mattel and Tyco
believe that a collar mechanism is not an uncommon feature of transactions
like the Merger. Mattel and Tyco agreed to include a collar for the exchange
ratio because each believed a collar would provide valuable protection for its
respective stockholders in the event of a significant increase (in the case of
Tyco stockholders) or significant decrease (in the case of Mattel
stockholders) in the price of Mattel Common Stock prior to closing. PURSUANT
TO THE MERGER AGREEMENT, CHANGES IN MATTEL'S STOCK PRICE DO NOT GIVE RISE TO
ANY TERMINATION, WALK-AWAY, RESOLICITATION OR OTHER RIGHTS FOR EITHER TYCO OR
MATTEL. See "The Merger Agreement--Termination; Fees and Expenses." The
closing sales price of a share of Mattel Common Stock on the NYSE Composite
Tape on February 12, 1997 was $25.875. The average of the high and low sales
prices for the ten trading days up to and including February 12, 1997 was
$26.99375. See "Comparative Per Share Prices and Dividends."
TYCO STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT PRICE QUOTATION FOR SHARES
OF MATTEL COMMON STOCK PRIOR TO CASTING THEIR VOTES IN CONNECTION WITH THE
SPECIAL MEETING. STOCKHOLDERS CAN OBTAIN A CURRENT QUOTATION FOR MATTEL COMMON
STOCK FREE OF CHARGE BY CALLING 1-800-624-4296 AT ANY TIME PRIOR TO THE
SPECIAL MEETING.
Mattel and Tyco currently intend to consummate the Merger as soon as
possible after the Special Meeting, subject to the satisfaction of all of the
conditions to each party's obligation to consummate the Merger set forth in
the Merger Agreement. See "The Merger Agreement--Conditions to Consummation of
the Merger." Although Tyco and Mattel believe that such conditions will be
satisfied at the time of or shortly after the Special Meeting, it is possible
that consummation of the transaction (and, consequently, the Measurement
Period) could be delayed due to the failure of any condition to be met,
including, without limitation, failure of the applicable waiting period under
Antitrust Law to expire. See "--Certain Legal Matters" and "The Merger
Agreement--Conditions to Consummation of the Merger." In the event
consummation of the Merger is delayed for any reason, Mattel and Tyco have
agreed in the Merger Agreement (see "The Merger Agreement--Covenants") to work
together diligently to resolve any obstacles to consummation of the Merger as
promptly as possible prior to July 17, 1997, or, in the case of delays caused
by antitrust considerations, November 17, 1997 (together, the "Deadlines"), at
which time the Merger Agreement would become terminable by either party. See
"The Merger Agreement--Termination; Fees and Expenses." Tyco and Mattel agreed
to the Deadlines specifically to ensure that the Merger would either occur or
be terminated within a reasonable period, and the Tyco Board considered the
existence of the Deadlines in determining to approve and recommend the Merger.
Both Tyco and Mattel negotiated the Exchange Ratio determination mechanism
and the collar and approved the Merger with the understanding that the
Measurement Price could be above or below the collar range. See "--Background
of the Merger." As a consequence, neither Tyco nor Mattel presently intends to
delay
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consummation of, amend in any material respect, or resolicit stockholder
approval for the Merger in the event that the Measurement Price is outside of
the collar range, or in the event that there is a delay between the Special
Meeting and the closing. The Tyco Board believes that it has fiduciary
obligations under state law to act in the best interests of Tyco stockholders
and to ensure full and candid disclosure of all material information
concerning matters to be presented for a vote at the Special Meeting. While
Tyco believes that the Merger on the terms agreed is fair to and in the best
interests of Tyco stockholders (see "--Recommendation of the Tyco Board;
Tyco's Reasons for the Merger") and that all material information concerning
the Merger has been disclosed in this Proxy Statement/Prospectus (including
the information incorporated herein by reference), Tyco believes that there
could be certain circumstances in which the Tyco Board could determine, as a
fiduciary matter, to resolicit proxies for a vote of Tyco stockholders or take
other action with respect to the Merger. Tyco is not in a position to
speculate as to what such circumstances would be or as to what actions Tyco
might take, and does not consider such circumstances or such actions likely.
In making the determination whether to take any such action, the Tyco Board
would take into account the possibility that Mattel could assert that such
action constitutes a breach of the Merger Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Messrs. Grey, Baughman and Pearce are covered by employment agreements which
entitle each of them to benefits upon a termination of employment following a
change of control. If the executive's employment is terminated within six
months following a change of control the executive will receive an amount
equal to the product of (i) 2.99 and (ii) the average of the executive's base
salary plus annual bonus for the five calendar years prior to the date of
termination. However, to the extent payments and benefits provided the
executive would be subject to the excise tax under (S)4999 of the Code, such
payments shall be reduced to the extent necessary to avoid such excise tax.
The employment agreements with each of Messrs. Grey, Baughman and Pearce will
be amended as follows: (a) all "change of control" provisions contained in
such agreements will be amended to extend through the Effective Date, the date
by which a change of control (as defined in the agreements) must occur in
order for the executive to become entitled to change of control benefits
thereunder; and (b) each executive shall be reimbursed by Tyco (or, after the
Effective Date, by Mattel), for all reasonable expenses incurred (including,
without limitation, reasonable legal fees and expenses) by the executive to
enforce the terms of his employment agreement.
Mr. Baughman's employment agreement will be amended (i) to eliminate the
requirement for Mr. Baughman to have "Good Reason" (as defined in his
agreement) to terminate his employment upon a change of control; (ii) to
provide change of control benefits upon Mr. Baughman's voluntary resignation
for any or no reason following a change of control; and (iii) to provide for
payment immediately upon a change of control in a single lump sum of amounts
payable under the agreement to Mr. Baughman upon a change of control.
The employment agreements with Messrs. Grey, Baughman and Pearce will be
amended as follows: medical, health, life, executive medical, long-term and
short-term disability insurance coverage under the Tyco benefit plans will be
provided at Tyco's (or, after the Effective Date, Mattel's) expense for 24
months following their respective terminations of employment, provided that
such continued coverage is permitted under the general terms and conditions of
such plans. Such coverage will, to the extent permitted under such plans, be
identical to coverage provided by the Tyco plans at the time the Merger
Agreement was executed. In the event that such coverage is unavailable to the
aforementioned executives, Tyco (or Mattel, as the case may be) shall provide
equivalent coverage for such executives. In addition, provisions in the
employment agreements with Messrs. Grey, Baughman and Pearce describing
limitations on amounts of change of control payments were eliminated from such
agreements.
Assuming the termination of Messrs. Grey, Baughman and Pearce in a manner
resulting in the payment of the benefits under their respective employment
agreements beginning immediately following the Effective Date, the estimated
cost to Mattel of such benefits would be approximately $6.7 million in the
aggregate. In addition Messrs. Grey, Baughman and Pearce will receive benefits
aggregating $5.0 million consisting of payments under the Retention Plan and
the benefits of the exchange of restricted stock and unvested stock options in
the Merger.
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Pursuant to the Merger Agreement, Tyco will establish an $8 million Key
Executive Retention Program (the "Retention Plan") out of which Tyco may, at
its discretion, make payments or enter into commitments to make payments of up
to $5 million under such Retention Plan. Any payments or commitments to make
payments in excess of $5 million requires the prior written consent of Mattel,
which consent shall not be unreasonably withheld. Nineteen senior management
employees of Tyco and its subsidiaries will be included in the Retention Plan,
including Messrs. Grey, Baughman, Pearce. Amounts payable under the Retention
Plan shall be payable in a single lump sum at the Effective Date. Employees
participating in the Retention Plan may be requested by Mattel to facilitate
matters critical to continuing the operations of Tyco during the transition.
Pursuant to the Merger Agreement, in December 1996 Tyco declared and paid to
plan participants the maximum bonus amounts for fiscal 1996 under the Tyco
Toys, Inc. Executive Bonus Plan (the "Bonus Plan"). In addition, all
distributions under the Tyco Toys, Inc. Deferred Stock Unit Plan (the "Unit
Plan"), when made in accordance with applicable provisions of the plan, shall
be made in a single distribution on or after the Effective Date.
Pursuant to the Merger Agreement, Tyco's employment agreement with Mr.
Michael J. Lyden, President of Tyco USA and Executive Vice President of Tyco,
will be amended to provide that Mr. Lyden will receive payments from Tyco (or,
after the Effective Date, from Mattel) equaling the sum of (i) 50% of any and
all excise taxes incurred by Mr. Lyden with respect to any and all change of
control payments received by Mr. Lyden (the "Excise Tax Payment"), and (ii)
any and all other taxes incurred by Mr. Lyden with respect to such payment to
Mr. Lyden of such Excise Tax Payment (the "Other Tax"). Such payments will be
paid at the time any such tax is incurred (without the necessity of an actual
cash outlay by Mr. Lyden), and, in the case of such payments made with respect
to the Other Tax, shall be determined using the highest marginal tax rates in
effect at the time of such payment. However, payments shall not exceed
$250,000.
The Merger Agreement provides that, after the Effective Date, Mattel will
indemnify and hold harmless the directors, officers and employees of Tyco
against any losses, claims, damages, expenses or obligations arising out of
the transactions contemplated by the Merger Agreement. Mattel agreed in the
Merger Agreement that all rights to indemnification existing in favor of
directors, officers, or employees of Tyco as provided in Tyco's Restated
Certificate of Incorporation, as amended (the "Tyco Charter") or in the Tyco
Bylaws, in effect on the date of the Merger Agreement with respect to matters
occurring through the Effective Date, shall survive the Merger and shall
continue in full force and effect for a period of not less than six years from
the Effective Date. The Merger Agreement provides that, with respect to
matters occurring prior to the Effective Date, Mattel will maintain directors'
and officers' liability insurance policies as currently maintained by Tyco for
two years after the Effective Date to the extent that such policies are
obtainable at an annual cost of not greater than $410,000; provided that if
such coverage is not available for such amount, Mattel shall purchase as much
coverage as possible for such amount.
Pursuant to the Merger Agreement, Tyco shall establish prior to the
Effective Date a bonus plan to provide payments to employees who remain
employed by Tyco and its subsidiaries through the Effective Date and, unless
involuntarily terminated without cause by Mattel earlier, remain employed by
Mattel and its affiliates for six months thereafter. Payments under such plan
shall be made by Mattel on the six-month anniversary of the Effective Date or
at such earlier time after the Effective Date as an eligible employee's
employment with Mattel or its affiliates shall be terminated involuntarily
without cause. Tyco and Mattel shall, in writing, mutually select employees of
Tyco and its subsidiaries eligible to participate in the plan. In no event
shall the aggregate payments under the plan exceed $10,000,000.
Also see "The Merger Agreement--Indemnification," and "The Merger--Effect on
Employee Benefits Plans."
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
General. The following is a summary description of the material United
States federal income tax consequences of the Merger. This summary is not a
complete description of all of the consequences of the Merger and, in
particular, may not address United States federal income tax considerations
that may affect the treatment of a stockholder which, at the Effective Date,
is not a U.S. person, is a tax-exempt entity or an individual who acquired
Tyco Common Stock pursuant to an employee stock option or otherwise as
compensation. In addition, no information is provided herein with respect to
the tax consequences of the Merger under applicable foreign, state or local
laws. The following discussion is based on the Code, as in effect on the date
of this Proxy Statement/Prospectus, without consideration of the particular
facts or circumstances of any holder of Tyco Common Stock. Consequently, each
Tyco stockholder is advised to consult his or her tax advisor as to the
specific tax consequences to him or her of the Merger.
The Merger. The obligation of Mattel and Tyco to effect the Merger is
conditioned upon the delivery of an opinion to Mattel from Wachtell, Lipton,
Rosen & Katz, its counsel, and an opinion to Tyco from Baer Marks & Upham LLP,
its counsel, each dated as of the Effective Date, based upon certain customary
representations and assumptions set forth therein, substantially to the effect
that for United States federal income tax purposes the Merger constitutes a
reorganization within the meaning of Section 368(a) of the Code.
Based on such opinions, the material United States federal income tax
consequences of the Merger will be:
(i) no gain or loss will be recognized by Mattel or by Tyco as a result
of the Merger;
(ii) no gain or loss will be recognized by Tyco stockholders upon their
exchange of Tyco Capital Stock for Mattel Common Stock, Mattel Series B
Preferred Stock or Mattel Series C Preferred Stock, except that a Tyco
stockholder who receives cash proceeds in lieu of a fractional share
interest in Mattel Common Stock will recognize a gain or loss equal to the
difference between the cash received and the tax basis allocated to the
fractional share interest;
(iii) the tax basis of the Mattel Common Stock, Mattel Series B Preferred
Stock or Mattel Series C Preferred Stock received by a Tyco stockholder who
exchanges his or her Tyco Capital Stock for Mattel Common Stock, Mattel
Series B Preferred Stock or Mattel Series C Preferred Stock will be the
same as such stockholder's tax basis in the Tyco Capital Stock surrendered
in exchange therefor (reduced by any tax basis allocable to a fractional
share interest for which cash is received); and
(iv) the holding period of the Mattel Common Stock, Mattel Series B
Preferred Stock or Mattel Series C Preferred Stock received by a Tyco
stockholder will include the period during which the Tyco Capital Stock
surrendered in exchange therefor was held (provided that such Tyco Capital
Stock was held by such Tyco stockholder as a capital asset at the Effective
Date).
Information Reporting and Backup Withholding. Payments in respect of Tyco
Capital Stock may be subject to information reporting to the Internal Revenue
Service and to a 31% backup withholding tax. Backup withholding will not
apply, however, to a payment to a Tyco stockholder or other payee if such
stockholder or payee completes and signs the substitute Form W-9 that will be
included as part of the transmittal letter or otherwise proves to the combined
company and the Exchange Agent that it is exempt from backup withholding.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests in conformity with GAAP. Under such method of accounting, holders of
Tyco Common Stock will be deemed to have combined their existing voting common
stock interest with that of holders of Mattel Common Stock by exchanging their
shares for shares of Mattel Common Stock. Accordingly, the book value of the
assets, liabilities and stockholders' equity of Tyco, as reported on its
consolidated balance sheet, will be carried over to the consolidated balance
sheet of the combined company and no goodwill will be created. The combined
company will be able to include in its consolidated income the consolidated
income of both companies for the entire fiscal year in which the
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Merger occurs; however, certain expenses incurred to effect the Merger must be
treated as current charges against income rather than adjustments to the
balance sheet.
The unaudited pro forma financial information contained in this Proxy
Statement/Prospectus has been prepared using the pooling of interests
accounting method to account for the Merger. See "Selected Historical and Pro
Forma Combined Financial Data" and "Unaudited Pro Forma Condensed Combined
Financial Statements."
Prior to the execution of the Initial Merger Agreement and subsequent to the
execution of the Amendment Agreement, Mattel received reports from Price
Waterhouse to the effect that, assuming the Merger is consummated in the
manner contemplated by the Merger Agreement, the Merger would properly be
accounted for as a pooling of interests in conformity with GAAP. Prior to the
execution of the Initial Merger Agreement, Tyco received an opinion from
Deloitte & Touche which addressed the ability of Tyco to enter into a
transaction to be accounted for as a pooling of interests in accordance with
GAAP. Deloitte & Touche's opinion was limited to specific criteria of APB
Opinion No. 16 that relate to actions of Tyco up to the date of the related
opinion. Such opinion concluded that with regard to the specific criteria
considered and related solely to prior actions of Tyco, such actions would not
preclude Tyco from entering into a transaction accounted for as a pooling of
interests in accordance with GAAP. It is a condition to the obligations of the
parties to consummate the Merger that Mattel and Tyco receive reports from
Price Waterhouse and Deloitte & Touche, respectively, each confirming the
assertions contained in the respective reports of Price Waterhouse and
Deloitte & Touche described above. Under certain circumstances, Mattel will
pay Tyco a fee if the Merger Agreement is terminated as a result of failure of
the pooling of interests condition. See "The Merger Agreement--Termination;
Fees and Expenses."
EFFECT ON EMPLOYEE BENEFITS PLANS
Tyco maintains a number of employee benefit plans and compensation
arrangements in which eligible employees of Tyco and its subsidiaries
participate. After the Effective Date, Mattel will honor in accordance with
their terms, all employment, severance, consulting and other compensation
contracts between Tyco or any of its subsidiaries and any current or former
director, officer or employee thereof, and all provisions for vested benefits
or other vested amounts earned or accrued through the Effective Date under
Tyco's benefit plans, each as of the date of the Merger Agreement except for
changes thereto which are (i) not material, (ii) permitted by the Merger
Agreement, or (iii) otherwise agreed to by Mattel and Tyco.
For a period of six months after the Merger, Mattel shall provide generally
to the officers and employees of Tyco and its subsidiaries employee benefits,
including, without limitation, pension benefits, health and welfare benefits,
and severance arrangements, on terms and conditions in the aggregate that are
no less favorable than those provided under the benefit plans maintained by
Tyco as of the date of the Merger Agreement.
While no material changes in the aggregate benefits provided under the Tyco
employee benefit programs are contemplated for a period of at least six months
following the Merger, a number of these arrangements contain "change of
control" provisions which will be triggered by the Merger and which have the
consequences discussed below.
The Tyco Toys, Inc. 1992 Non-Qualified Stock Option Plan (the "Option Plan")
provides benefits for eligible participants in the form of stock options. As a
result of the Merger, each of the outstanding rights with respect to Tyco
Common Stock pursuant to stock options granted by Tyco under the Option Plan
("Tyco Stock Options") shall be converted into and become the right to receive
a number of full shares of Mattel Common Stock equal to its fair value as of
the Effective Date, as mutually agreed between Mattel and Tyco. Tyco will use
reasonable efforts to obtain any consents or releases reasonably deemed
necessary or appropriate by Mattel in connection with this conversion.
The Unit Plan provides benefits for eligible participants in the form of
deferred restricted stock units (each, a "Tyco Restricted Stock Unit"). As a
result of the Merger, each Tyco Restricted Stock Unit vested as of the
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Effective Date shall be converted into and become the right to receive a
number of shares of Mattel Common Stock equal to the Exchange Ratio, which
Tyco and Mattel have determined to be the fair value of such unit. Each Tyco
Restricted Stock Unit which has not vested as of the Effective Date shall be
converted into and become the right to receive a number of shares of Mattel
Common Stock equal to .3272 multiplied by the Exchange Ratio, which Mattel and
Tyco have determined to be the fair value of each such unit.
The Bonus Plan provides benefits for eligible participants in the form of
restricted stock. As a result of the Merger, shares of Tyco Common Stock under
the Bonus Plan (all of which are vested) shall be converted into and become
the right to receive a number of shares of Mattel Common Stock equal to the
Exchange Ratio.
The Tyco Toys, Inc. Restricted Stock Plan for Non-Employee Directors (the
"Directors Plan") provides benefits for eligible participants in the form of
restricted stock. As a result of the Merger, shares of Tyco Common Stock under
the Directors Plan (all of which are vested) shall be converted into and
become the right to receive a number of shares of Mattel Common Stock equal to
the Exchange Ratio.
The Deferred Compensation Plan for Non-Employee Directors of Tyco Toys, Inc.
(the "Deferred Compensation Plan") provides benefits for eligible participants
in the form of deferred stock awards. As a result of the Merger, any interests
in the deferred stock account under the Deferred Compensation Plan (all of
which are vested) shall be converted into and become the right to receive a
number of shares of Mattel Common Stock equal to the Exchange Ratio.
In addition to the employment agreements with Messrs. Grey, Baughman and
Pearce (see "--Interests of Certain Persons in the Merger") 19 other employees
of Tyco are covered by employment agreements which entitle each of the covered
employees to benefits upon a change of control. These agreements will entitle
each of the covered employees to a benefit equaling six months salary upon a
change of control provided that the employee is actively employed by Tyco on
the date the change of control occurs. The agreements also provide for
severance payments of from six month's to one year's salary and provide
medical and/or life insurance benefits (also for six months or one year) upon
termination of employment at any time without cause. These agreements are to
be amended as follows: (i) all "change of control" provisions contained in
such agreements will be amended to extend through the Effective Date, the date
by which a change of control (as defined in the agreements) must occur in
order for the employees to become entitled to change of control benefits
thereunder; (ii) each such employee shall be reimbursed by Tyco (or, after the
Effective Date, by Mattel), for all reasonable expenses incurred (including,
without limitation, reasonable legal fees and expenses) by the employee to
enforce the terms of his employment agreement; and (iii) all severance and
bonus payments payable to the employee upon termination of employment will be
paid in a single lump sum immediately upon termination of employment.
Pursuant to the Merger Agreement, after the Effective Date, Mattel will bear
the costs of providing, and will cause to be provided, out-placement services
to employees of Tyco, as agreed by Mattel and Tyco prior to the Effective
Date, who are terminated on or after the Effective Date.
Pursuant to the Merger Agreement, prior to the Effective Date, Tyco shall
establish a bonus plan to provide payments to employees who remain employed by
Tyco and its subsidiaries through the Effective Date and, unless involuntarily
terminated without cause by Mattel earlier, remain employed by Mattel and its
affiliates for six months thereafter. Payments under such plan shall be made
by Mattel on the six-month anniversary of the Effective Date or at such
earlier time after the Effective Date as an eligible employee's employment
with Mattel or its affiliates shall be terminated involuntarily without cause.
Tyco and Mattel shall, in writing, mutually select employees of Tyco and its
subsidiaries eligible to participate in the plan. In no event shall the
aggregate payments under the plan exceed $10,000,000.
Other than those disclosed in the foregoing discussion, there are no
agreements between Mattel and Tyco with respect to the treatment of Tyco
employees and their benefits. For a description of arrangements with members
of Tyco's senior management see "--Interests of Certain Persons in the
Merger."
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CERTAIN LEGAL MATTERS
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act") and the rules promulgated thereunder, the Merger
may not be consummated until notifications have been given and certain
information has been furnished to the Antitrust Division of the United States
Department of Justice (the "Antitrust Division") and the United States Federal
Trade Commission (the "FTC") and specified waiting periods have expired. On
November 25, 1996, Tyco and Mattel each filed a Notification and Report Form
for review under the HSR Act with the FTC and the Antitrust Division. On
December 23, 1996, the FTC submitted to Mattel and Tyco a request for
additional information and documentary material (the "Second Request"). Mattel
and Tyco are in the process of furnishing information in response to the
Second Request. Under the HSR Act, the applicable waiting period during which
the Merger may not be consummated will expire on the 20th day after the date
on which Mattel and Tyco have "substantially complied" with the Second
Request. On January 23, 1997, the FTC issued Civil Investigative Demands
("CIDs") to both Mattel and Tyco in connection with the FTC's investigation of
the proposed Merger. The CIDs will not affect the applicable waiting period.
The parties intend to comply with the CIDs as soon as practicable.
Mattel and Tyco do not believe that any additional governmental filings in
the United States, other than the Certificate of Merger to be filed in
Delaware, are required with respect to the Merger. At any time before or after
consummation of the Merger, the FTC or the Antitrust Division or certain
private parties could take such action under the antitrust laws as they deem
necessary or desirable, including seeking divestiture of substantial assets of
Tyco or Mattel. Consummation of the Merger is conditioned upon, among other
things, the absence of any preliminary or permanent injunction or other order
issued by any court or other judicial or administrative body of competent
jurisdiction which prohibits or prevents the consummation of the Merger.
Mattel and Tyco do not believe that the consummation of the Merger will
result in a violation of any applicable antitrust laws. However, there can be
no assurance that a challenge to the Merger on antitrust grounds will not be
made or, if such a challenge is made, of the result. Under certain
circumstances, Mattel will pay Tyco a fee if the Merger Agreement is
terminated due to an inability to satisfy certain antitrust-related
conditions. See "The Merger Agreement--Termination; Fees and Expenses."
Foreign Approvals. Mattel and Tyco conduct operations in a number of foreign
countries where regulatory filings or approvals may be required in connection
with the consummation of the Merger. Mattel and Tyco believe that all such
material filings and approvals have been made or obtained, or will be made or
obtained, as the case may be.
RESALES OF MATTEL CAPITAL STOCK RECEIVED IN THE MERGER
The Mattel Common Stock and Mattel Series C Preferred Stock issued pursuant
to the Merger will be freely transferable under the Securities Act of 1933, as
amended (the "Securities Act"), except for shares issued to any Tyco
stockholder who may be deemed to be an affiliate of Mattel for purposes of
Rule 144 promulgated under the Securities Act ("Rule 144") or an affiliate of
Tyco for purposes of Rule 145 promulgated under the Securities Act ("Rule
145") (each an "Affiliate"). Affiliates will include persons (generally
executive officers, directors and 10% stockholders) who control, are
controlled by, or are under common control with (i) Mattel or Tyco at the time
of the Special Meeting, or (ii) Mattel at or after the Effective Date.
Rules 144 and 145 will restrict the sale of Mattel Common Stock and Mattel
Series C Preferred Stock (including Mattel Series C Preferred Stock held in
the form of Mattel Series C Depository Shares) received in the Merger by
Affiliates and certain of their family members and related interests.
Generally speaking, during the two years following the Effective Date, those
persons who are Affiliates of Tyco at the time of the Special Meeting
(provided they are not Affiliates of Mattel at or following the Effective
Date) may publicly resell any Mattel Common Stock and Mattel Series C
Preferred Stock received by them in the Merger, subject to certain limitations
as to, among other things, the amount of Mattel Common Stock and Mattel Series
C Preferred Stock, as the case may be, sold by them in any three-month period
and as to the manner of sale. After the two-year period, such Affiliates may
resell their shares without such restrictions so long as there is adequate
current public
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information with respect to Mattel as required by Rule 144. Persons who become
Affiliates of Mattel prior to, or at or after the Effective Date, may publicly
resell the Mattel Common Stock and Mattel Series C Preferred Stock received by
them in the Merger subject to similar limitations and subject to certain
filing requirements specified in Rule 144.
The ability of Affiliates to resell shares of Mattel Common Stock and Mattel
Series C Preferred Stock received in the Merger under Rule 144 or Rule 145 as
summarized herein generally will be subject to Mattel's having satisfied its
reporting requirements under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") for specified periods prior to the time of sale.
Affiliates also would be permitted to resell Mattel Common Stock and Mattel
Series C Preferred Stock received in the Merger pursuant to an effective
registration statement under the Securities Act or another available exemption
from the Securities Act registration requirements.
This Proxy Statement/Prospectus does not cover any resales of Mattel Common
Stock or Mattel Series C Preferred Stock received by persons who may be deemed
to be Affiliates of Mattel or Tyco in the Merger.
Commission guidelines regarding qualifying for the pooling of interests
method of accounting also limit sales of shares of the acquiring and acquired
company by affiliates of either company in a business combination. Commission
guidelines indicate further that the pooling of interests method of accounting
will generally not be challenged on the basis of sales by affiliates of the
acquiring or acquired company if they do not dispose of any of the shares of
the corporation they own or shares of a corporation they receive in connection
with a merger during the period beginning 30 days before the merger and ending
when financial results covering at least 30 days of post-merger operations of
the combined entity have been published. Tyco has agreed in the Merger
Agreement to use its best efforts to cause each person who is an Affiliate
(for purposes of Rule 145 and for purposes of qualifying the Merger for
pooling of interests accounting treatment) of Tyco to deliver to Mattel a
written agreement intended to ensure compliance with the Securities Act and
preserve the ability to treat the Merger as a pooling of interests.
Mattel has agreed in the Merger Agreement to publish, as soon as is
reasonably practicable but in no event later than 45 days after the end of the
first month ending at least 30 days after the Effective Date, results
including at least 30 days of combined operations of Mattel and Tyco in
accordance with the terms of the Commission's Accounting Series Release No.
135.
Shares of Mattel Series B Preferred Stock issued in the Merger are not
being registered under the Securities Act. Consequently, the recipients of
such shares may transfer such shares only pursuant to an effective
registration statement under the Securities Act or an available exemption from
the Securities Act registration requirements with respect to such shares.
STOCK EXCHANGE LISTING
It is a condition to the Merger that the shares of Mattel Common Stock and
Mattel Series C Depositary Shares to be issued in connection with the Merger
be authorized for listing on the NYSE, subject to official notice of issuance.
DIVIDEND
Mattel expects to continue to declare until the Effective Date regularly
scheduled dividends on Mattel Common Stock, and Tyco expects to continue to
declare until the Effective Date regularly scheduled dividends on Tyco Series
B Preferred Stock and on Tyco Series C Preferred Stock. Tyco does not pay
dividends on Tyco Common Stock. The Mattel Series B Preferred Stock and Mattel
Series C Preferred Stock issued in the Merger will accrue dividends from the
last dividend payment date on the Tyco Series B Preferred Stock and Tyco
Series C Preferred Stock, respectively.
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APPRAISAL RIGHTS
Under the DGCL, the holders of Tyco Capital Stock are not entitled to any
appraisal rights with respect to the Merger.
SUPPLEMENT TO TYCO RIGHTS AGREEMENT
Tyco is party to a Rights Agreement, dated as of September 8, 1988 (the
"Tyco Rights Agreement"), between Tyco and The Chase Manhattan Bank (as
successor to Manufacturers Hanover Trust Company), as Rights Agent, pursuant
to which, in connection with the Merger Agreement, Tyco has supplemented the
Tyco Rights Agreement to provide that neither the execution of the Merger
Agreement nor the consummation of the transactions contemplated thereby,
including the Merger, will result in the grant of any rights to any person
under the Tyco Rights Agreement to purchase or receive additional shares of
Tyco Capital Stock or enable or require the Tyco Rights (as defined herein) to
be exercised, distributed or triggered in any way. See "Comparison of
Stockholder Rights--Rights Plans."
THE MERGER AGREEMENT
GENERAL
The following is a description of all of the material terms of the Merger
Agreement. Such description does not, however, purport to be complete and is
qualified in its entirety by reference to the Initial Merger Agreement, a copy
of which is attached hereto as Annex A and incorporated herein by reference,
and to the Amendment Agreement, a copy of which is attached hereto as Annex B
and incorporated herein by reference. Stockholders of Tyco are urged to read
the Initial Merger Agreement and the Amendment Agreement (which together
constitute the Merger Agreement referred to in this Proxy
Statement/Prospectus) in their entirety.
THE MERGER
The Merger Agreement provides that, subject to the requisite approval of the
Merger by holders of Tyco Capital Stock and the satisfaction or waiver of the
other conditions to the Merger, Tyco will be merged with and into Mattel in
accordance with Delaware law, whereupon the separate existence of Tyco will
cease and Mattel will be the surviving corporation of the Merger. On the
Effective Date, Tyco Capital Stock, Tyco Stock Options, and Tyco Restricted
Stock Units will be converted into Mattel Common Stock, Mattel Series C
Preferred Stock or Mattel Series B Preferred Stock, as applicable, in the
manner described below. Mattel's Restated Certificate of Incorporation (the
"Mattel Charter") and Mattel's bylaws (the "Mattel Bylaws") will continue to
be the Certificate of Incorporation and bylaws, respectively, of Mattel as the
surviving corporation in the Merger. The directors and officers of Mattel
immediately prior to the Effective Date will continue to be the directors and
officers of Mattel until their respective successors are duly elected and
qualified.
EFFECTIVE DATE
The Merger will become effective on such date as a Certificate of Merger is
duly filed with the Secretary of State of Delaware. The filing of the
Certificate of Merger will be made as soon as practicable after all conditions
contemplated by the Merger Agreement have been satisfied or waived.
CONVERSION OF TYCO CAPITAL STOCK
At the Effective Date:
(i) each share of Tyco Capital Stock held by Tyco or any subsidiary of
Tyco or held by Mattel or any other subsidiary of Mattel immediately prior
to the Effective Date will be canceled, and no payment will be made with
respect thereto;
(ii) each remaining outstanding share of Tyco Common Stock shall be
converted into a number of shares of Mattel Common Stock equal to the
Exchange Ratio;
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(iii) each remaining outstanding share of Tyco Series C Preferred Stock
shall be converted into a share of Mattel Series C Preferred Stock with
substantially the same rights and preferences as correspond to Tyco Series
C Preferred Stock as contemplated by Section III(E) of the Certificate of
Designations for the Tyco Series C Preferred Stock; and
(iv) each remaining outstanding share of Tyco Series B Preferred Stock
shall be converted into one share of Mattel Series B Preferred Stock with
economic terms as nearly equivalent as possible to, and with the same
voting and other rights as correspond to Tyco Series B Preferred Stock;
The Merger Agreement provides that the Exchange Ratio is the number (rounded
to the nearest 1/100,000) obtained by dividing (i) $12.50 by (ii) the average
of the high and low sales prices of Mattel Common Stock as reported on the
NYSE on each of the trading days in the Measurement Period (which is defined
to be the ten consecutive trading days immediately preceding the fifth trading
date prior to the Effective Date), provided that the Exchange Ratio shall not
be less than .37791, nor greater than .51129. In addition, one Mattel Right
will be issued with and will attach to each share of Mattel Common Stock
issued to former Tyco Holders in the Merger. See "Comparison of Stockholder
Rights."
As of the Effective Date, present Tyco Holders will cease to have any rights
as holders of such shares, options or restricted stock units, but will have
the rights of holders of Mattel Common Stock, Mattel Series C Preferred Stock
or Mattel Series B Preferred Stock, as the case may be. After the Effective
Date, the stock transfer books of Tyco will be closed and there shall be no
further transfers of Tyco Capital Stock, Tyco Stock Options or Tyco Restricted
Stock Units. See "Comparison of Stockholder Rights."
FRACTIONAL SHARES
Fractional shares of Mattel Common Stock will not be issued in connection
with the Merger. In lieu of any such fractional share, each Tyco Holder who
would otherwise have been entitled to a fraction of a share of Mattel Common
Stock upon surrender of Certificates for exchange will be paid in cash
(without interest) in an amount equal to such holder's proportionate interest
in the net proceeds from the sale or sales in the open market by the Exchange
Agent, on behalf of all such holders, of the aggregate fractional Mattel
Common Stock issuable pursuant to the Merger Agreement. As soon as practicable
following the Effective Date, the Exchange Agent shall determine the excess of
(i) the number of full shares of Mattel Common Stock delivered to the Exchange
Agent by Mattel over (ii) the aggregate number of full shares of Mattel Common
Stock to be distributed to Tyco Holders (the "Excess Mattel Shares"), and the
Exchange Agent, as agent for the former Tyco Holders, will sell the Excess
Mattel Shares at the prevailing prices on the NYSE. The sale of the Excess
Mattel Shares by the Exchange Agent will be executed on the NYSE through one
or more member firms of the NYSE and will be executed in round lots to the
extent practicable. Mattel will pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of
the Exchange Agent, incurred in connection with such sale of Excess Mattel
Shares. Until the net proceeds of such sale have been distributed to the
former Tyco Holders, the Exchange Agent will hold such proceeds in trust for
such former holders. As soon as practicable after the determination of the
amount of cash to be paid to former Tyco Holders in lieu of any fractional
interests, the Exchange Agent will make available such amounts to such former
holders.
SURRENDER AND PAYMENT
The Merger Agreement provides that prior to the Effective Date, Mattel will
appoint The First National Bank of Boston, or such other person reasonably
satisfactory to Tyco, to act as the Exchange Agent for the Merger. As soon as
practicable after the Effective Date, Mattel will make available, and each
Tyco Holder will be entitled to receive, upon surrender to the Exchange Agent
of certificates representing such stock (or, in the case of Tyco Stock Options
or Tyco Restricted Stock Units, the relevant agreement or other evidence of
right and interest in such stock options or restricted stock units)
("Certificates") (see "--Effect On Tyco Stock Options, Restricted Stock and
Employee Benefit Plans") for cancellation, certificates representing the
number of shares of Mattel Common Stock, Mattel Series C Preferred Stock or
Mattel Series B Preferred Stock, as the case may be, into which such shares,
options or stock units are converted in the Merger and cash in consideration
of
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fractional shares, as described above. Mattel Common Stock, Mattel Series C
Preferred Stock or Mattel Series B Preferred Stock into which Tyco stock,
stock options and restricted stock units will be converted in the Merger shall
be deemed to have been issued at the Effective Date.
No dividends or other distributions that are declared or made on Mattel
Common Stock will be paid to persons entitled to receive certificates
representing Mattel Common Stock until such persons surrender their
Certificates. Upon such surrender, there shall be paid to the person in whose
name the certificates representing such Mattel Common Stock shall be issued
any dividends or other distributions which shall have become payable with
respect to such Mattel Common Stock in respect of a record date after the
Effective Date. In no event shall the person entitled to receive such
dividends be entitled to receive interest on such dividends. In the event that
any certificates representing shares of Mattel Common Stock, Mattel Series C
Preferred Stock, or Mattel Series B Preferred Stock, as the case may be, are
to be issued in a name other than that in which the Certificates surrendered
in exchange therefor are registered, it shall be a condition of such exchange
that the person requesting such exchange pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates for
such shares of Mattel Common Stock, Mattel Series C Preferred Stock, or Mattel
Series B Preferred Stock, as the case may be, in a name other than that of the
registered holder of the Certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, none of the Exchange Agent, Mattel,
Tyco nor Sub shall be liable to any Tyco Holder for any shares of Mattel
Common Stock or dividends thereon, any shares of Mattel Series C Preferred
Stock, or any shares of Mattel Series B Preferred Stock, as the case may be,
delivered to a public official pursuant to any applicable escheat laws.
In connection with the Merger, Mattel will deposit with the Depositary
shares of Mattel Series C Preferred Stock in exchange for the shares of Tyco
Series C Preferred Stock then on deposit with the Depositary, and thereafter
each Tyco Series C Preferred Depositary Share shall represent an interest in
one twenty-fifth of a share of Mattel Series C Preferred Stock. In addition,
Mattel will succeed Tyco as a party to the Deposit Agreement, and depositary
receipts representing Tyco Series C Depositary Shares will be exchanged for
depositary receipts representing Mattel Series C Depositary Shares.
DETAILED INSTRUCTIONS, INCLUDING A TRANSMITTAL LETTER, WILL BE MAILED TO
TYCO HOLDERS PROMPTLY FOLLOWING THE EFFECTIVE DATE AS TO THE METHOD OF
EXCHANGING CERTIFICATES FORMERLY REPRESENTING SHARES OF TYCO COMMON STOCK,
TYCO SERIES C PREFERRED STOCK, TYCO SERIES B PREFERRED STOCK, TYCO STOCK
OPTIONS AND TYCO RESTRICTED STOCK UNITS FOR CERTIFICATES REPRESENTING SHARES
OF MATTEL COMMON STOCK, MATTEL SERIES C PREFERRED STOCK OR MATTEL SERIES B
PREFERRED STOCK, AS THE CASE MAY BE. SEE "--CONVERSION OF TYCO CAPITAL STOCK"
AND "--EFFECT ON TYCO STOCK OPTIONS, RESTRICTED STOCK AND EMPLOYEE BENEFIT
PLANS". TYCO HOLDERS SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR SHARES,
OPTIONS OR RESTRICTED STOCK UNITS TO TYCO OR TO THE EXCHANGE AGENT PRIOR TO
RECEIPT OF THE TRANSMITTAL LETTER.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of Tyco and Mattel to consummate the Merger are subject to
the satisfaction of certain conditions, including: (i) the approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the requisite vote of the holders of Tyco Common Stock, Tyco Series C
Preferred Stock and Tyco Series B Preferred Stock voting together as a class;
(ii) the authorization for listing on the NYSE upon official notice of
issuance of the Mattel Common Stock and the Mattel Series C Preferred Stock
issuable to Tyco Holders pursuant to the Merger Agreement; (iii) the waiting
period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated and any authorization,
consent or approval required under any Antitrust Law (as defined herein) shall
have been obtained or any waiting period applicable to the review of the
Merger shall have expired or been terminated; (iv) the Registration Statement
for the Mattel Common Stock to be issued in connection with the Merger
becoming effective in accordance with the provisions of the Securities Act and
not being the subject of any stop order suspending effectiveness issued by the
Commission; (v) the absence of any preliminary or permanent injunction or
other order by any court or other judicial or administrative
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body of competent jurisdiction which prohibits or prevents the consummation of
the Merger (each party agreeing to use its best efforts to have any such
injunction lifted); and (vi) the receipt by Tyco and Mattel of letters from
Deloitte & Touche and Price Waterhouse, respectively, relating to the
availability of pooling of interests accounting treatment.
The obligation of Tyco to consummate the Merger is also subject to the
satisfaction of the following further conditions (unless waived by Tyco): (i)
Mattel and Sub shall have performed in all material respects all of their
agreements contained in the Merger Agreement required to be performed on or
prior to the Effective Date, and the representations and warranties of Mattel
and Sub contained in the Merger Agreement shall be true in all material
respects, when made and as of the Effective Date except (a) as contemplated or
permitted by the Merger Agreement, (b) for representations and warranties
which are by their express provisions made as of a specific date or dates,
which were or will be true at such date or dates as stated therein, and (c)
that if Mattel makes the election described under "--Termination; Fees and
Expenses" and the Effective Date shall have occurred after the nine-month
anniversary of the date of the Merger Agreement, then the representations and
warranties need only be true as of the nine-month anniversary of the date of
the Merger Agreement; (ii) Tyco shall have received the opinion of Baer Marks
& Upham LLP, counsel to Tyco, to the effect that as of the Effective Date of
the Merger, the Merger will be treated for United States federal income tax
purposes as a "reorganization" within the meaning of Section 368(a) of the
Code (see "The Merger--Certain United States Federal Income Tax
Consequences"); and (iii) the consummation of the Merger and the other
transactions contemplated by the Merger Agreement shall not give rise to any
Mattel Right becoming exercisable for any security or asset of any person.
The obligations of Mattel to consummate the Merger are also subject to the
satisfaction of the following further conditions (unless waived by Mattel):
(i) Tyco shall have performed in all material respects all of its obligations
contained in the Merger Agreement required to be performed by it prior to the
Effective Date, and the representations and warranties of Tyco contained in
the Merger Agreement shall be true in all material respects, when made and as
of the closing date of the Merger except (a) as contemplated or permitted by
the Merger Agreement, (b) for representations and warranties which are by
their express provisions made as of a specific date or dates which were or
will be true in all material respects at such date or dates as stated therein,
and (c) that if Mattel makes the election described under "--Termination; Fees
and Expenses" and the Effective Date shall have occurred after the nine-month
anniversary of the date of the Merger Agreement, then the representations and
warranties need only be true as of the nine-month anniversary of the date of
the Merger Agreement; (ii) Mattel shall have received a favorable opinion of
Wachtell, Lipton, Rosen & Katz, counsel to Mattel, to the effect that the
Merger will be treated for United States federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code (see "The
Merger--Certain United States Federal Income Tax Consequences"); (iii) Mattel
shall have received a letter from Deloitte & Touche, dated a date within two
business days before the date on which the Registration Statement shall become
effective, in form and substance reasonably satisfactory to Mattel and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement; and (iv) Tyco shall have obtained all consents,
approvals, releases or authorizations from, and shall have made all filings
and registrations ("Consents") to or with, any person, including but not
limited to any Governmental Entity (as defined in the Merger Agreement)
necessary to be obtained or made in order to consummate the transactions
contemplated by this Agreement, unless the failure to obtain such Consents
would not, individually or in the aggregate, have a Material Adverse Effect
(as defined herein) on Tyco. "Material Adverse Effect" is defined in the
Merger Agreement as a material adverse effect on business, properties, assets,
condition, or results of operations of the corporation and its subsidiaries
taken as a whole, except for (x) adverse changes resulting from general
economic, financial or market conditions; (y) adverse changes resulting from
conditions or circumstances generally affecting the toy industry; or (z)
adverse changes resulting from announcement or pendency of the Merger
Agreement or the Merger.
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REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Mattel and Tyco relating to, among other things, the following matters (which
representations and warranties are subject, in certain cases, to specified
exceptions): (i) the due organization, power and standing of, and similar
corporate matters with respect to Tyco and Mattel; (ii) each of Mattel's and
Tyco's capitalization; (iii) the authorization, execution, delivery,
performance and enforceability of the Merger Agreement by each such party and
of the transactions contemplated thereby; (iv) reports and other documents
filed with the Commission and other regulatory authorities and the accuracy of
the information contained therein; (v) the absence of certain changes or
events having a Material Adverse Effect on the financial condition, business
or results of operations of Tyco or Mattel; (vi) the absence of any litigation
that would have a Material Adverse Effect on the financial condition, business
or results of operations of Tyco or Mattel; (vii) the absence of any material
untrue statements in the Registration Statement and this Proxy
Statement/Prospectus; (viii) the receipt of the opinion of Tyco's financial
advisor; (ix) the absence of any governmental or regulatory authorization,
consent or approval required to consummate the Merger (except as disclosed to
the other party); (x) the absence of any default under Tyco's employee benefit
plans; (xi) the absence of any tax delinquencies that would have a Material
Adverse Effect on the financial condition, business or results of operations
of Tyco or Mattel; (xii) the absence of any product liability claim that would
have a Material Adverse Effect on the financial condition, business or results
of operations of Tyco or Mattel; and (xiii) the absence of actions taken by
Tyco or Mattel that would prevent the Merger from being effected as a pooling
of interests for accounting and financial reporting purposes.
CONDUCT OF BUSINESS PENDING THE MERGER
Prior to the Effective Date, unless Mattel shall otherwise agree in writing,
Tyco shall, and shall cause its subsidiaries to, carry on their respective
businesses in the usual, regular and ordinary course in substantially the same
manner as previously conducted, and shall, and shall cause its subsidiaries
to, use their diligent efforts to preserve intact their present business
organizations, keep available the services of their present officers and
employees and preserve their relationships with customers, suppliers and
others having business dealings with them to the end that their goodwill and
ongoing businesses shall be unimpaired at the Effective Date. Tyco shall, and
shall cause its subsidiaries to: (i) maintain insurance coverages and its
books, accounts and records in the usual manner consistent with prior
practices; (ii) comply in all material respects with all laws, ordinances and
regulations of governmental entities applicable to Tyco and its subsidiaries;
(iii) maintain and keep its properties and equipment in good repair, working
order and condition, ordinary wear and tear excepted; and (iv) perform in all
material respects its obligations under all contracts and commitments to which
it is a party or by which it is bound, in each case other than where the
failure to so maintain, comply or perform, either individually or in the
aggregate, would not have a Material Adverse Effect on Tyco.
Except as required or permitted by the Merger Agreement, Tyco shall not and
shall not propose to: (i) sell or pledge or agree to sell or pledge any
capital stock owned by it in any of its subsidiaries; (ii) amend its
certificate of incorporation or bylaws; (iii) split, combine or reclassify its
outstanding capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
Tyco Capital Stock, or declare, set aside or pay any dividend or other
distribution payable in cash, stock or property (other than regular Tyco
dividends); or (iv) directly or indirectly redeem, purchase or otherwise
acquire or agree to redeem, purchase or otherwise acquire any shares of Tyco
Capital Stock.
Tyco shall not, nor shall it permit any of its subsidiaries to: (i) except
as required by the Merger Agreement, deliver or sell or agree to issue,
deliver or sell any additional shares of, or rights of any kind to acquire any
shares of, its capital stock of any class, any indebtedness or any option,
rights or warrants to acquire, or securities convertible into, shares of
capital stock other than issuances of Tyco Common Stock pursuant to the
exercise of employee stock options outstanding on the date of the Merger
Agreement or the conversion of Tyco Series C Preferred Stock, Tyco Series B
Preferred Stock or indebtedness of Tyco; (ii) acquire, lease or dispose or
agree to acquire, lease or dispose of any capital assets or any other assets
other than in the ordinary course of business;
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(iii) incur additional indebtedness or encumber or grant a security interest
in any asset or enter into any other material transaction other than in each
case in the ordinary course of business; (iv) acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial equity interest
in, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, in each case
in this clause (iv) which are material, individually or in the aggregate, to
Tyco and its subsidiaries taken as a whole, except that Tyco may create new
wholly-owned subsidiaries in the ordinary course of business; or (v) enter
into any contract, agreement, commitment or arrangement with respect to any of
the foregoing.
Except as previously disclosed to Mattel, Tyco shall not, nor shall it
permit any of its subsidiaries to, except as required to comply with
applicable law and except as permitted by the Merger Agreement: (i) adopt,
enter into, terminate or amend any bonus, profit sharing, compensation,
severance, termination, stock option, pension, retirement, deferred
compensation, employment or other Tyco benefit plan, agreement, trust, fund or
other arrangement for the benefit or welfare of any director, officer or
current or former employee; (ii) increase in any manner the compensation or
fringe benefit of any director, officer or employee (except for normal
increases in the ordinary course of business that are consistent with past
practice and that, in the aggregate, do not result in a material increase in
benefits or compensation expense to Tyco and its subsidiaries relative to the
level in effect prior to such amendment); (iii) pay any benefit not provided
under any existing plan or arrangement; (iv) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or Tyco
benefit plan (including, without limitation, the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any benefit plans
or agreements or awards made thereunder) (except that Tyco may provide normal
annual salary increases consistent with past practice); (v) take any action to
fund or in any other way secure the payment of compensation or benefits under
any employee plan, agreement, contract or arrangement or Tyco benefit plan
other than in the ordinary course of business consistent with past practice;
or (vi) adopt, enter into, amend or terminate any contract, agreement,
commitment or arrangement to do any of the foregoing.
Tyco shall not, nor shall it permit any of its subsidiaries to, make any
investments in non-investment-grade securities; provided, however, that Tyco
will be permitted to create new wholly-owned subsidiaries in the ordinary
course of business.
Tyco shall not, nor shall it permit any of its subsidiaries to, take or
cause to be taken any action, whether before or after the Effective Date,
which would disqualify the Merger as a pooling of interests for accounting
purposes or as a reorganization within the meaning of Section 368(a) of the
Code.
Prior to the Effective Date, unless Tyco shall otherwise agree in writing:
(i) Mattel shall, and shall cause its subsidiaries to, carry on their
respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, and shall, and shall
cause its material subsidiaries to, use their best efforts to preserve intact
their present business organizations, keep available the services of their
present officers and employees and preserve their relationships with
customers, suppliers and others having business dealings with them to the end
that their goodwill and ongoing businesses shall be unimpaired at the
Effective Date, provided, however, that nothing contained in the Merger
Agreement shall prevent Mattel from creating new wholly-owned subsidiaries in
the ordinary course of business as long as the creation of such subsidiaries
(either alone or in the aggregate) would not have a material adverse effect on
Mattel; and (ii) Mattel shall not, nor shall it permit any of its subsidiaries
to, take or cause to be taken any action, whether before or after the
Effective Date, which would disqualify the Merger as a pooling of interests
for accounting purposes or as a reorganization within the meaning of Section
368(a) of the Code.
COVENANTS
The Merger Agreement provides that each of Mattel and Tyco and their
respective subsidiaries shall give the other access to information and
personnel and shall prepare and file all necessary filings with respect to the
Merger Agreement and the transactions contemplated thereby, including
Commission, HSR Act and foreign governmental filings.
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Prior to the Effective Date, Tyco agrees to cause to be delivered to Mattel
an opinion (satisfactory to counsel for Mattel) of the general counsel of Tyco
or such law firm as may be reasonably satisfactory to Mattel, identifying all
persons who were, in his or its opinion, at the time of the Special Meeting,
Affiliates of Tyco. Tyco agrees to use its diligent efforts to obtain, and
deliver to Mattel, agreements from all Affiliates that they will not sell or in
any other way reduce such Affiliate's risk relative to any Mattel Common Stock
received in the Merger, until such time as financial results covering at least
30 days of post-merger operations have been published, except as permitted by
Staff Accounting Bulletin No. 76 issued by the Commission. The Merger Agreement
provides that as soon as is reasonably practicable but in no event later than 45
days after the end of the first month ending at least 30 days after the
Effective Date, Mattel will publish results including at least 30 days of
combined operations of Mattel and Tyco as referred to in the written agreements
referred to in the previous sentence.
Mattel agrees to use its best efforts to list the shares of Mattel Common
Stock and the Mattel Series C Depositary Shares issued pursuant to the Merger
on the NYSE.
In the Merger Agreement, Mattel and Tyco have agreed to use their best
efforts to file (i) notifications under the HSR Act, and (ii) such
notifications and filings as may be required under other Antitrust Laws (as
defined herein). The Sherman Act, as amended, the Clayton Act, as amended, the
HSR Act, the Federal Trade Commission Act, as amended, all other federal,
state, or foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization, restraint of trade or lessening of competition
through merger or acquisition collectively are referred to as the "Antitrust
Laws." Mattel and Tyco have further agreed to use their best efforts to take
all action necessary under applicable laws and regulations with respect to the
following: (x) to cause the expiration or termination of the applicable
waiting periods under the HSR Act as soon as practicable, (y) to cause the
expiration or termination of applicable waiting periods, the satisfaction of
such other filing requirements, or the issuance of such approvals, consents or
authorizations as may be required with respect to the Antitrust Laws of any
foreign jurisdiction, and (z) to avoid the entry of any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent, under
any Antitrust Law, that would have the effect of prohibiting, preventing or
restricting consummation of the Merger or of imposing any material limitation
on the conduct of the businesses of Tyco or Mattel following consummation of
the Merger; provided, however, that Mattel shall not be required to take any
action if it determines, in its sole discretion, that it is not in its best
interest to do so.
In connection with the efforts referenced in the foregoing paragraph to
obtain all requisite approvals and authorizations for the transactions
contemplated by the Merger Agreement under Antitrust Laws, Mattel and Tyco
have agreed to (i) cooperate in all respects with each other in connection
with any filing or submission and in connection with any investigation or
other inquiry; (ii) promptly inform the other party of any communication to it
from any Governmental Entity (as defined in the Merger Agreement) and permit
the other party to review in advance any proposed communication from it to any
Governmental Entity or third party; and (iii) not arrange for or participate
in any meeting with any Governmental Entity in respect of any filings,
investigation or other inquiry without consulting with each other in advance,
and giving the other party the opportunity to attend and participate. Tyco
shall not enter into any proposed understanding, undertaking, or agreement
with any Governmental Entity in connection with the transactions contemplated
by the Merger Agreement without the prior written consent of Mattel. Mattel
shall keep Tyco reasonably informed of determinations made under the
discretion granted to Mattel in the Merger Agreement to unilaterally refrain
from taking action.
In connection with the foregoing, if any administrative or judicial action
or proceeding is instituted (or threatened to be instituted) challenging any
transaction contemplated by the Merger Agreement as violative of any Antitrust
Law, Mattel and Tyco have agreed to cooperate and use their respective best
efforts to contest and resist any such action or proceeding and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order that is in effect and that prohibits, prevents, or restricts
consummation of the transactions contemplated by the Merger Agreement or
imposes any material limitation on the conduct of the businesses of Mattel and
Tyco following consummation of such transactions, unless and until Mattel, in
its sole discretion, determines that to contest or litigate such matters is
not in its best interest.
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If any objections are asserted with respect to the Merger under any
Antitrust Law or if any suit is instituted challenging the Merger as violative
of any Antitrust Law, Mattel (and Tyco, if requested by Mattel) shall take
such action as may be required or proposed (i) by the applicable Governmental
Entity in order to resolve any such objections as such Governmental Entity may
have to such transactions under such Antitrust Law, or (ii) by any domestic or
foreign court or similar tribunal, in any suit brought by a private party or
Governmental Entity challenging the Merger as violative of any Antitrust Law,
in order to avoid the entry of, or to effect the dissolution of, any
injunction, temporary restraining order or other order that has the effect of
preventing the consummation of the Merger or would otherwise deprive Mattel of
any material benefit of the ownership and control of its assets or operations
after the Effective Date; provided, however, that Tyco shall not be required
to commit to or to implement any action that is to be consummated prior to the
Effective Date; and provided, further, that certain provisions of the Merger
Agreement notwithstanding, Mattel shall not be required to take any action if
it determines, in its sole discretion, that it is not in its best interest to
do so.
Subject to the foregoing, Mattel and Tyco have agreed to use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Merger Agreement, including using all reasonable efforts to obtain all
necessary waivers, consents and approvals, to effect all necessary
registrations and filings (including, but not limited to, filings with all
applicable Governmental Entities) and to lift any injunction or other legal
bar to the Merger (and, in such case, to proceed with the Merger as
expeditiously as possible), subject to the appropriate vote of the
shareholders of Tyco. Notwithstanding the foregoing, but subject to the
provisions relating to cooperation with respect to antitrust-related matters,
there shall be no action required to be taken and no action will be taken in
order to consummate and make effective the transactions contemplated by the
Merger Agreement if such action, either alone or together with another action,
would have a Material Adverse Effect on either Tyco or Mattel.
Effective at the Effective Date, Tyco will repay all obligations of it and
its subsidiaries under the GECC Debt (as defined in the Merger Agreement) and
obtain a release of all obligations, liens and security interests thereunder
(and Mattel shall provide funding with respect thereto to the extent Tyco does
not have sufficient cash as of the Effective Date to repay all such
obligations). Further, Mattel will comply with its obligations under Article 5
of that certain Indenture dated as of August 15, 1992 pursuant to which Tyco
issued its 10 1/8% Senior Subordinated Notes due August 2002 thereof, and
Mattel will comply with the covenants and obligations set forth in Tyco's
Convertible Subordinated Notes, dated September 30, 1991 in the aggregate
amount of $16,034,000.
EFFECT ON TYCO STOCK OPTIONS, RESTRICTED STOCK AND EMPLOYEE BENEFIT PLANS
The Merger Agreement provides that in the Merger (i) each of the outstanding
Tyco Stock Options granted under the Tyco Benefit Plans (as defined in the
Merger Agreement) shall be converted into a number of shares of Mattel Common
Stock equal to the fair value of such option as of the Effective Date, as
mutually agreed by Mattel and Tyco, (ii) each outstanding vested Tyco
Restricted Stock Unit shall be converted into a number of shares of Mattel
Common Stock equal to the Exchange Ratio, and (iii) each outstanding unvested
Tyco Restricted Stock Unit shall be converted into a number of shares of
Mattel Common Stock equal to .3272 multiplied by the Exchange Ratio.
The Merger Agreement provides that, after the Effective Date, Mattel shall
honor in accordance with their terms all employment, severance, consulting and
other compensation contracts between Tyco or any of its subsidiaries and any
current or former director, officer or employee thereof, and all provisions
for vested benefits or other vested amounts earned or accrued through the
Effective Date under any Tyco Benefit Plan, each as of the date of the Merger
Agreement except for changes that are not material, are permitted by the
Merger Agreement, are set forth on a schedule to the Merger Agreement, or are
otherwise agreed to by the parties thereto.
Pursuant to the Merger Agreement, after the date of the Merger Agreement,
Tyco shall establish a plan to provide payments to employees who remain
employed by Tyco and its subsidiaries through the Effective Date
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and, unless involuntarily terminated without cause by Mattel earlier, remain
employed by Mattel and its affiliates for six months thereafter. Payments
under such plan shall be made by Mattel on the six-month anniversary of the
Effective Date or at such earlier time after the Effective Date as an eligible
employee's employment with Mattel or its affiliates shall be terminated
involuntarily without cause. Tyco and Mattel shall, in writing, mutually
select employees of Tyco and its subsidiaries eligible to participate in the
plan. Aggregate payments under the plan are limited to $10,000,000.
The Merger Agreement further provides that, for six months after the
Effective Date, Mattel shall provide generally to the former officers and
employees of Tyco and its subsidiaries employee benefits, including, without
limitation, pension benefits, health and welfare benefits, and severance
arrangements, on terms and conditions in the aggregate that are no less
favorable as those provided by Tyco as of the date of the Merger Agreement.
NO SOLICITATION
The Merger Agreement provides that, subject to the fiduciary duties of the
Tyco Board, as advised by outside counsel, neither Tyco nor any of its
subsidiaries shall, directly or indirectly, take (nor shall Tyco authorize or
permit its subsidiaries, officers, directors, employees, representatives,
investment bankers, attorneys, accountants or other agents or affiliates, to
take) any action to (i) encourage, solicit or initiate the submission of any
"Acquisition Proposal" (defined as any proposed (a) merger, consolidation or
similar transaction involving Tyco, (b) sale, lease or other disposition,
directly or indirectly, by merger, consolidation, share exchange or otherwise
of assets of Tyco or its subsidiaries representing 30% or more of the
consolidated assets of Tyco and its subsidiaries, (c) issue, sale, or other
disposition of (including by way of merger, consolidation, share exchange or
any similar transaction) securities (or options, rights or warrants to
purchase, or securities convertible into, such securities) representing 30% or
more of the voting power of Tyco, or (d) transaction in which any person shall
acquire "beneficial ownership" (as such term is defined in Rule 13d-3 under
the Exchange Act), or the right to acquire beneficial ownership or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of 15% or
more of the outstanding Tyco Common Stock), (ii) enter into any agreement with
respect to any Acquisition Proposal, or (iii) participate in any way in
discussions or negotiations with, or furnish any information to, any person in
connection with, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal. Tyco will promptly communicate to Mattel any
solicitation received by Tyco and the terms of any proposal or inquiry,
including the identity of the person and its affiliates making the same, that
it may receive in respect of any such transaction, or of any such information
requested from it or of any such negotiations or discussions being sought to
be initiated with it.
INDEMNIFICATION
The Merger Agreement provides that, from and after the Effective Date,
Mattel shall indemnify, defend and hold harmless the officers, directors and
employees of Tyco against all losses, expenses, claims, damages or liabilities
arising out of the transactions contemplated by the Merger Agreement to the
fullest extent permitted or required under applicable law. All rights to
indemnification existing in favor of the directors, officers or employees of
Tyco as provided in the Tyco Charter or the Tyco Bylaws, in effect on the date
of the Merger Agreement, with respect to matters occurring through the
Effective Date, shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective Date. The
Merger Agreement provides that, with respect to matters occurring prior to the
Effective Date, Mattel will cause the Surviving Corporation to maintain in
effect for not less than two years after the Effective Date the current
policies of directors' and officers' liability insurance maintained by Tyco;
provided, however, that the Surviving Corporation shall not be required to pay
an annual premium for such insurance in excess of $410,000, but in such case
shall purchase as much coverage as possible for such amount.
TERMINATION; FEES AND EXPENSES
The Merger Agreement may be terminated at any time prior to the Effective
Date, whether before or after approval of the matters presented in connection
with the Merger by the shareholders of Tyco: (i) by mutual
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consent of the Boards of Directors of Mattel and Tyco; (ii) by either Mattel
or Tyco if the Merger shall not have been consummated on or before the nine-
month anniversary of the date of the Initial Merger Agreement, provided that
the terminating party is not otherwise in material breach of its
representations, warranties or obligations under the Merger Agreement, and
provided, further, that if the conditions set forth in Section 8.1(c)
(relating to the HSR Act and Antitrust Laws) or Section 8.1(f) (relating to
accounting treatment) of the Merger Agreement have not been satisfied prior to
the nine-month anniversary of the date of the Initial Merger Agreement, then
Tyco may not terminate the Merger Agreement until the one-year anniversary of
the date of the Initial Merger Agreement; (iii) by Tyco if any of the
conditions specified in Sections 8.1 (relating to conditions to each party's
obligation to effect the merger) and 8.2 (relating to conditions to Tyco's
obligation to effect the merger) of the Merger Agreement have not been met or
waived by Tyco at such time as such condition is no longer capable of
satisfaction; (iv) by Mattel if any of the conditions specified in Sections
8.1 and 8.3 (relating to conditions to Mattel's obligation to effect the
merger) of the Merger Agreement have not been met or waived by Mattel at such
time as such condition is no longer capable of satisfaction; (v) by Mattel if
(a) the Tyco Board shall have withdrawn, modified in a manner adverse to
Mattel, or refrained from making its recommendation concerning the Merger, or
shall have disclosed its intention to change such recommendation, or (b) Tyco
shall have entered into an agreement with a third party (other than a
customary confidentiality agreement) with respect to an Acquisition Proposal;
(vi) by Tyco if, pursuant to the provisions described under "--No
Solicitation," Tyco shall have entered into an agreement with respect to an
Acquisition Proposal, provided that prior to such termination Tyco shall have
paid to Mattel the Tyco Breakup Fee; or (vii) by Mattel if any requirements or
conditions are imposed, or proposed to be imposed, upon either Mattel or Tyco
or any of their respective affiliates by any Governmental Entity (not
including any foreign governmental entity other than those of Canada and the
European Community) in connection with the authorization, consent or approval
of such Governmental Entity (or the expiration or termination of any waiting
period applicable to such Governmental Entity's review of the transactions
contemplated by the Merger Agreement) under any Antitrust Law in connection
with the consummation of the transactions contemplated hereby, or by any
domestic or foreign court or similar tribunal in any suit brought by a private
party or such Government Entity challenging the transactions contemplated
hereby as violative of any Antitrust Law, which, in the reasonable opinion of
Mattel, would materially restrict or limit the operations of Mattel or Tyco or
any of their respective affiliates or otherwise deprive Mattel or any of its
affiliates of any material benefit of the ownership and control of its assets
or operations after the Effective Date.
The Merger Agreement provides that Tyco shall pay a $40 million breakup fee
to Mattel ("Tyco Breakup Fee") in the event the Merger Agreement is
terminated: (i) by either party pursuant to part (iii) or (iv) of the
preceding paragraph if Tyco Holders shall not have approved and adopted the
Merger and the Merger Agreement and prior to the votes of Tyco Holders an
Acquisition Proposal shall have been made and within one year of such
termination (a) Tyco shall have entered into a definitive agreement with a
third party providing for the acquisition of Tyco or a majority of Tyco's
assets or voting securities by such third party or the consolidation or merger
of Tyco pursuant to which Tyco's stockholders will hold less than a majority
of the outstanding voting securities of the resulting corporation immediately
following consummation of such transaction or (b) any third party shall have
acquired beneficial ownership of more than 20% of the outstanding voting
securities of Tyco other than an acquisition of securities from Tyco in
capital raising transactions without the intention or effect of constituting a
Change in Control (as defined in the GECC Debt), provided, however, that, with
respect to this clause (b), if a third party acquires beneficial ownership of
voting securities of Tyco in excess of 20% without the approval of the Tyco
Board and the Tyco Rights are not redeemed, then the Tyco Breakup Fee will not
be payable unless and until a third party acquires in excess of 50% of the
outstanding voting securities of Tyco; or (ii) by Mattel pursuant to part (v)
of the preceding paragraph; or (iii) by Tyco pursuant to part (vi) of the
preceding paragraph; and at the time of such termination Mattel is not in
material breach of any representation, warranty or material covenant therein.
The Merger Agreement also provides that Mattel shall pay a $15 million
breakup fee to Tyco (the "Mattel Breakup Fee") in the event the Merger
Agreement is terminated by Tyco or Mattel under part (ii) of the second
preceding paragraph or by Mattel under part (vii) of the second preceding
paragraph, if, in either case: (a) all
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conditions to the obligations of Mattel and Tyco (see "--Conditions to
Consummation of the Merger") have been satisfied (other than the condition
specified in Section 8.1(c) of the Merger Agreement or the condition specified
in Section 8.1(f) of the Merger Agreement, but only, in the case of the
condition specified in Section 8.1(c), if the failure of such condition to be
satisfied is in respect of injunctions or orders issued under the Antitrust
Laws of the United States, and only, in the case of the condition specified in
Section 8.1(f), if the failure of such condition to be satisfied is not
related to any terms or provisions of Tyco Benefit Plans or securities and not
caused by any action taken by Tyco); (b) Tyco shall not be in material breach
of any representation, warranty or material covenant contained therein; and
(c) Tyco shall have satisfied its obligations pursuant to Section 3.5
(relating to the Special Meeting) and Section 6.1(vi) (relating to accounting
treatment) (in the case of the condition specified in Section 8.1(f)) and
Section 7.7 (relating to antitrust filings) (in the case of the condition
specified in Section 8.1(c)) of the Merger Agreement.
Generally, all costs and expenses incurred in connection with the Merger
shall be paid by the party incurring such expense, except that Mattel and Tyco
agree to each pay 50% of all printing expenses incurred in connection with the
printing of this Proxy Statement/Prospectus.
AMENDMENT; WAIVER
The Merger Agreement provides that it may be amended by the parties thereto,
by or pursuant to action taken by the respective Boards of Directors, at any
time before or after approval thereof by the stockholders of Tyco, but, after
such approval, no amendment shall be made which changes the ratios at which
any class of Tyco Capital Stock is to be converted into Mattel Capital Stock
or which in any way materially adversely affects the rights of such
stockholders, without such further approval of such stockholders. The Merger
Agreement may not be amended except by an instrument in writing signed on
behalf of each of Mattel, Sub and Tyco.
At any time prior to the Effective Date, the parties to the Merger
Agreement, by or pursuant to action taken by their respective Boards of
Directors, may: (i) extend the time for the performance of any of the
obligations or other acts of the other parties thereto; (ii) waive any
inaccuracies in the representations and warranties contained therein or in any
documents delivered pursuant thereto; and (iii) waive any compliance with any
of the agreements or conditions contained therein; provided, however, that no
such waiver shall materially adversely affect the rights of stockholders of
Mattel or Tyco. Any agreement on the part of a party to the Merger Agreement
to any such extension or waiver shall be valid if set forth in an instrument
in writing signed on behalf of such party.
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THE STOCKHOLDERS AGREEMENT
In connection and concurrently with its entering into of the Merger
Agreement, Mattel entered into the Stockholders Agreement, dated as of
November 17, 1996, with Corporate Partners, Corporate Offshore Partners, L.P.,
The State Board Administration of Florida, a body corporate organized under
the constitution of the State of Florida (together, the "Stockholders"), and
Corporate Advisors, L.P. The Stockholders together hold all of the outstanding
shares of Tyco Series B Preferred Stock which, as of the Record Date,
represented 9.3% of the issued and outstanding shares of Tyco capital stock
entitled to vote at the Special Meeting.
The Stockholders Agreement provides that the Stockholders (i) will vote
their shares of Tyco Series B Preferred Stock in favor of the Merger Agreement
at the Special Meeting, (ii) will not transfer, sell or otherwise dispose of
their shares of Tyco Series B Preferred Stock prior to the Effective Date, and
(iii) will not solicit or hold discussions or negotiations concerning any
Acquisition Proposal relating to Tyco. The Stockholders Agreement also
constitutes the consent of the Stockholders to the treatment of their shares
of Series B Preferred Stock provided for in the Merger Agreement. See "The
Merger Agreement--Conversion of Tyco Capital Stock." In the Stockholders
Agreement, Mattel has agreed to assume and be bound by all obligations of Tyco
under that certain Registration Rights Agreement, dated April 15, 1994,
between the Stockholders and Tyco, and Mattel, and the Stockholders have
agreed that such agreement will be amended to pertain to the Mattel Series B
Stock (and the securities which may be issued on conversion or exchange
thereof) in lieu of the Tyco Series B Stock.
The Stockholders Agreement will automatically terminate if the Merger
Agreement is terminated. In addition, the Stockholders may terminate the
Stockholders Agreement in their sole discretion if (i) Section 3.1(d) of the
Merger Agreement (which sets forth the consideration to be received by the
Stockholders in the Merger) is amended or modified, without the prior written
consent of the Stockholders, if such amendment or modification is adverse to
the interests of the Stockholders, or (ii) any other amendment or modification
of the Merger Agreement shall have been made without the prior written consent
of the Stockholders which amendment is adverse to the interests of the
Stockholders with respect to the transactions contemplated by the Stockholders
Agreement or by the Merger Agreement.
SPECIAL CONSIDERATIONS
In connection with a review of Mattel's Annual Report on Form 10-K for the
year ended December 31, 1995, the staff of the Division of Corporation Finance
of the Securities and Exchange Commission has made inquiries of Mattel
regarding its accounting for certain matters during 1994 and 1995. In the
course of that review, the staff identified two matters on which it disagrees
with Mattel on the application of GAAP to Mattel's accounting treatment under
certain contracts with The Walt Disney Company ("Disney").
The first matter relates to the timing of accrual of minimum royalty
obligations to Disney under a contract relating to Mattel's sale of infant and
preschool toys based on Disney characters (the "I&P Agreement"). The staff
believes that under GAAP, Mattel should have accrued for a shortfall in those
obligations during 1994 and 1995.
The second matter relates to the appropriate method of amortizing payment
obligations under contracts with Disney involving the placement of Mattel
sponsored stores and sponsorship of attractions at Disney theme parks (the
"Theme Parks Agreements"). The staff believes that under GAAP, the payments
should have been amortized over the life of the Theme Parks Agreements by the
straight-line method rather than at a rate based upon the pattern of usage
and, accordingly, that certain adjustments made by Mattel during the fourth
quarters of 1994 and 1995 were inappropriate.
In addition, Mattel made an accounting error in closing out inventory hedge
contracts in 1994 and 1995. Mattel recognized the resulting gain during the
period the hedge contracts were closed rather than during the period the
related inventory was sold as required by GAAP. This affected the timing of
income during the period
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1994-96, but has no impact at the end of the period or going forward or on the
amount of Mattel's income during the period.
While Mattel believes that its accounting treatment for the first two
matters discussed above was correct, it has decided to make a catch-up
adjustment to results in the fourth quarter of 1996 in the amount of $21.8
million before taxes, or $15.1 million after taxes ($0.05 per share).
Application of the Staff's interpretation during 1994-96 would have decreased
Mattel's reported pre-tax income in 1994 and 1995 and increased its reported
pre-tax income in 1996 as follows:
(i) for 1994, a reduction in pretax income of $19.5 million (5.2% of pre-
tax income), from $393.6 million to $374.2 million, of which $11.8 million
is attributable to the I&P Agreement, $4.9 million is attributable to the
Theme Parks Agreements and $2.8 million is attributable to hedge
accounting, and of which $10.8 million (20.5% of pre-tax income) is
applicable to the fourth quarter;
(ii) for 1995, a reduction in pre-tax income of $8.2 million (1.6% of
pre-tax income), of which $2.0 million is attributable to the I&P
Agreement, $3.3 million is attributable to the Theme Parks Agreements and
$2.9 million is attributable to hedge accounting, and of which $4.0 million
(2.5% of pre-tax income) is applicable to the fourth quarter; and
(iii) for 1996, an increase in pre-tax income of $5.9 million (1.0% of
pre-tax income), of which $0.7 million is attributable to the Theme Parks
Agreements and $5.6 million is applicable to hedge accounting, offset by
$0.4 million attributable to the I&P Agreement.
Mattel's accounting treatment for royalty obligations under the I&P
Agreement and payments under the Theme Parks Agreements was determined with
the concurrence of Mattel's independent auditors, Price Waterhouse. Mattel's
accounting treatment for the royalty shortfall under the I&P Agreement and the
1994 adjustment to its payment obligations under the Theme Parks Agreements
were also reviewed by a second accounting firm, Ernst & Young, whose views
with respect to the accounting treatment of such matters were reflected in an
independent report prepared by the law firm of Davis Polk & Wardwell for the
Audit Committee of Mattel's Board of Directors. That report to the Audit
Committee concluded that Mattel's accounting treatment for these matters was
in accordance with GAAP. While Mattel continues to believe its original
accounting treatment was appropriate, Mattel has taken the fourth quarter
charge described above.
44
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
give effect to the Merger of Mattel and Tyco under the pooling of interests
method of accounting. These pro forma financial statements are presented for
illustrative purposes only, and therefore are not necessarily indicative of
the operating results and financial position that might have been achieved had
the Merger occurred as of an earlier date, nor are they necessarily indicative
of operating results and financial position which may occur in the future.
A pro forma condensed combined balance sheet is provided as of September 30,
1996, giving effect to the Merger as though it had been consummated on that
date. Pro forma condensed combined income statements are provided for the
nine-month periods ended September 1995 and 1996, and the years ended December
31, 1993, 1994, and 1995, giving effect to the Merger as though it had
occurred at the beginning of the earliest period presented.
The condensed historical statements of income for annual periods are derived
from the historical consolidated financial statements of Mattel and Tyco, and
should be read in conjunction with the companies' separate 1995 Annual Reports
on Form 10-K. The historical financial statements as of or for the nine months
ended September 30, 1995 and 1996 have been prepared in accordance with GAAP
applicable to interim financial information and, in the opinions of Mattel's
and Tyco's respective managements, include all adjustments necessary for a
fair presentation of financial information for such interim periods.
45
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------- ----------------------
MATTEL TYCO ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash, cash equivalents and marketable
securities............................ $ 97.1 $ 29.8 $ 0.6 (a) $ 127.5
Accounts receivable, net............... 1,232.9 319.4 -- 1,552.3
Inventories............................ 477.6 89.1 -- 566.7
Prepaid expenses and other current
assets................................ 205.0 35.6 (2.1)(b) 238.5
-------- ------ ------ --------
Total current assets................. 2,012.6 473.9 (1.5) 2,485.0
-------- ------ ------ --------
Property, plant and equipment, net....... 562.5 31.7 -- 594.2
Other noncurrent assets.................. 511.2 273.5 7.0 (c) 791.7
-------- ------ ------ --------
Total Assets......................... $3,086.3 $779.1 $ 5.5 $3,870.9
======== ====== ====== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings and current
portion of long-term liabilities...... $ 423.3 $106.2 $(83.8)(d) $ 445.7
Accounts payable, accrued liabilities
and income taxes payable.............. 832.4 170.4 39.8 (e) 1,042.6
-------- ------ ------ --------
Total current liabilities............ 1,255.7 276.6 (44.0) 1,488.3
-------- ------ ------ --------
Medium-Term notes........................ 220.0 -- -- 220.0
Senior subordinated notes................ -- 126.5 -- 126.5
6-3/4% senior notes due 2000............. 100.0 -- -- 100.0
Other long-term debt..................... 55.2 20.6 -- 75.8
Other long-term liabilities.............. 105.6 2.0 -- 107.6
Shareholders' equity..................... 1,349.8 353.4 49.5 (f) 1,752.7
-------- ------ ------ --------
Total Liabilities and Shareholders'
Equity.............................. $3,086.3 $779.1 $ 5.5 $3,870.9
======== ====== ====== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
46
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------- ----------------------
MATTEL TYCO ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net Sales........................... $2,483.5 $494.0 $ -- $2,977.5
Cost of sales..................... 1,274.8 285.5 25.9 (g) 1,586.2
-------- ------ ------ --------
Gross Profit........................ 1,208.7 208.5 (25.9) 1,391.3
Advertising and promotion
expenses......................... 367.7 109.5 (24.1)(g) 453.1
Other selling and administrative
expenses......................... 432.8 87.5 (1.8)(g) 518.5
Interest expense.................. 51.8 20.4 -- 72.2
Restructuring and integration
charges.......................... -- 4.9 -- 4.9
Other (income) expense, net....... (13.2) 1.0 -- (12.2)
-------- ------ ------ --------
Income (Loss) from Continuing Opera-
tions Before Income Taxes.......... 369.6 (14.8) -- 354.8
Provision (benefit) for income tax-
es................................. 123.8 (4.9) (2.7)(h) 116.2
-------- ------ ------ --------
Income (Loss) from Continuing Opera-
tions.............................. 245.8 (9.9) 2.7 238.6
Preference stock dividend require-
ments.............................. 3.3 2.4 -- 5.7
-------- ------ ------ --------
Income (Loss) from Continuing
Operations Applicable to Common
Shares............................. $ 242.5 $(12.3) $ 2.7 $ 232.9
======== ====== ====== ========
Income (Loss) Per Share from
Continuing Operations(i)........... $ 0.86 $(0.35) $ 0.79
======== ====== ========
Average number of common and common
equivalent shares outstanding(i)... 281.0 34.8 296.1
======== ====== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
47
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------- ----------------------
MATTEL TYCO ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net Sales............................. $2,595.4 $492.7 $ -- $3,088.1
Cost of sales....................... 1,291.8 278.2 23.7 (g) 1,593.7
-------- ------ ------ --------
Gross Profit.......................... 1,303.6 214.5 (23.7) 1,494.4
Advertising and promotion expenses.. 369.9 110.3 (23.4)(g) 456.8
Other selling and administrative ex-
penses............................. 471.1 84.4 (0.3)(g) 555.2
Interest expense.................... 52.5 17.1 -- 69.6
Other expense, net.................. 18.7 4.5 -- 23.2
-------- ------ ------ --------
Income (Loss) from Continuing Opera-
tions Before Income Taxes............ 391.4 (1.8) -- 389.6
Provision (benefit) for income tax-
es................................. 127.2 (0.4) -- 126.8
-------- ------ ------ --------
Income (Loss) from Continuing Opera-
tions................................ 264.2 (1.4) -- 262.8
Preference stock dividend require-
ments.............................. -- 4.6 -- 4.6
-------- ------ ------ --------
Income (Loss) from Continuing
Operations Applicable to Common
Shares............................... $ 264.2 $ (6.0) $ -- $ 258.2
======== ====== ====== ========
Income (Loss) Per Share from Continu-
ing Operations(i).................... $ 0.95 $(0.17) $ 0.87
======== ====== ========
Average number of common and common
equivalent shares outstanding(i)..... 279.4 34.8 295.1
======== ====== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
48
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------- ----------------------
MATTEL TYCO ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net Sales............................. $2,704.4 $730.2 $ -- $3,434.6
Cost of sales....................... 1,378.2 436.7 38.6 (g) 1,853.5
-------- ------ ------ --------
Gross Profit.......................... 1,326.2 293.5 (38.6) 1,581.1
Advertising and promotion expenses.. 426.7 180.8 (42.1)(g) 565.4
Other selling and administrative ex-
penses............................. 473.4 134.9 3.5 (g) 611.8
Interest expense.................... 62.6 23.5 -- 86.1
Restructuring and integration
charges............................ 115.0 28.2 -- 143.2
Other expense, net.................. 11.9 9.4 -- 21.3
-------- ------ ------ --------
Income (Loss) from Continuing
Operations Before Income Taxes....... 236.6 (83.3) -- 153.3
Provision (benefit) for income tax-
es................................. 100.7 (13.4) (0.7)(h) 86.6
-------- ------ ------ --------
Income (Loss) from Continuing Opera-
tions................................ 135.9 (69.9) 0.7 66.7
Preference stock dividend require-
ments.............................. 4.9 -- -- 4.9
-------- ------ ------ --------
Income (Loss) from Continuing
Operations Applicable to Common
Shares............................... $ 131.0 $(69.9) $ 0.7 $ 61.8
======== ====== ====== ========
Income (Loss) Per Share from Continu-
ing Operations(i).................... $ 0.49 $(2.08) $ 0.22
======== ====== ========
Average number of common and common
equivalent shares outstanding(i)..... 267.5 33.6 282.1
======== ====== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
49
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------- ---------------------
MATTEL TYCO ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net Sales.............................. $3,205.0 $753.1 $ -- $3,958.1
Cost of sales........................ 1,603.5 445.4 41.3 (g) 2,090.2
-------- ------ ----- --------
Gross Profit........................... 1,601.5 307.7 (41.3) 1,867.9
Advertising and promotion expenses... 516.5 172.5 (32.9)(g) 656.1
Other selling and administrative ex-
penses.............................. 536.4 123.6 (8.4)(g) 651.6
Interest expense..................... 55.5 30.9 -- 86.4
Restructuring and integration
charges............................. 72.0 4.7 -- 76.7
Other expense, net................... 27.5 7.5 -- 35.0
-------- ------ ----- --------
Income (Loss) from Continuing Opera-
tions Before Income Taxes............. 393.6 (31.5) -- 362.1
Provision for income taxes........... 137.8 1.5 (3.6)(h) 135.7
-------- ------ ----- --------
Income (Loss) from Continuing Opera-
tions................................. 255.8 (33.0) 3.6 226.4
Preference stock dividend require-
ments............................... 4.7 2.1 -- 6.8
-------- ------ ----- --------
Income (Loss) from Continuing
Operations Applicable to Common
Shares................................ $ 251.1 $(35.1) $ 3.6 $ 219.6
======== ====== ===== ========
Income (Loss) Per Share from Continuing
Operations(i)......................... $ 0.90 $(1.01) $ 0.74
======== ====== ========
Average number of common and common
equivalent shares outstanding(i)...... 279.9 34.7 295.0
======== ====== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
50
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------- ---------------------
MATTEL TYCO ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net Sales............................ $3,638.8 $709.1 $ -- $4,347.9
Cost of sales...................... 1,849.6 416.2 36.2 (g) 2,302.0
-------- ------ ----- --------
Gross Profit......................... 1,789.2 292.9 (36.2) 2,045.9
Advertising and promotion ex-
penses............................ 584.5 160.8 (32.4)(g) 712.9
Other selling and administrative
expenses.......................... 603.1 119.1 (3.8)(g) 718.4
Interest expense................... 73.6 28.0 -- 101.6
Restructuring and integration
charges........................... -- 8.9 -- 8.9
Other (income) expense, net........ (4.9) 4.3 -- (0.6)
-------- ------ ----- --------
Income (Loss) from Continuing Opera-
tions Before Income Taxes........... 532.9 (28.2) -- 504.7
Provision (benefit) for income tax-
es................................ 175.1 (1.0) (4.1)(h) 170.0
-------- ------ ----- --------
Income (Loss) from Continuing Opera-
tions............................... 357.8 (27.2) 4.1 334.7
Preference stock dividend require-
ments............................. 3.3 3.2 -- 6.5
-------- ------ ----- --------
Income (Loss) from Continuing
Operations Applicable to Common
Shares.............................. $ 354.5 $(30.4) $ 4.1 $ 328.2
======== ====== ===== ========
Income (Loss) Per Share from Continu-
ing Operations(i)................... $ 1.26 $(0.87) $ 1.11
======== ====== ========
Average number of common and common
equivalent shares outstanding(i).... 281.0 34.8 296.1
======== ====== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
51
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined financial statements are
presented for illustrative purposes only, giving effect to the Merger of
Mattel and Tyco as accounted for by the pooling of interests method. In
accordance with Commission reporting rules, the pro forma condensed combined
statements of income, and the historical statements from which they are
derived, present only income from continuing operations and, therefore, do not
include discontinued operations, extraordinary items and the cumulative
effects of accounting changes.
Because the transaction has not been completed, costs of the Merger
transaction can only be estimated at this time. The pro forma condensed
combined statement of income for the nine months ended September 30, 1996
excludes: (i) the positive effects of potential cost savings which may be
achieved upon combining the resources of the companies; (ii) transaction costs
of approximately $60 to $70 million, including investment banking, legal and
accounting fees, and contractual termination and incentive benefits.
Additionally, Mattel expects to restructure the combined operations, resulting
in additional nonrecurring charges. The amount of such charges cannot be
reasonably estimated until an analysis of the newly combined operations is
completed and a restructuring plan developed.
The pro forma condensed combined balance sheet as of September 30, 1996
includes, in accordance with Commission reporting rules, the impact of all
transactions, whether of a recurring or nonrecurring nature, that can be
reasonably estimated and should be reflected as of that date.
2. PRO FORMA ADJUSTMENTS
Intercompany Transactions--There were no intercompany transactions which
required elimination from the pro forma combined operating results or balance
sheet.
(a) Cash--Cash has been adjusted to reflect the issuance of 3.0 million
shares of Mattel Common Stock to an independent third party prior to the
Merger consummation date, and the prepayment of certain Tyco short-term
borrowings (including the related prepayment fee).
(b) Prepaid Expenses and Other Current Assets--Current assets have been
adjusted to reflect the write-off of the current portion of Tyco's capitalized
debt issuance costs related to certain short-term borrowings that will be
prepaid.
(c) Other Noncurrent Assets--The combined pro forma financial information
has been adjusted to reflect the write-off of the noncurrent portion of Tyco's
capitalized debt issuance cost related to certain short-term borrowings that
will be prepaid, and recognition of tax benefits relating to certain foreign
net operating losses of Tyco.
(d) Short-term Borrowings--Borrowings have been adjusted to reflect the
prepayment of certain Tyco short-term borrowings.
(e) Accounts Payable, Accrued Liabilities, and Income Taxes Payable--The pro
forma adjustment principally reflects $45 million, net of related taxes, for
the minimum of the estimated range for transaction costs related to the
Merger.
(f) Shareholders' Equity--Shareholders' equity has been adjusted to reflect
the following:
--Common stock accounts are adjusted for the assumed issuance of
approximately 15.6 million shares of Mattel Common Stock in exchange for
approximately 34.8 million shares of Tyco Common Stock outstanding as of
September 30, 1996, utilizing the Exchange Ratio (estimated to be 0.43459
for purposes of this analysis). Additionally, adjustments reflect
conversion of the Tyco Stock Options and the Tyco
52
<PAGE>
Restricted Stock Units into Mattel Common Stock. The number of shares of
Mattel Common Stock to be issued at consummation of the Merger will be
based upon the actual number of shares of Tyco Common Stock outstanding at
that time and the actual exchange ratio.
--Additional paid-in capital is adjusted for the effects of: (i) issuance
of shares of Mattel Common Stock having a par value of $1.00 per share in
exchange for Tyco Common Stock having a par value of $0.01 per share; (ii)
cancellation of approximately 0.2 million shares of Tyco Common Stock held
in treasury as of September 30, 1996; (iii) the issuance of 0.5 million
shares of Mattel Common Stock for the Tyco Stock Options and Restricted
Stock Units; (iv) the issuance of 3.0 million shares of Mattel Common Stock
from its treasury to an independent third party prior to the merger
consummation date; and (v) conversion of Tyco Series B Preferred Stock and
Tyco Series C Preferred Stock, having a par value of $0.10 per share, into
equivalent shares of Mattel Series B Preferred Stock and Mattel Series C
Preferred Stock, having a par value of $1.00 per share.
--Retained earnings is adjusted for the effects of: (i) accrual for the
minimum of the estimated range for transaction costs related to the Merger;
(ii) compensation expense related to the Tyco Restricted Stock Units; (iii)
write-off of Tyco's debt issuance costs and a prepayment fee related to
certain short-term borrowings; and (iv) recognition of tax benefits
relating to certain foreign net operating losses of Tyco.
(g) Pro Forma Combined Statement of Income--Certain reclassifications have
been made to conform Tyco's reporting of cost of sales, advertising and
promotion, and selling and administration expenses to that of Mattel.
(h) Provision (Benefit) for Income Taxes--The pro forma financial adjustment
reflects the reduction of valuation allowances established in the historical
financial statements of Tyco, resulting in the recognition of benefits of
losses incurred by certain foreign affiliates in the pro forma combined
financial statements.
(i) Income per Common Share--Historical and pro forma per share data of the
companies include the retroactive effect of the November 1993 merger of
Fisher-Price into a wholly owned subsidiary of Mattel, accounted for as a
pooling of interests. Pro forma weighted-average common shares outstanding for
all periods presented are based upon Mattel's and Tyco's combined historical
weighted-average shares, after adjustment of Tyco's historical number of
shares by the Exchange Ratio (estimated to be 0.43459 for purposes of this
analysis).
53
<PAGE>
CAPITALIZATION OF MATTEL AND TYCO
The following table sets forth the capitalization of Mattel and Tyco as of
September 30, 1996, and as adjusted to give effect to the Merger and related
transactions. See "The Merger Agreement."
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
--------------------------------------
HISTORICAL PRO FORMA(a)
---------------- --------------------
MATTEL TYCO ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Short-term debt, including current
maturities(a)........................ $ 423.3 $106.2 $(83.8) $ 445.7
-------- ------ ------ --------
Long-term debt, net of current
maturities:
6 3/4% senior notes due 2000........ 100.0 -- -- 100.0
10 1/8% senior subordinated notes
due 2002........................... -- 126.5 -- 126.5
7% convertible subordinated notes... -- 16.0 -- 16.0
Medium-Term notes................... 220.0 -- -- 220.0
Mortgage note....................... 44.2 3.7 -- 47.9
Other............................... 11.0 0.9 -- 11.9
-------- ------ ------ --------
Total long-term debt.............. 375.2 147.1 -- 522.3
-------- ------ ------ --------
Shareholders' equity:
Mattel Series B Preferred Stock..... -- -- 0.1 0.1
Mattel Series C Preferred Stock..... -- -- 0.8 0.8
Tyco Series B Preferred Stock(b).... -- -- -- --
Tyco Series C Preferred Stock....... -- 0.1 (0.1) --
Mattel Common Stock(c).............. 279.0 -- 15.6 294.6
Tyco Common Stock(c)................ -- 0.4 (0.4) --
Additional paid-in capital(d)....... 116.3 441.3 (2.7) 554.9
Treasury stock(d)................... (228.0) (1.7) 79.3 (150.4)
Retained earnings/(accumulated
deficit)(e)(f)..................... 1,256.4 (64.3) (43.1) 1,149.0
Currency translation and other
adjustments(e)..................... (73.9) (22.4) -- (96.3)
-------- ------ ------ --------
Total shareholders' equity........ 1,349.8 353.4 49.5 1,752.7
-------- ------ ------ --------
Total capitalization.................. $2,148.3 $606.7 $(34.3) $2,720.7
======== ====== ====== ========
</TABLE>
- --------
(a) The pro forma adjustments and resulting combined amounts reflect the
actions to be taken at the Effective Date of the Merger to (i) cancel all
Tyco Common Stock issued but held in treasury, (ii) convert all other
issued and outstanding shares of Tyco Common Stock into shares of Mattel
Common Stock using the Exchange Ratio (estimated to be 0.43459 for
purposes of this analysis), (iii) convert all outstanding shares of Tyco
Series B Preferred Stock and Tyco Series C Preferred Stock into equivalent
shares of Mattel Series B and C Preferred Stock, (iv) convert the Tyco
Stock Options and the Tyco Restricted Stock Units into shares of Mattel
Common Stock, and (v) prepay certain Tyco short-term borrowings.
(b) The aggregate par value of Tyco Series B Preferred Stock outstanding is
insignificant in terms of data rounded to tenths of millions of dollars.
(c) The approximate number of shares of Mattel Common Stock assumed exchanged
in the Merger was based upon 34,826,668 Tyco Common Stock outstanding as
of September 30, 1996, as adjusted by the Exchange Ratio (estimated to be
0.43459 for purposes of this analysis). Additionally, adjustments reflect
conversion of the Tyco Stock Options and the Tyco Restricted Stock Units
into Mattel Common Stock.
(d) Additional paid-in capital is adjusted for the effects of: (i) issuance of
shares of Mattel Common Stock having a par value of $1.00 per share in
exchange for Tyco Common Stock having a par value of $0.01 per share; (ii)
cancellation of approximately 0.2 million shares of Tyco Common Stock held
in treasury as of September 30, 1996; (iii) the issuance of 0.5 million
shares of Mattel Common Stock for the Tyco Stock Options and the Tyco
Restricted Stock Units; (iv) the issuance of 3.0 million shares of Mattel
Common Stock from its treasury to an independent third party prior to the
merger consummation date; and (v) conversion of Tyco Series B Preferred
Stock and Tyco Series C Preferred Stock, having a par value of $0.10 per
share, into equivalent shares of Mattel Series B Preferred Stock and
Mattel Series C Preferred Stock, having a par value of $1.00 per share.
(e) Since December 27, 1987 (see Quasi-Reorganization in Note 1 to the
Consolidated Financial Statements in Mattel's 1995 Annual Report on Form
10-K, incorporated herein by reference).
(f) The net decrease in retained earnings principally reflects the $45 million
after-tax effect of a pro forma accrual for estimated costs and expenses
directly related to the transaction (see Note 1--Basis of Presentation to
the Unaudited Pro Forma Condensed Combined Financial Statements, included
herein).
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK OF MATTEL
GENERAL
Mattel's authorized capital stock as of the date of this Proxy
Statement/Prospectus consists of 600,000,000 shares of Mattel Common Stock,
$1.00 par value, 3,000,000 shares of preferred stock, $1.00 par value, and
20,000,000 shares of preference stock, $.01 par value. No shares of preferred
stock or preference stock are presently outstanding. Mattel does not presently
have outstanding, and the Mattel Charter does not authorize, any other classes
of capital stock. The issued and outstanding shares of Mattel Common Stock are
duly authorized, validly issued, fully paid and nonassessable.
COMMON STOCK
Holders of shares of Mattel Common Stock have no preemptive, redemption or
conversion rights. The holders of Mattel Common Stock are entitled to receive
dividends when and as declared by the Mattel Board out of funds legally
available therefor. Each holder of Mattel Common Stock is entitled to one vote
per share of Mattel Common Stock held of record by them and may cumulate their
votes in the election of directors. On most matters, the Mattel Common Stock
will vote together as a single class with the Mattel Series B Preferred Stock
and the Mattel Series C Preferred Stock to be issued in the Merger. As of
November 11, 1996, there were 279,057,614 shares of Mattel Common Stock
issued. Each outstanding share of Mattel Common Stock is accompanied by a
Mattel Right. See "Comparison of Stockholder Rights--Rights Plans--Mattel
Rights."
The registrar and transfer agent for the Mattel Common Stock is the First
National Bank of Boston.
PREFERRED AND PREFERENCE STOCK
The Mattel Board has the power, without further vote of shareholders, to
authorize the issuance of up to 3,000,000 shares of preferred stock and
20,000,000 shares of preference stock and to fix and determine the terms,
limitations and relative rights and preferences of any shares of preferred or
preference stock that it causes to be issued. This power includes the
authority to establish voting, dividend, redemption, conversion, liquidation
and other rights of any such shares. No shares of preferred or preference
stock are now outstanding, and Mattel has no current plan to issue any such
shares other than in connection with the Merger.
As of the Effective Date, separate Certificates of Designations amending the
Mattel Charter will be filed to authorize the issuance of two new classes of
preferred stock, Series B Voting Convertible Exchangeable Preferred Stock and
Series C Mandatorily Convertible Redeemable Preferred Stock. The summaries
contained herein of the terms of the Mattel Series B Preferred Stock and
Mattel Series C Preferred Stock do not purport to be complete and are subject
to and qualified in their entirety by reference to all of the provisions of
the Mattel Charter and the Certificate of Designations, Rights, Preferences
and Limitations relating to each such class of preferred stock (the
"Certificates of Designations").
Mattel Preference Stock. Each outstanding share of Mattel Common Stock is
accompanied by a Mattel Right, which entitles the holder thereof to purchase
one one-hundredth (128/37,500, as adjusted) of a share of Mattel Series E
Junior Participating Preference Stock par value $.01 per share ("Mattel Series
E Preference Shares") under certain circumstances. See "Comparison of
Stockholder Rights--Rights Plans--Mattel Rights." There are 1,500,000 shares
of Mattel Series E Preference Shares authorized for issuance. There are
currently no Mattel Series E Preference Shares outstanding.
MATTEL SERIES B VOTING CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
As of the Effective Date, Mattel will be authorized to issue up to 53,631
shares of Mattel Series B Preferred Stock and will issue one share of Mattel
Series B Preferred Stock for each of the 53,631 outstanding shares of Tyco
Series B Preferred Stock. Shares of Mattel Series B Preferred Stock will have
economic terms as nearly
55
<PAGE>
equivalent as possible to, and with the same voting and other rights as
correspond to, shares of Tyco Series B Preferred Stock.
The Mattel Series B Preferred Stock, like the Tyco Series B Preferred Stock,
will have an annual dividend yield of 6%, payable in cash. The Mattel Series B
Preferred Stock will have a liquidation value of $1,050 per share and will be
convertible, at the option of the holder, into shares of Mattel Common Stock
at a conversion price per share equal to $10.00 divided by the Exchange Ratio,
subject to certain adjustments as set forth in the Certificate of Designations
for the Mattel Series B Preferred Stock. Commencing in 1999, the shares of
Mattel Series B Preferred Stock will be convertible into Mattel Common Stock
for designated periods at the then market price, but not less than a price per
share equal to $5 divided by the Exchange Ratio. Holders of Mattel Series B
Preferred Stock will be entitled to vote (on an as-converted basis) with the
holders of Mattel Common Stock and Mattel Series C Preferred Stock as a single
class on all matters on which the holders of Mattel Common Stock may vote.
Mattel will have the option, at any time, to exchange Mattel Series B
Preferred Stock for 6% convertible subordinated notes of Mattel. Mattel may
redeem Mattel Series B Preferred Stock at any time after April 15, 1997 for an
amount equal to 105.25% of its liquidation value if the average closing price
(as defined in the Certificate of Designations relating to the Mattel Series B
Preferred Stock) of Mattel Common Stock exceeds 175% of the then current
conversion price of the Mattel Series B Preferred Stock. The 175% threshold is
reduced to 150% for redemptions after April 15, 1998 and eliminated for
redemptions commencing April 15, 1999. In addition, the redemption price is
reduced over time from 105.25% of the liquidation value to 100% in 2004. On
April 15, 2004, Mattel is required to redeem all outstanding shares of Mattel
Series B Preferred Stock and the redemption price shall be paid, at Mattel's
option, in cash or in shares of Mattel Common Stock.
Pursuant to the terms of a registration rights agreement among Mattel (as
successor to Tyco) and the holders of the Mattel Series B Preferred Stock,
Mattel will grant the holders thereof certain demand and incidental
registration rights with respect to Mattel Series B Preferred Stock, any
Mattel Common Stock issued upon conversion of such preferred stock or any
notes issued in exchange for such preferred stock.
MATTEL SERIES C MANDATORILY CONVERTIBLE REDEEMABLE PREFERRED STOCK
As of the Effective Date, Mattel will be authorized to issue up to 772,800
shares of Mattel Series C Preferred Stock and will issue one share of Mattel
Series C Preferred Stock for each of the 772,800 shares of Tyco Series C
Preferred Stock outstanding as of the Record Date. Shares of Mattel Series C
Preferred Stock will have substantially the same rights and preferences as the
Tyco Series C Preferred Stock.
Dividends
Holders of Mattel Series C Preferred Stock will be entitled to receive, when
and as dividends on the Mattel Series C Preferred Stock are declared by the
Mattel Board out of funds legally available therefor cash dividends from the
issue date, accruing at the rate per share of 8.25% per annum (or $10.3125 per
annum or $2.5781 per quarter), payable quarterly in arrears on January 1,
April 1, July 1 and October 1 of each year, or, if any such date is not a
business day, the next succeeding business day; provided, however, that with
respect to any dividend period during which a redemption occurs, Mattel may,
at its option, declare accrued dividends to, and pay such dividends on, the
date fixed for redemption, in which case such dividends would be payable in
cash to the holders of Mattel Series C Preferred Stock as of the record date
for such dividend payment and would not be included in the calculation of the
Call Price (as defined herein) related to Mattel Series C Preferred Stock as
set forth below. Dividends will cease to accrue in respect of the Mattel
Series C Preferred Stock on July 1, 2000 (the "Mandatory Conversion Date") or
on the date of their earlier conversion or redemption.
Dividends will be payable to holders of record as they appear on the stock
register of Mattel on such record dates, not less than 15 nor more than 60
days preceding the payment date thereof, as shall be fixed by the Mattel
Board. Dividends for any period less than a full quarterly dividend period
will be computed on the basis of a 360-day year of twelve 30-day months and
the actual number of days elapsed in any period less than one month.
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Dividends will accrue whether or not there are funds legally available for
the payment of such dividends and whether or not such dividends are declared.
Accrued but unpaid dividends on Mattel Series C Preferred Stock will
accumulate as of the dividend payment date on which they first become payable,
but no interest will accrue on accumulated but unpaid dividends on Mattel
Series C Preferred Stock.
The Mattel Series C Preferred Stock will rank on a parity, both as to
payment of dividends and distribution of assets upon liquidation, with Mattel
Series B Preferred Stock and any future preferred stock issued by Mattel that
by its terms ranks pari passu with the Mattel Series C Preferred Stock.
As long as any shares of Mattel Series C Preferred Stock are outstanding, no
dividends (other than dividends payable in shares of, or warrants, rights or
options exercisable for or convertible into shares of Mattel Common Stock or
any other capital stock of Mattel ranking junior to the Mattel Series C
Preferred Stock as to the payment of dividends and the distribution of assets
upon liquidation ("Junior Stock") and cash in lieu of fractional shares in
connection with any such dividend) will be paid or declared in cash or
otherwise, nor will any other distribution be made (other than a distribution
payable in Junior Stock and cash in lieu of fractional shares in connection
with any such distribution), on any Junior Stock unless (i) full dividends on
preferred stock (including the Mattel Series C Preferred Stock) that do not
constitute Junior Stock ("Parity Preferred Stock") have been paid, or declared
and set aside for payment, for all dividend periods terminating at or before
the date of such Junior Stock dividend or distribution payment to the extent
such dividends are cumulative; (ii) dividends in full for the current
quarterly dividend period have been paid, or declared and set aside for
payment, on all Parity Preferred Stock to the extent such dividends are
cumulative; (iii) Mattel has paid or set aside all amounts, if any, then or
theretofore required to be paid or set aside for all purchase, retirement and
sinking funds, if any, for any Parity Preferred Stock; and (iv) Mattel is not
in default on any of its obligations to redeem any Parity Preferred Stock.
In addition, as long as any shares of Mattel Series C Preferred Stock are
outstanding, no shares of any Junior Stock may be purchased, redeemed, or
otherwise acquired by Mattel or any of its subsidiaries (except in connection
with a reclassification or exchange of any Junior Stock through the issuance
of other Junior Stock (and cash in lieu of fractional shares in connection
therewith) or the purchase, redemption or other acquisition of any Junior
Stock with any Junior Stock (and cash in lieu of fractional shares in
connection therewith)), nor may any funds be set aside or made available for
any sinking fund for the purchase or redemption of any Junior Stock unless:
(i) full dividends on Parity Preferred Stock have been paid, or declared and
set aside for payment for all dividend periods terminating at or before the
date of such purchase or redemption to the extent such dividends are
cumulative; (ii) dividends in full for the current quarterly dividend period
have been paid, or declared and set aside for payment, on all Parity Preferred
Stock to the extent such dividends are cumulative; (iii) Mattel has paid or
set aside all amounts, if any, then or theretofore required to be paid or set
aside for all purchase, retirement, and sinking funds, if any, for any Parity
Preferred Stock; and (iv) Mattel is not in default on any of its obligations
to redeem any Parity Preferred Stock.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property or Junior Stock) as may be determined
by the Mattel Board may be declared and paid on the shares of any Junior Stock
from time to time and Junior Stock may be purchased, redeemed or otherwise
acquired by Mattel or any of its subsidiaries from time to time. In the event
of the declaration and payment of any such dividends or other distributions,
the holders of such Junior Stock will be entitled, to the exclusion of holders
of Parity Preferred Stock, to share therein according to their respective
interests.
As long as any shares of Mattel Series C Preferred Stock are outstanding,
dividends or other distributions may not be declared or paid on any Parity
Preferred Stock (other than dividends or other distributions payable in Junior
Stock and cash in lieu of fractional shares in connection therewith), and
Mattel may not purchase, redeem or otherwise acquire any Parity Preferred
Stock (except with any Junior Stock and cash in lieu of fractional shares in
connection therewith), unless either: (i)(a) full dividends on Parity
Preferred Stock have been paid, or
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declared and set aside for payment, for all dividend periods terminating at or
before the date of such Parity Preferred Stock dividend, distribution,
purchase, redemption or other acquisition payment to the extent such dividends
are cumulative; (b) dividends in full for the current quarterly dividend
period have been paid, or declared and set aside for payment, on all Parity
Preferred Stock to the extent such dividends are cumulative; (c) Mattel has
paid or set aside all amounts, if any, then or theretofore required to be paid
or set aside for all purchase, retirement and sinking funds, if any, for any
Parity Preferred Stock; and (d) Mattel is not in default on any of its
obligations to redeem any Parity Preferred Stock; or (ii) with respect to the
payment of dividends only, any such dividends will be declared and paid pro
rata so that the amounts of any dividends declared and paid per share of
Mattel Series C Preferred Stock and each other share of Parity Preferred Stock
will in all cases bear to each other the same ratio that accrued dividends
(including any accumulation with respect to unpaid dividends for prior
dividend periods, if such dividends are cumulative) per share of Mattel Series
C Preferred Stock and such other shares of Parity Preferred Stock bear to each
other.
Mandatory Conversion of the Mattel Series C Preferred Stock
On the Mandatory Conversion Date, each outstanding share of Mattel Series C
Preferred Stock will automatically convert into (i) a number of shares of
Mattel Common Stock equal to the product of 27.775 and the Exchange Ratio (the
"Mandatory Conversion Rate"), and (ii) the right to receive cash in an amount
equal to all accrued and unpaid dividends on such Mattel Series C Preferred
Stock (other than previously declared dividends payable to a holder of record
as of a prior date) to the Mandatory Conversion Date, whether or not declared,
out of funds legally available for the payment of dividends, subject to (1)
the right of Mattel to redeem the Mattel Series C Preferred Stock on or after
July 1, 1999 (the "First Call Date") and before the Mandatory Conversion Date
(as described below) and (2) the conversion of the Mattel Series C Preferred
Stock to Mattel Common Stock at the option of the holder at any time before
the Mandatory Conversion Date (as described below). See "--Mattel Series C
Depositary Shares--Redemption or Conversion of Mattel Series C Depositary
Shares." The Mandatory Conversion Rate is subject to adjustment as described
below. Dividends will cease to accrue on the Mandatory Conversion Date in
respect of the Mattel Series C Preferred Stock then outstanding.
Optional Redemption of the Mattel Series C Preferred Stock
The shares of Mattel Series C Preferred Stock will not be redeemable prior
to the First Call Date. At any time and from time to time on or after that
date until immediately before the Mandatory Conversion Date, Mattel will have
the right to redeem, in whole or in part, the outstanding Mattel Series C
Preferred Stock. Upon any such redemption, the holder of the Mattel Series C
Preferred Stock shall receive in exchange for each share of Mattel Series C
Preferred Stock, unless previously redeemed or converted, the greater of (i)
the number of shares of Mattel Common Stock equal to the quotient of (a) the
applicable Call Price (as described below) in effect on the redemption date,
divided by (b) the Current Market Price (as defined herein) of the Mattel
Common Stock, determined as of the trading day immediately preceding the
Notice Date (as defined below) and (ii) a number of shares of Mattel Common
Stock equal to the product of 20.4925 and the Exchange Ratio (the "Optional
Rate"). The Optional Rate is subject to adjustment as described below.
Dividends will cease to accrue on the Mattel Series C Preferred Stock on the
date fixed for their redemption.
The "Call Price" for each share of Mattel Series C Preferred Stock is equal
to the sum of (i)(a) $127.575 (the equivalent of $5.103 per Mattel Series C
Depositary Share) on and after the First Call Date, to and including September
30, 1999; (b) $126.925 (the equivalent of $5.077 per Mattel Series C
Depositary Share) on and after October 1, 1999, to and including December 31,
1999; (c) $126.30 (the equivalent of $5.052 per Mattel Series C Depositary
Share) on and after January 1, 2000, to and including March 31, 2000; (d)
$125.65 (the equivalent of $5.026 per Mattel Series C Depositary Share) on and
after April 1, 2000, to and including May 31, 2000; or (e) $125.00 (the
equivalent of $5.00 per Mattel Series C Depositary Share) on and after June 1,
2000, to and including June 30, 2000; and (ii) all accrued and unpaid
dividends thereon to but not including the date fixed for redemption (other
than previously declared dividends payable to a holder of record as of a prior
date).
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The "Current Market Price" per share of the Mattel Common Stock on any date
of determination means the lesser of (i) the average of the closing sale
prices of the Mattel Common Stock as reported on the NYSE Composite Tape on
the 15 consecutive trading days ending on and including such date of
determination or (ii) the closing sale price of the Mattel Common Stock as
reported on the NYSE Composite Tape for such date of determination; provided,
however, that with respect to any redemption of shares of Mattel Series C
Preferred Stock, if any event resulting in an adjustment of the Mandatory
Conversion Rate occurs during the period beginning on the first day of such
15-day period and ending on the applicable redemption date, the Current Market
Price as determined pursuant to the foregoing will be appropriately adjusted
to reflect the occurrence of such event. The "Notice Date" with respect to any
notice given by Mattel in connection with a redemption of the Mattel Series C
Preferred Stock means the date on which first occurs either the public
announcement of such redemption or the commencement of mailing of such notice
to the holders of Mattel Series C Preferred Stock.
If fewer than all outstanding shares of Mattel Series C Preferred Stock are
to be called for redemption, Mattel Series C Preferred Stock to be called will
be selected by Mattel, from outstanding Mattel Series C Preferred Stock not
previously called, by lot or pro rata (as nearly as may be possible) or by any
other method determined by the Mattel Board, in its sole discretion, to be
equitable.
Mattel will provide notice of any redemption of Mattel Series C Preferred
Stock to holders of record of shares of Mattel Series C Preferred Stock to be
called for redemption not less than 15 nor more than 60 days before the date
fixed for redemption. Accordingly, the earliest Notice Date for any call for
redemption of Mattel Series C Preferred Stock will be July 1, 1999. Any such
notice will be provided by mail, sent to the holders of record of Mattel
Series C Preferred Stock to be called at each such holder's address as it
appears on the stock register of Mattel, first class postage prepaid;
provided, however, that failure to give such notice or any defect therein will
not affect the validity of the proceeding for redemption of any Mattel Series
C Preferred Stock to be redeemed except as to the holder to whom Mattel has
failed to give such notice or whose notice was defective. On and after the
redemption date, all rights of the holders of Mattel Series C Preferred Stock
called for redemption will terminate except the right to receive the Call
Price (unless Mattel defaults on the payment of the Call Price). A public
announcement of any call for redemption will be made by Mattel before, or at
the time of, the mailing of such notice of redemption.
Each holder of Mattel Series C Preferred Stock called for redemption must
surrender the certificates evidencing such shares of Mattel Series C Preferred
Stock to Mattel at the place designated in the notice of redemption and will
thereupon be entitled to receive certificates for shares of Mattel Common
Stock equal to the Call Price, divided by the Current Market Price of the
Mattel Common Stock and cash for any fractional share amount.
Conversion at the Option of the Holder
Shares of Mattel Series C Preferred Stock will be convertible in whole or in
part, at the option of the holder thereof, at any time before the Mandatory
Conversion Date, unless previously redeemed, into shares of Mattel Common
Stock at the Optional Rate (which, as previously defined, is equal to the
product of 20.4925 and the Exchange Ratio). The Optional Rate is subject to
adjustment as described below. The right to convert shares of Mattel Series C
Preferred Stock called for redemption will terminate immediately before the
close of business on any redemption date with respect to such shares.
Conversion of Mattel Series C Preferred Stock at the option of the holder
may be effected by delivering certificates evidencing such Mattel Series C
Preferred Stock together with written notice of conversion and a proper
assignment of such certificates to Mattel or in blank (and, if applicable,
cash payment of an amount equal to the dividend attributable to the current
quarterly dividend period payable on such shares), to the office of the
transfer agent for the Mattel Series C Preferred Stock or to any other office
or agency maintained by Mattel for that purpose and otherwise in accordance
with conversion procedures established by Mattel. Each optional conversion
will be deemed to have been effected immediately before the close of business
on the date on which the foregoing requirements have been satisfied. The
conversion will be at the Optional Rate in effect at such time and on such
date.
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Holders of Mattel Series C Preferred Stock at the close of business on a
record date for any payment of declared dividends will be entitled to receive
the dividend payable on such Mattel Series C Preferred Stock on the
corresponding dividend payment date notwithstanding the optional conversion of
such Mattel Series C Preferred Stock following such record date and before
such dividend payment date. However, shares of Mattel Series C Preferred Stock
surrendered for conversion after the close of business on a record date for
any payment of declared dividends and before the opening of business on the
corresponding dividend payment date must be accompanied by payment in cash of
an amount equal to the dividend attributable to the current quarterly dividend
period payable on such date (unless such shares of Mattel Series C Preferred
Stock are subject to redemption on a redemption date between such record date
and such dividend payment date). A holder of shares of Mattel Series C
Preferred Stock called for redemption on the First Call Date or any other
dividend payment date will receive the dividend on such Mattel Series C
Preferred Stock payable on that date and will be able to convert such Mattel
Series C Preferred Stock after the record date for such dividend without
paying an amount equal to such dividend to Mattel upon conversion. Upon any
optional conversion of shares of Mattel Series C Preferred Stock, Mattel will
make no payment of or allowance for previously declared dividends or
distributions on the shares of Mattel Common Stock issued upon such
conversion.
The Mattel Series C Depositary Shares are subject to conversion and
redemption upon the same terms and conditions (including those as to notice to
the owners of Mattel Series C Depositary Shares and as to selection of
depositary shares to be called if fewer than all Mattel Series C Depositary
Shares are to be called) as the Mattel Series C Preferred Stock held by the
Depositary, adjusted to reflect the fact that 25 Mattel Series C Depositary
Shares are the equivalent of one share of Mattel Series C Preferred Stock. See
"--Mattel Series C Depositary Shares--Redemption or Conversion of Mattel
Series C Depositary Shares."
Conversion Adjustments
The Mandatory Conversion Rate and the Optional Rate are each subject to
adjustment as appropriate in certain circumstances, including if Mattel (i)
pays a stock dividend or makes a distribution with respect to its Mattel
Common Stock in shares of Mattel Common Stock; (ii) subdivides or splits its
outstanding Mattel Common Stock; (iii) combines its outstanding Mattel Common
Stock into a smaller number of shares; (iv) issues any shares of Mattel Common
Stock by reclassification of its shares of Mattel Common Stock; (v) issues
certain rights or warrants to all holders of its Mattel Common Stock; or (vi)
pays a dividend or distributes to all holders of its Mattel Common Stock
evidences of its indebtedness, cash or other assets (including capital stock
of Mattel but excluding (a) any Permitted Cash Dividends (as defined below) or
(b) distributions and dividends referred to in clause (i) above written). In
addition, Mattel will be entitled (but will not be required) to make upward
adjustments in the Mandatory Conversion Rate, the Optional Rate and the Call
Price as Mattel, in its discretion, determines to be advisable, in order that
any stock dividend, subdivision of shares, distribution of rights to purchase
stock or securities, or distribution of securities convertible into or
exchangeable for stock (or any transaction which could be treated as any of
the foregoing transactions under Section 305 of the Code) hereafter made by
Mattel to its shareholders will not be taxable. "Permitted Cash Dividends"
means, with respect to any consecutive 12-month period, all cash dividends and
cash distributions on the Mattel Common Stock (other than cash dividends and
cash distributions for which a prior adjustment to the Mandatory Conversion
Rate and the Optional Rate was previously made) not in excess of, on a per
share of outstanding Mattel Common Stock basis, 10% of the average of the
closing share price of the Mattel Common Stock as reported on the NYSE
Composite Tape over such period. All adjustments to the Mandatory Conversion
Rate, the Optional Rate and the Call Price will be calculated to the nearest
1/100th of a share of Mattel Common Stock. No adjustment in the Mandatory
Conversion Rate or the Optional Rate will be required unless such adjustment
would require an increase or decrease of at least 1% therein; provided,
however, that any adjustments which, by reason of the foregoing, are not
required to be made will be carried forward and taken into account in any
subsequent adjustment. All adjustments will be made successively.
Whenever the Mandatory Conversion Rate, the Optional Rate and the Call Price
are adjusted as provided in the preceding paragraph, Mattel will file with the
transfer agent for the Mattel Series C Preferred Stock a certificate with
respect to such adjustment, make a prompt public announcement thereof and mail
notice to
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holders of the Mattel Series C Preferred Stock providing specified information
with respect to such adjustment. At least 10 business days before taking any
action that would result in adjustment to the Mandatory Conversion Rate, the
Optional Rate or the Call Price, Mattel will notify each record holder of
Mattel Series C Preferred Stock concerning such proposed action.
Adjustments for Certain Transactions
Unless sooner redeemed or converted, in case of any reclassification of the
Mattel Common Stock, any consolidation of Mattel with, or merger of Mattel
into, any other entity, any merger of any entity into Mattel (other than a
merger that does not result in a reclassification, conversion, exchange or
cancellation of the outstanding shares of Mattel Common Stock), any sale or
transfer of all or substantially all of the assets of Mattel or any compulsory
share exchange whereby the Mattel Common Stock is converted into other
securities, cash or other property (a "Transaction"), then each share of
Mattel Series C Preferred Stock will, after consummation of such Transaction,
be entitled to be converted (i) on the Mandatory Conversion Date into the kind
and amount of securities, cash or other property receivable upon consummation
of such Transaction by a holder of the number of shares of Mattel Common Stock
into which such Mattel Series C Preferred Stock would have been converted if
the conversion on the Mandatory Conversion Date had occurred immediately
before the date of consummation of such Transaction, plus the right to receive
cash in an amount equal to all accrued and unpaid dividends on such Mattel
Series C Preferred Stock (other than previously declared dividends payable to
a holder of record as of a prior date), (ii) upon redemption by Mattel on any
redemption date into the kind and amount of securities, cash or other property
receivable upon consummation of such Transaction by a holder of the number of
shares of Mattel Common Stock that would have been issuable at the Call Price
in effect on such redemption date upon a redemption of such Mattel Series C
Preferred Stock immediately before consummation of such Transaction (assuming
that, if the Notice Date for such redemption is not before such Transaction,
the Notice Date had been the date of such Transaction; and assuming in each
case that such holder of shares of Mattel Common Stock failed to exercise
rights of election, if any, as to the kind or amount of securities, cash or
other property receivable upon consummation of such Transaction (provided
that, if the kind or amount of securities, cash or other property receivable
upon consummation of such transaction is not the same for each non-electing
share, then the kind and amount of securities, cash or other property
receivable upon consummation of such Transaction for each non-electing share
will be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares)) or (iii) at the option of the holder,
into the kind and amount of securities, cash or other property receivable upon
consummation of such Transaction by a holder of the number of shares of Mattel
Common Stock into which such Mattel Series C Preferred Stock might have been
converted immediately before consummation of such Transaction. The kind and
amount of securities into or for which the Mattel Series C Preferred Stock
will be convertible or redeemed after consummation of such Transaction will be
subject to adjustment as described under "--Conversion Adjustments" following
the date of consummation of such Transaction.
Fractional Shares
No fractional shares of Mattel Common Stock will be issued upon redemption
or conversion of Mattel Series C Preferred Stock. In lieu of any fractional
share otherwise issuable in respect of the aggregate number of shares of
Mattel Series C Preferred Stock of any holder that are redeemed or converted,
such holder will be entitled to receive an amount in cash equal to the same
fraction of the Current Market Price of the Mattel Common Stock, determined as
of the Notice Date, in the case of redemption by Mattel, or the trading day
immediately preceding (i) the Mandatory Conversion Date, in the case of a
mandatory conversion, or (ii) the effective date of conversion, in the case of
an optional conversion by a holder.
Mattel Rights Agreement
Shares of Mattel Common Stock issued upon conversion of the Mattel Series C
Preferred Stock will be entitled to receive Mattel Rights in accordance with
the terms and conditions of the Mattel Rights Agreement. The method of
calculation of the Current Market Price of the Mattel Common Stock does not
take into account
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any separate value of the Mattel Rights, except to the extent any such value
may be reflected in the Current Market Price.
Liquidation Rights
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of Mattel, and subject to the rights of holders of any other series
of preferred stock, the holders of outstanding Mattel Series C Preferred Stock
are entitled to receive an amount equal to $125, plus accrued and unpaid
dividends thereon, out of the assets of Mattel available for distribution to
shareholders, before any distribution of assets is made to holders of Mattel
Common Stock or any other Junior Stock upon liquidation, dissolution or
winding up.
If upon any voluntary or involuntary liquidation, dissolution, or winding up
of Mattel, the assets of Mattel are insufficient to permit the payment of the
full preferential amounts payable with respect to the Mattel Series C
Preferred Stock and all other series of Parity Preferred Stock, the holders of
Mattel Series C Preferred Stock and of all other series of Parity Preferred
Stock will share ratably in any distribution of assets of Mattel in proportion
to the full respective preferential amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to which they are
entitled, the holders of Mattel Series C Preferred Stock will not be entitled
to any further participation in any distribution of assets by Mattel. A
Transaction will not be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of Mattel.
Voting Rights
The holders of Mattel Series C Preferred Stock will have the right with the
holders of Mattel Common Stock to vote in the election of directors and upon
each other matter coming before any meeting of the holders of Mattel Common
Stock. Each share of Mattel Series C Preferred Stock will be entitled to a
number of votes equal to the product of 25 and the Exchange Ratio. The holders
of Mattel Series C Preferred Stock, Mattel Common Stock and Mattel Series B
Preferred Stock will vote together as one class on such matters except as
otherwise provided by law or by the Mattel Charter.
In the event that the equivalent of six quarterly dividends payable on the
Mattel Series C Preferred Stock shall be in arrears, the number of directors
of Mattel will be increased by two and the holders of the Mattel Series C
Preferred Stock shall have the exclusive right, voting separately and as a
class, with each share of Mattel Series C Preferred Stock entitled to a number
of votes equal to the product of 25 and the Exchange Ratio, to elect the two
additional directors (the "Series C Directors"). Such right shall continue
until all dividends in arrears and dividends in full for the current quarterly
period have been paid or declared and set apart for payment. The term of
office of any director elected by the holders of the Mattel Series C Preferred
Stock will terminate on the earlier of (i) the next annual meeting of
shareholders at which a successor has been elected and qualified, or (ii) the
termination of the right of holders of the Mattel Series C Preferred Stock to
elect Series C Directors.
Mattel will not, without the approval of the holders of at least 66 2/3% of
the Mattel Series C Preferred Stock then outstanding: (i) amend, alter, or
repeal any of the provisions of the Mattel Charter or Mattel Bylaws so as to
affect adversely the powers, preferences or rights of the holders of the
Mattel Series C Preferred Stock then outstanding or reduce the minimum time
for any required notice to which the holders of the Mattel Series C Preferred
Stock then outstanding may be entitled (an amendment of the Mattel Charter to
authorize or create, or to increase the authorized amount of, Mattel Common
Stock or other Junior Stock or any stock of any class ranking on a parity with
the Mattel Series C Preferred Stock being deemed not to affect adversely the
powers, preferences or rights of the holders of the Mattel Series C Preferred
Stock); (ii) authorize or create, or increase the authorized amount of, any
stock of any class, or any security convertible into capital stock of any
class, ranking prior to the Mattel Series C Preferred Stock either as to the
payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up of Mattel; (iii) merge or consolidate with or into
any other corporation, unless each holder of Mattel Series C Preferred Stock
immediately preceding such merger or consolidation receives or continues to
hold an equivalent number of shares in the resulting corporation, with
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substantially the same rights and preferences, as correspond to the Mattel
Series C Preferred Stock so held as contemplated above under "--Adjustments
for Certain Transactions," or (iv) voluntarily dissolve, liquidate or wind up
the affairs of Mattel.
Mattel will not, without the approval of the holders of at least a majority
of the shares of Mattel Series C Preferred Stock then outstanding, create, or
increase the authorized number of shares of, any other class or classes of
Parity Preferred Stock, other than the Mattel Series B Preferred Stock, or
create any stock or other security convertible into or exchangeable for or
evidencing the right to purchase any Parity Preferred Stock, or increase the
authorized number of shares of any such other class or amount of such other
stock or security.
Notwithstanding the provisions summarized in the preceding two paragraphs,
no such approval described therein of the holders of the Mattel Series C
Preferred Stock will be required if, at or before the time when such
amendment, alteration or repeal is to take effect or when the authorization,
creation, increase or issuance of any such prior or parity stock or
convertible security is to be made, or when such consolidation or merger is to
take effect, as the case may be, provision is made for the redemption of all
Mattel Series C Preferred Stock at the time outstanding in accordance with the
Certificate of Designations.
Transfer Agent and Registrar
First City Transfer Company (or a successor thereto selected by Mattel) will
act as transfer agent and registrar for, and paying agent for the payment of
dividends on, the Mattel Series C Preferred Stock.
Miscellaneous
Upon issuance, the Mattel Series C Preferred Stock will be fully paid and
nonassessable. Holders of Mattel Series C Preferred Stock have no preemptive
rights. Mattel will at all times reserve and keep available out of its
authorized and unissued Mattel Common Stock, solely for issuance upon the
conversion or redemption of Mattel Series C Preferred Stock, such number of
shares of Mattel Common Stock as will from time to time be issuable upon the
conversion or redemption of all the Mattel Series C Preferred Stock then
outstanding. The Mattel Series C Preferred Stock redeemed for, or converted
into Mattel Common Stock or otherwise reacquired by Mattel will resume the
status of authorized and unissued shares of Preferred Stock, undesignated as
to series, and will be available for subsequent issuance.
MATTEL SERIES C DEPOSITARY SHARES
General
Each Mattel Series C Depositary Share will represent one twenty-fifth of a
share of Mattel Series C Preferred Stock to be deposited under the Deposit
Agreement, dated as of June 24, 1996 (the "Deposit Agreement"), among Mattel
(as successor to Tyco), Midlantic Bank, N.A., as Depositary (the
"Depositary"), and all holders from time to time of depositary receipts issued
thereunder (the "Depositary Receipts"). Subject to the terms of the Deposit
Agreement, each owner of a Mattel Series C Depositary Share will be entitled
to all the rights and preferences of the Mattel Series C Preferred Stock
represented thereby (including dividend, voting, redemption, conversion and
liquidation rights) and subject, proportionately, to all of the limitations of
the Mattel Series C Preferred Stock represented thereby, contained in the
Certificate of Designations summarized under "--Mattel Series C Mandatorily
Convertible Redeemable Preferred Stock."
The Mattel Series C Depositary Shares will be evidenced by Depositary
Receipts previously issued in respect of Tyco Series C Depositary Shares.
Mattel intends to make application to the Depository Trust Company for
continued acceptance of the Depositary Receipts for its book-entry settlement
system.
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Dividends and Other Distributions
The Depositary will distribute all cash distributions and other
distributions received in respect of the Mattel Series C Preferred Stock to
the record holders of Mattel Series C Depositary Shares in proportion to the
number of such Mattel Series C Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Mattel Series C
Depositary Shares entitled thereto, unless the Depositary determines that it
is not feasible to make such distribution, in which case the Depositary may,
with the approval of Mattel, sell such property and distribute the net
proceeds from such sale to such holders.
Record Date
Whenever (i) any cash dividend or other cash distribution becomes payable,
any distribution of property other than cash is made, or any rights,
preferences or privileges are at any time offered with respect to the Mattel
Series C Preferred Stock, or (ii) the Depositary receives notice of any
meeting at which holders of Mattel Series C Preferred Stock are entitled to
vote or of which holders of Mattel Series C Preferred Stock are entitled to
notice or any solicitation of consents in respect of the Mattel Series C
Preferred Stock, or any call or conversion of any Mattel Series C Preferred
Stock, or if at any time the Depositary and Mattel otherwise deem it
appropriate, the Depositary will in each such instance fix a record date
(which shall be the same date as the record date for the Mattel Series C
Preferred Stock) for the determination of the holders of Depositary Receipts
who are entitled to (a) receive such dividend, distribution, rights,
preferences or privileges, net proceeds from the sale of such property, or,
(b) receive notice of, and give instructions for the exercise of voting or
consent rights at, any such meeting or (c) receive notice of any such call or
conversion, subject to the provisions of the Deposit Agreement.
Withdrawal of Mattel Series C Preferred Stock
Upon surrender of the Depositary Receipts at the corporate trust office of
the Depositary (unless the related Mattel Series C Depositary Shares have been
previously called for redemption), the holder of the Mattel Series C
Depositary Shares evidenced thereby is entitled to delivery at such office to
or upon his order of the number of whole shares of Mattel Series C Preferred
Stock and any money or other property represented by such Mattel Series C
Depositary Shares. Holders of Mattel Series C Depositary Shares will be
entitled to receive whole shares of Mattel Series C Preferred Stock on the
basis of one share of Mattel Series C Preferred Stock for each 25 Mattel
Series C Depositary Shares, but holders of such whole shares of Mattel Series
C Preferred Stock will not thereafter be entitled to receive Mattel Series C
Depositary Shares in exchange therefor. If the Depositary Receipts delivered
by the holder evidence a number of Mattel Series C Depositary Shares in excess
of the number of Mattel Series C Depositary Shares representing the number of
whole shares of Mattel Series C Preferred Stock to be withdrawn, the
Depositary will deliver to such holder at the same time a new Depositary
Receipt evidencing such excess number of Mattel Series C Depositary Shares.
Redemption or Conversion of Mattel Series C Depositary Shares
As described under "--Mattel Series C Mandatorily Convertible Redeemable
Preferred Stock--Mandatory Conversion of the Mattel Series C Preferred Stock,"
"--Optional Redemption of the Mattel Series C Preferred Stock" and "--
Conversion at the Option of the Holder," the Mattel Series C Preferred Stock
is subject to automatic conversion into shares of Mattel Common Stock on the
Mandatory Conversion Date, Mattel's right to redeem the Mattel Series C
Preferred Stock for Mattel Common Stock at any time on or after the First Call
Date and before the Mandatory Conversion Date and the holder's right to
convert the Mattel Series C Preferred Stock into Mattel Common Stock at its
option. The Mattel Series C Depositary Shares are subject to redemption or
conversion upon the same terms and conditions (including as to notice to the
owners of Mattel Series C Depositary Shares and as to selection of Mattel
Series C Depositary Shares to be called if fewer than all of the outstanding
Mattel Series C Depositary Shares are to be called) as the Mattel Series C
Preferred Stock held by the Depositary using the Common Stock received by the
Depositary, except that the number of shares of Common Stock received upon
conversion of each Mattel Series C Depositary Share will be equal to one
twenty-
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fifth of the number of shares of Common Stock received upon conversion of each
of the Mattel Series C Preferred Stock. To the extent that Mattel Series C
Depositary Shares are converted into shares of Common Stock and all such
shares of Common Stock cannot be distributed to the record holders of
Depositary Receipts without creating fractional interests in such shares,
Mattel will cause the Depositary to distribute cash to holders in lieu of
fractional shares as provided under "--Mattel Series C Mandatorily Convertible
Redeemable Preferred Stock--Fractional Shares." The amount distributed in the
foregoing case will be reduced by any amount required to be withheld by Mattel
or the Depositary on account of taxes or otherwise required pursuant to a law,
regulation or court process.
Voting of Mattel Series C Preferred Stock
Upon receipt of notice of any meeting at which holders of Mattel Series C
Preferred Stock are entitled to vote, the Depositary will mail the information
contained in such notice of meeting to the record holders of the Mattel Series
C Depositary Shares relating to Mattel Series C Preferred Stock. Each record
holder of such Mattel Series C Depositary Shares on the record date (which
will be the same date as the record date of the Mattel Series C Preferred
Stock) will be entitled to instruct the Depositary as to the exercise of the
voting rights pertaining to the amount of shares of Mattel Series C Preferred
Stock represented by such holder's Mattel Series C Depositary Shares. The
Depositary will use its best efforts, insofar as practicable, to vote the
amount of shares of Mattel Series C Preferred Stock represented by such Mattel
Series C Depositary Shares in accordance with such instructions and Mattel
will agree to take all reasonable action which may be deemed necessary by the
Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting Mattel Series C Preferred Stock to the extent it does not
receive specific instructions from the holders of Mattel Series C Depositary
Shares representing Mattel Series C Preferred Stock.
Each Mattel Series C Depositary Share shall entitle the holder to instruct
the Depositary to cast one twenty-fifth of a share of Mattel Series C
Preferred Stock share vote on each matter submitted to a vote of the
stockholders of Mattel. See "--Mattel Series C Mandatorily Convertible
Redeemable Preferred Stock--Voting Rights."
Amendment and Termination of the Deposit Agreement
The form of Depositary Receipt evidencing the Mattel Series C Depositary
Shares and any provision of the Deposit Agreement may at any time be amended
by agreement between Mattel and the Depositary. However, any amendment which
materially and adversely alters the rights of the holders of Mattel Series C
Depositary Shares (or, which relates to or affects rights to receive dividends
or distributions, or voting or redemption rights) will not be effective unless
such amendment has been approved by the holders of at least two-thirds of the
Mattel Series C Depositary Shares then outstanding. In no event may any
amendment impair the right of any holder of Depositary Receipts, subject to
the conditions specified in the Deposit Agreement, upon such surrender of the
Depositary Receipts evidencing such Mattel Series C Depositary Shares, to
receive shares of Mattel Series C Preferred Stock or upon conversion of the
Mattel Series C Preferred Stock represented by the Depositary Receipts, to
receive shares of Common Stock, and in each case any money or other property
represented thereby, except in order to comply with mandatory provisions of
applicable law.
The Deposit Agreement may be terminated by Mattel or the Depositary only if
(i) all outstanding Mattel Series C Depositary Shares have been redeemed or
converted, (ii) there has been a final distribution in respect of the Mattel
Series C Preferred Stock in connection with any liquidation, dissolution or
winding up of Mattel and such distribution has been distributed to the holders
of Depositary Receipts, or (iii) upon consent of holders of Depositary
Receipts representing not less than two-thirds of the Mattel Series C
Depositary Shares then outstanding.
Whenever the Deposit Agreement is to be terminated pursuant to clause (iii)
of the preceding paragraph the Depositary will mail notice of such termination
to the record holders of all Depositary Receipts then outstanding at least 30
days prior to the date fixed in such notice for such termination. The
Depositary may likewise terminate
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the Deposit Agreement if at any time 90 days shall have expired after the
Depositary shall have delivered to Mattel a written notice of its election to
resign and a successor depositary shall not have been appointed and accepted
its appointment. If any Depositary Receipts remain outstanding after the date
of termination, the Depositary thereafter will discontinue the transfer of
Depositary Receipts, will suspend the distribution of dividends to the holders
thereof, and will not give any further notices (other than notices of such
termination) or perform any further acts under the Deposit Agreement except as
provided below and except that the Depositary will continue to (i) collect
dividends on the Mattel Series C Preferred Stock and any other distributions
with respect thereto and (ii) deliver the Mattel Series C Preferred Stock
together with such dividends and distributions and the net proceeds of any
sales of rights, preferences, privileges or other property, without liability
for interest thereon, in exchange for Depositary Receipts surrendered. At any
time after the expiration of three years from the date of termination, the
Depositary may sell the Mattel Series C Preferred Stock then held by it at
public or private sales, at such place or places and upon such terms as it
deems proper and may thereafter hold the net proceeds of any such sale,
together with any money and other property then held by it, without liability
or interest thereon, for the pro rata benefit of the holders of Depositary
Receipts which have not been surrendered. Mattel does not intend to terminate
the Deposit Agreement or to permit the resignation of the Depositary without
appointing a successor depositary. In the event the Deposit Agreement is
terminated, Mattel will use all reasonable efforts to have the Mattel Series C
Preferred Stock listed on the NYSE.
Charges of Depositary
Mattel will pay all transfer and other governmental charges arising solely
from the existence of the depositary arrangements. Mattel will pay charges of
the Depositary in connection with any redemption of such Mattel Series C
Preferred Stock. Holders of Depositary Receipts will pay transfer and other
taxes and governmental charges and such other charges as are expressly
provided in the Deposit Agreement to be for their accounts. The Depositary may
refuse to effect any transfer of a Depositary Receipt or any withdrawal of
Mattel Series C Preferred Stock evidenced thereby until all such taxes and
charges with respect to such Depositary Receipt or such Mattel Series C
Preferred Stock are paid by the holder thereof.
Miscellaneous
The Depositary will forward to holders of Mattel Series C Preferred Stock
all reports and communications from Mattel which are delivered to the
Depositary and which Mattel is required to furnish to the holders of Mattel
Series C Preferred Stock.
Neither the Depositary nor Mattel will be liable if it is prevented or
delayed by law or any circumstances beyond its control in performing its
obligations under the Deposit Agreement. The obligations of Mattel and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and Mattel and the Depositary will not be
obligated to prosecute or defend any legal proceeding in respect of any Mattel
Series C Depositary Shares or Mattel Series C Preferred Stock unless
satisfactory indemnity is furnished. They may rely on written advice of
counsel or accountants, or information provided by persons presenting Mattel
Series C Preferred Stock for deposit, holders of Mattel Series C Depositary
Shares or other persons believed to be competent and on documents believed to
be genuine.
Resignation and Removal of Depositary
The Depositary may resign at any time by delivering to Mattel notice of its
election to do so, and Mattel may at any time remove the Depositary. Any such
resignation or removal of the Depositary will take effect upon the appointment
of a successor Depositary, which successor Depositary must be appointed within
90 days after delivery of the notice of resignation or removal and must be a
bank or trust company having its principal office in the United States and
having a combined capital surplus of at least $50 million.
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COMPARISON OF STOCKHOLDER RIGHTS
The rights of Tyco stockholders are currently governed by the Tyco Charter,
the Tyco Bylaws and the DGCL. The rights of Mattel stockholders are governed
by the Mattel Charter, the Mattel Bylaws and the DGCL. After the Effective
Date, the rights of Tyco stockholders who become stockholders of Mattel will
be governed by the Mattel Charter, the Mattel Bylaws and the DGCL. In most
respects, the rights of Tyco stockholders are similar to those of Mattel
stockholders. The following is a summary of the material differences between
the rights of Tyco stockholders and those of Mattel stockholders. The
following is a discussion only of those material differences between the
rights of Tyco stockholders under the Tyco Charter and the Tyco Bylaws ("Tyco
Governing Documents"), on the one hand, and the rights of Mattel stockholders
under the Mattel Charter and the Mattel Bylaws ("Mattel Governing Documents"),
on the other. This summary does not purport to be a complete discussion of,
and is qualified in its entirety by reference to, the Tyco Charter, the Tyco
Bylaws, the Mattel Charter, the Mattel Bylaws and the DGCL.
CLASSIFICATION OF BOARD OF DIRECTORS; CUMULATIVE VOTING
The Tyco Charter provides for the classification of the Tyco Board into
three classes, with directors serving staggered three-year terms. The Tyco
Governing Documents do not provide for cumulative voting in elections of
directors.
The Mattel Governing Documents do not provide for the classification of the
Mattel Board. The Mattel Bylaws provide for one-year terms for directors. The
Mattel Governing Documents provide for cumulative voting of shares for
directors.
STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
Certain Business Combinations. The Tyco Governing Documents do not contain
provisions relating to the approval by holders of Tyco Common Stock of
business combinations and other transactions except with respect to certain
transactions with Interested Shareholders. Specifically, the Tyco Charter
provides that any Significant Transaction (as defined herein) involving Tyco
and an Interested Stockholder (as defined herein) must be approved by the
affirmative vote of 80% of the voting power of the outstanding stock entitled
to vote generally in the election of directors, voting together as a single
class. The voting requirement does not apply if (i) the Significant
Transaction is approved by a majority of the Tyco "Continuing Directors"
(defined as any member of the Tyco Board who was a member on December 20,
1985, or who is elected to the Board thereafter upon the recommendation of a
majority of the Continuing Directors, voting separately and as a subclass of
directors on such recommendation), voting separately as a subclass of
directors; (ii) certain fair price conditions are met; or (iii) immediately
prior to the Significant Transaction Tyco beneficially owned a majority of
each class of equity securities of the Interested Stockholder. As defined in
the Tyco Charter, a "Significant Transaction" includes, among other things:
(i) any merger or consolidation of Tyco or any Tyco subsidiary with any
Interested Stockholder or affiliate or associate thereof; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition having an
aggregate value of $5,000,000 or more to or with an Interested Stockholder or
affiliate or associate thereof; (iii) any reclassification of securities,
recapitalization, reorganization or other transaction which has the effect of
increasing the percentage interest owned by any Interested Stockholder or
affiliate or associate thereof of any class of equity securities or securities
convertible into equity securities of Tyco or any subsidiary; (iv) the
issuance, transfer or sale by Tyco or any subsidiary of any securities of Tyco
to any Interested Stockholder or affiliate or associate thereof in exchange
for cash, securities or other property having an aggregate value of $5,000,000
or more; (v) the adoption of any plan or proposal for the liquidation,
dissolution or winding up of Tyco if as of the record date for the
determination of shareholders entitled to vote with respect thereto any person
is an Interested Stockholder; and (vi) any agreement, contract or arrangement
providing for any of the foregoing. As defined in the Tyco Charter,
"Interested Stockholder" means any person (other than Tyco or any Subsidiary
and other than any pension, profit-sharing, employee stock ownership or other
employee benefit plan of Tyco or any subsidiary or any trustee of or fiduciary
with respect to any such plan when acting in such capacity) who or which: (a)
is at such time the beneficial owner, directly or indirectly, of 20% or more
of
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the outstanding shares of Tyco entitled to vote in the election of directors;
(b) at any time within the two-year period immediately prior to such time was
the beneficial owner of 20% or more of the outstanding shares of Tyco entitled
to vote in the election of directors; or (c) is at such time an assignee of or
has otherwise succeeded to the beneficial ownership of any shares of voting
stock which were at any time within the two-year period immediately prior to
such time beneficially owned by any Interested Stockholder, if such assignment
or succession shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act; provided, however, that "Interested Stockholder" shall not
mean any person who or which, as of December 20, 1985, met any of the
preceding conditions.
The Mattel Governing Documents do not contain any supermajority voting
provisions or any other provisions relating to the approval of business
combinations and other transactions by holders of Mattel Capital Stock. Except
as provided above with respect to the Mattel Series B Preferred Stock and the
Mattel Series C Preferred Stock after the Effective Date, all holders of
Mattel Capital Stock having voting rights vote together as one class on all
matters submitted to a vote of stockholders of Mattel.
Removal of Directors. The Tyco Bylaws provide that directors may be removed
from office, with or without cause, by the affirmative vote of holders of a
majority of the shares then entitled to vote in an election of directors.
The Mattel Governing Documents do not set forth procedures regarding removal
of directors.
Amendments to Certificate of Incorporation. The Tyco Charter provides that
provisions in the Tyco Charter regarding stockholder action by written
consent, the size and classification of the Tyco Board, the filling of
vacancies on the Tyco Board, the calling of meetings of stockholders and the
nomination by stockholders of directors and other stockholder proposals may
not be repealed or amended in any respect unless such action is approved by
the affirmative vote of holders of two-thirds of the voting power of the
outstanding voting stock entitled to vote in the election of directors, voting
together as a single class, unless such amendment is approved by a majority of
the Continuing Directors in which event any such amendment shall require
approval by the affirmative vote of a majority of the voting power of the
outstanding voting stock entitled to vote in the election of directors.
Under the Tyco Charter, the amendment or repeal of any provision of the Tyco
Charter relating to interested shareholder transactions requires the
affirmative vote of holders of 80% of the voting power of the outstanding
voting stock of Tyco entitled to vote in the election of directors, voting
together as a single class, unless such amendment is approved by a majority of
the Continuing Directors in which event any such amendment need only be
approved by the affirmative vote of holders of a majority of the voting power
of the outstanding voting stock entitled to vote in the election of directors.
The Mattel Charter does not contain any general amendment provisions. Under
the DGCL, all amendments to the Mattel Charter must be approved by the
affirmative vote of holders of a majority of the voting power of the
outstanding shares of Mattel Capital Stock entitled to vote generally in the
election of directors, unless a class vote is required under Delaware law. The
Mattel Charter provides that if any proposed amendment to the Charter would
adversely alter or change the preferences, special rights or powers of any
outstanding series of preferred stock or preference stock, or would authorize
the issuance of a class of stock with superior rights or preferences, then the
holders of such adversely affected series of stock shall be entitled to vote
as a series upon such amendment and the affirmative vote of two-thirds of the
outstanding shares of each such series shall be necessary to the adoption of
such amendment.
SPECIAL MEETINGS OF STOCKHOLDERS; STOCKHOLDER ACTION BY WRITTEN CONSENT
The Tyco Charter provides that special meetings of stockholders may only be
called at the discretion of the Tyco Board by resolution adopted by the
affirmative vote of a majority of the entire Tyco Board. The Tyco Charter
prohibits stockholder action by written consent in lieu of a meeting.
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The Mattel Bylaws provide that special meetings of stockholders may be
called only by the Mattel Board or the chief executive officer of Mattel. The
Mattel Governing Documents are silent with respect to stockholder action by
written consent in lieu of a meeting.
NOTICE OF STOCKHOLDER NOMINATIONS OF DIRECTORS
The Tyco Charter requires that notice of the intent to make a nomination at
a meeting of stockholders must be delivered to the principal executive offices
of Tyco, addressed to the Secretary not less than 10 days prior to the first
anniversary date of the initial written notice of the previous year's annual
meeting and not more than 75 days prior to the annual meeting (in the case of
an election at an annual meeting) or not more than 10 days following the date
on which written announcement of such meeting is made (in the case of an
election at a special meeting). In either case, the notice must contain (i) as
to each nominee, all information relating to such nominee that would be
required to be disclosed in a definitive proxy statement filed with the
Commission pursuant to Section 14A of the Exchange Act and such nominee's
written consent to serve if elected, and (ii) as to the stockholder, the name
and address of such stockholder, and the class and number of shares held of
record, held beneficially and represented by proxy by such person as of the
record date for the meeting and as of the date of such notice.
The Mattel Bylaws require that written notice of intent to make a nomination
at a meeting of stockholders must be delivered to the Secretary of Mattel at
the principal executive offices not less than 30 days prior to the date of the
meeting; provided, however, that in the event that less than 40 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure
was made. Such notice must contain (i) as to each nominee, 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 of the Exchange Act (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected) and (ii) as to the stockholder giving the
notice, the name and address, as they appear on Mattel's books, of such
stockholder and the class and number of shares of Mattel Capital Stock that
are beneficially owned by such stockholder.
STOCKHOLDER PROPOSAL PROCEDURES
The Tyco Charter provides that any stockholder who wants to present a
proposal for action by the stockholders at a meeting shall deliver a written
notice to the principal executive offices of Tyco, addressed to the attention
of the Secretary not less than 10 days prior to the first anniversary date of
the initial notice of the previous year's annual meeting and not more than 75
days prior to the annual meeting (in the case of business to be brought before
an annual meeting of stockholders) or not more than 10 days after the initial
written notice of the meeting (in the case of business to be brought before a
special meeting). The notice must set forth (i) a full description of the
business proposed to be brought before the meeting, (ii) the name and address
of the person proposing to bring such business before the meeting, (iii) the
class and number of shares held of record, held beneficially and represented
by proxy by such person as of the record date for the meeting and as of the
date of such notice, and (iv) all other information that would be required to
be filed with the Commission if, with respect to the business proposed, the
proposing person were a participant in a solicitation subject to Section 14 of
the Exchange Act. (If the proposal involves the nomination of directors, see
"--Notice of Stockholder Nominations of Directors."
The Mattel Bylaws require that written notice of intent to conduct business
at an annual meeting of stockholders must be delivered to the Secretary of
Mattel at the principal executive offices not less than 30 days prior to the
date of the meeting; provided, however, that in the event that less than 40
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be received
not later than the close of business on the tenth day following the day on
which such notice of
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the date of the meeting was mailed or such public disclosure was made. Such
notice must contain (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the meeting, (ii) the name and address, as they appear on Mattel's books,
of the proposing stockholder, (iii) the class and number of shares of Mattel's
Capital Stock that are beneficially owned, and (iv) any material interest of
such stockholder in such business.
At any special meeting of stockholders, only business brought by or at the
direction of the Mattel Board will be conducted.
RIGHTS PLANS
Tyco Rights. Pursuant to the Tyco Rights Agreement, one preferred share
purchase right (each, a "Tyco Right") is attached to each share of Tyco Common
Stock. The Tyco Rights generally have the effect of preventing third parties
from acquiring in excess of 20% (15% in certain circumstances) of the voting
power of Tyco on terms not approved by the Tyco Board. The Tyco Rights
Agreement specifying the terms of the Tyco Rights is incorporated by
reference. See "Where You Can Find More Information."
Mattel Rights. Pursuant to the Mattel Rights Agreement, one Mattel Right is
attached to each share of Mattel Common Stock. The Mattel Rights generally
have the effect of preventing third parties from acquiring in excess of 20% of
the voting power of Mattel on terms not approved by the Mattel Board. The
Mattel Rights Agreement specifying the terms of the Mattel Rights is
incorporated by reference. See "Description of Capital Stock of Mattel" and
"Where You Can Find More Information."
TRADEMARK MATTERS
The trademarks View-Master, Matchbox, Tyco, Tyco Classic Game and Tyco
VideoCam are all United States registered trademarks owned by Tyco. The
trademark Sesame Street is owned by Children's Television Workshop, Inc. and
used under license by Tyco.
The trademarks Barbie, Fisher-Price, Power Wheels, Hot Wheels, See 'N Say,
UNO and Skip-Bo, are all United States registered trademarks owned by Mattel.
Except for the United States and Canada, the Scrabble trademark is a mark
owned by J.W. Spear and Sons plc (a wholly owned subsidiary of Mattel) and
registered throughout most of the world. The trademark Cabbage Patch Kids is
owned by Original Appalachian Artworks, Inc. and used under license by Mattel.
OTHER MATTERS
It is not expected that any matters other than those described in this Proxy
Statement/Prospectus will be brought before the Special Meeting. If any other
matters are presented, however, it is the intention of the persons named in
the proxy to vote the proxy in accordance with the discretion of the persons
named in such proxy.
LEGAL MATTERS
The validity of the shares of Mattel Common Stock, Mattel Series B Preferred
Stock and Mattel Series C Preferred Stock to be issued in the Merger is being
passed upon for Mattel by Robert Normile, Esquire, Vice President and
Assistant General Counsel of Mattel. The United States federal income tax
consequences of the Merger will be passed upon for Mattel by Wachtell, Lipton,
Rosen & Katz and for Tyco by Baer Marks & Upham LLP.
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EXPERTS
The consolidated financial statements incorporated in this Proxy
Statement/Prospectus by reference to the Annual Report on Form 10-K of Mattel,
Inc. for the year ended December 31, 1995, have been so incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting. In
addition, as described under the heading "The Merger--Accounting Treatment,"
Price Waterhouse LLP has furnished Mattel with its opinion that, provided the
merger is consummated in the manner described in the Merger Agreement, and
certain other conditions are fulfilled, the transaction would be properly
accounted for as a pooling of interests.
The consolidated financial statements incorporated in this Proxy
Statement/Prospectus by reference from the Annual Report on Form 10-K of Tyco
Toys, Inc. for the year ended December 31, 1995, have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing. In addition, as described under the heading "The
Merger--Accounting Treatment," Deloitte & Touche LLP has furnished Tyco with
an opinion of Deloitte & Touche LLP dated November 17, 1996 relating to the
ability of Tyco to enter into a transaction to be accounted for as a pooling
of interests up to the date of such opinion.
STOCKHOLDER PROPOSALS
Tyco will hold a 1997 Annual Meeting only if the Merger is not consummated
prior thereto. In the event of such a meeting, any stockholder proposals
intended to be presented thereat had to have been received by Tyco at its
principal executive offices no later than December 18, 1996 in order to have
been eligible for inclusion in Tyco's proxy statement and form of proxy.
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ANNEX A
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
NOVEMBER 17, 1996
AMONG
MATTEL, INC.,
TRUCK ACQUISITION CORP.
AND
TYCO TOYS, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
The Merger
<TABLE>
<C> <S> <C>
Section 1.1 The Merger................................................. 1
Section 1.2 Effective Date of the Merger............................... 1
ARTICLE II
The Surviving Corporation
Section 2.1 Certificate of Incorporation............................... 1
Section 2.2 By-Laws.................................................... 2
Section 2.3 Board of Directors; Officers............................... 2
Section 2.4 Effects of Merger.......................................... 2
ARTICLE III
Conversion of Shares
Section 3.1 Exchange Ratio............................................. 2
Section 3.2 Parent to Make Certificates Available...................... 3
Section 3.3 Dividends; Transfer Taxes.................................. 3
Section 3.4 No Fractional Shares....................................... 4
Section 3.5 Company Shareholders' Meeting.............................. 4
Section 3.6 Closing of the Company's Transfer Books.................... 4
Section 3.7 Assistance in Consummation of the Merger................... 4
Section 3.8 Closing.................................................... 4
ARTICLE IV
Representations and Warranties of Parent
Section 4.1 Organization and Qualification............................. 5
Section 4.2 Capitalization............................................. 5
Section 4.3 Subsidiaries............................................... 5
Section 4.4 Authority Relative to this Merger Agreement................ 6
Section 4.5 Reports and Financial Statements........................... 6
Section 4.6 Absence of Certain Changes or Events....................... 7
Section 4.7 Litigation................................................. 7
Section 4.8 Information in Disclosure Documents, Registration
Statements, Etc........................................... 7
Section 4.9 Employee Benefit Plans..................................... 7
Section 4.10 ERISA...................................................... 8
Section 4.11 Takeover Provisions Inapplicable........................... 8
Section 4.12 Parent Action.............................................. 8
Section 4.13 Compliance with Applicable Laws............................ 8
Section 4.14 Liabilities................................................ 9
Section 4.15 Taxes...................................................... 9
Section 4.16 Certain Agreements......................................... 9
Section 4.17 Patents, Trademarks, Etc................................... 9
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
Section 4.18 Product Liability........................................... 9
Section 4.19 Environment................................................. 10
Section 4.20 Title to Assets; Liens...................................... 10
Section 4.21 Parent Ownership of Stock................................... 10
Section 4.22 [Reserved].................................................. 10
Section 4.23 Accounting Matters.......................................... 10
Section 4.24 No Material Adverse Effect.................................. 10
ARTICLE IV-A
Representations and Warranties Regarding Sub
Section 4A.1 Organization................................................ 10
Section 4A.2 Capitalization.............................................. 11
Section 4A.3 Authority Relative to this Merger Agreement................. 11
ARTICLE V
Representations and Warranties of the Company
Section 5.1 Organization and Qualification.............................. 11
Section 5.2 Capitalization.............................................. 11
Section 5.3 Subsidiaries................................................ 12
Section 5.4 Authority Relative to this Merger Agreement................. 12
Section 5.5 Reports and Financial Statements............................ 13
Section 5.6 Absence of Certain Changes or Events........................ 13
Section 5.7 Litigation.................................................. 13
Section 5.8 Information in Disclosure Documents......................... 14
Section 5.9 Employee Benefit Plans...................................... 14
Section 5.10 ERISA....................................................... 14
Section 5.11 Takeover Provisions Inapplicable............................ 15
Section 5.12 Company Action.............................................. 15
Section 5.13 Fairness Opinion............................................ 15
Section 5.14 Financial Advisor........................................... 15
Section 5.15 Compliance with Applicable Laws............................. 15
Section 5.16 Liabilities................................................. 15
Section 5.17 Taxes....................................................... 16
Section 5.18 Certain Agreements.......................................... 16
Section 5.19 Accounts Receivable......................................... 16
Section 5.20 Inventory................................................... 16
Section 5.21 Patents, Trademarks, Etc.................................... 17
Section 5.22 Product Liability........................................... 17
Section 5.23 Environment................................................. 17
Section 5.24 Title to Assets; Liens...................................... 17
Section 5.25 Accounting Matters.......................................... 17
Section 5.26 No Material Adverse Effect.................................. 17
ARTICLE VI
Conduct of Business Pending the Merger
Section 6.1 Conduct of Business by the Company Pending the Merger....... 17
Section 6.2 Conduct of Business by Parent and Sub Pending the Merger.... 19
Section 6.3 Notice of Breach............................................ 19
</TABLE>
<PAGE>
ARTICLE VII
Additional Agreements
<TABLE>
<C> <S> <C>
Section 7.1 Access and Information..................................... 19
Section 7.2 Registration Statement/Proxy Statement..................... 20
Section 7.3 Compliance with the Securities Act......................... 20
Section 7.4 Stock Exchange Listing..................................... 20
Section 7.5 Employment Arrangements.................................... 20
Section 7.6 Indemnification............................................ 21
Section 7.7 Antitrust Filings; Best Efforts; Notification.............. 21
Section 7.8 Additional Agreements...................................... 22
Section 7.9 No Solicitation............................................ 23
Section 7.10 Dividend Adjustment........................................ 23
Section 7.11 Takeover Provisions Inapplicable........................... 24
ARTICLE VIII
Conditions Precedent
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger.................................................... 24
Section 8.2 Conditions to Obligation of the Company to Effect the
Merger.................................................... 25
Section 8.3 Conditions to Obligations of Parent and Sub to Effect the
Merger.................................................... 25
ARTICLE IX
Termination, Amendment and Waiver
Section 9.1 Termination................................................ 26
Section 9.2 Effect of Termination...................................... 27
Section 9.3 Amendment.................................................. 27
Section 9.4 Waiver..................................................... 28
ARTICLE X
General Provisions
Section 10.1 Non-Survival of Representations, Warranties and
Agreements................................................ 28
Section 10.2 Notices.................................................... 28
Section 10.3 Fees and Expenses.......................................... 29
Section 10.4 Publicity.................................................. 29
Section 10.5 Specific Performance....................................... 29
Section 10.6 Interpretation............................................. 29
Section 10.7 Miscellaneous.............................................. 29
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Merger Agreement"), dated as of
November 17, 1996, by and among Mattel, Inc., a Delaware corporation
("Parent"), Truck Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and Tyco Toys, Inc., a Delaware corporation (the
"Company"):
WITNESSETH:
Whereas, the Boards of Directors of Parent, Sub and the Company have
approved the acquisition of the Company by Parent;
Whereas, the Boards of Directors of Parent, Sub and the Company have
approved the merger of Sub into the Company (the "Merger"), upon the terms and
subject to the conditions set forth herein;
Whereas, certain significant stockholders of the Company have entered into a
support agreement, dated as of the date hereof, pursuant to which such
stockholders have agreed to vote in favor of the transaction and to consent to
the treatment of the Company Series B Preferred Stock (as defined below) as
contemplated by this Agreement;
Whereas, for federal income tax purposes, it is intended that the Merger
shall qualify as a "reorganization" within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code");
Whereas, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests";
Now, Therefore, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, the parties
hereto agree as follows:
ARTICLE I
The Merger
Section 1.1 The Merger. Upon the terms and subject to the conditions hereof,
on the Effective Date (as defined below in Section 1.2), Sub shall be merged
into the Company and the separate existence of Sub shall thereupon cease, and
the name of the Company, as the surviving corporation in the Merger (the
"Surviving Corporation"), shall by virtue of the Merger remain "Tyco Toys,
Inc."
Section 1.2 Effective Date of the Merger. The Merger shall become effective
when a properly executed Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, which filing shall be made as
soon as practicable after the closing of the transactions contemplated by this
Merger Agreement in accordance with Section 3.8. When used in this Merger
Agreement, the term "Effective Date" shall mean the date and time at which
such filing shall have been made.
ARTICLE II
The Surviving Corporation
Section 2.1 Certificate of Incorporation. The Certificate of Incorporation
of Sub shall be the Certificate of Incorporation of the Surviving Corporation
after the Effective Date, and thereafter may be amended in accordance with its
terms and as provided by law and this Merger Agreement.
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Section 2.2 By-Laws. The By-laws of Sub as in effect on the Effective Date
shall be the By-laws of the Surviving Corporation.
Section 2.3 Board of Directors; Officers. The directors of Sub immediately
prior to the Effective Date shall be the directors of the Surviving
Corporation and the officers of the Company immediately prior to the Effective
Date shall be the officers of the Surviving Corporation, in each case until
their respective successors are duly elected and qualified.
Section 2.4 Effects of Merger. The Merger shall have the effects set forth
in Section 259 of the Delaware General Corporation Law (the "DGCL").
ARTICLE III
Conversion of Shares
Section 3.1 Exchange Ratio. As of the Effective Date, by virtue of the
Merger and without any action on the part of any holder of any capital stock
of the Company:
(a) All shares of capital stock of the Company which are held by the
Company or any subsidiary of the Company, and any shares of capital stock
of the Company owned by Parent, Sub or any other subsidiary of Parent,
shall be cancelled.
(b) Subject to Section 3.4, each remaining outstanding share of common
stock, $0.01 par value, of the Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Date shall be converted into
a number of fully paid and nonassessable shares of the common stock, $1.00
par value, of Parent ("Parent Common Stock") equal to the Exchange Ratio.
The "Exchange Ratio" shall mean the quotient (rounded to the nearest
1/100,000) obtained by dividing (i) $12.50 by (ii) the average of the high
and low sales prices of Parent Common Stock as reported on the New York
Stock Exchange, Inc. ("NYSE") Composite Tape on each of the ten consecutive
trading days immediately preceding the fifth trading date prior to the
Effective Date, but in no event shall the Exchange Ratio be more than
.51129 or less than .37791. One nonvoting preference share purchase right
issuable pursuant to the Rights Agreement dated as of February 7, 1992
between Parent and The First National Bank of Boston or any other purchase
right issued in substitution thereof (the "Parent Rights") shall be issued
together with and shall attach to each share of Parent Common Stock issued
pursuant to Sections 3.1(b), (c), (g) and (h) or upon conversion of the
Parent Series B Preferred Stock (as defined below) issued pursuant to
Section 3.1(d).
(c) Subject to Section 3.4, each remaining outstanding share of Series C
Mandatorily Convertible Redeemable Preferred Stock, par value $.10 per
share, of the Company (the "Company Series C Preferred Stock") issued and
outstanding immediately prior to the Effective Date shall be converted into
a number of fully paid and nonassessable shares of Parent Common Stock
equal to the product of (i) 20.4925 and (ii) the Exchange Ratio.
(d) Subject to Section 3.4, each of the remaining outstanding shares of
Series B Preferred Stock, par value $.10 per share, of the Company (the
"Company Series B Preferred Stock"), issued and outstanding immediately
prior to the Effective Date shall each be converted into a share of Series
B Preferred Stock, par value $1.00 per share, of Parent (the "Parent Series
B Preferred Stock"), with economic terms as nearly equivalent as possible
to, and with the same voting and other rights as correspond to the Company
Series B Preferred Stock.
(e) In the event of any stock dividend, stock split, reclassification,
recapitalization, combination or exchange of shares with respect to, or
rights issued in respect of, Parent Common Stock after the date it is
calculated and prior to the Effective Date, the Exchange Ratio shall be
adjusted accordingly.
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(f) Each issued and outstanding share of capital stock of Sub shall be
converted into and become one fully paid and nonassessable share of common
stock, $.01 par value, of the Surviving Corporation.
(g) Subject to Section 3.4, each of the outstanding rights with respect to
Company Common Stock pursuant to stock options ("Company Stock Options")
granted under the Company Benefit Plans (as defined herein) shall be
converted into and become the right to receive a number of shares of Parent
Common Stock equal to its fair value as of the Effective Date as mutually
agreed between Parent and the Company.
(h) Subject to Section 3.4, each vested Restricted Stock Unit as of the
Effective Date under the Company's Deferred Stock Unit Plan shall be
converted into and become the right to receive a number of shares of Parent
Common Stock equal to the Exchange Ratio, which the parties have determined
to be the "fair value" of such unit. Subject to Section 3.4, each unvested
Restricted Stock Unit as of the Effective Date under the Company's Deferred
Stock Unit Plan shall be converted into and become the right to receive a
number of shares of Parent Common Stock equal to .3272 multiplied by the
Exchange Ratio, which the parties have determined to be the "fair value" of
such unit.
Section 3.2 Parent to Make Certificates Available. Prior to the Effective
Date, Parent shall select The First National Bank of Boston or such other
person or persons reasonably satisfactory to the Company to act as Exchange
Agent for the Merger (the "Exchange Agent"). As soon as practicable after the
Effective Date, Parent shall make available, and each holder of Company Common
Stock, Company Series B Preferred Stock, Company Series C Preferred Stock,
Company Stock Options or Company Restricted Stock Units to be converted
pursuant to Section 3.1 (each, a "Company Holder") will be entitled to
receive, upon surrender to the Exchange Agent of one or more certificates
representing such stock (or in the case of Company Restricted Stock Units and
Company Stock Options, the relevant agreement or other evidence of right and
interest in such Restricted Stock Units or Company Stock Options)
("Certificates") for cancellation, certificates representing the number of
shares of Parent Common Stock or Parent Series B Preferred Stock, as the case
may be, into which such shares or options are converted in the Merger and cash
in consideration of fractional shares as provided in Section 3.4. Such shares
of Parent Common Stock or Parent Series B Preferred Stock issued in the Merger
shall each be deemed to have been issued at the Effective Date.
Section 3.3 Dividends; Transfer Taxes. No dividends or other distributions
that are declared or made on Parent Common Stock will be paid to persons
entitled to receive certificates representing Parent Common Stock pursuant to
this Merger Agreement until such persons surrender their Certificates
representing Company Common Stock, Company Series C Preferred Stock, Company
Stock Options or Company Restricted Stock Units, as the case may be. Upon such
surrender, there shall be paid to the person in whose name the certificates
representing such Parent Common Stock shall be issued any dividends or other
distributions which shall have become payable with respect to such Parent
Common Stock in respect of a record date after the Effective Date. In no event
shall the person entitled to receive such dividends be entitled to receive
interest on such dividends. In the event that any certificates for any shares
of Parent Common Stock or Parent Series B Preferred Stock, as the case may be,
are to be issued in a name other than that in which the Certificates
representing shares of Company Common Stock, Company Series B Preferred Stock,
Company Series C Preferred Stock, Company Stock Options or Company Restricted
Stock Units, as the case may be, surrendered in exchange therefor are
registered, it shall be a condition of such exchange that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of certificates for such shares of
Parent Common Stock or Parent Series B Preferred Stock, as the case may be in
a name other than that of the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not applicable. Notwithstanding the foregoing,
neither the Exchange Agent nor any party hereto shall be liable to a Company
Holder for any shares of Parent Common Stock or dividends thereon or any
shares of Parent Series B Preferred Stock, as the case may be, delivered to a
public official pursuant to any applicable escheat laws.
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Section 3.4 No Fractional Shares. No certificates or scrip representing less
than one full share of Parent Common Stock shall be issued upon the surrender
for exchange of Certificates representing Company Common Stock, Company Series
C Preferred Stock, Company Stock Options or Company Restricted Stock Units
pursuant to Section 3.1(b), (c), (g) or (h). In lieu of any such fractional
share, each Company Holder who would otherwise have been entitled to a
fraction of a share of Parent Common Stock upon surrender of Certificates for
exchange pursuant to Section 3.1(b), (c), (g) or (h) shall be paid upon such
surrender cash (without interest) in an amount equal to such holder's
proportionate interest in the net proceeds from the sale or sales in the open
market by the Exchange Agent, on behalf of all such holders, of the aggregate
fractional Parent Common Stock issued pursuant to this Section 3.4. As soon as
practicable following the Effective Date, the Exchange Agent shall determine
the excess of (i) the number of full shares of Parent Common Stock delivered
to the Exchange Agent by Parent over (ii) the aggregate number of full shares
of Parent Common Stock to be distributed to holders of Company Common Stock,
Company Series C Preferred Stock, Company Stock Options or Company Restricted
Stock Units (such excess being herein called the "Excess Shares"), and the
Exchange Agent, as agent for the former Company Holders, shall sell the Excess
Shares at the prevailing prices on the NYSE. The sale of the Excess Shares by
the Exchange Agent shall be executed on the NYSE through one or more member
firms of the NYSE and shall be executed in round lots to the extent
practicable. Parent shall pay all commissions, transfer taxes and other out-
of-pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of Excess Shares. Until
the net proceeds of such sale have been distributed to the former Company
Holders, the Exchange Agent will hold such proceeds in trust for such former
stockholders (the "Fractional Securities Fund"). As soon as practicable after
the determination of the amount of cash to be paid to former Company Holders
in lieu of any fractional interests, the Exchange Agent shall make available
in accordance with this Merger Agreement such amounts to such former
stockholders.
Section 3.5 Company Shareholders' Meeting. The Company shall take all action
necessary, in accordance with applicable law and its Restated Certificate of
Incorporation and By-laws, to convene a special meeting of the holders of
capital stock of the Company entitled to vote thereat (the "Company Meeting")
as promptly as practicable for the purpose of considering and taking action
upon this Merger Agreement. Subject to Section 7.9 hereof, the Board of
Directors of the Company will recommend that holders of any capital stock of
the Company entitled to vote thereon vote in favor of and approve the Merger
and the adoption of the Merger Agreement at the Company Meeting. At the
Company Meeting, all of the shares of Company Common Stock, Company Series B
Preferred Stock and Company Series C Preferred Stock then owned by Parent,
Sub, or any other subsidiary of Parent, or with respect to which Parent, Sub,
or any other subsidiary of Parent holds the power to direct the voting, will
be voted in favor of approval of the Merger and adoption of this Merger
Agreement.
Section 3.6 Closing of the Company's Transfer Books. At the close of
business on the Effective Date, the stock transfer books of the Company shall
be closed and no transfer of any shares of capital stock of the Company shall
be made thereafter. In the event that, after the Effective Date, Certificates
are presented to the Surviving Corporation, they shall be cancelled and
exchanged for the securities of Parent and/or cash as provided in Sections
3.1(b), (c), (d), (g) or (h) and 3.4.
Section 3.7 Assistance in Consummation of the Merger. Each of Parent, Sub
and the Company shall provide all reasonable assistance to, and shall
cooperate with, each other to bring about the consummation of the Merger as
soon as possible in accordance with the terms and conditions of this Merger
Agreement. Parent shall cause Sub to perform all of its obligations in
connection with this Merger Agreement.
Section 3.8 Closing. The closing of the transactions contemplated by this
Merger Agreement shall take place (i) at the offices of Wachtell, Lipton,
Rosen & Katz, 51 West 52nd Street, New York, New York 10019, at 9:00 A.M.
local time on the day which is at least one business day after the day on
which the last of the conditions set forth in Article VIII is fulfilled or
waived or (ii) at such other time and place as Parent and the Company shall
agree in writing.
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ARTICLE IV
Representations and Warranties of Parent
Parent represents and warrants to the Company, except as set forth in a
disclosure schedule delivered by Parent concurrently herewith (the "Parent
Disclosure Schedule"), as follows:
Section 4.1 Organization and Qualification. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has the corporate power to carry on its business as it is now
being conducted or currently proposed to be conducted. Parent is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities make such qualification necessary,
except where the failure to be so qualified will not, individually or in the
aggregate, have a Parent Material Adverse Effect. As used in this Agreement,
"Parent Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets, financial condition, or results of operations of
Parent and its subsidiaries taken as a whole, except for (i) adverse changes
resulting from general economic, financial or market conditions, (ii) adverse
changes resulting from conditions or circumstances generally affecting the toy
industry, or (iii) adverse changes resulting from the announcement or pendency
of this Merger Agreement or the Merger.
Section 4.2 Capitalization. The authorized capital stock of Parent consists
of 600,000,000 shares of Parent Common Stock, 3,000,000 shares of preferred
stock, $1.00 par value, and 20,000,000 shares of preference stock, $0.01 par
value. As of November 11, 1996, 279,057,614 shares of Parent Common Stock were
validly issued and outstanding, fully paid and nonassessable and 7,223,289
shares of Parent Common Stock were held in treasury. As of November 11, 1996,
no shares of preferred stock or preference stock were issued and outstanding.
As of November 11, 1996, there were no bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which the Parent's
shareholders may vote issued or outstanding. As of November 11, 1996, except
for employee stock options to acquire 14,088,204 shares of Parent Common
Stock, the award of an aggregate of 683,593 shares of restricted stock to
certain executive officers of Parent (the "Restricted Stock Issuance") and the
Parent Rights and, except as set forth on Schedule 4.2 and as provided herein,
there are no options, warrants, calls or other rights, agreements or
commitments presently outstanding obligating Parent to issue, deliver or sell
shares of its capital stock or debt securities, or obligating Parent to grant,
extend or enter into any such option, warrant, call or other such right,
agreement or commitment. All of the shares of Parent Common Stock issuable in
accordance with this Merger Agreement in exchange for Company Common Stock at
the Effective Date in accordance with this Merger Agreement will be, when so
issued, duly authorized, validly issued, fully paid and nonassessable.
Section 4.3 Subsidiaries. The only "Significant Subsidiaries" (as such term
is defined in Rule 1-02 of Regulation S-X of the Securities and Exchange
Commission (the "Commission")) ("Significant Subsidiaries") of Parent are
those set forth on Schedule 4.3. Each Significant Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the corporate power to carry on its
business as it is now being conducted or currently proposed to be conducted.
Each Significant Subsidiary is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary except where the failure to be so qualified will
not have a Parent Material Adverse Effect. All the outstanding shares of
capital stock of each Significant Subsidiary are validly issued, fully paid
and nonassessable and those owned by Parent or by a Significant Subsidiary of
Parent are owned free and clear of any liens, claims or encumbrances. There
are no existing options, warrants, calls or other rights, agreements or
commitments of any character relating to the issued or unissued capital stock
or other securities of any of the Significant Subsidiaries of Parent. Except
as set forth in Parent's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and except for wholly owned subsidiaries which are formed
after the date hereof in the ordinary course of business, Parent does not
directly or indirectly own any interests in any other
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corporation, partnership, joint venture or other business association or
entity which are material to Parent and its subsidiaries taken as a whole.
Section 4.4 Authority Relative to this Merger Agreement. Parent has the
corporate power to enter into this Merger Agreement and to carry out its
obligations hereunder. The execution and delivery of this Merger Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by Parent's Board of Directors. This Merger Agreement constitutes a
valid and binding obligation of Parent enforceable in accordance with its
terms except as enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought. No other corporate proceedings on the part
of Parent are necessary to authorize the Merger Agreement and the transactions
contemplated hereby. Parent is not subject to or obligated under (i) any
charter, by-law, indenture or other loan document provision (other than the
Credit Agreement dated as of March 10, 1995, among Parent, the Banks named
therein and Bank of America National Trust and Savings Association, as amended
(the "Parent Credit Agreement")) or (ii) any other contract, license,
franchise, permit, order, decree, concession, lease, instrument, judgment,
statute, law, ordinance, rule or regulation applicable to Parent or any of its
subsidiaries or their respective properties or assets, which would be breached
or violated, or under which there would be a default (with or without notice
or lapse of time, or both), or under which there would arise a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit, by its executing and carrying out this Merger Agreement
other than, in the case of clause (ii) only, (A) any breaches, violations,
defaults, terminations, cancellations, accelerations or losses which, either
singly or in the aggregate, will not have a Parent Material Adverse Effect or
prevent the consummation of the transactions contemplated hereby and (B) the
laws and regulations referred to in the next sentence. Except as referred to
herein or in connection, or in compliance, with the provisions of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
the Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and other governmental
approvals required under the applicable laws of any foreign jurisdiction
("Foreign Laws") and the environmental, corporation, securities or blue sky
laws or regulations of the various states, no filing or registration with, or
authorization, consent or approval of, any public body or authority is
necessary for the consummation by Parent of the Merger or the other
transactions contemplated by this Merger Agreement, other than filings,
registrations, authorizations, consents or approvals the failure of which to
make or obtain would not have a Parent Material Adverse Effect or prevent the
consummation of the transactions contemplated hereby.
Section 4.5 Reports and Financial Statements. Parent has, to the extent such
documents were requested by the Company, previously furnished the Company with
true and complete copies of its (i) Annual Reports on Form 10-K for the three
fiscal years ended December 31, 1995, as filed with the Commission, (ii)
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996, June 30,
1996 and September 30, 1996, as filed with the Commission, (iii) proxy
statements related to all meetings of its shareholders (whether annual or
special) since December 31, 1994, and (iv) all other reports or registration
statements filed by Parent with the Commission since December 31, 1994, except
registration statements on Form S-8 relating to employee benefit plans, which
are all the documents (other than preliminary material) that Parent was
required to file with the Commission since that date (clauses (i) through (iv)
being referred to herein collectively as the "Parent SEC Reports"). As of
their respective dates, the Parent SEC Reports complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the Commission thereunder
applicable to such Parent SEC Reports. As of their respective dates, the
Parent SEC Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements of Parent included in the Parent SEC
Reports comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the Commission
with respect thereto, and the financial statements included in the Parent SEC
Reports have been prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis (except as may be
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indicated therein or in the notes thereto or in Schedule 4.5 to the Parent
Disclosure Schedule) and fairly present the financial position of Parent and
its subsidiaries as at the dates thereof and the results of their operations
and changes in financial position for the periods then ended subject, in the
case of the unaudited interim financial statements, to normal year-end audit
adjustments and any other adjustments described therein.
Section 4.6 Absence of Certain Changes or Events. Except as disclosed in the
Parent SEC Reports, since September 30, 1996, there has not been (i) any
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of
business), individually or in the aggregate, having a Parent Material Adverse
Effect (other than as a result of changes in laws or regulations of general
applicability); (ii) any damage, destruction or loss, whether or not covered
by insurance, which, insofar as reasonably can be foreseen, in the future
would have a Parent Material Adverse Effect; (iii) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to the capital stock of Parent (except for regularly
scheduled cash dividends out of current earnings at a rate not greater than
the rate in effect on September 30, 1996); or (iv) any entry into any
commitment or transaction material to Parent and its subsidiaries taken as a
whole (including, without limitation, any borrowing or sale of assets) except
in the ordinary course of business consistent with past practice.
Section 4.7 Litigation. Except as disclosed in the Parent SEC Reports, there
is no suit, action or proceeding pending or, to the knowledge of Parent,
threatened against or affecting Parent or any of its subsidiaries which, alone
or in the aggregate, is likely, insofar as Parent reasonably foresees, to have
a Parent Material Adverse Effect, nor is there any judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding against Parent or any of its
subsidiaries having, or which, insofar as Parent reasonably foresees, in the
future could have, either alone or in the aggregate, any such Parent Material
Adverse Effect.
Section 4.8 Information in Disclosure Documents, Registration Statements,
Etc. None of the information with respect to Parent or Sub to be included or
incorporated by reference in (i) the Registration Statement to be filed with
the Commission by Parent on Form S-4 under the Securities Act for the purpose
of registering the shares of Parent Common Stock to be issued in the Merger
(the "Registration Statement") and (ii) the proxy statement of the Company
(the "Proxy Statement") required to be mailed to the shareholders of the
Company in connection with the Merger will, in the case of the Proxy Statement
or any amendments or supplements thereto, at the time of the mailing of the
Proxy Statement and any amendments or supplements thereto, and at the time of
the Company Meeting to be held in connection with the Merger, or, in the case
of the Registration Statement, at the time it becomes effective and at the
Effective Date, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. The Registration Statement will comply as to form in
all material respects with the provisions of the Securities Act, and the rules
and regulations promulgated thereunder.
Section 4.9 Employee Benefit Plans. Except as disclosed in the Parent SEC
Reports, there are no material employee benefit or compensation plans,
agreements or arrangements, including "employee benefit plans," as defined in
Section 3 (3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and including, but not limited to, plans, agreements or
arrangements relating to former employees, including, but not limited, to
retiree medical plans, maintained by Parent or any of its subsidiaries or
material collective bargaining agreements to which Parent or any of its
subsidiaries is a party (together, the "Benefit Plans"). To the best knowledge
of Parent, no default exists with respect to the obligations of Parent or any
of its subsidiaries under any such Benefit Plan, which default, alone or in
the aggregate, would have a Parent Material Adverse Effect. Since January 1,
1996, there have been no disputes or grievances subject to any grievance
procedure, unfair labor practice proceedings, arbitration or litigation under
such Benefit Plans, which have not been finally resolved, settled or otherwise
disposed of, nor is there any default, or any condition which, with notice or
lapse of time or both, would constitute such a default, under any such Benefit
Plans, by Parent or its subsidiaries or, to the best knowledge of Parent and
its subsidiaries, any other party thereto, which failure to resolve, settle or
otherwise dispose of or default, alone or in the aggregate, would have a
Parent Material Adverse Effect. Since January 1,
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1996, there have been no strikes, lockouts or work stoppages or slowdowns, or
to the best knowledge of Parent and its subsidiaries, jurisdictional disputes
or organizing activity occurring or threatened with respect to the business or
operations of Parent or its subsidiaries which have had or would have a Parent
Material Adverse Effect.
Section 4.10 ERISA. All Benefit Plans have been administered in accordance,
and are in compliance with the applicable provisions of ERISA, except where
such failures to administer or comply would not have a Parent Material Adverse
Effect. Each of the Benefit Plans which is intended to meet the requirements
of Section 401(a) of the Code has been determined by the Internal Revenue
Service to be "qualified," within the meaning of such section of the Code, and
Parent knows of no fact which is likely to have an adverse effect on the
qualified status of such plans. None of the Benefit Plans which are defined
benefit pension plans have incurred any "accumulated funding deficiency"
(whether or not waived) as that term is defined in Section 412 of the Code and
the fair market value of the assets of each such plan equals or exceeds the
accrued liabilities of such plan. To the best knowledge of Parent, there are
not now nor have there been any non-exempt "prohibited transactions," as such
term is defined in Section 4975 of the Code or Section 406 of ERISA, involving
Parent's Benefit Plans which could subject Parent or its subsidiaries to the
penalty or tax imposed under Section 502(i) of ERISA or Section 4975 of the
Code. No Benefit Plan which is subject to Title IV of ERISA has been
completely or partially terminated; no proceedings to completely or partially
terminate any Benefit Plan have been instituted within the meaning of Subtitle
C of said Title IV of ERISA; and no reportable event within the meaning of
Section 4043(c) of said Subtitle C for which the 30 day notice requirement has
been waived of ERISA has occurred with respect to any Benefit Plan. Neither
the Parent nor any of its subsidiaries has made a complete or partial
withdrawal, within the meaning of Section 4201 of ERISA, from any
multiemployer plan which has resulted in, or is reasonably expected to result
in, any withdrawal liability to the Parent or any of its subsidiaries except
for any such liability which would not have a Parent Material Adverse Effect.
Neither the Parent nor any of its subsidiaries has engaged in any transaction
described in Section 4069 of ERISA within the last five years except for any
such transaction which would not have a Parent Material Adverse Effect.
Section 4.11 Takeover Provisions Inapplicable. As of the date hereof and at
all times on or prior to the Effective Date, Section 203 of the DGCL and the
Parent Rights are, and shall be, inapplicable to the Merger and the
transactions contemplated by this Merger Agreement.
Section 4.12 Parent Action. The Board of Directors of Parent (at a meeting
duly called and held) has by the requisite vote of directors (a) approved the
Merger in accordance with the DGCL, (b) taken any necessary steps to render
Section 203 of the DGCL and the Parent Rights inapplicable to the Merger and
the transactions contemplated by this Merger Agreement, and (c) adopted any
necessary resolution having the effect of causing Parent not to be subject, to
the extent permitted by applicable law, to any state takeover law that may
purport to be applicable to the Merger and the transactions contemplated by
this Merger Agreement.
Section 4.13 Compliance with Applicable Laws. Parent and its subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
courts, administrative agencies or commissions or other governmental
authorities or instrumentalities, domestic or foreign (each, a "Governmental
Entity"), except for such permits, licenses, variances, exemptions, orders and
approvals the failure of which, individually or in the aggregate, to hold
would not have a Parent Material Adverse Effect (the "Parent Permits"). To the
knowledge of Parent, Parent and its subsidiaries are in compliance with the
terms of the Parent Permits, except for such failures to comply, which singly
or in the aggregate, would not have a Parent Material Adverse Effect. To the
knowledge of Parent, except as disclosed in the Parent SEC Reports filed prior
to the date of this Merger Agreement, the businesses of Parent and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible violations which
individually or in the aggregate do not and would not have a Parent Material
Adverse Effect. To the knowledge of Parent, except as disclosed in the Parent
SEC Reports, no investigation or review by any Governmental Entity with
respect to Parent or any of its subsidiaries is pending, or, to the knowledge
of Parent, threatened, nor has any Governmental Entity indicated an intention
to conduct the same, other than those the outcome of which would not have a
Parent Material Adverse Effect.
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Section 4.14 Liabilities. As of September 30, 1996, neither Parent nor any
of its subsidiaries has any material liabilities or obligations (absolute,
accrued, contingent or otherwise) of a nature required to be disclosed on a
balance sheet or in the related notes to the consolidated financial statements
prepared in accordance with GAAP which are not disclosed or provided for in
the most recent Parent SEC Reports. To the best knowledge of Parent, there was
no basis, as of September 30, 1996, for any claim or liability (absolute,
accrued, contingent or otherwise) of a nature required to be disclosed on a
balance sheet or in the related notes to the consolidated financial statements
prepared in accordance with GAAP which is or would have a Parent Material
Adverse Effect, not reflected in the Parent SEC Reports.
Section 4.15 Taxes. Each of Parent and its subsidiaries has filed all tax
returns required to be filed by any of them and has paid (or Parent has paid
on its behalf), or has set up an adequate reserve for the payment of, all
taxes required to be paid in respect of the periods covered by such returns.
The information contained in such tax returns are true, complete and accurate
in all respects. Neither Parent nor any subsidiary of Parent is delinquent in
the payment of any tax, assessment or governmental charge. No deficiencies for
any taxes have been proposed, asserted or assessed against Parent or any of
its subsidiaries that have not been finally settled or paid in full and no
requests for waivers of the time to assess any such tax are pending. The
federal income tax returns of Parent and each of its subsidiaries consolidated
in such returns have been examined by and settled with the Internal Revenue
Service for all years through December 31, 1991. For the purposes of this
Merger Agreement, the term "tax" shall include all federal, state, local and
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise and other taxes, duties and
assessments of any nature whatsoever together with all interest, penalties and
additions imposed with respect to such amounts. No representation contained in
this Section 4.15 (each, a "Parent Relevant Representation") shall be deemed
to be untrue unless all untruths of Parent Relevant Representations
cumulatively would be expected to have a Parent Material Adverse Effect.
Section 4.16 Certain Agreements. Except as disclosed on the Parent
Disclosure Schedule or in the Parent SEC Reports filed prior to the date of
this Merger Agreement, neither Parent nor any of its subsidiaries is a party
to any oral or written (i) agreement, contract, indenture or other instrument
relating to Indebtedness (as defined below) in an amount exceeding $10,000,000
or (ii) other contract, agreement or commitment (except those entered into in
the ordinary course of business) having a Parent Material Adverse Effect.
"Indebtedness" means any liability in respect of (A) borrowed money, (B)
capitalized lease obligations, (C) the deferred purchase price of property or
services (other than trade payables in the ordinary course of business) and
(D) guarantees of any of the foregoing incurred by any person other than the
Parent, as appropriate, or any of their respective subsidiaries, except that
Indebtedness shall not include short term credit facilities entered into in
the ordinary course of business. Neither the Parent nor any of its
subsidiaries is in default (with or without notice or lapse of time, or both)
under any indenture, note, credit agreement, loan document, lease, license or
other agreement including, but not limited to, any Benefit Plan, whether or
not such default has been waived, which default, alone or in the aggregate
with other such defaults, would have a Parent Material Adverse Effect.
Section 4.17 Patents, Trademarks, Etc. To the knowledge of Parent, Parent
and its subsidiaries have all patents, trademarks, trade names, service marks,
trade secrets, copyrights and other proprietary intellectual property rights
and licenses as are necessary in connection with the businesses of Parent and
its subsidiaries, the lack of which would have a Parent Material Adverse
Effect, and Parent does not have any knowledge of any conflict with the rights
of Parent and its subsidiaries therein or any knowledge of any conflict by
them with the rights of others therein which, insofar as reasonably can be
foreseen, could, individually or in the aggregate, have a Parent Material
Adverse Effect.
Section 4.18 Product Liability. Parent is not aware of any claim, or the
basis of any claim, against Parent or any of its subsidiaries for injury to
person or property of employees or any third parties suffered as a result of
the sale of any product or performance of any service by Parent or any of its
subsidiaries, including claims arising out of the defective or unsafe nature
of its products or services, which could, individually or in the aggregate,
have a Parent Material Adverse Effect. Parent and its subsidiaries have, and
on the Effective Date will have, full and adequate insurance coverage for
potential product liability claims against it.
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Section 4.19 Environment. (i) As used herein, the term "Environmental Laws"
means all federal, state, local or Foreign Laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or
industrial, toxic or hazardous substances or wastes into the environment, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of chemicals, pollutants,
contaminants, or industrial, toxic or hazardous substances or wastes, as well
as all authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ii) To the knowledge of Parent, except as set forth in the Parent SEC
Reports and except as set forth on Schedule 4.19, there are, with respect
to Parent or any of its subsidiaries, no past or present violations of
Environmental Laws, releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental liability
or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") or similar state or local
laws, which liabilities, either individually or in the aggregate, would
have a Parent Material Adverse Effect.
Section 4.20 Title to Assets; Liens. Except as disclosed in the Parent SEC
Reports, to the extent material to the business or operations of Parent and
its subsidiaries, taken as a whole, Parent has good and marketable title to
all of its inventory, accounts receivable, property, equipment and other
assets, and such assets are free and clear of any material mortgages, liens,
charges, encumbrances, or title defects of any nature whatsoever, except for
such mortgages, liens, charges, encumbrances or title defects which would not
materially and adversely affect the value of such property as carried on the
Parent's financial statements contained in the Parent SEC Reports or would not
have a Parent Material Adverse Effect. Parent and its subsidiaries have valid
and enforceable leases for the premises and the equipment, furniture and
fixtures purported to be leased by them except for leases, the failure of
which to have or be enforceable, would not have a Parent Material Adverse
Effect.
Section 4.21 Parent Ownership of Stock. As of the date hereof Parent does
not beneficially own any shares of Company Common Stock other than pursuant to
the terms of this Merger Agreement.
Section 4.22 [Reserved]
Section 4.23 Accounting Matters. Except as set forth on Schedule 4.23,
neither Parent nor, to its best knowledge, any of its affiliates, has through
the date hereof, taken or agreed to take any action nor are they aware of any
circumstances which currently exist that would prevent Parent from accounting
for the business combination to be effected by the Merger as a "pooling of
interests."
Section 4.24 No Material Adverse Effect. Except as disclosed in the Parent
SEC Reports, Parent is not aware of any fact which, alone or together with
another fact, is likely to result in a Parent Material Adverse Effect.
ARTICLE IV-A
Representations and Warranties Regarding Sub
Parent and Sub jointly and severally represent and warrant to the Company as
follows:
Section 4A.1 Organization. Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Sub has
not engaged in any business (other than certain organizational matters) since
it was incorporated.
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Section 4A.2 Capitalization. The authorized capital stock of Sub consists of
1,000 shares of common stock, par value $0.01 per share, 1,000 shares of which
are validly issued and outstanding, fully paid and nonassessable and are owned
by Parent free and clear of all liens, claims and encumbrances.
Section 4A.3 Authority Relative to this Merger Agreement. Sub has the
corporate power to enter into this Merger Agreement and to carry out its
obligations hereunder. The execution and delivery of this Merger Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by its Board of Directors and sole shareholder, and no other
corporate proceedings on the part of Sub are necessary to authorize this
Merger Agreement and the transactions contemplated hereby. Except as referred
to herein or in connection, or in compliance, with the provisions of the HSR
Act, the Securities Act, the Exchange Act, the Foreign Laws and the
environmental, corporation, securities or blue sky laws or regulations of the
various states, no filing or registration with, or authorization, consent or
approval of, any public body or authority is necessary for the consummation by
Sub of the Merger or the transactions contemplated by this Merger Agreement,
other than filings, registrations, authorizations, consents or approvals the
failure to make or obtain would not prevent the consummation of the
transactions contemplated hereby. The Merger Agreement constitutes a valid and
binding obligation of Sub enforceable in accordance with its terms except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought.
ARTICLE V
Representations and Warranties of the Company
The Company represents and warrants to Parent, except as set forth in a
disclosure schedule delivered by the Company concurrently herewith (the
"Company Disclosure Schedule"), as follows:
Section 5.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power to carry on its business as it
is now being conducted or currently proposed to be conducted. The Company is
duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified will not have a Company
Material Adverse Effect. As used in this Agreement, "Company Material Adverse
Effect" shall mean a material adverse effect on the business, properties,
assets, financial condition, or results of operations of the Company and its
subsidiaries taken as a whole, except for (i) adverse changes resulting from
general economic, financial or market conditions, (ii) adverse changes
resulting from conditions or circumstances generally affecting the toy
industry, or (iii) adverse changes resulting from the announcement or pendency
of this Merger Agreement or the Merger. Complete and correct copies as of the
date hereof of the Articles of Incorporation and By-laws of the Company and
each of its Significant Subsidiaries have, to the extent requested, been
delivered to Parent as part of the Company Disclosure Schedule.
Section 5.2 Capitalization. The authorized capital stock of the Company
consists of 75,000,000 shares of Company Common Stock, 1,000,000 shares of
Company Series B Preferred Stock, and 772,800 shares of Company Series C
Preferred Stock. As of November 11, 1996, 34,826,668 shares of Company Common
Stock, 53,631 shares of Company Series B Preferred Stock and 772,800 shares of
Company Series C Preferred Stock were validly issued and outstanding, fully
paid and nonassessable, and 190,490 shares of Company Common Stock were held
in treasury and there have been no material changes in such numbers of shares
through the date hereof. As of the date hereof, there are no bonds,
debentures, notes or other indebtedness having the right to vote on any
matters on which the Company's shareholders may vote issued or outstanding. As
of November 11, 1996, except for (i) employee stock options to acquire
1,749,306 shares of Company Common Stock, (ii) the rights (the "Company
Rights") issued pursuant to the Rights Agreement dated as of September 8,
1988, between
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the Company and Manufacturers Hanover Trust Company, as Rights Agent, (the
"Company Rights Agreement"), (iii) 5,631,255 shares of capital stock of the
Company issuable upon conversion of the Company Series B Preferred Stock, up
to 21,464,520 shares of capital stock of the Company issuable upon conversion
of the Company Series C Preferred Stock and 1,603,400 shares of capital stock
of the Company issuable upon conversion of any Indebtedness convertible into
shares of capital stock of the Company there are no options, warrants, calls
or other rights, agreements or commitments presently outstanding obligating
the Company to issue, deliver or sell shares of its capital stock or debt
securities, or obligating the Company to grant, extend or enter into any such
option, warrant, call or other such right, agreement or commitment, and there
have been no material changes in such numbers through the date hereof. As of
the date hereof the conversion ratio for the Company Series C Preferred Stock
is 20.4925.
Section 5.3 Subsidiaries. Except for wholly owned subsidiaries which were
formed after the date hereof in the ordinary course of business, the only
Significant Subsidiaries of the Company are those named in the Company SEC
Reports. Each Significant Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the corporate power to carry on its business as it is
now being conducted or currently proposed to be conducted. Each Significant
Subsidiary is duly qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary except where the failure to be so qualified will not
have a Company Material Adverse Effect. All the outstanding shares of capital
stock of each Significant Subsidiary are validly issued, fully paid and
nonassessable and those owned by the Company or by a subsidiary of the Company
are owned free and clear of any liens, claims or encumbrances. There are no
existing options, warrants, calls or other rights, agreements or commitments
of any character relating to the issued or unissued capital stock or other
securities of any of the Significant Subsidiaries of the Company. Except as
set forth in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 and except for wholly owned subsidiaries which are formed
after the date hereof in the ordinary course of business, the Company does not
directly or indirectly own any interest in any other corporation, partnership,
joint venture or other business association or entity.
Section 5.4 Authority Relative to this Merger Agreement. The Company has the
corporate power to enter into this Merger Agreement, subject to the requisite
approval of this Merger Agreement by the holders of (i) Company Common Stock,
Company Series B Preferred Stock and Company Series C Preferred Stock voting
together as a single class and (ii) Company Series C Preferred Stock voting
separately as a class, and to carry out its obligations hereunder. The
execution and delivery of this Merger Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Company's
Board of Directors. This Merger Agreement constitutes a valid and binding
obligation of the Company enforceable in accordance with its terms except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought. Except for the requisite approval of the holders of (i) Company
Common Stock, Company Series B Preferred Stock and Company Series C Preferred
Stock voting together as a class and (ii) Company Series C Preferred stock
voting separately as a class, no other corporate proceedings on the part of
the Company are necessary to authorize this Merger Agreement and the
transactions contemplated hereby. The Company is not subject to or obligated
under (i) any charter, by-law, indenture or other loan document provision
(other than as set forth in the Company Disclosure Schedule) or (ii) any other
contract, license, franchise, permit, order, decree, concession, lease,
instrument, judgment, statute, law, ordinance, rule or regulation applicable
to the Company or any of its subsidiaries or their respective properties or
assets which would be breached or violated, or under which there would be a
default (with or without notice or lapse of time, or both), or under which
there would arise a right of termination, cancellation or acceleration of any
obligation or the loss of a material benefit, by its executing and carrying
out this Merger Agreement, other than, in the case of clause (ii) only, (A)
any breaches, violations, defaults, terminations, cancellations, accelerations
or losses which, either singly or in the aggregate, will not have a Company
Material Adverse Effect or prevent the consummation of the transactions
contemplated hereby and (B) the laws and regulations referred to in the next
sentence. Except as referred to herein or, with
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respect to the Merger or the transactions contemplated thereby, in connection,
or in compliance, with the provisions of the HSR Act, the Securities Act, the
Exchange Act, the Foreign Laws and the environmental, corporation, securities
or blue sky laws or regulations of the various states, no filing or
registration with, or authorization, consent or approval of, any public body
or authority is necessary for the consummation by the Company of the Merger or
the other transactions contemplated hereby, other than filings, registrations,
authorizations, consents or approvals the failure of which to make or obtain
would not have a Company Material Adverse Effect or prevent the consummation
of the transactions contemplated hereby and thereby.
Section 5.5 Reports and Financial Statements. The Company has previously
furnished Parent with true and complete copies of its (i) Annual Report on
Form 10-K for the year ended December 31, 1995, as filed with the Commission,
(ii) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996,
June 30, 1996 and September 30, 1996, as filed with the Commission, (iii)
proxy statements related to all meetings of its shareholders (whether annual
or special) since December 31, 1994 and (iv) all other reports or registration
statements filed by the Company with the Commission since December 31, 1994,
except registration statements on Form S-8 relating to employee benefit plans,
which are all the documents (other than preliminary material) that the Company
was required to file with the Commission since that date (clauses (i) through
(iv) being referred to herein collectively as the "Company SEC Reports"). As
of their respective dates, the Company SEC Reports complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the Commission thereunder
applicable to such Company SEC Reports. As of their respective dates, the
Company SEC Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements of the Company included in the Company
SEC Reports comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, and the financial statements included in the
Company SEC Reports, have been prepared in accordance with GAAP applied on a
consistent basis (except as may be indicated therein or in the notes thereto)
and fairly present the financial position of the Company and its subsidiaries
as at the dates thereof and the results of their operations and changes in
financial position for the periods then ended subject, in the case of the
unaudited interim financial statements, to normal year-end audit adjustments
and any other adjustments described therein.
Section 5.6 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports or as set forth on Schedule 5.6 of the Company Disclosure
Schedule, since September 30, 1996, there has not been (i) any transaction,
commitment, dispute or other event or condition (financial or otherwise) of
any character (whether or not in the ordinary course of business) individually
or in the aggregate having a Company Material Adverse Effect (other than as a
result of changes in laws or regulations of general applicability); (ii) any
damage, destruction or loss, whether or not covered by insurance, which,
insofar as reasonably can be foreseen, in the future would have a Company
Material Adverse Effect; (iii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to the capital stock of the Company (except for required dividends on
the Company Series C Preferred Stock at the rate of 8.25%, payable in cash and
required dividends on the Company Series B Preferred Stock at the rate of
6.00% payable in cash (the "Regular Company Dividends") in effect on September
30, 1996), or (iv) any entry into any commitment or transaction material to
the Company and its subsidiaries taken as a whole (including, without
limitation, any borrowing or sale of assets) except in the ordinary course of
business consistent with past practice.
Section 5.7 Litigation. Except as disclosed in the Company's SEC Reports or
as set forth on Schedule 5.7 of the Company Disclosure Schedule, there is no
suit, action or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its subsidiaries which,
either alone or in the aggregate, is likely, insofar as the Company reasonably
foresees, to have a Company Material Adverse Effect, nor is there any
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against the Company or any of its subsidiaries having, or which, insofar as
the Company reasonably foresees, in the future could have, either alone or in
the aggregate, any such Company Material Adverse Effect.
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Section 5.8 Information in Disclosure Documents. None of the information
with respect to the Company or its subsidiaries to be included or incorporated
by reference in the Proxy Statement or the Registration Statement will, in the
case of the Proxy Statement or any amendments or supplements thereto, at the
time of the mailing of the Proxy Statement and any amendments or supplements
thereto, and at the time of the Company Meeting to be held in connection with
the Merger, or, in the case of the Registration Statement, at the time it
becomes effective and at the Effective Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
Section 5.9 Employee Benefit Plans. Except as disclosed in the Company SEC
Reports or as set forth on Schedule 5.9, there are no material employee
benefit or compensation plans, agreements or arrangements, including "employee
benefit plans," as defined in Section 3(3) of ERISA, and including, but not
limited to, plans, agreements or arrangements relating to former employees,
including, but not limited to, retiree medical plans, maintained by the
Company or any of its subsidiaries or material collective bargaining
agreements to which the Company or any of its subsidiaries is a party
(together, the "Company Benefit Plans"). To the best knowledge of the Company,
no default exists with respect to the obligations of the Company or any of its
subsidiaries under such Company Benefit Plan, which default, alone or in the
aggregate, would have a Company Material Adverse Effect. Since January 1,
1996, there have been no disputes or grievances subject to any grievance
procedure, unfair labor practice proceedings, arbitration or litigation under
such Company Benefit Plans, which have not been finally resolved, settled or
otherwise disposed of, nor is there any default, or any condition which, with
notice or lapse of time or both, would constitute such a default, under any
such Company Benefit Plans, by the Company or its subsidiaries or, to the best
knowledge of the Company and its subsidiaries, any other party thereto, which
failure to resolve, settle or otherwise dispose of or default, alone or in the
aggregate, would have a Company Material Adverse Effect. Since December 31,
1995, there have been no strikes, lockouts or work stoppages or slowdowns, or
to the best knowledge of the Company and its subsidiaries, jurisdictional
disputes or organizing activity occurring or threatened with respect to the
business or operations of the Company or its subsidiaries which have had or
would have a Company Material Adverse Effect. Except as set forth on Schedule
5.9, neither the execution of the Merger Agreement nor the consummation of the
transactions contemplated hereby will (either alone or upon the occurrence of
additional events or acts) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to any
employee of the Company or any of its subsidiaries.
Section 5.10 ERISA. All Company Benefit Plans have been administered in
accordance, and are in compliance, with the applicable provisions of ERISA,
except where such failures to administer or comply would not have a Company
Material Adverse Effect. Each of the Company Benefit Plans which is intended
to meet the requirements of Section 401(a) of the Code has been determined by
the Internal Revenue Service to be "qualified," within the meaning of such
section of the Code, and the Company knows of no fact which is likely to have
an adverse effect on the qualified status of such plans. None of the Company
Benefit Plans which are defined benefit pension plans have incurred any
"accumulated funding deficiency" (whether or not waived) as that term is
defined in Section 412 of the Code and the fair market value of the assets of
each such plan equal or exceed the accrued liabilities of such plan. To the
best knowledge of the Company, there are not now nor have there been any non-
exempt "prohibited transactions," as such term is defined in Section 4975 of
the Code or Section 406 of ERISA, involving the Company's Benefit Plans which
could subject the Company, its subsidiaries or Parent to the penalty or tax
imposed under Section 502(i) of ERISA or Section 4975 of the Code. No Company
Benefit Plan which is subject to Title IV of ERISA has been completely or
partially terminated; no proceedings to completely or partially terminate any
Company Benefit Plan have been instituted within the meaning of Subtitle C of
said Title IV of ERISA; and no reportable event within the meaning of Section
4043(c) of said Subtitle C for which the 30-day notice requirement has been
waived of ERISA has occurred with respect to any Company Benefit Plan. Neither
the Company nor any of its subsidiaries has made a complete or partial
withdrawal, within the meaning of Section 4201 of ERISA, from any
multiemployer plan which has resulted in, or is reasonably expected to result
in, any withdrawal liability to the Company or any of its subsidiaries except
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for any such liability which would not have a Company Material Adverse Effect.
Neither the Company nor any of its subsidiaries has engaged in any transaction
described in Section 4069 of ERISA within the last five years except for any
such transaction which would not have a Company Material Adverse Effect.
Section 5.11 Takeover Provisions Inapplicable. As of the date hereof and at
all times on or prior to the Effective Date, Section 203 of the DGCL, the
Company Rights Agreement and Article IX of the Company's Restated Certificate
of Incorporation are, and shall be, inapplicable to the Merger and the
transactions contemplated by this Merger Agreement.
Section 5.12 Company Action. The Board of Directors of the Company (at a
meeting duly called and held) has by the requisite vote of directors (a)
determined that the Merger is advisable and fair and in the best interests of
the Company and its shareholders, (b) approved the Merger in accordance with
the provisions of Section 251 of the DGCL, (c) recommended the approval of
this Merger Agreement and the Merger by the holders of the Company Common
Stock, Company Series B Preferred Stock and Company Series C Preferred Stock
and directed that the Merger be submitted for consideration by the Company's
shareholders entitled to vote thereon at the Company Meeting, (d) taken all
necessary steps to render Article IX of the Company's Restated Certificate of
Incorporation inapplicable to the Merger and the transactions contemplated by
this Merger Agreement, (e) taken all necessary steps to render the Company
Rights Agreement inapplicable to the Merger and the transactions contemplated
by this Merger Agreement, (f) taken all necessary steps to approve any actions
necessary or appropriate to consummate the transactions contemplated by this
Merger Agreement with respect to the GECC Debt and the 2002 Indenture (each as
defined herein) and (g) adopted any necessary resolution having the effect of
causing the Company not to be subject, to the extent permitted by applicable
law, to any state takeover law that may purport to be applicable to the Merger
and the transactions contemplated by this Merger Agreement.
Section 5.13 Fairness Opinion. The Company has received the opinion of Allen
& Company, financial advisors to the Company, dated the date hereof, to the
effect that the consideration to be received by the Company's shareholders in
the Merger is fair to the shareholders of the Company from a financial point
of view.
Section 5.14 Financial Advisor. Except for Allen & Company, no broker,
finder or investment banker is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger or the transactions
contemplated by this Merger Agreement based upon arrangements made by or on
behalf of the Company, and the fees and commissions payable to Allen & Company
as contemplated by this Section will be the amount set forth in that certain
letter, dated November 17, 1996, from Allen & Company to the Company.
Section 5.15 Compliance with Applicable Laws. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities, except for such permits, licenses,
variances, exemptions, orders and approvals the failure of which, individually
or in the aggregate, to hold would not have a Company Material Adverse Effect
(the "Company Permits"). To the knowledge of the Company, the Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
for such failures to comply which, singly or in the aggregate, would not have
a Company Material Adverse Effect. To the knowledge of the Company, except as
disclosed in the Company SEC Reports filed prior to the date of this Merger
Agreement, the businesses of the Company and its subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for possible violations which individually or in the aggregate
do not and would not have a Company Material Adverse Effect. To the knowledge
of the Company, no investigation or review by any Governmental Entity with
respect to the Company or any of its subsidiaries is pending, or, to the
knowledge of the Company, threatened, nor has any Governmental Entity
indicated an intention to conduct the same, other than those the outcome of
which would not have a Company Material Adverse Effect.
Section 5.16 Liabilities. As of September 30, 1996, neither the Company nor
any of its subsidiaries has any material liabilities or obligations (absolute,
accrued, contingent or otherwise) of a nature required to be disclosed on a
balance sheet or in the related notes to the consolidated financial statements
prepared in
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accordance with GAAP which are not disclosed or provided for in the most
recent Company SEC Reports. To the best knowledge of the Company, there was no
basis, as of September 30, 1996, for any claim or liability (absolute,
accrued, contingent or otherwise) of a nature required to be disclosed on a
balance sheet or in the related notes to the consolidated financial statements
prepared in accordance with GAAP which is or would have a Company Material
Adverse Effect, not reflected in the Company SEC Reports.
Section 5.17 Taxes. Each of the Company and its subsidiaries has filed all
tax returns required to be filed by any of them and has paid (or the Company
has paid on its behalf), or has set up an adequate reserve for the payment of,
all taxes required to be paid in respect of the periods covered by such
returns. The information contained in such tax returns is true, complete and
accurate. Neither the Company nor any subsidiary of the Company is delinquent
in the payment of any tax, assessment or governmental charge. No deficiencies
for any taxes have been proposed, asserted or assessed against the Company or
any of its subsidiaries that have not been finally settled or paid in full and
no requests for waivers of the time to assess any such tax are pending. No
representation contained in this Section 5.17 (each, a "Relevant
Representation") shall be deemed to be untrue unless all untruths of Relevant
Representations cumulatively would be expected to have a Company Material
Adverse Effect.
Section 5.18 Certain Agreements. Except as disclosed on the Company
Disclosure Schedule or in the Company SEC Reports filed prior to the date of
this Merger Agreement, neither the Company nor any of its subsidiaries is a
party to any oral or written (i) agreement, contract, indenture or other
instrument relating to Indebtedness in an amount exceeding $2,000,000, (ii)
agreement which, after giving effect to the transactions contemplated by this
Merger Agreement, purports to restrict or bind Parent or any of its
subsidiaries other than the Surviving Corporation and its subsidiaries in any
respect that could have a Parent Material Adverse Effect or (iii) contract,
agreement or commitment (except those entered into in the ordinary course of
business) having a Company Material Adverse Effect. Neither the Company nor
any of its subsidiaries is in default (or would be in default with notice or
lapse of time, or both) under any indenture, note, credit agreement, loan
document, lease, license or other agreement including, but not limited to, any
Company Benefit Plan, whether or not such default has been waived, which
default, alone or in the aggregate with other such defaults, would have a
Company Material Adverse Effect. Except as set forth on Schedule 5.18, none of
the Company or any of its subsidiaries is a party to and bound by any
contract, agreement, commitment, plan, arrangement or other understanding
which upon execution of this Merger Agreement or consummation of the
transactions contemplated hereby will (either alone or upon the occurrence of
additional acts or events) result in any material payment becoming due from
the Company or Parent or any of their subsidiaries.
Section 5.19 Accounts Receivable. As of the date hereof, the accounts
receivable of the Company and its subsidiaries as reflected in the most recent
financial statements contained in the Company SEC Reports, to the extent
uncollected on the date hereof, and the accounts receivable reflected on the
books of the Company and its subsidiaries as of the date hereof are valid and
existing and represent monies due, and the Company as of the date hereof, has
made reserves reasonably considered adequate for receivables not collectible
in the ordinary course of business, and (subject to the aforesaid reserves)
are subject to no refunds or other adjustments and to no defenses, rights of
setoff, assignments, restrictions, encumbrances or conditions enforceable by
third parties on or affecting any thereof, except for such refunds,
adjustments, defenses, rights of setoff, assignments, restrictions,
encumbrances or conditions as would not, individually or in the aggregate,
have a Company Material Adverse Effect.
Section 5.20 Inventory. As of the date hereof, the inventories of the
Company and its subsidiaries as reflected in the most recent financial
statements contained in the Company SEC Reports except for normal year-end
adjustments made in accordance with GAAP applied consistently with prior
periods, (i) are carried as provided in the Company SEC Reports not in excess
of the lower of cost or net realizable value and (ii) do not include any
inventory which is obsolete, surplus or not usable or saleable in the lawful
and ordinary course of business of the Company and its subsidiaries as
heretofore conducted, in each case net of reserves provided therefor.
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Section 5.21 Patents, Trademark, Etc. To the knowledge of the Company, the
Company and its subsidiaries have all patents, trademarks, trade names,
service marks, trade secrets, copyrights and licenses and other proprietary
intellectual property rights and licenses as are necessary in connection with
the businesses of the Company and its subsidiaries, the lack of which would
have a Company Material Adverse Effect, and the Company does not have any
knowledge of any conflict with the rights of the Company and its subsidiaries
therein or any knowledge of any conflict by them with the rights of others
therein which, insofar as reasonably can be foreseen, could, individually or
in the aggregate, have a Company Material Adverse Effect.
Section 5.22 Product Liability. The Company is not aware of any claim, or
the basis of any claim, against the Company or any of its subsidiaries for
injury to person or property of employees or any third parties suffered as a
result of the sale of any product or performance of any service by the Company
or any of its subsidiaries, including claims arising out of the defective or
unsafe nature of its products or services, which could, individually or in the
aggregate, have a Company Material Adverse Effect. The Company and its
subsidiaries have, and on the Effective Date will have, full and adequate
insurance coverage for potential product liability claims against it.
Section 5.23 Environment. To the knowledge of the Company, there are, except
as set forth in the Company SEC Reports, with respect to the Company or any of
its subsidiaries, no past or present violations of Environmental Laws,
releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any common law liability or any liability under CERCLA or
similar state or local laws, which liabilities, either individually or in the
aggregate, would have a Company Material Adverse Effect.
Section 5.24 Title to Assets; Liens. To the extent material to the business
or operations of the Company and its subsidiaries, taken as a whole, the
Company has good and marketable title to all of its inventory, accounts
receivable, property, equipment and other assets, and except as disclosed in
the Company's SEC Reports such assets are free and clear of any material
mortgages, liens, charges, encumbrances, or title defects of any nature
whatsoever, except for such mortgages, liens, charges, encumbrances or title
defects which would not materially and adversely affect the value of such
property as carried on the Company's financial statements contained in the
Company SEC Reports or would not have a Company Material Adverse Effect. The
Company and its subsidiaries have valid and enforceable leases for the
premises and the equipment, furniture and fixtures purported to be leased by
them, except for leases, the failure of which to have or be enforceable, would
not have a Company Material Adverse Effect.
Section 5.25 Accounting Matters. Neither the Company nor, to its best
knowledge, any of its affiliates, has through the date hereof, taken or agreed
to take any action nor are they aware of any circumstances which currently
exist that would prevent Parent from accounting for the business combination
to be effected by the Merger as a "pooling of interests."
Section 5.26 No Material Adverse Effect. Except as disclosed in the Company
SEC Reports, the Company is not aware of any fact which, alone or together
with another fact, is likely to result in a Company Material Adverse Effect.
ARTICLE VI
Conduct of Business Pending the Merger
Section 6.1 Conduct of Business by the Company Pending the Merger. Prior to
the Effective Date, unless Parent shall otherwise agree in writing:
(i) the Company shall, and shall cause its subsidiaries to, carry on
their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, and shall, and
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shall cause its subsidiaries to, use their diligent efforts to preserve
intact their present business organizations, keep available the services of
their present officers and employees and preserve their relationships with
customers, suppliers and others having business dealings with them to the
end that their goodwill and ongoing businesses shall be unimpaired at the
Effective Date. The Company shall, and shall cause its subsidiaries to, (A)
maintain insurance coverages and its books, accounts and records in the
usual manner consistent with prior practices; (B) comply in all material
respects with all laws, ordinances and regulations of Governmental Entities
applicable to the Company and its subsidiaries; (C) maintain and keep its
properties and equipment in good repair, working order and condition,
ordinary wear and tear excepted; and (D) perform in all material respects
its obligations under all contracts and commitments to which it is a party
or by which it is bound, in each case other than where the failure to so
maintain, comply or perform, either individually or in the aggregate, would
not result in a Company Material Adverse Effect;
(ii) except as required by this Merger Agreement or as permitted pursuant
to Section 7.10 hereof, the Company shall not and shall not propose to (A)
sell or pledge or agree to sell or pledge any capital stock owned by it in
any of its subsidiaries, (B) amend its Restated Certificate of
Incorporation or Bylaws, (C) split, combine or reclassify its outstanding
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
capital stock of the Company, or declare, set aside or pay any dividend or
other distribution payable in cash, stock or property (other than Regular
Company Dividends), or (D) directly or indirectly redeem, purchase or
otherwise acquire or agree to redeem, purchase or otherwise acquire any
shares of Company capital stock;
(iii) the Company shall not, nor shall it permit any of its subsidiaries
to, (A) except as required by this Merger Agreement, issue, deliver or sell
or agree to issue, deliver or sell any additional shares of, or rights of
any kind to acquire any shares of, its capital stock of any class, any
Indebtedness or any option, rights or warrants to acquire, or securities
convertible into, shares of capital stock other than issuances of Company
Common Stock pursuant to the exercise of employee stock options outstanding
on the date hereof or the conversion of Company Series C Preferred Stock,
Company Series B Preferred Stock or Indebtedness of the Company; (B)
acquire, lease or dispose or agree to acquire, lease or dispose of any
capital assets or any other assets other than in the ordinary course of
business, (C) incur additional Indebtedness or encumber or grant a security
interest in any asset or enter into any other material transaction other
than in each case in the ordinary course of business; (D) acquire or agree
to acquire by merging or consolidating with, or by purchasing a substantial
equity interest in, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof, in each case in this Clause (D) which are material,
individually or in the aggregate, to the Company and its subsidiaries taken
as a whole, except that the Company may create new wholly owned
subsidiaries in the ordinary course of business; or (E) enter into any
contract, agreement, commitment or arrangement with respect to any of the
foregoing;
(iv) except as set forth in the Company Disclosure Schedule, the Company
shall not, nor shall it permit, any of its subsidiaries to, except as
required to comply with applicable law and except as provided in Section
7.5 hereof, (A) adopt, enter into, terminate or amend any bonus, profit
sharing, compensation, severance, termination, stock option, pension,
retirement, deferred compensation, employment or other Company Benefit
Plan, agreement, trust, fund or other arrangement for the benefit or
welfare of any director, officer or current or former employee, (B)
increase in any manner the compensation or fringe benefit of any director,
officer or employee (except for normal increases in the ordinary course of
business that are consistent with past practice and that, in the aggregate,
do not result in a material increase in benefits or compensation expense to
the Company and its subsidiaries relative to the level in effect prior to
such amendment), (C) pay any benefit not provided under any existing plan
or arrangement, (D) grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or Company Benefit
Plan (including, without limitation, the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units
or restricted stock, or the removal of existing restrictions in any benefit
plans or agreements or awards made thereunder), (E) take any action to fund
or in any other way secure the payment of compensation or benefits under
any employee plan, agreement, contract or arrangement or
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Company Benefit Plan other than in the ordinary course of business
consistent with past practice, or (F) adopt, enter into, amend or terminate
any contract, agreement, commitment or arrangement to do any of the
foregoing;
(v) the Company shall not, nor shall it permit any of its subsidiaries
to, make any investments in non-investment grade securities provided,
however, that the Company will be permitted to create new wholly owned
subsidiaries in the ordinary course of business; and
(vi) the Company shall not, nor shall it permit any of its subsidiaries
to, take or cause to be taken any action, whether before or after the
Effective Date, which would disqualify the Merger as a "pooling of
interests" for accounting purposes or as a "reorganization" within the
meaning of Section 368(a) of the Code.
Section 6.2 Conduct of Business by Parent and Sub Pending the Merger.
(a) Parent. Prior to the Effective Date, unless the Company shall otherwise
agree in writing or except as otherwise required by this Merger Agreement:
(i) Parent shall, and shall cause its subsidiaries to, carry on their
respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, and shall, and shall
cause its material subsidiaries to, use their best efforts to preserve
intact their present business organizations, keep available the services of
their present officers and employees and preserve their relationships with
customers, suppliers and others having business dealings with them to the
end that their goodwill and ongoing businesses shall be unimpaired at the
Effective Date, provided, however, that nothing contained herein shall
prevent Parent from creating new wholly owned subsidiaries in the ordinary
course of business as long as the creation of such subsidiaries (either
alone or in the aggregate) will not have a Parent Material Adverse Effect;
and (ii) the Parent shall not, nor shall it permit any of its subsidiaries
to, take or cause to be taken any action, whether before or after the
Effective Date, which would disqualify the Merger as a "pooling of
interests" for accounting purposes or as a reorganization within the
meaning of Section 368(a) of the Code.
(b) Sub. During the period from the date of this Merger Agreement to the
Effective Date, Sub shall not engage in any activities of any nature except
as provided in or contemplated by this Merger Agreement.
Section 6.3 Notice of Breach. Each party shall promptly give written notice
to the other party upon becoming aware of the occurrence or, to its knowledge,
impending or threatened occurrence, of any event which would cause or
constitute a breach of any of its representations, warranties or covenants
contained or referenced in this Merger Agreement and will use its best efforts
to prevent or promptly remedy the same. Any such notification shall not be
deemed an amendment of the Company Disclosure Schedule or the Parent
Disclosure Schedule.
ARTICLE VII
Additional Agreements
Section 7.1 Access and Information. Each of the Company and Parent and their
respective subsidiaries shall afford to the other and to the other's
accountants, counsel and other representatives full access during normal
business hours (and at such other times as the parties may mutually agree)
throughout the period prior to the Effective Date to all of its properties,
books, contracts, commitments, records and personnel and, during such period,
each shall furnish promptly to the other (i) a copy of each report, schedule
and other document filed or received by it pursuant to the requirements of
federal or state securities laws, and (ii) all other information concerning
its business, properties and personnel as the other may reasonably request.
Each of the Company and Parent shall hold, and shall cause their respective
employees and agents to hold, in confidence all such information in accordance
with the terms of the Confidentiality Agreements, dated September 28, 1995 (as
extended by letter agreement, dated October 14, 1996) and November 8, 1996
between Parent and the Company (the "Confidentiality Agreements").
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Section 7.2 Registration Statement/Proxy Statement. (a) As promptly as
practicable after the execution of this Merger Agreement, the Company and
Parent shall prepare and the Company shall file with the Commission
preliminary proxy materials which shall constitute the preliminary Proxy
Statement and a preliminary prospectus with respect to the Parent Common Stock
to be issued in connection with the Merger. As promptly as practicable after
comments are received from the Commission with respect to the preliminary
proxy materials and after the furnishing by the Company and Parent of all
information required to be contained therein, the Company shall file with the
Commission the definitive Proxy Statement and Parent shall file with the
Commission the Registration Statement and Parent and the Company shall use all
reasonable efforts to cause the Registration Statement to become effective as
soon thereafter as practicable.
(b) Parent and the Company shall make all necessary filings with respect to
the Merger, under the Securities Act and the Exchange Act and the rules and
regulations thereunder, under applicable blue sky or similar securities laws
and shall use all reasonable efforts to obtain required approvals and
clearances with respect thereto.
Section 7.3 Compliance with the Securities Act. (a) Prior to the Effective
Date the Company shall cause to be delivered to Parent an opinion
(satisfactory to counsel for Parent) of the general counsel of the Company or
such law firm as may be reasonably satisfactory to Parent, identifying all
persons who were, in his or its opinion, at the time of the Company Meeting
convened in accordance with Section 3.5, "affiliates" of the Company as that
term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act
(the "Affiliates").
(b) The Company shall use its diligent efforts to obtain a written agreement
from each person who is identified as a possible Affiliate in the opinion
referred to in clause (a) above, in the form previously approved by the
parties, that he or she will not offer to sell, sell or otherwise dispose of
any of the capital stock of Parent issued to him or her pursuant to the
Merger, except in compliance with Rule 145 or another exemption from the
registration requirements of the Securities Act. The Company shall deliver
such written agreements to Parent on or prior to the Effective Date. The
Company shall use its diligent efforts to cause each person who is identified
as an Affiliate in such opinion to deliver to Parent, on or prior to the
earlier of (i) the mailing of the Proxy Statement/Prospectus or (ii) the
thirtieth day prior to the Effective Date, a written agreement, in the form to
be approved by the parties hereto, that such Affiliate will not thereafter
sell or in any other way reduce such Affiliate's risk relative to any Parent
Common Stock received in the Merger (within the meaning of the Commission's
Financial Reporting Release No. 1, "Codification of Financing Reporting
Policies," (S) 201.01 (47 F.R. 21030) (April 15, 1982)), until such time as
financial results (including combined sales and net income) covering at least
30 days of post-merger operations have been published, except as permitted by
Staff Accounting Bulletin No. 76 issued by the Commission. As soon as is
reasonably practicable but in no event later than 45 days after the end of the
first month ending at least 30 days after the Effective Date, Parent will
publish results including at least 30 days of combined operations of Parent
and the Company as referred to in the written agreements provided for by this
Section 7.3(b).
Section 7.4 Stock Exchange Listing. Parent shall use its best efforts to
list on the NYSE, upon official notice of issuance, the shares of Parent
Common Stock to be issued pursuant to the Merger.
Section 7.5 Employment Arrangements. (a) After the Effective Date, Parent
shall, or shall cause the Surviving Corporation to, honor in accordance with
their terms, all employment, severance, consulting and other compensation
contracts between the Company or any of its subsidiaries and any current or
former director, officer or employee thereof, and all provisions for vested
benefits or other vested amounts earned or accrued through the Effective Date
under any Company Benefit Plan, each as of the date hereof except for changes
thereto which are (i) not material, (ii) permitted by this Merger Agreement,
(iii) set forth on Schedule 7.5 hereto, or (iv) otherwise agreed to by the
parties hereto.
(b) For a period of six months after the Effective Date, Parent shall
provide, or shall cause the Surviving Corporation to provide, generally to the
officers and employees of the Surviving Corporation and its subsidiaries
employee benefits, including, without limitation, pension benefits, health and
welfare benefits, and severance
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arrangements, on terms and conditions in the aggregate that are no less
favorable as those provided under the Company Benefit Plans as of the date
hereof.
Section 7.6 Indemnification. (a) From and after the Effective Date, Parent
shall indemnify, defend and hold harmless the officers, directors and
employees of the Company (the "Indemnified Parties") against all losses,
expenses, claims, damages or liabilities arising out of the transactions
contemplated by this Merger Agreement to the fullest extent permitted or
required under applicable law. Parent agrees that all rights to
indemnification existing in favor of the directors, officers or employees of
the Company as provided in the Company's Restated Certificate of Incorporation
or By-Laws, as in effect as of the date hereof, with respect to matters
occurring through the Effective Date, shall survive the Merger and shall
continue in full force and effect for a period of not less than six years from
the Effective Date. Parent agrees to cause Surviving Corporation to maintain
in effect for not less than two years after the Effective Date the current
policies of directors' and officers' liability insurance maintained by the
Company with respect to matters occurring prior to the Effective Date;
provided, however, that Surviving Corporation shall not be required to pay an
annual premium for such insurance in excess of $410,000, but in such case
shall purchase as much coverage as possible for such amount.
(b) In the event that any action, suit, proceeding or investigation relating
hereto or to the transactions contemplated by this Merger Agreement is
commenced, whether before or after the Effective Date, the parties hereto
agree to cooperate and use their respective reasonable efforts to vigorously
defend against and respond thereto.
Section 7.7 Antitrust Filings; Best Efforts; Notification. (a) The Company
and Parent shall use their best efforts to file in connection with the Merger
and the transactions contemplated hereby as soon as practicable (i)
notifications under the HSR Act, and (ii) such notifications and filings as
may be required under any Antitrust Laws (as defined below). The Company and
Parent shall use their best efforts to take all action necessary, proper and
advisable under applicable laws and regulations with respect to the following:
(x) to cause the expiration or termination of the applicable waiting periods
under the HSR Act as soon as practicable, including, without limitation, by
responding as promptly as practicable to any inquiries received from the
Federal Trade Commission (the "FTC") or the Antitrust Division of the
Department of Justice (the "Antitrust Division") or any state or local
governmental entity for additional information or documentation, (y) with
regards to the proper national and multinational authorities to cause the
expiration or termination of applicable waiting periods, the satisfaction of
such other filing requirements, or the issuance of such approvals, consents or
authorizations as may be required with respect to the Antitrust Laws of any
foreign jurisdiction, and (z) to avoid the entry of any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent, under
any Antitrust Law, that would have the effect of prohibiting, preventing or
restricting consummation of the transactions contemplated by this Merger
Agreement or of imposing any material limitation on the conduct of the
businesses of the Company or Parent following consummation of such
transactions; provided, however, that Parent shall not be required to take any
action if Parent determines, in its sole discretion, that it is not in its
best interest to do so.
(b) The Company and Parent shall, in connection with the efforts referenced
in the foregoing paragraph to obtain all requisite approvals and
authorizations for the transactions contemplated by this Merger Agreement
under Antitrust Laws, (i) cooperate in all respects with each other in
connection with any filing or submission and in connection with any
investigation or other inquiry; (ii) promptly inform the other party of any
communication to it from any Governmental Entity and permit the other party to
review in advance any proposed communication from it to any Governmental
Entity or third party; and (iii) not arrange for or participate in any meeting
with any Governmental Entity in respect of any filings, investigation or other
inquiry without consulting with each other in advance, and, to the extent
permitted by such Governmental Entity, giving the other party the opportunity
to attend and participate thereat. The Company shall not enter into any
proposed understanding, undertaking, or agreement with any Governmental Entity
in connection with the transactions contemplated by this Merger Agreement
without the prior written consent of Parent. Parent shall keep the Company
reasonably informed of determinations made pursuant to the proviso of the last
sentence of Section 7.7(a), Section 7.7(c) and of Section 7.7(d).
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(c) In connection with the foregoing, if any administrative or judicial
action or proceeding is instituted (or threatened to be instituted)
challenging any transaction contemplated by this Merger Agreement as violative
of any Antitrust Law, each of Parent and the Company shall cooperate and use
its respective best efforts to contest and resist any such action or
proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents, or restricts
consummation of the transactions contemplated by this Merger Agreement or
imposes any material limitation on the conduct of the businesses of the
Company or Parent following consummation of such transactions, unless and
until Parent, in its sole discretion, determines that to contest or litigate
such matters is not in its best interest.
(d) If any objections are asserted with respect to the transactions
contemplated hereby under any Antitrust Law or if any suit is instituted
challenging any of the transactions contemplated hereby as violative of any
Antitrust Law or regulation, Parent and the Company, if requested by Parent,
shall take such action as may be required or proposed (i) by the applicable
Governmental Entity in order to resolve any such objections as such
Governmental Entity may have to such transactions under such Antitrust Law, or
(ii) by any domestic or foreign court or similar tribunal, in any suit brought
by a private party or Governmental Entity challenging the transactions
contemplated hereby as violative of any Antitrust Law, in order to avoid the
entry of, or to effect the dissolution of, any injunction, temporary
restraining order or other order that has the effect of preventing the
consummation of any of such transactions or would otherwise deprive Parent or
any of its affiliates of any material benefit of the ownership and control its
assets or operations after the Effective Date; provided, however, that the
Company shall not be required to commit to or to implement any action that is
to be consummated prior to the Effective Date; and provided, further, that,
other provisions of this Section 7.7 notwithstanding, Parent shall not be
required to take any action pursuant to this Section 7.7(d) if Parent
determines, in its sole discretion, that it is not in Parent's best interest
to do so.
(e) "Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, all other
federal, state, or foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization, restraint of trade or lessening of competition
through merger or acquisition.
Section 7.8 Additional Agreements. (a) Subject to the terms and conditions
herein provided (including, without limitation, Section 7.7), each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Merger Agreement,
including using all reasonable efforts to obtain all necessary waivers,
consents and approvals, to effect all necessary registrations and filings
(including, but not limited to, filings with all applicable Governmental
Entities) and to lift any injunction or other legal bar to the Merger (and, in
such case, to proceed with the Merger as expeditiously as possible), subject
to the appropriate vote of the shareholders of the Company. Notwithstanding
the foregoing, but subject to Section 7.7, there shall be no action required
to be taken and no action will be taken in order to consummate and make
effective the transactions contemplated by this Merger Agreement if such
action, either alone or together with another action, would result in a
Company Material Adverse Effect or a Parent Material Adverse Effect.
(b) In case at any time after the Effective Date any further action is
necessary or desirable to carry out the purposes of this Merger Agreement, the
proper officers and/or directors of Parent, the Company and the Surviving
Corporation shall take all such necessary action.
(c) Following the Effective Date, Parent shall use its best efforts to
conduct the business, and shall cause the Surviving Corporation to use its
best efforts to conduct its business, except as otherwise contemplated by this
Merger Agreement, in a manner which would not jeopardize the characterization
of the Merger as a reorganization within the meaning of Section 368(a) of the
Code.
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(d) (i) The Company shall, effective at the Effective Date, repay all
obligations of it and its subsidiaries under the credit agreements, revolving
credit facilities and receivable funding facilities with General Electric
Capital Corporation set forth on Schedule 7.8(d) (the "GECC Debt") and obtain
a release of all obligations, liens and security interests thereunder (and
Parent shall use reasonable efforts to cooperate with the Company with respect
to the foregoing and shall provide funding with respect thereto, to the extent
the Company does not have sufficient cash as of the Effective Date to repay
all such obligations), and (ii) Parent shall cause the Company to comply with
its obligations under that certain Indenture dated as of August 15, 1992
pursuant to which the Company issued its 10 1/8% Senior Subordinated Notes due
August 2002 (the "2002 Indenture") pursuant to Article 5 thereof and (iii)
Parent will cause the Company to comply with the covenants and obligations set
forth in the Company's Convertible Subordinated Notes, dated September 30,
1991 in the aggregate amount of $16,034,000.
(e) After the date hereof, the Company shall establish a plan to provide
payments to employees who remain employed by the Company through the Effective
Date and, unless involuntarily terminated without cause by Parent earlier, for
six months thereafter. Payments under such plan shall be made by the Company
on the six month anniversary of the Effective Date or at such earlier time
after the Effective Date as an eligible employee's employment with the Company
or its affiliates shall be terminated involuntarily without cause. The Company
and Parent shall, in writing, mutually select Company employees eligible to
participate in the plan. In no event shall the aggregate payments under the
plan exceed $10,000,000.
Section 7.9 No Solicitation. Subject to the fiduciary duties of the Board of
Directors of the Company as advised by outside counsel, neither the Company
nor any of its subsidiaries shall, directly or indirectly, take (nor shall the
Company authorize or permit its subsidiaries, officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to take) any action to (i) encourage, solicit or initiate the
submission of any Acquisition Proposal, (ii) enter into any agreement with
respect to any Acquisition Proposal or (iii) participate in any way in
discussions or negotiations with, or furnish any information to, any person in
connection with, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal. The Company will promptly communicate to Parent
any solicitation received by the Company and the terms of any proposal or
inquiry, including the identity of the person and its affiliates making the
same, that it may receive in respect of any such transaction, or of any such
information requested from it or of any such negotiations or discussions being
sought to be initiated with it. "Acquisition Proposal" shall mean any proposed
(A) merger, consolidation or similar transaction involving the Company, (B)
sale, lease or other disposition directly or indirectly by merger,
consolidation, share exchange or otherwise of assets of the Company or its
subsidiaries representing 30% or more of the consolidated assets of the
Company and its subsidiaries, (C) issue, sale, or other disposition of
(including by way of merger, consolidation, share exchange or any similar
transaction) securities (or options, rights or warrants to purchase, or
securities convertible into, such securities) representing 30% or more of the
voting power of the Company or (D) transaction in which any person shall
acquire beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act), or the right to acquire beneficial ownership or any "group" (as
such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of 15% or
more of the outstanding Company Common Stock.
Section 7.10 Dividend Adjustment. (a) Except in the circumstances described
in the next paragraph, prior to the Effective Date the Company and Parent may,
in lieu of their respective regular quarterly dividends covering the period
described in the next sentence, each declare a special dividend on Company
Common Stock and Parent Common Stock, respectively, to holders of record of
such shares as of the record date established therefor (which record date
shall be prior to the Effective Date) with a payment date which is the same as
the Effective Date. Such special dividend may be in an amount per share not
greater than the product of (A) a fraction, (i) the numerator of which equals
the number of days between the payment date with respect to the most recent
regular common stock dividend paid by the Company or Parent, as the case may
be, and the Effective Date and (ii) the denominator of which equals 91, and
(B) the amount of the regular quarterly cash
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dividend per share of Company Common Stock or Parent Common Stock most
recently paid by the Company or Parent, as the case may be, prior to the
Effective Date.
(b) If the Effective Date occurs after a regularly scheduled record date for
dividends on the Parent Common Stock and before the regularly scheduled record
date for dividends on Company Common Stock that next succeeds such Parent
record date, then the Company may declare a special dividend on the Company
Common Stock to holders of record of such shares as of the record date
established therefor (which record date shall be prior to the Effective Date)
with a payment date which is the same as the payment date for dividends on the
Parent Common Stock to which such Parent record date relates. Such special
dividend may be in an amount per share not greater than the product of (A) a
fraction, (i) the numerator of which equals the number of days between the
payment date with respect to the most recent regular common stock dividend
paid by the Company and such payment date for the Parent Common Stock and (ii)
the denominator of which equals 91, and (B) the amount of the regular
quarterly cash dividend per share of Company Common Stock most recently paid
by the Company prior to the Effective Date.
(c) This section shall be interpreted and, in circumstances where necessary,
appropriately modified so as to give effect to its intent, namely, that
dividends on the Company Common Stock and Parent Common Stock shall be paid in
such a manner as to result in the periods covered by such dividends, giving
effect to the Merger and anticipated dividend payment dates thereafter, being
synchronous.
Section 7.11 Takeover Provisions Inapplicable. The Company shall (a) take
all action (including, if required, redeeming all of the outstanding Company
Rights or amending or terminating the Company Rights Agreement) so that the
entering into of this Agreement nor the consummation of the transactions
contemplated hereby shall not and will not result in the grant of any rights
to any person under the Company Rights Agreement to purchase or receive
additional shares of capital stock of the Company or enable or require the
Company Rights to be exercised, distributed or triggered in any way and (b)
take all action as may be necessary to render Article IX of the Company's
Restated Certificate of Incorporation inapplicable to this Merger Agreement
and the transactions contemplated hereby.
ARTICLE VIII
Conditions Precedent
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Date of the following conditions:
(a) This Merger Agreement and the transactions contemplated hereby shall
have been approved and adopted by the requisite vote of the holders of (i)
the Company Common Stock, the Company Series B Preferred Stock and the
Company Series C Preferred Stock voting together as a class and (ii) the
Company Series C Preferred Stock voting separately as a class.
(b) The Parent Common Stock issuable in the Merger shall have been
authorized for listing on the NYSE upon official notice of issuance.
(c) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated and any authorization,
consent or approval required under any Antitrust Law shall have been
obtained or any waiting period applicable to the review of the transactions
contemplated hereby shall have expired or been terminated.
(d) The Registration Statement shall have become effective in accordance
with the provisions of the Securities Act. No stop order suspending the
effectiveness of the Registration Statement shall have been issued by the
Commission and remain in effect.
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(e) No preliminary or permanent injunction or other order by any court or
other judicial or administrative body of competent jurisdiction which
prohibits or prevents the consummation of the Merger shall have been issued
and remain in effect (each party agreeing to use its best efforts to have
any such injunction lifted).
(f) Parent and the Company shall have received letters from Price
Waterhouse LLP and Deloitte & Touche LLP, respectively, to the effect that
the Merger qualifies for "pooling of interests" accounting treatment if
consummated in accordance with this Merger Agreement.
Section 8.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Date of the additional following
conditions, unless waived by the Company:
(a) Parent and Sub shall have performed in all material respects their
agreements contained in this Merger Agreement required to be performed on
or prior to the Effective Date and the representations and warranties of
Parent and Sub contained in this Merger Agreement shall be true in all
material respects when made and on and as of the Effective Date as if made
on and as of such date, except (i) as contemplated or permitted by this
Merger Agreement, (ii) for representations and warranties which are by
their express provisions made as of a specific date or dates, which were or
will be true in all material respects at such time or times as stated
therein, and (iii) that if the Effective Date occurs after the nine month
anniversary of the date hereof pursuant to the second proviso of Section
9.1(b), then the representations and warranties need only be true as of the
nine month anniversary of the date of this Merger Agreement, and the
Company shall have received a certificate of the President or Chief
Executive Officer or a Vice President of Parent to that effect.
(b) The Company shall have received a favorable opinion of Baer Marks &
Upham LLP, based upon certain factual representations of the Company,
Parent and Sub reasonably requested by such counsel, dated the Effective
Date, to the effect that the Merger will constitute a "reorganization" for
federal income tax purposes within the meaning of Section 368(a) of the
Code.
(c) The consummation of the Merger and the other transactions
contemplated hereby shall not give rise to any Parent Right becoming
exercisable for any security or asset of any person.
Section 8.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Date of the additional
following conditions, unless waived by Parent:
(a) The Company shall have performed in all material respects its
agreements contained in this Merger Agreement required to be performed on
or prior to the Effective Date and the representations and warranties of
the Company contained in this Merger Agreement shall be true in all
material respects when made and on and as of the Effective Date as if made
on and as of such date, except (i) as contemplated or permitted by this
Merger Agreement, (ii) for representations and warranties which are by
their express provisions made as of a specific date or dates which were or
will be true in all material respects at such date or dates, and (iii) that
if the Effective Date occurs after the nine month anniversary of the date
hereof pursuant to the second proviso of Section 9.1(b), then the
representations and warranties need only be true as of the nine month
anniversary of the date of this Merger Agreement, and Parent and Sub shall
have received a certificate of the President or Chief Executive Officer or
a Vice President of the Company to that effect.
(b) Parent shall have received a letter of Deloitte & Touche LLP, the
Company's independent auditors, dated a date within two business days
before the date on which the Registration Statement shall become effective
and addressed to Parent, in form and substance reasonably satisfactory to
Parent and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
(c) Parent shall have received a favorable opinion of Wachtell, Lipton,
Rosen & Katz, based upon certain factual representations of the Company and
Parent reasonably requested by such counsel,
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to the effect that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code.
(d) [Reserved]
(e) Company shall have obtained all consents, appeals, releases or
authorizations from, and shall have made all filings and registrations
("Consents") to or with, any person, including but not limited to any
Governmental Entity necessary to be obtained or made in order to consummate
the transactions contemplated by this Agreement, unless the failure to
obtain such Consents would not, individually or in the aggregate, have a
Company Material Adverse Effect, except as contemplated by Section 8.3(f).
(f) Parent shall have received the written opinion of Baer Marks & Upham
LLP, dated the Effective Date, to the effect that execution of this Merger
Agreement did not, and that consummation of the Merger will not, violate
any provision of or give any rise to any termination right or to other
additional rights to any person under, the agreement set forth on Schedule
8.3(f) hereto, unless written consent by the other party thereto in form
and substance reasonably satisfactory to Parent is obtained by the Company
prior to the Effective Date.
ARTICLE IX
Termination, Amendment and Waiver
Section 9.1 Termination. This Merger Agreement may be terminated at any time
prior to the Effective Date, whether before or after approval by the
shareholders of the Company:
(a) by mutual consent of the Board of Directors of Parent and the Board
of Directors of the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated on or before the nine month anniversary of the date hereof,
provided, that the terminating party is not otherwise in material breach of
its representations, warranties or obligations under this Merger Agreement,
and provided, further, that if the conditions set forth in Section 8.1(c)
or Section 8.1(f) shall not have been satisfied prior to the nine month
anniversary of the date hereof, then the Company may not terminate the
Merger Agreement until the one year anniversary of the date hereof;
(c) by the Company if any of the conditions specified in Sections 8.1 and
8.2 have not been met or waived by the Company at such time as such
condition is no longer capable of satisfaction;
(d) by Parent if any of the conditions specified in Sections 8.1 and 8.3
have not been met or waived by Parent at such time as such condition is no
longer capable of satisfaction;
(e) by Parent if (i) the Company's Board of Directors shall have
withdrawn, modified in a manner adverse to Parent, or refrained from making
its recommendation concerning the Merger referred to in Section 3.5 hereof,
or shall have disclosed its intention to change such recommendation, or
(ii) the Company shall have entered into an agreement with a third party
(other than a customary confidentiality agreement) with respect to an
Acquisition Proposal;
(f) by the Company if, pursuant to Section 7.9, the Company shall have
entered into an agreement with respect to an Acquisition Proposal, provided
that prior to such termination the Company shall have paid to Parent the
Company Breakup Fee (as defined in Section 9.2); or
(g) by Parent if any requirements or conditions are imposed, or proposed
to be imposed, upon either Parent or the Company or any of their respective
affiliates by any Governmental Entity in connection with the authorization,
consent or approval of such Governmental Entity (or the expiration or
termination of any waiting period applicable to such Governmental Entity's
review of the transactions contemplated by this Merger Agreement) under any
Antitrust Law in connection with the consummation of
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the transactions contemplated hereby, or by any domestic or foreign court
or similar tribunal in any suit brought by a private party or Government
Entity challenging the transactions contemplated hereby as violative of any
Antitrust Law, which, in the reasonable opinion of Parent, would materially
restrict or limit the operations of Parent or the Company or any of their
respective affiliates or otherwise deprive Parent or any of its affiliates
of any material benefit of the ownership and control of its assets or
operations after the Effective Date. For purposes of this paragraph, the
term "Governmental Entity" shall not include any foreign governmental
entity other than those of Canada and the European Community.
Section 9.2 Effect of Termination. (a) In the event of termination of this
Merger Agreement by either Parent or the Company, as provided above, this
Merger Agreement shall forthwith become void and (except for the willful
breach of this Merger Agreement by any party hereto) there shall be no
liability on the part of either the Company, Parent or Sub or their respective
officers or directors; provided that Sections 9.2, 10.3 and 10.7 shall survive
the termination.
(b) The Company shall make payment to Parent (by wire transfer or cashiers
check) of a breakup fee in the amount of $40,000,000 (the "Company Breakup
Fee") in the event this Merger Agreement is terminated and at the time of such
termination Parent is not in material breach of any representation, warranty
or material covenant contained herein (i) by either party pursuant to Section
9.1(c) or 9.1(d) if the Company's shareholders shall not have approved and
adopted the Merger and this Merger Agreement and prior to the vote of the
Company's shareholders an Acquisition Proposal shall have been made and within
one year of such termination (x) the Company shall have entered into a
definitive agreement with a third party providing for the acquisition of the
Company or a majority of the Company's assets or voting securities by such
third party or the consolidation or merger of the Company pursuant to which
the Company's stockholders will hold less than a majority of the outstanding
voting securities of the resulting corporation immediately following
consummation of such transaction or (y) any third party shall have acquired
beneficial ownership of more than 20% of the outstanding voting securities of
the Company (the "Threshold Amount") other than an acquisition of securities
from the Company in capital raising transactions without the intention or
effect of constituting a Change in Control (as defined in the Credit
Agreement, dated as of February 22, 1995 between the Company and certain of
its subsidiaries and General Electric Capital Corporation), provided, however
that with respect to this clause (y) if a third party acquires beneficial
ownership of voting securities of the Company in excess of the Threshold
Amount without the approval of the Board of Directors of the Company and the
Company Rights are not redeemed, then the Company Breakup Fee will not be
payable unless and until a third party acquires in excess of 50% of the
outstanding voting securities of the Company or (ii) by Parent pursuant to
Section 9.1(e); or (iii) by the Company pursuant to Section 9.1(f).
(c) Parent shall make payment to the Company (by wire transfer or cashiers
check) in the amount of $15,000,000 (the "Parent Breakup Fee") in the event
this Merger Agreement is terminated by the Company or Parent under Section
9.1(b) or by Parent under Section 9.1(g), if, in either case, (i) all
conditions to the obligations of Parent and the Company specified in Article
VIII have been satisfied (other than the condition specified in Section 8.1(c)
or the condition specified in Section 8.1(f), but only, in the case of the
condition specified in Section 8.1(c), if the failure of such condition to be
satisfied is in respect of injunctions or orders issued under the Antitrust
Laws of the United States, and only, in the case of the condition specified in
Section 8.1(f), if the failure of such condition to be satisfied is not
related to any terms or provisions of the Company's benefit plans or
securities and not caused by any action taken by the Company), (ii) the
Company shall not be in material breach of any representation, warranty or
material covenant contained herein, and (iii) the Company shall have satisfied
its obligations pursuant to Section 3.5, Section 6.1(vi) (in the case of the
condition specified in Section 8.1(f)) and Section 7.7 (in the case of the
condition specified in Section 8.1(c)).
Section 9.3 Amendment. This Merger Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of
Directors, at any time before or after approval hereof by the shareholders of
the Company, but, after such approval, no amendment shall be made which
changes the ratios at which any class of capital stock of the Company is to be
converted into capital stock of Parent as provided in
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Section 3.1 or which in any way materially adversely affects the rights of
such shareholders, without the further approval of such shareholders. This
Merger Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.
Section 9.4 Waiver. At any time prior to the Effective Date, the parties
hereto, by or pursuant to action taken by their respective Boards of
Directors, may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
documents delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein provided, however, that no such
waiver shall materially adversely affect the rights the shareholders of the
Company and Parent. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE X
General Provisions
Section 10.1 Non-Survival of Representations, Warranties and Agreements. No
representations, warranties or agreements in this Merger Agreement shall
survive the Merger, except for the agreements contained in Sections 3.1, 3.2,
3.3, 3.4, 3.6, 3.7, the agreements referred to in Sections 7.5, 7.6, 7.7, 7.8,
10.1, 10.3 and 10.7 and in the last sentence of Section 7.3(b).
Section 10.2 Notices. All notices or other communications under this Merger
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by cable, telegram,
telex, telecopy or other standard form of telecommunications, or by registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:
If to the Company:
Tyco Toys, Inc.
6000 Midlantic Drive
Mt. Laurel, New Jersey 08054
Attention: R. Michael Kennedy, Jr., Esq.
General Counsel
Telecopy No.: (609) 273-2885
With a copy to:
Baer Marks & Upham LLP
805 Third Avenue
20th Floor
New York, New York 10022
Attention: Joel M. Handel, Esq.
Telecopy No.: (212) 702-5797
If to Parent or Sub:
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245-5012
Attention: Barnett Rosenberg, Esq.
General Counsel
Telecopy No.: (310) 252-2567
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With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
Telecopy No.: (212) 403-2000
or to such other address as any party may have furnished to the other parties
in writing in accordance with this Section.
Section 10.3 Fees and Expenses. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Merger Agreement and
the transactions contemplated by this Merger Agreement shall be paid by the
party incurring such expenses, except that the Parent and Company agree to
each pay 50% of all printing expenses incurred by the parties hereto.
Section 10.4 Publicity. So long as this Merger Agreement is in effect,
Parent, Sub and the Company agree to consult with each other in issuing any
press release or otherwise making any public statement with respect to the
transactions contemplated by this Merger Agreement, and none of them shall
issue any press release or make any public statement prior to such
consultation, except as may be required by law or by obligations pursuant to
any listing agreement with any national securities exchange. The commencement
of litigation relating to this Merger Agreement or the transactions
contemplated hereby or any proceedings in connection therewith shall not be
deemed a violation of this Section 10.4.
Section 10.5 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Merger
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Merger
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
Section 10.6 Interpretation. When a reference is made in this Merger
Agreement to subsidiaries of Parent or the Company, the word "subsidiaries"
means corporations more than 50% of whose outstanding voting securities are
directly or indirectly owned by Parent or the Company, as the case may be. The
headings contained in this Merger Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Merger
Agreement.
Section 10.7 Miscellaneous. This Merger Agreement (including the documents
and instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof (other than as provided in the Confidentiality Agreements, as the same
may be amended); (b) except as provided in the last sentence of Section
7.3(b), Sections 7.5 and 7.6, is not intended to confer upon any other person
any rights or remedies hereunder; (c) shall not be assigned by operation of
law or otherwise, except that Sub shall have the right to assign to Parent or
any direct wholly owned subsidiary of Parent any and all rights and
obligations of Sub under this Merger Agreement; and (d) shall be governed in
all respects, including validity, interpretation and effect, by the laws of
the State of Delaware (without giving effect to the provisions thereof
relating to conflicts of law). This Merger Agreement may be executed in two or
more counterparts which together shall constitute a single agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement to
be signed by their respective officers thereunder duly authorized all as of
the date first written above.
Mattel, Inc.
/s/ Ned Mansour
By___________________________________
Name: Ned Mansour
Title: President of Corporate
Operations
Truck Acquisition Corp.
/s/ Ned Mansour
By___________________________________
Name: Ned Mansour
Title: President
Tyco Toys, Inc.
/s/ Harry J. Pearce
By___________________________________
Name: Harry J. Pearce
Title: Vice Chairman
A-31
<PAGE>
ANNEX B
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated as of November 22,
1996 (the "Amendment Agreement"), is among Mattel, Inc., a Delaware
corporation ("Parent"), Truck Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and Tyco Toys, Inc., a Delaware
corporation (the "Company").
WHEREAS, the parties hereto have previously entered into that certain
Agreement and Plan of Merger, dated as of November 17, 1996 (the "Merger
Agreement"); and
WHEREAS, Section 9.3 of the Merger Agreement provides that the Merger
Agreement may be amended, pursuant to action of the respective Board of
Directors of each of the parties thereto, by an instrument in writing signed
by each of the parties thereto; and
WHEREAS, the Board of Directors of each of the parties to the Merger
Agreement has authorized the amendment of the Merger Agreement in the manner
and subject to the conditions contemplated hereby; and
WHEREAS, the parties hereto have agreed to amend the Merger Agreement in
certain respects as specified in this Amendment Agreement;
NOW, THEREFORE, in consideration of the premises and representations,
warranties, covenants and agreements set forth herein, the parties hereby
amend and supplement the Merger Agreement as follows:
Section 1. Defined Terms. Except as otherwise set forth herein, capitalized
terms used herein and not defined shall have the meaning provided in the
Merger Agreement.
Section 2. Effectiveness of Amendments. The parties hereto agree that the
Merger Agreement shall be amended in the manner provided for herein (the
"Amendments"), which Amendments shall be effective upon execution of this
Amendment Agreement (the "Amendment Effective Time").
Section 3. The Merger. Section 1.1 of the Merger Agreement is hereby amended
and restated in its entirety to provide as follows:
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, on the Effective Date (as defined below in Section 1.2), the
Company shall be merged into Parent and the separate existence of the
Company shall thereupon cease, and the name of Parent, as the surviving
corporation in the Merger (the "Surviving Corporation"), shall remain
"Mattel, Inc."
Section 4. The Surviving Corporation. Sections 2.1, 2.2 and 2.3 of the
Merger Agreement are hereby amended and restated in their entirety to provide
as follows:
Section 2.1 Certificate of Incorporation. The Certificate of
Incorporation of Parent shall be the Certificate of Incorporation of the
Surviving Corporation after the Effective Date, and thereafter may be
amended in accordance with its terms and as provided by law and this Merger
Agreement.
Section 2.2 By-Laws. The By-laws of Parent as in effect on the Effective
Date shall be the By-laws of the Surviving Corporation.
Section 2.3 Board of Directors; Officers. The directors and officers of
Parent immediately prior to the Effective Date shall be the directors and
officers of the Surviving Corporation until their respective successors are
duly elected and qualified.
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Section 5. Conversion of Shares. Paragraph (c) of Section 3.1 of the Merger
Agreement is hereby amended and restated in its entirety to provide as
follows:
(c) Each of the remaining outstanding shares of Series C Mandatorily
Convertible Redeemable Preferred Stock, par value $.10 per share, of the
Company (the "Company Series C Preferred Stock") issued and outstanding
immediately prior to the Effective Date shall be converted into a share of
Series C Mandatorily Convertible Redeemable Preferred Stock, $1.00 par
value, of Parent ("Parent Series C Preferred Stock"), with substantially
the same rights and preferences as correspond to the Company Series C
Preferred Stock as contemplated by Section III(E) of the Certificate of
Designations for the Company Series C Preferred Stock. Appropriate
alterations to reflect the transactions contemplated by this Agreement will
be made at the Effective Date to the depositary share agreement relating to
the Company Series C Preferred Stock.
Section 6. Conversion of Shares. Paragraph (f) of Section 3.1 of the Merger
Agreement is hereby amended and restated in its entirety to provide as
follows:
(f) Each issued and outstanding share of capital stock of Sub shall be
continue to be issued and outstanding and shall in all respects be
unaffected by the Merger.
Section 7. Issuance of Shares. Section 3.2 of the Merger Agreement is hereby
amended and restated in its entirety to provide as follows:
Section 3.2. Parent to Make Certificates Available. Prior to the
Effective Date, Parent shall select The First National Bank of Boston or
such other person or persons reasonably satisfactory to the Company to act
as Exchange Agent for the Merger (the "Exchange Agent"). As soon as
practicable after the Effective Date, Parent shall make available, and each
holder of Company Common Stock, Company Series B Preferred Stock, Company
Series C Preferred Stock, Company Stock Options or Company Restricted Stock
Units to be converted pursuant to Section 3.1 (each, a "Company Holder")
will be entitled to receive, upon surrender to the Exchange Agent of one or
more certificates representing such stock (or in the case of Company
Restricted Stock Units and Company Stock Options, the relevant agreement or
other evidence of right and interest in such Restricted Stock Units or
Company Stock Options) ("Certificates") for cancellation, certificates
representing the number of shares of Parent Common Stock, Parent Series B
Preferred Stock or Parent Series C Preferred Stock, as the case may be,
into which such shares or options are converted in the Merger and cash in
consideration of fractional shares as provided in Section 3.4. Such shares
of Parent Common Stock, Parent Series B Preferred Stock or Parent Series C
Preferred Stock issued in the Merger shall each be deemed to have been
issued at the Effective Date.
Section 8. Dividends; Transfer Taxes. Section 3.3 of the Merger Agreement is
hereby amended and restated in its entirety to provide as follows:
Section 3.3. Dividends; Transfer Taxes. No dividends or other
distributions that are declared or made on Parent Common Stock will be paid
to persons entitled to receive certificates representing Parent Common
Stock pursuant to this Merger Agreement until such persons surrender their
Certificates representing Company Common Stock, Company Stock Options or
Company Restricted Stock Units, as the case may be. Upon such surrender,
there shall be paid to the person in whose name the certificates
representing such Parent Common Stock shall be issued any dividends or
other distributions which shall have become payable with respect to such
Parent Common Stock in respect of a record date after the Effective Date.
In no event shall the person entitled to receive such dividends be entitled
to receive interest on such dividends. In the event that any certificates
for any shares of Parent Common Stock, Parent Series C Preferred Stock or
Parent Series B Preferred Stock, as the case may be, are to be issued in a
name other than that in which the Certificates representing shares of
Company Common Stock, Company Series B Preferred Stock, Company Series C
Preferred Stock, Company Stock Options or Company Restricted Stock Units,
as the case may be, surrendered in exchange therefor are registered, it
shall be a condition of such exchange that the person requesting such
exchange shall pay to the Exchange Agent any transfer or other taxes
required by reason of the issuance of certificates for such shares of
Parent Common Stock, Parent Series C Preferred Stock or
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Parent Series B Preferred Stock, as the case may be in a name other than
that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a Company Holder for
any shares of Parent Common Stock or dividends thereon or any shares of
Parent Series B Preferred Stock or Parent Series C Preferred Stock, as the
case may be, delivered to a public official pursuant to any applicable
escheat laws.
Section 9. No Fractional Shares. Section 3.4 of the Merger Agreement is
hereby amended and restated in its entirety to provide as follows:
Section 3.4. No Fractional Shares. No certificates or scrip representing
less than one full share of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates representing Company Common Stock,
Company Stock Options or Company Restricted Stock Units pursuant to Section
3.1(b), (g) or (h). In lieu of any such fractional share, each Company
Holder who would otherwise have been entitled to a fraction of a share of
Parent Common Stock upon surrender of Certificates for exchange pursuant to
Section 3.1(b), (g) or (h) shall be paid upon such surrender cash (without
interest) in an amount equal to such holder's proportionate interest in the
net proceeds from the sale or sales in the open market by the Exchange
Agent, on behalf of all such holders, of the aggregate fractional Parent
Common Stock issued pursuant to this Section 3.4. As soon as practicable
following the Effective Date, the Exchange Agent shall determine the excess
of (i) the number of full shares of Parent Common Stock delivered to the
Exchange Agent by Parent over (ii) the aggregate number of full shares of
Parent Common Stock to be distributed to holders of Company Common Stock,
Company Stock Options or Company Restricted Stock Units (such excess being
herein called the "Excess Shares"), and the Exchange Agent, as agent for
the former Company Holders, shall sell the Excess Shares at the prevailing
prices on the NYSE. The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of the NYSE
and shall be executed in round lots to the extent practicable. Parent shall
pay all commissions, transfer taxes and other out-of-pocket transaction
costs, including the expenses and compensation of the Exchange Agent,
incurred in connection with such sale of Excess Shares. Until the net
proceeds of such sale have been distributed to the former Company Holders,
the Exchange Agent will hold such proceeds in trust for such former
stockholders (the "Fractional Securities Fund"). As soon as practicable
after the determination of the amount of cash to be paid to former Company
Holders in lieu of any fractional interests, the Exchange Agent shall make
available in accordance with this Merger Agreement such amounts to such
former stockholders.
Section 10. Representations and Warranties of the Company. Section 5.4 of
the Merger Agreement is hereby amended and restated in its entirety to provide
as follows:
Section 5.4 Authority Relative to this Merger Agreement. The Company has
the corporate power to enter into this Merger Agreement, subject to the
requisite approval of this Merger Agreement by the holders of Company
Common Stock, Company Series B Preferred Stock and Company Series C
Preferred Stock voting together as a single class, and to carry out its
obligations hereunder. The execution and delivery of this Merger Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Company's Board of Directors. This Merger Agreement
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms except as enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of
the court before which any proceeding therefor may be brought. Except for
the requisite approval of the holders of Company Common Stock, Company
Series B Preferred Stock and Company Series C Preferred Stock voting
together as a class, no other corporate proceedings on the part of the
Company are necessary to authorize this Merger Agreement and the
transactions contemplated hereby. The Company is not subject to or
obligated under (i) any charter, by-law, indenture or other loan document
provision (other than as set forth in the Company Disclosure Schedule) or
(ii) any other contract, license, franchise, permit, order, decree,
concession, lease, instrument, judgment, statute, law, ordinance, rule or
regulation applicable to the
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Company or any of its subsidiaries or their respective properties or assets
which would be breached or violated, or under which there would be a
default (with or without notice or lapse of time, or both), or under which
there would arise a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit, by its executing and
carrying out this Merger Agreement, other than, in the case of clause (ii)
only, (A) any breaches, violations, defaults, terminations, cancellations,
accelerations or losses which, either singly or in the aggregate, will not
have a Company Material Adverse Effect or prevent the consummation of the
transactions contemplated hereby and (B) the laws and regulations referred
to in the next sentence. Except as referred to herein or, with respect to
the Merger or the transactions contemplated thereby, in connection, or in
compliance, with the provisions of the HSR Act, the Securities Act, the
Exchange Act, the Foreign Laws and the environmental, corporation,
securities or blue sky laws or regulations of the various states, no filing
or registration with, or authorization, consent or approval of, any public
body or authority is necessary for the consummation by the Company of the
Merger or the other transactions contemplated hereby, other than filings,
registrations, authorizations, consents or approvals the failure of which
to make or obtain would not have a Company Material Adverse Effect or
prevent the consummation of the transactions contemplated hereby and
thereby.
Section 11. Conditions Precedent. Paragraph (a) of Section 8.1 of the Merger
Agreement is hereby amended and restated in its entirety to provide as
follows:
(a) This Merger Agreement and the transactions contemplated hereby shall
have been approved and adopted by the requisite vote of the holders of the
Company Common Stock, the Company Series B Preferred Stock and the Company
Series C Preferred Stock voting together as a class.
Section 12. Conditions Precedent. Paragraph (b) of Section 8.1 of the Merger
Agreement is hereby amended and restated in its entirety to provide as
follows:
(b) The Parent Common Stock and the Parent Series C Preferred Stock
issuable in the Merger shall have been authorized for listing on the NYSE
upon official notice of issuance.
Section 13. Conditions Precedent. Paragraph (e) of Section 8.3 of the Merger
Agreement is hereby amended by inserting a period after the phrase "Company
Material Adverse Effect" and deleting the remainder of the such paragraph.
Section 14. Conditions Precedent. Paragraph (f) of Section 8.3 of the Merger
Agreement is hereby amended and restated in its entirety to provide as
follows:
(f) Notwithstanding paragraph 8.3(e), the Company shall not be required
to obtain a Consent with respect to the agreement set forth on Schedule
8.3(f).
Section 15. Conforming Changes. The parties hereto agree to make such other
conforming changes to the Merger Agreement as are necessary to make each
provision consistent with the amendments adopted in this Amendment Agreement.
Section 16. Representations and Warranties of this Amendment Agreement.
(a) Parent and Sub represent and warrant to the Company that, as to the
matters set forth in Sections 4.4 and 4A.3 of the Merger Agreement, such
matters, mutatis mutandis, are true and correct with respect to this Amendment
Agreement.
(b) The Company represents and warrants to Parent that, as to the matters
set forth in Sections 5.4 of the Merger Agreement, as amended hereby, such
matters, mutatis mutandis, are true and correct with respect to this Amendment
Agreement.
Section 17. Miscellaneous.
(a) This Amendment Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules
of conflict of laws.
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<PAGE>
(b) This Amendment Agreement may be executed by the parties hereto in
separate counterparts, each of which shall constitute one and the same
original.
(c) Except as provided in this Amendment Agreement, the Merger Agreement
remains in full force and effect without any amendment or alteration.
(d) The provisions of Section 10.2, 10.4 and 10.5 contained in the Merger
Agreement are hereby incorporated herein by reference and made applicable,
mutatis mutandis, to this Amendment Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement and
caused the same to be duly delivered on their behalf as of the day and year
first written above.
Mattel, Inc.
/s/ Ned Mansour
By___________________________________
Name: Ned Mansour
Title: President of Corporate
Operations
Truck Acquisition Corp.
/s/ Ned Mansour
By___________________________________
Name: Ned Mansour
Title: President
Tyco Toys, Inc.
/s/ Harry J. Pearce
By___________________________________
Name: Harry J. Pearce
Title: Vice Chairman
B-6
<PAGE>
ANNEX C
[LETTERHEAD OF ALLEN & COMPANY, INC.]
November 17, 1996
Members of the Board of Directors
Tyco Toys, Inc.
6000 Midlantic Drive
Mt. Laurel, New Jersey 08054
To the Members of the Board:
You have requested our opinion, as of this date, as to the fairness, from a
financial point of view, to the holders of the outstanding shares of (i)
Common Stock, par value $0.01 per share (the "Company Common Stock"), (ii)
Series B Preferred Stock par value $0.10 per share ("Company Series B
Preferred Stock"), and (iii) Series C Mandatorily Convertible Redeemable
Preferred Stock, par value $0.10 per share ("Company Series C Preferred
Stock"), of Tyco Toys, Inc., a Delaware corporation (the "Company"), of the
consideration to be received by such holders in connection with the Proposed
Transaction hereinafter referred to.
Pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), to be
entered into as of November 17, 1996, among the Company, Mattel, Inc., a
Delaware corporation (the "Purchaser"), and Truck Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of the Purchaser ("Merger
Sub"), the Company will enter into a business combination transaction pursuant
to which Merger Sub will be merged with and into the Company (the "Proposed
Transaction"). Pursuant to the terms of the Merger Agreement, among other
things, each outstanding share of the Company Common Stock will be converted
into the right to receive in Common Stock, par value $1.00 per share of the
Purchaser (the "Purchaser Common Stock"), the Exchange Ratio between Purchaser
Common Stock and Company Common Stock specified in the Merger Agreement which,
on the terms and conditions of, and subject to the limits set forth in the
Merger Agreement, would provide $12.50 of Purchaser Common Stock for each
share of the Company Common Stock. In addition, pursuant to the Merger
Agreement, each outstanding share of Company Series B Preferred Stock will be
converted into one share of Purchaser Series B Preferred Stock, par value
$1.00 per share, and each outstanding share of Company Series C Preferred
Stock will be converted into the right to receive a number of shares of
Purchaser Common Stock equal to the product of 20.4925 and the Exchange Ratio.
We understand that the terms of the Proposed Transaction, including the
intended qualification for treatment for accounting purposes as a pooling of
interests, and for tax purposes as a reorganization pursuant to Section 368 of
the Internal Revenue Code, have been structured, in part, to optimize the
accounting and tax treatment of the Proposed Transaction for the Company's
stockholders and the Purchaser.
We also understand that all approvals required for the consummation of the
Proposed Transaction have been or, prior to consummation of the Proposed
Transaction, will be obtained.
In arriving at our opinion, we have among other things:
(i) reviewed the terms and conditions of the proposed Merger Agreement;
(ii) analyzed publicly available historical business and financial
information relating to the Company and the Purchaser, as presented in
documents filed with the Securities and Exchange Commission;
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(iii) reviewed certain financial forecasts and other budgetary data
provided to us by the Company and the Purchaser relating to their
respective businesses for the fiscal year ending December 31, 1996,
together with the Company's estimates of the results of its operations for
fiscal years 1996, 1997 and 1998;
(iv) conducted discussions with certain members of the senior management
of the Company and the Purchaser with respect to the financial condition,
business, operations, strategic objectives and prospects of the Company and
the Purchaser, respectively;
(v) reviewed and analyzed public information, including certain stock
market data and financial information relating to selected public companies
which we deemed generally comparable to the Company and the Purchaser;
(vi) reviewed the trading history of the Company Common Stock, the
Company Series C Preferred Stock, and the Purchaser Common Stock, including
each company's respective performance in comparison to market indices and
to selected companies in comparable businesses, the market reaction to
selected public announcements regarding each company, and assessments of
the prospects of the Purchaser and the Company by third party professional
analysts;
(vii) reviewed public financial and transaction information relating to
merger and acquisition transactions we deemed to be comparable to the
Proposed Transaction;
(viii) analyzed the pro forma combination of the Purchaser and the
Company resulting from the Proposed Transaction; and
(ix) conducted such other financial analyses and investigations as we
deemed necessary or appropriate for the purposes of the opinion expressed
herein.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information respecting the Company and
the Purchaser and any other information provided to us, and we have not
assumed any responsibility for any independent verification of such
information or any independent valuation or appraisal of any of the assets of
the Company or the Purchaser. With respect to the financial forecasts referred
to above, we have assumed that they have been reasonably prepared on a basis
reflecting the best currently available judgments of management as to future
financial performance.
As you know, Allen & Company Incorporated ("Allen") was originally engaged
as the Company's financial advisor in 1993 in connection with the Company's
capital raising efforts, which lead to the private placement of the Company
Series B Preferred Stock, and has since such time and as requested by the
Company, provided financial advisory services to the Company. In the course of
providing such services to the Company, we have had conversations on behalf of
the Company with several parties regarding potential investments, either in
the Company or in securities to be issued by the Company, potential joint
ventures or other potential strategic relationships. Allen has been retained
by the Company in connection with the Proposed Transaction and will receive a
fee for its services pursuant to the letter agreement between the Company and
Allen, as amended.
In addition to our review and analysis of the specific information set forth
above, our opinion herein reflects and gives effect to our assessment of
general economic, monetary and market conditions existing as of the date
hereof as they may affect the business and prospects of the Company and the
Purchaser.
In connection with the preparation of this opinion, we have not been
authorized by the Company or its Board of Directors to solicit, nor have we
solicited, third party indications of interest for the acquisition of all or
any part of the Company.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its
entirety in any filing made by the Company or the Purchaser with the
Securities and Exchange Commission with
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respect to the Proposed Transaction and the transactions related thereto. In
addition, we express no recommendation as to how the stockholders of the
Company should vote at the stockholders' meeting to be held in connection with
the Proposed Transaction.
Based on and subject to the foregoing, we are of the opinion that, as of
this date, the consideration to be received by the holders of the Company
Common Stock, Company Series B Preferred Stock, and Company Series C Preferred
Stock pursuant to the Proposed Transaction is fair to such holders from a
financial point of view.
Very truly yours,
ALLEN & COMPANY INCORPORATED
By: /s/ Richard L. Field
------------------------
Richard L. Fields
Managing Director
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<PAGE>
[LETTERHEAD OF ALLEN & COMPANY, INC.]
November 22, 1996
Members of the Board of Directors
Tyco Toys, Inc.
6000 Midlantic Drive
Mt. Laurel, New Jersey 08054
To the Members of the Board:
Reference is made to our opinion, dated November 17, 1996 (the "Opinion"),
as to the fairness, from a financial point of view, to the holders of the
outstanding shares of Company Common Stock, Company Series B Preferred Stock,
and Company Series C Preferred Stock, of Tyco Toys, Inc., a Delaware
corporation (the "Company"), of the consideration to be received by such
holders in connection with the Proposed Transaction referred to in the
Opinion. Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Opinion.
Pursuant to that certain Amendment to Agreement and Plan of Merger, dated as
of the date hereof (the "Amendment Agreement"), among the Company, Mattel,
Inc., a Delaware corporation (the "Purchaser"), and Truck Acquisition Corp., a
Delaware corporation and wholly-owned subsidiary of the Purchaser, the terms
of the Proposed Transaction have been modified such that, among other things,
(i) in lieu of Merger Sub merging with and into the Company, in the Proposed
Transaction the Company will merge with and into the Purchaser, with the
separate corporate existence of the Company ceasing, and (ii) in lieu of the
conversion of Company Series C Preferred Stock provided for in the Merger
Agreement, in the Proposed Transaction each share of Company Series C
Preferred Stock will be converted into one share of a comparable Series C
Mandatorily Convertible Redeemable Preferred Stock of the Purchaser.
Based on and subject to the qualifications set forth in our Opinion, this
will confirm that we are of the opinion that the consideration to be received
by the holders of Company Common Stock, Company Series B Preferred Stock, and
Company Series C Preferred Stock in connection with the Proposed Transaction,
as modified with respect to the Company Series C Preferred Stock by the
Amendment Agreement, is fair to such holders from a financial point of view.
Very truly yours,
ALLEN & COMPANY INCORPORATED
By: /s/ Richard L. Fields
------------------------
Richard L. Fields
Managing Director
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Mattel, Inc. (the "Company" or the "Registrant") has adopted provisions in
its Restated Certificate of Incorporation (the "Certificate") which require
the Company to indemnify any and all persons whom it has the power to
indemnify pursuant to the Delaware General Corporation Law (the "DGCL")
against any and all expenses, judgments, fines, amounts paid in settlement,
and any other liabilities to the fullest extent permitted by the DGCL.
The Certificate also empowers the Registrant by action of its Board of
Directors to 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 Registrant would have the
power to indemnify any such individual under the DGCL.
In addition, the Registrant's By-laws require that 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
investigative, by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director, officer, employee or
agent of the Registrant or is or was serving at the request of the Registrant,
a director, officer, employee or agent of the Registrant 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
benefits 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 Registrant to the fullest extent
authorized by the DGCL, 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 Registrant to provide broader indemnification rights than said law
permitted the Registrant 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 for
claims by such persons for non-payment of entitled indemnification claims
against the Registrant, the Registrant shall indemnify such person seeking
indemnification in connection with a proceeding initiated by such person only
if such proceeding was authorized by the Registrant's Board of Directors. The
By-laws specify that the right to indemnification so provided is a contract
right, set forth certain procedural and evidentiary standards applicable to
the enforcement of a claim under the By-laws, entitle the persons to be
indemnified to be reimbursed for the expenses of prosecuting any such claim
against the Registrant and entitle them to have all expenses incurred in
advance of the final disposition of a proceeding paid by the Registrant. Such
provisions, however, are intended to be in furtherance and not in limitation
of the general right to indemnification provided in the By-laws.
The Company has entered into indemnity agreements (the "Indemnity
Agreements") with each director of the Company, including directors who are
also officers and employees of the Company, and certain senior officers of the
Company. The Indemnity Agreements provide that the Company will pay any costs
which an indemnitee actually and reasonably incurs because of claims made
against him or her by reason of the fact that he or she is or was a director
or officer of the Company. The payments to be made under the Indemnity
Agreements include, but are not limited to, expenses of investigation,
judicial or administrative proceedings or appeals, damages, judgments, fines,
amounts paid in settlement, and attorneys' fees and disbursements, except the
Company is not obligated to make any payment under the Indemnity Agreements
which the Company is prohibited by law from paying as indemnity, or where (a)
indemnification is provided to an indemnitee under an insurance policy, except
for amounts in excess of insurance coverage, (b) the claim is one for which an
indemnitee is otherwise indemnified by the Company, (c) final determination is
rendered in a claim based upon
II-1
<PAGE>
the indemnitee obtaining a personal profit or advantage to which he or she is
not legally entitled, (d) final determination is rendered on a claim for an
accounting of profits made in connection with a violation of Section 16(b) of
the Securities Exchange Act of 1934 (the "Exchange Act"), or similar state or
common law provisions, (e) the indemnitee was adjudged to be deliberately
dishonest, or (f) (with respect to a director) liability arises out of a
breach of certain of his or her fiduciary duties.
The directors and officers of the Company and its subsidiaries are insured
under certain insurance policies against claims made during the period of the
policies against liabilities arising out of claims for certain acts in their
capacities as directors and officers of the Company and its subsidiaries.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following is a list of exhibits to this registration
statement:
<TABLE>
<C> <S>
2.1 --Agreement and Plan of Merger, dated as of November 17, 1996, by and
among Registrant, Truck Acquisition Corp. ("Sub") and Tyco Toys, Inc.
("Tyco") (included in Part I hereof as Annex A to the Proxy
Statement/Prospectus)
2.2 --Amendment to Agreement and Plan of Merger, dated as of November 22,
1996, by and among Registrant, Sub and Tyco (included in Part I hereof
as Annex B to the Proxy Statement/Prospectus)
3.1 --Restated Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.0 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993)
3.2 --By-laws of the Registrant, as amended to date (incorporated by
reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992)
4.1 --Form of Certificate of Designations, Preferences, Rights and
Limitations relating to the Series C Mandatorily Convertible Redeemable
Preferred Stock
4.2 --Form of Deposit Agreement relating to Series C Mandatorily Convertible
Redeemable Preferred Stock
4.3 --Form of Depositary Receipt evidencing ownership of depositary shares
each representing one twenty-fifth of a share of Series C Mandatorily
Convertible Redeemable Preferred Stock
4.4 --Rights Agreement, dated as of February 7, 1992, between Registrant and
The First National Bank of Boston, as Rights Agent (incorporated by
reference to Exhibit 1 to Registrant's Registration Statement on Form
8-A, dated February 12, 1992)
(The Registrant has not filed certain long-term debt instruments under
which the principal amount of securities authorized to be issued does
not exceed 10% of the total assets of the Company. Copies of such
agreements will be provided to the Securities and Exchange Commission
upon request.)
5 --Opinion of Robert Normile as to the legality of the securities being
issued
8.1 --Opinion of Baer Marks & Upham LLP as to federal income tax matters
8.2 --Opinion of Wachtell, Lipton, Rosen & Katz as to federal income tax
matters
12 --Computation of Consolidated Ratios of Earnings to Fixed Charges
23.1 --Consent of Price Waterhouse LLP
23.2 --Consent of Deloitte & Touche LLP
23.3 --Consent of Allen & Company Incorporated
23.4 --Consent of Robert Normile (included in Exhibit 5 hereof)
23.5 --Consent of Baer Marks & Upham (included in Exhibit 8.1 hereof)
23.6 --Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.2
hereof)
23.7 --Consent of Davis Polk & Wardwell
23.8 --Consent of Ernst & Young LLP
24 --Powers of Attorney (included on signature pages to this Registration
Statement)
99.1 --Form of Proxy
</TABLE>
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
The Registrant undertakes that every prospectus: (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions referred to in Item 20 of this
registration statement, or otherwise, the registrant has been advised that in
the opinion of the Securities and
II-3
<PAGE>
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF EL SEGUNDO, STATE OF
CALIFORNIA, ON FEBRUARY 14, 1997.
Mattel, Inc.
/s/ Francesca Luzuriaga
By:
----------------------------------
Name: Francesca Luzuriaga
Title: Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
WE, THE UNDERSIGNED DIRECTORS AND OFFICERS OF MATTEL, INC., DO HEREBY
SEVERALLY CONSTITUTE AND APPOINT JILL E. BARAD, NED MANSOUR, ROBERT NORMILE,
BARNETT ROSENBERG, LELAND P. SMITH 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 COMPANY TO COMPLY WITH THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY RULES, REGULATIONS AND REQUIREMENTS OF THE SECURITIES AND
EXCHANGE COMMISSION, IN CONNECTION WITH THIS REGISTRATION STATEMENT ON FORM S-
4, 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 (INCLUDING POST-EFFECTIVE 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 ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED.
SIGNATURE TITLE DATE
/s/ Jill E. Barad President and Chief February 14,
- ------------------------------------- Executive Officer 1997
JILL E. BARAD
/s/ Francesca Luzuriaga Executive Vice February 14,
- ------------------------------------- President and Chief 1997
FRANCESCA LUZURIAGA Financial Officer
/s/ Kevin M. Farr Senior Vice February 14,
- ------------------------------------- President and 1997
KEVIN M. FARR Controller (Chief
Accounting Officer)
Chairman of the
- ------------------------------------- Board
JOHN W. AMERMAN
/s/ Harold Brown Director February 14,
- ------------------------------------- 1997
HAROLD BROWN
/s/ James A. Eskridge Director February 14,
- ------------------------------------- 1997
JAMES A. ESKRIDGE
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Tully M. Friedman Director February 14,
- ------------------------------------- 1997
TULLY M. FRIEDMAN
/s/ Ronald M. Loeb Director February 14,
- ------------------------------------- 1997
RONALD M. LOEB
/s/ Edward H. Malone Director February 14,
- ------------------------------------- 1997
EDWARD H. MALONE
/s/ Ned Mansour Director and February 14,
- ------------------------------------- President, 1997
NED MANSOUR Corporate
Operations
/s/ Edward N. Ney Director February 14,
- ------------------------------------- 1997
EDWARD N. NEY
/s/ William D. Rollnick Director February 14,
- ------------------------------------- 1997
WILLIAM D. ROLLNICK
/s/ Christopher A. Sinclair Director February 14,
- ------------------------------------- 1997
CHRISTOPHER A. SINCLAIR
Director and
- ------------------------------------- President Mattel
BRUCE L. STEIN Worldwide
/s/ John L. Vogelstein Director February 14,
- ------------------------------------- 1997
JOHN L. VOGELSTEIN
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DOCUMENT DESCRIPTION PAGE NO.
----------- -------------------- ----------
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of November
17, 1996, by and among Registrant, Truck Acquisition
Corp. ("Sub") and Tyco Toys, Inc. ("Tyco") (included
in Part I hereof as Annex A to the Proxy
Statement/Prospectus)...............................
2.2 Amendment to Agreement and Plan of Merger, dated as
of November 22, 1996, by and among Registrant, Sub
and Tyco (included in Part I hereof as Annex B to
the Proxy Statement/Prospectus).....................
3.1 Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.0
to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993)...................
3.2 By-laws of the Registrant, as amended to date
(incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992)............................
4.1 Form of Certificate of Designations, Preferences,
Rights and Limitations relating to the Series C
Mandatorily Convertible Redeemable Preferred Stock..
4.2 Form of Deposit Agreement relating to Series C
Mandatorily Convertible Redeemable Preferred Stock..
4.3 Form of Depositary Receipt evidencing ownership of
depositary shares each representing one twenty-fifth
of a share of Series C Mandatorily Convertible
Redeemable Preferred Stock..........................
4.4 Rights Agreement, dated as of February 7, 1992,
between Registrant and The First National Bank of
Boston, as Rights Agent (incorporated by reference
to Exhibit 1 to Registrant's Registration Statement
on Form 8-A, dated February 12, 1992)
5 Opinion of Robert Normile as to the legality of the
securities being issued.............................
8.1 Opinion of Baer Marks & Upham LLP as to federal
income tax matters..................................
8.2 Opinion of Wachtell, Lipton, Rosen & Katz as to
federal income tax matters..........................
12 Computation of Consolidated Ratios of Earnings to
Fixed Charges.......................................
23.1 Consent of Price Waterhouse LLP......................
23.2 Consent of Deloitte & Touche LLP.....................
23.3 Consent of Allen & Company Incorporated..............
23.4 Consent of Robert Normile (included in Exhibit 5
hereof).............................................
23.5 Consent of Baer Marks & Upham (included in Exhibit
8.1 hereof).........................................
23.6 Consent of Wachtell, Lipton, Rosen & Katz (included
in Exhibit 8.2 hereof)..............................
23.7 Consent of Davis Polk & Wardwell.....................
23.8 Consent of Ernst & Young LLP.........................
24 Powers of Attorney (included on signature pages to
this Registration Statement)........................
99.1 Form of Proxy........................................
</TABLE>
<PAGE>
EXHIBIT 4.1
FORM OF
CERTIFICATE OF DESIGNATIONS
PREFERENCES, RIGHTS AND LIMITATIONS OF
SERIES C MANDATORILY CONVERTIBLE
REDEEMABLE PREFERRED STOCK
OF
MATTEL, INC.
---------------
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
The undersigned, _________________, ___________ of Mattel, Inc., a
Delaware corporation (the "Corporation"), DOES HEREBY CERTIFY that the following
resolution has been duly adopted by the Directors of the Corporation:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Directors of the Corporation (the "Directors") by
the provisions of the Restated Certificate of Incorporation of
the Corporation (the "Certificate of Incorporation"), there
hereby is created, out of the 3,000,000 shares of Preferred Stock
of the Corporation authorized in Article Fourth of the Restated
Certificate of Incorporation (the "Preferred Stock"), a series of
Preferred Stock of the Corporation consisting of 772,800 shares,
which series shall have the following voting powers,
designations, preferences and relative, participating, optional
and other rights, and the following qualifications, limitations
and restrictions (in addition to the powers, designations,
preferences and relative, participating optional and other
rights, and the qualifications, limitations and restrictions, set
forth in the Restated Certificate of Incorporation which are
applicable to the Preferred Stock):
SECTION I. DESIGNATION AND SIZE OF ISSUE; RANKING. A. The
designation of the series of preferred stock shall be "Series C Mandatorily
Convertible Redeemable Preferred Stock" (the "Series C Preferred Stock") and the
number of shares constituting the Series C Preferred Stock shall be
_____________ shares.
<PAGE>
B. Any share of Series C Preferred Stock which at any time has been
redeemed for, or converted into, shares of Common Stock, par value $1.00 per
share, of the Corporation (the "Common Stock") or otherwise reacquired by the
Corporation shall, after such redemption, conversion or other acquisition,
resume the status of authorized and unissued shares of preferred stock, par
value $1.00 per share, of the Corporation (the "Preferred Stock"), without
designation as to series until such shares are once more designated as part of a
particular series by the Board of Directors.
C. The shares of Series C Preferred Stock shall rank on a parity,
both as to payment of dividends and distribution of assets upon liquidation,
with the Corporation's Series B Voting Convertible Exchangeable Preferred Stock
(the "Series B Preferred") and any future Preferred Stock issued by the
Corporation after the date of this Certificate of Designations that by its terms
ranks pari passu with the Series C Preferred Stock.
SECTION II. DIVIDENDS. A. The holders of record of the shares of
Series C Preferred Stock shall be entitled to receive, when and as declared by
the Board of Directors out of funds legally available therefor, cash dividends
("Dividends") from the date of the issuance of the shares of Series C Preferred
Stock accruing at the rate per share of $10.3125 per annum or $2.5781 per
quarter, for each share of Series C Preferred Stock, payable quarterly in
arrears, on each January 1; April 1; July 1 and October 1 (each a "Dividend
Payment Date") or, if any such date is not a business day (as defined herein),
the Dividend due on such Dividend Payment Date shall be paid on the next
succeeding business day; provided, however, that, with respect to any dividend
-------- -------
period during which a redemption occurs, the Corporation may, at its option,
declare accrued Dividends to, and pay such Dividends on, the date fixed for
redemption, in which case such Dividends shall be payable in cash to the holders
of the shares of Series C Preferred Stock as of the record date for such
dividend payment and shall not be included in the calculation of the related
Call Price (as defined herein). The first dividend shall be paid on the first
Dividend Payment Date subsequent to the issuance of the Series C Preferred Stock
in connection with the merger of Tyco Toys, Inc. with and into the Company.
Dividends on shares of Series C Preferred Stock shall be cumulative and shall
accumulate from the date of original issuance of the Series C Preferred Stock.
Dividends on shares of Series C Preferred Stock shall cease to accrue on and
after the Mandatory Conversion Date (as defined herein) or on and after the date
of the earlier conversion or redemption of the Series C Preferred
-2-
<PAGE>
Stock, as the case may be. Dividends shall be payable to holders of record as
they appear on the stock register of the Corporation on such record dates, not
less than 15 nor more than 60 days preceding the payment date thereof, as shall
be fixed by the Board of Directors. Dividends payable on shares of Series C
Preferred Stock for any period less than a full quarterly dividend period (or,
in the case of the first Dividend, from the date of initial issuance of the
shares of Series C Preferred Stock to but excluding the first Dividend Payment
Date) shall be computed on the basis of a 360-day year of twelve 30-day month
and the actual number of days elapsed in any period less than one month.
Dividends shall accrue on a daily basis whether or not there are funds of the
Corporation legally available for the payment of such dividends and whether or
not such Dividends are declared. Accrued but unpaid Dividends shall cumulate as
of the Dividend Payment Date on which they first become payable, but no interest
shall accrue on accumulated but unpaid Dividends.
B. As long as shares of Series C Preferred Stock are outstanding, no
dividends (other than dividends payable in shares of, or warrants, rights or
options exercisable for or convertible into shares of Common Stock or any other
capital stock of the Corporation ranking junior to the shares of Series C
Preferred Stock as to the payment of dividends and the distribution of assets
upon liquidation (collectively, the "Junior Stock") and cash in lieu of
fractional shares in connection with any such dividend) shall be paid or
declared in cash or otherwise, nor shall any other distribution be made (other
than a distribution payable to Junior Stock and cash in lieu of fractional
shares in connection with any such distribution), on any Junior Stock unless (i)
full dividends on Preferred Stock (including the shares of Series C Preferred
Stock) that does not constitute Junior Stock (such Preferred Stock being "Parity
Preferred Stock") have been paid, or declared and set aside for payment, for all
dividend periods terminating at or before the date of such Junior Stock dividend
or distribution payment to the extent such dividends are cumulative; (ii)
dividends in full for the current quarterly dividend period have been paid, or
declared and set aside for payment, on all Parity Preferred Stock to the extent
such dividends are cumulative; (iii) the Corporation has paid or set aside all
amounts, if any, then or theretofore required to be paid or set aside for all
purchase, retirement, and sinking funds, if any, for any Parity Preferred Stock;
and (iv) the Corporation is not in default on any of its obligations to redeem
any Parity Preferred Stock.
C. As long as any shares of Series C Preferred Stock are outstanding,
no shares of any Junior Stock may be purchased, redeemed or otherwise acquired
by the Corporation or
-3-
<PAGE>
any, of its subsidiaries (except in connection with a reclassification or
exchange of any Junior Stock through the issuance of other Junior Stock (and
cash in lieu of fractional shares in connection therewith) or the purchase,
redemption or other acquisition of any Junior Stock with any Junior Stock (and
cash in lieu of fractional shares in connection therewith)) nor may any funds be
set aside or made available for any sinking fund for the purchase or redemption
of any Junior Stock unless: (i) full dividends on Parity Preferred Stock have
been paid, or declared and set aside for payment, for all dividend periods
terminating at or before the date of such purchase, redemption or other
acquisition to the extent such dividends are cumulative; (ii) dividends in full
for the current quarterly dividend period have been paid, or declared and set
aside for payment, on all Parity Preferred Stock to the extent such dividends
are cumulative; (iii) the Corporation has paid or set aside all amounts, of any,
then or theretofore required to be paid or set aside for all purchase,
retirement, and sinking funds, if any, for any Parity Preferred Stock; and (iv)
the Corporation is not in default on any of its obligations to redeem any Parity
Preferred Stock.
D. As long as any shares of Series C Preferred Stock are outstanding,
dividends or other distributions may not be declared or paid on any Parity
Preferred Stock (other than dividends or other distributions payable in Junior
Stock and cash in lieu of fractional shares in connection therewith), and the
Corporation may not purchase, redeem or otherwise acquire any Parity Preferred
Stock (except with any Junior Stock and cash in lieu of fractional shares in
connection therewith), unless either: (i) (a) full dividends on Parity
Preferred Stock have been paid, or declared and set aside for payment, for all
dividend periods terminating at or before the date of such Parity Preferred
Stock dividend, distribution, purchase redemption or other acquisition payment
to the extent such dividends are cumulative; (b) dividends in full for the
current quarterly dividend period have been paid, or declared and set aside for
payment, on all Parity Preferred Stock to the extent such dividends are
cumulative; (c) the Corporation has paid or set aside all amounts, if any, then
or theretofore required to be paid or set aside for all purchase, retirement,
and sinking funds, if any, for any Parity Preferred Stock; and (d) the
Corporation is not in default on any of its obligations to redeem any Parity
Preferred Stock; or (ii) with respect to the payment of dividends only, any such
dividends shall be declared and paid pro rata so that the amounts of any
dividends declared and paid per share of Series C Preferred Stock and each other
share of Parity Preferred Stock shall in all cases bear to each other the same
ratio that accrued dividends (including any accumulation with respect to unpaid
dividends for prior dividend periods, if
-4-
<PAGE>
such dividends are cumulative) per share of Series C Preferred Stock and such
other shares of Parity Preferred Stock bear to each other.
SECTION III. CONVERSION OR REDEMPTION. A. Unless previously either
redeemed by the Corporation or converted at the option of the holder in
accordance with the provisions of Section III(C), on July 1, 2000 (the
"Mandatory Conversion Date") each outstanding share of Series C Preferred Stock
shall mandatorily convert (the "Mandatory Conversion") into (i) shares of
authorized Common Stock at the Mandatory Conversion Rate (as defined herein) in
effect on the Mandatory Conversion Date and (ii) the right to receive cash in an
amount equal to all accrued and unpaid dividends on such share of Series C
Preferred Stock (other than previously declared dividends payable to a holder of
record as of a prior date) to but excluding the Mandatory Conversion Date,
whether or not declared, out of funds legally available for the payment of
dividends, subject to the right of the Corporation to redeem the shares of
Series C Preferred Stock on or after July 1, 1999 (the "First Call Date") and
before the Mandatory Conversion Date and the conversion of the shares of Series
C Preferred Stock at the option of the holder at any time before the Mandatory
Conversion Date. The "Mandatory Conversion Rate" shall initially be [the
product of 27.775 and the Exchange Ratio] shares of Common Stock for each share
of Series C Preferred Stock and shall be subject to adjustment as set forth in
Sections III(D) and III(E). Shares of Series C Preferred Stock shall cease to
be outstanding on the Mandatory Conversion Date. The Corporation shall make
such arrangements as it deems appropriate for the issuance of certificates
representing shares of Common Stock and for the payment of cash in respect of
such accrued and unpaid dividends, if any, or cash in lieu of fractional shares,
if any, in exchange for and contingent upon surrender of certificates
representing the shares of Series C Preferred Stock, and the Corporation may
defer the payment of dividends on such shares of Common Stock and the voting
thereof until, and make such payment and voting contingent upon, the surrender
of certificates representing the shares of Series C Preferred Stock; provided,
--------
that the Corporation shall give the holders of the shares of Series C Preferred
Stock such notice of any such actions as the Corporation deems appropriate and
upon surrender such holders shall be entitled to receive such dividends declared
and paid, if any, on such shares of Common Stock subsequent to the Mandatory
Conversion Date.
B. (i) Shares of Series C Preferred Stock are not redeemable by the
Corporation before the First Call Date. At any time and from time to time on or
after that date until
-5-
<PAGE>
immediately before the Mandatory Conversion Date, the Corporation shall have the
right to redeem, in whole or in part, the outstanding shares of Series C
Preferred Stock (subject to the notice provisions set forth in Section
III(B)(iii)). Upon any such redemption, the Corporation shall deliver to each
holder thereof, in exchange for each such share of Series C Preferred Stock
subject to redemption, the greater of:
(a) the number of shares of Company Common Stock equal to the quotient of
(1) the applicable Call Price (as defined below) in effect on the
redemption date, divided by (b) the Current Market Price of the Mattel
Common Stock, determined as of the trading day immediately preceding the
Notice Date (as defined below); or
(b) a number of shares of Company Common Stock equal to [the product of
20.4925 and the Exchange Ratio] (the "Optional Rate").
Dividends on the shares of Series C Preferred Stock shall cease to accrue on and
after the date fixed for their redemption.
The "Call Price" of each share of Series C Preferred Stock shall be
the sum of (x) $127.575 on and after the First Call Date, to and including
September 30, 1999; $126.925 on and after October 1, 1999, to and including
December 1, 1999; $126.30 on and after January 1, 2000, to and including March
31, 2000; $126.65 on and after April 1, 2000, to and including May 31, 2000; and
$125.000 on and after June 1, 2000, to and including June 30, 2000; and (y) all
accrued and unpaid Dividends thereon to but not including the date fixed for
redemption (other than previously declared Dividends payable to a holder of
record as of a prior date). If fewer than all of the outstanding shares of
Series C Preferred Stock are to be called for redemption, the shares of Series C
Preferred Stock to be called for redemption shall be selected by the Corporation
by lot or on a pro rata basis (as nearly as may be) from the outstanding shares
of Series C Preferred Stock not previously called for redemption or by any other
method determined by the Board of Directors in its sole discretion to be
equitable.
(ii) The term "Current Market Price" per share of the Common Stock on
any date of determination means the lesser of (x) the average of the Closing
Prices (as defined herein) of the Common Stock for the 15 consecutive Trading
Days ending on and including such date of determination, or (y) the Closing
Price of the Common Stock on such date of determination; provided, however, that
-------- -------
with respect to any redemption of shares of Series C Preferred Stock, if any
event resulting in an adjustment of the Mandatory Conversion Rate occurs during
the
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<PAGE>
period beginning on the first day of such 15-day period and ending on the
applicable redemption date, the Current Market Price as determined pursuant to
the foregoing shall be appropriately adjusted to reflect the occurrence of such
event.
(iii) The Corporation shall provide notice of any redemption of the
shares of Series C Preferred Stock to holders of record of the shares of Series
C Preferred Stock to be called for redemption not less than 15 nor more than 60
days before the date fixed for redemption. Any such notice shall be provided by
mail, sent to the holders of record of the shares of Series C Preferred Stock to
be called at each such holder's address as it appears on the stock register of
the Corporation, first class postage prepaid; provided, however, that failure to
-------- -------
give such notice or any defect therein shall not affect the validity of the
proceeding for redemption of any shares of Series C Preferred Stock to be
redeemed except as to the holder to whom the Corporation has failed to give such
notice or whose notice was defective. A public announcement of any call for
redemption shall be made by the Corporation before, or at the time of, the
mailing of such notice of redemption. The term "Notice Date" with respect to
any notice given by the Corporation in connection with a redemption of the
shares of Series C Preferred Stock means the date on which first occurs either
the public announcement of such redemption or the commencement of mailing of the
notice to the holders of shares of Series C Preferred Stock, in each case
pursuant to this Section III(B)(iii).
Each such notice shall state, as appropriate, the following and may
contain such other information as the Corporation deems advisable:
(a) the redemption date;
(b) that all outstanding shares of Series C Preferred Stock are
to be redeemed or, in the case of a redemption of fewer than all
outstanding shares of Series C Preferred Stock, the number of such
shares held by such holder to be redeemed;
(c) the Call Price, the number of shares of Common Stock
deliverable upon the redemption of each share of Series C Preferred
Stock to be redeemed and the Current Market Price used to calculate
much number of shares of Common Stock;
(d) the place or places where certificates for shares of Series
C Preferred Stock are to be surrendered for redemption; and
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<PAGE>
(e) that dividends on the shares of Series C Preferred Stock to
be redeemed shall cease to accrue on and after such redemption date
(except as otherwise provided herein).
(iv) The Corporation's obligation to deliver shares of Common Stock
and provide funds (in lieu of fractional share amounts) upon redemption in
accordance with this Section III(B) shall be deemed fulfilled if, on or before a
redemption date, the Corporation shall deposit with a bank or trust company, or
an affiliate of a bank or trust company, having an office or agency in New York,
New York and having (or such affiliate having) a combined capital and surplus of
at least $50,000,000 according to its last payable statement of condition, or
shall set aside or make other reasonable provision for the issuance of, such
number of shares of Common Stock as are required to be delivered by the
Corporation pursuant to this Section III(B) upon the occurrence of the related
redemption of shares of Series C Preferred Stock and for the payment of cash in
lieu of the issuance of fractional share amounts, in trust for the account of
the holders of such shares of Series C Preferred Stock to be redeemed (and so as
to be and continue to be available therefor), with irrevocable instructions and
authority to such bank or trust company that such shares and funds be delivered
upon redemption of the shares of Series C Preferred Stock so called for
redemption. Any interest accrued on such funds shall be paid to the Corporation
from time to time. Any shares of Common Stock or funds so deposited and
unclaimed at the end of two years from such redemption date shall be repaid and
released to the Corporation, after which the holder or holders of such shares of
Series C Preferred Stock so called for redemption shall look only to the
Corporation for delivery of shares of Common Stock and the payment of any other
funds due in connection with the redemption of the shares of Series C Preferred
Stock.
(v) Each holder of shares of Series C Preferred Stock called for
redemption must surrender the certificates evidencing such shares (properly
endorsed or assigned for transfer if the Board of Directors shall so require and
the notice shall so state) to the Corporation at the place designated in the
notice of such redemption and shall thereupon be entitled to receive
certificates evidencing shares of Common Stock and to receive any funds payable
pursuant to this Section III(B) following such surrender and following the date
of such redemption. In case fewer than all the shares represented by any such
surrendered certificate are called for redemption, a new certificate shall be
issued at the expense of the Corporation representing the unredeemed shares. If
such notice of redemption shall have been given, and if on the date fixed for
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<PAGE>
redemption shares of Common Stock and funds necessary for the redemption shall
have been irrevocably either set aside by the Corporation separate and apart
from its other funds or assets in trust for the account of the holders of the
shares to be redeemed (and so as to be and continue to be available therefor) or
deposited with a bank or trust company or an affiliate thereof as provided
herein or the Corporation shall have made other reasonable provision therefor,
then, notwithstanding that the certificates evidencing any shares of Series C
Preferred Stock so called for redemption shall not have been surrendered, the
shares represented thereby so called for redemption shall be deemed no longer
outstanding and Dividends with respect to the shares so called for redemption
and all rights with respect to the shares so called for redemption shall
forthwith on and after such date cease and terminate (unless the Corporation
defaults on the payment of the redemption price), except for (a) the rights of
the holders to receive the shares of Common Stock and funds, if any, payable
pursuant to the Section III(B), without interest, upon surrender of their
certificates therefor and (b) the right of the holders, pursuant to Section
III(C), to convert the shares of Series C Preferred Stock called for redemption
until immediately before the close of business on any redemption date; provided,
--------
however, that holders of shares of Series C Preferred Stock at the close of
- -------
business on a record date for any payment of Dividends shall be entitled to
receive the Dividend payable on such shares on the corresponding Dividend
Payment Date notwithstanding the redemption of such shares following such record
date and before the Dividend Payment Date. Holders of shares of Series C
Preferred Stock that are redeemed shall not be entitled to receive dividends
declared and paid on the shares of Common Stock payable therefor pursuant to
this Section III(B), and such shares of Common Stock shall not be entitled to
vote, until such shares of Common Stock are issued upon the surrender of the
certificates representing such shares of Series C Preferred Stock and upon such
surrender such holders shall be entitled to receive such dividends declared and
paid on such shares of Common Stock subsequent to such redemption date.
C. Shares of Series C Preferred Stock are convertible, in whole or in
part, at the option of the holder thereof ("Optional Conversion"), at any time
before the Mandatory Conversion Date, unless previously redeemed, into shares of
Common Stock at the Optional Rate (a rate of [the product of 20.4925 and the
Exchange Ratio] shares of Common Stock for each share of Series C Preferred
Stock), subject to adjustment as set forth below. The right of Optional
Conversion of shares of Series C Preferred Stock called for redemption shall
terminate immediately before the close of business on any redemption date with
respect to such shares.
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<PAGE>
Optional Conversion of shares of Series C Preferred Stock may be
effected by delivering certificates evidencing such shares of Series C Preferred
Stock, together with written notice of conversion and a proper assignment of
such certificates to the Corporation or in blank (and, if applicable, cash
payment of an amount equal to the Dividend attributable to the current quarterly
dividend period payable on such shares), to the office of the transfer agent for
the shares of Series C Preferred Stock or to any other office or agency
maintained by the Corporation for that purpose and otherwise in accordance with
Optional Conversion procedures established by the Corporation. Each Optional
Conversion shall be deemed to have been effected immediately before the close of
business on the date on which the foregoing requirements shall have been
satisfied. The Optional Conversion shall be at the Optional Rate in effect at
such time and on such date.
Holders of shares of Series C Preferred Stock at the close of business
on a record date for any declared Dividends shall be entitled to receive such
Dividend on the corresponding Dividend Payment Date notwithstanding the Optional
Conversion of such shares of Series C Preferred Stock following such record date
and before such Dividend Payment Date. However, shares of Series C Preferred
Stock surrendered for Optional Conversion after the close of business on a
record date for any declared Dividend and before the opening of business on the
next succeeding Dividend Payment Date must be accompanied by payment in cash of
an amount equal to the Dividends payable on such date that are attributable to
the current quarterly dividend period (unless such shares of Series C Preferred
Stock are subject to redemption on a redemption date between such record date
established for such Dividend Payment Date and such actual Dividend Payment
Date). Except as provided above, the Corporation shall make no payment of or
allowance for unpaid Dividends, whether or not in arrears, on such shares of
Series C Preferred Stock as to which Optional Conversion has been effected or
for previously declared dividends or distributions on the shares of Common Stock
issued upon Optional Conversion.
D. The Mandatory Conversion Rate and the Optional Rate are each
subject to Adjustment from time to time as provided below in this paragraph (D).
(i) If the Corporation shall pay a stock dividend or make a
distribution with respect to its Common Stock in shares of Common Stock
(including by way of reclassification of any shares of its Common Stock), the
Mandatory Conversion Rate and the Optional Rate in effect at the opening of
business on the day following the date fixed for the determination of
shareholders entitled to receive such dividend or other
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<PAGE>
distribution shall each be increased by multiplying such Mandatory Conversion
Rate and Optional Rate by a fraction of which the numerator shall be the sum of
the number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination, immediately before such dividend or
distribution, plus the total number of shares of Common Stock constituting such
dividend or other distribution, and of which the denominator shall be the number
of shares of Common Stock outstanding at the close of business on the date fixed
for such determination, immediately before such dividend or distribution, such
increase to become effective immediately after the opening of business on the
day following the date fixed for such determination. For the purposes of this
clause (i) the number of shares of Common Stock at any time outstanding shall
not include shares held in the treasury.
(ii) In case outstanding shares of Common Stock shall be subdivided
or split into a greater number of shares of Common Stock, the Mandatory
Conversion Rate and the Optional Rate in effect at the opening of business on
the day following the day upon which such subdivision becomes effective shall
each be proportionately increased, and, conversely, in case outstanding shares
of Common Stock shall be combined into a smaller number of shares of Common
Stock, the Mandatory Conversion Rate and the Optional Rate in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall each be proportionately reduced, such increased or
reductions, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such subdivision or
combination becomes effective.
(iii) If the Corporation shall, after the date of this Certificate of
Designations, issue rights or warrants to all holders of its Common Stock
entitling them (for a period not exceeding ___ days from the date of such
issuance) to subscribe for or purchase shares of Common Stock at a price per
share less than the Current Market Price of the Common Stock on the record date
for the determination of shareholders entitled to receive such rights or
warrants, then in each case the Mandatory Conversion Rate and the Optional Rate
shall each be adjusted by multiplying the Mandatory Conversion Rate and the
Optional Rate in effect on such record date by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights or warrants,
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<PAGE>
immediately before such issuance, plus the number of additional shares of Common
Stock offered for subscription or purchase pursuant to such rights or warrants,
and of which the denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants, immediately
before such issuance, plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock so
offered for subscription or purchase pursuant to such rights or warrants would
purchase at such Current Market Price (determined by multiplying such total
number of shares by the exercise price of such rights or warrants and dividing
the product so obtained by such Current Market Price). Shares of Common Stock
held by the Corporation or by another corporation of which a majority of the
shares entitled to vote in the election of directors are held, directly or
indirectly, by the Corporation shall not be deemed to be outstanding for
purposes of such computation. Such adjustment shall become effective at the
opening of business on the business day next following the record date for the
determination of shareholders entitled to receive such rights or warrants. To
the extent that shares of Common Stock are not delivered after the expiration of
such right or warrants, the Mandatory Conversion Rate and the Optional Rate
shall each be readjusted to the Mandatory Conversion Rate and the Optional Rate
which would then be in effect had the adjustments made after the issuance of
such rights or warrants been made upon the basis of issuance of rights or
warrants in respect of only the number of shares of Common Stock actually
delivered.
(iv) If the Corporation shall pay a dividend or make a distribution
to all holders of its Common Stock consisting of evidences of its indebtedness,
cash or other assets (including shares of capital stock of the Corporation other
than Common Stock but excluding any cash dividends or distributions, other than
Extraordinary Cash Distributions (as defined herein) and dividends referred to
in clauses (i) and (ii) above) or shall issue to all holders of its Common Stock
rights or warrants to subscribe for or purchase any of its securities (other
than those referred to in clause (iii) above), then in each such case, the
Mandatory Conversion Rate and the Optional Rate shall each be adjusted by
multiplying the Mandatory Conversion Rate and the Optional Rate in effect on the
record date for such dividend or distribution or for the determination of
shareholders entitled to receive such rights or warrants, as the case may be, by
a fraction of which the numerator shall be the Current Market Price per share of
the Common Stock on such record date, and of which the denominator shall be such
Current Market Price per share of Common Stock less either (a) the fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive) on such record date of the portion of the assets or evidences of
indebtedness so distributed, or of such subscription rights or warrants,
applicable to one share of Common Stock, or (b) if applicable, the amount of the
Extraordinary Cash Distribution. Such adjustment shall become effective on the
opening of business on the business day next
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<PAGE>
following the record date for such dividend or distribution or for the
determination of holders entitled to receive such rights or warrants, as the
case may be. The term "Extraordinary Cash Distribution" means, with respect to
any consecutive 12-month period, all cash dividends and cash distributions on
the Common Stock during such period (other than cash dividend and cash
distributions for which prior adjustment to the Mandatory Conversion Rate and
Optional Rate was previously made) to the extent such dividends and
distributions exceed, on a per share of Common Stock basis, 10% of the average
daily Closing Price of the Common Stock over such period.
(v) Any shares of Common Stock issuable in payment of a dividend or
other distribution shall be deemed to have been issued immediately before the
close of business on the record date for such dividend or other distribution for
purposes of calculating the number of outstanding shares of Common Stock under
this Section III.
(vi) Anything in this Section III notwithstanding, the Corporation
shall be entitled (but shall not be required) to make such upward adjustments in
the Mandatory Conversion Rate, the Optional Rate and the Call Price in addition
to those set forth by this Section III, as the Corporation, in its sole
discretion, shall determine to be advisable, in order that any stock dividends,
subdivision of stock, distribution of rights to purchase stock or securities, or
distribution of securities convertible into or exchangeable for stock (or any
transaction that could be treated as any of the foregoing transactions pursuant
to Section 305 of the Internal Revenue Code of 1986, as amended) hereafter made
by the Corporation to its shareholders shall not be taxable.
(vii) In any case in which this Section III(D) shall require that an
adjustment as a result of any event become effective at the opening of business
on the business day next following a record date and the date fixed for
conversion pursuant to Section III(A) or redemption pursuant to Section III(B),
on and after such record date, but before the occurrence of such event, the
Corporation may, in its sole discretion, elect to defer paying to such holder
any amount in cash in lieu of a fractional share of Common Stock pursuant to
Section IV until after the occurrence of such event.
(viii) All adjustments to the Mandatory Conversion Rate and the
Optional Rate shall be calculated to the nearest 1/100th of a share of Common
Stock. No adjustment in the Mandatory Conversion Rate or in the Optional Rate
shall be required unless such adjustment would require an increase or decrease
of at least one percent therein; provided, however,
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<PAGE>
that any adjustments which by reason of this Section III(D) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All adjustments to the Mandatory Conversion Rate and Optional Rate
shall be made successively.
(ix) Before taking any action that would result in an adjustment
affecting the Mandatory Conversion Rate or the Optional Rate such that the
conversion price (for purposes of this Section, an amount equal to the Call
Price divided by the Mandatory Conversion Rate or the Optional Rate,
respectively, as in effect from time to time) would be below the then par value
of the Common Stock, the Corporation shall take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable shares of Common Stock at
the Mandatory Conversion Rate or the Optional Rate as so adjusted.
(x) Before redeeming any shares of Series C Preferred Stock, the
Corporation shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of Common Stock upon such redemption.
E. In case of any reclassification of the Common Stock, any
consolidation of the Corporation with, or merger of the Corporation into, any
other entity, any merger of any entity into the Corporation (other than a merger
that does not result in a reclassification, conversion, exchange or cancellation
of the outstanding shares of Common Stock), any sale or transfer of all or
substantially all of the assets of the Corporation or any compulsory share
exchange whereby the Common Stock is converted into other securities, cash or
other property (a "Transaction"), then each share of Series C Preferred Stock
will, after consummation of such Transaction, be entitled to be converted (i) on
the Mandatory Conversion Date into the kind and amount of securities, cash or
other property receivable upon consummation of such Transaction by a holder of
the number of
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<PAGE>
shares of Common Stock into which such share of Series C Preferred Stock would
have been converted if the conversion on the Mandatory Conversion Date had
occurred immediately before the date of consummation of such Transaction, plus
the right to receive cash in an amount equal to all accrued and unpaid dividends
on such share of Series C Preferred Stock (other than previously declared
dividends payable to a holder of record as of a prior date), (ii) upon
redemption by the Corporation on any redemption date in exchange for the kind
and amount of securities, cash or other property receivable upon consummation of
such Transaction by a holder of the number of shares of Common Stock that would
have been issuable at the Call Price in effect on such redemption date upon a
redemption of such share of Series C Preferred Stock immediately before
consummation of such Transaction (assuming that, if the Notice Date for such
redemption is not before such Transaction, the Notice Date had been the date of
such Transaction; and assuming in each case that such holder of share of Common
Stock failed to exercise rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon consummation of such
transaction (provided that, if the kind or amount of securities, cash or other
property receivable upon consummation of such transaction is not the same for
each non-electing share, then the kind and amount of securities, cash or other
property receivable upon consummation of such transaction for each non-electing
share will be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares)) or (iii) at the option of the holder,
into the kind and amount of securities, cash or other property receivable upon
consummation of such Transaction by a holder of the number of shares of Common
Stock into which such share of Series C Preferred Stock might have been
converted immediately before consummation of such Transaction. The kind and
amount of securities into or for which the shares of Series C Preferred Stock
will be convertible or redeemable after consummation of such Transaction will be
subject to adjustment as described in Section III(D) following the date of
consummation of such Transaction.
F. Whenever the Mandatory Conversion Rate and the Optional Rate are
adjusted as provided in Section III(D), the Corporation shall: (i) forthwith
compute the adjusted Mandatory Conversion Rate and Optional Rate in accordance
with this Section III and prepare a certificate signed by the Chief Financial
Officer, any Vice President, the Treasurer or the Controller of the Corporation
setting forth the adjusted Mandatory Conversion Rate and the Optional Rate, the
method of calculations thereof in reasonable detail and the facts requiring such
adjustment and upon which such adjustment is based, which certificate shall be
conclusive, final and binding evidence of the correctness of the adjustment, and
shall file such certificate forthwith with the transfer agent for the shares of
Series C Preferred Stock and the Common Stock, and (ii) promptly mail a notice
stating that the Mandatory Conversion Rate and the Optional Rate have been
adjusted, the facts requiring such adjustment and upon which such adjustment is
based and setting forth the adjusted Mandatory Conversion Rate and Optional
Rate, to the holders of record of the outstanding shares of Series C Preferred
Stock.
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<PAGE>
G. In case, at any time while any of the shares of Series C Preferred
Stock are outstanding, (i) the Corporation shall declare a dividend (or any
other distribution) on the Common Stock, excluding any cash dividends other than
Extraordinary Cash Distributions; (ii) the Corporation shall authorize the
issuance to all holders of the Common Stock of rights or warrants to subscribe
for or purchase shares of the Common Stock or of any other subscription rights
or warrants; or (iii) the Corporation shall enter into or authorize the entry
into any Transaction; then the Corporation shall cause to be filed at each
office or agency maintained for the purpose of conversion of the shares of
Series C Preferred Stock, and shall cause to be mailed to the holders of shares
of Series C Preferred Stock at their last addresses as they shall appear on the
stock register of the Corporation, at least 10 business days before the date
hereinafter specified in clause (A) or (B) below (or the earlier of the dates
hereinafter specified, in the event that more than one date is specified), a
notice stating (A) the date on which a record is to be taken for the purpose of
such dividend distribution, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution, rights or warrants are to be determined, or (B)
the date on which any such Transaction is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock or securities or other property
(including cash), if any, deliverable upon such Transaction. The failure to
give or receive the notice required by the paragraph (G) or any defect therein
shall not affect the legality or validity of any such dividend, distribution,
right or warrant of other action.
SECTION IV. NO FRACTIONAL SHARES. No fractional shares of Common
Stock shall be issued upon redemption or conversion of any the shares of the
Series C Preferred Stock. In lieu of any fractional share otherwise issuable in
respect of the aggregate number of shares of the Series C Preferred Stock of any
holder that are redeemed or converted on any redemption date or upon Mandatory
Conversion or Optional Conversion, such holder shall be entitled to receive an
amount in cash (computed to the nearest cent) equal to the same fraction of the
Current Market Price of the Common Stock, determined as of the Notice Date, in
the case of redemption by the Corporation, or the trading day immediately
preceding (i) the Mandatory Conversion Date, in the case of a Mandatory
Conversion, or (ii) the effective date of conversion, in the case of an Optional
Conversion by the holder. If more than one share of Series C Preferred Stock
shall be surrendered for conversion or redemption at one time by or for the same
holder the number of full shares of Common Stock issuable upon conversion
thereof shall be computed
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<PAGE>
on the basis of the aggregate number of shares of the Series C Preferred Stock
so surrendered or redeemed.
SECTION V. RESERVATION OF COMMON STOCK. The Corporation shall at all
times reserve and keep available out of its authorized and unissued Common
Stock, solely for issuance upon the conversion or redemption of shares of the
Series C Preferred Stock, as herein provided, free from preemptive rights, such
maximum number of shares of Common stock as shall from time to time be issuable
upon the Mandatory Conversion or Optional Conversion or redemption of all the
shares of Series C Preferred Stock then outstanding.
SECTION VI. DEFINITIONS. As used in this Certificate of
Designations:
(i) The term "business day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close;
(ii) The term "Closing Price", on any day, shall mean the last sale
price as shown on the New York Stock Exchange Composite Tape on such day, or, in
case no such sale takes place on such day, the average of the reported closing
bid and asked prices on the New York Stock Exchange, or, if the Common Stock is
not listed or admitted to trading on such Exchange, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or, if not listed or admitted to trading on any national securities exchange,
the average of the closing bid and asked prices of the Common Stock on the
Nasdaq, or, if the Common Stock is not included on Nasdaq, any interdealer
quotation system or any comparable system, or if not available in such manner,
as furnished by any New York Stock Exchange member firm selected in good faith
from time to time by the Board of Directors for that purpose;
(iii) The term "record date" shall be such date as from time to time
fixed by the Board of Directors with respect to the receipt of dividends, the
receipt of a redemption price upon redemption or the taking of any action or
exercise of any voting right permitted hereby; and
(iv) The term "Trading Day" shall mean a date on which the New York
Stock Exchange (or any successor to such Exchange) is open for the transaction
of business.
SECTION VII. PAYMENT OF TAXES. The Corporation shall pay any and all
documentary, stamp or similar issue or
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<PAGE>
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock on the redemption or conversion of shares of Series C Preferred Stock
pursuant to Section III; provided, however, that the Corporation shall not be
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required to pay any tax which may be payable
in respect of any registration of transfer involved in the issue or delivery of
shares of Common Stock in a name other than that of the registered holder of
shares of Series C Preferred Stock redeemed or converted or to be redeemed or
converted, and no such issue or delivery shall be made unless and until the
period requesting such issue has paid to the Corporation the amount of any such
tax or has established, to the satisfaction of the Corporation, that such tax
has been paid.
SECTION VIII. LIQUIDATION RIGHTS. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation, and
subject to the rights of holders of any other series of Preferred Stock, the
holders of outstanding shares of Series C Preferred Stock are entitled to
receive the sum of $125 per share, plus an amount equal to any accrued and
unpaid Dividends thereon, out of the assets of the Corporation available for
distribution to shareholders, before any distribution of assets is made to
holders of Common Stock or any other capital stock ranking junior to the shares
of Series C Preferred Stock upon liquidation, dissolution, or winding up. If
upon any voluntary or involuntary liquidation, dissolution, or winding up of the
Corporation, the assets of the Corporation are insufficient to permit the
payment of the full preferential amounts payable with respect to the shares of
Series C Preferred Stock and all other series of Parity Preferred Stock, the
holders of shares of Series C Preferred Stock and of all other series of Parity
Preferred Stock shall share ratably in any distribution of assets of the
Corporation in proportion to the full respective preferential amounts to which
they are entitled. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of shares of Series C
Preferred Stock shall not be entitled to any further participation in any
distribution of assets by the Corporation. A Transaction will not be deemed to
be a voluntary or involuntary liquidation, dissolution or winding up of the
Corporation.
SECTION IX. VOTING RIGHTS. A. The holders of shares of Series C
Preferred Stock shall have the right with the holders of Common Stock to vote in
the election of directors and upon each other matter coming before any meeting
of the holders of Common Stock. Each share of Series C Preferred Stock will be
entitled to a number of votes equal to [the product of 25 and the Exchange
Ratio]. The holders of shares of Series C Preferred Stock and the holders of
Common Stock shall
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<PAGE>
vote together as one class on such matters except as otherwise provided by law
or by the Articles of Incorporation.
B. In the event that the equivalent of six quarterly dividends
payable on the Series C Preferred Stock shall be in arrears, the number of
directors of the Corporation will be increased by two and the holders of shares
of Series C Preferred Stock shall have the exclusive right, voting separately
and as a class, with each share of Series C Preferred Stock entitled to 20
votes, to elect the two additional directors (the "Series C Preferred Stock
Directors"). Such right shall continue until all dividends in arrears and
dividends in full for the currently quarterly period have been paid or declared
and set apart for payment. The term of office of any director elected by the
holders of shares of Series C Preferred Stock will terminate on the earlier of
(i) the next annual meeting of shareholders at which a successor has been
elected and qualified or (ii) the termination of the right of holders of shares
of Series C Preferred Stock to elect the Series C Preferred Stock Directors.
C. The Corporation shall not, without the approval of the holders of
at least 66-2/3 percent of the shares of Series C Preferred Stock then
outstanding: (i) amend, alter, or repeal any of the provisions of the Restated
Certificate of Incorporation or By-Laws of the Corporation so as to affect
adversely the powers, preferences or rights of the holders of shares of Series C
Preferred Stock then outstanding or reduce the minimum time for any required
notice to which the holders of shares of Series C Preferred Stock then
outstanding may be entitled (an amendment of the Restated Certificate of
Incorporation to authorize or create, or to increase the authorized amount of,
Common Stock or other Junior Stock or any stock of any class ranking on a parity
with the Series C Preferred Stock being deemed not to affect adversely the
powers, preferences or rights of the holders of the shares of Series C Preferred
Stock); (ii) authorize or create, or increase the authorized amount of, any
stock of any class, or any security convertible into capital stock of any class,
ranking prior to the Series C Preferred Stock either as to the payment of
dividends or the distribution of assets upon liquidation, dissolution or winding
up of the Corporation; (iii) merge or consolidate with or into any other
corporation, unless each holder of shares of Series C Preferred Stock
immediately preceding such merger or consolidation receives or continues to hold
in the resulting corporation the same number of shares, with substantially the
same rights and preferences, as correspond to the shares of Series C Preferred
Stock so held as contemplated by Section III(E); or (iv) voluntarily dissolve,
liquidate or wind up the affairs of the Corporation.
-19-
<PAGE>
D. The Corporation shall not, without the approval of the holders of
at least a majority of the shares of Series C Preferred Stock then outstanding:
(i) increase the authorized number of shares of Preferred Stock; or (ii) create
any other class or classes of capital stock of the Corporation ranking on a
parity with the Preferred Stock, either as to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, or create any stock or other security convertible into or
exchangeable for or evidencing the right to purchase any stock of such other
class ranking on a parity with the Preferred Stock, or increase the authorized
number of shares of any such other class or amount of such other stock or
security.
E. Notwithstanding the provisions set forth in Sections IX(C) and
IX(D) no such approval described therein of the holders of the shares of Series
C Preferred Stock shall be required if, at or before the time when such
amendment, alteration or repeal is to take effect or when the authorization,
creation, increase or issuance of any such prior or parity stock or convertible
security is to be made, or when such consolidation or merger, voluntary
liquidation, dissolution or winding up, sale, lease, conveyance, purchase or
redemption is to take effect, as the case may be, provision is made for the
redemption of all shares of Series C Preferred Stock at the time outstanding.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed and attested this _____ day of _____________, 1997.
MATTEL, INC.
By:__________________________________
Name:
Title:
Attest:
- ------------------------------
Name:
Title:
-20-
<PAGE>
EXHIBIT 4.2
FORM OF DEPOSIT AGREEMENT
MATTEL, INC.,
[ ], As Depositary
AND
THE HOLDERS FROM TIME TO TIME OF
THE DEPOSITARY RECEIPTS DESCRIBED HEREIN
DEPOSIT AGREEMENT
FOR
SERIES C MANDATORILY CONVERTIBLE
REDEEMABLE PREFERRED STOCK
Dated as of ____________, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I. Definitions............................. 1
ARTICLE II. Book-Entry, Form of Receipts, Deposit
of Stock, Execution and Delivery,
Transfer, Surrender and Redemption
of Receipts.......................... 3
SECTION 2.01. Book-Entry Form; Form and Transfer of
Receipts............................. 3
SECTION 2.02. Deposit of Stock; Execution and
Delivery of Receipts in Respect
Thereof.............................. 6
SECTION 2.03. Optional Redemption of Stock............ 7
SECTION 2.04. Mandatory Conversion of Stock........... 9
SECTION 2.05. Conversion of Stock at the Option of the
Holder............................... 9
SECTION 2.06. Registration of Transfer of Receipts.... 10
SECTION 2.07. Surrender of Receipts and Withdrawal of
Stock................................ 11
SECTION 2.08. Limitations on Execution and Delivery,
Transfer, Surrender and Exchange of
Receipts............................. 12
SECTION 2.09. Lost Receipts, etc...................... 13
SECTION 2.10. Cancellation and Destruction of
Surrendered Receipts................. 13
SECTION 2.11. Interchangeability of Book-Entry
Receipts and Receipts in Physical,
Certificated Form.................... 13
ARTICLE III. Certain Obligations of Holders of
Receipts and the Company............. 14
SECTION 3.01. Filing Proofs, Certificates and Other
Information.......................... 14
SECTION 3.02. Payment of Taxes or Other Governmental
Charges.............................. 14
SECTION 3.03. Warranty as to Stock.................... 15
SECTION 3.04. Warranty as to Receipts................. 15
ARTICLE IV. The Deposited Securities; Notices....... 15
SECTION 4.01. Cash Distributions...................... 15
SECTION 4.02. Distributions Other than Cash, Rights,
Preferences or Privileges............ 16
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 4.03. Subscription Rights, Preferences or
Privileges........................... 17
SECTION 4.04. Notice of Dividends, etc.; Fixing
of Record Date for Holders
of Receipts.......................... 18
SECTION 4.05. Voting Rights........................... 18
SECTION 4.06. Changes Affecting Stock and
Reclassifications, Recapitalizations,
etc.................................. 19
SECTION 4.07. Inspection of Reports................... 20
SECTION 4.08. Lists of Receipt Holders................ 20
ARTICLE V. The Depositary, the Depositary's Agents,
the Registrar and the Company........ 20
SECTION 5.01 Maintenance of Offices, Agencies and
Transfer Books by the Depositary;
Registrar............................ 20
SECTION 5.02. Prevention of or Delay in
Performance by the Depositary,
the Depositary's Agents, the
Registrar or the Company............. 21
SECTION 5.03. Obligations of the Depositary, the
Depositary's Agents, the Registrar
and the Company...................... 22
SECTION 5.04. Resignation and Removal of the
Depositary; Appointment of Successor
Depositary........................... 23
SECTION 5.05. Corporate Notices and Reports........... 24
SECTION 5.06. Indemnification by the Company.......... 25
SECTION 5.07. Charges and Expenses.................... 25
ARTICLE VI. Amendment and Termination............... 26
SECTION 6.01. Amendment............................... 26
SECTION 6.02. Termination............................. 26
ARTICLE VII. Miscellaneous........................... 27
SECTION 7.01. Counterparts............................ 27
SECTION 7.02. Exclusive Benefit of Parties............ 27
SECTION 7.03. Invalidity of Provisions................ 28
SECTION 7.04. Notices................................. 28
SECTION 7.05. Depositary's Agents..................... 29
SECTION 7.06. Holders of Receipts Are Parties......... 29
SECTION 7.07. Governing Law........................... 29
SECTION 7.08. Inspection of Deposit Agreement......... 29
SECTION 7.09. Headings................................ 29
</TABLE>
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<PAGE>
DEPOSIT AGREEMENT
DEPOSIT AGREEMENT dated as of __________, 1997, among Mattel, Inc., a
Delaware corporation, [ ], and the holders from time to time of the
Receipts described herein.
WHEREAS, it is desired to provide, as hereinafter set forth in this
Deposit Agreement, for the deposit of shares of the Stock of the Company with
the Depositary for the purposes set forth in this Deposit Agreement and for the
issuance hereunder of Receipts evidencing Depositary Shares in respect of the
Stock so deposited; and
WHEREAS, the Receipts are to be substantially in the form of Exhibit A
annexed hereto, with appropriate insertions, modifications and omissions, as
hereinafter provided in this Deposit Agreement.
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
ARTICLE I
Definitions
-----------
The following definitions shall for all purposes, unless otherwise
indicated, apply to the respective terms used in this Deposit Agreement. Terms
not otherwise defined herein shall be given the meaning assigned to such terms
in the Certificate.
"Certificate" shall mean the Certificate of Designations filed with
the Secretary of State of the State of Delaware establishing the Stock as a
series of preferred stock of the Company designated as "Series C Mandatorily
Convertible Redeemable Preferred Stock."
"Common Stock" shall mean the Company's Common Stock par value $1.00
per share, or any security into which the Common Stock may be converted.
"Company" shall mean Mattel, Inc., a Delaware corporation, and its
successors.
"Deposit Agreement" shall mean this Deposit Agreement, as amended or
supplemented from time to time.
<PAGE>
"Depositary" shall mean [ ], and any successor as Depositary
hereunder.
"Depositary Shares" shall mean Depositary Shares, each representing
ownership of one-twentieth of the Stock deposited with the Depositary hereunder
under this Deposit Agreement, all as evidenced by a Receipt. Subject to the
terms of this Deposit Agreement, each owner of a Depositary Share is entitled,
proportionately, to all the rights, preferences and privileges of the Stock
represented by such Depositary Share, including the dividend, voting,
redemption, conversion and liquidation rights and subject, proportionately, to
all of the limitations of the Stock represented thereby, contained in the
Certificate, and to the benefits of all obligations of the Company under the
Certificate.
"Depositary's Agent" shall mean any agent appointed by the Depositary
pursuant to Section 7.05.
"Depositary's Office" shall mean the corporate trust office of the
Depositary in [ ], at which at any particular time its depositary receipt
business shall be administered.
"Mandatory Conversion Date" shall be July 1, 2000.
"Mandatory Conversion Rate" shall mean the conversion rate, as set
forth in Section III(A) of the Certificate, at which the Stock, and therefore
the Depositary Shares, will convert into Common Stock on the Mandatory
Conversion Date.
"Optional Rate" shall mean the conversion rate, as set forth in
Section III(B) of the Certificate, at which the Stock, and therefore the
Depositary Shares, will be subject to upon conversion, and may be subject to
upon redemption.
"Receipt" shall mean one of the Depositary Receipts issued hereunder
by the Depositary, whether in definitive or temporary form, evidencing interests
held in Depositary Shares in substantially the form set forth in Exhibit A
hereto. When the context requires, the term "Receipt" shall be deemed to
include the DTC Receipt (as defined in Section 2.01 hereof).
"Record Holder" as applied to a Receipt shall mean the person in whose
name a Receipt is registered on the books of the Depositary maintained for such
purpose.
"Redemption Date" shall have the meaning set forth in Section 2.03
hereof.
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<PAGE>
"Registrar" shall mean any bank or trust company which shall be
appointed to register ownership and transfers of Receipts as herein provided.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stock" shall mean the Company's Series C Mandatorily Convertible
Redeemable Preferred Stock, par value $0.10 per share.
"Stockholder" shall mean holders of the Stock.
"Transaction" shall mean the occurrence of such an event, as set forth
in Section III(E) of the Certificate, which causes the consideration receivable
upon redemption or conversion of the Stock, and therefore the Depositary Shares,
to include securities, cash or other property in replacement of, or in addition
to Common Stock.
ARTICLE II
Book-Entry, Form of Receipts, Deposit
of Stock, Execution and Delivery, Transfer,
Surrender and Redemption of Receipts
-------------------------------------------
SECTION 2.01. Book-Entry Form; Form and Transfer of Receipts. The
----------------------------------------------
Company and the Depositary shall make application to The Depository Trust
Company ("DTC") for acceptance of all or a portion of the Receipts for its book-
entry settlement system. The Company hereby appoints the Depositary acting
through any authorized officer thereof as its attorney-in-fact, with full power
to delegate, for purposes of executing any agreements, certifications or other
instruments or documents necessary or desirable in order to effect the
acceptance of such Receipts for DTC eligibility, including, but not limited to,
a letter of representations, in form satisfactory to the Company, the Depositary
and DTC. So long as the Receipts are eligible for book-entry settlement with
DTC, except as provided for in Section 2.11 of this Deposit Agreement, or unless
otherwise required by law, all Depositary Shares to be traded on the New York
Stock Exchange with book-entry settlement through DTC shall be represented by a
single receipt (the "DTC Receipt") which shall be deposited with DTC (or its
designee) evidencing all such Depositary Shares and registered in the name of
the nominee of DTC (initially expected to be Cede & Co.). [ ]
or such other entity as is agreed to by DTC may hold the DTC Receipt as
custodian for DTC. During any period
-3-
<PAGE>
in which any Depositary Shares are evidenced by the DTC Receipts except as
expressly provided for in Section 2.11 of this Deposit Agreement, no person
acquiring Depositary Shares traded on the New York Stock Exchange with book-
entry settlement through DTC shall receive or be entitled to receive physical
delivery of the Receipts evidencing such Depositary Shares. Ownership of
beneficial interests in the DTC Receipt shall be shown on, and the transfer of
such ownership shall be effected through, records maintained by (i) DTC or its
nominee for such DTC Receipt, or (ii) institutions that have accounts with DTC.
If DTC subsequently ceases to make its book-entry settlement system
available for the Receipts, the Company may instruct the Depositary regarding
making other arrangements for book-entry settlement. In the event that the
Receipts are not eligible for, or it is no longer necessary to have the Receipts
available in book-entry form, the Depositary shall provide written instructions
to DTC to deliver to the Depositary for cancellation the DTC Receipt, and the
Company shall instruct the Depositary to deliver to the beneficial owners of the
Depositary Shares previously evidenced by the DTC Receipt definitive Receipts in
physical form evidencing such Depositary Shares. Such definitive Receipts shall
be in the form annexed hereto as Exhibit A with appropriate insertions,
modifications and omissions, as hereafter provided.
The beneficial owners of Depositary Shares shall, except as stated
above with respect to Depositary Shares in book-entry form represented by the
DTC Receipt, be entitled to receive Receipts in physical, certificated form as
herein provided.
The Receipts shall be typewritten, in the case of the DTC Receipt, and
otherwise shall, upon notice by the Company to the Depositary, be definitive
Receipts which shall be engraved or printed or lithographed on steel-engraved
borders and shall be substantially in the form set forth as Exhibit A annexed to
this Deposit Agreement, with appropriate insertions, modifications and
omissions, as hereinafter provided. The DTC Receipt shall bear such legend or
legends as may be required by DTC in order for it to accept the Depositary
Shares for its book-entry settlement system. Until such time as the Receipts
are so engraved or printed or lithographed in accordance with the preceding
sentence, the Depositary, upon the written order of the Company or any holder of
Stock, as the case may be, delivered in compliance with Section 2.02, shall
execute and deliver temporary Receipts which are printed, lithographed,
typewritten, mimeographed or otherwise substantially of the tenor of the
definitive Receipts in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other
-4-
<PAGE>
variations as the persons executing such Receipts may determine, as evidenced by
their execution of such Receipts. After the preparation of definitive Receipts,
the temporary Receipts shall be exchangeable for definitive Receipts upon
surrender of the temporary Receipts at the Depositary's Office, without charge
to the holder. Upon surrender for cancellation of any one or more temporary
Receipts, the Depositary shall execute and deliver in exchange therefor
definitive Receipts representing the same number of Depositary Shares as
represented by the surrendered temporary Receipt or Receipts. Such exchange
shall be made at the Depositary's expense and without any charge therefor to the
holder of the Receipts. Until so exchanged, the temporary Receipts shall in all
respects be entitled to the same benefits under this Deposit Agreement, and with
respect to the Stock, as definitive Receipts.
Receipts shall be executed by the Depositary by the manual signature
of a duly authorized officer of the Depositary; provided, that such signature
may be a facsimile if a Registrar for the Receipts (other than the Depositary)
shall have been appointed and such Receipts are countersigned by manual
signature of a duly authorized officer of the Registrar. No Receipt shall be
entitled to any benefits under this Deposit Agreement or be valid or obligatory
for any purpose unless it shall have been executed manually by a duly authorized
officer of the Depositary or, if a Registrar for the Receipts (other than the
Depositary) shall have been appointed, by manual or facsimile signature of a
duly authorized officer of the Depositary and countersigned manually by a duly
authorized officer of such Registrar. The Depositary shall record on its books
each Receipt so signed and delivered as hereinafter provided.
Receipts shall be in denominations of any number of whole Depositary
Shares.
Receipts may be endorsed with or have incorporated in the text thereof
such legends or recitals or changes not inconsistent with the provisions of this
Deposit Agreement as may be required by the Depositary or required to comply
with any applicable law or any regulation or with the rules and regulations of
any securities exchange upon which the Stock, the Depositary Shares or the
Receipts may be listed or to conform with any usage with respect thereto, or to
indicate any special limitations or restrictions to which any particular
Receipts are subject.
Subject to any limitations set forth in a Receipt or in this Deposit
Agreement, title to Depositary Shares evidenced by a Receipt which is properly
endorsed or accompanied by a properly executed instrument of transfer, shall be
transferable
-5-
<PAGE>
by delivery with the same effect as in the case of a negotiable instrument;
provided, however, that until transfer of a Receipt shall be registered on the
- -------- -------
books of the Depositary as provided in Section 2.04, the Depositary may,
notwithstanding any notice to the contrary, treat the record holder thereof at
such time as the absolute owner thereof for the purpose of determining the
person entitled to distributions of dividends or other distributions, the
exchange of Depositary Shares for Stock, the right to exchange Receipts pursuant
to Section 2.11 or to any notice provided for in this Deposit Agreement and for
all other purposes.
SECTION 2.02. Deposit of Stock; Execution and Delivery of Receipts in
-------------------------------------------------------
Respect Thereof. Subject to the terms and conditions of this Deposit Agreement,
- ---------------
the Company or any holder of Stock may from time to time deposit shares of the
Stock under this Deposit Agreement by delivery to the Depositary of a
certificate or certificates for the Stock to be deposited, properly endorsed or
accompanied, if required by law or the Depositary, by a duly executed instrument
of transfer or endorsement, in form satisfactory to the Depositary, together
with all such certifications as may be required by the Depositary in accordance
with the provisions of this Deposit Agreement, and together with a written order
of the Company or such holder, as the case may be, directing the Depositary to
execute and deliver to, or upon the written order of, the person or persons
stated in such order a Receipt or Receipts for the number of Depositary Shares
representing such deposited Stock.
Deposited Stock shall be held by the Depositary at the Depositary's
Office or at such other place or places as the Depositary shall determine.
Upon receipt by the Depositary of a certificate or certificates for
Stock deposited in accordance with the provisions of this Section, together with
the other documents required as above specified, and upon recordation of the
Stock on the books of the Company in the name of the Depositary or its nominee,
the Depositary, subject to the terms and conditions of this Deposit Agreement,
shall execute and deliver, to or upon the order of the Company or a holder of
Stock depositing shares of Stock in accordance with the first paragraph of this
Section, a Receipt or Receipts for the number of Depositary Shares representing
the Stock so deposited and registered in such name or names as may be requested
by the Company or such holder. The Depositary shall execute and deliver such
Receipt or Receipts at the Depositary's Office or such other offices, if any, as
the Depositary may designate. Delivery at other offices shall be at the risk
and expense of the person requesting such delivery. The DTC Receipt shall
provide that it shall
-6-
<PAGE>
evidence the aggregate amount of Depositary Shares from time to time indicated
in the records of the Depositary and that the aggregate amount of Depositary
Shares evidenced thereby may from time to time be increased or decreased by
making adjustments on such records of the Depositary.
Other than in the case of splits, combinations or other
reclassifications affecting the Stock, or in the case of dividends or other
distributions of Stock, if any, there shall be deposited hereunder not more than
[______________] shares of Stock.
SECTION 2.03. Optional Redemption of Stock. Whenever the Company
----------------------------
shall elect to redeem shares of Stock in accordance with the provisions of the
Certificate, it shall (unless otherwise agreed to in writing with the
Depositary) give the Depositary not less than 30 days' notice of the proposed
date of such proposed redemption of Stock and the number of shares of Stock held
by the Depositary to be so redeemed. On the date of such redemption, provided
that the Company shall then have deposited with the Depositary the number of
shares of Common Stock and any cash necessary to effect such redemption, the
Depositary shall redeem the number of Depositary Shares representing such Stock.
The Depositary shall mail notice of such redemption and the proposed
simultaneous redemption of the number of Depositary Shares representing the
Stock to be redeemed, first class postage prepaid, not less than 15 nor more
than 60 days prior to the date fixed for redemption of such Stock and Depositary
Shares (the "Redemption Date"), to the Record Holders on the record date for
such redemption (determined pursuant to Section 4.04 hereof) of the Receipts
evidencing the Depositary Shares to be so redeemed, at the addresses of such
Record Holders as the same appear on the records of the Depositary, but neither
failure to mail any such notice to one or more such Record Holders nor any
defect in any notice shall affect the sufficiency of the proceedings for
redemption as to other Record Holders. Each such notice shall state (i) that
the Company has elected to redeem all or a portion of the Stock represented by
the Depositary Shares, (ii) the record date for purposes of such redemption,
(iii) the Redemption Date, (iv) that all outstanding Depositary Shares are to be
redeemed, or in the case of a redemption of fewer than all outstanding
Depositary Shares in connection with a partial redemption of Stock pursuant to
Section III(B) of the Certificate, the number of such Depositary Shares held by
such Record Holder to be redeemed, (v) the number of shares of Common Stock,
cash in lieu of fractional shares and other consideration (in the event that a
Transaction has occurred) to be received for each Depositary Share held by such
Record Holder (such conversion amounts to be determined by the Company in
accordance with the Certificate),
-7-
<PAGE>
(vi) the place or places where Receipts evidencing Depositary Shares are to be
surrendered for shares of Common Stock, (vii) that dividends in respect of the
Stock represented by the Depositary Shares to be redeemed will cease to accrue
at the close of business on such Redemption Date; and (viii) any other
information required by applicable law and any other procedures to be followed
by such Record Holders to receive Common Stock for their redeemed Depositary
Shares. In case less than all the outstanding Depositary Shares are to be
redeemed, the Depositary Shares to be so redeemed shall be selected by lot or
pro rata (as nearly as may be) or in any other equitable manner determined by
the Depositary to be consistent with the method determined by the Board of
Directors, in its sole discretion, with respect to the Stock.
The Depositary shall similarly mail notice of such redemption to the
Stockholders, if any, whose shares of Stock are designated by the Company for
redemption at their addresses as they appear on the records of the Depositary,
first class postage prepaid, not less than 15 and not more than 60 days prior to
the Redemption Date. Neither failure to mail any notice to any Stockholder nor
any defect in any notice shall affect the sufficiency of the proceedings for
redemption as to other Stockholders.
Notice having been mailed by the Depositary as aforesaid, from and
after the Redemption Date (unless the Company shall have failed to redeem the
shares of Stock to be redeemed by it as set forth in the Company's notice
provided for in the preceding paragraph) all dividends in respect of the shares
of Stock so called for redemption shall cease to accrue, the Depositary Shares
called for redemption shall be deemed no longer to be outstanding, and all
rights of the Record Holders of Receipts evidencing such Depositary Shares
(except the right to receive shares of Common Stock, cash in lieu of fractional
shares upon redemption, if applicable, or other consideration resulting from the
occurrence of a Transaction, if any) shall, to the extent of such Depositary
Shares, cease and terminate. Upon any surrender in accordance with said notice
of the Receipts evidencing any such Depositary Shares (properly endorsed or
assigned for transfer, if the Depositary shall so require), each such Depositary
Share shall be redeemed by the Depositary for the number of Common Shares
therefor specified in said notice, plus cash for fractional shares, if any,
represented by such Depositary Share. The foregoing shall further be subject to
the terms and conditions of the Certificate. If less than all the Depositary
Shares evidenced by a Receipt are called for redemption, the Depositary will
deliver to the Record Holder of such Receipt, upon surrender of such Receipt, to
the Depositary, a new Receipt evidencing the Depositary Shares evidenced
-8-
<PAGE>
by such prior Receipt and not called for redemption, together with certificates
representing the shares of Common Stock issuable upon redemption of the
Depositary Shares called for redemption.
SECTION 2.04. Mandatory Conversion of Stock. On the Mandatory
-----------------------------
Conversion Date, all outstanding shares of the Stock will automatically convert
into Common Stock at the Mandatory Conversion Rate. Provided that the Company
shall then have deposited with the Depositary the number of shares of Common
Stock, cash in lieu of fractional shares, and other consideration (in the event
that a Transaction has occurred) necessary to effect such conversion, the
Depositary shall convert all outstanding Depositary Shares representing Stock
into Common Stock at the Mandatory Conversion Rate specified to the Depositary
by the Company.
From and after the Mandatory Conversion Date (unless the Company shall
have failed to deposit the shares of Common Stock, cash or other consideration
as required above), (i) all dividends in respect of the shares of Stock shall
cease to accrue, (ii) the Depositary Shares shall be deemed no longer to be
outstanding, (iii) all rights of the holders of Receipts evidencing such
Depositary Shares (except the right to receive the shares of Common Stock and
any other consideration then due) shall, to the extent of such Depositary
Shares, cease and terminate and (iv) upon surrender of the Receipts evidencing
any such Depositary Shares in accordance with such procedures and documentation
as the Depositary may require, such Depositary Shares shall be converted by the
Depositary into whole shares of Common Stock and any other consideration
therefor specified by the Company, plus all money and other property, if any,
represented by such Depositary Shares. The foregoing shall further be subject
to the terms and conditions of the Certificate.
SECTION 2.05. Conversion of Stock at the Option of the Holder. Upon
-----------------------------------------------
the Depositary's receipt from any Record Holder, at any time prior to the
Mandatory Conversion Date or until immediately before the close of business on
any redemption date with respect to such shares, of a written notice of such
Record Holders' election to convert any or all whole shares of the Stock
represented by such holders's Depositary Shares into Common Stock, along with
delivery to the Depositary of such holder's Receipt(s) evidencing such
Depositary Shares, cash payment of an amount equal to the Depositary Share's
portion of the dividends payable on the Stock (for conversions taking place
after the close of business on a record date for any declared dividend and
before the opening of business on the
-9-
<PAGE>
next succeeding dividend payment date, as set forth in the Certificate), if
applicable, and a proper assignment of such Receipts(s) to the Company or in
blank, provided that the Company shall then have deposited with the Depositary
the number of shares of Common Stock and any money or other property necessary
to effect such conversion, the Depositary shall, promptly thereafter, (i) cancel
such Receipt(s), (ii) deliver to such Record Holder a certificate for the number
of whole shares of Common Stock into which such Stock is converted, pursuant to
the Optional Rate as calculated by the Company in accordance with the
Certificate, (iii) deliver to such holder all cash in lieu of fractional shares,
if any, or other consideration (in the event a Transaction has occurred) to be
received for each Depositary Share, (iv) if less than all of the Depositary
Shares evidenced by any Receipt are converted, deliver to such holder a new
Receipt or Receipts evidencing the quantity of Depositary Shares evidenced by
such prior Receipt but not converted and (v) cancel (or, if the Depositary is
not the transfer agent for Stock, deliver for cancellation) that number of
shares of Stock held by the Depositary which are represented by the aggregate of
all Depositary Shares so converted. Each such conversion of Depositary Shares
shall be deemed to have been effected immediately before the close of business
on the date on which the foregoing requirements as to delivery of notice of
conversion, Receipt(s), and assignment shall have been satisfied.
After the effective date of such conversion of any Depositary Shares,
(i) all dividends in respect of the shares of Stock represented by such
Depositary Shares shall cease to accrue, (ii) the Depositary Shares being so
converted shall be deemed no longer to be outstanding and (iii) all rights of
the holders of Receipts evidencing such Depositary Shares (except the right to
receive the shares of Common Stock and any money or other property to which such
holders were entitled upon such conversion) shall, to the extent of such
Depositary Shares, cease and terminate. No fractional shares of Stock may be
converted. The foregoing shall further be subject to the terms and conditions
of the Certificate.
SECTION 2.06. Registration of Transfer of Receipts. Subject to the
------------------------------------
terms and conditions of this Deposit Agreement, the Depositary shall make
transfers on its books from time to time of Receipts upon any surrender thereof
at the Depositary's Office by the holder in person or by such holder's duly
authorized attorney, properly endorsed or accompanied by a properly executed
instrument of transfer, and duly stamped as may be required by law. Thereupon
the Depositary shall execute a new Receipt or Receipts evidencing the same
aggregate number of Depositary Shares as those evidenced by the Receipt or
Receipts
-10-
<PAGE>
surrendered and deliver such new Receipt or Receipts to or upon the order of the
person entitled thereto.
SECTION 2.07. Surrender of Receipts and Withdrawal of Stock. Any
---------------------------------------------
holder of a Receipt or Receipts representing any number of whole shares of Stock
(or such holder's duly authorized attorney) may withdraw the Stock and all money
and other property, if any, represented thereby by surrendering such Receipt or
Receipts at the Depositary's Office or at such other offices as the Depositary
may designate for such withdrawals. If such holder's Depositary Shares are
being held by DTC or its nominee pursuant to Section 2.01, such holder shall
request, in accordance with Section 2.11, withdrawal from the book-entry system
of the number of Depositary Shares specified in the preceding sentence.
Thereafter, without unreasonable delay, the Depositary shall deliver to such
holder, or to the person or persons designated by such holder as hereinafter
provided, the number of whole shares of Stock and all money and other property,
if any, represented by the Receipt or Receipts so surrendered for withdrawal,
but holders of such whole shares of Stock will not thereafter be entitled to
receive Depositary Shares in exchange therefor. If a Receipt delivered by the
holder to the Depositary in connection with such withdrawal shall evidence a
number of Depositary Shares in excess of the number of Depositary Shares
representing the number of whole shares of Stock to be so withdrawn, the
Depositary shall at the same time, in addition to such number of whole shares of
Stock and such money and other property, if any, to be so withdrawn, deliver to
such holder, or (subject to Section 2.06) upon his order, a new Receipt
evidencing such excess number of Depositary Shares. In no event will fractional
shares of Stock (or cash in lieu thereof) be distributed by the Depositary.
Delivery of the Stock and money and other property being withdrawn may be made
by the delivery of such certificates, documents of title and other instruments
as the Depositary may deem appropriate, which, if required by the Depositary,
shall be properly endorsed or accompanied by proper instruments of transfer.
Stock delivered pursuant to the preceding paragraph may be endorsed
with or have incorporated in the text thereof such legends or recitals or
changes not inconsistent with the provisions of this Deposit Agreement as may be
required by the Depositary or required to comply with any applicable law or any
regulation thereunder or with the rules and regulations of any securities
exchange upon which the Stock may be listed or to conform with any usage with
respect thereto, or to indicate any special limitations or restrictions to which
any particular shares of Stock are subject.
-11-
<PAGE>
If the Stock and the money and other property being withdrawn are to
be delivered to a person or persons other than the Record Holder of the Receipt
or Receipts being surrendered for withdrawal of Stock, such holder shall execute
and deliver to the Depositary a written order so directing the Depositary and
the Depositary may require that the Receipt or Receipts surrendered by such
holder for withdrawal of such shares of Stock be properly endorsed in blank or
accompanied by a properly executed instrument of transfer in blank.
Delivery of the Stock and the money and other property, if any,
represented by Receipts surrendered for withdrawal shall be made by the
Depositary at the Depositary's Office, except that, at the request, risk and
expense of the holder surrendering such Receipt or Receipts and for the account
of the holder thereof, such delivery may be made at such other place as may be
designated by such holder.
SECTION 2.08. Limitations on Execution and Delivery, Transfer,
------------------------------------------------
Surrender and Exchange of Receipts. As a condition precedent to the execution
- ----------------------------------
and delivery, registration of transfer, surrender or exchange of any Receipt,
the Depositary, any of the Depositary's Agents or the Company may require (i)
payment to it of a sum sufficient for the payment (or, in the event that the
Depositary or the Company shall have made such payment, the reimbursement to it)
of any charges or expenses payable by the holder of a Receipt pursuant to
Section 5.07 (or evidence reasonably satisfactory to the Company that such
charges and expenses have been paid), (ii) the production of evidence
satisfactory to it as to the identity and genuineness of any signature and (iii)
compliance with such regulations, if any, as the Depositary or the Company may
establish not inconsistent with the provisions of this Deposit Agreement.
The deposit of Stock may be refused, the delivery of Receipts against
Stock may be suspended, the registration of transfer of Receipts may be refused
and the registration of transfer, surrender or exchange of outstanding Receipts
may be suspended (i) during any period when the register of stockholders of the
Company is closed or (ii) if any such action is deemed necessary or advisable by
the Depositary, any of the Depositary's Agents or the Company at any time or
from time to time because of any requirement of law or of any government or
governmental body or commission or under any provision of the Deposit Agreement,
or with the approval of the Company, for any other reason.
Without limitation of the foregoing, the Depositary shall not accept
for deposit under this Deposit Agreement any Stock as to which it has actual
knowledge is required to be
-12-
<PAGE>
registered under the Securities Act, unless a registration statement under the
Securities Act is in effect as to such Stock; provided, however, the Depositary
-------- -------
shall have no affirmative duty to determine whether any Stock is required to be
registered under the Securities Act or whether the effectiveness of any
registration statement has been suspended.
SECTION 2.09. Lost Receipts, etc. In case any Receipt shall be
-------------------
mutilated, destroyed, lost or stolen, the Depositary in its discretion may
execute and deliver a Receipt of like form and tenor in exchange and
substitution for such mutilated Receipt, or in lieu of and in substitution for
such destroyed, lost or stolen Receipt, upon (i) the filing by the holder
thereof with the Depositary of evidence satisfactory to the Depositary of such
destruction or loss or theft of such Receipt, of the authenticity thereof and of
his or her ownership thereof, (ii) the furnishing of the Depositary with
reasonable indemnification satisfactory to it, and (ii) the payment of a fee of
two percent (2%) of the value of the Depositary Shares represented by such
receipt, however, in no case shall such fee be in excess of $250.
SECTION 2.10. Cancellation and Destruction of Surrendered Receipts.
----------------------------------------------------
All Receipts surrendered to the Depositary or any Depositary's Agent shall be
cancelled by the Depositary. Except as prohibited by applicable law or
regulation, the Depositary is authorized to destroy all Receipts so cancelled.
Any Receipt evidenced in book-entry form shall be deemed cancelled when the
Depositary has caused the amount of Depositary Shares evidenced by the DTC
Receipt to be reduced in proportion to the number of Depositary Shares evidenced
by the surrendered Receipt.
SECTION 2.11. Interchangeability of Book-Entry Receipts and Receipts
------------------------------------------------------
in Physical, Certificated Form. Subject to the terms and conditions of this
- ------------------------------
Deposit Agreement, upon receipt by the Depositary of written instructions from a
DTC participant on behalf of any person having a beneficial interest in
Depositary Shares evidenced by the DTC Receipt for the purpose of directing the
Depositary to execute and deliver a Receipt in physical, certificated form
evidencing such Depositary Shares, the Depositary shall follow the customary
procedures established by DTC for the purpose of reducing the number of
Depositary Shares evidenced by the DTC Receipt and, following such reduction,
shall execute and deliver to or upon the order of the person or persons named in
such order a Receipt or Receipts registered in the name or names requested by
such person and evidencing in the aggregate the number of Depositary Shares
equal to the reduction in the number evidenced by the DTC Receipt. The
Depositary may require in such written instructions
-13-
<PAGE>
any certification or representation as it shall deem necessary to comply with
applicable law.
Subject to the terms and conditions of this Deposit Agreement, upon
receipt by the Depositary of a Receipt or Receipts in physical, certificated
form, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Depositary, including any required certifications, and
together with written instructions directing the Depositary to adjust its
records to reflect an increase in the aggregate amount of Depositary Shares
evidenced by the DTC Receipt (including, without limitation, information
regarding the DTC participant account to be credited with such increase), and
upon payment of the fees and expenses of the Depositary, the Depositary shall
cancel such Receipt or Receipts in physical, certificated form and shall follow
the customary procedures established by DTC for the purpose of reflecting such
increase in the number of Depositary Shares evidenced by the DTC Receipt.
ARTICLE III
Certain Obligations of
Holders of Receipts and the Company
-----------------------------------
SECTION 3.01. Filing Proofs, Certificates and Other Information. Any
-------------------------------------------------
holder of a Receipt may be required from time to time to file such proof of
residence, or other matters or other information, to execute such certificates
and to make such representations and warranties as the Depositary or the Company
may reasonably deem necessary or proper. The Depositary or the Company may
withhold the delivery, or delay the registration of transfer, redemption or
exchange, of any Receipt or the withdrawal of the Stock represented by the
Depositary Shares evidenced by any Receipt or the distribution of any dividend
or other distribution or the sale of any rights or of the proceeds thereof until
such proof or other information is filed or such certificates are executed or
such representations and warranties are made.
SECTION 3.02. Payment of Taxes or Other Governmental Charges.
----------------------------------------------
Holders of Receipts shall be obligated to make payments to the Depositary of
certain charges and expenses as provided in Section 5.07, or provide reasonably
satisfactory evidence to the Depositary that such charges and expenses have been
paid. Registration of transfer of any Receipt or any withdrawal of Stock and
all money or other property, if any, represented by the Depositary Shares
evidenced by such Receipt
-14-
<PAGE>
may be refused until any such payment due is made, and any dividends, interest
payments or other distributions may be withheld or any part of or all the Stock
or other property represented by the Depositary Shares evidenced by such Receipt
and not theretofore sold may be sold for the account of the holder thereof
(after attempting by reasonable means to notify such holder prior to such sale),
and such dividends, interest payments or other distributions or the proceeds of
any such sale may be applied to any payment of such charges or expenses, the
holder of such Receipt remaining liable for any deficiency. The Depositary shall
act as the withholding agent for any payments, distributions and exchanges made
with respect to the Depositary Shares and Receipts, and the Stock, Common Stock
or other securities or assets represented thereby (collectively, the
"Securities"). The Depositary shall be responsible with respect to the
Securities for the timely (i) collection and deposit of any required withholding
or backup withholding tax, and (ii) filing of any information returns or other
documents with federal (and other applicable) taxing authorities. In the event
the Depositary is required to pay any such amounts, the Company shall reimburse
the Depositary for payment thereof upon the request of the Depositary and the
Depositary shall, upon the Company's request and as instructed by the Company,
pursue its rights against such holder at the Company's expense.
SECTION 3.03. Warranty as to Stock. The Company hereby represents
--------------------
and warrants that the Stock, when issued, will be validly issued, fully paid and
nonassessable. Such representation and warranty shall survive the deposit of the
Stock and the issuance of the Receipts.
SECTION 3.04. Warranty as to Receipts. The Depositary hereby
-----------------------
represents and warrants that the Receipts, when issued, will be validly issued,
fully paid and nonassessable. Such representation and warranty shall survive
the deposit of the Stock and the issuance of the Receipts.
ARTICLE IV
The Deposited Securities; Notices
---------------------------------
SECTION 4.01. Cash Distributions. Whenever the Depositary shall
------------------
receive any cash dividend or other cash distribution on Stock, the Depositary
shall, subject to Sections 3.01 and 3.02, distribute to record holders of
Receipts on the record date fixed pursuant to Section 4.04 such amounts of such
dividend or distribution as are, as nearly as practicable, in proportion to the
respective numbers of Depositary Shares evidenced by the Receipts held by such
holders; provided, however,
-------- -------
-15-
<PAGE>
that in case the Company or the Depositary shall be required to withhold and
shall withhold from any cash dividend or other cash distribution in respect of
the Stock an amount on account of taxes, the amount made available for
distribution or distributed in respect of Depositary Shares shall be reduced
accordingly. The Depositary shall distribute or make available for distribution,
as the case may be, only such amount, however, as can be distributed without
attributing to any holder of Depositary Shares a fraction of one cent, and any
balance not so distributable shall be held by the Depositary (without liability
for interest thereon) and shall be added to and be treated as part of the next
sum received by the Depositary for distribution to Record Holders then
outstanding.
SECTION 4.02. Distributions Other than Cash, Rights, Preferences or
-----------------------------------------------------
Privileges. Whenever the Depositary shall receive any distribution other than
- ----------
cash, rights, preferences or privileges upon Stock, the Depositary shall,
subject to Sections 3.01 and 3.02, distribute to Record Holders on the record
date fixed pursuant to Section 4.04 such amounts of the securities or property
received by it as are, as nearly as practicable, in proportion to the respective
numbers of Depositary Shares evidenced by the Receipts held by such holders,
except that the Depositary may not distribute fractional shares of Common Stock
or of any security not issuable in fractional shares. If in the opinion of the
Company such distribution cannot be made proportionately among such Record
Holders, or if for any other reason (including any requirement that the Company
or the Depositary withhold an amount on account of taxes) the Depositary deems,
after consultation with the Company, such distribution not to be feasible, the
Depositary may, at the direction of the Company, adopt such method as the
Company deems equitable and practicable for the purpose of effecting such
distribution, including the sale (at public or private sale) of the securities
or property thus received, or any part thereof, at such place or places and upon
such terms as it may deem proper.
No fractional shares or Common Stock will be issued upon conversion or
redemption of Depositary Shares or upon payment of stock dividends or
distributions on the Stock; and, if such conversion, redemption, dividend or
distribution would otherwise result in a fractional share of Common Stock being
issued, the Depositary shall sell the total number of shares of Common Stock
that would have been represented by such fractional shares at public sale at
such place or places and upon such terms it deems proper. The net proceeds of
any such sale shall, subject to Sections 3.01 and 3.02, be distributed or made
available for distribution, as the case may be, by the Depositary to Record
Holders of Receipts as provided by Section
-16-
<PAGE>
4.01 in the case of a distribution received in cash. The amount distributed in
the foregoing cases will be reduced by any amount required to be withheld by the
Company or the Depositary on account of taxes or otherwise required pursuant to
law, regulation or court process.
SECTION 4.03. Subscription Rights, Preferences or Privileges. If the
----------------------------------------------
Company shall at any time offer or cause to be offered to the persons in whose
names Stock is recorded on the books of the Company any rights, preferences or
privileges to subscribe for or to purchase any securities or any rights,
preferences or privileges of any other nature, such rights, preferences or
privileges shall in each such instance be made available by the Depositary to
the record holders of Receipts in such manner as the Company may determine,
either by the issue to such record holders of warrants representing such rights,
preferences or privileges or by such other method as may be approved by the
Company in its discretion with the reasonable approval of the Depositary;
provided, however, that (i) if at the time of issue or offer of any such rights,
- -------- -------
preferences or privileges the Company determines that it is not lawful or (after
consultation with the Depositary) not feasible to make such rights, preferences
or privileges available to holders of Receipts by the issue of warrants or
otherwise or (ii) if and to the extent so instructed by holders of Receipts who
do not desire to exercise such rights, preferences or privileges, then the
Company, in its discretion (with approval of the Depositary; in any case where
the Company has determined that it is not feasible to make such rights,
preferences or privileges available), may, if applicable laws or the terms of
such rights, preferences or privileges permit such transfer, sell such rights,
preferences or privileges at public or private sale, at such place or places and
upon such terms as it may deem proper. The net proceeds of any such sale shall,
subject to Sections 3.01 and 3.02, be distributed by the Depositary to the
record holders of Receipts entitled thereto as provided by Section 4.01 in the
case of a distribution received in cash. The Company shall not make any
distribution of any such rights, preferences or privileges unless the Company
shall have provided an opinion of counsel stating that such rights, preferences
or privileges have been registered under the Securities Act or that the offering
and sale of such rights, preferences or privileges are exempt from registration
under the Securities Act.
If registration under the Securities Act of the securities to which
any rights, preferences or privileges relate is required in order for holders of
Receipts to be offered or sold the securities to which such rights, preferences
or privileges relate, the Company agrees with the Depositary that it will
-17-
<PAGE>
file promptly a registration statement pursuant to the Securities Act with
respect to such rights, preferences or privileges and securities and use its
commercially reasonable efforts and take all steps available to it to cause such
registration statement to become effective sufficiently in advance of the
expiration of such rights, preferences or privileges to enable such holders to
exercise such rights, preferences or privileges. In no event shall the
Depositary make available to the holders of Receipts any right, preference or
privilege to subscribe for or to purchase any securities unless and until such
registration statement shall have become effective, or unless the offering and
sale of such securities to such holders are exempt from registration under the
provisions of the Securities Act.
If any other action under the laws of any jurisdiction or any
governmental or administrative authorization, consent or permit is required in
order for such rights, preferences or privileges to be made available to holders
of Receipts, the Company agrees with the Depositary that the Company will use
its commercially reasonable efforts to take such action or obtain such
authorization, consent or permit sufficiently in advance of the expiration of
such rights, preferences or privileges to enable such holders to exercise such
rights, preferences or privileges.
SECTION 4.04. Notice of Dividends, etc.; Fixing of Record Date for
----------------------------------------------------
Holders of Receipts. Whenever (i) any cash dividend or other cash distribution
- -------------------
shall become payable, any distribution other than cash shall be made, or any
rights, warrants, preferences or privileges shall at any time be offered, with
respect to Stock, or (ii) the Depositary shall receive notice of any meeting at
which holders of Stock are entitled to vote or of which holders of Stock are
entitled to notice or any solicitation of consents in respect of the Stock, or
any call or conversion of any shares of Stock or at any time the Depositary and
the Company shall decide it is appropriate, the Depositary shall in each such
instance fix a record date (which shall be the same date as the record date
fixed by the Company with respect to the Stock) for the determination of the
holders of Receipts who shall be entitled to (a) receive such dividend,
distribution, rights, warrants, preferences or privileges or the net proceeds of
the sale thereof, (b) receive notice of, and give instructions for the exercise
of voting rights at, any such meeting or (c) receive notice of any such call or
conversion, subject to the provisions hereof.
SECTION 4.05. Voting Rights. Upon receipt of notice of any meeting
-------------
at which the holders of Stock are entitled to vote or any solicitation of
consents in respect of Stock, the
-18-
<PAGE>
Depositary shall, as soon as practicable thereafter, mail to the record holders
of Receipts a notice which shall contain (i) such information as is contained in
such notice of meeting or consent solicitation and (ii) a statement that the
holders may, subject to any applicable restrictions, instruct the Depositary as
to the exercise of the voting rights pertaining to the amount of Stock
represented by their respective Depositary Shares and a brief statement as to
the manner in which such instructions may be given. Upon the written request of
a holder of a Receipt on the relevant record date, the Depositary shall use its
best efforts to vote or cause to be voted or deliver a consent with respect to
the amount of Stock represented by the Depositary Shares evidenced by such
Receipt, in accordance with the instructions set forth in such request. To the
extent any such instructions request the voting of a fraction of a share of
Stock, the Depositary shall aggregate such fraction with all other fractions
resulting from requests with the same voting instructions and shall vote the
number of whole shares resulting from requests with the same voting instructions
and shall vote the number of whole shares resulting from such aggregation in
accordance with the instructions received in such requests. The Company hereby
agrees to take all reasonable action which may be deemed necessary by the
Depositary in order to enable the Depositary to vote such Stock or cause such
Stock to be voted. In the absence of specific instructions from the holder of a
Receipt, the Depositary will abstain from voting to the extent of the Stock
represented by the Depositary Shares evidenced by such Receipt.
Holders of Receipts shall also be entitled to vote on certain
amendments to the Deposit Agreement pursuant to Section 6.01 hereof.
SECTION 4.06. Changes Affecting Stock and Reclassifications,
----------------------------------------------
Recapitalizations, etc. Whenever a Transaction occurs the Company may in its
- -----------------------
discretion, direct the Depositary to execute and deliver additional Receipts, or
may call for the surrender of all outstanding Receipts to be exchanged for new
Receipts specifically describing such new property into which the Stock may be
converted or redeemed for.
Whenever the Mandatory Conversion Rate and Optional Rate are adjusted
by the Company pursuant to Section II(D) of the Certificate, the Company shall
provide a certificate to the Depositary as required by Section III(F) of the
Certificate. Such certificate shall set forth such adjustments, the method of
calculation thereof and the facts requiring such adjustment and upon which such
adjustment is based. The Depositary shall promptly mail notice containing the
foregoing information to each Record Holder.
-19-
<PAGE>
Whenever a Transaction occurs, the Company shall provide notice to the
Depositary containing the date on which such Transaction is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their Common Stock for securities or
other property (including cash), if any, deliverable upon such Transaction. The
Depositary shall promptly mail notice containing the foregoing information to
each Record Holder.
SECTION 4.07. Inspection of Reports. The Depository shall make
---------------------
available for inspection by holders of Receipts at the Depositary's Office, and
at such other places as it may from time to time deem advisable, any reports and
communications received from the Company which are received by the Depositary as
the holder of Stock unless at the time of or prior to receipt the Company
advises the Depositary that such reports or communications have not been
generally available to the stockholders.
SECTION 4.08. Lists of Receipt Holders. Promptly upon request from
------------------------
time to time by the Company, the Depositary shall furnish to it a list, as of
recent date, of the names, addresses and holdings of Depositary Shares of all
persons in whose names Receipts are registered on the books of the Depositary.
ARTICLE V
The Depositary, the Depositary's
Agents, the Registrar and the Company
-------------------------------------
SECTION 5.01. Maintenance of Offices, Agencies and Transfer Books by
------------------------------------------------------
the Depositary; Registrar. Upon execution of this Deposit Agreement, the
- -------------------------
Depositary shall maintain at the Depositary's Office, facilities for the
execution and delivery, registration and registration of transfer, surrender and
exchange of Receipts, and at the offices of the Depositary's Agents, if any,
facilities for the delivery, registration of transfer, surrender and exchange of
Receipts, all in accordance with the provisions of this Deposit Agreement.
The Depositary shall keep books at the Depositary's Office for the
registration and registration of transfer of Receipts, and to reflect potential
split-ups and combinations of Depositary Shares, which books at all reasonable
times shall be open for inspection by the Company.
-20-
<PAGE>
The Depositary may close each such books only when the register of
stockholders of the Company is closed or as otherwise required by law.
The Depositary may, with the approval of the Company, appoint a
Registrar (which may be the Depositary) for registration of the Receipts or the
Depositary Shares evidenced thereby. If the Receipts or the Depositary Shares
evidenced thereby or the Stock represented by such Depositary Shares shall be
listed on the New York Stock Exchange, the Depositary will appoint a Registrar
(acceptable to the Company) for registration of such Receipts or Depositary
Shares in accordance with any requirements of such Exchange. Such Registrar
(which may be the Depositary if so permitted by the requirements of such
Exchange) may be removed and a substitute registrar appointed by the Depositary
upon the request or with the approval of the Company. If the Receipts, such
Depositary Shares or such Stock are listed on one or more other stock exchanges,
the Depositary will, at the request of the Company, arrange such facilities for
the delivery, registration, registration of transfer, surrender and exchange of
such Receipts, such Depositary Shares or such Stock as may be required by law or
applicable stock exchange regulation.
SECTION 5.02. Prevention of or Delay in Performance by the
--------------------------------------------
Depositary, the Depositary's Agents, the Registrar or the Company. None of the
- -----------------------------------------------------------------
Depositary, any Depositary's Agent, any Registrar or the Company shall incur any
liability to any holder of any Receipt if by reason of any provision of any
present or future law, or regulation thereunder, of the United States of America
or of any other governmental authority or, in the case of the Depositary, the
Depositary's Agent or the Registrar, by reason of any provision, present or
future, of the Company's Restated Certificate of Incorporation, as amended
(including the Certificate) or by reason of any act of God or war or other
circumstance beyond the control of the relevant party, the Depositary, the
Depositary's Agent, the Registrar or the Company shall be prevented or forbidden
from, or subjected to any penalty on account of, doing or performing any act or
thing which the terms of this Deposit Agreement provide shall be done or
performed; nor shall the Depositary, any Depositary's Agent, any Registrar or
the Company incur any liability to any holder of a Receipt (i) by reason of any
nonperformance or delay, caused as aforesaid, in the performance of any act or
thing which the terms of this Deposit Agreement provide shall or may be done or
performed, or (ii) by reason of any exercise of, or failure to exercise, any
discretion provided for in this Deposit Agreement except, in the case of any
such exercise or failure to exercise discretion not caused as aforesaid, if
-21-
<PAGE>
caused by the gross negligence or willful misconduct of the party charged with
such exercise or failure to exercise.
SECTION 5.03. Obligations of the Depositary, the Depositary's Agents,
-------------------------------------------------------
the Registrar and the Company. None of the Depositary, any Depositary's Agent,
- -----------------------------
any Registrar or the Company assumes any obligation or shall be subject to any
liability under this Deposit Agreement to holders of Receipts other than for its
gross negligence or willful misconduct.
None of the Depositary, any Depositary's Agent, any Registrar or the
Company shall be under any obligation to appear in, prosecute or defend any
action, suit or other proceeding in respect of the Stock, the Common Stock, the
Depositary Shares or the Receipts which in its opinion may involve it in expense
or liability unless indemnity satisfactory to it against all expense and
liability be furnished as often as may be required.
None of the Depositary, any Depositary's Agent, any Registrar or the
Company shall be liable for any action or any failure to act by it in reliance
upon the written advice of legal counsel or accountants, or information from any
person presenting Stock for deposit, any holder of a Receipt or any other person
believed by it in good faith to be competent to give such information. The
Depositary, any Depositary's Agent, any Registrar and the Company may each rely
and shall each be protected in acting upon any written notice, request,
direction or other document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
The Depositary shall not be responsible for any failure to carry out
any instruction to vote any of the shares of Stock or for the manner or effect
of any such vote made, as long as any such action or non-action is in good faith
or in accordance with the Depositary Agreement. The Depositary undertakes, and
any Registrar shall be required to undertake, to perform such duties and only
such duties as are specifically set forth in this Deposit Agreement, and no
implied covenants or obligations shall be read into this Deposit Agreement
against the Depositary or any Registrar. The Depositary will indemnify the
Company against any liability which may arise out of acts performed or omitted
by the Depositary or the Depositary's Agents due to its or their gross
negligence, willful misconduct or bad faith. The Depositary, the Depositary's
Agents, and any Registrar may own and deal in any class of securities of the
Company and its affiliates and in Receipts. The Depositary may also act as
transfer agent or registrar of any of the securities of the Company and its
affiliates.
-22-
<PAGE>
It is intended that neither the Depositary nor any Depositary's Agent
shall be deemed to be an "issuer" of the securities under the federal securities
laws or applicable state securities laws, it being expressly understood and
agreed that the Depositary and any Depositary's Agent are acting only in a
ministerial capacity as Depositary for the Stock.
The Depositary agrees to comply with all information reporting and
withholding requirements applicable to it under law or this Deposit Agreement in
its capacity as Depositary.
None of the Depositary (or its officers, directors, employees or
agents), any Depositary's Agent or the Registrar makes any representation or has
any responsibility as to the validity of the Registration Statement pursuant to
which the Depositary Shares are registered under the Securities Act, the Stock,
the Depositary Shares or the Receipts (except its countersignature thereon), or
any instruments referred to therein or herein, or as to the correctness of any
statement made therein or herein; provided, however, that the Depositary is
-------- -------
responsible for its representations in this Deposit Agreement.
The Depositary assumes no responsibility for the correctness of the
description that appears in the Receipts, which can be taken as a statement of
the Company summarizing certain provisions of this Deposit Agreement.
Notwithstanding any other provision herein or in the Receipts, the Depositary
makes no warranties or representations as to the validity, genuineness or
sufficiency of any Stock at any time deposited with the Depositary hereunder or
of the Depositary Shares, as to the validity or sufficiency of this Deposit
Agreement, as to the value of the Depositary Shares or as to any right, title or
interest of the record holders of Receipts in and to the Depositary Shares,
except that the Depositary hereby represents and warrants as follows: (i) the
Depositary has been duly organized and is validly existing and in good standing
under the laws of the State of [Delaware], with full power, authority and legal
right under such law to execute, deliver and carry out the terms of this Deposit
Agreement; (ii) this Deposit Agreement has been duly authorized, executed and
delivered by the Depositary; and (iii) this Deposit Agreement constitutes a
valid and binding obligation of the Depositary, enforceable against the
Depositary in accordance with its terms.
SECTION 5.04. Resignation and Removal of the Depositary; Appointment
------------------------------------------------------
of Successor Depositary. The Depositary may at any time resign as Depositary
- -----------------------
hereunder by notice of its election so to do delivered to the Company, such
resignation to take effect upon the appointment of a successor Depositary and
its acceptance of such appointment as hereinafter provided.
-23-
<PAGE>
The Depositary may at any time be removed by the Company by notice of
such removal delivered to the Depositary, such removal to take effect upon the
appointment of a successor Depositary and its acceptance of such appointment as
hereinafter provided.
In case at any time the Depositary acting hereunder shall resign or be
removed, the Company shall, within 60 days after the delivery of the notice of
resignation or removal, as the case may be, appoint a successor Depositary,
which shall be a bank or trust company having its principal office in the United
States of America and having a combined capital and surplus of at least
$50,000,000. If no successor Depositary shall have been so appointed and have
accepted appointment within 60 days after delivery of such notice, the resigning
or removed Depositary may petition any court of competent jurisdiction for the
appointment of a successor Depositary. Every successor Depositary shall execute
and deliver to its predecessor and to the Company an instrument in writing
accepting its appointment hereunder, and thereupon such successor Depositary,
without any further act or deed, shall become fully vested with all the rights,
powers, duties and obligations of its predecessor and for all purposes shall be
the Depositary under this Deposit Agreement, and such predecessor, upon payment
of all sums due it and on the written request of the Company, shall execute and
deliver an instrument transferring to such successor all rights and powers of
such predecessor hereunder, shall duly assign, transfer and deliver all right,
title and interest in the Stock and any moneys or property held hereunder to
such successor, and shall deliver to such successor a list of the record holders
of all outstanding Receipts. Any successor Depositary shall promptly mail
notice of its appointment to the record holders of Receipts.
Any corporation into or with which the Depositary may be merged,
consolidated or converted shall be the successor of such Depositary without the
execution or filing of any document or any further act, and notice thereof shall
not be required hereunder. Such successor Depositary may authenticate the
Receipts in the name of the predecessor Depositary or in the name of the
successor Depositary.
SECTION 5.05. Corporate Notices and Reports. The Company agrees that
-----------------------------
it will transmit to the record holders of Receipts, in each case at the
addresses furnished to it pursuant to Section 4.08, all notices and reports
(including without limitation financial statements) required by law, by the
rules of any national securities exchange upon which the Stock, the
-24-
<PAGE>
Depositary Shares or the Receipts are listed or by the Company's Restated
Certificate of Incorporation, as amended (including the Certificate), to be
furnished by the Company to holders of Stock. Such transmission will be at the
Company's expense.
SECTION 5.06. Indemnification by the Company. The Company shall
------------------------------
indemnify the Depositary, any Depositary's Agent and any Registrar against, and
hold each of them harmless from, any loss, liability or expense (including
reasonable attorney fees and expenses) which may arise out of (a) acts performed
or omitted in connection with this Deposit Agreement and the Receipts (i) by the
Depositary, any Registrar or any of their respective agents (including any
Depositary's Agent), except for any liability arising out of gross negligence,
willful misconduct or bad faith on the respective parts of any such person or
persons, or (ii) by the Company or any of its agents, or (b) the offer, sale or
registration of the Receipts, the Common Stock or the Stock pursuant to the
provisions hereof. The obligations of the Company set forth in this Section
5.06 shall survive any succession of any Depositary, Registrar or Depositary's
Agent.
SECTION 5.07. Charges and Expenses. The Company shall pay all
--------------------
transfer and other taxes and governmental charges arising solely from the
existence of the depositary arrangements. The Company shall pay all charges of
the Depositary in connection with the initial deposit of the Stock, the initial
issuance of the Depositary Shares and any redemption or conversion of the Stock
by the Company and all withdrawals of shares of the Stock by owners of
Depositary Shares. All other transfer and other taxes and governmental charges
shall be at the expense of holders of Depositary Shares. The Depositary may
refuse to effect any transfer of a Receipt or any withdrawal of Stock evidenced
thereby until all such taxes and charges with respect to such Receipt or Stock
are paid by the holder thereof. If a holder of Receipts requests the Depositary
to perform duties not required under this Deposit Agreement, the Depositary
shall notify the holder of the approximate cost of the performance of such
duties. If such duties are subsequently performed at the request of such
holder, such holder will be liable for such charges and expenses. All other
charges and expenses of the Depositary and any Depositary's Agent hereunder and
of any Registrar (including, in each case, fees and expenses of counsel)
incident to the performance of their respective obligations hereunder will be
paid upon consultation and agreement between the Depositary and the Company as
to the amount and nature of such charges and expenses.
-25-
<PAGE>
ARTICLE VI
Amendment and Termination
-------------------------
SECTION 6.01. Amendment. The form of Receipt evidencing the
---------
Depositary Shares and any provision of the Deposit Agreement may at any time be
amended by agreement between the Company and the Depositary; provided, however,
-------- -------
that no such amendment (other than any change in the fees of any Depositary,
Registrar or Transfer Agent, which shall go into effect not sooner than 90 days
after notice thereof to the holders of the Receipts) which shall materially and
adversely alter the rights of the holders of Depositary Shares (or, which
relates to or affects rights to receive dividends or distributions, or voting or
redemption rights) will be effective unless such amendment has been approved by
the holders of at least two-thirds of the Depositary Shares then outstanding.
In no event may any amendment impair the right of any holder of Receipts,
subject to the conditions specified in the Deposit Agreement, upon such
surrender of the Receipts evidencing such Depositary Shares, to receive Stock or
upon conversion of the Stock represented by the Depositary Receipts, to receive
shares of Common Stock, and in each case any money or other property represented
thereby, except in order to comply with mandatory provisions of applicable law.
SECTION 6.02. Termination. The Deposit Agreement may be terminated
-----------
by the Company or the Depositary only if (i) all outstanding Depositary Shares
have been redeemed or converted, (ii) there has been a final distribution in
respect of the Stock in connection with any liquidation, dissolution or winding
up of the Company and such distribution has been distributed to the holders of
Receipts or (iii) upon consent of holders of Receipts representing not less than
two-thirds of the Depositary Shares then outstanding.
Whenever the Deposit Agreement has been terminated pursuant to clause
(iii) of the preceding paragraph the Depositary will mail notice of such
termination to the record holders of all Receipts then outstanding at least 30
days prior to the date fixed in such notice for such termination. The
Depositary may likewise terminate the Deposit Agreement if at any time 90 days
shall have expired after the Depositary shall have delivered to the Company a
written notice of its election to resign and successor depositary shall not have
been appointed and accepted its appointment. If any Receipts remain outstanding
after the date of termination, the Depositary thereafter will discontinue the
transfer of Receipts, will suspend the distribution of dividends to the holders
thereof, and will not give any further notices (other than notices of such
termination) or
-26-
<PAGE>
perform any further acts under the Deposit Agreement except as provided below
and except that the Depositary will continue to (i) collect dividends on the
Stock and any distributions with respect thereto and (ii) deliver the Stock
together with such dividends and distributions and the net proceeds of any sales
of rights, preferences, privileges or other property, without liability for
interest thereon, in exchange for Receipts surrendered. At any time after the
expiration of two years from the date of termination, the Depositary may sell
the Stock then held by it at public or private sales, at such place or places
and upon such terms as it deems proper and may thereafter hold the net proceeds
of any such sale, together with any money and other property then held by it,
without liability or interest thereon, for the pro rata benefit of the holders
of Receipts which have not been surrendered. Subject to applicable escheat laws,
any monies set aside by the Company in respect of any payment with respect to
the Stock represented by the Depositary Shares, or dividends thereon, and
unclaimed at the end of two years from the date upon which such payment is due
and payable shall revert to the general funds of the Company, after which time
the holders of such Depositary Shares shall look only to the general funds of
the Company for the payment thereof.
The Company does not intend to terminate the Deposit Agreement or to
permit the resignation of the Depositary without appointing a successor
depositary. In the event the Deposit Agreement is terminated, the Company will
use all reasonable efforts to have the Stock listed on the New York Stock
Exchange.
Upon the termination of this Deposit Agreement, the Company shall be
discharged from all obligations under this Deposit Agreement except for its
obligations to the Depositary, any Depositary's Agent and any Registrar under
Sections 5.06 and 5.07.
ARTICLE VII
Miscellaneous
-------------
SECTION 7.01. Counterparts. This Deposit Agreement may be executed
------------
in any number of counterparts, and by each of the parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed an original, but all such counterparts taken together shall constitute
one and the same instrument.
SECTION 7.02. Exclusive Benefit of Parties. This Deposit Agreement
----------------------------
is for the exclusive benefit of the parties
-27-
<PAGE>
hereto, including the holders of the Receipts, and their respective successors
hereunder, and shall not be deemed to give any legal or equitable right, remedy
or claim to any other person whatsoever.
SECTION 7.03. Invalidity of Provisions. In case any one or more of
------------------------
the provisions contained in this Deposit Agreement or in the Receipts should be
or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein or
therein shall in no way be affected, prejudiced or disturbed thereby.
SECTION 7.04. Notices. Any and all notices to be given to the
-------
Company hereunder or under the Receipts shall be in writing and shall be deemed
to have been duly given if personally delivered or sent by mail, overnight
courier or facsimile confirmed by letter, addressed to the Company at 333
Continental Boulevard, El Segundo, California 90245, to the attention of Barnett
Rosenberg, Esq., facsimile number 310-252-6123, or at any other address of which
the Company shall have notified the Depositary in writing.
Any and all notices to be given to the Depositary hereunder or under
the Receipts shall be in writing and shall be deemed to have been duly given if
personally delivered or sent by mail, overnight courier or facsimile confirmed
by letter, addressed to the Depositary at the Depositary's Office at [__________
___________________________________], facsimile number, or at any other address
of which the Depositary shall have notified the Company in writing.
Any and all notices to be given to any record holder of a Receipt
hereunder or under the Receipts shall be in writing and shall be deemed to have
been duly given if personally delivered or sent by mail, overnight courier or
facsimile confirmed by letter, addressed to such record holder at the address of
such record holder as it appears on the stock register of the Company, or if
such holder shall have filed with the Depositary or the Company a written
request that notices intended for such holder be mailed to some other address,
at the address designated in such request.
Delivery of a notice sent by mail, by telegram, telex or facsimile
shall be deemed to be effected at the time when a duly addressed letter
containing the same (or a confirmation thereof in the case of a telegram or
telex message) is deposited, postage prepaid, in a post office letter box. The
Depositary or the Company may, however, act upon any telegram, telex or
facsimile message received by it from the other or
-28-
<PAGE>
from any holder of a Receipt, notwithstanding that such telegram, telex or
facsimile message shall not subsequently be confirmed by letter or as aforesaid.
SECTION 7.05. Depositary's Agents. The Depositary may from time to
-------------------
time appoint Depositary's Agents to act in any respect for the Depositary for
the purposes of this Deposit Agreement and may at any time appoint additional
Depositary's Agents and vary or terminate the appointment of such Depositary's
Agents. The Depositary will notify the Company of any such action.
SECTION 7.06. Holders of Receipts Are Parties. The holders of
-------------------------------
Receipts from time to time shall be parties to this Deposit Agreement and shall
be bound by and entitled to the benefits of all of the terms and conditions
hereof and of the Receipts by acceptance of delivery thereof.
SECTION 7.07. Governing Law. This Deposit Agreement and the Receipts
-------------
and all rights hereunder and thereunder and provisions hereof and thereof shall
be governed by, and construed in accordance with, the laws of the State of New
York without giving effect to principles of conflict of laws.
SECTION 7.08. Inspection of Deposit Agreement. Copies of this
-------------------------------
Deposit Agreement shall be filed with the Depositary and the Depositary's Agents
and shall be open to inspection during business hours at the Depositary's Office
and the respective offices of the Depositary's Agents, if any, by any holder of
a Receipt.
SECTION 7.09. Headings. The headings of articles and sections in
--------
this Deposit Agreement and in the form of Receipt set forth in Exhibit A hereto
have been inserted for convenience only and are not to be regarded as a part of
this Deposit Agreement or the Receipts or to have any bearing upon the meaning
or interpretation of any provision contained herein or in the Receipts.
-29-
<PAGE>
IN WITNESS WHEREOF, the Company and the Depositary have duly executed
this Deposit Agreement as of the day and year first above set forth, and all
holders of Receipts shall become parties hereto by and upon acceptance by them
of delivery of Receipts issued in accordance with the terms hereof.
MATTEL, INC.
By:________________________________
Name:______________________________
Title:_____________________________
[ ], as Depositary
By:________________________________
Name:______________________________
Title:_____________________________
-30-
<PAGE>
EXHIBIT 4.3
FORM OF DEPOSITARY RECEIPT
Number DEPOSITARY SHARES
(each representing
1/25th of one share
Series C Mandatorily
Convertible Redeemable Preferred Stock)
DEPOSITARY RECEIPT FOR DEPOSITARY SHARES
REPRESENTING SERIES C MANDATORILY CONVERTIBLE REDEEMABLE PREFERRED STOCK OF
Mattel, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE cusip
SEE REVERSE FOR CERTAIN
DEFINITIONS AND INFORMATION
[ ], as Depositary (the
"Depositary"), hereby certifies that
is the registered owner of DEPOSITARY SHARES,
("Depositary Shares"), each Depositary Share representing one twentieth of one
share of Series C Mandatorily Convertible Redeemable Preferred Stock, par value
$1.00, of Mattel, Inc., a Delaware corporation (the "Corporation"), on
deposit with the Depositary, subject to the terms and entitled to the benefits
of the Deposit Agreement dated as of ______, 1997 (the "Deposit Agreement"),
between the Corporation and the Depositary. By accepting this Depositary Receipt
the holder hereof becomes a party to and agrees to be bound by all the terms and
conditions of the Deposit Agreement. This Depositary Receipt shall not be
valid or obligatory for any purpose or entitled to any benefits under the
Deposit Agreement unless it shall have been executed by the Depositary by the
manual signature of a duly authorized officer or, if executed in facsimile by
the Depositary, countersigned by a Registrar in respect of the Depositary
Receipts by the manual signature of a duly authorized officer thereof.
All Depositary Shares evidenced by this Depositary Receipt and all increases
and decreases of the number of Depositary Shares and the respective dates
thereof shall be endorsed by the holder or any appointed custodian hereof on
the schedule attached hereto and made a part hereof, or on a continuation
thereof which shall be attached hereto and made a part hereof.
Dated:___________, 1997
- ------------------- -----------------
Depositary Registrar
By By
THE ADDRESS OF THE PRINCIPAL OFFICE
OF THE DEPOSITARY IS
<PAGE>
MATTEL, INC.
MATTEL, INC. WILL FURNISH WITHOUT CHARGE TO EACH RECEIPTHOLDER WHO
SO REQUESTS A COPY OF THE DEPOSIT AGREEMENT AND A STATEMENT OR SUMMARY OF THE
POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR
OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF WHICH THE
CORPORATION IS AUTHORIZED TO ISSUE AND OF THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. ANY SUCH REQUEST IS TO BE
ADDRESSED TO THE DEPOSITARY NAMED AND AT THE ADDRESS SET FORTH ON THE FACE OF
THIS RECEIPT.
------------------------------------------------
The following abbreviations when used in the instructions on
the face of this receipt shall be construed as though they were written out in
full according to applicable laws or regulations.
TEN COM - as tenant in common UNIF GIFT MIN ACT -______Custodian ________
(Cust) (Minor)
TEN ENT - as tenants by the entireties Under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right of
survivorship and not as
tenants in common
--------------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE
- ------------------------------------------------------------------------------
Depositary Shares represented by the within Receipt, and do hereby irrevocably
constitute and appoint
Attorney to transfer the
said Depositary Shares on the books of the within named Depositary with full
power of substitution in the premises.
Dated
----------------------------
- -----------------------------------------------------------------------------
NOTICE: The signature to the assignment must correspond with the name as
written upon the face of this Receipt in every particular, without alteration
or enlargement or any change whatever.
<PAGE>
EXHIBIT 5
[LETTERHEAD OF ROBERT NORMILE]
February 14, 1997
Mattel, Inc.
333 Continental Boulevard
El Segundo, CA 90245-5012
Subject: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
Reference is made to the registration statement on Form S-4 (the
"Registration Statement") being filed by Mattel, Inc., a Delaware corporation
(the "Company"), with the Securities and Exchange Commission for the purpose of
registering under the Securities Act of 1933, as amended (the "Securities Act")
securities of the Company to be issued or reserved for issuance in connection
with the merger (the "Merger") of Tyco Toys, Inc. ("Tyco") with and into the
Company and as described in the Registration Statement. The securities covered
by the Registration Statement are (i) up to 19,198,818 shares of the common
stock, $1.00 par value per share, of the Company ("Common Stock"), issuable in
connection with the Merger; (ii) 19,320,000 Depositary Shares (the "Depositary
Shares") to be issued in the Merger, each Depositary Share representing one-
twentieth of a share of Series C Mandatorily Convertible Redeemable Preferred
Stock, $1.00 par value per share, of the Company (the "Series C Preferred
Stock"); (iii) 772,800 shares of Series C Preferred Stock to be issued in
connection with the Merger; (iv) an indeterminate number of shares of Common
Stock to be issued upon conversion of the Series C Preferred Stock; (v) an
indeterminate number of shares of Common Stock to be issued upon conversion of
shares of Series B Voting Convertible Exchangeable Preferred Stock, $1.00 par
value per share, of the Company (the "Series B Preferred Stock"); and (vi) the
preference share purchase rights of the Company (the "Rights") issuable together
with the shares of Common Stock to be issued in the Merger or issuable upon
conversion of the Series B Preferred Stock or upon conversion of the Series C
Preferred Stock. The Series B Preferred Stock is to be issued in the Merger but
is not being registered under the Registration Statement. The Depositary Shares
will be represented by depositary receipts (the "Depositary Receipts") issued
pursuant to a Deposit Agreement (the "Deposit Agreement") between the Company
(as successor to Tyco in the Merger) and Midlantic Bank, N.A. (the
"Depositary"). The Depositary Shares and the shares of Common Stock and Series C
Preferred Stock covered by the Registration Statement are sometimes referred to
herein as the "Shares."
I have examined originals or copies, certified or otherwise identified to
my satisfaction, of such corporate records, certificates of public officials,
and other documents as I have deemed necessary or relevant as a basis for my
opinion set forth herein.
<PAGE>
Based on and subject to the foregoing and subject further to the
assumptions set forth below, I am of the opinion that:
A. The Company is a corporation duly organized and validly existing
under the laws of the State of Delaware.
B. When the Shares to be issued in the Merger have been so issued in
the manner contemplated by the Registration Statement such Shares will be
validly issued, fully paid, and non-assessable.
C. When the Shares issuable upon conversion of the Series B Preferred
Stock and the Shares issuable upon conversion of the Series C Preferred
Stock have been issued upon such conversion, such Shares will be validly
issued, fully paid, and non-assessable.
D. When the Rights issuable together with the shares of Common Stock
to be issued in the Merger or issuable upon conversion of the Series B
Preferred Stock or the Series C Preferred Stock have been issued in
accordance with the Rights Agreement dated February 7, 1992 between Mattel
and The First National Bank of Boston, as Rights Agent (the "Rights
Agreement"), such Rights will be validly issued and will be binding
obligations of Mattel entitled to the benefits of the Rights Agreement.
The opinion set forth in paragraph B above assumes, with respect to the
Depositary Shares, compliance with the terms of the Deposit Agreement by each
of the Company and the Depositary, and with respect to the Series C Preferred
Stock, due authorization for issuance by the Board of Directors of the Company
and proper filing of the Certificate of Designations relating to the Series C
Preferred Stock with the Secretary of State of the State of Delaware in
accordance with Section 103 of the Delaware General Corporation Law. The
opinion set forth in paragraph C above assumes, with respect to the Common Stock
issuable upon exercise of the Series B Preferred Stock and the Common Stock
issuable upon exercise of the Series C Preferred Stock, due authorization for
issuance by the Board of Directors of the Company of each such series of
preferred stock, proper filing of the respective Certificates of Designations
relating to each such series of preferred stock with the Secretary of State of
the State of Delaware in accordance with Section 103 of the Delaware General
Corporation Law and issuance of the shares of each such series of preferred
stock in the Merger in the manner contemplated by the Registration Statement.
I am not a member of the Bar of any jurisdiction other than the States of
California and New York, and I express no opinion other than on the laws of the
States of California and New York and the General Corporation Law of the State
of Delaware.
<PAGE>
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to me under the caption "Legal Matters" in the
Proxy Statement/Prospectus forming a part of the Registration Statement. In
giving this consent, I do not thereby admit that I am in the category of persons
whose consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ Robert Normile
Robert Normile
Vice President and
Assistant General Counsel
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF BAER MARKS & UPHAM LLP]
February 14, 1997
Tyco Toys, Inc.
6000 Midlantic Drive
Mt. Laurel, New Jersey 08054-1516
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") of Mattel, Inc. ("Mattel"), a Delaware corporation,
relating to the merger (the "Merger") of Tyco Toys, Inc., a Delaware corporation
("Tyco"), with and into Mattel, upon the terms and conditions set forth in the
Agreement and Plan of Merger dated as of November 17, 1996, as amended as of
November 22, 1996 (as so amended, the "Agreement"), by and among Tyco, Mattel
and Truck Acquisition Corp., a wholly owned subsidiary of Mattel.
We have participated in the preparation of the discussion set forth
under the headings "SUMMARY -- Certain United States Federal Income Tax
Consequences" and "THE MERGER -- Certain United States Federal Income Tax
Consequences" in the Joint Proxy Statement/Prospectus that is part of the
Registration Statement. Subject to the qualifications and conditions set forth
therein, such discussion, insofar as it relates to the federal income tax
consequences of the Merger to Tyco and the stockholders of Tyco, constitutes the
opinion of our firm.
We consent to the use of this opinion as Exhibit 8.1 to the
Registration Statement and to the reference to our firm under the headings
"SUMMARY -- Certain United States Federal Income Tax Consequences" and "THE
MERGER -- Certain United States Federal Income Tax Consequences" in the Joint
Proxy Statement/Prospectus that is part of the Registration Statement. In giving
such consent, we do not hereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
Very truly yours,
/s/ Baer Marks & Upham LLP
<PAGE>
EXHIBIT 8.2
[LETTERHEAD OF WACHTELL, LIPTON, ROSEN & KATZ]
February 14, 1997
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245-5012
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") of Mattel, Inc. ("Mattel"), a Delaware corporation,
relating to the merger (the "Merger") of Tyco Toys, Inc., a Delaware corporation
("Tyco"), with and into Mattel, upon the terms and conditions set forth in the
Agreement and Plan of Merger dated as of November 17, 1996, as amended as of
November 22, 1996 (as so amended, the "Agreement"), by and among Tyco, Mattel
and Truck Acquisition Corp., a wholly owned subsidiary of Mattel.
We have participated in the preparation of the discussion set forth
under the headings "SUMMARY -- Certain United States Federal Income Tax
Consequences" and "THE MERGER -- Certain United States Federal Income Tax
Consequences" in the Joint Proxy Statement/Prospectus that is part of the
Registration Statement. Subject to the qualifications and conditions set forth
therein, such discussion, insofar as it relates to the federal income tax
consequences of the Merger to Mattel and the stockholders of Mattel, constitutes
the opinion of our Firm.
We consent to the use of this opinion as Exhibit 8.2 to the
Registration Statement and to the reference to our firm under the headings
"SUMMARY -- Certain United States Federal Income Tax Consequences" and "THE
MERGER -- Certain United States Federal Income Tax Consequences" in the Joint
Proxy Statement/Prospectus that is part of the Registration Statement. In giving
such consent, we do not hereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
<PAGE>
EXHIBIT 12
MATTEL, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31, (a)
------------------ ------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR
FIXED CHARGES:
Income before income
taxes, cumulative ef-
fect of changes in ac-
counting principles and
extraordinary item..... $391,395 $369,580 $532,902 $393,632 $236,646 $282,945 $214,326
Less (plus) minority in-
terest and undistrib-
uted income (loss) of
less-than-majority-
owned affiliates, net.. 253 (136) 197 215 124 (23) 2,432
Add:
Interest expense........ 52,491 51,804 73,589 55,449 62,614 68,716 64,334
Dividends - STAR pre-
ferred stock........... -- -- -- -- -- -- 1,257
Appropriate portion of
rents (b).............. 10,984 10,448 14,276 11,242 11,276 11,898 7,871
Earnings available for
fixed charges.......... $455,113 $431,696 $620,964 $460,538 $310,660 $363,536 $290,220
FIXED CHARGES:
Interest expense........ $ 52,491 $ 51,804 $ 73,589 $ 55,449 $ 62,614 $ 68,716 $ 64,334
Capitalized interest.... 1,457 439 693 285 -- -- --
Dividends - STAR pre-
ferred stock........... -- -- -- -- -- -- 1,257
Dividends - Series F
preference stock....... -- 3,297 3,342 4,689 4,894 4,826 4,830
Appropriate portion of
rents (b).............. 10,984 10,448 14,276 11,242 11,276 11,898 7,871
Fixed charges (c) $ 64,932 $ 65,988 $ 91,900 $ 71,665 $ 78,784 $ 85,440 $ 78,292
Ratio of earnings to
fixed charges.......... 7.01x 6.54x 6.76x 6.43x 3.94x 4.25x 3.71x
</TABLE>
- --------
(a) Consolidated financial information for 1993, 1992 and 1991 has been
restated for the effects of the November 1993 merger of Fisher-Price, Inc.
into a wholly-owned subsidiary of the Company, accounted for as a pooling
of interests. Fisher-Price, Inc. was excluded from periods prior to July
1, 1991, while its business was operated as a division of The Quaker Oats
Company.
(b) Portion of rental expenses which is deemed representative of an interest
factor, not to exceed one-third of total rental expense.
(c) Until July 1, 1991, the Company was a guarantor of certain foreign bank
lines of credit extended to less-than-majority-owned joint ventures.
Performance by the Company pursuant to these guarantees was deemed
unlikely, thus the associated fixed charges have been excluded from
computation of the ratio of earnings to fixed charges. The portion of
fixed charges paid by less-than-majority-owned joint ventures for which
the Company was guarantor was approximately $4.5 million in 1991.
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Mattel, Inc. of
our report dated February 6, 1996, which appears on page 51 of Mattel, Inc.'s
1995 Annual Report to Shareholders, which is incorporated by reference in its
Annual Report on Form 10-K for the year ended December 31, 1995. We also consent
to the incorporation by reference of our report on the Financial Statement
Schedules, which appears on page 25 of such Annual Report on Form 10-K. We
also consent to the use of our reports dated November 17, 1996 and November 22,
1996, which were required pursuant to Section 8.1(f) of the Merger Agreement,
relating to the proposed accounting treatment of the Merger. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Los Angeles, California
February 14, 1997
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Mattel, Inc. on Form S-4 of our reports dated February 7, 1996, except for
Note 5, as to which the date is February 15, 1996, appearing in the Annual
Report on Form 10-K of Tyco Toys, Inc. for the year ended December 31, 1995 and
to the reference to us with regard thereto under the heading "Experts" in the
Proxy Statement/Prospectus, which is part of this Registration Statement.
We also hereby consent to the reference to us under the headings "The Merger --
Accounting Treatment" and "Experts" in such Proxy Statement/Prospectus with
regard to our opinion dated November 17, 1996, relating to the ability of Tyco
Toys, Inc. to enter into a transaction to be accounted for as a pooling-of-
interests up to the date of such opinion. In giving such consent, we do not
thereby admit that such reference or a consent to such opinion is required under
Section 7 of the Securities Act of 1933 or the rules and regulations adopted by
the Securities and Exchange Commission thereunder.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 13, 1997
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF ALLEN & COMPANY INCORPORATED]
February 13, 1997
Tyco Toys, Inc.
6000 Midlantic Drive
Mt. Laurel, NJ 08054
Mattel, Inc.
333 Continental Boulevard
El Segundo, CA 90245-5012
Gentlemen:
We hereby consent to the references to our firm and to the inclusion of our
opinions dated November 17, 1996 and November 22, 1996 and the descriptions of
such opinions in the Proxy Statement Prospectus of Tyco Toys, Inc. and
Mattel, Inc. constituting a part of the Registration Statement on Form S-4 of
Mattel, Inc. filed with the Securities and Exchange Commission today. In giving
the foregoing consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1993,
as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
ALLEN & COMPANY INCORPORATED
By:/s/ Richard Fields
-----------------------------------
Name: Richard Fields
Title: Managing Director
<PAGE>
EXHIBIT 23.7
CONSENT OF COUNSEL TO THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF MATTEL, INC.
We hereby consent to the reference to our name as having prepared the
report referred to in the last paragraph under the caption "Special
Considerations" in the Prospectus dated February 14, 1997, included in the
Registration Statement of Mattel, Inc. In giving such consent, we do not thereby
admit that we are "experts" within the meaning of Section 11 of the Securities
Act of 1933 or in the category of persons whose consent is required under
Section 7 of such Act.
DAVIS POLK & WARDWELL
/s/ Davis Polk & Wardwell
----------------------------------
February 12, 1997
<PAGE>
EXHIBIT 23.8
CONSENT
-------
We hereby consent to the reference to our name as having reviewed certain
Mattel, Inc. accounting treatments in connection with a report by the law firm
of Davis Polk Wardwell in the last paragraph under the caption "Special
Considerations" in the Prospectus dated February 14, 1997, included in the
Registration Statement of Mattel, Inc. In giving such consent, we do not
thereby admit that we are "experts" within the meaning of Section 11 of the
Securities Act of 1933 or in the category of persons whose consent is required
under Section 7 of such Act.
/s/ Ernst & Young LLP
New York, NY
February 14, 1997
<PAGE>
LOGO
TYCO TOYS, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD
MARCH 18, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having received the Notice of Special Meeting to be held on
March 18, 1997 and the related Joint Proxy Statement/Prospectus, hereby
appoint(s) Richard E. Grey, Gary Baughman and Harry Pearce, and each of them,
proxies of the undersigned (with full power of substitution) to attend the
above Special Meeting and all adjournments thereof (the "Meeting") and there to
vote all shares of Common Stock, Series B Preferred Stock and Series C
Preferred Stock of Tyco Toys, Inc. (the "Company") that the undersigned would
be entitled to vote if personally present, in regard to all matters which may
come before the Meeting, and especially to vote on the matters set forth on the
reverse side.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER SPECIFIED
HEREIN. IF NO SPECIFICATION IS MADE, THE PROXIES INTEND TO VOTE "FOR" PROPOSAL
1 AND IN THE PROXIES' DISCRETION ON ANY OTHER MATTERS COMING BEFORE THE
MEETING. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
If you wish to vote in accordance with the Board of Directors'
recommendations, just sign on the reverse side. You need not mark any boxes.
<PAGE>
LOGO
To approve the Agreement and Plan of Merger, dated as of November 17, 1996,
by and among Mattel, Inc., Truck Acquisition, Inc. and Tyco Toys, Inc., as
amended as of November 22, 1996.
FOR [_] AGAINST [_] ABSTAIN [_]
Signature __________________________
Date _______________________________
Signature __________________________
Date _______________________________
In signing please write name(s) as
appearing in the imprint of this
card. If the person(s) signing
hereon hold(s) any shares in a
fiduciary, custodial or joint
capacity or capacities, this Proxy
is signed in every such capacity as
well as individually.
