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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: April 16, 1999
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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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:
1.0 Distribution Agreement dated as of April 16, 1999 among
the Registrant, Morgan Stanley & Co. Incorporated and Credit
Suisse First Boston Corporation
4.1 Officer's Certificate establishing the terms of the Series D
Medium-Term Notes
4.2 Form of Floating Rate Series D Medium-Term Note
4.3 Form of Fixed Rate Series D Medium-Term Note
5.1 Opinion of Irell & Manella LLP as to the legality of the
Series D Medium-Term Notes
23.1 Consent of Irell & Manella LLP (included in their opinion)
99.1 Additional Information
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/ Lee B. Essner
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Lee B. Essner
Assistant Secretary and
Date: April 16, 1999 Assistant General Counsel
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EXHIBIT 1.0
MATTEL, INC.
$400,000,000
Series D Medium-Term Notes
Due More Than Nine Months From Date of Issue
DISTRIBUTION AGREEMENT
April 16, 1999
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
Dear Sirs:
Mattel, Inc., a Delaware corporation (the "Company"), confirms its
agreement with each of you with respect to the issue and sale from time to time
by the Company of up to $400,000,000 (or the equivalent thereof in one or more
foreign currencies or composite currencies) aggregate initial public offering
price of its Series D Medium-Term Notes due more than nine months from date of
issue (the "Notes"). The Notes will be issued under an Indenture, dated as of
February 15, 1996 (the "Indenture"), between the Company and Chase Manhattan
Bank and Trust Company, National Association (formerly Chemical Trust Company of
California), as Trustee (the "Trustee"), and will have the maturities, interest
rates, redemption provisions, if any, and other terms as set forth in
supplements to the Basic Prospectus referred to below.
The Company hereby appoints Morgan Stanley & Co. Incorporated ("Morgan
Stanley") and Credit Suisse First Boston Corporation ("Credit Suisse First
Boston") (individually, an "Agent" and collectively, the "Agents") as its
exclusive agents, subject to Section 12, for the purpose of soliciting and
receiving offers to purchase Notes from the Company by others and, on the basis
of the representations and warranties herein contained, but subject to the terms
and conditions herein set forth, each Agent agrees to use reasonable efforts to
solicit and receive offers to purchase Notes upon terms acceptable to the
Company at such times and in such amounts as the Company shall from time to time
specify. In addition, any
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Agent may also purchase Notes as principal pursuant to the terms of a terms
agreement relating to such sale (a "Terms Agreement") in accordance with the
provisions of Section 2(b) hereof.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-68017) for the
registration of the Notes under the Securities Act of 1933, as amended (the
"Securities Act"), and the offering thereof from time to time in accordance with
Rule 415 of the Rules and regulations of the Commission promulgated pursuant to
the Securities Act. Such registration statement (and any further registration
statements which may be filed by the Company for the purpose of registering
additional Notes and in connection with which this Agreement is included or
incorporated by reference as an exhibit), including all documents incorporated
therein by reference, as from time to time amended or supplemented by the filing
of documents pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Securities Act or otherwise, are referred to herein as the
"Registration Statement." The Company proposes to file with the Commission from
time to time, pursuant to Rule 424 under the Securities Act, supplements to the
prospectus included in the Registration Statement that will describe certain
terms of the Notes. The prospectus in the form in which it appears in the
Registration Statement is hereinafter referred to as the "Basic Prospectus." The
term "Prospectus" means the Basic Prospectus together with the prospectus
supplement or supplements (each a "Prospectus Supplement") specifically relating
to Notes, as filed with, or transmitted for filing to, the Commission pursuant
to Rule 424. As used herein, the terms "Basic Prospectus" and "Prospectus" shall
include in each case the documents, if any, incorporated by reference therein.
If the Company elects to rely on Rule 434 promulgated pursuant to the Securities
Act, all references to the Prospectus shall be deemed to include, without
limitation, the form of prospectus and the term sheet, taken together, provided
to the Agents by the Company in reliance on such Rule 434 (the "Rule 434
Prospectus"). Unless the context otherwise requires, all references in this
Agreement to documents, financial statements and schedules and other information
which is "contained," "included," "stated," "described in," or "referred to" in
the Registration Statement or the Prospectus shall be deemed to mean and include
all such documents, financial statements and schedules and other information
which is or is deemed to be incorporated by reference in the Registration
Statement or the Prospectus, as the case may be; and all references in this
Agreement to "amendments" or "supplements" to the Registration Statement or
Prospectus shall be deemed to mean and include the filing of any document under
the Exchange Act after the date of this Agreement which is or is deemed to be
incorporated by reference in the Registration Statement or the Prospectus, as
the case may be. If the Company files a registration statement to register a
portion of the Notes and relies on Rule 462(b) promulgated pursuant to the
Securities Act for such registration statement to become effective upon filing
with the Commission (the "Rule 462 Registration Statement"), then any reference
to "Registration Statement" herein shall be deemed to be to both the
registration statement referred to above (No. 333-68017) and the Rule 462
Registration Statement, as each such registration statement may be amended
pursuant to the Securities Act.
1. Representations and Warranties. The Company represents and
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warrants to and agrees with each Agent as of the Commencement Date (as defined
below), as of each time the Company accepts an offer to purchase Notes
(including any purchase by an Agent pursuant to a Terms Agreement), as of each
time the Company issues and delivers Notes and as of each time the Registration
Statement or the Basic Prospectus is amended or supplemented, as follows (it
being understood that such representations, warranties and agreements shall be
deemed to
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relate to the Registration Statement, the Basic Prospectus and the Prospectus,
each as amended or supplemented to each such time):
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or
threatened to the Company by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to
the Exchange Act and incorporated by reference in the Prospectus complied,
or will comply when so filed, in all material respects with the applicable
requirements of the Exchange Act and the applicable rules and regulations
of the Commission thereunder, (ii) each part of the Registration Statement,
when such part became effective, did not contain, and each such part, as
amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, (iii) the Registration Statement and the Prospectus comply,
and, as amended or supplemented, if applicable, will comply in all material
respects with the applicable requirements of the Securities Act and the
applicable rules and regulations of the Commission thereunder, and (iv) the
Prospectus does not contain and, as amended or supplemented, if applicable,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that (1)
the representations and warranties set forth in this Section 1(b) do not
apply (A) to statements or omissions in the Registration Statement or the
Prospectus contained in or omitted from the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto in reliance upon
and in conformity with information furnished to the Company in writing by
such Agent expressly for use therein or (B) to that part of the
Registration Statement that constitutes the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), of the Trustee or (C) information, if any,
contained in the Registration Statement or Prospectus relating to The
Depository Trust Company or its book-entry system and (2) the
representations and warranties set forth in clauses (iii) and (iv) above,
when made as of the Commencement Date or as of any time on which the
Company accepts an offer to purchase Notes, shall be deemed not to cover
information concerning an offering of particular Notes to the extent such
information will be set forth in a supplement to the Basic Prospectus.
(c) The financial statements of the Company and its consolidated
subsidiaries set forth in the Registration Statement and Prospectus fairly
present the financial condition of the Company and its consolidated
subsidiaries as of the dates indicated and the results of operations and
changes in financial position for the periods therein specified in
conformity with generally accepted accounting principles consistently
applied throughout the periods involved (except as otherwise stated
therein).
(d) The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as
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described in the Prospectus and is duly qualified to transact business and
is in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
(e) Each "significant subsidiary" (as defined in Regulation S-X
of the Securities Act) of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in the
Prospectus, except to the extent that the failure of any such subsidiary,
singly or in the aggregate, to be so duly incorporated or validly existing
or to have such corporate power and authority, would not have a material
adverse effect on the Company and its subsidiaries taken as a whole or on
the business of the Company and its subsidiaries taken as a whole. Each
such subsidiary of the Company is duly qualified to transact business and
is in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure of any such
subsidiary, singly or in the aggregate, to be so qualified or be in good
standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(f) This Agreement has been duly authorized, executed and
delivered by the Company and any applicable Written Terms Agreement (as
hereinafter defined), when executed and delivered, will be duly authorized,
executed and delivered by the Company.
(g) The Indenture has been duly qualified under the Trust
Indenture Act and has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement of the Company, enforceable in
accordance with its terms except as such enforceability may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting the enforcement of
creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in
equity or at law).
(h) The Notes have been duly authorized and established as a
series of securities under the Indenture and, when the terms of a
particular Note and its issuance and sale have been duly authorized and
established by all necessary corporate action in conformity with the
Indenture, and such Note has been duly completed, executed, authenticated
and issued in accordance with the provisions of the Indenture and delivered
to and duly paid for by the purchasers thereof as contemplated by this
Agreement, such Note will be entitled to the benefits of the Indenture and
will be a valid and binding obligation of the Company, enforceable in
accordance with its terms except as such enforceability may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting the enforcement of
creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in
equity or at law).
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(i) The execution and delivery by the Company of this Agreement,
the Notes, the Indenture and any applicable Written Terms Agreement, and
the performance by the Company of its obligations under this Agreement, the
Notes, the Indenture and any applicable Terms Agreement will not (A)
violate any provision of applicable law or the certificate of incorporation
or by-laws of the Company or (B) breach in any material respect or
otherwise violate in any material respect any agreement or other instrument
binding upon the Company or any of its subsidiaries that is material to the
Company and its subsidiaries, taken as a whole, or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
the Company or any subsidiary, and no consent, approval, authorization or
order of, or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations under this
Agreement, the Notes, the Indenture and any applicable Terms Agreement,
except such as may be required by the Securities Act, the Trust Indenture
Act, the rules and regulations of any securities exchange where the Notes
may be listed, linked or indexed, and the securities or Blue Sky laws of
the various states in connection with the offer and sale of the Notes.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus.
(k) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described or any statutes, regulations, contracts or other documents that
are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to, or incorporated by reference in,
the Registration Statement that are not described or filed or incorporated
as required.
(l) The Company or one or more of its subsidiaries own or
possess the patents, patent rights, licenses, inventions, copyrights, know-
how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, the "Intellectual
Property") employed by them in connection with the business operated by
them, except to the extent that the failure to own or possess the
Intellectual Property would not reasonably be expected to have a material
adverse effect on the Company and its subsidiaries taken as a whole, and
neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to
any of the foregoing which, singly or in the aggregate, would reasonably be
expected to result in any material adverse change, or any notice of any
other development with respect to the foregoing involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company and its
subsidiaries taken as a whole, except as may be described in writing to,
and accepted for exclusion by, the Agents.
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(m) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended.
(n) The Company and its subsidiaries are (i) in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or the use, disposal or release of hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"),
(ii) have received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective
businesses, and (iii) are in compliance with all terms and conditions of
any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such
permits, licenses or approvals would not, singly or in the aggregate,
reasonably be expected to have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(o) Neither the Company nor any of its subsidiaries has,
directly or indirectly, paid or delivered any fee, commission or other sum
of money or item or property, however characterized, to any finder, agent,
government official or other party, in the United States or any other
country, which is in any manner related to the business, assets or
operations of Company or any of its subsidiaries, which is, or may be with
the passage of time or discovery, illegal under any federal, state or local
laws of the United States (including without limitation the U.S. Foreign
Corrupt Practices' Act) or any other country having jurisdiction; and
neither the Company nor any of its subsidiaries has participated, directly
or indirectly, in any boycotts or other similar practices affecting any of
its actual or potential customers, except in either case where such
actions, individually or in the aggregate, are not reasonably expected to
have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
Notwithstanding the foregoing, the representations and warranties set
forth in Section 1(b)(iii) and (iv), (h) (except as to due authorization of the
Notes) and (i), when made as of the Commencement Date, with respect to any Notes
the payments of principal or interest on which will be determined by reference
to one or more currency exchange rates, commodity prices, equity indices or
other factors, shall be deemed not to address the application of the Commodity
Exchange Act, as amended, or the rules, regulations or interpretations of the
Commodity Futures Trading Commission.
2. Solicitations as Agent; Purchases as Principal.
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(a) Solicitations as Agent. In connection with an Agent's
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actions as agent hereunder, such Agent agrees to use reasonable efforts to
solicit offers to purchase Notes upon the terms and conditions set forth in
the Prospectus as then amended or supplemented.
The Company reserves the right, in its sole discretion, to
instruct the Agents to suspend at any time, for any period of time or
permanently, the solicitation of
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offers to purchase Notes. As soon as practicable, but in any event not
later than one business day in New York, after receipt of notice from the
Company, the Agents will suspend solicitations of offers to purchase Notes
from the Company until such time as the Company has advised the Agents that
such solicitation may be resumed. While such solicitation is suspended, the
Company shall not be required to deliver any certificates, opinions or
letters in accordance with Sections 5(a), 5(b) and 5(c); provided, however,
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that if the Registration Statement or Prospectus is amended or supplemented
during the period of suspension (other than by an amendment or supplement
providing solely for a change in the interest rates, redemption provisions,
amortization schedules or maturities offered on the Notes or for a change
the Agents deem to be immaterial), no Agent shall be required to resume
soliciting offers to purchase Notes until the Company has delivered such
certificates, opinions and letters as such Agent may request.
The Company agrees to pay to each Agent, as consideration for the
sale of each Note resulting from a solicitation made or an offer to
purchase received by such Agent, a commission in the form of a discount
from the purchase price of such Note equal to the percentage set forth
below of the purchase price of such Note:
Term Commission Rate
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From 9 months to less than 1 year 0.125%
From 1 year to less than 18 months 0.150%
From 18 months to less than 2 years 0.200%
From 2 years to less than 3 years 0.250%
From 3 years to less than 4 years 0.350%
From 4 years to less than 5 years 0.450%
From 5 years to less than 6 years 0.500%
From 6 years to less than 9 years 0.550%
From 9 years to less than 15 years 0.600%
From 15 years to less than 20 years 0.700%
From 20 years to less than 30 years 0.750%
30 years and beyond To be negotiated
Each Agent shall communicate to the Company, orally or in
writing, each offer to purchase Notes received by such Agent as agent that
in its judgment should be considered by the Company. The Company shall
have the sole right to accept offers to purchase Notes and may reject any
offer in whole or in part. Each Agent shall have the right to reject any
offer to purchase Notes that it considers to be unacceptable, and any such
rejection shall not be deemed a breach of its agreements contained herein.
The procedural details relating to the issue and delivery of Notes sold by
the Agents as agents and the payment therefor shall be as set forth in the
Administrative Procedures (as hereinafter defined).
(b) Purchases as Principal. Each sale of Notes to an Agent as
----------------------
principal shall be made in accordance with the terms of this Agreement. In
connection with each such sale, the Company will enter into a Terms
Agreement that will provide for the sale of such Notes to and the purchase
thereof by such Agent. Each Terms Agreement will take the form of either
(i) a written agreement between such Agent and the Company, which may be
substantially in the form of Exhibit A hereto (a "Written Terms
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Agreement"), or (ii) an oral agreement between such Agent and the Company
confirmed in writing by such Agent to the Company.
An Agent's commitment to purchase Notes pursuant to a Terms
Agreement shall be deemed to have been made on the basis of the
representations and warranties of the Company herein contained and shall be
subject to the terms and conditions herein set forth. Each Terms Agreement
shall specify the principal amount of Notes to be purchased by such Agent
pursuant thereto, the maturity date of such Notes, the price to be paid to
the Company for such Notes, the interest rate and interest rate formula, if
any, applicable to such Notes and any other terms of such Notes. Each such
Terms Agreement may also specify any requirements for officers'
certificates, opinions of counsel and letters from the independent public
accountants of the Company pursuant to Section 4 hereof. A Terms Agreement
may also specify certain provisions relating to the reoffering of such
Notes by such Agent.
Each Terms Agreement shall specify the time and place of delivery
of and payment for such Notes. Unless otherwise specified in a Terms
Agreement, the procedural details relating to the issue and delivery of
Notes purchased by an Agent as principal and the payment therefor shall be
as set forth in the Administrative Procedures. Each date of delivery of
and payment for Notes to be purchased by an Agent pursuant to a Terms
Agreement is referred to herein as a "Settlement Date."
Unless otherwise specified in a Terms Agreement, if you are
purchasing Notes as principal you may resell such Notes to other dealers.
Any such sales may be at a discount, which shall not exceed the amount set
forth in the Prospectus Supplement relating to such Notes.
(c) Administrative Procedures. The Agents and the Company
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agree to perform the respective duties and obligations specifically
provided to be performed in the Medium-Term Notes Administrative Procedures
(attached hereto as Exhibit B) (the "Administrative Procedures"), as
amended from time to time. The Administrative Procedures may be amended
only by written agreement of the Company and the Agents.
(d) Delivery. The documents required to be delivered by
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Section 4 of this Agreement as a condition precedent to each Agent's
obligation to begin soliciting offers to purchase Notes as an agent of the
Company shall be delivered at the Los Angeles office of O'Melveny & Myers
LLP, counsel for the Agents, not later than 1 p.m., Los Angeles time, on
the date hereof, or at such other time and/or place as the Agents and the
Company may agree upon in writing. The date of delivery of such documents
is referred to herein as the "Commencement Date."
(e) Obligations Several. The Company acknowledges that the
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obligations of the Agents under this Agreement are several and not joint.
3. Agreements. The Company agrees with each Agent that:
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(a) Prior to the termination of the offering of the Notes
pursuant to this Agreement or any Terms Agreement, the Company will not
file any Prospectus
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Supplement relating to the Notes or any amendment to the Registration
Statement unless the Company has previously furnished to the Agents copies
thereof for their review and will not file any such proposed supplement or
amendment to which the Agents reasonably object; provided, however, that
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(i) the foregoing requirement shall not apply to any of the Company's
periodic filings with the Commission required to be filed pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act or pursuant to Item 5
(including related exhibits filed pursuant to Item 7) of Form 8-K, copies
of which filings the Company will cause to be delivered to the Agents
promptly after being transmitted for filing with the Commission and (ii)
any Prospectus Supplement that merely sets forth the terms or a description
of particular Notes shall only be reviewed and approved by the Agent or
Agents offering such Notes. Subject to the foregoing sentence, the Company
will promptly cause each Prospectus Supplement to be filed with or
transmitted for filing to the Commission in accordance with Rule 424(b)
under the Securities Act. The Company will promptly advise the Agents (i)
of the filing of any amendment or supplement to the Basic Prospectus
(except that notice of the filing of an amendment or supplement to the
Basic Prospectus that merely sets forth the terms or a description of
particular Notes shall only be given to the Agent or Agents offering such
Notes), (ii) of the filing and effectiveness of any amendment to the
Registration Statement, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to
the Basic Prospectus or for any additional information, (iv) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the institution or threatening of any
proceeding for that purpose, and (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Notes for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Company will use its reasonable best
efforts to prevent the issuance of any such stop order or notice of
suspension of qualification and, if issued, to obtain as soon as possible
the withdrawal thereof. If the Basic Prospectus is amended or supplemented
as a result of the filing under the Exchange Act of any document
incorporated by reference in the Prospectus, no Agent shall be obligated to
solicit offers to purchase Notes so long as it is not reasonably satisfied
with such document.
(b) If, at any time when a prospectus relating to the Notes is
required to be delivered under the Securities Act, any event occurs or
condition exists as a result of which the Prospectus, as then amended or
supplemented, would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in the
light of the circumstances when the Prospectus, as then amended or
supplemented, is delivered to a purchaser, not misleading, or if, in the
opinion of the Agents communicated to the Company or in the opinion of the
Company, it is necessary at any time to amend or supplement the Prospectus,
as then amended or supplemented, to comply with applicable securities law,
the Company will immediately notify the Agents by telephone (with
confirmation in writing) to suspend solicitation of offers to purchase
Notes and, if so notified by the Company, the Agents shall forthwith
suspend such solicitation and cease using the Prospectus, as then amended
or supplemented. If the Company shall decide to amend or supplement the
Registration Statement or Prospectus, as then amended or supplemented, it
shall so advise the Agents promptly by telephone (with confirmation in
writing) and, at its expense, shall prepare
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and cause to be filed promptly with the Commission an amendment or
supplement to the Registration Statement or Prospectus, as then amended or
supplemented, reasonably satisfactory in all respects to the Agents, that
will correct such statement or omission or effect such compliance and will
supply such amended or supplemented Prospectus to the Agents in such
quantities as they may reasonably request. If any documents, certificates,
opinions and letters furnished to the Agents pursuant to paragraph (f)
below and Sections 5(a), 5(b) and 5(c) in connection with the preparation
and filing of such amendment or supplement are reasonably satisfactory in
all respects to the Agents, upon the filing with the Commission of such
amendment or supplement to the Prospectus or upon the effectiveness of an
amendment to the Registration Statement, the Agents will resume the
solicitation of offers to purchase Notes hereunder. Notwithstanding any
other provision of this Section 3(b), until the distribution of any Notes
an Agent may own as principal has been completed, if any event described
above in this paragraph (b) occurs, the Company will, at its own expense,
forthwith prepare and cause to be filed promptly with the Commission an
amendment or supplement to the Registration Statement or Prospectus, as
then amended or supplemented, reasonably satisfactory in all respects to
such Agent, will supply such amended or supplemented Prospectus to such
Agent in such quantities as it may reasonably request and shall furnish to
such Agent pursuant to paragraph (f) below and Sections 5(a), 5(b) and 5(c)
such documents, certificates, opinions and letters as it may reasonably
request in connection with the preparation and filing of such amendment or
supplement.
(c) The Company will make generally available to its security
holders and to the Agents as soon as practicable earning statements that
satisfy the provisions of Section 11(a) of the Securities Act and the rules
and regulations of the Commission thereunder covering twelve-month periods
beginning, in each case, not later than the first day of the Company's
fiscal quarter next following the "effective date" (as defined in Rule 158
under the Securities Act) of the Registration Statement with respect to
each sale of Notes. If such fiscal quarter is the last fiscal quarter of
the Company's fiscal year, such earning statement shall be made available
not later than 90 days after the close of the period covered thereby and in
all other cases shall be made available not later than 45 days after the
close of the period covered thereby.
(d) The Company will furnish to each Agent, without charge, a
signed copy of the Registration Statement, including exhibits and all
amendments thereto, and as many copies of the Prospectus, any documents
incorporated by reference therein and any supplements and amendments
thereto as such Agent may reasonably request.
(e) The Company will endeavor to arrange for the qualification
of the Notes for offer and sale under the securities or Blue Sky laws of
such jurisdictions as the Agents shall reasonably request and to maintain
such qualifications for as long as the Agents shall reasonably request;
provided, however, that the Company shall not be required to (i) qualify as
-------- -------
a foreign corporation or as a dealer in securities; (ii) file a general
consent to service of process; or (iii) subject itself to taxation in any
such jurisdiction.
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(f) The Company shall furnish to the Agents such relevant
documents and certificates of officers of the Company relating to the
business, operations and affairs of the Company, the Registration
Statement, the Basic Prospectus, any amendments or supplements thereto, the
Indenture, the Notes, this Agreement, the Administrative Procedures, any
Terms Agreement and the performance by the Company of its obligations
hereunder or thereunder as the Agents may from time to time reasonably
request.
(g) The Company shall notify the Agents promptly in writing of
any downgrading, or of its receipt of any notice of any intended or
potential downgrading or of any review for possible change that does not
indicate the direction of the possible change, in the rating accorded any
of the Company's securities by any "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act.
(h) The Company will, whether or not any sale of Notes is
consummated, pay all expenses incident to the performance of its
obligations under this Agreement and any Terms Agreement, including: (i)
the preparation and filing of the Registration Statement and the Prospectus
and all amendments and supplements thereto, (ii) the preparation, issuance
and delivery of the Notes, (iii) the fees and disbursements of the
Company's counsel and accountants and of the Trustee and its counsel, (iv)
the qualification of the Notes under securities or Blue Sky laws in
accordance with the provisions of Section 3(e), including filing fees and
the reasonable fees and disbursements of counsel for the Agents in
connection therewith and in connection with the preparation of any Blue Sky
or Legal Investment Memoranda, (v) the printing and delivery to the Agents
in quantities as hereinabove stated of copies of the Registration Statement
and all amendments thereto and of the Prospectus and any amendments or
supplements thereto, (vi) the printing and delivery to the Agents of copies
of any Blue Sky or Legal Investment Memoranda, (vii) any fees charged by
rating agencies for the rating of the Notes, (viii) the fees and expenses,
if any, incurred with respect to any filing with the National Association
of Securities Dealers, Inc., (ix) the reasonable fees and disbursements of
counsel for the Agents incurred in connection with the offering and sale of
the Notes, including any opinions to be rendered by such counsel hereunder,
and (x) any reasonable out-of-pocket expenses incurred by the Agents in
connection with or relating to this Agreement; provided that any
advertising expenses (including tombstones) incurred by the Agents shall
have been approved by the Company.
(i) Between the date of any Terms Agreement and the Settlement
Date with respect to such Terms Agreement, the Company will not, without
such Agent's prior consent, offer, sell, contract to sell or otherwise
dispose of any debt securities of the Company substantially similar to such
Notes (other than (i) the Notes that are to be sold pursuant to such Terms
Agreement, (ii) Notes previously agreed to be sold by the Company, and
(iii) commercial paper and short-term bank loans issued in the ordinary
course of business), except as may otherwise be provided in such Terms
Agreement.
4. Conditions of the Obligations of the Agents. Each Agent's
-------------------------------------------
obligation to solicit offers to purchase Notes as agent of the Company, each
Agent's obligation to purchase
11
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Notes pursuant to any Terms Agreement and the obligation of any other purchaser
to purchase Notes will be subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of the Company's officers made in each certificate furnished pursuant to the
provisions hereof and to the performance and observance by the Company of all
covenants and agreements herein contained on its part to be performed and
observed (in the case of an Agent's obligation to solicit offers to purchase
Notes, at the time of such solicitation, and, in the case of an Agent's or any
other purchaser's obligation to purchase Notes, at the time the Company accepts
the offer to purchase such Notes and at the time of issuance and delivery) and
(in each case) to the following additional conditions precedent when and as
specified:
(a) Prior to such solicitation or purchase, as the case may be:
(i) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole, from that set
forth in the Prospectus, as amended or supplemented at the time of
such solicitation or at the time such offer to purchase was made,
that, in the judgment of the relevant Agent, is material and adverse
and that makes it, in the judgment of such Agent, impracticable to
market the Notes on the terms and in the manner contemplated by the
Prospectus, as so amended or supplemented;
(ii) there shall not have occurred any (A) suspension or
material limitation of trading generally on or by, as the case may be,
the New York Stock Exchange, the American Stock Exchange, the National
Association of Securities Dealers, Inc., the Chicago Board Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of
Trade, (B) suspension of trading of any securities of the Company on
any exchange or in any over-the-counter market, (C) declaration of a
general moratorium on commercial banking activities in New York by
either Federal or New York State authorities, or (D) any outbreak or
escalation of hostilities or any change in financial markets or any
calamity or crisis that, in the judgment of the relevant Agent, is
material and adverse and, in the case of any of the events described
in clauses (ii)(A) through (D), such event, singly or together with
any other such event, makes it, in the judgment of such Agent,
impracticable to market the Notes on the terms and in the manner
contemplated by the Prospectus, as amended or supplemented at the time
of such solicitation or at the time such offer to purchase was made;
and
(iii) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating accorded
any of the Company's securities by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act;
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(A) except, in each case described in paragraph (i), (ii) or (iii) above,
as disclosed to the relevant Agent in writing by the Company prior to such
solicitation or, in the case of a purchase of Notes, as disclosed to the
relevant Agent before the offer to purchase such Notes was made, or (B)
unless in each case described in (ii) above, the relevant event shall have
occurred and been known to the relevant Agent before such solicitation or,
in the case of a purchase of Notes, before the offer to purchase such Notes
was made.
(b) On the Commencement Date and, if called for by any Terms
Agreement, on the corresponding Settlement Date, the relevant Agents shall
have received a certificate, dated the Commencement Date or such Settlement
Date, as the case may be, signed by an executive officer of the Company to
the effect set forth in subparagraph (a)(iii) above and to the effect that
the representations and warranties of the Company contained herein are true
and correct as of such date and that the Company has complied in all
material respects with all of the agreements and satisfied in all material
respects all of the conditions on its part to be performed or satisfied on
or before such date.
The officer signing and delivering such certificate may rely upon
the best of his knowledge as to proceedings threatened.
(c) On the Commencement Date and, if called for by any Terms
Agreement, on the corresponding Settlement Date, the relevant Agents shall
have received:
(i) The opinion, dated as of such date, of Irell & Manella
LLP, counsel for the Company to the effect that:
(A) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus, as then amended or supplemented, and
is duly qualified to transact business and is in good standing in
the State of California;
(B) each of this Agreement and any applicable Written
Terms Agreement has been duly authorized, executed and delivered
by the Company;
(C) the Indenture has been qualified under the Trust
Indenture Act and has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of
the Company, enforceable in accordance with its terms except as
may be limited by (i) the effect of bankruptcy, insolvency or
similar laws affecting creditors' rights generally; (ii) the
effect of general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith
and fair dealing and the possible unavailability of specific
performance or injunctive relief, regardless of whether such
enforceability is considered in
13
<PAGE>
a proceeding in equity or at law; and (iii) certain rights,
remedies and waivers contained in the Indenture or the Notes may
be limited or rendered ineffective by applicable California laws
or judicial decisions governing such provisions, but such laws or
judicial decisions do not render the Indenture invalid or
unenforceable as a whole;
(D) the Notes have been duly authorized and, when the
final terms of a particular Note and its issuance and sale have
been established in accordance with the provisions of the
Indenture and when the Notes have been executed and authenticated
in accordance with the provisions of the Indenture and delivered
to and paid for by the purchasers thereof in accordance with this
Agreement, will be entitled to the benefits of the Indenture and
will be valid and binding obligations of the Company, enforceable
in accordance with their respective terms except as may be
limited by (i) the effect of bankruptcy, insolvency or similar
laws affecting creditors' rights generally; (ii) the effect of
general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance
or injunctive relief, regardless of whether such enforceability
is considered in a proceeding in equity or at law; and (iii)
certain rights, remedies and waivers contained in the Indenture
or the Notes may be limited or rendered ineffective by applicable
California laws or judicial decisions governing such provisions,
but such laws or judicial decisions do not render the Indenture
invalid or unenforceable as a whole;
(E) the execution and delivery by the Company of this
Agreement, the Notes, the Indenture and any applicable Written
Terms Agreement, the issuance and sale of the Notes and the
performance by the Company of its obligations under this
Agreement, the Notes, the Indenture and any applicable Terms
Agreement will not (A) violate the certificate of incorporation
or bylaws, as amended, of the Company, (B) violate any Applicable
Laws, (C) to the best of such counsel's knowledge, violate,
breach or result in a default or event of default under, any
agreement or other instrument listed as an exhibit to any of the
documents filed by the Company pursuant to the Exchange Act and
incorporated by reference in the Registration Statement or (D)
breach or otherwise violate any obligation of or restriction on
the Company under any judgment, decree or order, known to such
counsel, of any court or Governmental Authority entered in any
proceeding to which the Company was or is now a party or by which
it is bound (provided, however, that such counsel may state that
-------- -------
no opinion is expressed as to the securities or Blue Sky laws of
the various jurisdictions in which the Notes are to be offered or
sold) and that no Governmental Approval is required in connection
with the issuance and sale of the Notes other than registration
thereof under the Securities Act, qualifications of the Indenture
under the Trust Indenture Act, and such registrations or
qualifications as may be necessary under the securities or
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<PAGE>
Blue Sky laws of the various United States jurisdictions in which
the Notes are to be offered or sold.
For purposes of the opinion contained in the foregoing paragraph,
the term "Applicable Law" means the Delaware General Corporation
Law and the laws of the State of California and of the United
States of America which such counsel has, in the exercise of
customary diligence, recognized as applicable to the Company or
the transactions of the type contemplated by this Agreement; the
term "Governmental Authority" shall mean any California or
federal executive, legislative, judicial, administrative or
regulatory body; and the term "Governmental Approval" means any
order, consent, permit or approval of any Governmental Authority
pursuant to Applicable Laws.
(F) the statements (1) in the Prospectus, as then
amended or supplemented, under the captions "Description of
Notes," "Description of Debt Securities" and "United States
Income Tax Consequences to Holders" and (2) in the Registration
Statement under Item 15, in each case insofar as such statements
constitute summaries of the legal matters, documents or
proceedings referred to therein, fairly present, in all material
respects, the information called for with respect to such legal
matters, documents and proceedings and fairly summarize, in all
material respects, the matters referred to therein;
(G) to the best of such counsel's knowledge, there are
no legal or governmental proceedings pending or threatened to
which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its
subsidiaries is subject or any developments in such proceedings
that are required to be described or incorporated therein by
reference, in the Registration Statement or the Prospectus, as
then amended or supplemented, and are not so described or
incorporated therein by reference, or of any statutes or
regulations that are required to be described in the Registration
Statement or the Prospectus, as then amended or supplemented, or
to be filed or incorporated by reference as exhibits to such
Registration Statement that are not so described or filed or
incorporated as required;
(H) the Company is not an "investment company" or an
entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended;
(I) the Registration Statement has been declared
effective under the Act; the Prospectus, as then amended or
supplemented, has been filed as required hereunder; and to the
best knowledge of such counsel no stop order suspending the
effectiveness of the Registration Statement has been issued and
no proceeding for that purpose has been instituted or threatened
by the Commission;
15
<PAGE>
(J) each document, if any, filed pursuant to the
Exchange Act and incorporated by reference in the Registration
Statement and the Prospectus, as then amended or supplemented
(except for financial statements and schedules included therein
as to which such counsel need not express any opinion), complied
on their face when so filed as to form in all material respects
with the Exchange Act and the applicable rules and regulations of
the Commission thereunder, and the Registration Statement, as of
its effective date, and the Prospectus, as of its date, appeared
on their face to comply in all material respects with the
requirements as to form for registration statements on Form S-3
and the related rules and regulations then in effect, except that
in each case such counsel need not express an opinion as to (i)
the financial statements and schedules included or incorporated
by reference therein or excluded therefrom or (ii) the Form T-1;
and
(K) no facts have come to the attention of such
counsel that would lead such counsel to believe that (1) (except
for financial statements and schedules as to which such counsel
need not express any belief and except for that part of the
Registration Statement that constitutes the Form T-1 heretofore
referred to) each part of the Registration Statement, as then
amended, if applicable, when such part became effective contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and (2) (except for
financial statements and schedules as to which such counsel need
not express any belief) the Prospectus, as then amended or
supplemented, if applicable, as of the date such opinion is
delivered contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; provided that in the case of an
--------
opinion delivered on the Commencement Date or pursuant to Section
5(c), the belief set forth in clause (2) above shall be deemed
not to cover information concerning an offering of particular
Notes to the extent such information will be set forth in a
supplement to the Basic Prospectus.
(ii) The opinion, dated as of such date, of the general
counsel or the assistant general counsel of the Company, to the effect
that:
(A) the Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires
such qualification, except to the extent that the failure to be
so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a
whole;
(B) based upon opinions, oral or written, of foreign
counsel, or of certificates of governmental officials, each of
the
16
<PAGE>
subsidiaries of the Company meeting the definition of
"Significant Subsidiary" under Regulation S-X of the Commission
has been duly incorporated, is validly existing as a corporation
in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the
Prospectus, as then amended or supplemented, and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on such
subsidiary;
(C) the execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement, any applicable Written Terms Agreement, the Notes and
the Indenture will not breach in any material respects any
agreement or other instrument binding upon the Company or any of
its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or, to the knowledge of such
counsel, violate any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the
Company or any subsidiary, and no consent, approval,
authorization or order of or qualification with any governmental
body or agency is required for the performance by the Company of
its obligations under this Agreement, any applicable Terms
Agreement, the Notes and the Indenture, except such as may be
required by the securities or Blue Sky laws of the various states
in connection with the offer and sale of the Notes or as may have
been previously obtained;
(D) to the best of such counsel's knowledge, the
Company or one or more of its subsidiaries own or possess the
Intellectual Property employed by them in connection with the
business operated by them, except to the extent that the failure
to own or possess the Intellectual Property would not reasonably
be expected have a material adverse effect on the Company and its
subsidiaries taken as a whole;
(E) to such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is a party or to which any of
the properties of the Company or any of its subsidiaries is
subject or any development in such proceedings that are required
to be described in the Registration Statement or the Prospectus,
as then amended or supplemented, and are not so described, or any
contracts or other documents that are required to be described in
the Registration Statement or the Prospectus, as then amended or
supplemented, or to be filed or incorporated by reference as
exhibits to such Registration Statement, that are not so
described or filed or incorporated as required; and
17
<PAGE>
(F) no facts have come to the attention of such
counsel that would lead such counsel to believe that (1) (except
for financial statements and schedules as to which such counsel
need not express any belief and except for that part of the
Registration Statement that constitutes the Form T-1 heretofore
referred to) each part of the Registration Statement, as then
amended, if applicable, when such part became effective did not
and, as of the date such opinion is delivered, does not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and (2) (except for
financial statements and schedules as to which such counsel need
not express any belief) the Prospectus, as then amended or
supplemented, if applicable, as of the date such opinion is
delivered contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; provided that in the case of an
--------
opinion delivered on the Commencement Date or pursuant to Section
5(b), the belief set forth in clause (2) above shall be deemed
not to cover information concerning an offering of particular
Notes to the extent such information will be set forth in a
supplement to the Basic Prospectus.
(iii) The opinion, dated as of such date, of O'Melveny &
Myers LLP, counsel for the Agents, covering the matters in
subparagraphs (B), (C), (D) and (F) (but only with respect to
statements in the Prospectus, as then amended or supplemented, under
the captions "Description of Notes" and "Description of Debt
Securities"), and that nothing has come to their attention with
respect to the matters in subparagraph (K) in paragraph (c)(i) above.
Notwithstanding the foregoing, the opinions described above, when
contained in an opinion delivered on the Commencement Date or pursuant to
Sections 5(b) or 5(c), shall be deemed not to address the application of
the Commodity Exchange Act, as amended, or the rules, regulations or
interpretations of the Commodity Futures Trading Commission to Notes the
payments of principal or interest on which will be determined by reference
to one or more currency exchange rates, commodity prices, equity indices or
other factors.
With respect to subparagraph (K) of paragraph (c)(i) above, Irell
& Manella LLP may state that their opinion and belief are based upon their
participation in conferences in connection with the preparation of the
Registration Statement and Prospectus and any amendments or supplements
thereto and documents incorporated therein by reference and review and
discussion of the contents thereof, but are without independent check or
verification, except as specified. With respect to subparagraph (K) of
paragraph (c)(iii) above, O'Melveny & Myers LLP may state that their
opinion and belief are based upon their participation in conferences in
connection with the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto (other than documents
incorporated therein by reference) and review of the
18
<PAGE>
contents thereof (including documents incorporated therein by reference),
but are without independent check or verification, except as specified.
The opinion of Irell & Manella LLP described in paragraph (c)(i)
above shall be rendered to the relevant Agents at the request of the
Company and shall so state therein.
(d) On the Commencement Date and, if called for by any Terms
Agreement, on the corresponding Settlement Date, the Company's independent
public accountants shall have furnished to the relevant Agents a letter or
letters, dated as of the Commencement Date or such Settlement Date, as the
case may be, in form and substance satisfactory to such Agents containing
statements and information of the type ordinarily included in accountant's
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in or incorporated by reference
into the Prospectus, as then amended or supplemented.
(e) On the Commencement Date and on each Settlement Date, the
Company shall have furnished to the relevant Agents such appropriate
further information, certificates and documents as they may reasonably
request.
5. Additional Agreements of the Company.
------------------------------------
(a) Each time the Registration Statement or Prospectus is
amended or supplemented (other than by an amendment or supplement providing
solely for a change in the interest rates, redemption provisions,
amortization schedules or maturities offered on the Notes or for a change
the Agents deem to be immaterial or for an amendment or supplement by
filing of a Form 8-K which the Company deems to be immaterial), the Company
will deliver or cause to be delivered forthwith to each Agent a certificate
signed by an executive officer of the Company, dated the date of such
amendment or supplement, as the case may be, in form reasonably
satisfactory to the Agents, of the same tenor as the certificate referred
to in Section 4(b) relating to the Registration Statement or the Prospectus
as amended or supplemented to the time of delivery of such certificate.
(b) Each time the Company furnishes a certificate pursuant to
Section 5(a), the Company will furnish or cause to be furnished forthwith
to each Agent a written opinion of the general counsel or assistant general
counsel of the Company. Any such opinion shall be dated the date of such
amendment or supplement, as the case may be, shall be in a form
satisfactory to the Agents and shall be of the same tenor as the opinion
referred to in Section 4(c)(ii), as the case may be, but modified to relate
to the Registration Statement and the Prospectus as amended and
supplemented to the time of delivery of such opinion. In lieu of such
opinion, counsel last furnishing such an opinion to an Agent may furnish to
each Agent a letter to the effect that such Agent may rely on such last
opinion to the same extent as though it were dated the date of such letter
(except that statements in such last opinion will be deemed to relate to
the Registration Statement and the Prospectus as amended or supplemented to
the time of delivery of such letter.)
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(c) Each time the Company files a Form 10-K or an amendment to a
Form 10-K and each time a Terms Agreement calls for a written opinion of
independent counsel for the Company, the Company will furnish or cause to
be furnished forthwith to each Agent a written opinion of independent
counsel for the Company. Any such opinion shall be dated the date of such
amendment or supplement, as the case may be, shall be in a form
satisfactory to the Agents and shall be of the same tenor as the opinion
referred to in Section 4(c)(i), as the case may be, but modified to relate
to the Registration Statement and the Prospectus as amended and
supplemented to the time of delivery of such opinion. In lieu of such
opinion, counsel last furnishing such an opinion to an Agent may furnish to
each Agent a letter to the effect that such Agent may rely on such last
opinion to the same extent as though it were dated the date of such letter
(except that statements in such last opinion will be deemed to relate to
the Registration Statement and the Prospectus as amended or supplemented to
the time of delivery of such letter.)
(d) Each time the Registration Statement or the Prospectus is
amended or supplemented to set forth amended or supplemental financial
information or such amended or supplemental information is incorporated by
reference in the Prospectus, the Company shall cause its independent public
accountants forthwith to furnish each Agent with a letter, dated the date
of such amendment or supplement, as the case may be, in form satisfactory
to the Agents, of the same tenor as the letter referred to in Section 4(d),
with regard to the amended or supplemental financial information included
or incorporated by reference in the Registration Statement or the
Prospectus as amended or supplemented to the date of such letter.
6. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each Agent
and each person, if any, who controls such Agent within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably
incurred by any Agent or any such controlling person in connection with
investigating or defending any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof or the Prospectus (as
amended or supplemented if the Company shall have furnished any amendments
or supplements thereto), or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
relating to such Agent furnished to the Company in writing by such Agent
expressly for use therein.
(b) Each Agent agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act to the same extent as the foregoing indemnity from the
Company to such Agent, but only with reference to information relating to
such Agent furnished to the Company in writing by such Agent
20
<PAGE>
expressly for use in the Registration Statement or the Prospectus or any
amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to either paragraph (a) or (b) above, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in
such proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless
(i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the fees and expenses of more than
one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed
as they are incurred. Such firm shall be designated in writing by Morgan
Stanley or, if Morgan Stanley is not an indemnified party and is not
reasonably likely to become an indemnified party, by the Agents that are
indemnified parties, in the case of parties indemnified pursuant to
paragraph (a) above, and by the Company, in the case of parties indemnified
pursuant to paragraph (b) above. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of
the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to
the date of such settlement, unless such fees and expenses are being
disputed in good faith. No indemnifying party shall, without the prior
written consent of the indemnified party (which consent shall not be
unreasonably withheld), effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been
a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter
of such proceeding.
21
<PAGE>
(d) To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 6 is required to be made but is unavailable to an
indemnified party or insufficient in respect of any losses, claims, damages
or liabilities referred to therein in connection with any offering of
Notes, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one hand and each Agent on the other hand from the offering of such Notes
or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and each Agent on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and each Agent on the other hand in connection with the offering of
such Notes shall be deemed to be in the same respective proportions as the
total net proceeds from the offering of such Notes (before deducting
expenses) received by the Company bear to the total discounts and
commissions received by each Agent in respect thereof. The relative fault
of the Company on the one hand and of each Agent on the other hand shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or by such Agent and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. Each Agent's obligation to contribute pursuant to this
Section 6 shall be several (in the proportion that the principal amount of
the Notes the sale of which by or through such Agent gave rise to such
losses, claims, damages or liabilities bears to the aggregate principal
amount of the Notes the sale of which by or through any Agent gave rise to
such losses, claims, damages or liabilities) and not joint.
(e) The Company and the Agents agree that it would not be just or
equitable if contribution pursuant to this Section 6 were determined by pro
---
rata allocation (even if the Agents were treated as one entity for such
----
purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 6, no Agent shall be required to contribute
any amount in excess of the amount by which the total price at which the
Notes referred to in paragraph (d) above that were offered and sold to the
public through such Agent exceeds the amount of any damages that such Agent
has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The remedies provided for
in this Section 6 are not exclusive and
22
<PAGE>
shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
7. Position of the Agents. In acting under this Agreement and in
----------------------
connection with the sale of any Notes by the Company (other than Notes sold to
an Agent pursuant to a Terms Agreement), each Agent is acting solely as agent of
the Company and does not assume any obligation towards or relationship of agency
or trust with any purchaser of Notes. An Agent shall make reasonable efforts to
assist the Company in obtaining performance by each purchaser whose offer to
purchase Notes has been solicited by such Agent and accepted by the Company, but
such Agent shall not have any liability to the Company in the event any such
purchase is not consummated for any reason. If the Company shall default in its
obligations to deliver Notes to a purchaser whose offer it has accepted, the
Company shall hold the relevant Agent harmless against any loss, claim, damage
or liability arising from or as a result of such default and shall, in
particular, pay to such Agent the commission it would have received had such
sale been consummated.
8. Termination. This Agreement may be terminated at any time by the
-----------
Company or, as to any Agent, by the Company or such Agent upon the giving of
written notice of such termination to the other parties hereto, but without
prejudice to any rights, obligations or liabilities of any party hereto accrued
or incurred prior to such termination. The termination of this Agreement shall
not require termination of any Terms Agreement, and the termination of any such
Terms Agreement shall not require termination of this Agreement. If this
Agreement is terminated, the provisions of the third paragraph of Section 2(a),
Section 2(e), the last sentence of Section 3(b) and Sections 3(c), 3(h), 6, 7,
9, 11 and 14 shall survive; provided that if at the time of termination an offer
--------
to purchase Notes has been accepted by the Company but the time of delivery to
the purchaser or its agent of such Notes has not occurred, the provisions of
Sections 2(b), 2(c), 3(a), 3(e), 3(f), 3(g), 3(i), 4 and 5 shall also survive
until such delivery has been made.
9. Representations and Indemnities to Survive. The respective
------------------------------------------
indemnity and contribution agreements, representations, warranties and other
statements of the Company, its officers and the Agents set forth in or made
pursuant to this Agreement or any Terms Agreement will remain in full force and
effect, regardless of any termination of this Agreement or any such Terms
Agreement, any investigation made by or on behalf of an Agent or the Company or
any of the officers, directors or controlling persons referred to in Section 6
and delivery of and payment for the Notes.
10. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to Morgan Stanley, will be mailed,
delivered or telefaxed and confirmed to Morgan Stanley at 1585 Broadway, 2nd
Floor, New York, New York 10036, Attention: Manager, Continuously Offered
Products (telefax number: 212-761-0780), with a copy to 1585 Broadway, 34th
Floor, New York, New York 10036, Attention: Peter Cooper, Investment Banking
Information Center (telefax number: 212-761-0260), or, if sent to Credit Suisse
First Boston, will be mailed, delivered or telefaxed and confirmed to Credit
Suisse First Boston at Eleven Madison Avenue, New York, New York 10010,
Attention: Short and Medium Term Finance (telefax number: 212-325-8183), with a
copy to Helena M. Willner at the above address, or, if sent to the Company, will
be mailed, delivered or telefaxed and confirmed to the Company at 333
Continental Boulevard, El Segundo, California 90245-5012, Attention:
23
<PAGE>
William Stavro, Senior Vice President and Treasurer (telefax number: 310-252-
3215), with a copy to Lee B. Essner, Esq., Assistant General Counsel.
11. Successors. This Agreement and any Terms Agreement will inure to
----------
the benefit of and be binding upon the parties hereto and their respective
successors and the officers, directors and controlling persons referred to in
Section 6 and the purchasers of Notes (to the extent expressly provided in
Section 4), and no other person will have any right or obligation hereunder.
12. Amendments. This Agreement may be amended or supplemented if,
----------
but only if, such amendment or supplement is in writing and is signed by the
Company and each Agent; provided that the Company may from time to time, on
--------
seven days' prior written notice to the Agents but without the consent of any
Agent, amend this Agreement to add as a party hereto one or more additional
firms registered under the Exchange Act, whereupon each such firm shall become
an Agent hereunder on the same terms and conditions as the other Agents that are
parties hereto. The Agents shall sign any amendment or supplement giving effect
to the addition of any such firm as an Agent under this Agreement.
13. Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
14. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the internal laws of the State of New York.
15. Headings. The headings of the sections of this Agreement have
--------
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
24
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement between the
Company and you.
Very truly yours,
MATTEL, INC.
By: /s/ Lee B. Essner
--------------------------------------
Assistant Secretary
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Michael Fusco
---------------------------------
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Mike Hartmeier
--------------------------------
25
<PAGE>
EXHIBIT A
MATTEL, INC.
SERIES D MEDIUM-TERM NOTES
TERMS AGREEMENT
__________ __, 19__
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245-5012
Attention:
Re: Distribution Agreement dated as of
April 16, 1999 (the "Distribution Agreement")
-----------------------------------------------
We agree to purchase your Series D Medium-Term Notes (the "Notes")
having the following terms:
We agree to purchase, severally and not jointly, the principal amount
of Notes set forth below opposite our names:
Name Principal Amount
---- of Notes
-------------
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
Total...............$
=============
A-1
<PAGE>
The Notes shall have the following terms:
<TABLE>
<CAPTION>
All Notes: Fixed Rate Notes: Floating Rate Notes:
- ---------- ---------------- -------------------
<S> <C> <C>
Principal amount: Interest Rate: Base rate:
Purchase price: Applicability of modified payment Index maturity:
upon acceleration:
Price to public: If yes, state issue price: Spread:
Settlement date and time: Amortization schedule: Spread multiplier:
Place of delivery: Alternate rate event spread:
Specified currency: Initial interest rate:
Maturity date: Initial interest reset date:
Initial accrual period OID: Interest reset dates:
Total amount of OID: Interest reset period:
Original yield to maturity: Maximum interest rate:
Optional repayment date(s): Minimum interest rate:
Optional redemption date(s): Interest payment period:
Initial redemption date: Interest payment dates:
Initial redemption percentage: Calculation agent:
Annual redemption percentage decrease:
Other terms:
</TABLE>
A-2
<PAGE>
The provisions of Sections 1, 2(b) and 2(c) and 3 through 6, 9, 10, 11
and 14 of the Distribution Agreement and the related definitions are
incorporated by reference herein and shall be deemed to have the same force and
effect as if set forth in full herein.
If on the Settlement Date any one or more of the Agents shall fail or
refuse to purchase Notes that it has or they have agreed to purchase on such
date, and the aggregate amount of Notes which such defaulting Agent or Agents
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate amount of the Notes to be purchased on such date, the other Agents
shall be obligated severally in the proportions that the amount of Notes set
forth opposite their respective names above bears to the aggregate amount of
Notes set forth opposite the names of all such non-defaulting Agents, or in such
other proportions as _______________________________ may specify, to purchase
the Notes which such defaulting Agent or Agents agreed but failed or refused to
purchase on such date; provided that in no event shall the amount of Notes that
--------
any Agent has agreed to purchase pursuant to this Agreement be increased
pursuant to this paragraph by an amount in excess of one-ninth of such amount of
Notes without the written consent of such Agent. If on the Settlement Date any
Agent or Agents shall fail or refuse to purchase Notes and the aggregate amount
of Notes with respect to which such default occurs is more than one-tenth of the
aggregate amount of Notes to be purchased on such date, and arrangements
satisfactory to _________________________________________ and the Company for
the purchase of such Notes are not made within 36 hours after such default, this
Agreement shall terminate without liability on the part of any non-defaulting
Agent or the Company. In any such case either
_________________________________________ or the Company shall have the right to
postpone the Settlement Date but in no event for longer than seven days, in
order that the required changes, if any, in the Registration Statement and in
the Prospectus or in any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Agent from
liability in respect of any default of such Agent under this Agreement.
This Agreement is subject to termination on the terms incorporated by
reference herein. If this Agreement is so terminated, the provisions of
Sections 3(h), 6, 9, 11 and 14 of the Distribution Agreement shall survive for
the purposes of this Agreement.
A-3
<PAGE>
The following information, opinions, certificates, letters and
documents referred to in Section 4 of the Distribution Agreement will be
required:
MORGAN STANLEY & CO. INCORPORATED
By:_____________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON CORPORATION
By:_____________________________________
Name:
Title:
Accepted:
MATTEL, INC.
By:______________________
Name:
Title:
A-4
<PAGE>
EXHIBIT B
MATTEL, INC.
SERIES D MEDIUM-TERM NOTES
ADMINISTRATIVE PROCEDURES
----------------------------------------
Explained below are the administrative procedures and specific terms of the
offering of Series D Medium-Term Notes (the "Notes"), on a continuous basis by
Mattel, Inc. (the "Company") pursuant to the Distribution Agreement, dated as of
April 16, 1999 (the "Distribution Agreement") among the Company and Morgan
Stanley & Co. Incorporated ("Morgan Stanley"), and Credit Suisse First Boston
Corporation ("Credit Suisse First Boston") (the "Agents"). The Notes will be
issued under an Indenture dated as of February 15, 1996 (the "Indenture")
between the Company and Chase Trust Company of California (formerly Chemical
Trust Company of California), as trustee (the "Trustee"). In the Distribution
Agreement, the Agents have agreed to use reasonable efforts to solicit purchases
of the Notes, and the administrative procedures explained below will govern the
issuance and settlement of any Notes sold through an Agent, as agent of the
Company. An Agent, as principal, may also purchase Notes for its own account,
and if requested by such Agent, the Company and such Agent will enter into a
terms agreement (a "Terms Agreement"), as contemplated by the Distribution
Agreement. The administrative procedures explained below will govern the
issuance and settlement of any Notes purchased by an Agent, as principal, unless
otherwise specified in the applicable Terms Agreement. Capitalized terms used
herein without definition shall have the meaning ascribed to them in the Notes.
The Trustee will be the Registrar, Calculation Agent, Authenticating Agent
and Paying Agent for the Notes and will perform the duties specified herein.
Each Note will be represented by either a Global Security (as defined below)
delivered to the Trustee, as agent for The Depository Trust Company ("DTC"), and
recorded in the book-entry system maintained by DTC (a "Book-Entry Note") or a
certificate delivered to the holder thereof or a person designated by such
holder (a "Certificated Note"). Except as set forth in the Indenture, an owner
of a Book-Entry Note will not be entitled to receive a Certificated Note. Book-
Entry Notes, which may be payable only in U.S. dollars, will be issued in
accordance with the administrative procedures set forth in Part I hereof as they
may subsequently be amended as the result of changes in DTC's operating
procedures. Certificated Notes will be issued in accordance with the
administrative procedures set forth in Part II hereof. Unless otherwise defined
herein, terms defined in the Indenture, the Notes or any prospectus supplement
relating to the Notes shall be used herein as therein defined.
For purposes of these Administrative Procedures, "Business Day" means any
day, other than a Saturday or Sunday, that is neither a legal holiday nor a day
on which banking institutions are authorized or required by law or regulation to
close in the City of New York, New York.
<PAGE>
The Company will advise the Agents in writing of the employees of the
Company with whom the Agents are to communicate regarding offers to purchase
Notes and the related settlement details.
PART I: ADMINISTRATIVE PROCEDURES FOR BOOK-ENTRY NOTES
In connection with the qualification of the Book-Entry Notes for
eligibility in the book-entry system maintained by DTC, the Trustee will perform
the custodial, document control and administrative functions described below, in
accordance with its respective obligations under a Letter of Representation
dated as of April 11, 1996, and a Bring-Down Letter of Representation dated as
of January 14, 1999 from the Company and the Trustee to DTC, and a Medium-Term
Note Certificate Agreement between Chemical Bank as agent for the Trustee and
DTC, dated as of December 2, 1988 (the "MTN Certificate Agreement"), and its
obligations as a participant in DTC, including DTC's Same-Day Funds Settlement
System ("SDFS").
Issuance: On any date of settlement (as defined under
"Settlement" below) for one or more Book-Entry
Notes, the Company will issue a single global
security in fully registered form without coupons
(a "Global Security") representing up to U.S.
$200,000,000 principal amount of all such Notes
that have the same Original Issue Date, Maturity
Date and other terms. Each Global Security will be
dated and issued as of the date of its
authentication by the Trustee. Each Global Security
will bear an "Interest Accrual Date," which will be
(i) with respect to an original Global Security (or
any portion thereof), its original issuance date
and (ii) with respect to any Global Security (or
any portion thereof) issued subsequently upon
exchange of a Global Security, or in lieu of a
destroyed, lost or stolen Global Security, the most
recent Interest Payment Date to which interest has
been paid or duly provided for on the predecessor
Global Security (or if no such payment or provision
has been made, the original issuance date of the
predecessor Global Security), regardless of the
date of authentication of such subsequently issued
Global Security. Book- Entry Notes may be payable
only in U.S. dollars. No Global Security will
represent any Certificated Note.
Denominations: Book-Entry Notes will be issued in principal
amounts of U.S. $1,000 or any amount in excess
thereof that is an integral multiple of U.S.
$1,000. Global Securities will be denominated in
principal amounts not in excess of U.S.
$200,000,000. If one or more Book-Entry Notes
having an aggregate principal amount in excess of
$200,000,000 would, but for the preceding sentence,
be represented by a single Global Security, then
one Global Security will be issued to represent
each U.S. $200,000,000 principal amount of such
Book-Entry Note or Notes and an additional Global
Security will be issued to represent any remaining
principal amount of such Book-Entry Note or Notes.
In such a case, each of the Global Securities
representing such Book-Entry Note or Notes shall be
assigned the same CUSIP number.
-6-
<PAGE>
Preparation of Pricing If any offer to purchase a Book-Entry Note is accepted
Supplement: by or on behalf of the Company, the Company will
prepare a pricing supplement (a "Pricing Supplement")
reflecting the terms of such Note. The Company (i) will
arrange to file such Pricing Supplement with the
Commission in accordance with the applicable paragraph
of Rule 424(b) under the Securities Act of 1933, as
amended, and (ii) will, as soon as possible and in any
event not later than 11:00 a.m. on the Business Day
immediately following the applicable trade date,
deliver the number of copies of such Pricing Supplement
to the relevant Agent as such Agent shall request at
the following address:
If to Morgan Stanley:
Morgan Stanley & Co. Incorporated
1585 Broadway, 2nd Floor
New York, New York 10036
Attn: Medium Term Note Trading Desk, Carlos
Cabrera
Telephone: (212) 761-4000
Telecopy: (212) 761-0780
If to Credit Suisse First Boston:
Credit Suisse First Boston Corporation
5 World Trade Center, 7th Floor
New York, New York 10048
Attn: Ms. Joan Bryan
Telephone: (212) 322-5105
Telecopy: (212) 803-4096
with a copy to:
Credit Suisse First Boston Corporation
Short and Medium Term Finance
Eleven Madison Avenue
New York, New York 10010
Attn: Helena Willner
Telephone: (212) 325-7198
Telecopy: (212) 325-8183
In each instance that a Pricing Supplement is prepared,
the relevant Agent will affix the Pricing Supplement to
Prospectuses prior to their use. Outdated Pricing
Supplements, and the Prospectuses to which they are
attached (other than those retained for files), will be
destroyed.
-7-
<PAGE>
Settlement: The receipt by the Company of immediately available
funds in payment for a Book-Entry Note and the
authentication and issuance of the Global Security
representing such Note shall constitute ?settlement?
with respect to such Note. All offers accepted by the
Company will be settled on the third Business Day next
succeeding the date of acceptance pursuant to the
timetable for settlement set forth below, unless the
Company and the purchaser agree to settlement on
another day, which shall be no earlier than the next
Business Day.
Settlement Procedures: Settlement Procedures with regard to each Book-Entry
Note sold by the Company to or through an Agent (unless
otherwise specified pursuant to a Terms Agreement)
shall be as follows:
A. The relevant Agent will advise the Company by
telephone that such Note is a Book-Entry
Note and of the following settlement information:
1. Principal amount.
2. Maturity Date.
3. In the case of a Fixed Rate Book-Entry Note,
the Interest Rate, whether such Note will pay
interest annually or semi-annually and
whether such Note is an Amortizing Note, and,
if so, the amortization schedule, or, in the
case of a Floating Rate Book-Entry Note, the
Initial Interest Rate (if known at such
time), Interest Payment Date(s), Interest
Payment Period, Calculation Agent, Base Rate,
Index Maturity, Interest Reset Period,
Initial Interest Reset Date, Interest Reset
Date, Spread or Spread Multiplier (if any),
Minimum Interest Rate (if any), Maximum
Interest Rate (if any), and the Alternate
Rate Event Spread (if any).
4. Redemption or repayment provisions (if any).
5. Settlement date and time (Original Issue
Date).
6. Interest Accrual Date.
7. Price.
8. Agent's commission (if any) determined as
provided in the Distribution Agreement.
9. Whether the Note is an Original Issue
Discount Note (an "OID Note"), and if it is
an OID Note, the total amount of OID, the
yield to maturity, the initial accrual period
OID and the applicability of Modified Payment
upon Acceleration (and, if so, the Issue
Price).
-8-
<PAGE>
10. Whether the Note is an Indexed Note, and if
it is an Indexed Note, the Denominated
Currency, the Indexed Currency or Currencies,
the Payment Currency, the Exchange Rate
Agent, the Reference Dealers, the Face
Amount, the Fixed Amount of each Indexed
Currency, the Aggregate Fixed Amount of each
Indexed Currency and the Authorized
Denominations (if other than U.S. Dollars).
11. Whether the Note is a Renewable Note, and if
it is a Renewable Note, the Initial Maturity
Date and the Final Maturity Date.
12. Whether the Company has the option to extend
the Original Maturity Date of the Note, and
if so, the Final Maturity Date of such Note.
13. Whether the Company has the option to reset
the Interest Rate, the Spread or the Spread
Multiplier of the Note.
14. Any other applicable terms.
B. The Company will advise the Trustee by telephone
or electronic transmission (confirmed in writing
at any time on the same date) of the information
set forth in Settlement Procedure "A?" above. The
Trustee will then assign a CUSIP number to the
Global Security representing such Note and will
notify the Company and the relevant Agent of such
CUSIP number by telephone as soon as practicable.
C. The Trustee will enter a pending deposit message
through DTC's Participant Terminal System,
providing the following settlement information to
DTC, to all relevant Agents and the CUSIP Bureau
of Standard & Poor's Corporation:
1. The information set forth in Settlement
Procedure "A".
2. The Initial Interest Payment Date for such
Note, the number of days by which such date
succeeds the related DTC Record Date (which
in the case of Floating Rate Notes which
reset daily or weekly, shall be the date five
calendar days immediately preceding the
applicable Interest Payment Date and, in the
case of all other Notes, shall be the Record
Date as defined in the Note) and, if known,
the amount of interest payable on such
Initial Interest Payment Date.
3. The CUSIP number of the Global Security
representing such Note.
4. Whether such Global Security will represent
any other Book-Entry Note (to the extent
known at such time).
-9-
<PAGE>
5. Whether such Note is an Amortizing Note (by
an appropriate notation in the comments field
of DTC's Participant Terminal System).
6. The number of participant accounts to be
maintained by DTC on behalf of the relevant
Agent and the Trustee.
D. The Trustee will complete and authenticate the
Global Security representing such Note.
E. DTC will credit such Note to the Trustee?s
participant account at DTC.
F. The Trustee will enter an SDFS deliver order
through DTC?s Participant Terminal System
instructing DTC to (i) debit such Note to the
Trustee?s participant account and credit such Note
to the relevant Agent?s participant account and
(ii) debit such Agent?s settlement account and
credit the Trustee?s settlement account for an
amount equal to the price of such Note less such
Agent?s commission (if any). The entry of such a
deliver order shall constitute a representation
and warranty by the Trustee to DTC that (a) the
Global Security representing such Book-Entry Note
has been issued and authenticated and (b) the
Trustee is holding such Global Security pursuant
to the MTN Certificate Agreement.
G. Unless the relevant Agent is the end purchaser of
such Note, such Agent will enter an SDFS deliver
order through DTC's Participant Terminal System
instructing DTC (i) to debit such Note to such
Agent?s participant account and credit such Note
to the participant accounts of the Participants
with respect to such Note and (ii) to debit the
settlement accounts of such Participants and
credit the settlement account of such Agent for an
amount equal to the price of such Note.
H. Transfers of funds in accordance with SDFS deliver
orders described in Settlement Procedures "F" and
"G" will be settled in accordance with SDFS
operating procedures in effect on the settlement
date.
I. The Trustee will credit to the account of the
Company maintained with respect to any transaction
conducted in U.S. Dollars at Bank of America,
Concord, California 94520, account number 12354-
11470, to the account of Mattel Toys, ABA
#121000358, or such other account as the Company
shall have specified to such Agent and the
Trustee, and with respect to any transaction
conducted in any Specified Currency other than
U.S. Dollars, to such account as the Company shall
have specified to such Agent and the Trustee, in
immediately available funds the amount transferred
to the Trustee in accordance with Settlement
Procedure "F".
-10-
<PAGE>
J. Unless the relevant Agent is the end purchaser of
such Note, such Agent will confirm the purchase of
such Note to the purchaser either by transmitting
to the Participants with respect to such Note a
confirmation order or orders through DTC's
institutional delivery system or by mailing a
written confirmation to such purchaser.
K. Monthly, the Trustee will send to the Company a
statement setting forth the principal amount of
Notes outstanding as of that date under the
Indenture and setting forth a brief description of
any sales of which the Company has advised the
Trustee that have not yet been settled.
Settlement Procedures For sales by the Company of Book-Entry Notes to or
Timetable: through an Agent (unless otherwise specified pursuant
to a Terms Agreement) for settlement on the first
Business Day after the sale date, Settlement Procedures
"A" through "J" set forth above shall be completed as
soon as possible but not later than the respective
times in New York City set forth below:
Settlement
Procedure Time
--------- ----
A 11:00 A.M. on sale date
B 12:00 Noon on sale date
C 2:00 P.M. on sale date
D 9:00 A.M. on settlement date
E 10:00 A.M. on settlement date
F-G 2:00 P.M. on settlement date
H 4:45 P.M. on settlement date
I-J 5:00 P.M. on settlement date
If a sale is to be settled more than one Business Day
after the sale date, Settlement Procedures "A", "B" and
"C" shall be completed as soon as practicable but no
later than 11:00 A.M., 12:00 Noon and 2:00 P.M.,
respectively, on the first Business Day after the sale
date. If the Initial Interest Rate for a Floating Rate
Book-Entry Note has not been determined at the time
that Settlement Procedure "A" is completed, Settlement
Procedures "B" and "C" shall be completed as soon as
such rate has been determined but no later than 12:00
Noon and 2:00 P.M., respectively, on the first Business
Day before the settlement date. Settlement Procedure
"H" is subject to extension in accordance with any
extension of Fedwire closing deadlines and in the other
events specified in the SDFS operating procedures in
effect on the settlement date.
If settlement of a Book-Entry Note is rescheduled or
cancelled, the Trustee, after receiving notice from the
Company or the relevant Agent, will deliver to DTC,
through DTC's Participant Terminal System, a
cancellation message to such effect by no later than
2:00 p.m. on the Business Day immediately preceding the
scheduled settlement date.
-11-
<PAGE>
Failure to Settle: If the Trustee fails to enter an SDFS deliver order
with respect to a Book-Entry Note pursuant to
Settlement Procedure "F", the Trustee may deliver to
DTC, through DTC's Participant Terminal System, as soon
as practicable a withdrawal message instructing DTC to
debit such Note to the Trustee's participant account,
provided that the Trustee's participant account
contains a principal amount of the Global Security
representing such Note that is at least equal to the
principal amount to be debited. If a withdrawal message
is processed with respect to all the Book-Entry Notes
represented by a Global Security, the Trustee will mark
such Global Security "cancelled," make appropriate
entries in the Trustee's records and send such
cancelled Global Security to the Company. The CUSIP
number assigned to such Global Security shall, in
accordance with the procedures of the CUSIP Service
Bureau of Standard & Poor's Corporation, be cancelled
and not immediately reassigned. If a withdrawal message
is processed with respect to one or more, but not all,
of the Book-Entry Notes represented by a Global
Security, the Trustee will exchange such Global
Security for two Global Securities, one of which shall
represent such Book-Entry Note or Notes and shall be
cancelled immediately after issuance and the other of
which shall represent the remaining Book-Entry Notes
previously represented by the surrendered Global
Security and shall bear the CUSIP number of the
surrendered Global Security.
If the purchase price for any Book-Entry Note is not
timely paid to the Participants with respect to such
Note by the beneficial purchaser thereof (or a person,
including an indirect participant in DTC, acting on
behalf of such purchaser), such Participants and, in
turn, the relevant Agent may enter SDFS deliver orders
through DTC's Participant Terminal System reversing the
orders entered pursuant to Settlement Procedures "F"
and "G", respectively. Thereafter, the Trustee will
deliver the withdrawal message and take the related
actions described in the preceding paragraph.
Notwithstanding the foregoing, upon any failure to
settle with respect to a Book-Entry Note, DTC may take
any actions in accordance with its SDFS operating
procedures then in effect.
In the event of a failure to settle with respect to one
or more, but not all, of the Book-Entry Notes to have
been represented by a Global Security, the Trustee will
provide, in accordance with Settlement Procedures "D"
and "F", for the authentication and issuance of a
Global Security representing the Book-Entry Notes to be
represented by such Global Security and will make
appropriate entries in its records.
-12-
<PAGE>
PART II: ADMINISTRATIVE PROCEDURES FOR CERTIFICATED NOTES
The Trustee will serve as Registrar in connection with the
Certificated Notes.
Issuance: Each Certificated Note will be dated and issued as of
the date of its authentication by the Trustee. Each
Certificated Note will bear an Original Issue Date,
which will be (i) with respect to an original
Certificated Note (or any portion thereof), its
original issuance date (which will be the settlement
date) and (ii) with respect to any Certificated Note
(or portion thereof) issued subsequently upon transfer
or exchange of a Certificated Note or in lieu of a
destroyed, lost or stolen Certificated Note, the
original issuance date of the predecessor Certificated
Note, regardless of the date of authentication of such
subsequently issued Certificated Note.
Preparation of Pricing If any offer to purchase a Certificated Note is
Supplement: accepted by or on behalf of the Company, the Company
will prepare a Pricing Supplement reflecting the terms
of such Note. The Company (i) will arrange to file such
Pricing Supplement with the Commission in accordance
with the applicable paragraph of Rule 424(b) under the
Act and (ii) will, as soon as possible and in any event
not later than 11:00 a.m. on the Business Day
immediately following the applicable trade date,
deliver the number of copies of such Pricing Supplement
to the relevant Agent as such Agent shall request at
the following address:
If to Morgan Stanley:
Morgan Stanley & Co. Incorporated
1585 Broadway, 2nd Floor
New York, New York 10036
Attn: Medium Term Note Trading Desk, Carlos
Cabrera
Telephone: (212) 761-4000
Telecopy: (212) 761-0780
If to Credit Suisse First Boston:
Credit Suisse First Boston Corporation
Short and Medium Term Finance
Eleven Madison Avenue
New York, New York 10010
Attn: Helena Willner
Telephone: (212) 325-7198
Telecopy: (212) 325-8183
-13-
<PAGE>
In each instance that a Pricing Supplement is prepared,
the relevant Agent will affix the Pricing Supplement to
Prospectuses prior to their use. Outdated Pricing
Supplements, and the Prospectuses to which they are
attached (other than those retained for files), will be
destroyed.
Settlement: The receipt by the Company of immediately available
funds in exchange for an authenticated Certificated
Note delivered to the relevant Agent and such Agent?s
delivery of such Note against receipt of immediately
available funds shall constitute "settlement" with
respect to such Note. All offers accepted by the
Company will be settled on the third Business Day next
succeeding the date of acceptance pursuant to the
timetable for settlement set forth below, unless the
Company and the purchaser agree to settlement on
another date, which date shall be no earlier than the
next Business Day.
Settlement Procedures: Settlement Procedures with regard to each Certificated
Note sold by the Company to or through an Agent (unless
otherwise specified pursuant to a Terms Agreement)
shall be as follows:
A. The relevant Agent will advise the Company by
telephone that such Note is a Certificated Note
and of the following settlement information:
1. Name in which Note is to be registered
("Registered Owner"?).
2. Address of the Registered Owner and address
for payment of principal and interest.
3. Taxpayer identification number of the
Registered Owner (if available).
4. Principal amount.
5. Maturity Date.
6. In the case of a Fixed Rate Certificated
Note, the Interest Rate, whether such Note
will pay interest annually or semi-annually
and whether such Note is an Amortizing Note
and, if so, the amortization schedule, or, in
the case of a Floating Rate Certificated
Note, the Initial Interest Rate (if known at
such time), Interest Payment Date(s),
Interest Payment Period, Calculation Agent,
Base Rate, Index Maturity, Interest Reset
Period, Initial Interest Reset Date, Interest
Reset Dates, Spread or Spread Multiplier (if
any), Minimum Interest Rate (if any), Maximum
Interest Rate (if any) and the Alternate Rate
Event Spread (if any).
7. Redemption or repayment provisions (if any).
8. Settlement date and time (Original Issue
Date).
-14-
<PAGE>
9. Interest Accrual Date.
10. Price.
11. Agent's commission (if any) determined as
provided in the Distribution Agreement.
12. Denominations.
13. Specified Currency.
14. Whether the Note is an OID Note, and if it is
an OID Note, the total amount of OID, the
yield to maturity, the initial accrual period
OID and the applicability of Modified Payment
upon Acceleration (and if so, the Issue
Price).
15. Whether the Note is an Indexed Note, and if
it is an Indexed Note, the Denominated
Currency, the Indexed Currency or Currencies,
the Payment Currency, the Exchange Rate
Agent, the Reference Dealers, the Face
Amount, the Fixed Amount of each Indexed
Currency, the Aggregate Fixed Amount of each
Indexed Currency and the Authorized
Denominations (if other than U.S. Dollars).
16. Whether the Note is a Renewable Note, and if
it is a Renewable Note, the Initial Maturity
Date and the Final Maturity Date.
17. Whether the Company has the option to extend
the Original Maturity Date of the Note, and,
if so, the Final Maturity Date of such Note.
18. Whether the Company has the option to reset
the Interest Rate, the Spread or the Spread
Multiplier of the Note.
19. Any other applicable terms.
B. The Company will advise the Trustee by telephone
or electronic transmissions (confirmed in writing
at any time on the same date) of the information
set forth in Settlement Procedure "A" above.
C. The Company will have delivered to the Trustee a
packet for such Note, which packet will contain
the following documents in forms that have been
approved by the Company, the relevant Agent and
the Trustee:
1. Note with customer confirmation.
2. Stub One - for the Trustee.
3. Stub Two - for the relevant Agent.
-15-
<PAGE>
4. Stub Three - for the Company.
D. The Trustee will complete such Note and
authenticate such Note and deliver it (with the
confirmation) and Stubs One and Two to the
relevant Agent at the following applicable
addresses: If to Morgan Stanley to Bank of New
York, Dealer Clearance Department, Window B, 1
Wall Street, 4th Floor, New York, New York 10005,
Attn: For the Account of Morgan Stanley & Co., and
if to Credit Suisse First Boston to Five World
Trade Center, New York, New York 10048, Attn: Paul
Riley. Such Agent will acknowledge receipt of the
Note by stamping or otherwise mailing Stub One and
returning it to the Trustee. Such delivery will be
made only against such acknowledgment of receipt
of evidence that instructions have been given by
such Agent for payment to the account of the
Company with respect to any transaction conducted
in U.S. Dollars at Bank of America, Concord,
California 94520, account number 12354-11470, to
the account of Mattel Toys, ABA #121000358, or
such other account as the Company shall have
specified to such Agent and the Trustee, and with
respect to any transaction conducted in any
Specified Currency other than U.S. Dollars, to
such account as the Company shall have specified
to such Agent and the Trustee, in immediately
available funds, of an amount equal to the price
of such Note less such Agent's commission (if
any). In the event that the instructions given by
such Agent for payment to the account of the
Company are revoked, the Company will as promptly
as possible wire transfer to the account of such
Agent an amount of immediately available funds
equal to the amount of such payment made.
E. Unless the relevant Agent is the end purchaser of
such Note, such Agent will deliver such Note (with
confirmation) to the customer against payment in
immediately available funds. Such Agent will
obtain the acknowledgment of receipt of such Note
by retaining Stub Two.
F. The Trustee will send Stub Three to the Company by
first-class mail. Monthly, the Trustee will also
send to the Company a statement setting forth the
principal amount of the Notes outstanding as of
that date under the Indenture and setting forth a
brief description of any sales of which the
Company has advised the Trustee that have not yet
been settled.
Settlement Procedures For sales by the Company of Certificated Notes to or
Timetable: through an Agent (unless otherwise specified pursuant
to a Terms Agreement), Settlement Procedures "A"
through "F" set forth above shall be completed on or
before the respective times in New York City set forth
below:
-16-
<PAGE>
<TABLE>
<CAPTION>
Settlement
Procedure Time
--------- ----
<S> <C>
A 2:00 P.M. on the day before settlement date
B 3:00 P.M. on the day before settlement date
C-D 2:15 P.M. on settlement date
E 3:00 P.M. on settlement date
5:00 P.M. on settlement date
</TABLE>
Failure to Settle: If a purchaser fails to accept delivery of and make
payment for any Certificated Note, the relevant Agent
will notify the Company and the Trustee by telephone
and return such Note to the Trustee. Upon receipt of
such notice, the Company will immediately wire transfer
to the account of such Agent an amount equal to the
price of such Note less such Agent's commission in
respect of such Note (if any). Such wire transfer will
be made on the settlement date, if possible, and in any
event not later than the Business Day following the
settlement date. If the failure shall have occurred for
any reason other than a default by such Agent in the
performance of its obligations hereunder and under the
Distribution Agreement, then the Company will reimburse
such Agent or the Trustee, as appropriate, on an
equitable basis for its loss of the use of the funds
during the period when they were credited to the
account of the Company. Immediately upon receipt of the
Certificated Note in respect of which such failure
occurred, the Trustee will mark such Note "cancelled,"
make appropriate entries in the Trustee's records and
send such Note to the Company.
-17-
<PAGE>
EXHIBIT 4.1
MATTEL, INC.
OFFICER'S CERTIFICATE PURSUANT TO
SECTIONS 2.2, 10.4 AND 10.5 OF THE INDENTURE
--------------------------------------------
Each of Harry J. Pearce, Chief Financial Officer, and William Stavro,
Senior Vice President and Treasurer, of Mattel, Inc., a Delaware corporation
(the "Company"), having read the Indenture dated as of February 15, 1996 (the
"Indenture"), between the Company and Chase Manhattan Bank and Trust Company
(formerly Chemical Trust Company of California), as Trustee, including Section
2.2 thereof, do hereby determine and certify pursuant to the authority vested in
them by the Board of Directors of the Company (pursuant to resolutions duly
adopted by the Board of Directors of the Company on November 4, 1998) as
follows:
(i) They hereby authorize and establish a Series of Securities
to be issued under the Indenture entitled the Series D Medium-Term Note
(the "Notes"), the terms and provisions of, and the form of notes
representing, such Series to be determined and approved by the Chief
Financial Officer and the Treasurer of the Company, which determination and
approval are to be evidenced by an Officers' Certificate as contemplated by
Section 2.2 of the Indenture;
(ii) It is hereby determined that the terms and provisions of
the Notes shall be as set forth in Annex A hereto and the forms of Notes
shall be as set forth in Annex B and Annex C hereto;
(iii) I have read the Indenture, including Section 2.2 thereof;
(iv) In my opinion, I have made such examination or
investigation as is necessary to enable me to express an informed opinion
as to whether the conditions precedent provided for in the Indenture
relating to the establishment of a Series of Securities (as defined in the
Indenture) have been complied with; and
(v) In my opinion, all conditions precedent provided for in the
Indenture relating to the establishment of the Series of Notes have been
complied with.
<PAGE>
IN WITNESS WHEREOF, we have hereunto signed our names and affixed the
seal of the Company this 16th day of April, 1999.
By: /s/ Harry J. Pearce
-------------------------
Harry J. Pearce
Chief Financial Officer
By: /s/ William Stavro
-------------------------
William Stavro
Senior Vice President and Treasurer
2
<PAGE>
ANNEX A
-------
Except as otherwise provided in the forms of Fixed Rate Note and
Floating Rate Note included herewith, the terms of the Notes shall be as follows
(terms defined in the Indenture or in the forms of Fixed Rate Note and Floating
Rate Note included herewith and not otherwise defined herein are used herein as
so defined):
(1) A Series of Securities to be issued under the Indenture has
been designated as the "Series D Medium-Term Notes" (such series is
hereinafter referred to as the "Notes" and each individual obligation under
such series, a "Note");
(2) The Notes shall constitute part of a single Series of
Securities under the Indenture, which Series is not limited in aggregate
principal amount, but is limited in aggregate initial public offering price
to $400,000,000;
(3) The date(s) on which principal of each Note is payable shall
be such date more than nine months from the date of issuance as is selected
by the purchaser of such Note and agreed to by the Chairman of the Board,
any President, any Vice President, the Treasurer, the Secretary, any
Assistant Treasurer or any Assistant Secretary of the Company (the
"Authorized Officers") at the time of issuance thereof, which date(s) shall
be included in the form of such Note upon issuance thereof;
(4) The rate or rates and, if applicable, the method used to
determine the rate, at which each Note shall bear interest (which may not
in any case exceed the maximum rate permitted under applicable law) shall
be determined by the Authorized Officers at the time of issuance thereof,
which rate or rates or method for establishing the rate shall be included
in the form of such Note upon issuance thereof. Interest will accrue from
the most recent date on which interest has been paid or duly provided for
or if no interest has been paid or duly provided for, from the Interest
Accrual Date, until the principal thereof has been paid or duly made
available for payment (except as provided below). Interest will be payable
on each Interest Payment Date, which shall be on May 15 and November 15 of
each year with respect to Fixed Rate Notes and on a date or dates as
specified in Floating Rate Notes, and at a maturity as specified in the
Note. The interest so payable and punctually paid or duly provided for, on
any Interest Payment Date will be paid to the person in whose name such
Note is registered at the close of business on the Record Date for such
Interest Payment date, which Record Date shall be the date 15 calendar days
prior to each Interest Payment Date (whether or not a Business Day);
provided, however, that interest payable on any Maturity Date (or any
-------- -------
redemption or repayment date) will be payable to the person to whom
principal shall be payable. The first payment of interest on any Note
issued between a Record Date and an Interest Payment Date will be made on
the Interest Payment Date following the next succeeding Record Date to the
person in whose name such Note is registered on such next succeeding Record
Date;
<PAGE>
(5) Payment of the principal of each Note, any premium and the
interest due on any Maturity Date (or any redemption or repayment date)
will be made in immediately available funds upon surrender of such Note at
the principal corporate trust office of the Trustee or at the office or
agency of the Trustee maintained for that purpose in The City of New York,
New York, or at such other paying agency as the Company may determine.
Payment of the principal of and premium, if any, and interest on each Note
will be made in the Specified Currency at the office or offices indicated
in such Note; provided, however, that U.S. dollar payments of interest,
-------- -------
other than interest due at maturity or on any date of redemption or
repayment, will be made by U.S. dollar check mailed to the address of the
person entitled thereto as such address shall appear in the Note register.
A holder of U.S. $10,000,000 or more in aggregate principal amount of Notes
having the same Interest Payment Date will be entitled to receive payments
of interest, other than interest due at maturity or on any date of
redemption or repayment, by wire transfer of immediately available funds if
appropriate wire transfer instructions have been received by the Paying
Agent in writing not less than 15 calendar days prior to the applicable
Interest Payment Date. If a Note is denominated in a Specified Currency
other than U.S. dollars and payments of interest are to be made by wire
transfer, such payments of interest thereon will be made by wire transfer
of immediately available funds to an account maintained by the holder
thereof with a bank located outside the United States if appropriate wire
transfer instructions have been received by the Paying Agent in writing not
less than 15 calendar days prior to the applicable Interest Payment Date.
If such wire transfer instructions are not so received, such interest
payments will be made by check payable in such Specified Currency mailed to
the address of the person entitled thereto as such address shall appear in
the Note register;
(6) Any Note may be redeemed or repurchased at the times and in
the manner set forth in such Note at the time of issuance thereof, as
determined and certified to the Trustee by the Authorized Officers;
(7) The Company shall be obligated to redeem or purchase each
Note pursuant to such sinking fund or analogous provisions (if any) or at
the option of the Holder thereof (if provided by the terms of the Note),
within such period or periods, at such price or prices and upon such other
terms and conditions as are set forth in such Note at the time of issuance
thereof, as determined and certified to the Trustee by the Authorized
Officers;
(8) The Notes shall be issued in registered form in
denominations of $1,000 and integral multiples thereof and each Note will
be represented by either a global security registered in the name of a
securities depository or a certificate issued in definitive form, as
determined and set forth at the time of issuance thereof;
(9) The principal of the Notes shall be payable upon declaration
of acceleration of maturity pursuant to Section 6.2 of the Indenture,
except that in the case of a Discount Security, the portion of the
principal that shall be payable upon declaration of acceleration shall be
such portion as is set forth in such Discount Note
-4-
<PAGE>
at the time of issuance thereof, as determined and certified to the Trustee
by the Authorized Officers;
(10) Unless specified otherwise in any Note, the currency of
denomination of the Notes shall be the coin or currency of the United
States of America that at the time of payment is legal tender for public
and private debts;
(11) Unless specified otherwise in any Note, principal of and
interest on the Notes shall be payable in the coin or currency of the
United States of America that at the time of payment is legal tender for
public and private debts;
(12) The manner in which the exchange rate used to calculate
payment of principal of or interest on the Notes that are to be made in a
Foreign Currency shall be as set forth in such Note at the time of issuance
thereof, as determined and certified to the Trustee by the Authorized
Officers;
(13) The manner in which the amount of any payment of principal
of or interest on any Note that is to be determined by reference to a
commodity, commodity index, stock exchange index or financial index shall
be as set forth in such Note at the time of issuance thereof, as determined
and certified to the Trustee by the Authorized Officers;
(14) Any other terms of the Notes, which shall not be
inconsistent with the Indenture, shall be as set forth in such Note at the
time of issuance thereof, as determined and certified to the Trustee by the
Authorized Officers;
(15) Fixed Rate Notes shall be in the form included herewith as
Annex B, and Floating Rate Notes shall be in the form included herewith as
Annex C hereto; and
(16) Any depositories, interest rate calculation agents,
exchange rate calculation agents or other agents with respect to the Notes,
other than those appointed in the Indenture, will be such as are in the
future appointed from time to time in accordance with the terms of the
Indenture.
-5-
<PAGE>
EXHIBIT 4.2
(FORM OF FACE OF SECURITY)
MATTEL, INC.
SERIES D MEDIUM-TERM NOTE
Floating Rate Note
REGISTERED REGISTERED
No. FLR- [PRINCIPAL
AMOUNT]
CUSIP:
If the registered owner of this Security (as indicated below) is The
Depository Trust Company (the "Depository") or a nominee of the Depository, this
Security is a Global Security and the following two legends apply:
This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of the Depository or a
nominee of the Depository. This Security is exchangeable for Securities
registered in the name of a person other than the Depository or its nominee only
in the limited circumstances described in the Indenture, and may not be
transferred except as a whole by the Depository to a nominee of the Depository,
by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor of the
Depository or a nominee of such successor.
Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) to the
Issuer (as defined below) or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co. or
such other name as requested by an authorized representative of The Depository
Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since
the registered owner hereof, Cede & Co., has an interest herein.
IF APPLICABLE, THE "TOTAL AMOUNT OF OID," "ORIGINAL YIELD TO MATURITY" AND
"INITIAL ACCRUAL PERIOD OID" (COMPUTED UNDER THE APPROXIMATE METHOD) SET FORTH
BELOW HAVE BEEN COMPLETED SOLELY FOR THE PURPOSES OF APPLYING THE FEDERAL INCOME
TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES.
<PAGE>
<TABLE>
<S> <C> <C>
BASE RATE: ORIGINAL ISSUE DATE: ORIGINAL MATURITY DATE:
INDEX MATURITY: INTEREST ACCRUAL DATE: FINAL MATURITY DATE:
SPREAD (PLUS OR MINUS): INITIAL INTEREST RATE: INTEREST PAYMENT DATE(S):
ALTERNATE RATE INITIAL INTEREST RESET DATE: INTEREST PAYMENT PERIOD:
EVENT SPREAD:
SPREAD MULTIPLIER: MAXIMUM INTEREST RATE: INTEREST RESET PERIOD:
APPLICABILITY OF MODIFIED MINIMUM INTEREST RATE: INTEREST RESET DATES:
PAYMENT UPON ACCELERATION:
If yes, state INITIAL REDEMPTION CALCULATION AGENT:
ISSUE PRICE: DATE:
INITIAL REDEMPTION PERCENTAGE: SPECIFIED CURRENCY:
ANNUAL REDEMPTION INDEX CURRENCY:
PERCENTAGE REDUCTION:
OPTIONAL REPAYMENT TOTAL AMOUNT OF OID:
DATE(S):
ORIGINAL YIELD TO MATURITY:
OTHER TERMS: INITIAL ACCRUAL
PERIOD OID:
</TABLE>
Mattel, Inc., a Delaware corporation (together with its successors and
assigns, the "Issuer"), for value received, hereby promises to pay to
or registered assignees, the principal sum of _______________________________,
on the Original Maturity Date specified above (except to the extent redeemed or
repaid prior to the Original Maturity Date) or, if the maturity hereof is
extended in accordance with the procedures set forth below to an Extended
Maturity Date, as defined below, on such Extended Maturity Date (except to the
extent previously redeemed or repaid) and to pay interest thereon, from the
Interest Accrual Date specified above at a rate per annum equal to the Initial
Interest Rate specified above until the Initial Interest Reset Date specified
above, and thereafter at a rate per annum determined in accordance with the
provisions specified on the reverse hereof (including the provisions relating to
extension of maturity) until the principal hereof is paid or duly made available
for payment. The Issuer will pay interest in
-2-
<PAGE>
arrears monthly, quarterly, semiannually or annually as specified above as the
Interest Payment Period on each Interest Payment Date (as specified above),
commencing with the first Interest Payment Date next succeeding the Interest
Accrual Date specified above, and at maturity (or on any redemption or repayment
date); provided, however, that if the Interest Accrual Date occurs between a
Record Date, as defined below, and the next succeeding Interest Payment Date,
interest payments will commence on the second Interest Payment Date succeeding
the Interest Accrual Date to the registered holder of this Note on the Record
Date with respect to such second Interest Payment Date; and provided, further,
that if an Interest Payment Date or the Maturity Date or redemption or repayment
date would fall on a day that is not a Business Day, as defined on the reverse
hereof, such Interest Payment Date, Maturity Date or redemption or repayment
date shall be the following day that is a Business Day, except that if the Base
Rate specified above is LIBOR and such next Business Day falls in the next
calendar month, the Interest Payment Date, Maturity Date or redemption or
repayment date shall be the immediately preceding day that is a Business Day.
Except as provided above, unless otherwise specified on the face
hereof, interest on Notes will be payable: (i) in the case of Notes with a
daily, weekly or monthly Interest Reset Date, on the third Wednesday of each
month or on the third Wednesday of March, June, September and December, as
specified on the face hereof; (ii) in the case of Notes with a quarterly
Interest Reset Date, on the third Wednesday of March, June, September and
December specified on the face hereof; (iii) in the case of Notes with a
semiannual Interest Reset Date, on the third Wednesday of the two months
specified on the face hereof; and (iv) in the case of Notes with an annual
Interest Reset Date, on the third Wednesday of the month specified on the face
hereof.
Interest on this Note will accrue from the most recent date on which
interest has been paid or duly provided for, or, if no interest has been paid or
duly provided for, from the Interest Accrual Date, until the principal hereof
has been paid or duly made available for payment (except as provided below).
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, subject to certain exceptions described herein, be
paid to the person in whose name this Note (or one or more predecessor Notes) is
registered at the close of business on the date 15 calendar days prior to such
Interest Payment Date (whether or not a Business Day) (each such date a "Record
Date"); provided, however, that interest payable at maturity (or on any
-------- -------
redemption or repayment date) will be payable to the person to whom the
principal hereof shall be payable.
Payment of the principal of this Note, any premium and the interest
due at maturity (or on any redemption or repayment date) will be made in
immediately available funds upon surrender of this Note at the principal
corporate trust office of the Trustee or at the office or agency of the Trustee
maintained for that purpose in The City of New York, New York, or at such other
paying agency as the Issuer may determine. Payment of the principal of and
premium, if any, and interest on this Note will be made in the Specified
Currency indicated above; provided, however, that U.S. dollar payments of
-------- -------
interest, other than interest due at maturity or any date of redemption or
repayment, will be made by U.S. dollar check mailed to the address of the person
entitled thereto as such address shall appear in the Note register. A holder of
U.S. $10,000,000 or more in aggregate principal amount of Notes having the same
Interest Payment Date will be entitled to receive payments of interest, other
than interest due at maturity or any date of redemption or repayment, by wire
-3-
<PAGE>
transfer of immediately available funds if appropriate wire transfer
instructions have been received by the Paying Agent in writing not less than 15
calendar days prior to the applicable Interest Payment Date. If this Note is
denominated in a Specified Currency other than U.S. dollars and payments of
interest are to be made by wire transfer, such payments will be made by wire
transfer of immediately available funds to an account maintained by the holder
hereof with a bank located outside the United States if appropriate wire
transfer instructions have been received by the Paying Agent in writing not less
than 15 calendar days prior to the applicable Interest Payment Date. If such
wire transfer instructions are not so received, such interest payments (other
than interest payable at maturity or on any redemption or repayment date) will
be made by check payable in such Specified Currency mailed to the address of the
person entitled thereto as such address shall appear in the Note register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture, as defined on the
reverse hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly
executed under its corporate seal.
DATED: MATTEL, INC.
By:________________________
Name:
Title:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Notes
referred to in the within-
mentioned Indenture.
CHASE MANHATTAN BANK AND TRUST COMPANY,
as Trustee
By:____________________________
Authorized Officer
-4-
<PAGE>
(FORM OF REVERSE OF SECURITY)
This Note is one of a duly authorized issue of Series D Medium-Term
Notes having maturities of more than nine months from the date of issue (the
"Notes") of the Issuer. The Notes are issuable under an indenture dated as of
February 15, 1996, duly executed and delivered by the Issuer to Chase Manhattan
Bank and Trust Company (formerly Chemical Trust Company of California), Trustee
(herein called the "Trustee"), to which indenture and all indentures
supplemental thereto (herein called the "Indenture") reference is hereby made
for a statement of the respective rights, limitations of rights and immunities
of the Issuer, the Trustee and holders of the Notes and terms upon which the
Notes are, and are to be, authenticated and delivered. The Issuer has appointed
Chase Manhattan Bank and Trust Company as the paying agent (the "Paying Agent,"
which term includes any additional or successor Paying Agent appointed by the
Issuer) with respect to the Notes. The terms of individual Notes may vary with
respect to interest rates, interest rate formulas, issue dates, maturity dates,
or otherwise, all as provided in the Indenture. To the extent not inconsistent
herewith, the terms of the Indenture are hereby incorporated by reference
herein.
This Note will not be subject to any sinking fund and, unless
otherwise provided on the face hereof in accordance with the provisions of the
following two paragraphs, will not be redeemable or subject to repayment at the
option of the holder prior to maturity.
If so indicated on the face of this Note, this Note may be redeemed in
whole or in part at the option of the Issuer on or after the Initial Redemption
Date specified on the face hereof on the terms set forth on the face hereof and
at a redemption price (expressed as a percentage of the principal amount hereof)
equal to the Initial Redemption Percentage, together with interest accrued and
unpaid hereon to the date of redemption. If this Note is subject to "Annual
Redemption Percentage Reduction," the Initial Redemption Percentage indicated on
the face hereof will be reduced on each anniversary of the Initial Redemption
Date by the Annual Redemption Percentage Reduction specified on the face hereof
until the redemption price of this Note is 100% of the principal amount hereof,
together with interest accrued and unpaid hereon to the date of redemption.
Notice of redemption shall be mailed by first class mail, postage prepaid, to
the registered holders of the Notes designated for redemption at their addresses
as the same shall appear on the Note register not less than 30 nor more than 60
days prior to the date fixed for redemption, subject to all the conditions and
provisions of the Indenture. In the event of redemption of this Note in part
only, a new Note or Notes for the amount of the unredeemed portion hereof shall
be issued in the name of the holder hereof upon the cancellation hereof, but, in
any event, the principal amount of the Note remaining outstanding after
redemption must be an Authorized Denomination.
If so indicated on the face of this Note, this Note will be subject to
repayment at the option of the holder on the Optional Repayment Date or Dates
specified on the face hereof on the terms set forth herein. On any Optional
Repayment Date, this Note will be repayable in whole or in part in increments of
$1,000 or, if this Note is denominated in a Specified Currency other than U.S.
dollars, in increments of 1,000 units of such Specified
-5-
<PAGE>
Currency (provided that any remaining principal amount hereof shall not be less
than the minimum Authorized Denomination hereof) at the option of the holder
hereof at a price equal to 100% of the principal amount to be repaid, together
with interest accrued and unpaid hereon to the date of repayment. For this Note
to be repaid at the option of the holder hereof, the Paying Agent must receive
at its principal corporate trust office in San Francisco, California, or at its
office in The City of New York, New York, at least 30 but not more than 60 days
prior to the date of repayment, (i) this Note with the form entitled "Option to
Elect Repayment" below duly completed or (ii) a telegram, telex, facsimile
transmission or a letter from a member of a national securities exchange or the
National Association of Securities Dealers, Inc. or a commercial bank or a trust
company in the United States setting forth the name of the holder of this Note,
the principal amount hereof, the principal amount hereof to be repaid, the
certificate number of this Note or a description of this Note's tenor and terms,
a statement that the option to elect repayment is being exercised thereby and a
guarantee that this Note, together with the form entitled "Option to Elect
Repayment" duly completed, will be received by the Paying Agent not later than
the third Business Day after the date of such telegram, telex, facsimile
transmission or letter; provided, however, that such telegram, telex, facsimile
-------- -------
transmission or letter shall only be effective if this Note and such form duly
completed are received by the Paying Agent by such third Business Day.
Effective exercise of such repayment option by the holder hereof shall be
irrevocable. In the event of repayment of this Note in part only, a new Note or
Notes for the amount of the unpaid portion hereof shall be issued in the name of
the holder hereof upon the cancellation hereof, but, in any event, the principal
amount of the Note remaining outstanding after repayment must be an Authorized
Denomination.
If so indicated on the face of this Note, the Issuer has the option to
extend the Original Maturity Date hereof for one or more periods of one or more
whole years (each an "Extension Period") up to but not beyond the Final Maturity
Date specified on the face hereof and in connection therewith to establish a new
interest rate (calculated with reference to a Base Rate and the Spread and/or
Spread Multiplier, if any) and new redemption provisions for the Extension
Period.
The Issuer may exercise such option by notifying the Paying Agent of
such exercise at least 45 but not more than 60 days prior to the Original
Maturity Date or, if the maturity hereof has already been extended, prior to the
maturity date then in effect (an "Extended Maturity Date"), such notice to be
accompanied by the form of the Extension Notice referred to below. No later
than 38 days prior to the Original Maturity Date or an Extended Maturity Date,
as the case may be (each, a "Maturity Date"), the Paying Agent will mail to the
holder hereof a notice (the "Extension Notice") relating to such Extension
Period, by first class mail, postage prepaid, setting forth (a) the election of
the Issuer to extend the maturity of this Note; (b) the new Extended Maturity
Date; (c) the interest rate applicable to the Extension Period (calculated with
reference to a Base Rate and the Spread and/or Spread Multiplier, if any); and
(d) the provisions, if any, for redemption during the extension period,
including the date or dates on which, the period or periods during which and the
price or prices at which such redemption may occur during the Extension Period.
Upon the mailing by the Paying Agent of an Extension Notice to the holder of
this Note, the maturity hereof shall be extended automatically, and, except as
modified by the Extension Notice and as described in the next paragraph, this
Note will have the same terms it had prior to the mailing of such Extension
Notice.
-6-
<PAGE>
Notwithstanding the foregoing, not later than 10:00 A.M., New York
City time, on the twentieth calendar day prior to the Maturity Date in effect
immediately preceding the mailing of the applicable Extension Notice (or if such
day is not a Business Day, not later than 10:00 A.M., New York City time, on the
immediately succeeding Business Day), the Issuer may, at its option, revoke the
interest rate provided for in such Extension Notice and establish a higher
Spread and/or Spread Multiplier, if any, for the Extension Period by causing the
Paying Agent to send notice of such higher Spread and/or Spread Multiplier, if
any, within seven days of receipt of such notice to the holder of this Note by
first class mail, postage prepaid, or by such other means as shall be agreed
between the Issuer and the Paying Agent. Such notice shall be irrevocable. All
Notes with respect to which the Maturity Date is extended in accordance with an
Extension Notice will bear such higher Spread and/or Spread Multiplier, if any,
for the Extension Period, whether or not tendered for repayment.
If the Issuer elects to extend the maturity hereof, the holder of this
Note will have the option to require the Issuer to repay this Note on the
Maturity Date in effect immediately preceding the mailing of the applicable
Extension Notice at a price equal to the principal amount hereof plus any
accrued and unpaid interest to such date. In order for this Note to be so
repaid on such Maturity Date, the holder hereof must follow the procedures set
forth above for optional repayment, except that the period for delivery of this
Note or notification to the Paying Agent shall be at least 25 but not more that
35 days prior to the Maturity Date in effect immediately preceding the mailing
of the applicable Extension Notice and except that if the holder hereof has
tendered this Note for repayment pursuant to this paragraph he may, by written
notice to the Paying Agent, revoke any such tender for repayment until 3:00
P.M., New York City time, on the twentieth calendar day prior to the Maturity
Date then in effect (or, if such day is not a Business Day, until 3:00 P.M., New
York City time, on the immediately succeeding Business Day).
This Note will bear interest at the rate determined in accordance with
the applicable provisions below by reference to the Base Rate shown on the face
hereof based on the Index Maturity, if any, shown on the face hereof (i) plus or
minus the Spread, if any, and/or (ii) multiplied by the Spread Multiplier, if
any, specified on the face hereof. Commencing with the Initial Interest Reset
Date specified on the face hereof, the rate at which interest on this Note is
payable shall be reset as of each Interest Reset Date (as used herein, the term
"Interest Reset Date" shall include the Initial Interest Reset Date). The
Interest Reset Dates will be the Interest Reset Dates specified on the face
hereof; provided, however, that (i) the interest rate in effect for the period
-------- -------
from the Interest Accrual Date to the Initial Interest Reset Date will be the
Initial Interest Rate and (ii) the interest rate in effect hereon for the ten
calendar days immediately prior to maturity hereof (or, with respect to any
principal amount to be redeemed or repaid, any redemption or repayment date)
shall be that in effect on the tenth calendar day preceding maturity hereof or
such date of redemption or repayment, as the case may be. If any Interest Reset
Date would otherwise be a day that is not a Business Day, such Interest Reset
Date shall be postponed to the next succeeding day that is a Business Day,
except that if the Base Rate specified on the face hereof is LIBOR and such
Business Day is in the next succeeding calendar month, such Interest Reset Date
shall be the immediately preceding Business Day. As used herein, "Business Day"
means any day, other than a Saturday or Sunday, that meets each of the following
applicable requirements: the day is (i) not a day on which banking institutions
are
-7-
<PAGE>
authorized or required by law or regulation to be closed in The City of New
York, New York, or San Francisco, California, (ii) if this Note is denominated
in a Specified Currency other than U.S. dollars, (a) not a day on which banking
institutions are authorized or required by law or regulation to close in the
financial center of the country issuing the Specified Currency (which in the
case of the lawful currency of the member states of the European Union that
adopt the single currency in accordance with the Treaty establishing the
European Community, as amended by the Treaty on European Union (the "Euro"),
shall be London and Luxembourg) and (b) a day on which banking institutions in
such financial center are carrying out transactions in such Specified Currency,
and (iii) if the Base Rate specified on the face hereof is LIBOR, a London
Banking Day. As used herein, "London Banking Day" means any day (i) if the Index
Currency (as defined below) is other than the Euro, on which dealings in
deposits in such Index Currency are transacted in the London interbank market or
(ii) if the Index Currency is the Euro, any day on which the Trans-European
Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open.
The Interest Reset Date will be, in the case of Notes which reset
daily, each Business Day; in the case of Notes (other than Notes whose Base Rate
is the Treasury Rate) which reset weekly, the Wednesday of each week; in the
case of Notes whose Base Rate is the Treasury Rate which reset weekly, the
Tuesday of each week, except as provided below; in the case of Notes which reset
monthly, the third Wednesday of each month; in the case of Notes which reset
quarterly, the third Wednesday of March, June, September and December; in the
case of Notes which reset semiannually, the third Wednesday of two months of
each year, as specified on the face hereof; and in the case of Notes which reset
annually, the third Wednesday of one month of each year, as specified on the
face hereof.
In the case where the Interest Payment Date or the Maturity Date (or
any redemption or repayment date) does not fall on a Business Day, payment of
interest, premium, if any, or principal otherwise payable on such date need not
be made on such date, but will be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date or on the
Maturity Date (or any redemption or repayment date), and no interest on such
payment shall accrue for the period from and after the Interest Payment Date or
the Maturity Date (or any redemption or repayment date) to such next succeeding
Business Day.
The Interest Determination Date pertaining to an Interest Reset Date
for Notes bearing interest calculated by reference to the CD Rate, Commercial
Paper Rate, Federal Funds Rate, CMT Rate and Prime Rate will be the second
Business Day next preceding such Interest Reset Date. The Interest
Determination Date pertaining to an Interest Reset Date for Notes bearing
interest calculated by reference to LIBOR shall be the second London Banking Day
preceding such Interest Reset Date. The Interest Determination Date pertaining
to an Interest Reset Date for Notes bearing interest calculated by reference to
the Treasury Rate shall be the day of the week in which such Interest Reset Date
falls on which Treasury bills normally would be auctioned; provided, however,
-------- -------
that if, as a result of a legal holiday, an auction is held on the Friday of the
week preceding such Interest Reset Date, the related Interest Determination Date
shall be such preceding Friday; and provided, further, that if an auction shall
-------- -------
fall on any Interest Reset Date, then the Interest Reset Date shall instead be
the first Business Day following the date of such auction.
-8-
<PAGE>
The "Calculation Date" pertaining to any Interest Determination Date
will be the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day, or (ii) the Business Day preceding the applicable Interest Payment
Date or Maturity Date or date of redemption or payment, as the case may be.
Determination of CD Rate. If the Base Rate specified on the face
------------------------
hereof is the CD Rate, the CD Rate with respect to this Note shall be determined
on each Interest Determination Date and shall be the rate on such date for
negotiable certificates of deposit having the Index Maturity specified on the
face hereof as published by the Board of Governors of the Federal Reserve System
in "Statistical Release H.15(519), Selected Interest Rates," or any successor
publication of the Board of Governors of the Federal Reserve System
("H.15(519)"), under the heading "CDs (Secondary Market)," or, if not so
published by 9:00 A.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the CD Rate will be the rate on such
Interest Determination Date for negotiable certificates of deposit of the Index
Maturity specified on the face hereof as set forth in the daily update of
H.15(519), available through the world wide web of the Board of Governors of the
Federal Reserve System at http://www.bog.frb.fed.us/releases/h15/update, or any
successor site or publication ("H.15 Daily Update"), under the caption "CDs
(Secondary Market)." If neither of such rates is published by 3:00 P.M., New
York City time, on such Calculation Date, then the CD Rate on such Interest
Determination Date will be calculated by the Calculation Agent referred to on
the face hereof and will be the arithmetic mean of the secondary market offered
rates as of 10:00 A.M., New York City time, on such Interest Determination Date,
of three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York selected by the Calculation Agent (after
consultation with the Issuer) for negotiable certificates of deposit of major
United States money center banks of the highest credit standing in the market
for negotiable certificates of deposit with a remaining maturity closest to the
Index Maturity specified on the face hereof in the denomination of $5,000,000;
provided, however, that if the dealers selected as aforesaid by the Calculation
- -------- -------
Agent are not quoting as mentioned in this sentence, the rate of interest in
effect for the applicable period will be the same as the CD Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable hereon shall be the Initial Interest
Rate).
Determination of Commercial Paper Rate. If the Base Rate specified on
--------------------------------------
the face hereof is the Commercial Paper Rate, the Commercial Paper Rate with
respect to this Note shall be determined on each Interest Determination Date and
shall be the Money Market Yield (as defined herein) of the rate on such date for
commercial paper having the Index Maturity specified on the face hereof, as such
rate shall be published in H.15(519) under the heading "Commercial Paper -
Nonfinancial," or if not so published prior to 9:00 A.M., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, the
Commercial Paper Rate shall be the Money Market Yield of the rate on such
Interest Determination Date for commercial paper of the Index Maturity specified
on the face hereof as published in H.15 Daily Update under the heading
"Commercial Paper-Nonfinancial." If neither of such rates is published by 3:00
P.M., New York City time, on such Calculation Date, then the Commercial Paper
Rate shall be the Money Market Yield of the arithmetic mean of the offered rates
as of 11:00 A.M., New
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<PAGE>
York City time, on such Interest Determination Date of three leading dealers in
commercial paper in The City of New York selected by the Calculation Agent
(after consultation with the Issuer) for commercial paper of the Index Maturity
specified on the face hereof, placed for an industrial issuer whose bond rating
is "AA," or the equivalent, from a nationally recognized rating agency;
provided, however, that if the dealers selected as aforesaid by the Calculation
- -------- -------
Agent are not quoting as mentioned in this sentence, the rate of interest in
effect for the applicable period will be the same as the Commercial Paper Rate
for the immediately preceding Interest Reset Period, (or, if there was no such
Interest Reset Period, the rate of interest payable hereon shall be the Initial
Interest Rate).
"Money Market Yield" shall be the yield calculated in accordance with
the following formula:
Money Market Yield = D x 360 x 100
-------------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Index Maturity specified on the face hereof.
Determination of Federal Funds Rate. If the Base Rate specified on
-----------------------------------
the face hereof is the Federal Funds Rate, the Federal Funds Rate with respect
to this Note shall be determined on each Interest Determination Date and shall
be the rate on such date for Federal Funds as published in H.15(519) under the
heading "Federal Funds (Effective)," or, if not so published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate will be the rate on such Interest
Determination Date as published in H.15 Daily Update under the heading "Federal
Funds/Effective." If neither of such rates is published by 3:00 P.M., New York
City time, on such Calculation Date, the Federal Funds Rate for such Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the rates for the last transaction in overnight Federal Funds
arranged by three leading brokers in Federal Funds transactions in The City of
New York selected by the Calculation Agent prior to 9:00 A.M., New York City
time, on such Interest Determination Date; provided, however, that if the
-------- -------
brokers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the rate of interest in effect for the applicable
period will be the same as the Federal Funds Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the rate
of interest payable hereon shall be the Initial Interest Rate).
Determination of LIBOR. If the Base Rate specified on the face hereof
----------------------
is LIBOR, LIBOR with respect to this Note shall be determined on each Interest
Determination Date as follows:
(i) As of the Interest Determination Date, LIBOR shall be either
(a) if "LIBOR Reuters" is specified on the face hereof, the arithmetic
mean of the offered rates (unless the specified Designated LIBOR Page
(as defined below) by its terms provides only for a single rate, in
which case such single
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<PAGE>
rate shall be used) for deposits in the Index Currency having the
Index Maturity designated on the face hereof, commencing on the second
London Banking Day immediately following such Interest Determination
Date, that appear on the Designated LIBOR Page as of 11:00 A.M.,
London time, on that Interest Determination Date, if at least two such
offered rates appear (unless, as aforesaid, only a single rate is
required) on such Designated LIBOR Page, or (b) if "LIBOR Telerate" is
specified on the face hereof, the rate for deposits in the Index
Currency having the Index Maturity designated on the face hereof,
commencing on the second London Banking Day immediately following such
Interest Determination Date, that appears on the Designated LIBOR Page
as of 11:00 A.M., London time, on that Interest Determination Date. If
fewer than two offered rates appear (if LIBOR Reuters is specified on
the face hereof), or no rate appears (if LIBOR Telerate is specified
on the face hereof), LIBOR in respect of the related Interest
Determination Date shall be determined as if the parties had specified
the rate described in clause (ii) below.
(ii) With respect to an Interest Determination Date on which fewer
than two offered rates appear (if LIBOR Reuters is specified on the
face hereof), or no rate appears (if LIBOR Telerate is specified on
the face hereof), on the applicable Designated LIBOR Page as specified
in clause (i) above, the Calculation Agent will request the principal
London offices of each of four major reference banks in the London
interbank market, as selected by the Calculation Agent, to provide the
Calculation Agent with its offered quotation for deposits in the Index
Currency for the period of the Index Maturity designated on the face
hereof, commencing on the second London Banking Day immediately
following such Interest Determination Date, to prime banks in the
London interbank market at approximately 11:00 A.M., London time, on
such Interest Determination Date and in a principal amount of not less
than $1,000,000 (or the equivalent in the Index Currency, if the Index
Currency is not the U.S. dollar) that is representative for a single
transaction in such Index Currency in such market at such time. If at
least two such quotations are provided, LIBOR determined on such
Interest Determination Date will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR
determined on such Interest Determination Date will be the arithmetic
mean of the rates quoted at approximately 11:00 A.M. (or such other
time specified on the face hereof), in the applicable principal
financial center for the country of the Index Currency on such
Interest Determination Date, by three major banks in such principal
financial center selected by the Calculation Agent for loans in the
Index Currency to leading European banks, having the Index Maturity
designated on the face hereof and in a principal amount of not less
than $1,000,000 commencing on the second London Banking Day
immediately following such Interest Determination Date (or the
equivalent in the Index Currency, if the Index Currency is not the
U.S. dollar) that is representative for a single transaction in such
Index Currency in such market at such time; provided however, that if
the banks so selected by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR for such Interest Reset
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<PAGE>
Period will be the same as LIBOR for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period,
the rate of interest payable hereon shall be the Initial Interest
Rate).
"Index Currency" means the currency (including composite currencies)
specified on the face hereof as the currency for which LIBOR shall be
calculated. If no such currency is specified on the face hereof, the Index
Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is
designated on the face hereof, the display on the Reuters Monitor Money Rates
Service for the purpose of displaying the London interbank rates of major banks
for the applicable Index Currency, or (b) if "LIBOR Telerate" is designated on
the face hereof, the display on the Dow Jones Telerate Service for the purpose
of displaying the London interbank rates of major banks for the applicable Index
Currency. If neither LIBOR Reuters nor LIBOR Telerate is specified on the face
hereof, LIBOR for the applicable Index Currency will be determined as if LIBOR
Telerate (and, if the U.S. dollar is the Index Currency, Page 3750) had been
specified. "Page 3750" means the display designated as page "3750" on the Dow
Jones Telerate Service (or such other page as may replace the 3750 page on that
service or such other service as may be nominated by the British Bankers'
Association for the purposes of displaying London interbank offered rates for
U.S. dollar deposits).
Determination of Prime Rate. If the Base Rate specified on the face
---------------------------
hereof is the Prime Rate, the Prime Rate with respect to this Note shall be
determined on each Interest Determination Date and shall be the rate set forth
in H.15(519) for such date opposite the caption "Bank Prime Loan." If such rate
is not yet published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Prime Rate for such Interest
Determination Date will be the rate as published in H.15 Daily Update opposite
the caption "Bank Prime Loan." If neither rate is published prior to 3:00 P.M.,
New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Prime Rate for such Interest Determination Date will be
the arithmetic mean of the rates of interest publicly announced by each bank
that appears on the Reuters Screen U.S. Prime 1 Page (as defined below) as such
bank's prime rate or base lending rate as in effect for such Interest
Determination Date as quoted on the Reuters Screen U.S. Prime 1 Page on such
Interest Determination Date, or, if fewer than four such rates but more than one
such rate appear on the Reuters Screen U.S. Prime 1 Page for such Interest
Determination Date, the rate shall be the arithmetic mean of the prime rates
quoted on the basis of the actual number of days in the year divided by 360 as
of the close of business on such Interest Determination Date by at least two
major money center banks in The City of New York selected by the Calculation
Agent (after consultation with the Issuer) from which quotations are requested.
If fewer than two quotations appear on the Reuters Screen Prime 1 Page, the
Prime Rate shall be calculated by the Calculation Agent and shall be determined
as the arithmetic mean on the basis of the prime rates in The City of New York
by three substitute banks or trust companies organized and doing business under
the laws of the United States, or any State thereof, in each case having total
equity capital of at least U.S. $500 million and being subject to supervision or
examination by federal or state authority, selected by the Calculation Agent to
quote such rate or rates; provided, however, that if the banks or trust
-------- -------
companies selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Prime Rate in effect for such Interest Reset
Date will be the same as the
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<PAGE>
Prime Rate for the immediately preceding Interest Reset Period (or, if there was
no such Interest Reset Period, the rate of interest payable hereon shall be the
Initial Interest Rate). "Reuters Screen U.S. Prime 1 Page" means the display
designated as Page "U.S. Prime 1" on the Reuters Monitor Money Rates Service (or
such other page as may replace the U.S. Prime 1 Page on that Service for the
purpose of displaying prime rates or base lending rates of major United States
banks).
Determination of Treasury Rate. If the Base Rate specified on the
------------------------------
face hereof is the Treasury Rate, the Treasury Rate with respect to this Note
shall be determined on each Interest Determination Date and shall be the rate
for the auction held on such date of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified on the face hereof, as
such rate appears on either the Telerate Page 56 or the Telerate Page 57 under
the heading "AVGE INVEST YIELD," or if not so published by 9:00 A.M., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, the auction average rate on such Interest Determination Date (expressed as
a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States Department
of the Treasury. In the event that the results of the auction of Treasury Bills
having the Index Maturity specified on the face hereof are not published or
reported as provided above by 3:00 P.M., New York City time, on such Calculation
Date or if no such auction is held on such Interest Determination Date, then the
Treasury Rate shall be calculated by the Calculation Agent and shall be a yield
to maturity (expressed as a bond equivalent, on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) calculated using the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
P.M., New York City time, on such Interest Determination Date, of three leading
primary United States government securities dealers selected by the Calculation
Agent (after consultation with the Issuer) for the issue of Treasury Bills with
a remaining maturity closest to the Index Maturity specified on the face hereof;
provided, however, that if the dealers selected as aforesaid by the Calculation
- -------- -------
Agent are not quoting bid rates as mentioned in this sentence, the Treasury Rate
for such Interest Reset Date will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable hereon shall be the Initial Interest
Rate).
Determination of CMT Rate. If the Base Rate specified on the face
-------------------------
hereof is the CMT Rate, the CMT Rate with respect to this Note shall be
determined on each Interest Determination Date and shall be the rate on such
date displayed for the Index Maturity specified on the face hereof on the
Designated CMT Telerate Page (as defined below) under the caption "...Treasury
Constant Maturities...Federal Reserve Board Release H.15...Mondays Approximately
3:45 p.m.," under the column for the Designated CMT Maturity Index (as defined
below) for (i) if the Designated CMT Telerate Page is 7051, the rate on such
Interest Determination Date and (ii) if the Designated CMT Telerate Page is
7052, the week or the month, as applicable, ended immediately preceding the week
in which the related Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page, or if not displayed by 3:00 p.m., New
York City time, on the related Calculation Date, then the CMT Rate for such
Interest Determination Date will be such Treasury Constant Maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519). If such
rate is no longer published, or, if not published by 3:00 p.m., New York City
time, on the related Calculation Date, then the CMT Rate for such Interest
-13-
<PAGE>
Determination Date will be such Treasury Constant Maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the Interest Determination Date with respect
to such Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 p.m., New York
City time, on the related Calculation Date, then the CMT Rate for the Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity, based on the arithmetic mean of the secondary market closing
offer side prices as of approximately 3:30 p.m., New York City time on the
Interest Determination Date reported, according to their written records, by
three leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York selected by the Calculation Agent
(from five such Reference Dealers selected by the Calculation Agent, after
consultation with the Issuer, and eliminating the highest quotation (or, in the
event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for the most recently issued direct
noncallable fixed rate obligations of the United States ("Treasury notes") with
an original maturity of approximately the Designated CMT Maturity Index and
remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent cannot obtain three such Treasury
notes quotations, the CMT Rate for such Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on the
arithmetic mean of the secondary market offer side prices as of approximately
3:30 p.m., New York City time, on the Interest Determination Date of three
Reference Dealers in The City of New York (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation (or, in
the event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for Treasury notes with an original
maturity of the number of years that is the next highest to the Designated CMT
Maturity Index and a remaining term to maturity closest to the Designated CMT
Maturity Index and in an amount of at least $100,000,000. If three or four (and
not five) of such Reference Dealers are quoting as described above, then the CMT
Rate will be based on the arithmetic mean of the offer prices obtained and
neither the highest nor the lowest of such quotes will be eliminated; provided
however, that if fewer than three Reference Dealers selected by the Calculation
Agent are quoting as described herein, the CMT Rate for such Interest Reset Date
will be the same as the CMT Rate for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of interest
payable on the CMT Rate Notes for which the CMT Rate is being determined shall
be the Initial Interest Rate). If two Treasury notes with an original maturity
as described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the quotes for the Treasury
note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones
Telerate Service (or any successor service) on the page designated in an
applicable Pricing Supplement (or any other page as may replace such page on
that service for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519)), for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519). If no such page is
-14-
<PAGE>
specified in the applicable Pricing Supplement, the Designated CMT Telerate Page
shall be 7052, for the most recent week.
"Designated CMT Maturity Index" shall be the original period to
maturity of the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30
years) specified in an applicable Pricing Supplement with respect to which the
CMT Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
Notwithstanding the foregoing, the interest rate hereon shall not be
greater than the Maximum Interest Rate, if any, or less than the Minimum
Interest Rate, if any, specified on the face hereof. The Calculation Agent
shall calculate the interest rate hereon in accordance with the foregoing on or
before each Calculation Date. The interest rate on this Note will in no event
be higher than the maximum rate permitted by California law, as the same may be
modified by United States Federal law of general application.
At the request of the holder hereof, the Calculation Agent will
provide to the holder hereof the interest rate hereon then in effect and, if
determined, the interest rate that will become effective as of the next Interest
Reset Date.
Interest payments on this Note will include interest accrued to but
excluding the Interest Payment Dates or at maturity (or on any earlier
redemption or repayment date), as the case may be; provided, however, that if
-------- -------
the Interest Reset Period with respect to this Note is daily or weekly, interest
payable on any Interest Payment Date, other than interest payable on any date on
which principal hereof is payable, will include interest accrued from and
including the Original Issue Date or from but excluding the last Record Date to
which interest has been paid, as the case may be, to and including the Record
Date immediately preceding the applicable Interest Payment Date. Accrued
interest hereon shall be an amount calculated by multiplying the face amount
hereof by an accrued interest factor. Such accrued interest factor shall be
computed by adding the interest factor calculated for each day in the period for
which interest is being paid. The interest factor for each such date shall be
computed by dividing the interest rate applicable to such day by 360 if the Base
Rate is the CD Rate, Commercial Paper Rate, Federal Funds Rate, Prime Rate or
LIBOR, as specified on the face hereof, or by the actual number of days in the
year if the Base Rate is the Treasury Rate or the CMT Rate, as specified on the
face hereof. All percentages used in or resulting from any calculation of the
rate of interest on this Note will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward, and all dollar amounts used in or resulting
from such calculation on this Note will be rounded to the nearest cent (with
one-half cent rounded upward). The interest rate in effect on any Interest
Reset Date will be the applicable rate as reset on such date. The interest rate
applicable to any other day is the interest rate from the immediately preceding
Interest Reset Date (or, if none, the Initial Interest Rate).
This Note and all the obligations of the Issuer hereunder are direct,
unsecured obligations of the Issuer and rank without preference or priority
among themselves and pari passu with all other existing and future unsecured and
---- -----
unsubordinated indebtedness of the Issuer, subject to certain statutory
exceptions in the event of liquidation upon insolvency.
-15-
<PAGE>
This Note, and any Note or Notes issued upon transfer or exchange
hereof, is issuable only in fully registered form, without coupons, and, if
denominated in U.S. dollars, is issuable only in denominations of U.S. $1,000
and any integral multiple of U.S. $1,000 in excess thereof. If this Note is
denominated in a Specified Currency other than U.S. dollars, then, unless a
higher minimum denomination is required by applicable law, it is issuable only
in denominations of the equivalent of U.S. $1,000 (rounded to an integral
multiple of 1,000 units of such Specified Currency), or any amount in excess
thereof which is an integral multiple of 1,000 units of such Specified Currency,
as determined by reference to the noon dollar buying rate in New York City for
cable transfers of such Specified Currency as published by the Federal Reserve
Bank of New York (the "Market Exchange Rate") on the Business Day immediately
preceding the date of issuance.
The Trustee has been appointed registrar for the Notes, and the
Trustee will maintain at its office in San Francisco, California, a register for
the registration and transfer of Notes. This Note may be transferred at the
aforesaid office of the Trustee or at the office of the Trustee in the City of
New York, New York, by surrendering this Note for cancellation, accompanied by a
written instrument of transfer in form satisfactory to the Trustee and duly
executed by the registered holder hereof in person or by the holder's attorney
duly authorized in writing, and thereupon the Trustee shall issue in the name of
the transferee or transferees, in exchange herefore, a new Note or Notes having
identical terms and provisions and having a like aggregate principal amount in
authorized denominations, subject to the terms and conditions set forth herein;
provided, however, that the Trustee will not be required (i) to register the
- -------- -------
transfer of or exchange any Note that has been called for redemption in whole or
in part, except the unredeemed portion of Notes being redeemed in part, (ii) to
register the transfer of or exchange any Note if the holder thereof has
exercised his right, if any, to require the Issuer to repurchase such Note in
whole or in part, except the portion of such Note not required to be
repurchased, or (iii) to register the transfer of or exchange Notes to the
extent and during the period so provided in the Indenture with respect to the
redemption of Notes. Notes are exchangeable at said office for other Notes of
other authorized denominations of equal aggregate principal amount having
identical terms and provisions. All such exchanges and transfers of Notes will
be free of charge, but the Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge in connection therewith. All Notes
surrendered for exchange shall be accompanied by a written instrument of
transfer in form satisfactory to the Trustee and executed by the registered
holder in person or by the holder's attorney duly authorized in writing. The
date of registration of any Note delivered upon any exchange or transfer of
Notes shall be determined by the Issuer and shall be such that no gain or loss
of interest results from such exchange or transfer.
In case any Note shall at any time become mutilated, defaced or be
destroyed, lost or stolen and such Note or evidence of the loss, theft or
destruction thereof (together with the indemnity hereinafter referred to and
such other documents or proof as may be required in the premises) shall be
delivered to the Trustee, a new Note of like tenor will be issued by the Issuer
in exchange for the Note so mutilated or defaced, or in lieu of the Note so
destroyed or lost or stolen, but, in the case of any destroyed or lost or stolen
Note, only upon receipt of evidence satisfactory to the Trustee and the Issuer
that such Note was destroyed or lost or stolen and, if required, upon receipt
also of indemnity satisfactory to each of them. All expenses and reasonable
charges associated with procuring such
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<PAGE>
indemnity and with the preparation, authentication and delivery of a new Note
shall be borne by the holder of the Note mutilated, defaced, destroyed, lost or
stolen.
The Indenture provides that if an Event of Default, as defined in the
Indenture, shall occur and be continuing with respect to any series of debt
securities issued under the Indenture, including the series of Series D Medium-
Term Notes of which this Note forms a part, the Trustee or the holders of not
less than 25% in aggregate principal amount of the debt securities then
outstanding of the series may, by a notice in writing to the Issuer (and to the
Trustee if given by such holders), declare the principal of, and the premium, if
any, on such series to be due and payable, together with interest accrued
thereon. Any Event of Default with respect to a particular series of debt
securities may be waived by the holders of a majority in aggregate principal
amount of the outstanding debt securities of the series affected, except in each
case a failure to pay the principal of, or premium, if any, or interest on, such
debt securities.
If the face hereof indicates that this Note is subject to "Modified
Payment upon Acceleration," then (i) if the principal hereof is declared to be
due and payable as described in the preceding paragraph, the amount of principal
due and payable with respect to this Note shall be limited to the aggregate
principal amount hereof multiplied by the sum of the Issue Price specified on
the face hereof (expressed as a percentage of the aggregate principal amount)
plus the original issue discount amortized from the Interest Accrual Date to the
date of declaration, which amortization shall be calculated using the "interest
method" (computed in accordance with generally accepted accounting principles in
effect on the date of declaration), (ii) for the purpose of any vote of
securityholders taken pursuant to the Indenture prior to the acceleration of
payment of this Note, the principal amount hereof shall equal the amount that
would be due and payable hereon, calculated as set forth in clause (i) above, if
this Note were declared to be due and payable on the date of any such vote and
(iii) for the purpose of any vote of securityholders taken pursuant to the
Indenture following the acceleration of payment of this Note, the principal
amount hereof shall equal the amount of principal due and payable with respect
to this Note, calculated as set forth in clause (i) above.
The Indenture contains provisions permitting the Issuer and the
Trustee, with the consent of the holders of not less than 66 2/3% in aggregate
principal amount of the debt securities at the time outstanding of all series
affected (or not less than 66 2/3% in aggregate principal amount of any series
affected in case one or more but not all of the series are affected) evidenced
as provided in the Indenture, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of any supplemental indenture or modifying in any manner the
rights of the holders of the securities of each such series; provided, however,
-------- -------
that no such supplemental indenture shall, among other matters, (i) change the
fixed maturity of any debt security, or reduce the rate of or extend the time of
payment of any interest thereon, or reduce the principal amount thereof or any
premium thereon, or make the principal thereof or any interest or premium
thereon payable in any currency other than that hereinbefore provided, without
the consent of the holder of each debt security so affected, or (ii) reduce the
aforesaid percentage of debt securities, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holder of
each debt security affected.
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<PAGE>
If the principal of, premium, if any, or interest on, this Note is
payable in a Specified Currency other than U.S. dollars and such Specified
Currency is not available to the Issuer for making payments hereon due to the
imposition of exchange controls or other circumstances beyond the control of the
Issuer or is no longer used by the government of the country issuing such
currency or for the settlement of transactions by public institutions within the
international banking community, then the Issuer will be entitled to satisfy its
obligations to the holder of this Note by making such payments in U.S. dollars
on the basis of the Market Exchange Rate on the date of such payment or, if the
Market Exchange Rate is not available on such date, as of the most recent
practicable date. Any payment made under such circumstances in U.S. dollars
where the required payment is in a Specified Currency other than U.S. dollars
will not constitute an Event of Default.
All determinations referred to above made by the Issuer or its agent
shall be at its sole discretion and shall, in the absence of manifest error, be
conclusive to the extent permitted by law for all purposes and binding on the
holder of this Note.
So long as this Note shall be outstanding, the Issuer will cause to be
maintained an office or agency for the payment of the principal of and premium,
if any, and interest on this Note as herein provided in The City of New York,
and an office or agency in said City for the registration, transfer and exchange
as aforesaid of the Notes and where notices and demands to or upon the Issuer in
respect of the Notes may be served. The Issuer may designate other agencies for
the payment of said principal, premium and interest at such place or places
(subject to applicable laws and regulations) as the Issuer may decide. So long
as there shall be such an agency, the Issuer shall keep the Trustee advised of
the names and locations of such agencies, if any are so designated.
With respect to moneys paid by the Issuer and held by the Trustee or
any Paying Agent for payment of the principal of or interest or premium, if any,
on any Notes that remain unclaimed at the end of two years after such principal,
interest or premium shall have become due and payable (whether at maturity or
upon call for redemption or otherwise), (i) the Trustee or such Paying Agent
shall notify the holders of such Notes that such moneys shall be repaid to the
Issuer and any person claiming such moneys shall thereafter look only to the
Issuer for payment thereof and (ii) such moneys shall be so repaid to the
Issuer. Upon such repayment all liability of the Trustee or such Paying Agent
with respect to such moneys shall thereupon cease, without, however, limiting in
any way any obligation that the Issuer may have to pay the principal of or
interest or premium if any, on this Note as the same shall become due.
No provision of this Note or of the Indenture shall alter or impair
the obligation of the Issuer, which is absolute and unconditional, to pay the
principal of, premium, if any, and interest on this Note at the time, place, and
rate, and in the coin or currency, herein prescribed unless otherwise agreed
between the Issuer and the registered holder of this Note; provided, however, if
-------- -------
the principal of, premium, if any, or interest on, this Note is payable in a
Specified Currency other than U.S. dollars and such Specified Currency is not
available to the Issuer for making payments hereon due to circumstances beyond
the control of the Issuer, as described above, then the Issuer will be entitled
to satisfy its obligations to the holder of this Note by making such payments in
U.S. dollars as set forth above.
-18-
<PAGE>
Prior to due presentment of this Note for registration of transfer,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
holder in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and none of the Issuer, the
Trustee or any such agent shall be affected by notice to the contrary.
Upon any consolidation by the Issuer with or merger by the Issuer into
any other corporation or any conveyance, transfer or lease of the properties and
assets of the Issuer substantially as an entirety in accordance with the
Indenture, the successor corporation formed by such consolidation or into which
the Issuer is merged or to which such conveyance, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Issuer under the Indenture with the same effect as if such successor
corporation had been named as the Issuer therein, and thereafter, except in the
case of a lease, the predecessor corporation shall be relieved of all
obligations and covenants under the Indenture and the Notes.
No recourse shall be had for the payment of the principal of, premium,
if any, or the interest on this Note, for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Indenture or any
supplemental indenture thereto, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Issuer or of any successor
corporation, either directly or through the Issuer or any successor corporation,
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
THIS NOTE SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.
All terms used in this Note which are defined in the Indenture and not
otherwise defined herein shall have the meanings assigned to them in the
Indenture.
-19-
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - __________________ Custodian ________________
(Cust) (Minor)
Under Uniform Gifts to Minors Act ___________________________________________
State
Additional abbreviations may also be used though not in the above list.
_______________________
-20-
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto
(PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE)
_______________________________________
_____________________________________________________________________________
_____________________________________________________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS INCLUDING ZIP CODE, OF ASSIGNEE)
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing such person attorney to transfer such note on the books of the
Issuer, with full power of substitution in the premises.
Dated: _____________________
______________________________________________
NOTICE: The signature to this assignment must
correspond to the name as written upon the face of this
Note in every particular, without alteration or any
change whatsoever; signature(s) must be guaranteed by
an eligible guarantor institution (banks, stock
brokers, savings and loan associations and credit
unions with membership in an approved signature
guarantee medallion program) pursuant to Securities and
Exchange Commission Rule 17Ad-15.
-21-
<PAGE>
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs the Issuer
to repay the within Note (or portion thereof specified below) pursuant to its
terms at a price equal to the principal amount thereof, together with interest
to the Optional Repayment Date, to the undersigned at
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name,
address and telephone number of the undersigned,
and name of contact person, if any)
If less than the entire principal amount of the within Note is to be
repaid, specify the portion thereof which the holder elects to have repaid:
______________________________; and specify the denomination or denominations
(which shall not be less than the minimum authorized denomination) of the Notes
to be issued to the holder for the portions of the within Note not being repaid
(in the absence of any such specification, one such Note will be issued for the
portion not being repaid):_____________________________________________
Dated: _________________________
_________________________________
NOTICE: The signature to the foregoing Election must correspond to
the name as written upon the face of this Note in every particular, without
alteration or any change whatsoever; signature(s) must be guaranteed by an
eligible guarantor institution (banks, stock brokers, savings and loan
associations and credit unions with membership in an approved signature
guarantee medallion program) pursuant to Securities and Exchange Commission Rule
17Ad-15.
-22-
<PAGE>
EXHIBIT 4.3
(FORM OF FACE OF SECURITY)
MATTEL, INC.
SERIES D MEDIUM-TERM NOTE
Fixed Rate Note
REGISTERED REGISTERED
No. FXR- [PRINCIPAL
AMOUNT]
CUSIP:
If the registered owner of this Security (as indicated below) is The
Depository Trust Company (the "Depository") or a nominee of the Depository, this
Security is a Global Security and the following two legends apply:
This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of the Depository or a
nominee of the Depository. This Security is exchangeable for Securities
registered in the name of a person other than the Depository or its nominee only
in the limited circumstances described in the Indenture, and may not be
transferred except as a whole by the Depository to a nominee of the Depository,
by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor of the
Depository or a nominee of such successor.
Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) to the
Issuer (as defined below) or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co. or
such other name as requested by an authorized representative of The Depository
Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since
the registered owner hereof, Cede & Co., has an interest herein.
IF APPLICABLE, THE "TOTAL AMOUNT OF OID," "ORIGINAL YIELD TO MATURITY" AND
"INITIAL ACCRUAL PERIOD OID" (COMPUTED UNDER THE APPROXIMATE METHOD) SET FORTH
BELOW HAVE BEEN COMPLETED SOLELY FOR THE PURPOSES OF APPLYING THE FEDERAL INCOME
TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES.
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL INITIAL REDEMPTION INTEREST RATE: ORIGINAL
ISSUE DATE: PERCENTAGE: MATURITY DATE:
<S> <C> <C> <C>
INTEREST ANNUAL APPLICABILITY FINAL MATURITY
ACCRUAL DATE: REDEMPTION OF MODIFIED DATE:
PERCENTAGE PAYMENT UPON
REDUCTION: ACCELERATION:
TOTAL AMOUNT If yes, state OPTIONAL
OF OID: ISSUE PRICE: REPAYMENT
DATES:
ORIGINAL YIELD SPECIFIED APPLICABILITY
TO MATURITY: CURRENCY: OF ANNUAL
INTEREST
INITIAL ACCRUAL PAYMENTS:
REDEMPTION DATE:
INITIAL RECORD DATES
REDEMPTION DATE: (IF OTHER THAN MAY 1
AND NOVEMBER 1):
OTHER TERMS:
</TABLE>
Mattel, Inc., a Delaware corporation (together with its successors and
assigns, the "Issuer"), for value received, hereby promises to pay to
or registered assignees, the principal sum of __________________, on the
Original Maturity Date specified above (except to the extent redeemed or repaid
prior to the Original Maturity Date) or, if the maturity hereof is extended in
accordance with the procedures set forth below to an Extended Maturity Date, as
defined below, on such Extended Maturity Date (except to the extent previously
redeemed or repaid) and to pay interest thereon at the Interest Rate per annum
specified above or, if the interest rate herein is reset or re-established in
connection with an extension of maturity in accordance with the procedures
specified on the reverse hereof, at the interest rate per annum determined
pursuant to such procedures, from the Interest Accrual Date specified above
until the principal hereof is paid or duly made available for payment (except as
provided below), semiannually (unless otherwise specified on the face hereof) in
arrears on the fifteenth day of May and November in each year (unless otherwise
specified on the face hereof) (each such date an "Interest Payment Date")
commencing on the Interest Payment Date next succeeding the Interest Accrual
Date specified above, and at maturity (or on any redemption or repayment date);
provided, however, that if the Interest Accrual Date occurs between a Record
Date, as defined below, and the next succeeding Interest Payment Date, interest
payments will commence on the second Interest Payment Date succeeding the
Interest Accrual Date to the registered holder
-2-
<PAGE>
of this Note on the Record Date with respect to such second Interest Payment
Date; and provided, further, that if this Note is subject to "Annual Interest
Payments," interest payments shall be made annually in arrears and the term
"Interest Payment Date" shall be deemed to mean the fifteenth day of November in
each year.
Interest on this Note will accrue from the most recent Interest
Payment Date to which interest has been paid or duly provided for, or, if no
interest has been paid or duly provided for, from the Interest Accrual Date,
until the principal hereof has been paid or duly made available for payment
(except as provided below). The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, subject to certain
exceptions described herein, be paid to the person in whose name this Note (or
one or more predecessor Notes) is registered at the close of business on the
date 15 calendar days prior to such Interest Payment Date, whether or not a
Business Day, unless otherwise provided on the face hereof (each such date a
"Record Date"); provided, however, that interest payable at maturity (or on any
-------- -------
redemption or repayment date) will be payable to the person to whom the
principal hereof shall be payable. As used herein, "Business Day" means any
day, other than a Saturday or Sunday, that meets each of the following
applicable requirements: the day is (i) not a day on which banking institutions
are authorized or required by law or regulation to be closed in The City of New
York, New York, or San Francisco, California, and (ii) if this Note is
denominated in a Specified Currency other than U.S. dollars, (a) not a day on
which banking institutions are authorized or required by law or regulation to
close in the financial center of the country issuing the Specified Currency
(which in the case of the lawful currency of the member states of the European
Union that adopt the single currency in accordance with the Treaty establishing
the European Community, as amended by the Treaty on European Union, shall be
London and Luxembourg) and (b) a day on which banking institutions in such
financial center are carrying out transactions in such Specified Currency.
Payment of the principal of this Note, any premium and the interest
due at maturity (or on any redemption or repayment date) will be made in
immediately available funds upon surrender of this Note at the principal
corporate trust office of the Trustee or at the office or agency of the Trustee
maintained for that purpose in The City of New York, New York, or at such other
paying agency as the Issuer may determine. Payment of the principal of and
premium, if any, and interest on this Note will be made in the Specified
Currency indicated above; provided, however, that U.S. dollar payments of
-------- -------
interest, other than interest due at maturity or on any date of redemption or
repayment, will be made by U.S. dollar check mailed to the address of the person
entitled thereto as such address shall appear in the Note register. A holder of
U.S. $10,000,000 or more in aggregate principal amount of Notes having the same
Interest Payment Date will be entitled to receive payments of interest, other
than interest due at maturity or on any date of redemption or repayment, by wire
transfer of immediately available funds if appropriate wire transfer
instructions have been received by the Paying Agent in writing not less than 15
calendar days prior to the applicable Interest Payment Date. If this Note is
denominated in a Specified Currency other than U.S. dollars and payments of
interest are to be made by wire transfer, such payments will be made by wire
transfer of immediately available funds to an account maintained by the holder
hereof with a bank located outside the United States if appropriate wire
transfer instructions have been received by the Paying Agent in writing not less
than 15 calendar days prior to the applicable Interest Payment Date. If such
wire transfer instructions are not
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<PAGE>
so received, such interest payments will be made by check payable in such
Specified Currency mailed to the address of the person entitled thereto as such
address shall appear in the Note register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture, as defined on the
reverse hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly
executed under its corporate seal.
DATED: MATTEL, INC.
By:___________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Notes referred to
in the within-mentioned Indenture.
CHASE MANHATTAN BANK AND TRUST COMPANY,
as Trustee
By:_______________________________
Authorized Officer
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<PAGE>
(FORM OF REVERSE OF SECURITY)
This Note is one of a duly authorized issue of Series D Medium-Term
Notes having maturities of more than nine months from the date of issue (the
"Notes") of the Issuer. The Notes are issuable under an indenture dated as of
February 15, 1996, duly executed and delivered by the Issuer to Chase Manhattan
Bank and Trust Company (formerly Chemical Trust Company of California), Trustee
(herein called the "Trustee"), to which indenture and all indentures
supplemental thereto (herein called the "Indenture") reference is hereby made
for a statement of the respective rights, limitations of rights and immunities
of the Issuer, the Trustee and holders of the Notes and the terms upon which the
Notes are, and are to be, authenticated and delivered. The Issuer has appointed
Chase Manhattan Bank and Trust Company as the paying agent (the "Paying Agent,"
which term includes any additional or successor Paying Agent appointed by the
Issuer) with respect to the Notes. The terms of individual Notes may vary with
respect to interest rates, interest rate formulas, issue dates, maturity dates,
or otherwise, all as provided in the Indenture. To the extent not inconsistent
herewith, the terms of the Indenture are hereby incorporated by reference
herein.
This Note will not be subject to any sinking fund and, unless
otherwise provided on the face hereof in accordance with the provisions of the
following two paragraphs, will not be redeemable or subject to repayment at the
option of the holder prior to maturity.
If so indicated on the face of this Note, this Note may be redeemed in
whole or in part at the option of the Issuer on or after the Initial Redemption
Date specified on the face hereof on the terms set forth on the face hereof and
at a redemption price (expressed as a percentage of the principal amount hereof)
equal to the Initial Redemption Percentage, together with interest accrued and
unpaid hereon to the date of redemption. If this Note is subject to "Annual
Redemption Percentage Reduction," the Initial Redemption Percentage indicated on
the face hereof will be reduced on each anniversary of the Initial Redemption
Date by the Annual Redemption Percentage Reduction specified on the face hereof
until the redemption price of this Note is 100% of the principal amount hereof,
together with interest accrued and unpaid hereon to the date of redemption.
Notice of redemption shall be mailed by first class mail, postage prepaid, to
the registered holders of the Notes designated for redemption at their addresses
as the same shall appear on the Note register not less than 30 nor more than 60
days prior to the date fixed for redemption, subject to all the conditions and
provisions of the Indenture. In the event of redemption of this Note in part
only, a new Note or Notes for the amount of the unredeemed portion hereof shall
be issued in the name of the holder hereof upon the cancellation hereof, but, in
any event, the principal amount of the Note remaining outstanding after
redemption must be an Authorized Denomination.
If so indicated on the face of this Note, this Note will be subject to
repayment at the option of the holder on the Optional Repayment Date or Dates
specified on the face hereof on the terms set forth herein. On any Optional
Repayment Date, this Note will be repayable in whole or in part in increments of
$1,000 or, if this Note is denominated in a Specified Currency other than U.S.
dollars, in increments of 1,000 units of such Specified Currency (provided that
any remaining principal amount hereof shall not be less than the minimum
Authorized Denomination hereof) at the option of the holder hereof at a price
-5-
<PAGE>
equal to 100% of the principal amount to be repaid, together with interest
accrued and unpaid hereon to the date of repayment. For this Note to be repaid
at the option of the holder hereof, the Paying Agent must receive at its
principal corporate trust office in San Francisco, California, or at its office
in The City of New York, New York, at least 30 days but not more than 60 days
prior to the date of repayment, (i) this Note with the form entitled "Option to
Elect Repayment" below duly completed or (ii) a telegram, telex, facsimile
transmission or a letter from a member of a national securities exchange or the
National Association of Securities Dealers, Inc. or a commercial bank or a trust
company in the United States setting forth the name of the holder of this Note,
the principal amount hereof, the principal amount hereof to be repaid, the
certificate number of this Note or a description of this Note's tenor and terms,
a statement that the option to elect repayment is being exercised thereby and a
guarantee that this Note, together with the form entitled "Option to Elect
Repayment" duly completed, will be received by the Paying Agent not later than
the third Business Day after the date of such telegram, telex, facsimile
transmission or letter; provided, however, that such telegram, telex, facsimile
-------- -------
transmission or letter shall only be effective if this Note and such form duly
completed are received by the Paying Agent by such third Business Day.
Effective exercise of such repayment option by the holder hereof shall be
irrevocable. In the event of repayment of this Note in part only, a new Note or
Notes for the amount of the unpaid portion hereof shall be issued in the name of
the holder hereof upon the cancellation hereof, but, in any event, the principal
amount of the Note remaining outstanding after repayment must be an Authorized
Denomination.
If so indicated on the face of this Note, the Issuer has the option to
extend the Original Maturity Date hereof for one or more periods of one or more
whole years (each an "Extension Period") up to but not beyond the Final Maturity
Date specified on the face hereof and in connection therewith to establish a new
interest rate and new redemption provisions for the Extension Period.
The Issuer may exercise such option by notifying the Paying Agent of
such exercise at least 45 but not more than 60 days prior to the Original
Maturity Date or, if the maturity hereof has already been extended, prior to the
maturity date then in effect (an "Extended Maturity Date"), such notice to be
accompanied by the form of the Extension Notice referred to below. No later
than 38 days prior to the Original Maturity Date or an Extended Maturity Date,
as the case may be (each, a "Maturity Date"), the Paying Agent will mail to the
holder hereof a notice (the "Extension Notice") relating to such Extension
Period, by first class mail, postage prepaid, setting forth (a) the election of
the Issuer to extend the maturity of this Note; (b) the new Extended Maturity
Date; (c) the interest rate applicable to the Extension Period; and (d) the
provisions, if any, for redemption during the extension period, including the
date or dates on which, the period or periods during which and the price or
prices at which such redemption may occur during the Extension Period. Upon the
mailing by the Paying Agent of an Extension Notice to the holder of this Note,
the maturity hereof shall be extended automatically, and, except as modified by
the Extension Notice and as described in the next paragraph, this Note will have
the same terms it had prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 A.M., New York
City time, on the twentieth calendar day prior to the Maturity Date in effect
immediately preceding the mailing of the applicable Extension Notice (or if such
day is not a Business
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<PAGE>
Day, not later than 10:00 A.M., New York City time, on the immediately
succeeding Business Day), the Issuer may, at its option, revoke the interest
rate provided for in such Extension Notice and establish a higher interest rate
for the Extension Period by causing the Paying Agent to send notice of such
higher interest rate within seven days of receipt of such notice to the holder
of this Note by first class mail, postage prepaid, or by such other means as
shall be agreed between the Issuer and the Paying Agent. Such notice shall be
irrevocable. All Notes with respect to which the Maturity Date is extended in
accordance with an Extension Notice will bear such higher interest rate for the
Extension Period, whether or not tendered for repayment.
If the Issuer elects to extend the maturity hereof, the holder of this
Note will have the option to require the Issuer to repay this Note on the
Maturity Date in effect immediately preceding the mailing of the applicable
Extension Notice at a price equal to the principal amount hereof plus any
accrued and unpaid interest to such date. In order for this Note to be so
repaid on such Maturity Date, the holder hereof must follow the procedures set
forth above for optional repayment, except that the period for delivery of this
Note or notification to the Paying Agent shall be at least 25 but not more than
35 days prior to the Maturity Date in effect immediately preceding the mailing
of the applicable Extension Notice and except that if the holder hereof has
tendered this Note for repayment pursuant to this paragraph he may, by written
notice to the Paying Agent, revoke any such tender for repayment until 3:00
P.M., New York City time, on the twentieth calendar day prior to the Maturity
Date then in effect (or, if such day is not a Business Day, until 3:00 P.M., New
York City time, on the immediately succeeding Business Day).
Interest payments on this Note will include interest accrued to but
excluding the Interest Payment Dates or the Maturity Date (or any earlier
redemption or repayment date), as the case may be. Unless otherwise specified
on the face hereof, interest payments for this Note will be computed and paid on
the basis of a 360-day year of twelve 30-day months.
In the case where the Interest Payment Date or the Maturity Date (or
any redemption or repayment date) does not fall on a Business Day, payment of
interest, premium, if any, or principal otherwise payable on such date need not
be made on such date, but will be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date or on the
Maturity Date (or any redemption or repayment date), and no interest on such
payment shall accrue for the period from and after the Interest Payment Date or
the Maturity Date (or any redemption or repayment date) to such next succeeding
Business Day.
This Note and all the obligations of the Issuer hereunder are direct,
unsecured obligations of the Issuer and rank without preference or priority
among themselves and pari passu with all other existing and future unsecured and
---- -----
unsubordinated indebtedness of the Issuer, subject to certain statutory
exceptions in the event of liquidation upon insolvency.
This Note, and any Note or Notes issued upon transfer or exchange
hereof, is issuable only in fully registered form, without coupons, and, if
denominated in U.S. dollars, is issuable only in denominations of U.S. $1,000
and any integral multiple of U.S. $1,000 in excess thereof. If this Note is
denominated in a Specified Currency other than U.S. dollars,
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<PAGE>
then, unless a higher minimum denomination is required by applicable law, it is
issuable only in denominations of the equivalent of U.S. $1,000 (rounded to an
integral multiple of 1,000 units of such Specified Currency), or any amount in
excess thereof which is an integral multiple of 1,000 units of such Specified
Currency, as determined by reference to the noon dollar buying rate in New York
City for cable transfers of such Specified Currency published by the Federal
Reserve Bank of New York (the "Market Exchange Rate") on the Business Day
immediately preceding the date of issuance.
The Trustee has been appointed registrar for the Notes, and the
Trustee will maintain at its office in San Francisco, California, a register for
the registration and transfer of Notes. This Note may be transferred at the
aforesaid office of the Trustee or at the office of the Trustee in The City of
New York, New York, by surrendering this Note for cancellation, accompanied by a
written instrument of transfer in form satisfactory to the Trustee and duly
executed by the registered holder hereof in person or by the holder's attorney
duly authorized in writing, and thereupon the Trustee shall issue in the name of
the transferee or transferees, in exchange herefor, a new Note or Notes having
identical terms and provisions and having a like aggregate principal amount in
authorized denominations, subject to the terms and conditions set forth herein;
provided, however, that the Trustee will not be required (i) to register the
- -------- -------
transfer of or exchange any Note that has been called for redemption in whole or
in part, except the unredeemed portion of Notes being redeemed in part, (ii) to
register the transfer of or exchange any Note if the holder thereof has
exercised his right, if any, to require the Issuer to repurchase such Note in
whole or in part, except the portion of such Note not required to be
repurchased, or (iii) to register the transfer of or exchange Notes to the
extent and during the period so provided in the Indenture with respect to the
redemption of Notes. Notes are exchangeable at said offices for other Notes of
other authorized denominations of equal aggregate principal amount having
identical terms and provisions. All such exchanges and transfers of Notes will
be free of charge, but the Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge in connection therewith. All Notes
surrendered for exchange shall be accompanied by a written instrument of
transfer in form satisfactory to the Trustee and executed by the registered
holder in person or by the holder's attorney duly authorized in writing. The
date of registration of any Note delivered upon any exchange or transfer of
Notes shall be determined by the Issuer and shall be such that no gain or loss
of interest results from such exchange or transfer.
In case any Note shall at any time become mutilated, defaced or be
destroyed, lost or stolen and such Note or evidence of the loss, theft or
destruction thereof (together with the indemnity hereinafter referred to and
such other documents or proof as may be required in the premises) shall be
delivered to the Trustee, a new Note of like tenor will be issued by the Issuer
in exchange for the Note so mutilated or defaced, or in lieu of the Note so
destroyed or lost or stolen, but, in the case of any destroyed or lost or stolen
Note, only upon receipt of evidence satisfactory to the Trustee and the Issuer
that such Note was destroyed, lost or stolen and, if required, upon receipt also
of indemnity satisfactory to each of them. All expenses and reasonable charges
associated with procuring such indemnity and with the preparation,
authentication and delivery of a new Note shall be borne by the holder of the
Note mutilated, defaced, destroyed, lost or stolen.
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<PAGE>
The Indenture provides that if an Event of Default, as defined in the
Indenture, shall occur and be continuing with respect to any series of debt
securities issued under the Indenture including the series of Series D Medium-
Term Notes of which this Note forms a part, the Trustee or the holders of not
less than 25% in aggregate principal amount of the debt securities then
outstanding of the series may, by a notice in writing to the Issuer (and to the
Trustee if given by such holders), declare the principal of, and the premium, if
any, on such series to be due and payable, together with interest accrued
thereon. Any Event of Default with respect to a particular series of debt
securities may be waived by the holders of a majority in aggregate principal
amount of the outstanding debt securities of the series affected, except in each
case a failure to pay the principal of, or premium, if any, or interest on, such
debt securities.
If the face hereof indicates that this Note is subject to "Modified
Payment upon Acceleration," then (i) if the principal hereof is declared to be
due and payable as described in the preceding paragraph, the amount of principal
due and payable with respect to this Note shall be limited to the aggregate
principal amount hereof multiplied by the sum of the Issue Price specified on
the face hereof (expressed as a percentage of the aggregate principal amount)
plus the original issue discount amortized from the Interest Accrual Date to the
date of declaration, which amortization shall be calculated using the "interest
method" (computed in accordance with generally accepted accounting principles in
effect on the date of declaration), (ii) for the purpose of any vote of
securityholders taken pursuant to the Indenture prior to the acceleration of
payment of this Note, the principal amount hereof shall equal the amount that
would be due and payable hereon, calculated as set forth in clause (i) above, if
this Note were declared to be due and payable on the date of any such vote and
(iii) for the purpose of any vote of securityholders taken pursuant to the
Indenture following the acceleration of payment of this Note, the principal
amount hereof shall equal the amount of principal due and payable with respect
to this Note, calculated as set forth in clause (i) above.
The Indenture contains provisions permitting the Issuer and the
Trustee, with the consent of the holders of not less than 66 2/3% in aggregate
principal amount of the debt securities at the time outstanding of all series to
be affected (or not less than 66 2/3% in aggregate principal amount of any
series affected in case one or more but not all of the series are affected)
evidenced as provided in the Indenture, to execute supplemental indentures
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or modifying in any
manner the rights of the holders of the securities of each such series;
provided, however, that no such supplemental indenture shall, among other
- -------- -------
matters, (i) change the fixed maturity of any debt security, or reduce the rate
of or extend the time of payment of any interest thereon, or reduce the
principal amount thereof or any premium thereon, or make the principal thereof
or any interest or premium thereon payable in any currency other than that
hereinbefore provided, without the consent of the holder of each debt security
so affected, or (ii) reduce the aforesaid percentage of debt securities, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holder of each debt security affected.
If the principal of, premium, if any, or interest on, this Note is
payable in a Specified Currency other than U.S. dollars and such Specified
Currency is not available to
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<PAGE>
the Issuer for making payments hereon due to the imposition of exchange controls
or other circumstances beyond the control of the Issuer or is no longer used by
the government of the country issuing such currency or for the settlement of
transactions by public institutions within the international banking community,
then the Issuer will be entitled to satisfy its obligations to the holder of
this Note by making such payments in U.S. dollars on the basis of the Market
Exchange Rate on the date of such payment or, if the Market Exchange Rate is not
available on such date, as of the most recent practicable date. Any payment made
under such circumstances in U.S. dollars where the required payment is in a
Specified Currency other than U.S. dollars will not constitute an Event of
Default.
All determinations referred to above made by the Issuer or its agent
shall be at its sole discretion and shall, in the absence of manifest error, be
conclusive to the extent permitted by law for all purposes and binding on the
holder of this Note.
So long as this Note shall be outstanding, the Issuer will cause to be
maintained an office or agency for the payment of the principal of and the
premium, if any, and interest on this Note as herein provided in The City of New
York, and an office or agency in said City for the registration, transfer and
exchange as aforesaid of the Notes and where notices and demands to or upon the
Issuer in respect of the Notes may be served. The Issuer may designate other
agencies for the payment of said principal, premium and interest at such place
or places (subject to applicable laws and regulations) as the Issuer may decide.
So long as there shall be such an agency, the Issuer shall keep the Trustee
advised of the names and locations of such agencies, if any are so designated.
With respect to moneys paid by the Issuer and held by the Trustee or
any Paying Agent for payment of the principal of or interest or premium, if any,
on any Notes that remain unclaimed at the end of the two years after such
principal, interest or premium shall have become due and payable (whether at
maturity or upon call for redemption or otherwise), (i) the Trustee or such
Paying Agent shall notify the holders of such Notes that such moneys shall be
repaid to the Issuer and any person claiming such moneys shall thereafter look
only to the Issuer for payment thereof and (ii) such moneys shall be so repaid
to the Issuer. Upon such repayment all liability of the Trustee or such Paying
Agent with respect to such moneys shall thereupon cease, without, however,
limiting in any way any obligation that the Issuer may have to pay the principal
of or interest or premium, if any, on this Note as the same shall become due.
No provision of this Note or of the Indenture shall alter or impair
the obligation of the Issuer, which is absolute and unconditional, to pay the
principal of, premium, if any, and interest on this Note at the time, place, and
rate, and in the coin or currency, herein prescribed unless otherwise agreed
between the Issuer and the registered holder of this Note; provided, however, if
-------- -------
the principal of, premium, if any, or interest on, this Note is payable in a
Specified Currency other than U.S. dollars and such Specified Currency is not
available to the Issuer for making payments hereon due to circumstances beyond
the control of the Issuer, as described above, then the Issuer will be entitled
to satisfy its obligations to the holder of this Note by making such payments in
U.S. dollars as set forth above.
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<PAGE>
Prior to due presentment of this Note for registration of transfer,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
holder in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and none of the Issuer, the
Trustee or any such agent shall be affected by notice to the contrary.
Upon any consolidation by the Issuer with or merger by the Issuer into
any other corporation or any conveyance, transfer or lease of the properties and
assets of the Issuer substantially as an entirety in accordance with the
Indenture, the successor corporation formed by such consolidation or into which
the Issuer is merged or to which such conveyance, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every right and power
of the Issuer under the Indenture with the same effect as if such successor
corporation had been named as the Issuer therein, and thereafter, except in the
case of a lease, the predecessor corporation shall be relieved of all
obligations and covenants under the Indenture and the Notes.
No recourse shall be had for the payment of the principal of, premium,
if any, or the interest on this Note, for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Indenture or any
supplemental indenture thereto, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Issuer or of any successor
corporation, either directly or through the Issuer or any successor corporation,
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
THIS NOTE SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.
All terms used in this Note which are defined in the Indenture and not
otherwise defined herein shall have the meanings assigned to them in the
Indenture.
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<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - ____________________ Custodian __________________
(Cust) (Minor)
Under Uniform Gifts to Minors Act _____________________________________
State
Additional abbreviations may also be used though not in the above list.
______________________
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<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto
(PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
____________________________________________________
____________________________________________________
____________________________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS INCLUDING ZIP CODE, OF ASSIGNEE
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing such person attorney to transfer such note on the books of the
Issuer, with full power of substitution in the premises.
Dated: _____________________
____________________________
NOTICE: The signature to this assignment must correspond to
the name as written upon the face of this Note in every
particular, without alteration or any change whatsoever;
signature(s) must be guaranteed by an eligible guarantor
institution (banks, stock brokers, savings and loan
associations and credit unions with membership in an
approved signature guarantee medallion program) pursuant to
Securities and Exchange Commission Rule 17Ad-15.
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<PAGE>
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs the Issuer
to repay the within Note (or portion thereof specified below) pursuant to its
terms at a price equal to the principal amount thereof, together with interest
to the Optional Repayment Date, to the undersigned at
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name,
address and telephone number of the undersigned,
and name of contact person, if any)
If less than the entire principal amount of the within Note is to be
repaid, specify the portion thereof which the holder elects to have repaid:
______________________________; and specify the denomination or denominations
(which shall not be less than the minimum authorized denomination) of the Notes
to be issued to the holder for the portions of the within Note not being repaid
(in the absence of any such specification, one such Note will be issued for the
portion not being repaid):_____________________________________________
Dated: _________________________
___________________________________
NOTICE: The signature to the foregoing Election must correspond to the name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever; signature(s) must be guaranteed by an eligible guarantor
institution (banks, stock brokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program)
pursuant to Securities and Exchange Commission Rule 17Ad-15.
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<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF IRELL & MANELLA LLP]
April 16, 1999
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245-5012
Re: Series D Medium-Term Notes
--------------------------
Ladies and Gentlemen:
We have acted as counsel for Mattel, Inc., a Delaware corporation (the
"Company"), in connection with the Company's Registration Statement on Form S-3
(No. 333-68017)(the "Registration Statement"), with respect to the registration
under the Securities Act of 1933, as amended (the "Act"), of up to $400,000,000
(or the equivalent thereof in one or more foreign currencies or composite
currencies) aggregate initial offering price of an indeterminate amount of
various Securities (as defined in the Registration Statement). The
Registration Statement was initially filed with the Securities and Exchange
Commission (the "Commission") on November 25, 1998, and was declared effective
by the Commission on December 8, 1998, having the effect of qualifying the
indenture dated as of February 15, 1996 (the "Indenture") between the Company
and Chase Manhattan Bank and Trust Company, N.A. (formerly Chemical Trust
Company of California), as trustee (the "Trustee"), under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). Pursuant to the Indenture,
the Company proposes to issue up to $400,000,000 (or the equivalent thereof in
one or more foreign currencies or composite currencies) in aggregate principal
amount of Securities designated as Series D Medium-Term Notes (the "Notes").
The Notes will be offered on a continuing basis pursuant to Rule 415 under the
Act by the Prospectus dated April 16, 1999 (the "Basic Prospectus"), as
supplemented by the Prospectus Supplement dated April 16, 1999 (the "Supplement"
and, together with the Basic Prospectus, the "Prospectus"). The Prospectus will
be further supplemented by pricing supplements, each of which will be dated
approximately as of the date of sale of particular Notes and will furnish
information as to the specific terms thereof.
For purposes of this opinion, we have reviewed such corporate records,
agreements and other instruments, and certificates of public officials, and have
considered such questions of law, as we deemed necessary or appropriate for the
purposes of this opinion.
<PAGE>
Mattel, Inc.
April 16, 1999
Page 2
On the basis of the foregoing and in reliance thereon, we are of the
opinion that the issuance and sale of Notes have been duly authorized and, when
the final terms of a particular Note and of its issuance and sale have been duly
established in accordance with the provisions of the Indenture and when the
Notes have been executed and authenticated in accordance with the provisions of
the Indenture and delivered to and paid for by the purchasers thereof in the
manner provided in the Distribution Agreement dated April 16, 1999 between the
Company and, as Agents, Morgan Stanley & Co. Incorporated and Credit Suisse
First Boston Corporation, the Notes will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the Company, enforceable
in accordance with their respective terms.
With respect to the opinions rendered above relating to enforceability of
the Notes:
(i) such opinions are subject to the following exceptions, limitations and
qualifications: (a) the effect of bankruptcy, insolvency and similar laws
affecting creditors' rights generally; (b) the effect of general principles of
equity, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing and the possible unavailability of specific
performance or injunctive relief, regardless of whether such enforceability is
considered in a proceeding in equity or at law; and (c) certain rights, remedies
and waivers contained in the Indenture or the Notes may be limited or rendered
ineffective by applicable California laws or judicial decisions governing such
provisions, but such laws or judicial decisions do not render the Indenture or
the Notes invalid or unenforceable as a whole;
(ii) we express no opinion with respect to (a) the enforceability of the
waiver of rights or defenses contained in Section 4.4 of the Indenture or (b)
whether acceleration of any Notes that may have been sold for less than the full
face amount thereof may affect the collectibility of that portion of the stated
principal amount thereof that might be determined to constitute unearned
interest thereon; and
(iii) in rendering such opinions, we have assumed that the interest rates
on the Notes at the time of their determination will not exceed the maximum rate
permitted under the usury laws of the State of California.
To the extent the obligations of the Company under the Indenture
and with respect to the Notes may be dependent upon such matters, we assume for
purposes of the opinions rendered above that the Trustee has complied with any
applicable requirement to file returns and pay taxes under the Franchise Tax Law
of the State of California; that the Trustee is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization; that
the Trustee is duly qualified to engage in the activities contemplated by the
Indenture; that the Indenture has been duly authorized, executed and delivered
by the Trustee and constitutes the valid and binding obligation of the Trustee
enforceable against the Trustee in accordance with its terms; that, with respect
to acting as a
<PAGE>
Mattel, Inc.
April 16, 1999
Page 3
trustee under the Indenture, the Trustee is generally in compliance with all
applicable laws and regulations; and that the Trustee has the requisite
organizational and legal power and authority to perform its obligations under
the Indenture.
Please be advised that we are licensed to practice law only in the State of
California. We express no opinion as to the law of any jurisdiction other than
the laws of the State of California, the Delaware General Corporation Law and
the United States federal laws.
This opinion is being rendered as of the date hereof and we assume no
obligations whatsoever to modify or update this opinion subsequent to the date
hereof, or to correct this opinion to the extent it may be rendered inaccurate
as a result of facts, circumstances or laws not in existence on the date hereof.
This opinion is rendered solely for your benefit in connection with the
transactions described above. We hereby consent to the use of this opinion as
an exhibit to the Company's Current Report on Form 8-K, event date April 16,
1999. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Irell & Manella LLP
Irell & Manella LLP
<PAGE>
EXHIBIT 99.1
SUPPLEMENT
DATED APRIL 16, 1999
TO
----------------
MATTEL, INC.
AND
THE LEARNING COMPANY, INC.
JOINT PROXY STATEMENT/PROSPECTUS
----------------
The following information supplements and should be read in conjunction with
the joint proxy statement/prospectus dated March 26, 1999 of Mattel, Inc. and
The Learning Company, Inc., previously furnished to stockholders of Mattel and
Learning Company. This supplement contains information regarding certain recent
developments relating to Mattel, selected historical financial data of Mattel
and Learning Company as of and for the year ended December 31, 1998, and
updated unaudited pro forma financial data of Mattel as of and for the years
ended December 31, 1996, 1997 and 1998. The purpose of this supplement is to
provide you with this additional information. To the extent information in this
supplement differs from or conflicts with information contained in the joint
proxy statement/prospectus, this supplement supersedes and replaces the
information in the joint proxy statement/prospectus.
This supplement is being furnished to record holders of Mattel common stock
as of March 15, 1999, in connection with the solicitation of proxies by the
board of directors of Mattel for use at a special meeting of stockholders of
Mattel to be held on May 7, 1999 and at any and all adjournments or
postponements of the Mattel special meeting, and record holders of Learning
Company common stock as of March 15, 1999, in connection with the solicitation
of proxies by the board of directors of Learning Company for use at the special
meeting of stockholders of Learning Company to be held on May 7, 1999 and at
any and all adjournments or postponements of the Learning Company special
meeting. The Mattel and Learning Company special meetings are being held to
consider and vote upon proposals to approve and adopt the Agreement and Plan of
Merger, dated as of December 13, 1998, between Mattel and Learning Company
under which Learning Company will be merged with and into Mattel, with Mattel
being the surviving corporation.
Please see the section entitled "Risk Factors" on page 19 of the joint proxy
statement/prospectus for a discussion of risks associated with the merger.
Neither the United States Securities and Exchange Commission nor any state
securities commission has approved or disapproved the Mattel common stock to be
issued in the merger or determined if this supplement to the joint proxy
statement/prospectus is accurate or adequate. Any representation to the
contrary is a criminal offense.
This supplement is dated April 16, 1999 and is expected to be first mailed to
stockholders on April 17, 1999. This supplement should be read in conjunction
with the joint proxy statement/prospectus dated March 26, 1999.
<PAGE>
Recent Developments
On April 15, 1999, Mattel reported a net loss of $17.9 million or $.07 per
share for the quarter ended March 31, 1999, compared to net income of $12.7
million or $.04 per share in the first quarter of 1998. Net sales for the first
quarter of 1999 were $692.1 million, down 2.0% from $705.2 million in the first
quarter of 1998. Mattel's profitability was affected by the addition of
Pleasant Company, due to the $.04 per share impact of goodwill amortization and
interest costs related to the acquisition of that company. Increased sales,
general and administrative expense levels were also a factor in the first
quarter of 1999 and are being addressed through a business realignment and a
restructuring described below. Mattel's gross margin was 45.8% for the first
quarter of 1999, compared to 45.9% for the first quarter of 1998. On a
comparable basis, excluding the impact of Pleasant Company, inventories were
down by $31 million from the first quarter of 1998, and accounts receivable
were down by $116 million.
Mattel also announced that a planned realignment of its operations to reduce
overhead and advertising costs would include the closure of certain of its
facilities and a workforce reduction affecting over 3,000 positions, or more
than 10% of Mattel's current employees. Based on such actions and the
anticipated completion of the merger of Mattel and Learning Company, Mattel
reported that it expects to incur a pre-tax charge of approximately $300
million to $350 million to be taken in the second quarter of 1999.
Approximately $75 million of the one-time charge is expected to be related to
merger transaction costs, approximately $90 million is expected to be related
to merger integration costs, and $135 million to $185 million is expected to be
related to Mattel restructuring costs. Mattel expects the combined actions to
result in cost savings of approximately $50 million in 1999 and at least $400
million over the following three years. However, the amount of the expected
cost savings are preliminary estimates and there can be no assurance that
Mattel's actions will result in such cost savings. See "Risk Factors" on pages
19 to 23 of the joint proxy statement/prospectus.
On April 15, 1999, Mattel also announced that it will spend an initial $50
million to launch an Internet venture, which is expected to result in the
creation of a new subsidiary later this year, a portion of which may be offered
to the public. Mattel expects that it will be able to offset a portion of its
investment in the Internet venture with cost savings from the restructuring
discussed above. Mattel's goal is to create a premier online destination and E-
commerce site to better serve children and their families. Mattel's strategy to
reach this goal is premised on attracting consumers to its sites by bringing
together the branded proprietary content of both Mattel and Learning Company at
one "Mattel.com" Web destination. After the merger with Learning Company,
Mattel expects to have over 80 websites and a database of approximately 25
million consumers.
1
<PAGE>
Selected Historical and Selected Unaudited Pro Forma Combined Financial Data
We are providing the following information to aid you in your analysis of the
financial aspects of the merger. This information is only a summary and you
should read it in conjunction with the historical and unaudited pro forma
combined financial statements and related notes that are incorporated by
reference or included in this supplement or the joint proxy
statement/prospectus. See "Where You Can Find More Information" on page 110 of
the joint proxy statement/prospectus or "Mattel Unaudited Pro Forma Condensed
Combined Financial Statements" on page 6 of this supplement.
Selected Financial Data of Mattel
Mattel's historical financial data for the annual periods presented below is
derived from its audited consolidated financial statements previously filed
with the Securities and Exchange Commission.
Mattel merged with Tyco Toys, Inc. in March 1997. This acquisition was
accounted for as a pooling of interests, which means that for accounting and
financial reporting purposes, Mattel and Tyco Toys, Inc. treated their
companies as if they had always been combined. Per share data also reflects the
retroactive effect of stock splits distributed to Mattel common stockholders in
January 1995 and March 1996.
Mattel's net income applicable to common shares for the year ended December
31, 1997 includes a $4.6 million extraordinary charge related to the loss on
early retirement of long-term debt in connection with Mattel's merger with Tyco
Toys, Inc.
Mattel's book value per common share represents Mattel's stockholders'
equity, adjusted for the liquidation preference of Mattel Series C preferred
stock, divided by the outstanding number of common shares.
<TABLE>
<CAPTION>
As of or For the Year Ended
--------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
(In millions, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Net sales........................ $3,971.2 $4,369.8 $4,535.3 $4,834.6 $4,781.9
Income from continuing operations
applicable to common shares..... 217.8 331.3 364.8 279.3 324.3
Net income applicable to common
shares.......................... 217.8 331.3 364.8 274.7 324.3
Income per common share--basic:
Income from continuing
operations.................... 0.74 1.13 1.26 0.96 1.11
Net income..................... 0.74 1.13 1.26 0.95 1.11
Income per common share--diluted:
Income from continuing
operations.................... 0.73 1.11 1.23 0.94 1.10
Net income..................... 0.73 1.11 1.23 0.93 1.10
Dividends declared per common
share........................... 0.15 0.19 0.24 0.27 0.31
Consolidated Balance Sheet Data:
Total assets..................... $3,150.4 $3,341.4 $3,581.1 $3,803.8 $4,262.2
Long-term liabilities............ 606.4 721.7 633.3 808.3 1,124.8
Stockholders' equity............. 1,385.8 1,551.7 1,805.9 1,822.1 1,820.2
Book value per common share...... 6.02
</TABLE>
2
<PAGE>
Selected Financial Data of Learning Company
Learning Company's historical financial data for the fiscal years 1995, 1996,
1997 and 1998 is derived from its audited consolidated financial statements
previously filed with the Securities and Exchange Commission. Learning
Company's historical financial data for the year ended December 31, 1994 is
unaudited. That financial data was prepared from the previously separate
audited financial statements of Learning Company and Broderbund Software, Inc.
Learning Company acquired Broderbund Software, Inc. on August 31, 1998 and
accounted for the acquisition as a pooling of interests, which means that for
accounting and financial reporting purposes, Learning Company and Broderbund
Software, Inc. treated their companies as if they had always been combined. As
a result, Learning Company restated its financial statements for the year ended
December 31, 1994 to include Learning Company's previously audited financial
data for its fiscal year and Broderbund Software, Inc.'s previously audited
financial data for its fiscal year ended August 31, 1994.
Learning Company's book value per common share represents Learning Company's
stockholders' equity, adjusted for the liquidation preference of Learning
Company Series A preferred stock, divided by the outstanding number of common
shares.
<TABLE>
<CAPTION>
As of or For the Year Ended
---------------------------------------
1994 1995 1996 1997 1998
------ -------- ------ ------ ------
(In millions, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Operations
Data:
Net sales............................ $233.1 $ 338.6 $529.5 $620.9 $839.3
Income (loss) from continuing
operations applicable to common
shares.............................. 32.2 (35.1) (376.5) (494.9) (105.3)
Net income (loss) applicable to
common shares....................... 32.2 (35.1) (376.5) (494.9) (105.3)
Income (loss) per common share--
basic:
Income (loss) from continuing
operations........................ 0.94 (0.86) (6.56) (7.48) (1.28)
Net income (loss) ................. 0.94 (0.86) (6.56) (7.48) (1.28)
Income (loss) per common share--
diluted:
Income (loss) from continuing
operations........................ 0.90 (0.86) (6.56) (7.48) (1.28)
Net income (loss) ................. 0.90 (0.86) (6.56) (7.48) (1.28)
Dividends declared per common share.. -- -- -- -- --
Consolidated Balance Sheet Data:
Total assets......................... $179.1 $1,047.2 $969.9 $623.8 $820.8
Long-term liabilities................ 16.8 550.5 574.9 377.6 292.6
Stockholders' equity................. 113.5 339.2 247.9 26.0 286.2
Book value per common share.......... 1.47
</TABLE>
3
<PAGE>
Selected Unaudited Pro Forma Combined Financial Data
We have provided selected unaudited financial data of Mattel after giving
effect to the merger, which is referred to as "pro forma" information. In
presenting this selected unaudited pro forma combined financial data, we
treated our companies as if they had always been combined for accounting and
financial reporting purposes. This method is known as the "pooling of
interests" method of accounting. We have prepared this information on a basis
consistent with the unaudited pro forma condensed combined financial statements
included in this supplement. You should be aware that this unaudited pro forma
information is presented for illustrative purposes only and may not be
indicative of the operating results or financial position that would have
occurred or that will occur after the consummation of the merger.
The unaudited pro forma combined income (loss) from continuing operations
applicable to common shares excludes the following:
. the positive effects of potential cost savings that the companies may
achieve upon combining the resources of Mattel and Learning Company;
. transaction costs of approximately $75 million to $85 million, including
investment banking, legal and accounting fees and contractual incentive
benefits; and
. merger integration and Mattel restructuring costs to be recognized in the
second quarter of 1999.
In addition, the unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1998 sets forth the unaudited pro
forma results of operations of Mattel, Learning Company, and Mindscape, Inc. as
if the acquisition of Mindscape, Inc. by Learning Company, which occurred on
March 5, 1998, had occurred on January 1, 1998.
Unaudited pro forma combined income (loss) per share from continuing
operations is based upon the combined historical weighted average number of
common shares outstanding, after adjustment of Learning Company's historical
number of shares, assuming an exchange ratio of 1.2.
Unaudited pro forma dividends declared per common share are assumed to be the
same as the historical cash dividend declarations of Mattel. Learning Company
did not pay cash dividends on its common stock during the periods presented.
Unaudited pro forma condensed combined stockholders' equity as of December
31, 1998 includes the impact of transaction costs related to the merger and tax
benefits relating to Learning Company's net operating loss carryforwards and
deductible temporary differences and excludes the impact of merger integration
and Mattel restructuring costs to be recognized in the second quarter of 1999.
We calculated the unaudited pro forma combined book value per common share by
dividing the unaudited pro forma combined stockholders' equity, adjusted for
the liquidation preference of Mattel Series C preferred stock, by the unaudited
pro forma combined number of shares outstanding. We excluded the liquidation
preference of Learning Company Series A preferred stock from the calculation
because these shares will be converted into Learning Company common stock
immediately prior to the merger.
4
<PAGE>
<TABLE>
<CAPTION>
As of or For the Year
Ended
---------------------------
1996 1997 1998
-------- -------- --------
(In millions, except per
share data)
<S> <C> <C> <C>
Consolidated Statement of Operations Data:
Net sales......................................... $5,064.8 $5,455.5 $5,630.3
Income (loss) from continuing operations
applicable to common shares...................... 14.6 (188.6) 150.2
Income (loss) per common share from continuing
operations--basic................................ 0.04 (0.51) 0.38
Income (loss) per common share from continuing
operations--diluted.............................. 0.04 (0.51) 0.36
Dividends declared per common share............... 0.24 0.27 0.31
Consolidated Balance Sheet Data:
Total assets...................................... $4,607.0 $4,512.9 $5,147.4
Long-term liabilities............................. 1,208.2 1,185.9 1,417.4
Stockholders' equity.............................. 2,109.8 1,933.4 2,120.8
Book value per common share....................... 4.88
</TABLE>
Learning Company Unaudited Pro Forma Equivalents
The Learning Company pro forma equivalent income (loss) per common share from
continuing operations, dividends declared per common share and book value per
common share are computed by multiplying the unaudited pro forma amounts for
the combined company by an assumed exchange ratio of 1.2.
<TABLE>
<CAPTION>
As of or For the
Year Ended
-------------------
1996 1997 1998
----- ------ -----
<S> <C> <C> <C>
Unaudited Pro Forma Equivalents:
Income (loss) per common share from continuing
operations--basic........................................ $0.05 $(0.61) $0.45
Income (loss) per common share from continuing
operations--diluted...................................... 0.05 (0.61) 0.43
Dividends declared per common share....................... 0.29 0.32 0.37
Book value per common share............................... 5.86
</TABLE>
5
<PAGE>
MATTEL
Unaudited Pro Forma Condensed Combined
Financial Statements
We have provided unaudited condensed combined financial statements of Mattel
after giving effect to the merger, which are referred to as "pro forma"
information. In presenting these unaudited pro forma condensed combined
financial statements, we treated our companies as if they had always been
combined for accounting and financial reporting purposes. This method is known
as the "pooling of interests" method of accounting. You should be aware that
these unaudited pro forma condensed combined financial statements are presented
for illustrative purposes only and may not be indicative of the operating
results or financial position that would have occurred or that will occur after
the consummation of the merger.
We have provided an unaudited pro forma condensed combined balance sheet as
of December 31, 1998 that includes the impact of transaction costs related to
the merger and tax benefits relating to Learning Company's net operating loss
carryforwards and deductible temporary differences. The impact of merger
integration and Mattel restructuring costs to be recognized in the second
quarter of 1999 are not included in this balance sheet.
We have also provided unaudited pro forma condensed combined statements of
operations for the years ended December 31, 1996, 1997, and 1998 assuming the
merger had occurred as of January 1, 1996. The unaudited pro forma condensed
combined statements of operations for all periods presented exclude the
positive effects of potential cost savings that the companies may achieve upon
combining the resources of Mattel and Learning Company, transaction costs of
approximately $75 to $85 million, including investment banking, legal and
accounting fees and contractual incentive benefits, and merger integration and
Mattel restructuring costs to be recognized in the second quarter of 1999.
On March 5, 1998, Learning Company purchased Mindscape, Inc. Since the
acquisition of Mindscape, Inc. is material to Learning Company's results of
operations, we have included the preacquisition results of Mindscape, Inc. in
the unaudited pro forma condensed combined statements of operations for the
year ended December 31, 1998 as if the acquisition had occurred on January 1,
1998.
Subsequent to the acquisition of Mindscape, Inc., in a letter dated September
9, 1998 to the American Institute of Certified Public Accountants, the Chief
Accountant of the Securities and Exchange Commission reiterated the views of
the staff of the Securities and Exchange Commission on certain appraisal
practices employed in the determination of the fair value of in-process
technology and other intangible assets. Learning Company had discussions in
March 1999 with the staff concerning the application of the methodology to the
valuation of the incomplete technology and other intangible assets as detailed
in the September 9, 1998 letter from the Chief Accountant of the Securities and
Exchange Commission, and as a result of these discussions, Learning Company
implemented the methodology. Learning Company restated its previously issued
results to reflect the discussions with the staff and to apply the appropriate
guidance and policies. The purchase price of Mindscape, Inc. has been allocated
by Learning Company based upon the application of the recent guidance and,
accordingly, Learning Company filed amended Quarterly Reports on Form 10-Q/A
for the first three quarters of 1998 restating the financial statements
contained therein. After applying the appropriate guidance and policy, the
allocation of the Mindscape, Inc. purchase price was changed for in-process
technology from $103 million to $40 million; for complete and core technology
from $13 million to $22 million; and for brands and trade names from $30
million to $38 million, resulting in a change to goodwill from $10 million to
$56 million.
The condensed historical statements of operations of Mattel are derived from
its audited consolidated financial statements previously filed with the
Securities and Exchange Commission in Mattel's 1998 Annual Report on Form 10-K.
The condensed historical statements of operations of Learning Company are
derived from its audited consolidated financial statements previously filed
with the Securities and Exchange Commission in Learning Company's 1998 Annual
Report on Form 10-K.
6
<PAGE>
MATTEL
Unaudited Pro Forma Condensed Combined Balance Sheet
as of December 31, 1998
<TABLE>
<CAPTION>
Historical Pro Forma
----------------- --------------------
Learning
Mattel Company Adjustments Combined
-------- -------- ----------- --------
(In millions)
<S> <C> <C> <C> <C>
ASSETS
------
Current Assets:
Cash, cash equivalents and marketable
securities........................... $ 212.5 $256.8 $ -- $ 469.3
Accounts receivable, net.............. 983.0 167.0 -- 1,150.0
Inventories........................... 584.4 59.9 -- 644.3
Prepaid expenses and other current
assets............................... 277.9 56.5 -- 334.4
-------- ------ ----- --------
Total current assets................ 2,057.8 540.2 -- 2,598.0
-------- ------ ----- --------
Property, plant and equipment, net...... 736.5 26.7 -- 763.2
Other noncurrent assets................. 1,467.9 253.9 64.4(a) 1,786.2
-------- ------ ----- --------
Total Assets........................ $4,262.2 $820.8 $64.4 $5,147.4
======== ====== ===== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Short-term borrowings and current
portion of long-term liabilities..... $ 167.5 $ 75.1 $ -- $ 242.6
Accounts payable, accrued liabilities
and income taxes payable............. 1,149.7 166.9 50.0(b) 1,366.6
-------- ------ ----- --------
Total current liabilities........... 1,317.2 242.0 50.0 1,609.2
-------- ------ ----- --------
Long-term debt.......................... 983.5 191.2 -- 1,174.7
Other long-term liabilities............. 141.3 101.4 -- 242.7
-------- ------ ----- --------
Total long-term liabilities......... 1,124.8 292.6 -- 1,417.4
-------- ------ ----- --------
Stockholders' equity.................... 1,820.2 286.2 14.4(c) 2,120.8
-------- ------ ----- --------
Total Liabilities and Stockholders'
Equity............................. $4,262.2 $820.8 $64.4 $5,147.4
======== ====== ===== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
7
<PAGE>
MATTEL
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Historical Pro Forma
----------------------------------- ---------------------
Learning
Mattel Company Mindscape Adjustments Combined
-------- -------- ---------------- ----------- --------
(Preacquisition)
(In millions, except per share data)
<S> <C> <C> <C> <C> <C>
Net Sales............... $4,781.9 $ 839.3 $ 9.1 $ -- $5,630.3
Cost of sales......... 2,418.9 289.0 9.8 -- 2,717.7
-------- ------- ------ ------ --------
Gross Profit............ 2,363.0 550.3 (0.7) -- 2,912.6
Advertising and
promotion expenses... 813.3 104.4 12.5 -- 930.2
Other selling and
administrative
expenses............. 882.1 262.6 11.8 -- 1,156.5
Amortization of
intangibles.......... 41.9 88.2 2.6 2.6(d) 135.3
Charge for incomplete
technology........... -- 56.8 -- -- 56.8
Restructuring and
other charges........ -- 113.3 16.6 -- 129.9
Special charge........ 44.0 -- -- -- 44.0
Interest expense...... 110.8 17.6 -- -- 128.4
Other expense
(income), net........ 5.8 (18.8) -- -- (13.0)
-------- ------- ------ ------ --------
Income (Loss) from
Continuing Operations
Before Income Taxes.... 465.1 (73.8) (44.2) (2.6) 344.5
Provision for income
taxes................ 132.8 31.5 1.1 20.9(e) 186.3
-------- ------- ------ ------ --------
Income (Loss) from
Continuing Operations.. 332.3 (105.3) (45.3) (23.5) 158.2
Preferred stock
dividend
requirements......... 8.0 -- -- -- 8.0
-------- ------- ------ ------ --------
Income (Loss) from
Continuing Operations
Applicable to Common
Shares................. $ 324.3 $(105.3) $(45.3) $(23.5) $ 150.2
======== ======= ====== ====== ========
Basic Income (Loss) Per
Common Share(f):
Income (Loss) Per Share
from Continuing
Operations............. $ 1.11 $ (1.28) $ 0.38
======== ======= ========
Average Number of Common
Shares................. 291.5 82.3 397.0
======== ======= ========
Diluted Income (Loss)
Per Common Share(f):
Income (Loss) Per Share
from Continuing
Operations............. $ 1.10 $ (1.28) $ 0.36
======== ======= ========
Average Number of Common
and Common Equivalent
Shares................. 303.2 82.3 436.3
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
8
<PAGE>
MATTEL
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Historical Pro Forma
----------------- ----------------------
Learning
Mattel Company Adjustments Combined
-------- -------- ----------- --------
(In millions, except per share data)
<S> <C> <C> <C> <C>
Net Sales............................. $4,834.6 $ 620.9 $ -- $5,455.5
Cost of sales....................... 2,434.6 201.3 -- 2,635.9
-------- ------- ------ --------
Gross Profit.......................... 2,400.0 419.6 -- 2,819.6
Advertising and promotion expenses.. 779.1 67.3 -- 846.4
Other selling and administrative
expenses........................... 797.0 216.1 -- 1,013.1
Amortization of intangibles......... 32.2 455.0 -- 487.2
Charge for incomplete technology.... -- 20.3 -- 20.3
Restructuring and other charges..... 275.0 68.6 -- 343.6
Interest expense.................... 90.1 22.5 -- 112.6
Other expense (income), net......... 1.5 (6.3) -- (4.8)
-------- ------- ------ --------
Income (Loss) from Continuing
Operations Before Extraordinary Item
and Income Taxes..................... 425.1 (423.9) -- 1.2
Provision (benefit) for income
taxes.............................. 135.3 71.0 (27.0)(e) 179.3
-------- ------- ------ --------
Income (Loss) from Continuing
Operations Before Extraordinary
Item................................. 289.8 (494.9) 27.0 (178.1)
Preferred stock dividend
requirements....................... 10.5 -- -- 10.5
-------- ------- ------ --------
Income (Loss) from Continuing
Operations Before Extraordinary Item
Applicable to Common Shares.......... $ 279.3 $(494.9) $ 27.0 $ (188.6)
======== ======= ====== ========
Basic Income (Loss) Per Common
Share(f):
Income (Loss) Per Share from
Continuing Operations Before
Extraordinary Item................... $ 0.96 $ (7.48) $ (0.51)
======== ======= ========
Average Number of Common Shares....... 290.5 66.2 369.9
======== ======= ========
Diluted Income (Loss) Per Common
Share(f):
Income (Loss) Per Share from
Continuing Operations Before
Extraordinary Item................... $ 0.94 $ (7.48) $ (0.51)
======== ======= ========
Average Number of Common and Common
Equivalent Shares.................... 295.7 66.2 369.9
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
9
<PAGE>
MATTEL
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Historical Pro Forma
------------------ ----------------------
Learning
Mattel Company Adjustments Combined
-------- -------- ----------- --------
(In millions, except per share data)
<S> <C> <C> <C> <C>
Net Sales......................... $4,535.3 $ 529.5 $ -- $5,064.8
Cost of sales................... 2,315.5 159.2 -- 2,474.7
-------- ------- ------ --------
Gross Profit...................... 2,219.8 370.3 -- 2,590.1
Advertising and promotion
expenses....................... 778.9 35.1 -- 814.0
Other selling and administrative
expenses....................... 772.3 162.2 -- 934.5
Amortization of intangibles..... 32.5 434.5 -- 467.0
Charge for incomplete
technology..................... -- 56.7 -- 56.7
Restructuring and other
charges........................ -- 12.3 -- 12.3
Interest expense................ 100.2 26.7 -- 126.9
Other (income), net............. (0.9) (9.3) -- (10.2)
-------- ------- ------ --------
Income (Loss) from Continuing
Operations Before Income Taxes... 536.8 (347.9) -- 188.9
Provision (benefit) for income
taxes.......................... 164.6 28.6 (26.3)(e) 166.9
-------- ------- ------ --------
Income (Loss) from Continuing
Operations....................... 372.2 (376.5) 26.3 22.0
Preferred stock dividend
requirements................... 7.4 -- -- 7.4
-------- ------- ------ --------
Income (Loss) from Continuing
Operations Applicable to Common
Shares........................... $ 364.8 $(376.5) $ 26.3 $ 14.6
======== ======= ====== ========
Basic Income (Loss) Per Common
Share(f):
Income (Loss) Per Share from
Continuing Operations............ $ 1.26 $ (6.56) $ 0.04
======== ======= ========
Average Number of Common Shares... 290.4 57.4 359.2
======== ======= ========
Diluted Income (Loss) Per Common
Share(f):
Income (Loss) Per Share from
Continuing Operations............ $ 1.23 $ (6.56) $ 0.04
======== ======= ========
Average Number of Common and
Common Equivalent Shares......... 303.1 57.4 368.2
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
10
<PAGE>
MATTEL
Notes to Unaudited Pro Forma Condensed Combined
Financial Statements
1. Basis of Presentation
The unaudited pro forma condensed combined financial statements assume a
business combination between Mattel and Learning Company accounted for using
the pooling of interests method and are based upon the respective historical
financial statements and the accompanying notes of Mattel and Learning Company,
as well as the historical financial statements of Mindscape, Inc.
According to the merger agreement, each share of Learning Company common
stock will be exchanged for not less than 1.0 or more than 1.2 shares of Mattel
common stock. Subject to the minimum and maximum, the exact exchange ratio of
shares of Mattel common stock received for shares of Learning Company common
stock will be determined by dividing $33.00 by the average of the closing
prices of Mattel common stock on the New York Stock Exchange for the random
trading days. Learning Company Series A preferred stock will be converted into
the right to receive a number of shares of Mattel common stock equal to the
exchange ratio multiplied by 20, which is the rate at which Learning Company
Series A preferred stock is convertible into Learning Company common stock.
Because the transaction has not been completed, the costs of the merger can
only be estimated at this time. The unaudited pro forma condensed combined
statements of operations for all periods presented exclude the positive effects
of potential cost savings that the companies may achieve upon combining the
resources of Mattel and Learning Company, transaction costs of approximately
$75 to $85 million, including investment banking, legal and accounting fees and
contractual incentive benefits, and merger integration and Mattel restructuring
costs to be recognized in the second quarter of 1999.
The unaudited pro forma condensed combined balance sheet as of December 31,
1998 includes the impact of all transactions, whether of a recurring or
nonrecurring nature, that can be reasonably estimated and should be reflected
as of that date. The impact of merger integration and Mattel restructuring
costs to be recognized in the second quarter of 1999 are not included in this
balance sheet.
Certain historical Learning Company and Mindscape, Inc. results have been
reclassified to conform with Mattel's basis of presentation.
2. Pro Forma Adjustments
Intercompany Transactions--There were no material intercompany transactions
that required elimination from the unaudited pro forma condensed combined
statements of operations or balance sheet.
Balance Sheet
(a) Other Noncurrent Assets--The unaudited pro forma condensed combined
balance sheet has been adjusted to reflect the recognition of the estimated tax
benefits related to Learning Company's net operating loss carryforwards and
deductible temporary differences under the combined company's income tax
position.
(b) Accounts Payable, Accrued Liabilities, and Income Taxes Payable--The pro
forma adjustment in the amount of $50 million, net of taxes, reflects accruals
in connection with the estimated transaction costs of $75 million related to
the merger. These costs are not considered in the unaudited pro forma condensed
combined statements of operations. These estimated transaction costs will be
charged against the results of operations during the quarter in which the
merger becomes effective.
11
<PAGE>
MATTEL
Notes to Unaudited Pro Forma Condensed Combined
Financial Statements (Continued)
(c) Stockholders' Equity--Stockholders' equity has been adjusted to reflect
the following:
--Common stock accounts are adjusted for the assumed issuance of
approximately 122.7 million shares of Mattel common stock in exchange for
approximately 87.3 million shares of Learning Company common stock, and
0.8 million shares of Learning Company Series A preferred stock, which is
convertible into 15.0 million shares of Learning Company common stock as of
December 31, 1998, assuming an exchange ratio of 1.2. The number of shares
of Mattel common stock to be issued at the effective time of the merger
will be based upon the actual number of shares of Learning Company common
stock and Learning Company Series A preferred stock outstanding at that
time and the actual exchange ratio.
--Additional paid-in capital is adjusted for the effects of issuance of
shares of Mattel common stock having a $1.00 par value per share in
exchange for Learning Company Series A preferred stock and Learning Company
common stock, each having a $0.01 par value per share, and the recognition
of the tax benefits related to the exercise of Learning Company non-
qualified stock options due to utilization of Learning Company's net
operating losses in the unaudited pro forma condensed combined statements
of operations.
--Retained earnings is adjusted for the effects of:
(1) accrual for the minimum of the estimated range for transaction
costs related to the merger;
(2) compensation expense related to the Learning Company restricted
common stock; and
(3) recognition of estimated tax benefits from the assessment of income
tax valuation allowances under the combined company's expected
income tax position.
Statement of Operations
(d) Amortization of Intangibles--In connection with its acquisition of
Mindscape, Inc., Learning Company recorded goodwill and other intangible
assets, which reflected the allocation of the purchase price paid to brand and
trade names and complete technology. The pro forma adjustment reflects the
amortization of the identifiable intangible assets acquired and goodwill over
their estimated useful lives on a straight-line basis. The estimated useful
lives of brand and trade names, completed technology and products, and goodwill
are 10, 2 and 10 years, respectively.
(e) Provision (Benefit) for Income Taxes--The unaudited pro forma adjustment
reflects the reduction of valuation allowances established in Learning
Company's historical financial statements resulting in the recognition of
estimated benefits of net operating losses incurred by Learning Company in the
unaudited pro forma condensed combined financial statements due to the combined
company's expected income tax position.
(f) Income (Loss) per Common Share--Historical and unaudited pro forma per
share data of Mattel and Learning Company include the retroactive effects of
the March 1997 merger of Tyco Toys, Inc. into Mattel, and the August 1998
merger of Broderbund Software, Inc. into Learning Company, each accounted for
as a pooling of interests. Unaudited pro forma weighted average common shares
outstanding for all periods presented are based upon Mattel's and Learning
Company's combined historical weighted average shares, adjusted for dilutive
common stock equivalents, as appropriate, and after adjustment of Learning
Company's historical number of shares assuming an exchange ratio of 1.2.
12
<PAGE>
CAPITALIZATION OF MATTEL AND LEARNING COMPANY
The following unaudited table sets forth the capitalization of Mattel and
Learning Company as of December 31, 1998, and as adjusted to give effect to the
merger and related transactions. See "The Merger Agreement" on page 71 of the
joint proxy statement/prospectus.
<TABLE>
<CAPTION>
As of December 31, 1998
-----------------------------------------
Historical Pro Forma(a)
------------------- --------------------
Learning
Mattel Company Adjustments Combined
-------- --------- ----------- --------
(In millions)
<S> <C> <C> <C> <C>
Short-term debt, including current
maturities......................... $ 167.5 $ 75.1 $ -- $ 242.6
-------- --------- ------ --------
Long-term debt, net of current
maturities:
6 3/4% senior notes, due 2000..... 100.0 -- -- 100.0
5 1/2% senior convertible notes,
due 2000......................... -- 191.2 -- 191.2
6% senior notes, due 2003......... 150.0 -- -- 150.0
6 1/8% senior notes, due 2005..... 150.0 -- -- 150.0
Medium-Term notes................. 540.5 -- -- 540.5
Mortgage note..................... 43.0 -- -- 43.0
-------- --------- ------ --------
Total long-term debt............ 983.5 191.2 -- 1,174.7
-------- --------- ------ --------
Stockholders' equity:
Mattel Series C preferred stock... 0.8 -- -- 0.8
Mattel special voting preferred
stock(b)......................... -- -- -- --
Learning Company Series A
preferred stock(c)(d)............ -- -- -- --
Mattel common stock(d)............ 300.4 -- 122.7 423.1
Learning Company common stock(d).. -- 0.8 (0.8) --
Learning Company special voting
stock(b)......................... -- -- -- --
Additional paid-in capital(e)..... 482.6 1,428.4 (83.6) 1,827.4
Treasury stock.................... (495.3) -- -- (495.3)
Retained earnings (accumulated
deficit)(f)...................... 1,724.6 (1,138.1) (23.9) 562.6
Accumulated other comprehensive
loss............................. (192.9) (4.9) -- (197.8)
-------- --------- ------ --------
Total stockholders' equity...... 1,820.2 286.2 14.4 2,120.8
-------- --------- ------ --------
Total capitalization................ $2,971.2 $ 552.5 $ 14.4 $3,538.1
======== ========= ====== ========
</TABLE>
- --------
(a) The pro forma adjustments and resulting combined amounts reflect the
actions to be taken at the effective time of the merger to (1) convert all
issued and outstanding shares of Learning Company common stock into shares
of Mattel common stock; and (2) convert all issued and outstanding shares
of Learning Company Series A preferred stock into shares of Mattel common
stock.
(b) One share of Mattel special voting preferred stock, $1.00 par value, will
be issued in exchange for one share of Learning Company special voting
stock, $1.00 par value, at the effective time of the merger. The share of
Learning Company special voting stock has a number of votes equal to the
number of outstanding exchangeable shares. The exchangeable shares are
exchangeable at the option of the holders on a one-for-one basis for
approximately 5.2 million shares of Learning Company common stock, as of
December 31, 1998, without additional payment. As a result of the merger,
the number of shares of Mattel common stock to be obtained upon exchange
will be approximately 6.2 million shares, assuming an exchange ratio of
1.2.
(c) The aggregate par value of Learning Company Series A preferred stock
outstanding is immaterial in terms of data rounded to tenths of millions of
dollars.
13
<PAGE>
(d) The approximate number of shares of Mattel common stock assumed exchanged
in the merger was based upon 87.3 million shares of Learning Company common
stock and 0.8 million shares of Learning Company Series A preferred stock,
which is convertible into approximately 15.0 million shares of Learning
Company common stock, that were issued and outstanding as of December 31,
1998.
(e) Additional paid-in capital is adjusted for the effects of issuance of
Mattel common stock having a $1.00 par value per share in exchange for
Learning Company common stock and Learning Company Series A preferred
stock, each having a $0.01 par value per share, and the recognition of
income tax benefits related to the exercise of Learning Company non-
qualified stock options due to the utilization of Learning Company's net
operating losses in the unaudited pro forma condensed combined statements
of operations.
(f) The net decrease in retained earnings principally relates to the pro forma
accrual for estimated costs and expenses directly related to the
transaction, partially offset by recognition of income tax benefits of
losses incurred by Learning Company that have been adjusted subject to the
combined company's expected income tax position. See Note 1--Basis of
Presentation to the Unaudited Pro Forma Condensed Combined Financial
Statements.
14
