SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: June 16, 1998
MATTEL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 001-05647 95-1567322
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File No.) Identification No.)
333 Continental Boulevard, El Segundo, California 90245-5012
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 252-2000
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N/A
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(Former name or former address, if changed since last report)
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Information to be included in the Report
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Item 5. Other Events
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Mattel, Inc. hereby incorporates by reference herein its
press release dated June 15, 1998 regarding the Company
achieving its full-year EPS target, a copy of which is
included as Exhibit 99.0 attached hereto.
On June 15, 1998, Mattel, Inc. and Pleasant Company
announced an agreement by which Mattel will acquire
the Wisconsin-based direct marketer of books, dolls,
clothing, accessories and activity products bearing
the American Girl brand for $700 million. Mattel also
announced that Pleasant Rowland, president and founder
of Pleasant Company, will become vice-chairman of Mattel,
Inc. and will serve on Mattel's board of directors. A
copy of the stock purchase agreement related to this
transaction is included as Exhibit 99.1 attached hereto.
Item 7. Financial Statements and Exhibits
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(a) Financial statements of businesses acquired: None
(b) Pro forma financial information: None
(c) Exhibits:
99.0 Press release dated June 15, 1998.
99.1 Stock purchase agreement dated June 12, 1998
between Pleasant Rowland Frautschi and W.
Jerome Frautschi and Mattel, Inc.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
MATTEL, INC.
Registrant
By: /s/ LELAND P. SMITH
-------------------------
Leland P. Smith
Date: June 16, 1998 Assistant General Counsel
------------- and Secretary
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EXHIBIT 99.0
FOR IMMEDIATE RELEASE
June 15, 1998 Mattel, Inc.
News Media Investor Relations
Glenn Bozarth Mike Salop
310-252-3521 310-252-2703
MATTEL CONFIDENT IT WILL ACHIEVE FULL-YEAR EPS TARGET
DESPITE DECLINE IN 1998 SECOND QUARTER
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LOS ANGELES, June 15 -- Mattel, Inc. today said that sales volume and
earnings for the second quarter ended June 30 will be negatively impacted
by a previously reported change in buying practices at Toys "R" Us.
The company said that a reduction of at least $70 million in sales to
Toys "R" Us and a $25 million decrease related to discontinued product
lines versus the 1997 quarter will contribute to a decline in net revenues
of approximately 10 percent, and result in earnings per share of
approximately $.20 for the quarter.
Despite the second quarter shortfall, the company said it remains
confident it will achieve projected earnings per share growth of
approximately 18 percent for the year.
In a separate news release, Mattel today announced an agreement to
acquire Pleasant Company, a Wisconsin-based direct marketer of books,
dolls, clothing, accessories and activity products bearing the American
Girl brand. Mattel said it expects the $700 million acquisition to be
modestly accretive to 1998 earnings.
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Mattel, Inc. is the worldwide leader in the design, manufacture and
marketing of children's toys. With headquarters in El Segundo, California,
Mattel has offices and facilities in 36 countries and sells its products in
more than 150 nations throughout the world.
Note:
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Forward-looking statements included in this release with respect to the
financial condition, results of operations and business of the company,
which include, but are not limited to, the Mattel and Tyco restructuring
charge, cost savings and profitability, are subject to certain risks and
uncertainties that could cause actual results to differ materially from
those set forth in such statements. These include without limitation: the
company's dependence on the timely development, introduction and customer
acceptance of new products; significant changes in buying patterns of major
customers; possible weaknesses of international markets; the impact of
competition on revenues and margins; the effect of currency fluctuations on
reportable income; unanticipated negative results of litigation or
environmental matters; and other risks and uncertainties as may be detailed
from time to time in the company's public announcements and SEC filings.
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EXHIBIT 99.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
by and between
PLEASANT ROWLAND FRAUTSCHI
and
W. JEROME FRAUTSCHI,
as Sellers
and
MATTEL, INC.,
as Purchaser
Dated as of June 12, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I PURCHASE AND SALE OF SHARES 1
1.1 Defined Terms 1
1.2 Purchase and Sale of Shares 1
1.3 Purchase Price 1
1.4 Closing 2
1.5 Execution and Delivery of Closing Documents 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS 2
2.1 Organization; Good Standing 3
2.2 Capital Stock 3
2.3 Subsidiaries and Joint Ventures 3
2.4 Authority; Enforceability 3
2.5 No Violation 3
2.6 Consents 4
2.7 Taxes 4
2.8 Financial Statements 4
2.9 Absence of Material Adverse Effect 5
2.10 Litigation 5
2.11 Employee Benefits 5
2.12 Labor Matters 7
2.13 Intellectual Property 7
2.14 Title to Assets; Liens 7
2.15 Environmental Compliance 8
2.16 Contracts 8
2.17 Financial Advisor 9
2.18 Compliance with Applicable Laws 9
2.19 Customers 9
2.20 Suppliers 9
2.21 Affiliate Transactions 9
2.22 Liabilities 10
2.23 Disclaimer of Other Representations and Warranties 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER 10
3.1 Organization; Good Standing 10
3.2 Due Authorization 10
3.3 Authority; Enforceability 10
3.4 No Violation 11
3.5 Consents 11
3.6 Financing. 11
3.7 Brokers and Finders 11
3.8 Securities Act 11
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ARTICLE IV COVENANTS 11
4.1 Conduct of Business of the Companies 11
4.2 No Disclosure or Negotiation with Others 12
4.3 Best Efforts 13
4.4 HSR Act Compliance 13
4.5 Confidentiality; Publicity 13
4.6 Employee Arrangements 14
4.7 American Girl Place.TM 14
4.8 Officers' and Directors' Liability Insurance; Indemnification 14
4.9 Childrens' Charities 15
ARTICLE V CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS 15
5.1 Representations and Warranties 15
5.2 Covenants 15
5.3 Sellers' Certificate 15
5.4 Opinion of Counsel 15
5.5 Corporate Records 15
5.6 Delivery of Stock Certificates 16
5.7 HSR Act 16
5.8 No Orders or Injunctions 16
5.9 Employment Agreement 16
5.10 Non-Competition and Non-Solicitation Agreement 16
ARTICLE VI CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS 16
6.1 Representations and Warranties 16
6.2 Covenants 16
6.3 Officer's Certificate 16
6.4 Opinion of Counsel 16
6.5 Delivery of Purchase Price 16
6.6 HSR Act 17
6.7 Release From Guarantees 17
6.8 No Orders or Injunctions 17
6.9 Employment Agreement 17
6.10 Non-Competition and Non-Solicitation Agreement 17
ARTICLE VII TERMINATION 17
7.1 Termination 17
7.2 Waiver 17
7.3 Return of Information 18
7.4 Effect of Termination 18
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ARTICLE VIII CERTAIN TAX MATTERS 18
8.1 Section 338(h)(10) Election 18
8.2 Allocation of Purchase Price 18
8.3 Cooperation on Tax Matters 18
8.4 Certain Taxes 20
8.5 Code Section 455 Deferred Subscription Matters 20
ARTICLE IX INDEMNIFICATION AND SURVIVAL 20
9.1 Survival of Representations, Warranties and Agreements 20
9.2 Agreement by Sellers to Indemnify 20
9.3 Agreement by Purchaser to Indemnify 21
9.4 Third Party Claims 22
9.5 Exclusive Remedy 22
ARTICLE X DEFINITIONS 22
10.1 Certain Defined Terms 22
10.2 Interpretation 26
ARTICLE XI MISCELLANEOUS 26
11.1 Expenses 26
11.2 Notices, Etc. 27
11.3 Amendments, Waivers, Etc 27
11.4 No Assignment 27
11.5 Entire Agreement 28
11.6 Specific Performance 28
11.7 Remedies Cumulative 28
11.8 No Third Party Beneficiaries 28
11.9 Governing Law 28
11.10 Severability 28
11.11 Headings 28
11.12 Counterparts 28
EXHIBIT A - Form of Opinion of Counsel to Sellers and the Companies
EXHIBIT B - Form of Opinion of Counsel to Purchaser
EXHIBIT C - Form of Employment Agreement
EXHIBIT D - Form of Non-Competition and Non-Solicitation Agreement
SCHEDULE 1.3 - Allocation of Purchase Price Among Sellers
SCHEDULE 2.2 - Capital Stock
SCHEDULE 2.3 - Subsidiaries and Joint Venture
SCHEDULE 2.5 - No Violation by Sellers
SCHEDULE 2.7 - Taxes
SCHEDULE 2.9 - Absence of Material Adverse Effect
SCHEDULE 2.10 - Litigation
SCHEDULE 2.11 - Employee Benefits
SCHEDULE 2.12 - Labor Matters
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SCHEDULE 2.13 - Intellectual Property
SCHEDULE 2.14 - Title to Assets; Liens
SCHEDULE 2.15 - Environmental Compliance
SCHEDULE 2.16 - Contracts
SCHEDULE 2.18 - Compliance with Applicable Laws
SCHEDULE 2.19 - Pleasant Publications Customers
SCHEDULE 2.20 - Suppliers
SCHEDULE 2.21 - Affiliate Transactions
SCHEDULE 2.22 - Liabilities
SCHEDULE 3.4 - No Violation by Purchaser
SCHEDULE 3.7 - Brokers and Finders
SCHEDULE 4.1 - Conduct of Business of the Companies
SCHEDULE 4.7 - Budget for American Girl Place
SCHEDULE 6.7 - Release From Guarantees
SCHEDULE 10.1 - Senior Officers
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STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of June 12,
1998, is by and between Mattel, Inc., a Delaware corporation ("Purchaser"),
Pleasant Rowland Frautschi, an individual resident in Wisconsin
("Rowland"), and W. Jerome Frautschi, an individual resident in Wisconsin
("Frautschi") (Rowland and Frautschi are collectively referred to herein as
"Sellers").
W I T N E S S E T H:
--------------------
WHEREAS, Sellers own all of the issued and outstanding shares (the
"Shares") of capital stock of each of Pleasant Company, a Wisconsin
corporation ("Pleasant Company"), Pleasant Company Publications, a
Wisconsin corporation ("Pleasant Publications"), Pleasant Company
Productions, a Wisconsin corporation ("Pleasant Productions"), American
Girl Place Incorporated, a Wisconsin corporation ("American Girl Place"),
American Girl Music Incorporated, a Wisconsin corporation ("American Girl
Music") and American Girls Productions Incorporated, a Wisconsin
corporation ("American Girls Productions"; and together with Pleasant
Company, Pleasant Publications, Pleasant Productions, American Girl Place
and American Girl Music, the "Companies");
WHEREAS, Purchaser desires to purchase from Sellers and Sellers desire
to sell to Purchaser the Shares upon the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Purchaser and Sellers hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
---------------------------
1.1 Defined Terms. Capitalized terms used herein have the meanings
set forth in Section 10.1.
1.2 Purchase and Sale of Shares. Subject to the terms an conditions
set forth herein, at the Closing, Sellers shall sell, transfer, convey,
assign and deliver to Purchaser, and Purchaser shall acquire, purchase and
accept the Shares from Sellers.
1.3 Purchase Price. The total purchase price (the "Purchase Price")
for the Shares shall be equal to Seven Hundred Million Dollars
($700,000,000), minus the Adjustment Amount, if any. The Purchase Price
shall be paid at Closing to Sellers pro rata in accordance with their
respective ownership of the Shares as set forth on Schedule 1.3. The
Purchase Price shall be paid to Sellers by wire transfer of immediately
available federal funds to an account or accounts
<PAGE>
designated by Sellers.
The "Adjustment Amount" will be equal to the sum of (a) the distributions
to Sellers after the date hereof from the Accumulated Adjustments Account,
(b) payments made or obligations incurred (in either case, excluding taxes
incurred by the Companies in connection with such payments) made on or
before the Closing Date by the Companies under the Incentive Plans,
(c) bonus payments made or obligations incurred (in either case, excluding
taxes incurred by the Companies in connection with such payments) on or
before the Closing Date by the Companies to its senior officers and
employees and (d) all fees and expenses payable by the Companies to Allen &
Company Incorporated in connection with financial and other services
provided by Allen & Company Incorporated to the Companies and Sellers,
other than one-half of such fees and expenses, up to the maximum set forth
in Section 11.1, payable pursuant to a letter agreement between Pleasant
Company and Allen & Company Incorporated, dated May 5, 1998 (the "Allen &
Co. Engagement Letter"), a true and correct copy of which has been
delivered by Sellers to Purchaser. Estimates of the distributions and
payments under clauses (a), (b), (c) and (d) of this Section 1.3 are set
forth on Schedule 1.3 hereto.
1.4 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 10:00 a.m., Madison,
Wisconsin, time, at the offices of Michael Best & Friedrich LLP, One South
Pinckney Street, Madison, Wisconsin 53703, on the fifth business day
following the date upon which the conditions precedent set forth in
Sections 5.7 and 6.6 of this Agreement are satisfied or waived by the
appropriate party hereto; provided the other conditions precedent set forth
in Articles V and VI of this Agreement are also satisfied on such date (the
"Closing Date"), or at such other place or time as may be agreed upon by
the parties.
1.5 Execution and Delivery of Closing Documents. Before the
Closing, each party shall cause to be prepared, and at the Closing the
parties shall execute and deliver, each agreement and instrument required
by this Agreement to be so executed and delivered and not theretofore
accomplished. At the Closing, Sellers shall deliver the certificate or
certificates representing the Shares, duly endorsed in blank or accompanied
by stock powers executed in blank, and in form sufficient to vest title
thereto fully in Purchaser, free and clear of all liens, claims and
encumbrances, against payment of the Purchase Price to be paid at Closing
by Purchaser and performance by Purchaser of its obligations under this
Agreement. At the Closing, each party also shall execute and deliver, or
cause to be executed and delivered, such other appropriate and customary
documents as any other party or its counsel reasonably may request for the
purpose of consummating the transactions contemplated by this Agreement.
All actions taken at the Closing shall be deemed to have been taken
simultaneously at the time the last of any such actions is taken or
completed.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
Sellers jointly and severally represent and warrant to Purchaser that:
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2.1 Organization; Good Standing. Each Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own and operate its properties, to carry on its business as
now conducted and proposed to be conducted. Each Company is duly qualified
and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so
qualified would not, individually or in the aggregate, have a Material
Adverse Effect.
2.2 Capital Stock. Schedule 2.2 sets forth the authorized, issued
and outstanding capital stock of the Companies. All outstanding Shares are
duly authorized, validly issued, fully paid and nonassessable (subject to
Section 180.0622(2)(b) of the WBCL). Sellers are the lawful record and
beneficial owners of all of the outstanding Shares of capital stock of each
Company. At the Closing, Sellers will deliver to Purchaser good and valid
title to the Shares, free and clear of any liens, claims and encumbrances.
Except as disclosed on Schedule 2.2, no options, warrants, commitments,
agreements or other rights to acquire capital stock from any Company or
that obligate any Company to grant, extend or enter into such option,
warrant, commitment, agreement or other rights are outstanding, and there
are no agreements or commitments of any character relating to the issued or
unissued capital stock of the Companies.
2.3 Subsidiaries and Joint Ventures. Except as disclosed on Schedule
2.3, no Company has any ownership interest in any corporation, partnership,
limited liability company, joint venture or other Person.
2.4 Authority; Enforceability. Each Seller has the capacity to
execute and deliver this Agreement and to perform his or her obligations
hereunder. Assuming due authorization, execution and delivery of this
Agreement by Purchaser, this Agreement constitutes a valid and binding
obligation of each Seller, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally and by general principles of equity (whether in
a proceeding at law on in equity).
2.5 No Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby,
will result in a violation or breach of the Articles of Incorporation or
Bylaws of any Company. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
(a) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree or ruling of any Governmental Authority to which
any Company is subject or (b) conflict with, result in a breach of, create
in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, contract, lease, instrument,
indenture or other arrangement to which any Company is a party, except (i)
as disclosed on Schedule 2.5 or (ii) where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation or failure
to give notice would not, individually or in the aggregate, have a Material
Adverse Effect or would prohibit the sale of the Shares hereunder or
otherwise materially impair the ability of Sellers to complete the sale of
the Shares hereunder.
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2.6 Consents. Neither the execution and delivery of this Agreement
by Sellers nor the performance of their obligations hereunder require the
consent, authorization or approval of any Governmental Authority, except
(a) any applicable consents, authorizations and approvals required by the
HSR Act or (b) where the failure to obtain such consent, authorization or
approval would not, individually or in the aggregate, have a Material
Adverse Effect or would prohibit the sale of the Shares hereunder or
otherwise materially impair the ability of Sellers to complete the sale of
the Shares hereunder.
2.7 Taxes.
(a) Each Company has filed all material federal, state, local
and foreign income, employment and property tax returns and reports
required to be filed by it through the date hereof, has paid all amounts
shown to be due on such returns and has withheld all amounts required to be
withheld with respect to such returns, except where the failure to file
such income, employment and property tax returns or pay all taxes shown
thereon would not, individually or in the aggregate, have a Material
Adverse Effect. There are no liens for taxes upon the assets of any
Company other than (i) liens for current taxes not yet due and payable and
liens for taxes that are being contested in good faith or (ii) liens which
would not, individually or in the aggregate, have a Material Adverse
Effect. To each Seller's Knowledge, as of the date hereof, there are no
pending actions or proceedings, assessments or collections of income,
employment, sales and use or property taxes of any kind that could subject
any Company to any liability for such taxes for the period on or prior to
the Closing Date, except for actions, proceedings, assessments or
collections which would not, individually or in the aggregate, have a
Material Adverse Effect. Except as set forth on Schedule 2.7, as of the
date hereof, no Company has received written notification from a tax
authority that threatens an action or proceeding for collection of income,
employment, sales and use or property taxes of any kind that could subject
any Company to any liability for such taxes for the period on or prior to
the Closing Date, except for actions, proceedings, assessments or
collections which would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) Each Company has filed an election to be treated as, and has
qualified as, an S Corporation for federal income tax purposes and the
corresponding provisions under the laws of the State of Wisconsin for the
entire period of its existence. All income tax returns of each Company and
its Shareholders have been filed in a manner consistent with each Company's
status as an S Corporation.
(c) No Company has waived any statute of limitations with
respect to income taxes or agreed to any extension of time with respect to
an income tax assessment or deficiency.
2.8 Financial Statements.
(a) Sellers have delivered to Purchaser audited balance sheets
of the Companies prepared on a consolidated basis as at December 31, 1997
and December 31, 1996, and audited statements of income, retained earnings
and cash flows of the Companies prepared on a consolidated basis for the
periods then ended, certified by the Companies' accountants (the "Audited
Financial Statements"). The Audited Financial Statements were prepared in
accordance
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with GAAP applied on a consistent basis throughout the periods
covered (except as may be indicated in the notes thereto) and fairly
present the financial position and results of operations of the Companies
as at the respective dates therefor and for the respective periods
indicated therein.
(b) Sellers have delivered to Purchaser an unaudited balance
sheet of the Companies on a consolidated basis as of March 31, 1998 and
unaudited statements of income, retained earnings and cash flows of the
Companies prepared on a consolidated basis for the period then ended (the
"Unaudited Financial Statements"; and together with the Audited Financial
Statements, the "Company Financial Statements"). The Unaudited Financial
Statements were prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered (except as may be indicated in the
notes thereto) and fairly present the financial position and results of
operations of the Companies as at the respective dates therefor and for the
respective periods indicated therein (subject to normal and recurring
adjustments).
2.9 Absence of Material Adverse Effect. Except as set forth on
Schedule 2.9, during the period since December 31, 1997: (a) the
businesses of the Companies have been operated in the ordinary course of
business consistent with past practice; (b) there has been no action taken
by any Company which, if taken from the date hereof through the Closing,
would violate Section 4.1(a) through (j); and (c) there has not been any
event or condition which has resulted in, or would have, individually or in
the aggregate, a Material Adverse Effect.
2.10 Litigation. Except as disclosed on Schedule 2.10, there is no
action, suit or proceeding pending, or to the each Seller's Knowledge,
threatened, against any Company, which, individually or in the aggregate,
is likely insofar as Sellers reasonably foresee, to have a Material Adverse
Effect, nor is there any judgment, decree, injunction or order of any
Governmental Authority against any Company, having, or which, insofar as
Sellers reasonably foresee, in the future could have, either individually
or in the aggregate, any such Material Adverse Effect.
2.11 Employee Benefits.
(a) Schedule 2.11 sets forth a true and complete list of all the
following: (i) each material "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, pursuant to which the Companies have (A)
any liability in respect of current or former employees, agents, directors
or independent contractors of the Companies or any beneficiaries or
dependents of any such persons or (B) any obligation to issue capital stock
of the Companies (each, an "Employee Plan"); and (ii) each other material
plan, program, policy, contract or arrangement providing for bonuses,
pensions, deferred pay, stock or stock related awards, severance pay,
salary continuation or similar benefits, hospitalization, medical, dental
or disability benefits, life insurance or other employee benefits, or
compensation to or for any current or former employees, agents, directors
or independent contractors or any beneficiaries or dependents of such
person (other than directors' and officers' liability policies), whether or
not insured or funded, (A) pursuant to which any Company has any liability
in excess of $200,000 or (B) constituting an employment or severance
agreement or arrangement with any employee, officer or director of any
Company (each, a "Benefit Arrangement").
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(b) Each Employee Plan and Benefit Arrangement has been
established, operated and maintained in all material respects in accordance
with its terms and in material compliance with all laws and the rules and
regulations thereunder, including, but not limited to, ERISA and the Code.
To each Seller's Knowledge, neither any Company nor any of their respective
current or former directors, officers, or employees, have engaged directly
or indirectly in any "prohibited transaction," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, with respect to which the
Companies have any material liability. All contributions and other
payments required to be made for any period through the date to which this
representation speaks to the Employee Plans and Benefit Arrangements (or to
any person pursuant to the terms thereof) have been made or paid in a
timely fashion, or, to the extent not required to be made or paid on or
before the date to which this representation speaks, have been reflected in
the Company Financial Statements.
(c) With respect to each Employee Plan (and each plan of any
entity that is treated as a single employer with any of the Companies under
Section 414(b), (c) or (m) of the Code or Section 4001 of ERISA (an "ERISA
Affiliate")) that is subject to Title IV or Section 302 of ERISA: (i) no
unsatisfied Title IV liability has been incurred by any Company and that
there is no material risk that any liability will be incurred (other than
for premiums due to the PBGC); (ii) the PBGC has not instituted termination
proceedings for any plans, and the Company does not believe that there is a
material risk of such proceedings being instituted; (iii) each Employee
Plan is adequately funded to meet accrued benefit obligations; (iv) no
accumulated funding deficiency exists; (v) no reportable event under
Section 4043 of ERISA has occurred; and (vi) no requirement to post
security has occurred or is reasonably expected to occur.
(d) No Employee Plan (or plan contributed to by an ERISA
Affiliate) is a "multiemployer plan" as that term is defined in Section
3(37) of ERISA or a "multiple employer plan" described in Section 4063(a)
of ERISA.
(e) There are no actions, suits, arbitrations, inquiries,
investigations or other proceedings (other than routine claims for
benefits) pending or, to each Seller's Knowledge, threatened, with respect
to any Employee Plan or Benefit Arrangement.
(f) Except for the Incentive Plans, neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (either alone or in conjunction with any other
event) result in, cause the accelerated vesting or payment of, or
materially increase the amount or value of, any payment or benefit to any
employee, officer or director of the Companies, and no payment or benefit
will result in an "excess parachute payment" within the meaning of Section
280G of the Code.
(g) The Internal Revenue Service has issued a favorable
determination letter with respect to each Employee Plan that is intended to
be qualified under Section 401(a) of the Code and each trust that is
intended to be exempt from taxation under Section 501(a) of the Code, and
no circumstances exist and no events have occurred that could adversely
affect such qualified status.
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(h) No Employee Plan provides health or life insurance benefits
following termination of employment, except as may be required under
applicable law.
(i) With respect to each Employee Plan, the Companies have
provided or made available to Purchaser true and complete copies, where
applicable, of (i) the current plan document, (ii) the most recent annual
report on Form 5500, (iii) the most recent actuarial report, (iv) the most
recent summary plan description and (v) the most recent Internal Revenue
Service determination letter.
2.12 Labor Matters. Except as disclosed in Schedule 2.12, the
Companies are not party to any collective bargaining agreements and there
are no labor strikes, work stoppages or other labor troubles, other than
routine employment matters, now pending, or, to each Seller's Knowledge,
threatened, against any Company.
2.13 Intellectual Property.
(a) Schedule 2.13 lists all registered trademarks, trade names,
copyrights, applications to register any of the foregoing, patents, patent
applications and license agreements (including both licenses from third
parties to any of the Companies of Intellectual Property owned or used by
such third parties and licenses from any of the Companies to a third party
of Intellectual Property owned or used by any of the Companies), whether or
not owned by any Company, material to the conduct of the businesses of the
Companies on the date hereof.
(b) To each Seller's Knowledge, the Companies own or have
defensible right to use all items of Intellectual Property used in
connection with the business of the Companies, except where the failure to
have such Intellectual Property would not, individually or in the
aggregate, have a Material Adverse Effect, and Sellers have no Knowledge of
any conflict between use of such Intellectual Property by Purchaser in a
manner consistent with its past use by the Companies and the rights of the
others which, insofar as reasonably can be foreseen, could, individually or
in the aggregate, have a Material Adverse Effect.
2.14 Title to Assets; Liens. To the extent material to the business
or operations of the Companies taken as a whole, each Company has good and
marketable title to all of its inventory, accounts receivable, property,
equipment and other assets and, except as set forth on Schedule 2.14, 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
(a) materially and adversely affect the value of such property as carried
on the Company Financial Statements or (b) individually or in the
aggregate, have a Material Adverse Effect. The Companies 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, individually or in the
aggregate, have a Material Adverse Effect.
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2.15 Environmental Compliance. Except as would not, individually or
in the aggregate, have a Material Adverse Effect or except as set forth on
Schedule 2.15:
(a) there are no claims pending or, to each Seller's Knowledge,
threatened, and neither Seller nor any of the Companies has received any
written notice, alleging, warning or notifying any Company that any Company
is, has been or may be in violation of, or in noncompliance with, in any
material respect, any Environmental Law;
(b) to each Seller's Knowledge, no Hazardous Substances have
ever been buried, spilled, leaked, discharged, emitted, generated, stored
or released, and no Hazardous Substances are now present in amounts,
concentrations or conditions requiring investigation, study, removal,
remediation or any other response or corrective action under, or forms the
basis of a claim pursuant to, any Environmental Law, in, on, from or under
any real property owned or leased by any Company or any other property with
respect to which any Company may be identified as a potentially responsible
party or otherwise bear liability, except for quantities stored by any
Company in the ordinary course of its business and in accordance, in all
material respects, with all applicable Environmental Laws;
(c) no real property owned or leased by any Company is being
used and, to each Seller's Knowledge, has ever been used in connection with
the business of manufacturing, storing or transporting Hazardous
Substances, and, to each Seller's Knowledge, no RCRA Hazardous Wastes have
been treated, stored or disposed of there;
(d) to each Seller's Knowledge, there are not now and never have
been any underground or above ground storage tanks or other containment
facilities of any kind on any real property owned or leased by any Company
which contain or contained any Hazardous Substances; and
(e) to each Seller's Knowledge, none of the real property owned
or leased by any Company is or has been listed on the National Priorities
List, the Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state, local or foreign list,
schedule, log, inventory or database of sites or facilities with potential,
threatened, suspected or actual releases of Hazardous Substances.
2.16 Contracts. Schedule 2.16 contains an accurate and complete
listing of all written contracts, to which any Company is a party, as of
the date of this Agreement, other than contracts with a term of less than
one year or involving payments to or by any Company of less than
$1,000,000, true and complete copies of which have been previously provided
to Purchaser. Except as disclosed on Schedule 2.16, each of such contracts
is in full force and effect and except where such breach or default would
not, individually or in the aggregate, have a Material Adverse Effect: (a)
to each Seller's Knowledge, no party thereto has breached or is in default
thereunder; (b) no event has occurred which, with the passage of time or
the giving of notice would constitute such a breach or default; (c) no
claim of default thereunder has been asserted or, to each Seller's
Knowledge, threatened; and (d) to each Seller's Knowledge, no party thereto
is seeking the renegotiation thereof or substitute performance thereunder.
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2.17 Financial Advisor. Except for Allen & Company Incorporated
pursuant to the Allen & Co. Engagement Letter, Sellers have not employed
any broker, finder or investment banker in connection with the transactions
contemplated by this Agreement.
2.18 Compliance with Applicable Laws. The Companies hold all
necessary permits, licenses, variances, orders and approvals of all
Governmental Authorities, except for such permits, licenses, variances,
exemptions, orders and approvals the failure of which to hold would not,
individually or in the aggregate, have a Material Adverse Effect (the
"Company Permits"); provided, however, this sentence shall not be
applicable to sale and use tax permits. To each Seller's Knowledge, the
Companies are in compliance with the terms of the Company Permits, except
for such failures to comply which, individually or in the aggregate, would
not have a Material Adverse Effect. To each Seller's Knowledge, except as
disclosed in Schedule 2.18, the businesses of the Companies are not being
conducted in violation of any law or regulation of any Governmental
Authority, except for violations which individually or in the aggregate
would not have a Material Adverse Effect. To each Seller's Knowledge, no
investigation or review by any Governmental Authority with respect to any
Company is pending, or threatened, nor has any Governmental Authority
indicated an intention to conduct the same, other than those the outcome of
which would not, individually or in the aggregate, have a Material Adverse
Effect.
2.19 Customers. Listed on Schedule 2.19 are the names of all the
retail and wholesale customers of Pleasant Publications which ordered goods
or merchandise from Pleasant Publications during the year ended December
31, 1997 and the three-month period ended March 31, 1998, and the amount
for which each such customer was invoiced during such periods. To each
Seller's Knowledge, except as disclosed in Schedule 2.19, no Company has
received any written notice that any significant retail or wholesale
customer of Pleasant Publications has ceased, or will cease, to use the
products of Pleasant Publications or has substantially reduced, or will
substantially reduce, the use of such products.
2.20 Suppliers. Except as set forth on Schedule 2.20, no Company has
received any written notice that any supplier from which the Companies
together ordered $1,000,000 or more worth of raw materials, supplies,
merchandise and other goods for the twelve-month period ended March 31,
1998 will not sell raw materials, supplies, merchandise or other goods to
any Company at any time after the Closing on terms and conditions similar
to those imposed on current purchases by the Companies, subject only to
general and customary price increases.
2.21 Affiliate Transactions. Except as disclosed in the notes to the
Company Financial Statements or as set forth on Schedule 2.21 hereto,
during the twelve months ended March 31, 1998, (a) neither Sellers nor any
affiliate of the Sellers (other than the Companies) nor any officer,
director or employee of any such affiliate of the Sellers provided or
caused to be provided to any of the Companies any assets, loans, advances,
services or facilities having a value in excess of $100,000 and (b) no
Company provided or caused to be provided to any Seller, any affiliate of
the Sellers or any officer, director or employee of any such affiliate of
the Sellers any assets, loans, advances, services or facilities having a
value in excess of $100,000.
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2.22 Liabilities. None of the Companies 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 consolidated balance sheet as of
March 31, 1998 and the notes thereto contained in the Unaudited Financial
Statements. Except as set forth on Schedule 2.22, to each Seller's
Knowledge, there was no basis, as of March 31, 1998, for any claim or
liability (absolute, 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, individually
or in the aggregate, would have a Material Adverse Effect, not reflected in
the consolidated balance sheet as of March 31, 1998 and the notes thereto
contained in the Unaudited Financial Statements.
2.23 Disclaimer of Other Representations and Warranties. Except as
expressly set forth in this Article II, Sellers make no representation or
warranty, express or implied, at law or in equity, in respect of the
Companies, or any of their respective assets, liabilities or operations,
including, without limitation, with respect to merchantability or fitness
for any particular purpose, and any such other representations or
warranties are hereby expressly disclaimed.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser represents and warrants to Sellers that:
3.1 Organization; Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own and operate its properties, to carry on its business as
now conducted and proposed by Purchaser to be conducted, to enter into this
Agreement, to carry out the provisions of this Agreement and to consummate
the transactions contemplated hereby. Purchaser is duly qualified and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect.
3.2 Due Authorization. The execution and delivery by Purchaser of
this Agreement, and the performance of its obligations hereunder, have been
duly and validly authorized and approved by all necessary corporate action
on the part of Purchaser.
3.3 Authority; Enforceability. Purchaser has full power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. Assuming due execution and delivery by Sellers,
this Agreement constitutes a valid and binding obligation of Purchaser,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights
generally and by general principles in equity (whether in a proceeding at
law or in equity).
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3.4 No Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
result in a violation or breach of the Articles of Incorporation or Bylaws
of Purchaser. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (a) violate any
constitution, statute, regulation, rule, injunction, judgment, order,
decree or ruling of any Governmental Authority to which Purchaser is
subject or (b) conflict with, result in a breach of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, instrument, indenture or other
arrangement to which Purchaser is a party, except (i) as disclosed on
Schedule 3.4 or (ii) where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation or failure to give
notice would not, individually or in the aggregate, have a Material Adverse
Effect or would prohibit the purchase of the Shares hereunder or otherwise
materially impair the ability of Purchaser to complete the purchase of the
Shares hereunder.
3.5 Consents. Neither the execution and delivery of this Agreement
by Purchaser and the performance of its obligations hereunder require the
consent, authorization or approval of any Governmental Authority, except
(a) any applicable consents, authorizations and approvals required by the
HSR Act or (b) where the failure to obtain such consent, authorization or
approval would not, individually or in the aggregate, have a Material
Adverse Effect or would prohibit the purchase of the Shares hereunder or
otherwise materially impair the ability of Purchaser to complete the
purchase of the Shares hereunder.
3.6 Financing. Purchaser has available the funds necessary to
consummate the transactions contemplated by this Agreement on a timely
basis.
3.7 Brokers and Finders. Except as disclosed on Schedule 3.7,
Purchaser has not employed any broker, finder or investment banker in
connection with the transactions contemplated by this Agreement.
3.8 Securities Act. The Shares are being acquired by Purchaser for
investment purposes only and not with a view to any public distribution
thereof. Purchaser will not offer to sell or otherwise dispose of the
Shares acquired by it in violation of the Securities Act of 1933, as
amended.
ARTICLE IV
COVENANTS
---------
4.1 Conduct of Business of the Companies. Except as contemplated on
Schedule 4.1, this Agreement or with the consent of Purchaser, during the
period from the date of this Agreement to the Closing, Sellers will cause
each of the Companies to (i) conduct its operations in the ordinary course
of business and (ii) not enter into any material transaction other than
those transactions which are in the ordinary course of business. Without
limiting the generality of the foregoing, and except as otherwise permitted
in this Agreement, prior to the Closing Date, Sellers will not permit any
of the Companies to, without the prior written consent of Purchaser:
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(a) issue, deliver, sell, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, disposition or pledge
or other encumbrance of (i) any Shares, or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe
for any Shares, or any rights, warrants, options, calls, commitments or any
other agreements of any character to purchase or acquire any Shares or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any Shares or (ii) any other securities in respect
of, in lieu of, or in substitution for, Shares outstanding on the date
hereof;
(b) grant any material increases in the compensation or benefits
of any of its directors, officers or employees, or make any amendments to
any Employee Plan or Benefit Arrangement or adopt any new Employee Plan or
Benefit Arrangement, except for normal increases or amendments in the
ordinary course of business;
(c) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Companies;
(d) make any acquisition or disposition, by means of merger,
consolidation or otherwise, of any material assets or other business
enterprise or operation, except for the purchase of inventory, supplies and
other similar items in the ordinary course of business;
(e) adopt any amendments to its Articles of Incorporation or
Bylaws;
(f) other than borrowings under existing credit facilities or
other borrowings in the ordinary course of business, incur any indebtedness
for borrowed money or guarantee any such indebtedness or make any loans,
advances or capital contributions to, or investments in, any other Person
(other than to any Company);
(g) enter into any agreement providing for acceleration of
payment or performance or other consequence as a result of a change of
control of the Companies;
(h) make any distributions to their shareholders except for (i)
distributions to Sellers from the Accumulated Adjustments Account, (ii)
payments of compensation to Sellers in the ordinary course of business,
(iii) payments to participants under the Incentive Plans, (iv) bonus
payments to employees as described in Section 1.3 and (v) distributions to
Sellers of art pieces owned by the Companies; provided that the aggregate
book value of such distributed art pieces shall not exceed $1,000,000;
(i) enter into any transactions having an aggregate value in
excess of $100,000 with Sellers or any affiliate of Sellers (other than the
Companies); or
(j) agree in writing, authorize, recommend, propose or announce
an intention to do any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
4.2 No Disclosure or Negotiation with Others. As long as this
Agreement shall remain effective, Sellers will not, nor will Sellers permit
any Company to, solicit or respond
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favorably to any solicitation from, or
otherwise enter into negotiations or reach any agreement with, any Person
or entity regarding the acquisition, merger or consolidation of any Company
or the sale of any capital stock of any Company.
4.3 Best Efforts. Sellers and Purchaser shall use their reasonable
best efforts to (a) promptly make all filings and seek to obtain all
authorizations required under all applicable laws with respect to the
transactions contemplated by this Agreement and will cooperate with each
other with respect thereto and (b) promptly take, or cause to be taken, all
other actions and do, or cause to be done, all other things necessary,
proper or appropriate to satisfy the conditions set forth in Articles V and
VI and to consummate and make effective the transactions contemplated by
this Agreement on the terms and conditions set forth herein as soon as
practicable (including seeking to remove promptly any injunction or other
legal barrier that may prevent such consummation).
4.4 HSR Act Compliance. Sellers and Purchaser will as promptly as
practicable, but in no event later than ten (10) business days following
the execution and delivery of this Agreement, file or cause to be filed, at
Purchaser's sole expense, with the United States Federal Trade Commission
(the "FTC") and the United State Department of Justice (the "DOJ") the
notification and report form required for the transactions contemplated
hereby and any supplemental information requested in connection therewith
pursuant to the HSR Act. Any such notification and report form and
supplemental information will be in substantial compliance with the
requirements of the HSR Act. Sellers and Purchaser will furnish to the
others such necessary information and reasonable assistance as the others
may request in connection with the preparation of any filing or submission
which is necessary under the HSR Act. Sellers and Purchaser will keep each
other apprised of the status of any communications with, and inquiries or
requests for additional information addressed to the entity that filed a
notification and report form as an acquired or acquiring person from, the
FTC or the DOJ and shall comply or cause its respective filing person to
comply promptly with any such inquiry or request. Sellers and Purchaser
will use their best efforts to obtain any clearance required under the HSR
Act for the purchase and sale of the Shares.
4.5 Confidentiality; Publicity. Purchaser and Sellers shall consult
with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or the transactions
contemplated hereby, and shall not issue any such press release or make any
such public statement without the prior consent of the other party;
provided, however, that any party hereto may, without the prior consent of
the other party, issue such press release or make such public statement as
may be required by law if it is has used all reasonable efforts to consult
with the other party and to obtain such party's consent but has been unable
to do so in a timely manner. Sellers hereby consent to the filing by
Purchaser of this Agreement (as executed) and the Employment Agreement
contemplated by Section 5.9 hereof (in the form attached as Exhibit C
hereto) as exhibits to a filing or filings to be made by Purchaser pursuant
to Section 13 or 15 of the Securities Exchange Act of 1934, as amended,
which filing or filings Purchaser may deem, after consultation with counsel
to Purchaser, necessary or advisable.
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4.6 Employee Arrangements. From and after the Closing Date,
Purchaser shall honor, and shall cause the Companies and their successors
to honor, in accordance with their terms, all employment, severance,
consulting, indemnification and other compensation contracts, including
deferred compensation arrangements, in effect on the date hereof as
disclosed on Schedule 2.11, between any Company and any current or former
director, officer or employee thereof, and all provisions for benefits or
other amounts earned or accrued through the Closing Date under any
employment contract, stock option, stock appreciation right, phantom stock,
restricted stock, severance, termination or other compensation plan,
program, arrangement or understanding maintained or contributed to by the
Companies, or with respect to which any Company could incur material
liability. For a period of not less than two (2) years following the
Closing Date, Purchaser shall cause to be provided to those employees of
the Companies on the Closing Date (the "Employees") who continue as
employees of the Companies, Employee Benefits that are determined to be no
less favorable in the aggregate than those provided to the Employees
immediately prior to the Closing Date, with such determination being
subject to the prior reasonable approval of Rowland or her successor or
designee. Solely for purposes of eligibility for and vesting of Employee
Benefits provided after the Closing Date to any individual who is, as of
the Closing Date, an employee of the Companies (including without
limitation, plans or programs of Purchaser and its affiliates after the
Closing Date, to the extent Employee Benefits are provided to any such
individual thereunder by Purchaser), all service with the Companies prior
to the Closing Date shall be treated as service with Purchaser and its
affiliates.
4.7 American Girl Place.TM Purchaser acknowledges that the
successful opening of American Girl PlaceTM in Chicago is a critical
component to the value of the Companies and the willingness of Sellers to
enter into this Agreement and the transactions contemplated hereby. The
successful opening of American Girl PlaceTM will require substantial
financial, personnel and other commitments from the Companies and their
officers. To this end, Purchaser agrees that: (i) Rowland will continue
to be responsible for and have the authority to continue the planning,
complete the improvements and operations related to the opening, and
supervise and participate in the opening of American Girl Place,TM without
any unreasonable interference of Purchaser; (ii) the Companies will
continue to devote the financial, personnel and other resources to the
opening of American Girl PlaceTM as Rowland deems necessary in her sole
discretion substantially in accordance with the budget for American Girl
PlaceTM through March 31, 1999 as set forth on Schedule 4.7; and (iii)
until no earlier than March 31, 1999, Rowland and the other senior managers
of the Companies will not be required to engage in any activities
(including, without limitation, meetings or presentations to the
Purchaser's board of directors, the press or the financial community) that
Rowland believes would interfere with her responsibility for the successful
opening of American Girl Place.TM
4.8 Officers' and Directors' Liability Insurance; Indemnification.
Purchaser shall cause the Companies and their successors to (i) maintain
the Companies' current directors' and officers' insurance and
indemnification policy or an equivalent policy, subject to terms and
conditions no less advantageous, for all directors and officers of the
Companies on the date hereof, for not less than two years after the Closing
Date to cover acts and omissions of directors and officers of the Companies
occurring at or prior to the Closing Date; provided, however, that
Purchaser shall not be required to pay an annual premium for such insurance
in excess of 200% of the premium paid by the Companies under the directors'
and officers'
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insurance and indemnification policy in effect as of the date
of this Agreement and (ii) maintain in effect for six years after the
Closing Date indemnification no less favorable to the indemnified parties
than those contained in the Articles of Incorporation of the Companies on
the date hereof relating to the rights to indemnification of officers and
directors with respect to indemnification for acts and omissions occurring
at or prior to the Closing Date.
4.9 Childrens' Charities. Purchaser agrees that it will cause the
Companies, for a period of not less than two years following the Closing
Date, to continue donating its obsolete, damaged and other non-saleable
inventory to the Madison Children's Museum, consistent with past practice,
and to use the proceeds from the sales of such inventory for children's
charitable purposes, consistent with past practice.
ARTICLE V
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
-----------------------------------------------
Except as may be waived in writing by Purchaser, the obligations of
Purchaser hereunder are subject to the fulfillment at or prior to the
Closing of each of the following conditions:
5.1 Representations and Warranties. The representations and
warranties (except for the representations and warranties in Section 2.15)
of Sellers contained herein (without regard to materiality qualifiers)
shall be true and correct in all respects as of the Closing Date with the
same force and effect as if made thereon (except for representations and
warranties made as of a specified date which shall remain true and correct
as of such date), except for inaccuracies that in the aggregate would not
have a Material Adverse Effect.
5.2 Covenants. Sellers shall have performed and complied in all
material respects with all covenants required by this Agreement to be
performed and complied with by Sellers at or prior to the Closing.
5.3 Sellers' Certificate. Purchaser shall have received (a) a
certificate from Sellers to the effect that the conditions specified in
Sections 5.1 and 5.2 are satisfied in all respects and (b) a certificate
from each individual listed on Schedule 10.1 hereto, to the effect that, to
their knowledge, the condition specified in Section 5.1 is satisfied in all
respects.
5.4 Opinion of Counsel. Purchaser shall have received an opinion of
counsel to Sellers and the Companies, in substantially the form attached
hereto as Exhibit A.
5.5 Corporate Records. Sellers shall have delivered to Purchaser
all corporate and other records of the Companies, including but not limited
to, minute books, stock books and registers.
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5.6 Delivery of Stock Certificates. Sellers shall have delivered to
Purchaser the stock certificates representing the Shares, which
certificates shall be properly endorsed (either on the certificates or by
separate stock powers) for transfer of the Shares to Purchaser.
5.7 HSR Act. The waiting period under the HSR Act applicable to the
transactions contemplated by this Agreement shall have expired or
terminated.
5.8 No Orders or Injunctions. No order or injunction shall have been
issued by any Governmental Authority which prevents or prohibits the sale
of the Shares by Sellers or any other transaction contemplated by this
Agreement.
5.9 Employment Agreement. Rowland shall have executed and delivered
to Purchaser an Employment Agreement in the form attached as Exhibit C
hereto.
5.10 Non-Competition and Non-Solicitation Agreement. Rowland shall
have executed and delivered to Purchaser a Non-Solicitation and Non-
Competition Agreement in the form attached as Exhibit D hereto.
ARTICLE VI
CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
--------------------------------------------
Except as may be waived in writing by each Seller, the obligations of
Sellers, hereunder are subject to fulfillment at or prior to the Closing of
each of the following conditions:
6.1 Representations and Warranties. The representations and
warranties of Purchaser contained herein (without regard to materiality
qualifiers) shall be true and correct in all respects as of the Closing
Date with the same force and effect as if made thereon (except for
representations and warranties as of a specified date which shall remain
true and correct as of such date), except for inaccuracies that would in
the aggregate not have a Material Adverse Effect.
6.2 Covenants. Purchaser shall have performed and complied in all
material respects with all covenants required by this Agreement to be
performed and complied with by it at or prior to the Closing.
6.3 Officer's Certificate. Sellers shall have received a certificate
from an authorized officer of Purchaser to the effect that the conditions
specified in Sections 6.1 and 6.2 are satisfied in all respects.
6.4 Opinion of Counsel. Sellers shall have received an opinion of
counsel to Purchaser in substantially the form attached hereto as Exhibit
B.
6.5 Delivery of Purchase Price. Purchaser shall have paid the
Purchase Price to Sellers as provided for in Section 1.3.
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6.6 HSR Act. The waiting period under the HSR Act applicable to the
transactions contemplated by this Agreement shall have expired or
terminated.
6.7 Release From Guarantees. Purchaser shall release each Seller
from, and indemnify each Seller with respect to, the guarantees by any
Seller of the Companies' indebtedness and other obligations set forth on
Schedule 6.7.
6.8 No Orders or Injunctions. No order or injunction shall have been
issued by any Governmental Authority which prevents or prohibits the
purchase of the Shares by Purchaser or any other transaction contemplated
by this Agreement.
6.9 Employment Agreement. Purchaser shall have executed and
delivered to Rowland an Employment Agreement in the form attached as
Exhibit C hereto.
6.10 Non-Competition and Non-Solicitation Agreement. Purchaser shall
have executed and delivered to Rowland a Non-Competition and Non-
Solicitation Agreement in the form attached as Exhibit D hereto.
ARTICLE VII
TERMINATION
-----------
7.1 Termination. This Agreement may be terminated at any time prior
to Closing:
(a) By the mutual written consent of Purchaser and Sellers;
(b) By Purchaser, upon written notice to Sellers given at any
time after September 30, 1998 (or such later date as shall have been
specified in writing by Seller) if any of the conditions specified in
Article V shall not have been satisfied (except to the extent the
satisfaction of any such condition shall have been waived by Purchaser);
(c) By Sellers, upon written notice to Purchaser given at any
time after September 30, 1998 (or such later date as shall have been
specified in writing by Purchaser) if any of the conditions specified in
Article VI shall not have been satisfied (except to the extent the
satisfaction of any condition shall have been waived by Sellers);
provided, however, that no party shall have the right to terminate this
Agreement pursuant to Sections 7.1(b) or 7.1(c) if the event giving rise to
such right is primarily attributable to such party or to any affiliated
party; and provided, further, that the party terminating this Agreement
shall give notice of its election to terminate and shall specify in such
notice the reason(s) therefore.
7.2 Waiver. At any time prior to the Closing, any party hereto may
(a) extend the time for performance of any of the obligations or other acts
of any other party hereto or (b) waive compliance with any of the
agreements of any other party or with any conditions to its
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own obligations, in each case only to the extent such obligations, agreements
and conditions are intended for its benefit.
7.3 Return of Information. Within ten (10) business days after the
termination of this Agreement in accordance with this Article VII,
Purchaser shall return to Sellers all information and all copies and
extracts thereof obtained pursuant to the Confidentiality Agreement in
whatever form provided by Sellers or its representatives, and shall
promptly destroy all such information of any kind prepared by Purchaser or
its representatives.
7.4 Effect of Termination. In the event of termination of this
Agreement pursuant to this Article VII, no party hereto shall have any
liability or further obligation to any other party to this Agreement,
except that Sections 4.5, 7.3, 7.4, 11.1 and 11.9 shall survive the
termination.
ARTICLE VIII
CERTAIN TAX MATTERS
-------------------
8.1 Section 338(h)(10) Election. At Purchaser's option, each Company
and each Seller will join with Purchaser in making an election under
Section 338(h)(10) of the Code (but no Seller shall be obligated to make,
and Sellers may affirmatively opt out of, any corresponding election under
state, local or foreign tax laws) with respect to the purchase and sale of
the Shares hereunder (a "Section 338(h)(10) Election"). Sellers will
include any income, gain, loss, deduction or other tax item resulting from
the Section 338(h)(10) Election on their tax returns to the extent required
by applicable law. Sellers shall be responsible for, and shall indemnify
each Company and Purchaser against, any federal income taxes payable by the
Companies with respect to taxable periods ending on or before the Closing
Date (treating the Closing Date as a hypothetical year end if the taxable
year does not in fact end on such date) including without limitation any
taxes payable as the result of the Section 338(h)(10) Election. Purchaser
shall be responsible for, and shall indemnify each Seller against, any
state (other than Wisconsin and Illinois) income taxes payable by such
Seller arising from the operation of the business of the Companies or
transactions contemplated by this Agreement for the taxable period ending
on or before the Closing Date (treating the Closing Date as a hypothetical
year end if the taxable year does not in fact end on such date) including
without limitation any taxes payable as the result of the Section
338(h)(10) Election.
8.2 Allocation of Purchase Price. Purchaser and Sellers agree that
the Purchase Price and liabilities of the Companies will be allocated to
the assets of the Companies for all purposes as may be agreed upon by
Sellers and Purchaser within 180 days after Closing.
8.3 Cooperation on Tax Matters.
(a) Purchaser and Sellers shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
filing of tax returns pursuant to this Section 8.3 and any audit,
litigation or other proceeding with respect to taxes. Such cooperation
shall
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include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any
such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Purchaser and Sellers
further agree, upon request of the other party, to use their best efforts
to obtain any certificate or other document from any governmental authority
or any other Person as may be necessary to mitigate, reduce or eliminate
any tax that could be imposed (including, but not limited to, with respect
to the transaction contemplated hereby).
(b) (i) Notwithstanding anything in this Agreement to the
contrary, if a written notice of deficiency, proposed adjustment,
assessment, audit, examination, or other claim with respect to any Company
shall be delivered or sent to Sellers, Purchaser or to such Company, or a
suit or dispute commenced or initiated against any Company, by any taxing
authority with respect to which Purchaser is entitled to indemnification
from Sellers pursuant to this Agreement (a "Taxing Authority Claim"),
Seller or Purchaser, as the case may be, shall promptly notify the other
party in writing of the Taxing Authority Claim, which notice shall apprise
such other party in reasonable detail of the nature of the Taxing Authority
Claim (the "Notice"), and shall include a copy thereof.
(ii) In the event of a tax audit by any taxing authority
over taxes for which one party to this Agreement (the "Tax Indemnified
Party") has been indemnified by the other party to this Agreement (the "Tax
Indemnifying Party"), the Tax Indemnifying Party will be entitled to
control the proceedings; provided, however, that the Tax Indemnifying Party
acknowledges its liability to the Tax Indemnified Party prior to assuming
such control. If the Tax Indemnifying Party elects to assume and control
the defense of any such audit, the Tax Indemnifying Party shall keep the
Indemnified Party informed of all material developments and events relating
to such audit, and the Tax Indemnified Party shall have the right, at its
own cost and expense, to participate in (but not to control) the defense of
such audit. The Tax Indemnifying Party shall not have the right to settle
or compromise such audit without the prior written consent of the Tax
Indemnified Party which consent shall not be unreasonably withheld. If the
Tax Indemnifying Party shall elect to assume and control the defense of
such audit, the Tax Indemnified Party may assume and control the defense of
such audit and settle or compromise such audit without the consent of the
Tax Indemnifying Party if the Tax Indemnified Party releases in writing the
Tax Indemnifying Party from any obligation under this Agreement with
respect to such audit. If the Tax Indemnifying Party shall not so elect to
assume and control the defense of such audit, the Tax Indemnified Party
shall control the defense of such audit.
(c) Disputes relating to any amount to be paid pursuant to
Section 8.3(b) shall be resolved by submission to an independent accounting
firm of national reputation mutually acceptable to Purchaser and Sellers,
which shall, within thirty business days after such submission, make its
determination, which shall be binding, final and conclusive on Sellers and
Purchaser. Payment shall be made within ten days of the resolution of such
dispute. The fees and disbursements incurred in resolving such dispute
shall be borne equally by Purchaser and Sellers.
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8.4 Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by
Purchaser when due, and Purchaser or the Companies shall, at their own
expense, file all necessary tax returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp, registration
and other taxes and fees, and, if required by applicable law, Sellers will
join in the execution of any such tax returns and other documentation.
8.5 Code Section 455 Deferred Subscription Matters. Purchaser and
Sellers agree that, for purposes of computing the income and deduction
resulting from the Section 338(h)(10) Election, the deemed asset purchaser
("New T") shall be treated as having assumed Pleasant Publications' prepaid
subscription liability, which corresponds to the deferred subscription
revenue, not previously included in income as of the time of the sale (as
determined under Code Section 455), in exchange for the payment by Pleasant
Publications to New T of an amount equal to such prepaid subscription
liability. The Parties agree that, rather than Pleasant Publications
writing a separate check to New T for such assumption, the liability shall
be netted against the amount otherwise payable by Purchaser, resulting in
the Purchase Price set forth in Section 1.3 of this Agreement.
ARTICLE IX
INDEMNIFICATION AND SURVIVAL
----------------------------
9.1 Survival of Representations, Warranties and Agreements. Except
as set forth below, no representations, warranties or agreements contained
in this Agreement shall survive the Closing. Notwithstanding the
foregoing:
(a) the representations and warranties contained in Sections
2.8(a) and 2.15 shall survive until one (1) year after the Closing Date;
(b) the representations and warranties contained in Section 2.7
and the agreements contained in Article VIII shall survive until the
applicable statute of limitations expires; and
(c) the representations and warranties contained in (i) Section
4.7 shall survive until March 31, 1999, (ii) Sections 4.5 and 11.1 shall
survive until the first anniversary of the Closing, (iii) Sections 4.6 and
4.9 shall survive until the second anniversary of the Closing,
(iv) Sections 4.8 and 11.8 shall survive until the sixth anniversary of the
Closing and (v) Sections 2.2 and 11.9 and this Article IX shall survive
indefinitely.
9.2 Agreement by Sellers to Indemnify.
(a) Subject to Section 9.2(b) below, from and after the Closing,
Sellers, jointly and severally, agree to indemnify, defend and hold
Purchaser harmless from and against Indemnifiable Damages. For purposes of
this Agreement, "Indemnifiable Damages" means,
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without duplication, the
aggregate of all expenses, costs, liabilities and damages (but specifically
excluding consequential damages and lost profits) incurred or suffered by
Purchaser to the extent (i) resulting from any breach of a representation
or warranty made by Sellers in or pursuant to this Agreement, (ii)
resulting from any breach of the covenants or agreements made by Sellers
pursuant to this Agreement, (iii) resulting from any inaccuracy in any
certificate or report delivered by any Seller pursuant to this Agreement or
(iv) otherwise arising from or relating to Sellers' sale of the Shares to
Purchaser. The parties shall make appropriate adjustments for tax benefits
and insurance coverage in determining Indemnifiable Damages.
(b) Notwithstanding the foregoing, Sellers shall have no
obligation to indemnify Purchaser from and against any Indemnifiable
Damages (i) until Purchaser has incurred Indemnifiable Damages in excess of
$21,000,000 (except for Indemnifiable Damages resulting from Sellers'
misrepresentation or breach of warranty under Section 2.2 or Seller's
breach of the agreements contained in Article VIII, for which there shall
be no deductible), after which point Sellers shall be obligated to
indemnify Purchaser only for such additional Indemnifiable Damages or
thereafter, (ii) to the extent the Indemnifiable Damages exceed $70,000,000
(except for Indemnifiable Damages resulting from Sellers' misrepresentation
or breach of warranty under Section 2.2 or Seller's breach of the
agreements contained in Article VIII, for which Sellers shall indemnify
Purchaser for Indemnifiable Damages up to the Purchase Price), after which
point Sellers will have no obligation to indemnify Purchaser for
Indemnifiable Damages.
9.3 Agreement by Purchaser to Indemnify.
(a) Subject to Section 9.3(b) below, from and after the Closing,
Purchaser agrees to indemnify, defend and hold Sellers harmless from and
against the Sellers' Indemnifiable Damages. For purposes of this
Agreement, "Sellers' Indemnifiable Damages" means, without duplication, the
aggregate of all expenses, costs, liabilities and damages (but specifically
excluding consequential damages and lost profits) incurred or suffered by
Sellers to the extent (i) resulting from any breach of a representation or
warranty made by Purchaser in or pursuant to this Agreement, (ii) resulting
from any breach of the covenants or agreements made by Purchaser in or
pursuant to this Agreement, (iii) resulting from any inaccuracy in any
certificate delivered by Purchaser pursuant to this Agreement or (iv)
otherwise arising from or relating to Sellers' sale of the Shares to
Purchaser. The parties shall make appropriate adjustments for tax benefits
and insurance coverage in determining Sellers' Indemnifiable Damages.
(b) Notwithstanding the foregoing, Purchaser shall have no
obligation to indemnify Sellers from and against any Sellers' Indemnifiable
Damages (i) until Sellers have incurred Indemnifiable Damages in excess of
$21,000,000 (except for Sellers' Indemnifiable Damages resulting from
Purchaser's breach of the agreements contained in Article VIII, for which
there shall be no deductible), after which point Purchaser shall be
obligated to indemnify Sellers only for such additional Indemnifiable
Damages or thereafter, (ii) to the extent the Sellers' Indemnifiable
Damages exceed $70,000,000 (except for Sellers' Indemnifiable Damages
resulting from Purchaser's breach of the agreements contained in
Article VIII, for which
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Purchaser shall indemnify Sellers for Indemnifiable
Damages up to the Purchase Price), after which point Purchaser will have no
obligation to indemnify Sellers for Indemnifiable Damages.
9.4 Third Party Claims. The obligations and liabilities of Sellers
and Purchaser hereunder with respect to their respective indemnities
pursuant to this Article IX resulting from any claim or other assertion of
liabilities by third parties (hereinafter called collectively "Claims"),
shall be subject to the following terms and conditions:
(a) the party seeking indemnification (the "Indemnified Party")
must give the other party (the "Indemnifying Party"), written notice of any
such Claim thirty (30) days after the Indemnified Party receives notice
thereof;
(b) the Indemnifying Party shall have the right to undertake, by
counsel or other representatives of its own choosing, the defense of such
Claim;
(c) in the event that the Indemnifying Party shall elect not to
undertake such defense, or within a reasonable time after notice of any
such Claim from the Indemnified Party shall fail to defend, the Indemnified
Party shall have the right to undertake the defense, compromise or
settlement of such Claim, by counsel or other representatives of its own
choosing, on behalf of and for the account and risk of the Indemnifying
Party; and
(d) notwithstanding anything in this Section 9.4 to the
contrary, (i) the Indemnified Party shall have the right, at its own cost
and expense, to have its own counsel to protect its own interests and
participate in the defense, compromise or settlement of the Claim, (ii) the
Indemnifying Party shall not, without the Indemnified Party's written
consent, settle or compromise any Claim or consent to entry of any judgment
which does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party, a release from all
liability in respect of such Claim and (iii) the Indemnified Party, by
counsel or other representatives of its own choosing and at its sole cost
and expense, shall have the right to consult with the Indemnifying Party
and its counsel or other representatives concerning such Claim, and the
Indemnifying Party and the Indemnified Party and their respective counsel
shall cooperate with respect to such Claim.
9.5 Exclusive Remedy. Purchaser and Sellers acknowledge and agree
that the indemnification provisions contained in this Article IX shall be
the exclusive post-closing remedy of Purchaser and Sellers with respect to
this Agreement.
ARTICLE X
DEFINITIONS
-----------
10.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the meanings herein specified unless the context otherwise
requires:
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"Accumulated Adjustments Account" means "accumulated adjustments
account" as defined in Section 1368 of the Code.
"Adjustment Amount" has the meaning set forth in Section 1.3.
"Agreement" has the meaning set forth in the first paragraph to this
Agreement.
"Allen & Co. Engagement Letter" has the meaning set forth in Section
1.3.
"American Girl Music" has the meaning set forth in the recitals to
this Agreement.
"American Girl Place" has the meaning set forth in the recitals to
this Agreement.
"American Girls Productions" has the meaning set forth in the recitals
to this Agreement.
"Audited Financial Statements" has the meaning set forth in Section
2.8(a).
"Benefit Arrangement" has the meaning set forth in Section 2.11(a).
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Claim" has the meaning set forth in Section 9.4.
"Closing" has the meaning set forth in Section 1.4.
"Closing Date" has the meaning set forth in Section 1.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph to this
Agreement.
"Company Financial Statements" has the meaning set forth in Section
2.8(a).
"Company Permits" has the meaning set forth in Section 2.18.
"Confidentiality Agreement" means that certain letter agreement, dated
as of April 30, 1998, between Allen & Company Incorporated (executed on
behalf of Sellers) and Purchaser, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"DOJ" has the meaning set forth in Section 4.4(a).
"Employee Benefits" means all medical, dental, life insurance, short-
term and long-term disability, sick leave, vacation, severance, retirement,
pension and savings plans, policies or arrangements.
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"Employee Plan" has the meaning set forth in Section 2.11(a).
"Employees" has the meaning set forth in Section 4.6.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Solid
Waste Disposal Act, as amended by the Resource Conversation and Recovery
Act, 42 U.S.C. Section6901, et seq., the Clean Water Act, 33 U.S.C.
Section 1251 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq.,
the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the Safe
Drinking Water Act, 42 U.S.C. Section 300f et seq., the Emergency Planning
and Community Right to Know Act, 42 U.S. C. Section 11001 et seq., the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq., the Oil
Pollution Act, 33 U.S.C. Section 2701 et seq., in each case as amended from
time to time, and any other statute, rule, regulation, law, by-law,
ordinance or directive of any Governmental Authority dealing with the
pollution or protection of natural resources or the indoor or ambient
environment or with the protection of human health or safety.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 2.11(c).
"Frautschi" has the meaning set forth in the first paragraph to this
Agreement.
"FTC" has the meaning set forth in Section 4.4(a).
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Governmental Authority" means government or subdivision thereof, or
any administrative, governmental or regulatory authority, agency,
commission, tribunal or body, domestic or foreign.
"Hazardous Substance" means any pollutant, contaminant, hazardous or
toxic substance or waste, solid waste, petroleum, petroleum product, by-
product or breakdown product, or any other chemical, substance or material
listed or identified in or regulated by or under any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Incentive Plans" means the Pleasant Company Stock Equivalent
Incentive Plans of November 1996 and January 1989.
"Indemnifiable Damages" has the meaning set forth in Section 9.2(a).
"Indemnified Party" has the meaning set forth Section 9.4(a).
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"Indemnifying Party" has the meaning set forth in Section 9.4(a).
"Intellectual Property" means trademarks, trade names, trade dresses,
copyrights, applications to register any of the foregoing, trade secrets
(including know-how), patents, patent applications, licenses and other
intellectual property.
"Knowledge" means, (a) when applied to Purchaser, the actual knowledge
of those individuals who as of the date hereof or at any time thereafter
are officers of Purchaser and (b) when applied to a Seller, the actual
knowledge of such Seller after making due inquiry of those individuals
listed on Schedule 10.1.
"Material Adverse Effect" means an adverse change in the financial
condition, business or results of the Companies or Purchaser, as the case
may be, which is material to the Companies taken as a whole, or Purchaser
and its subsidiaries taken as a whole, as the case may be, except for (i)
any adverse change resulting from general economic, financial or market
conditions, (ii) any adverse change resulting from conditions or
circumstances generally affecting the industries in which the Companies
operate and (iii) any adverse change resulting from the announcement or
pendency of this Agreement or the transactions contemplated thereby.
"New T" has the meaning set forth in Section 8.5.
"Notice" has the meaning set forth in Section 8.3(b).
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor entity.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
joint venture, trust, estate, association, organization or other entity.
"Pleasant Company" has the meaning set forth in the recitals to this
Agreement.
"Pleasant Productions" has the meaning set forth in the recitals to
this Agreement.
"Pleasant Publications" has the meaning set forth in the recitals to
this Agreement.
"Purchase Price" has the meaning set forth in Section 1.3.
"Purchaser" has the meaning set forth in the first paragraph to this
Agreement.
"RCRA Hazardous Waste" means a solid waste that is listed or
classified as a hazardous waste, as that term is defined in or pursuant to
the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section
6901 et seq.
"Rowland" has the meaning set forth in the first paragraph to this
Agreement.
"Section 338(h)(10) Election" has the meaning set forth in Section 8.1
to this Agreement.
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"Sellers" has the meaning set forth in the first paragraph to this
Agreement.
"Sellers' Indemnifiable Damages" has the meaning set forth in Section
9.3(b).
"Shares" has the meaning set forth in the recitals to this Agreement.
"Tax Indemnified Party" has the meaning set forth in Section 8.3(b).
"Tax Indemnifying Party" has the meaning set forth in Section 8.3(b).
"Taxing Authority Claims" has the meaning set forth in Section 8.3(b).
"Unaudited Financial Statements" has the meaning set forth in Section
2.8(b).
"WBCL" means the Wisconsin Business Corporation Law.
10.2 Interpretation. Unless otherwise specifically provided or the
context requires otherwise, (a) all references in this Agreement to
Articles, Sections, Schedules and Exhibits shall mean and refer to
Articles, Sections, Schedules and Exhibits of this Agreement, (b) the terms
"hereof" and "herein" and similar terms refer to this Agreement as a whole,
(c) all references to statutes and regulations shall include all amendments
of the same and any successor or replacement statutes and regulations and
(d) words using the singular or plural number shall also include the
plural and singular number, respectively.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Expenses. The Companies will pay the expenses of the Companies
and Sellers incurred in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, the fees and expenses
of any attorneys, accountants, investment bankers, brokers, finders or
other intermediaries or other Persons engaged by the Companies or Sellers
in connection with this Agreement and the transactions contemplated hereby;
provided, that the Companies' obligation for the fees and expenses of all
Persons engaged by the Companies or Sellers, including Allen & Company
Incorporated pursuant to the Allen & Co. Engagement Letter, shall not
exceed Five Million Five Hundred Thousand Dollars ($5,500,000) in the
aggregate. Purchaser shall pay all of its expenses incurred in connection
with this Agreement and the transactions contemplated hereby, including,
without limitation, the fees and expenses of any attorneys, accountants,
investment bankers, brokers, finders or other intermediaries or other
Persons engaged by Purchaser in connection with this Agreement and the
transactions contemplated hereby. Notwithstanding the foregoing, except
that in the event of a dispute concerning the terms or enforcement of this
Agreement, the prevailing party in any such dispute shall be entitled to
reimbursement of reasonable legal fees and disbursements from the other
party or parties to such dispute.
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11.2 Notices, Etc All notices, requests, demands or other
communications required by or otherwise with respect to this Agreement
shall be in writing and shall be deemed to have been duly given to any
party when delivered personally (by courier service or otherwise), when
delivered by telecopy or facsimile, by overnight courier, or seven days
after being mailed by first-class mail, postage prepaid and return receipt
requested in each case to the applicable addresses set forth below:
If to Sellers: c/o Pleasant Rowland Frautschi
Pleasant Company
8400 Fairway Place
Middleton, WI 53526
Fax: (608) 828-4784
with a copy to: Michael Best & Friedrich LLP
One South Pinckney Street
P.O. Box 1806
Madison, WI 53701-1806
Attn: Tod B. Linstroth
Fax: (608) 283-2275
If to Purchaser: Mattel, Inc.
333 Continental Boulevard
El Segundo, CA 90245
Attn: Ned Mansour
Fax: (310) 252-3671
with a copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attn: Andrew R. Brownstein
Fax: (212) 403-2000
or to such other address as such party shall have designated by notice so
given to each other party.
11.3 Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified except by an instrument
in writing signed by the party against whom enforcement is sought. The
failure of any party hereto to exercise any right, power or remedy provided
under this Agreement or otherwise available in respect hereof at law or in
equity, or to insist upon compliance by any other party hereto with its
obligations hereunder, and any custom or practice of the parties at
variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to
demand such compliance.
11.4 No Assignment. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the parties and their
respective successors and assigns; provided
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that neither the rights nor the
obligations of any party may be assigned or delegated without the prior
written consent of the other party.
11.5 Entire Agreement. This Agreement (together with the
Confidentiality Agreement) embodies the entire agreement and understanding
between the parties relating to the subject matter hereof and supersedes
all prior agreements and understandings relating to such subject matter.
There are no representations, warranties or covenants by the parties hereto
relating to such subject matter other than those expressly set forth in
this Agreement and the Confidentiality Agreement.
11.6 Specific Performance. Subject to Section 9.5, the parties
acknowledge that money damages are not an adequate remedy for violations of
this Agreement and that any party may, in its sole discretion, apply to a
court of competent jurisdiction for specific performance or injunctive or
such other relief as such court may deem just and proper in order to
enforce this Agreement or prevent any violation hereof and, to the extent
permitted by applicable law, each party waives any objection to the
imposition of such relief.
11.7 Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise or
beginning of the exercise of any thereof by any party shall not preclude
the simultaneous or later exercise of any other such right, power or remedy
by such party.
11.8 No Third Party Beneficiaries. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by, any Person who is
not a party hereto.
11.9 Governing Law. This Agreement and all disputes hereunder shall
be governed by and construed and enforced in accordance with the internal
laws of the State of Wisconsin, without regard to principles of conflict of
laws.
11.10 Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offering term or provision
in any other situation or in any other jurisdiction.
11.11 Headings. The name assigned this Agreement and the section
captions used herein are for convenience of reference only and shall not
affect the interpretation or construction hereof.
11.12 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one instrument. Each counterpart may
consist of a number of copies each signed by less than all, but together
signed by all, the parties hereto.
[signature page follows]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties set forth below.
MATTEL, INC.
By: /s/ Ned Mansour
---------------
Name: Ned Mansour
-----------
Title: President, Corporate Operations
-------------------------------
/s/ Pleasant Rowland Frautschi
------------------------------
Pleasant Rowland Frautschi
/s/ W. Jerome Frautschi
-----------------------
W. Jerome Frautschi
[Signature Page of Stock Purchase Agreement]
