<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-05647
---------
MATTEL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-1567322
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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
----------------------------
(Former name, former address and former fiscal year,
if changed since last report) None
------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
Number of shares outstanding of registrant's common stock, $1.00 par value,
(including 3,076,014 common shares issuable upon exchange of outstanding
exchangeable shares of Softkey software Products Inc.) as of April 28, 2000:
425,678,667 shares
<PAGE>
PART I - FINANCIAL INFORMATION
Mattel, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, March 31, Dec. 31,
(In thousands) 2000 1999 1999
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current Assets
Cash and short-term investments $ 214,937 $ 50,215 $ 247,354
Accounts receivable, net 897,196 855,855 1,001,972
Inventories 522,299 562,003 436,316
Prepaid expenses and other current assets 196,762 290,248 166,217
- -----------------------------------------------------------------------------------------------------------------------
Total current assets 1,831,194 1,758,321 1,851,859
- -----------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment
Land 34,696 34,763 34,882
Buildings 264,770 268,909 270,185
Machinery and equipment 549,693 521,478 552,625
Capitalized leases 23,271 21,406 23,271
Leasehold improvements 73,743 86,679 74,812
- -----------------------------------------------------------------------------------------------------------------------
946,173 933,235 955,775
Less: accumulated depreciation 437,480 387,039 422,142
- -----------------------------------------------------------------------------------------------------------------------
508,693 546,196 533,633
Tools, dies and molds, net 184,982 187,339 191,158
- -----------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 693,675 733,535 724,791
- -----------------------------------------------------------------------------------------------------------------------
Other Noncurrent Assets
Intangibles, net 1,186,194 1,242,380 1,200,622
Net investment in discontinued operations 318,687 401,055 457,158
Other assets 542,710 212,513 434,706
- -----------------------------------------------------------------------------------------------------------------------
$4,572,460 $4,347,804 $4,669,136
=======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Consolidated results for March 31, 1999 have been restated retroactively for the
effects of the May 1999 merger with The Learning Company, Inc. ("Learning
Company"), accounted for as a pooling of interests. See Note 2.
2
<PAGE>
Mattel, Inc. and Subsidiaries
Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>
March 31, March 31, Dec. 31,
(In thousands, except share data) 2000 1999 1999
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Short-term borrowings $ 848,698 $ 259,435 $ 369,549
Current portion of long-term liabilities 2,773 33,401 3,173
Accounts payable 218,106 200,121 293,277
Accrued liabilities 438,682 419,895 714,633
Income taxes payable 164,528 175,535 179,961
- ---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,672,787 1,088,387 1,560,593
- ---------------------------------------------------------------------------------------------------------------------------
Long-Term Liabilities
Senior notes 400,000 400,000 400,000
Medium-term notes 540,500 540,500 540,500
Mortgage note 42,213 42,856 42,380
Other 172,442 148,953 162,976
- ---------------------------------------------------------------------------------------------------------------------------
Total long-term liabilities 1,155,155 1,132,309 1,145,856
- ---------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Preferred stock, Series A $0.01 par value, $200.00
liquidation preference per share, 750.0 thousand
shares authorized, issued and outstanding at
March 31, 1999 - 8 -
Preferred stock, Series C $1.00 par value, $125.00
liquidation preference per share, 772.8 thousand
shares authorized; 771.9 thousand shares issued and
outstanding at March 31, 1999 - 772 -
Special voting preferred stock $1.00 par value, $10.00
liquidation preference per share, one share authorized,
issued and outstanding, representing the voting rights
of 2.6 million, 5.1 million and 3.2 million outstanding
exchangeable shares, respectively - - -
Common stock $1.00 par value, 1.0 billion shares
authorized; 434.3 million shares, 405.4 million shares
and 433.6 million shares issued, respectively 434,345 405,403 433,563
Additional paid-in capital 1,729,447 1,847,263 1,728,954
Deferred compensation - (11,933) -
Treasury stock at cost; 11.8 million shares, 14.2 million
shares, and 12.0 million shares, respectively (355,453) (494,007) (361,825)
Retained earnings 192,043 605,362 401,642
Accumulated other comprehensive loss (255,864) (225,760) (239,647)
- ---------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,744,518 2,127,108 1,962,687
- ---------------------------------------------------------------------------------------------------------------------------
$4,572,460 $4,347,804 $4,669,136
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Consolidated results for March 31, 1999 have been restated retroactively for the
effects of the May 1999 merger with Learning Company, accounted for as a pooling
of interests. See Note 2.
3
<PAGE>
Mattel, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the
Three Months Ended
-----------------------------------------
March 31, March 31,
(In thousands, except per share amounts) 2000 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $ 693,261 $688,315
Cost of sales 378,904 372,941
- ------------------------------------------------------------------------------------------------------------
Gross Profit 314,357 315,374
Advertising and promotion expenses 91,287 91,161
Other selling and administrative expenses 254,199 201,519
Amortization of intangibles 12,532 13,012
Interest expense 24,356 24,858
Other (income) expense, net (6,373) 2,244
- ------------------------------------------------------------------------------------------------------------
Loss Before Income Taxes (61,644) (17,420)
Benefit for income taxes (17,014) (4,790)
- ------------------------------------------------------------------------------------------------------------
Loss From Continuing Operations (44,630) (12,630)
Discontinued Operations (See Note 2)
(Loss) income from discontinued operations, net of taxes of
$(53.0) million and $10.0 million, respectively (126,606) 17,679
- ------------------------------------------------------------------------------------------------------------
Net (Loss) Income (171,236) 5,049
Less: preferred stock dividend requirements - 1,990
- ------------------------------------------------------------------------------------------------------------
Net (Loss) Income Applicable to Common Shares $(171,236) $ 3,059
============================================================================================================
(Loss) Income Per Common Share - Basic
Loss from continuing operations $ (0.10) $ (0.04)
(Loss) income from discontinued operations (0.30) 0.05
- ------------------------------------------------------------------------------------------------------------
Net (loss) income $ (0.40) $ 0.01
============================================================================================================
Weighted average number of common shares 425,495 396,480
============================================================================================================
(Loss) Income Per Common Share - Diluted
Loss from continuing operations $ (0.10) $ (0.03)
(Loss) income from discontinued operations (0.30) 0.04
- ------------------------------------------------------------------------------------------------------------
Net (loss) income $ (0.40) $ 0.01
============================================================================================================
Weighted average number of common and common
equivalent shares 425,495 422,264
============================================================================================================
Dividends Declared Per Common Share $ 0.09 $ 0.08
============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Consolidated results for March 31, 1999 have been restated retroactively for the
effects of the May 1999 merger with Learning Company, accounted for as a pooling
of interests. See Note 2.
4
<PAGE>
Mattel, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the
Three Months Ended
-----------------------------
March 31, March 31,
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net (loss) income $(171,236) $ 5,049
Deduct: (loss) income from discontinued operations (126,606) 17,679
- ----------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (44,630) (12,630)
Adjustments to reconcile loss from continuing operations to net cash flows
from operating activities:
Depreciation 47,097 45,926
Amortization 14,088 13,582
Increase (decrease) from changes in assets and liabilities:
Accounts receivable 98,041 76,575
Inventories (88,324) 5,253
Prepaid expenses and other current assets (3,610) (13,789)
Accounts payable, accrued liabilities and income taxes payable (396,980) (337,816)
Other, net 7,929 (7,709)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash flows used for operating activities of continuing operations (366,389) (230,608)
- ----------------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Purchases of tools, dies and molds (21,336) (27,218)
Purchases of other property, plant and equipment (15,017) (19,000)
Proceeds from sale of other property, plant and equipment 2,212 3,291
Other, net 1,570 (502)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash flows used for investing activities of continuing operations (32,571) (43,429)
- ----------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Short-term borrowings, net 477,904 135,950
Exercise of stock options including related tax benefit 1,858 809
Payment of dividends on common and preferred stock (38,461) (22,952)
Other, net (543) (187)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities of continuing operations 440,758 113,620
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Used For Discontinued Operations (73,811) -
Effect of Exchange Rate Changes on Cash (404) (1,822)
- ----------------------------------------------------------------------------------------------------------------------------
Decrease in Cash and Short-term Investments (32,417) (162,239)
Cash and Short-term Investments at Beginning of Period 247,354 212,454
- ----------------------------------------------------------------------------------------------------------------------------
Cash and Short-term Investments at End of Period $ 214,937 $ 50,215
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Consolidated results for March 31, 1999 have been restated retroactively for the
effects of the May 1999 merger with Learning Company, accounted for as a pooling
of interests. See Note 2.
5
<PAGE>
Mattel, Inc. and Subsidiaries
Notes To Consolidated Financial Information
1. The accompanying unaudited consolidated financial statements and related
disclosures have been prepared in accordance with generally accepted
accounting principles applicable to interim financial information and with
the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the
opinion of management, all adjustments considered necessary for a fair
presentation of Mattel, Inc. and its subsidiaries' ("Mattel") financial
position and interim results as of and for the periods presented have been
included. Certain amounts in the financial statements for prior periods have
been reclassified to conform with the current period's presentation. Because
Mattel's business is seasonal, results for interim periods are not
necessarily indicative of those which may be expected for a full year.
The financial information included herein should be read in conjunction with
Mattel's consolidated financial statements and related notes in its 1999
Annual Report to Stockholders filed on Form 10-K.
2. In May 1999, Mattel completed its merger with Learning Company, after which
Learning Company was merged with and into Mattel, with Mattel being the
surviving corporation. Each share of Learning Company Series A Preferred
Stock was converted into 20 shares of Learning Company common stock
immediately prior to the consummation of the merger. Pursuant to the merger
agreement, each outstanding share of Learning Company common stock was then
converted into 1.2 shares of Mattel common stock upon consummation of the
merger. As a result, approximately 126 million Mattel common shares were
issued in exchange for all shares of Learning Company common stock
outstanding as of the merger date. The outstanding share of Learning Company
special voting stock was converted into one share of Mattel Special Voting
Preferred Stock. Each outstanding exchangeable share of Learning Company's
Canadian subsidiary, Softkey Software Products Inc., remains outstanding,
but upon consummation of the merger became exchangeable for 1.2 shares of
Mattel common stock. This transaction was accounted for as a pooling of
interests.
On March 31, 2000, Mattel's board of directors resolved to sell its Consumer
Software segment, which is comprised primarily of the assets of Learning
Company. As a result of this decision, the Consumer Software segment is
being reported as a discontinued operation effective March 31, 2000, and the
consolidated financial statements have been reclassified to segregate the
net investment in and operating results of the Consumer Software segment.
Mattel expects to sell the Consumer Software segment by the end of the year
2000 and expects to record a gain for accounting purposes upon disposal. Net
sales of the Consumer Software segment were $64.4 million and $190.6 million
for the three months ended March 31, 2000 and 1999, respectively.
6
<PAGE>
3. Accounts receivable are shown net of allowances for doubtful accounts of
$27.0 million (March 31, 2000), $34.5 million (March 31, 1999), and $29.9
million (December 31, 1999).
4. Inventories are comprised of the following:
<TABLE>
<CAPTION>
(In thousands) March 31, 2000 March 31, 1999 Dec. 31, 1999
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Raw materials and work in process $ 51,232 $ 58,903 $ 41,452
Finished goods 471,067 503,100 394,864
--------------------------------------------------------------------------------------------------------------------------
$522,299 $562,003 $436,316
==========================================================================================================================
</TABLE>
5. Intangibles, net include the following:
<TABLE>
<CAPTION>
(In thousands) March 31, 2000 March 31, 1999 Dec. 31, 1999
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Goodwill $1,177,212 $1,231,834 $1,191,227
Other 8,982 10,546 9,395
--------------------------------------------------------------------------------------------------------------------------
$1,186,194 $1,242,380 $1,200,622
==========================================================================================================================
</TABLE>
6. Senior notes include the following:
<TABLE>
<CAPTION>
(In thousands) March 31, 2000 March 31, 1999 Dec. 31, 1999
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6-3/4% due 2000 $100,000 $100,000 $100,000
6% due 2003 150,000 150,000 150,000
6-1/8% due 2005 150,000 150,000 150,000
--------------------------------------------------------------------------------------------------------------------------
$400,000 $400,000 $400,000
==========================================================================================================================
</TABLE>
7. Comprehensive loss is as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
-------------------------------------------
(In thousands) March 31, 2000 March 31, 1999
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Loss from continuing operations $ (44,630) $(12,630)
(Loss) income from discontinued operations (126,606) 17,679
----------------------------------------------------------------------------------------------------
Net (loss) income (171,236) 5,049
Unrealized holding gain (loss) on securities 560 (3,876)
Currency translation adjustments (16,777) (23,986)
----------------------------------------------------------------------------------------------------
Comprehensive loss $(187,453) $(22,813)
====================================================================================================
</TABLE>
8. Supplemental disclosure of cash flow information is as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
----------------------------------------------
(In thousands) March 31, 2000 March 31, 1999
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash payments during the period:
Income taxes $22,679 $18,311
Interest 27,557 19,509
Noncash investing and financing activities during the period:
Issuance of common stock warrant $ 5,789 $ -
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
9. In the current quarter, the board of directors declared cash dividends of
$0.09 per common share, compared to $0.08 per common share in the first
quarter of 1999.
10. Basic (loss) income per common share is computed by dividing earnings
available to common stockholders by the weighted average number of common
shares and common shares obtainable upon the exchange of the exchangeable
shares of Mattel's Canadian subsidiary, Softkey Software Products Inc.,
outstanding during each period. Earnings available to common stockholders
represent reported net (loss) income less preferred stock dividend
requirements.
Diluted (loss) income per common share is computed by dividing diluted
earnings available to common stockholders by the weighted average number of
common shares, common shares obtainable upon the exchange of the
exchangeable shares of Mattel's Canadian subsidiary, Softkey Software
Products Inc., and other common equivalent shares outstanding during each
period. The calculation of common equivalent shares assumes the exercise of
dilutive stock options and warrants, net of assumed treasury share
repurchases at average market prices, and conversion of dilutive preferred
stock and convertible debt, as applicable. Diluted earnings available to
common stockholders represent earnings available to common stockholders
less preferred stock dividend requirements. Diluted earnings per share
presented for the 2000 first quarter is the same as basic earnings per
share due to Mattel's net loss position.
11. The table below presents information about segment revenues, operating
profit and assets. Mattel's reportable segments are separately managed
business units and include toy marketing and toy manufacturing. The Toy
Marketing segment is divided on a geographic basis between domestic and
international. The domestic Toy Marketing segment is further divided into
US Girls, US Boys/Entertainment, US Infant & Preschool, and Other. The US
Girls segment includes brands such as Barbie(R), Polly Pocket(R) and
Cabbage Patch Kids(R). The US Boys/Entertainment segment includes products
in the Wheels and Entertainment categories. The US Infant & Preschool
segment includes Fisher-Price(R), Disney preschool and plush, Power
Wheels(R), Sesame Street(R) and other preschool products. The Other segment
principally sells specialty girls products, including American Girl(R),
which are sold through the direct marketing distribution channel. The
International Toy Marketing segment sells products in all toy categories.
The Toy Manufacturing segment manufactures toy products, which are sold to
the Toy Marketing segments based on intercompany transfer prices. Such
prices are based on manufacturing costs plus a profit margin. Segment
revenues do not include sales adjustments such as trade discounts and other
allowances. However, such adjustments are included in the determination of
segment profit from operations. Segment profit from operations represents
income before interest expense and taxes. The consolidated total profit
from operations presented in the following table represents income before
income taxes as reported in the consolidated statements of operations.
8
<PAGE>
The segment assets are comprised of accounts receivable and inventories,
net of applicable reserves and allowances.
<TABLE>
<CAPTION>
(In thousands) March 31, 2000 March 31, 1999
- ---------------------------------------------------------------------------------------------------
REVENUES
<S> <C> <C>
Toy Marketing:
US Girls $ 170,344 $ 155,005
US Boys/Entertainment 118,280 120,630
US Infant & Preschool 182,997 174,249
Other 48,195 51,517
International 220,234 236,036
Toy Manufacturing 333,761 190,183
- ---------------------------------------------------------------------------------------------------
Segment total 1,073,811 927,620
Elimination of intersegment sales (333,761) (190,183)
Sales adjustments (46,789) (49,122)
- ---------------------------------------------------------------------------------------------------
Net sales from continuing operations $ 693,261 $ 688,315
===================================================================================================
OPERATING PROFIT (LOSS)
Toy Marketing:
US Girls $ 36,293 $ 29,055
US Boys/Entertainment 867 1,065
US Infant & Preschool 5,818 2,835
Other (14,499) (7,775)
International (17,554) (11,330)
Toy Manufacturing 24,289 12,458
- ---------------------------------------------------------------------------------------------------
Segment total 35,214 26,308
Interest expense (24,356) (24,858)
Executive severance and other related charges (53,073) -
Corporate and other (19,429) (18,870)
- ---------------------------------------------------------------------------------------------------
Loss from continuing operations
before income taxes $ (61,644) $ (17,420)
===================================================================================================
ASSETS
Toy Marketing:
US Girls & US Boys/Entertainment* $ 483,799 $ 464,236
US Infant & Preschool 272,831 322,357
Other 92,662 75,525
International 482,979 503,576
Toy Manufacturing 93,931 79,006
- ---------------------------------------------------------------------------------------------------
Segment total 1,426,202 1,444,700
Corporate and other (6,707) (26,842)
- ---------------------------------------------------------------------------------------------------
Accounts receivable and inventories from
continuing operations $1,419,495 $1,417,858
===================================================================================================
</TABLE>
* Asset information is not maintained by individual segment.
9
<PAGE>
12. In January 2000, Mattel and Warner Bros. Worldwide Consumer Products signed
a licensing agreement making Mattel the worldwide master toy licensee for
the literary characters from the Harry Potter books published by J.K.
Rowling as well as for feature film and television properties developed by
Warner Bros. Pictures featuring the Harry Potter characters. Mattel's
worldwide toy licensing agreement involves the first two Harry Potter books
and theatrical films. This agreement contains minimum royalty guarantees
and has a term of four years, provided that the second theatrical film is
released prior to January 1, 2003. If the second theatrical film is
released subsequent to January 1, 2003, the agreement will be extended to a
date twelve months after the release of the second theatrical film.
Pursuant to the agreement, Mattel issued Warner Bros. Consumer Products a
stock warrant, valued at $5.8 million, to purchase 3.0 million shares of
Mattel's common stock at an exercise price of $10.875 per share. This
warrant became fully vested and exercisable upon signing of the licensing
agreement and expires on December 31, 2003.
13. During the second quarter of 1999, Mattel initiated a restructuring plan
for its continuing business and incurred certain other nonrecurring
charges. The restructuring plan was aimed at leveraging global resources in
the areas of manufacturing, marketing and distribution, eliminating
duplicative functions worldwide and achieving improved operating
efficiencies. The following are the major restructuring initiatives:
. Consolidation of the Infant and Preschool businesses;
. Consolidation of the domestic and international back-office functions;
. Consolidation of direct marketing operations;
. Realignment of the North American sales force;
. Termination of various international distributor contracts; and
. Closure of three higher cost manufacturing facilities.
Severance and other compensation costs associated with the restructuring
relate to the termination of approximately 2,950 employees around the
world. Through March 31, 2000 approximately $43 million has been incurred
related to the termination of nearly 2,850 employees, of which
approximately 150 were terminated during the quarter.
10
<PAGE>
Components of the accrued restructuring and other nonrecurring costs,
including adjustments related to discontinued operations, are as follows:
<TABLE>
<CAPTION>
Discontinued
Balance Operations Amounts Balance
(In millions) Dec. 31, 1999 Adjustments Incurred March 31, 2000
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Severance and other compensation $ 83 $(29) $(19) $35
Distributor, license and other contract terminations 10 - (4) 6
Lease termination costs 18 (3) (6) 9
- -------------------------------------------------------------------------------------------------------------------
Total restructuring and asset writedowns 111 (32) (29) 50
Merger-related transaction and other costs 5 (1) - 4
Other nonrecurring charges 19 - (2) 17
- -------------------------------------------------------------------------------------------------------------------
Total restructuring, asset writedowns and
other charges $135 $(33) $(31) $71
===================================================================================================================
</TABLE>
The discontinued operations adjustments represent the reclassification of the
restructuring accrual related to Learning Company's business. The remaining
accrued restructuring balance for Learning Company has been included in
the net investment in discontinued operations in the consolidated balance
sheets.
The remaining restructuring balance of severance and compensation principally
represents the continued consolidation and streamlining of Mattel's European
operations, which are currently underway, and future cash payments for
employees already terminated. The remaining balance of restructuring costs
largely includes future cash payments on vacated leased spaces and
finalization of distributor terminations. Most of the restructuring actions
will be substantially complete by June 2000; however, future cash outlays will
extend beyond this date largely due to severance payment options available to
affected employees and future lease payments on vacated spaces. Total cash
outlays will be funded from existing cash balances and internally generated
cash from operations.
The nonrecurring charges principally relate to the October 1998 recall of
Mattel's Power Wheels(R) vehicles and environmental remediation costs related
to a manufacturing facility on a leased property in Beaverton, Oregon.
11
<PAGE>
Mattel, Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
CAUTIONARY STATEMENT
Certain written and oral statements made or incorporated by reference from time
to time by Mattel or its representatives in this Quarterly Report on Form 10-Q,
other filings or reports filed with the Securities and Exchange Commission,
press releases, conferences, or otherwise, are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Mattel is including this Cautionary Statement to make applicable and take
advantage of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 for any such forward-looking statements. Forward-looking
statements include any statement that may predict, forecast, indicate, or imply
future results, performance, or achievements, and forward-looking statements can
be identified by the use of terminology such as "believe," "anticipate,"
"expect," "estimate," "may," "will," "should," "project," "continue," "plans,"
"aims," "intends," "likely," or other words or phrases of similar terminology.
Management cautions you that forward-looking statements involve risks and
uncertainties which may cause actual results to differ materially from the
forward-looking statements. In addition to the risk factors listed in Mattel's
1999 Annual Report of Form 10-K and other important factors detailed herein and
from time to time in other reports filed by Mattel with the Securities and
Exchange Commission, including Forms 8-K, 10-Q and 10-K, the following important
factors could cause actual results to differ materially from those suggested by
any forward-looking statements.
Marketplace Risks
- - Increased competitive pressure, both domestically and internationally, which
may negatively affect the sales of Mattel's products
- - Changes in public and consumer preferences, which may negatively affect
Mattel's toy business
- - Significant changes in the play patterns of children, whereby they are
increasingly attracted to more developmentally advanced products at younger
ages, which may affect brand loyalty and the perceived value of and demand
for Mattel's products
- - Possible weaknesses in economic conditions, both domestically and
internationally, which may negatively affect the sales of Mattel's products
and the costs associated with manufacturing and distributing these products
Financial Considerations
- - Currency fluctuations, which may affect Mattel's reportable income
- - Significant changes in interest rates, both domestically and internationally,
which may negatively affect Mattel's cost of financing both its operations
and investments
- - Reductions in Mattel's credit ratings which may significantly increase the
cost of satisfying Mattel's long-term capital needs
12
<PAGE>
Other Risks
- - Mattel's inability to complete the timely sale of its Consumer Software
segment, which may expose Mattel to further material operating losses and
restructuring charges relating to that business
- - Development of new technologies, including the Internet, which may create new
risks to Mattel's ability to protect its intellectual property rights
- - Changes in laws or regulations, both domestically and internationally,
including those affecting the Internet, consumer products, environmental
activities or trade restrictions, which may lead to increased costs or
interruption in normal business operations of Mattel
- - Current and future litigation, governmental proceedings or environmental
matters, which may lead to increased costs or interruption in the normal
business operations of Mattel
- - Labor disputes, which may lead to increased costs or disruption of any of
Mattel's operations
The risks included herein are not exhaustive. Other sections of this Quarterly
Report on Form 10-Q may include additional factors which could materially and
adversely impact Mattel's business, financial condition and results of
operations. Moreover, Mattel operates in a very competitive and rapidly
changing environment. New risk factors emerge from time to time and it is not
possible for management to predict all such risk factors on Mattel's business,
financial condition or results of operations or the extent to which any factor,
or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results.
SUMMARY
Mattel designs, manufactures, and markets a broad variety of family products on
a worldwide basis through both sales to retailers and direct to consumers.
Mattel's business is dependent in great part on its ability each year to
redesign, restyle and extend existing core products and product lines, to design
and develop innovative new products and product lines, and to successfully
market those products and product lines. Mattel plans to continue to focus on
its portfolio of traditional brands which have historically had worldwide
sustainable appeal.
Mattel's portfolio of brands can be grouped in the following categories:
Girls - including Barbie(R) fashion dolls and accessories, collector dolls,
Fashion Magic(R), Cabbage Patch Kids(R) and Polly Pocket(R)
Boys/Entertainment - including Hot Wheels(R), Matchbox(R), Tyco(R)
Electric Racing and Tyco(R) Radio Control (collectively "Wheels") and
Disney, Nickelodeon(R), games and puzzles
Infant & Preschool - including Fisher-Price(R), Power Wheels(R), Sesame
Strect(R), Disney preschool and plush, Winnie the Pooh(R), See `N
Say(R), Magna Doodle(R), View-Master(R) and Blue's Clues(R)
Direct Marketing - American Girl(R), Barbie(R), Wheels and Fisher-Price(R)
13
<PAGE>
Mattel's business is seasonal, and, therefore, results of continuing operations
are comparable only with corresponding periods.
RESULTS OF CONTINUING OPERATIONS
Consolidated Results
Net loss from continuing operations for the first quarter of 2000 was $44.6
million or $0.10 per diluted share as compared to a net loss from continuing
operations of $12.6 million or $0.03 per diluted share in the first quarter of
1999. Profitability in the first quarter of 2000 was negatively impacted by a
$38.4 million or $0.09 per share after-tax charge related to the departure of
certain senior executives. Of the total after-tax charge, $25.0 million
represents cash payments during the quarter for severance and taxes related to
the forgiveness of an executive loan, and noncash charges totaling $13.4 million
related to executive retirement plan charges and the forgiveness of executive
loans.
The following is a percentage analysis of results of continuing operations:
<TABLE>
<CAPTION>
For the
Three Months Ended
-----------------------------
March 31, March 31,
2000 1999
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Net sales 100% 100%
===============================================================================================================
Gross profit 45.3% 45.8%
Advertising and promotion expenses 13.2 13.2
Other selling and administrative expenses 36.6 29.3
Amortization of intangibles 1.8 1.9
Other (income) expense, net (0.9) 0.3
- ---------------------------------------------------------------------------------------------------------------
Operating (loss) income (5.4) 1.1
Interest expense 3.5 3.6
- ---------------------------------------------------------------------------------------------------------------
Loss from continuing operations before income taxes (8.9)% (2.5)%
===============================================================================================================
</TABLE>
Net sales from continuing operations in the first quarter of 2000 increased 1%
from last year to $693.3 million. Sales to customers within the US increased 4%
and accounted for 70% of consolidated sales in the first quarter of 2000
compared to 68% in 1999. Sales to customers outside the US decreased 7% from the
year ago quarter. However, before the unfavorable exchange impact, international
sales were relatively flat with last year. Additionally, certain European
markets continue to be effected by retailer adjustments to just-in-time
inventory practices.
Sales in the Girls category increased 1% due to a 7% worldwide increase in
Barbie(R) products. Barbie(R) sales were up 14% in the US, but were down 5%
internationally. However, excluding the unfavorable exchange impact, Barbie(R)
sales were up 1% in international markets. The Girls category also experienced
decreases for other Girls products, including large and small dolls. Sales in
the Infant &
14
<PAGE>
Preschool category increased 2%, mainly due to a 17% growth in sales of core
Fisher-Price(R) products, partially offset by declines in sales of Sesame
Street(R), Disney Preschool and Winnie the Pooh(R) products. Sales of Wheels
products decreased 4% due to declines in Matchbox(R) and Tyco(R) Radio Control,
partially offset by an increase in Hot Wheels(R) sales. This category was
impacted by Mattel's decision to manage first quarter shipments of Wheels
product in order to reduce the level of retail inventory that was left in
December as a result of competition from Pokemon(TM). Sales of Entertainment
products increased 14%, driven by the strength of Toy Story 2 and Max Steel(TM)
products. Pleasant Company sales were down 2%. Decreased American Girl(R)
catalogue sales, affected in part by a later Easter, were partially offset by
increased sales at the American Girl(R) Place retail store and Pleasant
Company's publishing division.
Gross profit, as a percentage of net sales, was 45.3% in the first quarter of
2000 compared to 45.8% in 1999. The margin was positively affected by product
mix, but negatively impacted by exchange translations and higher shipping costs.
Advertising and promotion, as a percentage of net sales, was 13.2% in both the
first quarter of 1999 and 2000. Other selling and administrative expenses,
excluding the one-time severance expense, were 29.0% of net sales in 2000
compared to 29.3% in 1999. Other income, net increased by approximately $9
million due to favorable foreign exchange and investment gains. However, overall
foreign exchange negatively impacted Mattel in the quarter, after considering
the impact on cost of goods sold and the translation of foreign sales and
earnings. Interest expense was $24.4 million compared with $24.9 million in the
1999 quarter. Mattel's first quarter tax rate was 27.6%, consistent with full
year expectations.
Business Segment Results
Mattel's reportable segments are separately managed business units and include
toy marketing and toy manufacturing. The Toy Marketing segment is divided on a
geographic basis between domestic and international. The domestic Toy Marketing
segment is further divided into US Girls, US Boys/Entertainment, US Infant &
Preschool and Other. The US Girls segment includes products such as Barbie(R),
Polly Pocket(R) and Cabbage Patch Kids(R). The US Boys/Entertainment segment
includes products in the Wheels and Entertainment categories. The US Infant &
Preschool segment includes Fisher-Price(R), Disney preschool and plush, Power
Wheels(R), Sesame Street(R) and other preschool products. The Other segment
principally sells girls specialty products, including American Girl(R), which
are sold through the direct marketing distribution channel. The International
Toy Marketing segment sells products in all toy categories.
The US Girls segment sales increased by 10% in 2000 compared to 1999 due to a
14% increase in sales of Barbie(R) product. Within the Barbie(R) product line,
Mattel has employed strategies including targeting product for specific age
groups, creating a new logo and package design, and supporting retailer demand
for product in terms of earlier shipments and product offerings. The
15
<PAGE>
US Boys/Entertainment segment sales decreased 2% due to a 7% decrease in sales
of Wheels products, partially offset by a 22% increase in sales of Entertainment
products. The decrease in the Wheels business was largely driven by Mattel's
decision to manage first quarter shipments of Wheels product in order to reduce
the level of retail inventory that was left in December as a result of
competition from Pokemon(TM). The increase in Entertainment product sales was
largely due to introduction of Max Steel(TM) and increased sales of Toy Story 2
product. The US Infant & Preschool segment sales increased 5% largely due to
increased sales of core Fisher-Price(R) and Power Wheels(R) products, partially
offset by declines in sales of Sesame Street(R), Disney Preschool and Winnie the
Pooh(R) products.
Sales in the Other segment decreased by 6%, including a 2% decline in Pleasant
Company sales. Decreased American Girl(R) catalogue sales, affected in part by a
later Easter, were partially offset by increased sales at the American Girl
Place(R) retail store and for Pleasant Company's publishing division. The
International Toy Marketing segment sales decreased by 7%, or relatively flat
with last year before the unfavorable foreign exchange impact. In local
currency, Barbie(R) sales were up 1%, Wheels sales increased 7% and
Entertainment products grew 12%. Additionally, the International markets
experienced decreases in sales of other Girls products, including large and
small dolls. Sales in the Toy Manufacturing segment grew 75% largely due to
increased orders by the Toy Marketing segments for all products.
Operating profit in the US Girls segment increased by 25%, largely due to
increased sales of higher margin Barbie(R) products. Operating profit in the US
Boys/Entertainment segment decreased by 19% principally due to lower volume.
Operating profit in the US Infant & Preschool segment more than doubled largely
due to increased sales of relatively higher margin core Fisher-Price(R)
products. Operating profit in the Other segment decreased by 86% largely due to
lower sales of American Girl(R) products and increased advertising costs to
support a broader catalogue distribution. The International Toy Marketing
segment operating profit declined 55% largely due to unfavorable foreign
exchange impact. Toy Manufacturing segment profit nearly doubled largely due to
increased production in the first quarter.
16
<PAGE>
DISCONTINUED OPERATIONS
On March 31, 2000, Mattel's board of directors resolved to sell its Consumer
Software segment, which is comprised primarily of the assets of Learning
Company. As a result of this decision, the Consumer Software segment is being
reported as a discontinued operation effective March 31, 2000, and the
consolidated financial statements have been reclassified to segregate the net
investment in and operating results of the Consumer Software segment. Mattel
expects to sell the Consumer Software segment by the end of 2000 and expects to
record a gain for accounting purposes upon disposal. Net sales of the Consumer
Software segment were $64.4 million and $190.6 million for the three months
ended March 31, 2000 and 1999, respectively.
FINANCIAL POSITION
Mattel's cash position as of March 31, 2000 was $214.9 million, higher than the
$50.2 million as of the first quarter 1999 but lower than the $247.4 million at
year end 1999. Accounts receivable, net increased by $41.3 million from the year
ago quarter and decreased $104.8 million from year-end. Inventory balances
decreased $39.7 million from the 1999 quarter end as a result of tighter
inventory control. Since year end, inventory increased $86.0 million as a result
of routine inventory buildup to support sales later in the year. Prepaid
expenses decreased $93.5 million compared to first quarter 1999 and increased
$30.5 million compared to year end 1999 due to changes in prepaid income taxes.
Property, plant and equipment, net decreased $39.9 million from the first
quarter of 1999 due to the closure of manufacturing facilities and asset
writedowns taken as part of restructuring activities. Intangibles, net decreased
$56.2 million compared to the year-ago quarter due to amortization. Other assets
increased $330.2 million from the first quarter of 1999 and $108.0 million
compared to year end 1999, principally due to higher deferred income taxes.
17
<PAGE>
Short-term borrowings increased $589.3 million compared to the 1999 quarter end
due to increased commercial paper issuances and other short-term borrowings to
fund Mattel's seasonal financing needs and to fund Learning Company's cash
requirements. Compared to 1999 year end, short-term borrowings increased $479.1
million to support seasonal working capital financing needs. Current portion of
long-term liabilities decreased $30.6 million over the 1999 quarter end,
primarily due to the payment of $30.0 million of Medium-Term notes. Seasonal
financing needs for the next twelve months for both continuing and discontinued
operations are expected to be satisfied through internally generated cash,
issuance of commercial paper, and use of Mattel's various short-term bank lines
of credit. On March 31, 2000, Mattel implemented a new 364 day, $400.0 million
credit facility, with essentially the same terms and conditions as the existing
$1.0 billion revolving credit facility which will be used to help satisfy
seasonal financing needs.
A summary of Mattel's capitalization is as follows:
<TABLE>
<CAPTION>
(In millions, except percentage
information) March 31, 2000 March 31, 1999 Dec. 31, 1999
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Medium-term notes $ 540.5 19% $ 540.5 17% $ 540.5 17%
Senior notes 400.0 14 400.0 12 400.0 13
Other long-term debt obligations 42.2 1 42.8 1 42.4 2
- ----------------------------------------------------------------------------------------
Total long-term debt 982.7 34 983.3 30 982.9 32
Other long-term liabilities 172.5 6 149.0 5 163.0 5
Stockholders' equity 1,744.5 60 2,127.1 65 1,962.6 63
- ----------------------------------------------------------------------------------------
$2,899.7 100% $3,259.4 100% $3,108.5 100%
=========================================================================================
</TABLE>
Total long-term debt remained approximately the same as first quarter 2000 and
year end 1999. Although $100.0 million of the senior notes are maturing in 2000,
they have been classified as long-term in the consolidated balance sheets at
March 31, 2000 and December 31, 1999 since management has the ability and intent
to repay these obligations upon maturity with proceeds from the issuance of
other long-term debt instruments. Despite the recent rating agency downgrades of
Mattel's long-term debt, Mattel's long-term debt rating continues to be
investment grade and the downgrades are not expected to impact Mattel's ability
to access the capital markets to implement the refinancing. However, the rating
agency downgrades will have a negative impact on the pricing spread over the
Treasury rates and could cause Mattel to pay a slightly higher interest rate on
the issued debt than it otherwise would have paid. Mattel expects to satisfy its
future long-term capital needs through the retention of corporate earnings and
the issuance of long-term debt instruments. As of March 31, 2000, Mattel has up
to $400.0 million of debt and equity securities available for issuance under its
current shelf registration statement. Other long-term liabilities increased
$23.5 million compared to first quarter 1999 due to increases in employee
benefit plan liabilities. Stockholders' equity decreased $382.6 million since
March 31, 1999, primarily as a result of operating losses, common and preferred
dividends declared, and treasury stock purchases, partially offset by the
reissuance of treasury stock for the exercise of nonqualified stock options by
Mattel's employees. Stockholder's equity declined
18
<PAGE>
$218.1 million from year end 1999 as a result of the first quarter operating
loss, common dividends declared, and the unfavorable effect of foreign currency
translation.
RESTRUCTURING AND OTHER CHARGES FROM CONTINUING OPERATIONS
During the second quarter of 1999, Mattel initiated a restructuring plan for its
continuing business and incurred certain other nonrecurring charges. The
restructuring plan was aimed at leveraging global resources in the areas of
manufacturing, marketing and distribution, eliminating duplicative functions
worldwide and achieving improved operating efficiencies. The plan, which was
designed to reduce product costs and overhead spending, resulted in actual cost
savings of approximately $35 million in 1999. Mattel expects savings of
approximately $90 million in 2000.
The following are the major restructuring initiatives:
. Consolidation of the Infant and Preschool businesses;
. Consolidation of the domestic and international back-office functions;
. Consolidation of direct marketing operations;
. Realignment of the North American sales force;
. Termination of various international distributor contracts; and
. Closure of three higher cost manufacturing facilities.
Severance and other compensation costs associated with the restructuring relate
to the termination of approximately 2,950 employees around the world. Through
March 31, 2000 approximately $43 million has been incurred related to the
termination of nearly 2,850 employees, of which approximately 150 were
terminated during the quarter.
Components of the accrued restructuring and other nonrecurring costs, including
adjustments related to the discontinued operations, are as follows:
<TABLE>
<CAPTION>
Discontinued
Balance Operations Amounts Balance
(In millions) Dec. 31, 1999 Adjustments Incurred March 31, 2000
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Severance and other compensation $ 83 $(29) $(19) $35
Distributor, license and other contract terminations 10 - (4) 6
Lease termination costs 18 (3) (6) 9
- -----------------------------------------------------------------------------------------------------------------
Total restructuring and asset writedowns 111 (32) (29) 50
Merger-related transaction and other costs 5 (1) - 4
Other nonrecurring charges 19 - (2) 17
- -----------------------------------------------------------------------------------------------------------------
Total restructuring, asset writedowns and
other charges $135 $(33) $(31) $71
=================================================================================================================
</TABLE>
19
<PAGE>
The discontinued operations adjustments represent the reclassification of the
restructuring accrual related to Learning Company's business. The remaining
accrued restructuring balance for Learning Company has been included in the
net investment in discontinued operations in the consolidated balance sheets.
The remaining restructuring balance of severance and compensation principally
represents the continued consolidation and streamlining of Mattel's European
operations, which are currently underway, and future cash payments for employees
already terminated. The remaining balance of restructuring costs largely
includes future cash payments on vacated leased spaces and finalization of
distributor terminations. Most of the restructuring actions will be
substantially complete by June 2000; however, future cash outlays will extend
beyond this date largely due to severance payment options available to affected
employees and future lease payments on vacated spaces. Total cash outlays will
be funded from existing cash balances and internally generated cash from
operations.
The nonrecurring charges principally relate to the October 1998 recall of
Mattel's Power Wheels(R) vehicles and environmental remediation costs related to
a manufacturing facility on a leased property in Beaverton, Oregon.
FOREIGN CURRENCY RISK
Mattel's results of operations and cash flows can be impacted by exchange rate
fluctuations. To limit the exposure associated with exchange rate movements,
Mattel enters into foreign currency forward exchange and option contracts
primarily to hedge its purchase of inventory, sales and other intercompany
transactions denominated in foreign currencies. Mattel's results of operations
can also be affected by the translation of foreign revenues and earnings into US
dollars.
Market risk exposures exist with respect to the settlement of foreign currency
transactions during the year because currency fluctuations cannot be predicted
with certainty. Mattel seeks to mitigate its exposure to market risk by
monitoring its currency exchange exposure for the year and partially or fully
hedging such exposure. In addition, Mattel manages its exposure through the
selection of currencies used for foreign borrowings and intercompany invoicing.
Mattel does not trade in financial instruments for speculative purposes.
20
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Greenwald Litigation and Related Matters
On October 13, 1995, Michelle Greenwald filed a complaint (Case No. YC 025 008)
against Mattel in Superior Court of the State of California, County of Los
Angeles. Ms. Greenwald is a former employee whom Mattel terminated in July 1995.
Her complaint sought $50 million in general and special damages, plus punitive
damages, for breach of oral, written and implied contract, wrongful termination
in violation of public policy and violation of California Labor Code Section
970. Ms. Greenwald claimed that her termination resulted from complaints she
made to management concerning general allegations that Mattel did not account
properly for sales and certain costs associated with sales and more specific
allegations that Mattel failed to account properly for certain royalty
obligations to The Walt Disney Company.
On December 5, 1996, Mattel's motion for summary adjudication of Ms. Greenwald's
public policy claim was granted. On March 7, 1997, Mattel filed a motion for
summary judgment on the remaining causes of action. On December 9, 1997,
Mattel's motion for summary judgment of Ms. Greenwald's remaining claims was
granted. On February 4, 1998, Ms. Greenwald appealed from the dismissal of her
suit.
On March 27, 2000, the California Court of Appeal filed an opinion which
affirmed in part and reversed in part the judgment in favor of Mattel. The Court
of Appeal ruled that disputed factual issues exist which preclude summary
adjudication of certain claims and that such factual issues must be resolved by
a jury at trial. As a consequence, Ms. Greenwald's claims for termination in
violation of public policy, termination in breach of an implied agreement, and
violation of Labor Code Section 970 were ordered remanded to the trial court for
further proceedings. The Court of Appeal did not rule on whether Ms. Greenwald's
claims have substantive merit; it merely held that the claims should be
presented to a jury.
Mattel intends to file a petition requesting the California Supreme Court to
review the case and affirm the trial court's judgment. If that petition is not
successful, Mattel intends to continue to defend the action vigorously.
21
<PAGE>
Litigation Related to Business Combination
On December 16, 21, and 23, 1998, several stockholders of the legal entity The
Learning Company, Inc. that merged into Mattel ("Old Learning Company") filed
six separate purported class action complaints in the Court of Chancery of the
State of Delaware in and for New Castle County against Old Learning Company and
Old Learning Company's board of directors for alleged breaches of fiduciary
duties in connection with the May 1999 merger. The six complaints were
consolidated. The consolidated complaint named Mattel as an additional
defendant, claiming that Mattel aided and abetted the alleged breaches of
fiduciary duty. On March 9, 2000, the plaintiffs filed a notice and order of
dismissal dismissing the action without prejudice. On March 13, 2000, the
Court formally dismissed the action by entering the order.
Litigation Related to Learning Company Earnings Shortfall
Following Mattel's announcement on October 4, 1999 that it expected an earnings
shortfall at its Learning Company division in the third quarter of 1999, several
of Mattel's stockholders filed purported class action complaints naming Mattel
and certain of its present and former officers and directors as defendants. The
complaints generally allege, among other things, that the defendants made false
or misleading statements that artificially inflated the price of Mattel's common
stock by overstating the revenues and net income of Mattel, and its Learning
Company division, and by falsely representing that the May 1999 acquisition of
Learning Company would be immediately accretive to Mattel's 1999 and 2000
financial results.
Two additional purported class action complaints have been brought against
Mattel as successor to Learning Company and the former directors of Learning
Company on behalf of former stockholders of Broderbund Software, Inc.
("Broderbund") who acquired shares of Learning Company in exchange for their
Broderbund common stock in connection with the Learning Company-Broderbund
merger on August 31, 1998. The complaints in those actions generally allege that
Learning Company misstated its financial results prior to the time it was
acquired by Mattel. The purported class actions brought on behalf of Mattel and
Broderbund stockholders are all currently pending in the United States District
Court for the Central District of California.
On October 25, 1999, a Mattel stockholder filed a derivative complaint on behalf
and for the benefit of Mattel in the Superior Court of the State of California,
County of Los Angeles. The complaint alleges that Mattel's directors breached
their fiduciary duties, wasted corporate assets and grossly mismanaged Mattel in
connection with Mattel's acquisition of Learning Company and seeks both monetary
and injunctive relief. On February 10, 2000, the Court dismissed the complaint
with leave to amend. On March 10, 2000, Mattel and the other defendants entered
into a stipulation with the plaintiff staying the action.
22
<PAGE>
On March 17, 2000, a Mattel stockholder filed a second derivative complaint on
behalf and for the benefit of Mattel in the Superior Court of the State of
California, County of Los Angeles. On March 27, 2000, a Mattel stockholder filed
a third derivative complaint on behalf and for the benefit of Mattel in the
Court of Chancery of the State of Delaware in and for New Castle County. Both
complaints generally allege that Mattel's directors breached their fiduciary
duties and grossly mismanaged Mattel in connection with Mattel's acquisition of
Learning Company. The complaints seek both monetary and injunctive relief.
Mattel believes the purported class actions and derivative suits are without
merit and intends to defend them vigorously.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
3.0 By-laws of Mattel, as amended to date
11.0 Computation of Income (Loss) per Common and Common Equivalent Share
12.0 Computation of Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges and Preferred Stock Dividends
27.0 Financial Data Schedule (EDGAR filing only)
99.0 Amendment No. 4 to Mattel, Inc. 1990 Stock Option Plan
99.1 Amendment No. 3 to Amended and Restated Mattel 1996 Stock Option
Plan
99.2 Amendment No. 1 to Mattel 1999 Stock Option Plan
99.3 Separation Agreement between Mattel and Jill E. Barad dated
February 25, 2000
99.4 Severance and Consulting Agreement between Mattel and Ned Mansour
99.5 Mattel, Inc. Credit Agreement (364-Day Facility) dated as of
March 31, 2000
99.6 Fifth Amendment to Second Amended and Restated Credit Agreement
dated as of March 31, 2000
99.7 First Amendment to Receivables Purchase Agreement dated as of
March 31, 2000
(b) Reports on Form 8-K
-------------------
Mattel filed the following Current Reports on Form 8-K during the
quarterly period ended March 31, 2000:
<TABLE>
<CAPTION>
Date of Report Items Reported Financial Statements Filed
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
January 6, 2000 5,7 None
February 11, 2000 5,7 None
</TABLE>
23
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934 as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MATTEL, INC.
---------------------------
(Registrant)
Date: As of May 3, 2000 By: /s/ Kevin M. Farr
----------------- ---------------------------
Kevin M. Farr
Chief Financial Officer
24
<PAGE>
EXHIBIT 3.0
MATTEL, INC.
BYLAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
---------------------------
An annual meeting of the stockholders, for the election of directors
to succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such place,
on such date, and at such time as the Board of Directors shall each year fix,
which date shall be within thirteen months subsequent to the later of the date
of incorporation or the last annual meeting of stockholders.
Section 2. Special Meetings.
-----------------------------
Special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called by the Board of Directors
or the Chief Executive Officer and shall be held at such place, on such date,
and at such time as they or he shall fix.
Section 3. Notice of Meetings.
-------------------------------
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held to each stockholder
entitled to vote at such meeting, except as otherwise provided herein, in the
Restated Certificate of Incorporation or required by law.
When a meeting is adjourned to another place, date, or time, written
notice need not be given of the adjourned meeting if the place, date, and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
-------------------
At any meeting of the stockholders, the holders of a majority of all
of the shares of the stock entitled to vote at the meeting, present in person or
by proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law.
<PAGE>
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of the stock entitled to vote
who are present, in person or by proxy, may adjourn the meeting to another
place, date, or time.
If a notice of any adjourned special meeting of stockholders is sent
to all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 5. Organization.
-------------------------
Such person as the Board of Directors may have designated or, in the
absence of such a person, the highest ranking officer of the corporation who is
present shall call to order any meeting of the stockholders and act as chairman
of the meeting. In the absence of the Secretary of the corporation, the
secretary of the meeting shall be such person as the chairman appoints.
Section 6. Conduct of Business.
--------------------------------
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him in order.
Section 7. Proxies and Voting.
-------------------------------
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting.
Each stockholder shall have one vote for every share of stock entitled
to vote which is registered in his name on the record date for the meeting,
except as otherwise provided herein or required by law. As provided by the
Certificate of Incorporation, at all elections of directors each stockholder who
is entitled to vote shall be entitled to as many votes as shall equal the number
of votes which (except for the provisions as to cumulative voting contained in
the Certificate of Incorporation) he would be entitled to cast for the election
of directors with respect to his shares of stock multiplied by the number of
directors to be elected, and he may cast all of such votes for a single director
or may distribute them among the number to be voted for, or for any two or more
of them as he may see fit.
All voting, except for the election of directors and where otherwise
required by law, may be by a voice vote; provided, however, that upon demand
therefor by a stockholder entitled to vote or his proxy, a stock vote shall be
taken. Every stock vote shall be taken by ballots, each of which shall state
the name of the stockholder or proxy voting and such other information as may be
required under the procedure established for the meeting. Every vote
2
<PAGE>
taken by ballots shall be counted by an inspector or inspectors appointed by the
chairman of the meeting.
All elections shall be determined by a plurality of the votes cast,
and except as otherwise required by law, all other matters shall be determined
by a majority of the votes cast.
Section 8. Stock List.
-----------------------
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
name, shall be open to the examination of any such stockholder, for any purpose
germane to the meeting, during ordinary business hours for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number of
shares held by each of them.
Section 9. Business Brought Before the Meeting,
------------------------------------------------
At any annual meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting or any adjournment
thereof (i) by or at the direction of the Board of Directors or (ii) by any
stockholder of the corporation who is entitled to vote with respect thereto and
who complies with the notice procedures set forth in this Section 9. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation. To be timely, a stockholder's notice must be delivered or
mailed to and received at the principal executive offices of the corporation not
less than the close of business on the 90th day nor earlier than the 120th day
prior to the anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is more than 30
days before or more than 60 days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the 120th day prior to such annual meeting and not later than the
90th day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the
corporation. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice as described above. ("Public announcement" means disclosure in a press
release, national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Securities Exchange Act of 1934, as amended). A
stockholder's notice to the Secretary shall set forth as to each matter such
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be
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brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the corporation's capital stock that are beneficially
owned by such stockholder, (iv) any material interest of such stockholder in
such business, and (v) if the stockholder intends to solicit proxies in support
of such stockholder's proposal, a representation to that effect; provided,
however, that compliance by such stockholder with the notice provisions and
other requirements in this Section 9 shall not create a duty of the corporation
to include such stockholder's business or proposal in the corporation's proxy
statement or proxy, and notwithstanding such compliance the corporation shall
retain such discretion as it has to omit such business or proposal from such
proxy statement or proxy or both. Notwithstanding anything in the Bylaws to the
contrary, no business shall be brought before or conducted at an annual meeting
(i) except in accordance with the provisions of this Section 9 or (ii) if the
stockholder solicits proxies in support of such stockholder's proposal made the
representation required by clause (v) of the preceding sentence. The officer of
the corporation or other person presiding over the annual meeting shall, if the
facts so warrant, determine and declare to the meeting that business was not
properly brought before the meeting or any adjournment thereof in accordance
with the provisions of this Section 9 and, if he or she should so determine, he
or she shall so declare to the meeting and any such business so determined to be
not properly brought before the meeting shall not be transacted.
At any special meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting by or at the
direction of the Board of Directors.
Section 10. Nomination for Election to Board.
----------------------------------------------
Only persons who are properly nominated in accordance with the
procedures set forth in these Bylaws shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders or any adjournment thereof
(i) by or at the direction of the Board of Directors (ii) by any stockholder of
the corporation entitled to vote for the election of directors at the meeting
who complies with the notice procedures set forth in this Section 10. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely and complete notice in writing to
the Secretary of the corporation. For elections at an annual meeting, to be
timely, a stockholder's notice must be delivered or mailed to and received at
the principal executive offices of the corporation not later than the close of
business on the 90th day nor earlier than the 120th day prior to the anniversary
of the preceding year's annual meeting; provided, however, that in the event
that the date of the annual meeting is more than 30 days before or more than 60
days after such anniversary date, notice by the stockholder to be timely must be
so delivered not earlier than the close of business on the 120th day prior to
such annual meeting and not later than the 90th day prior to such annual meeting
or the 10th day following the day on which public announcement of the date of
such meeting is first made by the corporation. In the event the corporation
calls a special meeting of the stockholders for the purpose of electing one or
more directors to the Board of Directors, a stockholder may
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nominate a person or persons (as the case may be), for election to such position
(s) as specified in the corporation's notice of meeting, if the stockholder's
notice shall be delivered or mailed to and received at the principal executive
offices of the corporation not earlier than the close of business on the 120th
day prior to such special meeting and not later than the close of business on
the later of the 90th day prior to such meeting or the 10th day following the
day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected at
such meeting. In no event shall the public announcement of an adjournment of an
annual or special meeting commence a new time period for the giving of a
stockholder's notice as described above. ("Public announcement" is defined in
Section 9 herein. Such stockholder's notice shall be complete provided it sets
forth (i) as to each person whom such stockholder proposes to nominate for
election or re-election as a director, (a) the name, age, business address and
residence address of the person, (b) the principal occupation or employment of
the person, (c) the class and number of shares of capital stock of the
corporation which are owned directly or beneficially by the person, (d) a
statement as to the person's citizenship, and (e) such person's written consent
to serve as a director if elected; (ii) as to the stockholder giving the notice
(a) the name and address, as they appear on the corporation's books, of such
stockholder and (b) the class and number of shares of the corporation's stock
which are owned by such stockholder, and (iii) if the stockholder intends to
solicit proxies in support of such stockholder's nominee(s), a representation to
that effect; provided,however that compliance by a stockholder with the notice
----------------
provisions and other requirements in this Section 10 shall not create a duty of
the corporation to include the stockholder's nominee in the corporation's proxy
statement or proxy if the stockholder's nominee is not nominated by the Board of
Directors, and the corporation shall retain any discretion it has to omit the
nominee from the corporation's proxy statement and proxy. At the request of the
Board of Directors any person nominated by the Board of Directors for election
as a director shall furnish to the Secretary of the corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee. No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the provisions of this Section
10. The officer of the corporation or other person presiding at the meeting
shall, if the facts so warrant, determine and declare to the meeting that a
nomination made at the meeting or any adjournment thereof was not made in
accordance with the provisions of this Section 10, with law or rules applicable
to the meeting, or if the stockholder solicits proxies in support of such
stockholder's nominee(s) without such stockholder having made the representation
required by clause (iii) of this Section 10, and if he or she should so
determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded.
Section 11. Inspectors of Written Consent
------------------------------------------
In the event of the delivery, in the manner provided by ARTICLE V,
Section 3(b), to the corporation of the requisite written consent or consents to
take corporate action and/or any related revocation or revocations, the
corporation shall engage nationally recognized independent inspectors of
elections for the purpose of promptly performing a ministerial review of the
validity of the consents and revocations. For the purpose of permitting the
inspectors to perform such review, no action by written consent without a
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meeting shall be effective until such date as the independent inspectors certify
to the corporation that the consents delivered to the corporation in accordance
with ARTICLE V, Section 3(b) represent at least the minimum number of votes that
would be necessary to take the corporation action. Nothing contained in this
paragraph shall in any way be construed to suggest or imply that the Board of
Directors or any stockholder shall not be entitled to contest the validity of
any consent or revocation thereof, whether before or after such certification by
the independent inspectors, or take any other action (including, without
limitation, the commencement, prosecution or defense of any litigation with
respect thereto, and the seeking of injunctive relief in such litigation).
Section 12. Effectiveness of Written Consent
--------------------------------------------
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the date
the earliest dated written consent was received in accordance with ARTICLE V,
Section 3(b), a written consent or consents signed by a sufficient number of
holders to take such action are delivered to the corporation in the manner
prescribed in ARTICLE V, Section 3(b).
ARTICLE II - BOARD OF DIRECTORS
Section 1. Number and Term of Office.
--------------------------------------
The Board of Directors shall consist of one or more members, the
number thereof to be determined from time to time by resolution of the Board of
Directors. Each director shall hold office until the annual meeting of
stockholders next succeeding his election and until his successor is elected and
qualified, except as otherwise provided herein or required by law.
The Chairman of the Board of Directors, if there be one, shall be a
director and shall serve as Chairman of the Board of Directors at the pleasure
of the Board of Directors. The Chairman of the Board of Directors shall preside
at all meetings of the stockholders and of the Board of Directors. The Chairman
of the Board of Directors shall also perform such other duties and may exercise
such other powers as may from time to time be assigned by these Bylaws or by the
Board of Directors. If there shall be no Chairman of the Board of Directors,
the Board may designate a director to act in place of a Chairman of the Board of
Directors for any purpose.
Whenever the authorized number of directors is increased between
annual meetings of the stockholders, a majority of the directors then in office
shall have the power to elect such new directors for the balance of a term and
until their successors are elected and qualified. Any decrease in the
authorized number of directors shall not become effective until the expiration
of the term of the directors then in office unless, at the time of such
decrease, there shall be vacancies on the board which are being eliminated by
the decrease.
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Section 2. Vacancies.
----------------------
If the office of any director becomes vacant by reason of death,
resignation, disqualification, removal or other cause, a majority of the
directors remaining in office, although less than a quorum, may elect a
successor for the unexpired term and until his successor is elected and
qualified.
Section 3. Regular Meetings.
-----------------------------
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
-----------------------------
Special meetings of the Board of Directors may be called by one-third
of the directors then in office or by the chief executive officer and shall be
held at such place, on such date, and at such time as they or he shall fix.
Notice of the place, date and time of each such special meeting shall be given
each director by whom it is not waived by mailing written notice not less than
three days before the meeting or by telegraphing, sending by facsimile
transmission or by electronic mail the same not less than eighteen hours before
the meeting. Unless otherwise indicated in the notice thereof, any and all
business may be transacted at a special meeting.
Section 5. Quorum.
-------------------
At any meeting of the Board of Directors, one-third of the total
number of the whole board, but not less than two, shall constitute a quorum for
all purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof.
Section 6. Conduct of Business.
--------------------------------
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law.
Section 7. Powers.
-------------------
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The Board of Directors may, except as otherwise required by law,
exercise all such power and do all such acts and things as may be exercised or
done by the corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form
as it may determine, of written obligations of every kind, negotiable
or non-negotiable, secured or unsecured, and to do all things
necessary in connection therewith;
(4) To remove any officer of the corporation with or without
cause, from time to time to devolve the powers and duties of any
officer upon any other person for the time being;
(5) To confer upon any officer of the corporation the power to
appoint, remove and suspend subordinate officers and agents;
(6) To adopt from time to time such bonus or other compensation
plans for directors, officers and agents of the corporation and its
subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers and agents of the
corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with
these Bylaws, for the management of the corporation's business and
affairs.
Section 8. Compensation of Directors.
--------------------------------------
Directors, as such, may receive, pursuant to resolution of the Board
of Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
directors.
Section 9. Action without Meeting.
-----------------------------------
Any action required or permitted to be taken at any meeting of the
Board of Directors or of any Committee thereof may be taken without a meeting if
all members of the Board or Committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or Committee.
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ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
-------------------------------------------------
The Board of Directors, by a vote of a majority of the whole
Board, may from time to time designate committees of the Board, including an
Executive/Finance Committee, with the powers and duties it thereby confers, to
serve at the pleasure of the Board and shall, for those committees and any
others provided for herein, elect the director or directors to serve as the
member or members, designating, if it desires, other directors as alternate
members who may replace any absent or disqualified member at any meeting of the
committee. Committees other than the Executive/Finance Committee may have only
one member. In the absence or disqualification of any member of any committee
and any alternate member in his place, the member or members of the committee
present at the meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may by unanimous vote appoint another member of the
Board of Directors to act at the meeting in the place of the absent or
disqualified member.
Section 2. Executive/Finance Committee.
----------------------------------------
If the Board of Directors shall designate an Executive/Finance
Committee, said Committee shall have the following powers:
During the intervals between meetings of the Board of Directors,
that Committee shall have all of the powers and duties of the Board of
Directors, except with respect to matters delegated to another committee and
except as shall have been otherwise provided by the Board of Directors. All
action taken by the Executive/Finance Committee since the last meeting of the
Board of Directors shall be reported to the Board at its next meeting.
During the intervals between meetings of the Executive/Finance
Committee, the chairman thereof shall have such of the powers and duties of such
Committee as shall have been conferred upon him by the Board of Directors or the
Committee.
Section 3. Conduct of Business.
--------------------------------
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third of the members, but not less
than two, shall constitute a quorum; and all matters shall be determined by a
majority vote of the members present.
Section 4. Emergency Management Committee.
-------------------------------------------
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If as a result of a catastrophe or other emergency condition a quorum
of any committee of the Board of Directors having power to act in the premises
cannot readily be convened and a quorum of the Board of Directors cannot readily
be convened, then all the powers and duties of the Board of Directors shall
automatically vest and continue, until a quorum of the Board of Directors can be
convened, in the Emergency Management Committee, which shall consist of all
readily available members of the Board of Directors and two of whose members
shall constitute a quorum. The Emergency Management Committee shall call a
meeting of the Board of Directors as soon as circumstances permit for the
purpose of filling any vacancies on the Board of Directors and its committees
and taking such other action as may be appropriate.
ARTICLE IV - OFFICERS
Section 1. Generally,
----------------------
The officers shall consist of a Chief Executive Officer, a President,
one or more Vice Presidents (who may at the pleasure of the Board of Directors
be designated as Senior Vice Presidents, Executive Vice Presidents, Vice
Presidents in charge of a particular function such as Vice President-
Administration, or merely Vice President), a Secretary, a Treasurer, a
Controller, and such assistants to such officers as may from time to time be
appointed by the Board of Directors.
Officers shall be elected by the Board of Directors, which shall
consider that subject at its first meeting after every annual meeting of
stockholders. Each officer shall hold his office at the pleasure of the Board
of Directors and until his successor is elected and qualified or until his
earlier resignation or removal. Any number of offices may be held by the same
person.
The Board of Directors may appoint such other officers as the business
of the corporation may require, each of whom shall have such authority and
perform such duties as are provided in these Bylaws or as the Board of Directors
or the Chief Executive Officer may from time to time specify.
Section 2. Chief Executive Officer
-----------------------------------
Subject to the provisions of these Bylaws and to the direction of the
Board of Directors, the Chief Executive Officer of the Corporation shall have
the responsibility for the general management and control of the affairs and
business of the corporation and shall perform all duties and have all powers
which are commonly incident to the office of chief executive or which are
delegated to him by the Board of Directors.
The Chief Executive Officer shall have power to sign all stock
certificates, contracts and other instruments of the corporation which are
authorized. He shall have general supervision and direction of all of the other
officers and agents of the corporation.
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Section 3. President.
----------------------
The President shall have such duties and powers as may from time to
time be delegated to him by the Board of Directors or by the Chief Executive
Officer. In the absence or disability of the Chief Executive Officer, or during
the period of a vacancy in that office, he shall act as the Chief Executive
Officer of the corporation and shall have the duties and powers such office.
Section 4. Vice Presidents.
----------------------------
Each of the Vice Presidents shall have such duties and powers as may
from time to time be delegated to him by the Board of Directors, by the Chief
Executive Officer, or by the President. In the absence or disability of the
President, the Vice President designated by:
(a) the Board of Directors, or if no such designation is made, then by
(b) the Chief Executive Officer, or if no such designation is made, then
by
(c) the President
shall have the duties and powers of the President.
Section 5. The Treasurer.
--------------------------
The Treasurer shall have the custody of all monies and securities of
the corporation and shall keep regular books of account. He shall make such
disbursement of the funds of the corporation as are proper and shall render from
time to time an account of all such transactions and of the financial condition
of the corporation. He shall have such other duties and powers as are commonly
incident to this office or are delegated to him by the Board of Directors, by
the Chief Executive Officer, or by the President.
Section 6. The Secretary.
--------------------------
The Board of Directors shall appoint a Secretary or, at its
discretion, more than one Secretary, each of whom shall have such duties and
other powers as are commonly incident to this office or are delegated to him or
her by the Board of Directors, by the Chief Executive Officer, or by the
President. A Secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the stockholders and the Board of Directors. A
Secretary shall have charge of the corporate books.
Section 7. Delegation of Authority.
------------------------------------
The Board of Directors may from time to time delegate the powers or
duties of any officer to any other officer or agents, notwithstanding any
provision hereof.
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Section 8. Removal.
--------------------
Any officer of the corporation may be removed at any time, with or
without cause, by the Board of Directors.
Section 9. Action with Respect to Securities of Corporation.
-------------------------------------------------------------
Unless otherwise directed by the Board of Directors, the Chief
Executive Officer and the President, and each of them, shall have power to vote
and otherwise act on behalf of the corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this corporation may hold securities and otherwise to
exercise any and all rights and powers which this corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
----------------------------------
Each stockholder shall be entitled to a certificate signed by, or in
the name of the corporation by, the Chief Executive Officer, or the President or
a Vice President, and by the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer, certifying the number of shares owned by
him. Signatures required on such certificates may be manually signed by the
transfer agent, registrar or officer, or such signatures may be facsimile.
Section 2. Transfer of Stock.
------------------------------
Transfers of stock shall be made only upon the transfer books of the
corporation kept at an office of the corporation or by transfer agents
designated to transfer shares of the stock of the corporation. Except where a
certificate is issued in accordance with Section 4 of ARTICLE V of these Bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Dates.
-------------------------
(a) The Board of Directors may fix a record date, which shall not be
more than sixty (60) nor less than ten (10) days before the date of any meeting
of stockholders, nor more than sixty (60) days prior to the time for the other
action hereinafter described (except as otherwise set forth in paragraph (b) of
this Section), as of which there shall be determined the stockholders who are
entitled: to notice of or to vote at any meeting of stockholders or any
adjournment thereof; to receive payment of any dividend or other distribution or
allotment of any rights; or to exercise any rights with respect to any change,
conversion or exchange of stock or with respect to any other lawful action.
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(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within ten (10) days after the date
on which such a request is received, adopt a resolution fixing the record date.
If no record date has been fixed by the Board of Directors within ten (10) days
of the date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or any officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the date on which the Board of Directors adopts the
resolution taking such prior action.
Section 4. Lost, Stolen or Destroyed Certificates.
---------------------------------------------------
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 5. Regulations.
------------------------
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - INDEMNIFICATION
Section 1. Right to Indemnification.
-------------------------------------
Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or
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investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or person of whom he or she is the legal representative, is or was a
director or officer of the corporation, including when any such director or
officer is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended, (but, in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide broader
indemnification rights than said law permitted the corporation to provide prior
to such amendment) against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators; provided, however,
-------- -------
that, except as provided in Section 2 of this ARTICLE VI, the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the corporation.
The right to indemnification conferred in this Section shall be a contract right
and shall include the right to be paid by the corporation the expenses incurred
in defending any such proceeding in advance of its final disposition, such
advances to be paid by the corporation within 20 days after the receipt by the
corporation of a statement or statements from the claimant requesting such
advance or advances from time to time; provided, however, that, if the Delaware
-------- -------
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section or otherwise.
Section 2. Right of Claimant to Bring Suit.
--------------------------------------------
If a claim under Section 1 of this ARTICLE VI, is not paid in full by
the corporation within thirty days after a written claim has been received by
the corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be
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on the corporation. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
Section 3. Non-Exclusivity of Rights.
--------------------------------------
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
ARTICLE VI shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, bylaw, agreement, vote of stockholders or otherwise. No repeal or
modification of this ARTICLE VI shall in any way diminish or adversely affect
the rights of any director, officer, employee or agent of the corporation
hereunder in respect of any occurrence or matter arising prior to any such
repeal or modification.
Section 4. Insurance.
----------------------
The corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law. To the extent that the
corporation maintains any policy or policies providing such insurance, each such
director or officer, and each such agent or employee to which rights to
indemnification have been granted as provided in Section 7 of this ARTICLE VI,
shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage thereunder for any such director,
officer, employee or agent.
Section 5. Procedures for Indemnification
------------------------------------------
To obtain indemnification under this ARTICLE VI, a claimant shall
submit to the corporation a written request, including therein or therewith such
documentation and information as is reasonably available to the claimant and is
reasonably necessary to determine whether and to what extent the claimant is
entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this Section 5, a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if requested by the claimant,
by independent legal counsel ( as hereinafter defined), or (2) if no request is
made by the claimant for a determination by independent legal counsel, (i) by
the Board of Directors by a majority vote of a quorum consisting of
Disinterested Directors (as hereinafter defined), or (ii) if a quorum of the
Board of
15
<PAGE>
Directors consisting of Disinterested Directors is not obtainable or, even if
obtainable, such quorum of Disinterested Directors so directs, by independent
legal counsel in a written opinion to the Board of Directors, a copy o which
shall be delivered to the claimant, or (iii) if a quorum of Disinterested
Directors so directs, by the stockholders of the corporation. In the event the
determination of entitlement to indemnification is to be made by independent
legal counsel at the request of the claimant, the independent legal counsel
shall be selected by the Board of Directors unless there shall have occurred
within two years prior to the date of the commencement of the action, suit or
proceeding for which indemnification is claimed a Change of Control (as
hereinafter defined), in which case the independent legal counsel shall be
selected by the claimant unless the claimant shall request that such selection
be made by the Board of Directors. If it is so determined that the claimant is
entitled to indemnification, payment to the claimant shall be made within 10
days after such determination.
Section 6. Effect and Validity
-------------------------------
If a determination shall have been made pursuant to ARTICLE VI,
Section 5 that the claimant is entitled to indemnification, the corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to ARTICLE VI, Section 2. The corporation shall be precluded from
asserting in any judicial proceeding commenced pursuant to ARTICLE VI, Section 2
that the procedures and presumptions of this ARTICLE VI are not valid, binding
and enforceable and shall stipulate in such proceeding that the corporation is
bound by all the provisions of this ARTICLE VI.
If any provision or provisions of this ARTICLE VI shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (1) the validity,
legality and enforceability of the remaining provisions of this ARTICLE VI
(including, without limitation, each portion of any paragraph of this ARTICLE VI
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself held to be invalid, illegal or unenforceable) shall not in any way
be affected or impaired thereby; and (2) to the fullest extent possible, the
provisions of this ARTICLE VI (including, without limitation, each such portion
of any paragraph of this ARTICLE VI containing any such provision held to be
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal or unenforceable.
Section 7. Employees and Agents
--------------------------------
The corporation may grant rights to indemnification, and rights to be
paid by the corporation the expenses incurred in defending any proceeding in
advance of its final disposition, to any employee or agent of the corporation,
including when any such person is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans maintained or sponsored by the
corporation, to the fullest extent of the provision of this ARTICLE VI with
respect to the indemnification and advancement of expenses of directors and
officers of the corporation.
Section 8. Definitions
-----------------------
16
<PAGE>
For purposes of this ARTICLE VI:
(a) "Change of Control" means (i) The acquisition by any individual,
entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of common
stock of the corporation (the "Outstanding Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the corporation
entitled to vote generally in the election of directors (the "Outstanding voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the corporation, (ii) any acquisition by the
corporation, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the corporation or any corporation controlled
by the corporation or (iv) any acquisition pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (a) (iii) of this Section
7; or
(ii) Individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board of Directors; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the corporation's stockholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as through such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board of Directors; or
(iii) Consummation by the corporation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the corporation or the acquisition of assets of another entity (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individual and entities who
were the beneficial owners, respectively, of the Outstanding Common Stock and
Outstanding Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the corporation or all or substantially all of the
corporation's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately prior to such
Business Combination of the Outstanding Common Stock and Outstanding Voting
Securities, as the case may be, (B) no Person (excluding any employee benefit
plan (or related trust) of the corporation or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
17
<PAGE>
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors, providing for such
Business Combination; or
(iv) Approval by the stockholders of the corporation of a complete
liquidation or dissolution of the corporation.
(b) "Disinterested Director" means a director of the corporation who
is not and was not a party to the matter in respect of which
indemnification is sought by the claimant.
(c) "independent legal counsel" means a law firm, a member of a law
firm, or an independent practitioner, that is experienced in matters of
corporation law and shall include any person who, under the applicable
standards of professional conduct then prevailing, would not have a
conflict of interest in representing either the corporation or the claimant
in an action to determine the claimant's rights under this ARTICLE VI."
ARTICLE VII - NOTICES
Section 1. Notices.
--------------------
Whenever notice is required to be given to any stockholder, director,
officer, or agent, such requirement shall not be construed to mean personal
notice. Such notice may in every instance be effectively given by depositing a
writing in a post office or letter box, in a postpaid, sealed wrapper, or by
dispatching a prepaid telegram, addressed to such stockholder, director,
officer, or agent at his or her address as the same appears on the books of the
corporation. The time when such notice is dispatched shall be the time of the
giving of the notice.
Section 2. Waivers.
--------------------
A written waiver of any notice, signed by a stockholder, director,
officer or agent, whether before or after the time of the event for which notice
is to be given, shall be deemed equivalent to the notice required to be given to
such stockholder, director, officer, or agent. Neither the business nor the
purpose of any meeting need be specified in such a waiver.
18
<PAGE>
ARTICLE VIII - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for the use of facsimile signatures
elsewhere specifically authorized in these bylaws, facsimile signatures of any
officer or officers of the corporation may be used whenever and as authorized by
the Board of Directors or the Executive Committee.
Section 2. Corporate Seal.
---------------------------
The Board of Directors shall provide a suitable seal, containing the
name of the corporation, which seal shall be in charge of the Secretary. If and
when so directed by the Board of Directors or by the Executive Committee,
duplicates of the seal may be kept and used by the Treasurer or by any Assistant
Secretary or Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
-----------------------------------------------------
Each director, each member of any committee designated by the Board of
Directors, and each officer of the corporation shall, in the performance of his
duties, be fully protected in relying in good faith upon the books of account or
other records of the corporation, including reports made to the corporation by
any of its officers, by an independent certified public accountant, or by an
appraiser selected with reasonable care.
Section 4. Fiscal Year.
------------------------
The fiscal year of the corporation shall terminate at the end of
business on December 31 in each year, and the following year shall begin on the
next day thereafter.
Section 5. Time Periods.
-------------------------
In applying any provision of these Bylaws which require that an act be
done or not done a specified number of days prior to an event or that an act be
done during a period of a specified number of days prior to any event, calendar
days shall be used, the day of the doing of the act shall be excluded, and the
day of the event shall be included.
Section 6. Independent Accountants.
------------------------------------
The Board of Directors shall appoint on an annual basis such firm of
independent public accountants as it shall deem appropriate to examine the
Company's financial books and records on at least an annual basis. The
appointment of said independent
19
<PAGE>
accountants shall, at the next succeeding annual meeting of stockholders be
presented to the stockholders of the Company for ratification. Should the
stockholders fail to ratify the appointment by the Board of Directors of said
independent public accountants, the Board of Directors shall take the matter
under consideration and the vote of the stockholders in that regard shall be
deemed advisory in nature.
Section 7. Gender.
-------------------
Any reference to the masculine gender in these Bylaws shall be
construed to mean the feminine gender, as the situation may demand.
ARTICLE IX - AMENDMENTS
Section 1. Amendments.
-----------------------
These Bylaws may be amended or repealed by the Board of Directors at
any meeting or by the stockholders at any meeting.
20
<PAGE>
<TABLE>
<CAPTION>
MATTEL, INC. AND SUBSIDIARIES EXHIBIT 11.0
(Page 1 of 2)
COMPUTATION OF (LOSS) INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
(in thousands, except per share amounts)
For the
Three Months Ended
----------------------------------------------
March 31, March 31,
2000 1999
--------------------- -------------------
BASIC
- -----
<S> <C> <C>
Loss from continuing operations $ (44,630) $ (12,630)
(Loss) income from discontinued operations (126,606) 17,679
------------ ------------
Net (loss) income (171,236) 5,049
Less: Dividends on convertible preferred stock - (1,990)
------------ ------------
Net (loss) income applicable to common shares $ (171,236) $ 3,059
============ ============
Applicable Shares for Computation of (Loss) Income per Share:
Weighted average common shares outstanding 425,495 396,480
============ ============
(Loss) Income Per Common Share - Basic
Loss from continuing operations $ (0.10) $ (0.04)
(Loss) income from discontinued operations (0.30) 0.05
------------ ------------
Net (loss) income per common share $ (0.40) $ 0.01
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MATTEL, INC. AND SUBSIDIARIES EXHIBIT 11.0
(Page 2 of 2)
COMPUTATION OF (LOSS) INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
(in thousands, except per share amounts)
For the
Three Months Ended
---------------------------------------------
March 31, March 31,
2000 1999
---------------- ---------------
DILUTED
- -------
<S> <C> <C>
Loss from continuing operations $ (44,630) $ (12,630)
(Loss) income from discontinued operations (126,606) 17,679
----------- -----------
Net (loss) income (171,236) 5,049
Less: Dividends on convertible preferred stock - (1,990)
----------- -----------
Net (loss) income applicable to common shares $ (171,236) $ 3,059
=========== ===========
Applicable Shares for Computation of (Loss) Income per Share:
Weighted average common shares outstanding 425,495 396,480
Weighted average common equivalent shares arising from:
Dilutive stock options - 6,832
Assumed conversion of Series A convertible preferred stock - 18,000
Nonvested stock - 234
Stock subscription warrants - 718
----------- -----------
Weighted average number of common and common
equivalent shares 425,495 422,264
=========== ===========
(Loss) Income Per Common Share - Diluted
Loss from continuing operations $ (0.10) $ (0.03)
(Loss) income from discontinued operations (0.30) 0.04
----------- -----------
Net (loss) income per common share $ (0.40) $ 0.01
=========== ===========
</TABLE>
<PAGE>
EXHIBIT 12
(PAGE 1 0F 2)
MATTEL, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands, except ratios)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
-----------------------
March 31, March 31,
2000 1999
---------- ---------
<S> <C> <C>
EARNINGS AVAILABLE FOR FIXED
CHARGES:
Income (loss) from continuing operations before income taxes,
cumulative effect of changes in accounting principles and
extraordinary items ($ 61,644) ($ 17,420)
Less (plus) minority interest and
undistributed income (loss)
of less-than-majority-owned
affiliates, net 195 256
Add:
Interest expense 24,356 24,858
Appropriate portion of rents (c) 3,288 3,831
--------- ---------
Earnings available for fixed charges ($ 33,805) $ 11,525
========= =========
FIXED CHARGES:
Interest expense $ 24,356 $ 24,858
Capitalized interest 49 36
Appropriate portion of rents (c) 3,288 3,831
--------- ---------
Fixed charges $ 27,693 $ 28,725
========= =========
Ratio of earnings to fixed charges (1.22) (d) 0.40 (e)
========= =========
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, (a)(b)
------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED
CHARGES:
Income (loss) from continuing operations before income taxes,
cumulative effect of changes in accounting principles and
extraordinary items $ 165,336 $ 465,063 $ 425,082 $ 536,756 $ 504,668
Less (plus) minority interest and
undistributed income (loss)
of less-than-majority-owned
affiliates, net 145 (165) (144) 303 (36)
Add:
Interest expense 121,337 110,833 90,130 100,226 102,983
Appropriate portion of rents (c) 11,974 16,262 17,665 19,527 19,450
--------- --------- --------- --------- ---------
Earnings available for fixed charges $ 298,792 $ 591,993 $ 532,733 $ 656,812 $ 627,065
========= ========= ========= ========= =========
FIXED CHARGES:
Interest expense $ 121,337 $ 110,833 $ 90,130 $ 100,226 $ 102,983
Capitalized interest 527 993 991 1,789 693
Appropriate portion of rents (c) 11,974 16,262 17,665 19,527 19,450
--------- --------- --------- --------- ---------
Fixed charges $ 133,838 $ 128,088 $ 108,786 $ 121,542 $ 123,126
========= ========= ========= ========= =========
Ratio of earnings to fixed charges 2.23 X 4.62 X 4.90 X 5.40 X 5.09 X
========= ========= ========= ========= =========
</TABLE>
(a) Although Mattel merged with The Learning Company, Inc. ("Learning
Company") in May 1999, the results of operations of Learning Company have not
been included in this calculation since the Consumer Software segment is being
reported as a discontinued operation effective March 31, 2000.
(b) The ratio of earnings to fixed charges for 1995 through 1997 has been
restated for the effects of the March 1997 merger of Tyco Toys, Inc. ("Tyco")
into Mattel, which was accounted for as a pooling of interests.
(c) Portion of rental expenses which is deemed representative of an
interest factor, not to exceed one-third of total rental expense.
(d) Primarily as a result of a $53.1 million charge to earnings taken in
the first quarter of 2000 related to the departure of certain senior executives,
earnings did not cover fixed charges by $61.5 million for the three month period
ended March 31, 2000.
(e) Earnings did not cover fixed charges by $17.2 million for the three
month period ended March 31, 1999.
<PAGE>
EXHIBIT 12
(Page 2 of 2)
MATTEL, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(Amounts in thousands, except ratios)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
-----------------------
March 31, March 31,
2000 1999
----------- ----------
<S> <C> <C>
EARNINGS AVAILABLE FOR FIXED
CHARGES:
Income (loss) from continuing operations before income taxes,
cumulative effect of changes in accounting principles and
extraordinary items ($ 61,644) ($ 17,420)
Less (plus) minority interest and
undistributed income (loss)
of less-than-majority-owned
affiliates, net 195 256
Add:
Interest expense 24,356 24,858
Appropriate portion of rents (c) 3,288 3,831
--------- ---------
Earnings available for fixed charges ($ 33,805) $ 11,525
========= =========
FIXED CHARGES:
Interest expense $ 24,356 $ 24,858
Capitalized interest 49 36
Dividends - Series B preferred stock -- --
Dividends - Series C preferred stock -- 1,990
Dividends - Series F preference stock -- --
Appropriate portion of rents (c) 3,288 3,831
--------- ---------
Fixed charges $ 27,693 $ 30,715
========= =========
Ratio of earnings to combined fixed charges and
preferred stock dividends (1.22) (d) 0.38 (e)
========= =========
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, (a)(b)
------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED
CHARGES:
Income (loss) from continuing operations before income taxes,
cumulative effect of changes in accounting principles and
extraordinary items $ 165,336 $ 465,063 $ 425,082 $ 536,756 $ 504,668
Less (plus) minority interest and
undistributed income (loss)
of less-than-majority-owned
affiliates, net 145 (165) (144) 303 (36)
Add:
Interest expense 121,337 110,833 90,130 100,226 102,983
Appropriate portion of rents (c) 11,974 16,262 17,665 19,527 19,450
--------- --------- --------- --------- ---------
Earnings available for fixed charges $ 298,792 $ 591,993 $ 532,733 $ 656,812 $ 627,065
========= ========= ========= ========= =========
FIXED CHARGES:
Interest expense $ 121,337 $ 110,833 $ 90,130 $ 100,226 $ 102,983
Capitalized interest 527 993 991 1,789 693
Dividends - Series B preferred stock -- -- 2,537 3,406 3,200
Dividends - Series C preferred stock 3,980 7,960 7,968 3,985 --
Dividends - Series F preference stock -- -- -- -- 3,342
Appropriate portion of rents (c) 11,974 16,262 17,665 19,527 19,450
--------- --------- --------- --------- ---------
Fixed charges $ 137,818 $ 136,048 $ 119,291 $ 128,933 $ 129,668
========= ========= ========= ========= =========
Ratio of earnings to combined fixed charges and
preferred stock dividends 2.17 X 4.35 X 4.47 X 5.09 X 4.84 X
========= ========= ========= ========= =========
</TABLE>
(a) Although Mattel merged with Learning Company in May 1999, the results
of operations of Learning Company have not been included in this calculation
since the Consumer Software segment is being reported as a discontinued
operation effective March 31, 2000.
(b) The ratio of earnings to combined fixed charges and preferred stock
dividends for 1995 through 1997 has been restated for the effects of the March
1997 merger of Tyco into Mattel, which was accounted for as a pooling of
interests.
(c) Portion of rental expenses which is deemed representative of an
interest factor, not to exceed one-third of total rental expense.
(d) Primarily as a result of a $53.1 million charge to earnings taken in
the first quarter of 2000 related to the departure of certain senior executives,
earnings did not cover fixed charges by $61.5 million for the three month period
ended March 31, 2000.
(e) Earnings did not cover fixed charges by $19.2 million for the three
month period ended March 31, 1999.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM MATTEL, INC.'S BALANCE
SHEETS AND STATEMENTS OF OPERATIONS AS OF AND FOR THE THREE MONTHS ENDED MARCH
31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 214,937
<SECURITIES> 0
<RECEIVABLES> 924,236
<ALLOWANCES> 27,040
<INVENTORY> 522,299
<CURRENT-ASSETS> 1,831,194
<PP&E> 1,131,155
<DEPRECIATION> 437,480
<TOTAL-ASSETS> 4,572,460
<CURRENT-LIABILITIES> 1,672,787
<BONDS> 982,713
0
0
<COMMON> 434,345
<OTHER-SE> 1,310,173
<TOTAL-LIABILITY-AND-EQUITY> 4,572,460
<SALES> 693,261
<TOTAL-REVENUES> 693,261
<CGS> 378,904
<TOTAL-COSTS> 378,904
<OTHER-EXPENSES> 351,645
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,356
<INCOME-PRETAX> (61,644)
<INCOME-TAX> (17,014)
<INCOME-CONTINUING> (44,630)
<DISCONTINUED> (126,606)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (171,236)
<EPS-BASIC> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
<PAGE>
EXHIBIT 99.0
AMENDMENT NO. 4 TO
THE AMENDED AND RESTATED MATTEL 1990 STOCK OPTION PLAN
The Amended and Restated Mattel 1990 Stock Option Plan (the "Plan") is
hereby amended, effective as of January 1, 2000, as set forth below.
1. Section 12(a) of the Plan is hereby amended and restated to read in its
entirety as follows:
(a) Retirement. When a Participant's employment terminates on or
after the Participant's Retirement Date, all stock options which were
granted to such Participant at least six (6) months prior to the
Participant's Retirement Date, whether or not previously exercisable,
shall become exercisable immediately and except to the extent the terms
of such stock options permit its later termination, the Participant will
be able to exercise his or her vested stock options until the earlier of
(i) five (5) years following the Participant's Retirement Date or (ii)
the date on which the stock options would otherwise expire. In addition,
when a Participant's employment terminates on or after Participant's
Retirement Date, the Committee may permit Awards to continue in effect
beyond the date of such termination in accordance with the applicable
Award Agreement or such shorter period as the Committee may determine and
the exercisability and vesting of any Award may be accelerated.
2. The foregoing amendments to the Plan shall apply with respect to awards
previously granted under the Plan, effective as of January 1, 2000.
* * *
IN WITNESS WHEREOF, the Company has caused this Amendment No. 4 to the
Plan to be executed, effective as set forth above.
MATTEL, INC.
By: /s/ Alan Kaye
-----------------------------
Name: ALAN KAYE
Title: SVP HR
<PAGE>
EXHIBIT 99.1
AMENDMENT NO. 3 TO
THE AMENDED AND RESTATED MATTEL 1996 STOCK OPTION PLAN
The Amended and Restated Mattel 1996 Stock Option Plan (the "Plan") is
hereby amended, effective as of January 1, 2000, as set forth below.
1. Section 8 of the Plan is hereby amended by adding a new Paragraph (e),
reading in its entirety as follows:
(e) In the event the Participant incurs a Severance after the
attainment of age fifty-five (55) and the completion of five (5) years
of service (as determined for a Participant who is also an employee of
the Company in accordance with the terms of the Mattel, Inc. Personal
Investment Plan), all Non-Qualified Stock Options which were granted
to such Participant at least six (6) months prior to such Severance,
whether or not previously exercisable, shall become exercisable
immediately.
2. Section 9(b) of the Plan is hereby amended and restated to read in its
entirety as follows:
(b) Except to the extent the terms of an Option permit its later
termination, notwithstanding the provisions of Paragraph (a) above, in
the case of a Participant who incurs a Severance after the attainment
of age fifty-five (55) and the completion of five (5) years of service
(as determined for a Participant who is also an employee of the
Company in accordance with the terms of the Mattel, Inc. Personal
Investment Plan), the Participant will be able to exercise his or her
Non-Qualified Stock Options until the earlier of (i) five (5) years
following Severance or (ii) the date on which the Options would
otherwise expire.
3. The foregoing amendments to the Plan shall apply (i) with respect to awards
granted under the Plan on or after November 4, 1999, as of the date of
grant, and (ii) with respect to awards previously granted under the Plan,
effective as of January 1, 2000.
* * *
IN WITNESS WHEREOF, the Company has caused this Amendment No. 3 to the
Plan to be executed, effective as set forth above.
MATTEL, INC.
By: /s/ Alan Kaye
----------------------------
Name: Alan Kaye
Title: SVP HR
<PAGE>
EXHIBIT 99.2
AMENDMENT NO. 1 TO
MATTEL 1999 STOCK OPTION PLAN
The Mattel 1999 Stock Option Plan (the "Plan") is hereby amended,
effective as of November 4, 1999, as set forth below.
1. Section 8 of the Plan is hereby amended by adding a new Paragraph (e),
reading in its entirety as follows:
(e) In the event of the Participant's Retirement, all Options
which were granted to such Participant at least six (6) months
prior to the Participant's Retirement, whether or not previously
exercisable, shall become exercisable immediately.
2. Section 9(b) of the Plan is hereby amended and restated to read in its
entirety as follows:
(b) Except to the extent the terms of an Option permit its
later termination, notwithstanding the provisions of Paragraph (a) above, in the
event of a Participant's Retirement, the Participant will be able to exercise
his or her vested Options until the earlier of (i) five (5) years following the
Participant's Retirement or (ii) the date on which the Options would otherwise
expire.
* * *
IN WITNESS WHEREOF, the Company has caused this Amendment No. 1
to the Plan to be executed, effective as set forth above.
MATTEL, INC.
By: /s/ Alan Kaye
------------------------
Name: Alan Kaye
Title: Senior Vice President Human Resources
<PAGE>
Exhibit 99.3
SEPARATION AGREEMENT
This Separation Agreement (this "Agreement") by and between Mattel,
Inc., a Delaware corporation (the "Company") and Jill E. Barad (the
"Executive"), is dated as of February 25, 2000.
WHEREAS, the Executive has been employed by the Company as its Chief
Executive Officer pursuant to an Amended and Restated Employment Agreement
between the Company, and the Executive dated as of January 1, 1997 (the
"Employment Agreement"), and
WHEREAS, the Company and the Executive have agreed that the
Executive's employment shall terminate as of the date of this Separation
Agreement, and they wish to set forth their mutual agreement as to the terms and
conditions of such termination,
NOW, THEREFORE, the Company and the Executive hereby agree as follows:
1. Resignation. Effective as of February 3, 2000, the Executive
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hereby resigns from her employment with the Company, from her positions as a
member and Chairman of the Board of Directors of the Company, and from all
other positions the Executive may currently hold as an officer or member of the
board of directors of any of the Company's subsidiaries or affiliates.
2. Severance Payments and Benefits. (a) On March 2, 2000, the
-------------------------------
Company shall pay to the Executive the cash severance payments to which she is
entitled under Section 5(d)(i) of the Employment Agreement, as set forth in a
mutually agreed schedule of even date herewith (the "Schedule"). In addition,
the Company shall pay to the Executive, in accordance with Section 3(f) of the
Employment Agreement, the amount of any expenses that she has incurred on or
before February 3, 2000 for which she is entitled to be reimbursed pursuant in
said Section 3(f).
(b) As promptly as practicable after the Executive has had the
opportunity to elect her form of benefit in accordance with the Company's
Supplemental Executive Retirement Plan (the "SERP"), the Company shall commence
payment to her of her benefit under the SERP, the calculation of which shall be
set forth in the Schedule.
(c) Effective March 2, 2000, the entire balances due from the
Executive with respect to the Home Mortgage Loan and the Loan, as those terms
are defined in Sections 3(1) and 3(k) of the Employment Agreement, respectively,
are forgiven. In addition, on March 2, 2000 the Company shall pay the Executive
the additional amount set forth in the Schedule to make her whole for the
Federal and California income taxes and Medicare tax payable by her with respect
to the income she will recognize as a result of the forgiveness of the Home
Mortgage Loan.
(d) The Company shall also provide to the Executive the benefits to
which she is entitled pursuant to Section 3(j) and clauses (iv), (v) and (vi) of
Section 5(d) of the Employment Agreement. The Company shall return to the
Executive the painting owned by the Executive that is located in the Executive's
office. The Executive shall purchase from the Company certain paintings
purchased by the Company in 1999 and currently located in the
<PAGE>
Executive's residence at the prices paid for such paintings by the Company. For
the avoidance of doubt, the Executive acknowledges and agrees that the items
referred to in the preceding sentence shall not be subject to clause (iv) of
Section 5(d) of the Employment Agreement.
(c) The Company shall continue to provide home security services and
a driver/personal bodyguard to the Executive, on the same basis as they are
currently provided, through August 3, 2000.
(i) The Executive shall be entitled to retain the personal computer
and fax machine provided by the Company that are currently in the Executive's
home.
3. Stock Options. All options to acquire stock of the Company held
-------------
by the Executive shall be vested in full as of February 3, 2000 (to the extent
not already vested), and notwithstanding clause (ii) of Section 5(d) of the
Employment Agreement, shall remain outstanding and exercisable until the
expiration of their original terms; provided, that such options shall
immediately expire if the Executive commits any material breach any of the
covenants set forth in Section 5(c)(i) below.
4. Mutual Nondisparagement. (a) The Executive shall not make,
-----------------------
participate in the making of, or encourage any other person to make, any
statements, written or oral, which criticize, disparage, or defame the goodwill
or reputation of, or which are intended to embarrass or adversely affect the
morale of, the Company, any of its subsidiaries or affiliates, or any of their
respective present, former or future directors, officers, executives, employees
and/or shareholders. The Executive further agrees not to make any negative
statements, written or oral, relating to her employment, the termination of her
employment, or any aspect of the business of the Company or any of its
subsidiaries or affiliates.
(b) The Company shall not make, participate in the making of, or
encourage any employees or any other person to make, any statements, written or
oral, which criticize, disparage, or defame the reputation of, or which are
intended to embarrass, the Executive. The Company further agrees not to make
any negative statements, written or oral, relating to the Executive's employment
or the termination of her employment.
(c) Notwithstanding the foregoing, nothing in this Section 4 shall
prohibit any person from making truthful statements when required by order of a
court or other body having jurisdiction, or as otherwise may be required by law
or legal process.
5. The Executive's Covenants. (a) The Executive shall make herself
-------------------------
available, from February 25, 2000 through December 31, 2000, for consulting with
the Company with respect to matters involving the Company or any of its
subsidiaries and affiliates that may be within the Executive's knowledge, for up
to 40 hours per month upon request at mutually convenient times and places. The
Company shall make available to the Executive Company-paid secretarial
assistance reasonably necessary for the provision of such consulting services;
provided, that the Executive shall have the option to request that such
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secretarial assistance be provided, for a period ending no earlier than April
24, 2000, by the person employed as the Executive's secretarial assistant as of
February 3, 2000 ("Current Secretary"), subject to the Current Secretary's
consent to serve in such capacity. The Executive shall also make herself
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<PAGE>
available to the Company to assist the Company and its subsidiaries and
affiliates, as reasonably requested by the Company, with respect to pending and
future litigation, arbitrations, governmental investigations or other dispute
resolutions relating to matters that arose during the Executive's employment
with the Company and its subsidiaries and affiliates. The Company will reimburse
the Executive for all reasonable expenses and costs she may incur as a result of
providing services and assistance under this Section 5(a), upon receipt of
proper documentation thereof.
(b) The Executive shall remain bound by, and she hereby agrees to
comply with, the confidentiality provision of Section 11 of the Employment
Agreement.
(c) Until February 3, 2002, the Executive shall not, without the
prior written consent of the Company: (i) serve, directly or indirectly, alone
or in association with others as an employee, officer, director, consultant,
advisor, independent contractor, partner, or agent of, or otherwise render
personal services to, Hasbro, Inc., any subsidiary or affiliate of Hasbro, Inc.,
or any successor to any of them, or (ii) directly or indirectly employ, or
solicit the employment or services (whether as an employee, officer, director,
consultant, advisor, independent contractor, agent, partner or otherwise) of,
any person who was or is at any time during the previous twelve months an
employee, representative, officer or director of the Company or any of its
subsidiaries or affiliates, other than the home security personnel and
driver/personal bodyguard, in each case who were providing services to the
Executive as of February 3, 2000 and other than the Executive's Current
Secretary.
(d) The Executive acknowledges and agrees that because of the nature
of the business in which the Company and its subsidiaries and affiliates are
engaged and because of the nature of the confidential information to which the
Executive has had access during her employment, it would be impractical and
excessively difficult to determine the actual damages of the Company and its
subsidiaries and affiliates in the event the Executive breached any of the
covenants of Section 5(c), and remedies at law (such as monetary damages) for
any breach of the Executive's obligations under Section 5(c) would be
inadequate. The Executive therefore agrees and consents that if she commits any
breach of a covenant under Section 5(c) or threatens to commit any such breach,
the Company shall have the right (in addition to, and not in lieu of, any other
right or remedy that may be available to it) to temporary and permanent
injunctive relief from a court of competent jurisdiction, without posting any
bond or other security and without the necessity of proof of actual damage.
With respect to any provision of Section 5(c) finally determined to be
unenforceable, the Executive and the Company hereby agree that this Agreement or
any provision hereof may be reformed so that it is enforceable to the maximum
extent permitted by law. If any of the covenants of Section 5(c) are determined
to be wholly or partially unenforceable in any jurisdiction, such determination
shall not be a bar to or in any way diminish the Company's right to enforce any
such covenant in any other jurisdiction.
6. General Release: Time to Consider and Cancel the Agreement, Age
---------------------------------------------------------------
Discrimination in Employment Act Waiver. (a) The Executive, on behalf of herself
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and her successors, assigns, heirs and any and all other persons claiming
through the Executive, if any, and each of them, shall and does hereby forever
relieve, release, and discharge the Company and its respective predecessors,
successors, assigns, owners, attorneys, representatives, affiliates, parent
corporations, subsidiaries (whether or not wholly-owned), divisions, partners
and their
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<PAGE>
officers, directors, agents, employees, servants, executors, administrators,
accountants, investigators, insurers, and any and all other related individuals
and entities, if any, and each of them, in any and all capacities, from any and
all claims, debts, liabilities, demands, obligations, liens, promises, acts,
agreements, costs and expenses (including, but not limited to, attorneys' fees),
damages, actions and causes of action, of whatever kind or nature, including,
without limitation, any statutory, civil or administrative claim, or any
claim, arising out of acts or omissions occurring before the execution of this
Agreement, whether known or unknown, suspected or unsuspected, fixed or
contingent, apparent or concealed (collectively referred to as "claims"),
including, but not limited to, any claims based on, arising out of, related to
or connected with the subject matter of the Employment Agreement, this
Agreement, the Executive's employment or the termination thereof, and any and
all facts in any manner arising out of, related to or connected with the
Executive's employment with, or termination of employment from the Company and
its subsidiaries and affiliates, including, but not limited to, any claims
arising from rights under federal, state, and local laws prohibiting
discrimination on the basis of race, national origin, sex, religion, age,
marital status, pregnancy, handicap, ancestry, sexual orientation, or any other
form of discrimination, and any common law claims of any kind including, but not
limited to, contract, tort, and property rights including, but not limited to,
breach of contract, breach of the implied covenant of good faith and fair
dealing, tortious interference with contract or current or prospective economic
advantage, fraud, deceit, misrepresentation, defamation, wrongful termination,
infliction of emotional distress, breach of fiduciary duty, and any other common
law claim of any kind whatever.
(b) The Executive expressly waives any and all rights under Section
1542 of the Civil Code of the State of California, and all other federal or
state statutory rights, rules, and principles of common law or equity, including
without limitation those of any jurisdiction, government, or political
subdivision thereof, similar to Section 1542 ("similar provison"). Thus the
Executive may not invoke the benefits of Section 1542 or any similar provision
in order to prosecute or assert in any manner any claims released hereunder.
Section 1542 provides as follows.
A general release does not extend to claims which the creditor does
not know or suspect to exist in her favor at the time of executing
the release, which if known by her must have materially affected
her settlement with the debtor.
(c) The waiver given below in Section 6(d) is given only in exchange
for consideration in addition to anything of value to which the Executive is
already entitled. Such waiver does not waive rights or claims which may
arise after the date of execution of this Agreement. The Executive acknowledges
that: (i) this entire Agreement is written in a manner calculated to be
understood by her; (ii) she has been advised to consult with an attorney before
executing this Agreement; (iii) she was given a period of 21 days within which
to consider this Agreement; and (iv) to the extent she executes this Agreement
before the expiration of the 21-day period, she does so knowingly and
voluntarily and only after consulting her attorney. The Executive shall have
the right to cancel and revoke this Agreement during a period of 7 days
following her execution of this Agreement, and this Agreement shall not become
effective, and no money shall be paid hereunder until the expiration of such
7-day period. The 7-day period of revocation shall commence upon the date of
execution of this Agreement. In order to revoke this
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<PAGE>
Agreement, the Executive shall deliver to the Company, prior to the expiration
of said 7-day period, a written notice of revocation.
(d) In addition to the release set forth above in this Section 6, the
Executive hereby voluntarily and knowingly waives all rights or claims arising
under the Federal Age Discrimination in Employment Act.
7. Arbitration of Disputes. (a) The Company and the Executive agree
-----------------------
that any disputes, controversies or claims which arise out of or relate to this
Agreement, the Executive's employment or the termination of her employment,
including, but not limited to, any claim relating to the purported validity,
interpretation, enforceability or breach of this Agreement and/or any other
claim or controversy arising out of the relationship between the Executive and
the Company (or the nature of the relationship) or the termination of that
relationship, including, but not limited to, claims for breach of covenant,
breach of an implied covenant of good faith and fair dealing, breach of
contract, or intentional infliction of emotional distress, defamation, breach of
right of privacy, interference with advantageous or contractual relations,
fraud, conspiracy or other tort or property claims of any kind, which are not
settledby agreement between the parties, shall be settled by expedited
arbitration under the then-applicable arbitration rules of JAMS/Endispute (or
any other mutually agreed arbitrator) before a board of three arbitrators, as
selected thereunder.
(b) One arbitrator shall be selected by the Executive, one by the
Company and the third by the two persons so selected, all in accordance with the
then-applicable arbitration rules of JAMS/Endispute then in effect. In the
event that the arbitrator selected by the Executive and the arbitrator selected
by the Company are unable to agree upon a third arbitrator, then the third
arbitrator shall be selected from a list of seven each of whom shall be a member
of the "Independent List" of retired judges with experience in resolving
employment disputes provided by the Los Angeles office of JAMS/Endispute with
the parties striking names in order and the party striking first to be
determined by the flip of a coin. The arbitration shall be held in a location
to be mutually agreed upon by the parties. In the absence of agreement, the
Chairman of the arbitration panel shall determine the location.
(c) In consideration of the parties' agreement to submit to
arbitration as provided above and in further consideration of the anticipated
expedition and minimizing of expense resulting from this arbitration remedy, the
arbitration provisions of this Agreement shall provide the exclusive remedy, and
each party expressly waives any right she or it may have to seek redress in any
other form.
(d) Any claim which either party has against the other party which
could be submitted for resolution pursuant to this Section 7 must be presented
in writing by the claiming party to the other within the period of the
applicable statute of limitations. Unless the party against whom any claim is
asserted waives the time limits set forth above, any claim not brought within
the time periods specified shall be waived and forever barred.
(e) The Company will pay all costs and expenses of the arbitration to
the extent provided in this Section 7.
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<PAGE>
(f) Any decision and award or order of a majority of the arbitrators
shall be binding upon the parties hereto and judgment thereon may be entered in
the Superior Court of the State of California or any other court having
jurisdiction. The Executive and the Company agree and consent that if she or it,
as applicable, commits any breach of her or its, as applicable, covenants under
this Agreement or threatens to commit any such breach, the other party shall
have the right (in addition to, and not in lieu of, any other right or remedy
that may be available) to temporary and permanent injunctive relief from the
arbitrators, without posting any bond or other security and without the
necessity of proof of actual damage.
(g) Each of the above terms and conditions of this Section 7
shall have separate validity and the invalidity of any part therof shall not
affect the remaining parts.
(h) Any decision and award or order of a majority of the arbitrators
shall be final and binding between the parties as to all claims which were
raised in connection with the dispute to the full extent permitted by law. In
all other cases, the parties agree that a decision of a majority of arbitrators
shall be a condition precedent to the institution or maintenance of any legal,
equitable, administrative, or other formal proceeding by the Executive in
connection with the dispute, and that the decision and opinion of the
arbitrators may be presented in any other forum on the merits of the dispute.
8. Entire Agreement; Other Benefits. This Agreement sets forth the
--------------------------------
entire agreement of the Company and the Executive with respect to the subject
matter hereof, and supersedes the Employment Agreement in its entirety except as
specifically provided herein; provided, that nothing in this Agreement shall be
deemed to affect in any manner any rights the Executive may have with respect to
vested benefits under employee benefit plans sponsored by the Company and its
subsidiaries and affiliates that are qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended. This Agreement does not supersede the
Executive's Indemnity Agreement with the Company or the indemnification
provisions contained in the Company's Restated Certificate of Incorporation or
By-Laws.
9. Successors. (a) This Agreement is personal to the Executive and
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without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall incure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall incure to the benefit of and be binding
upon the Company and its successors. The Company shall require any successor to
all or substantially all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation, reorganization,
acquisition of stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform if no such succession had taken place.
10. Amendment; Waiver. This Agreement may be amended, modified or
-----------------
changed only by a written instrument executed by the Executive and the Company.
No provision of this Agreement may be waived except by a writing executed and
delivered by the party sought to be charged. Any such written waiver will be
effective only with respect to the event or
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<PAGE>
circumstance described therein and not with respect to any other event or
circumstance, unless such waiver expressly provides to the contrary.
11. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, without
reference to principles or conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.
(b) All notices and other communications hereunder shall be in
writing; shall be delivered by hand delivery to the other party or mailed by
registered or certified mail, return receipt requested, postage prepaid; shall
be deemed delivered upon actual receipt, and shall be addressed as follows:
if to the Executive:
Jill E. Barad
with a copy to:
M. Kenneth Suddleson
Katten, Muchin & Zavis
1999 Avenue of the Stars
Los Angeles, CA 90067
If to the Company:
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith.
(c) Notwithstanding any other provision of this Agreement, the
Company may withhold from any amounts or other transfers or assignments payable
under this Agreement, or any other benefits received pursuant hereto, such
Federal, state and/or local taxes as shall be required to be withheld from any
such, or any other, payments, transfers, assignments or benefits pursuant to any
applicable law or regulation. The Company may report, as required by any
applicable Federal, state or local law or regulation, any income or imputed
income payable under this Agreement.
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<PAGE>
IN WITNESS WHEREOF, such of the parties hereto has duly executed this
Agreement as of the date first set forth above.
THE EXECUTIVE:
/s/ Jill E. Barad
----------------------------
Jill E. Barad
THE COMPANY:
Mattel, Inc.
A Delaware corporation
By: /s/ Ronald M. Loeb
-------------------------
Ronald M. Loeb
Interim CEO
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<PAGE>
EXHIBIT 99.4
SEVERANCE AND CONSULTING AGREEMENT
1. PARTIES: The parties to this Severance and Consulting Agreement
(herein "Agreement") are Ned Mansour ("Mansour") and MATTEL, INC. ("Mattel").
2. RECITALS: This Agreement is made with reference to the following
facts:
2.1 Mansour has been employed by Mattel, Inc. as its President
pursuant to an Amended and Restated Employment Agreement dated as of
November 11, 1993, as amended September 1, 1995, as made subject to an
Interpretive Rider dated September 20, 1995, and as amended and restated as
of July 29, 1996 (herein "Employment Agreement").
2.2 Mattel and Mansour have agreed that, effective as of March 31,
2000 (the "Termination Date"), Mansour will resign all of his positions as
an officer (including, without limitation, President) and employee of
Mattel, and will resign all of his positions as an officer and/or employee
of any and all subsidiaries and affiliates of Mattel. In this connection
Mansour will execute the letter of resignation, a copy of which is attached
as Exhibit "A" hereto. In addition, Mattel and Mansour have agreed that,
beginning with the first annual meeting of Mattel's stockholders following
the date of this Agreement, Mansour will not seek re-election as a member
of the Board of Directors of Mattel (the "Board").
2.3 Certain issues have arisen with respect to Mansour's right to
receive certain payments and other benefits upon the termination of his
employment pursuant to the provisions of his Employment Agreement.
2.4 It is the intention of the parties hereto to settle and dispose
of, fully and completely, any and all claims, demands and cause or causes
of action each may have against the other, heretofore or hereafter arising
out of, connected with or incidental to the dealings between the parties
hereto prior to the Termination Date, including, without limitation on the
generality of the foregoing, any and all claims, demands and cause or
causes of action arising out of the employment or termination of Mansour's
employment with Mattel, or the interpretation or application of any
provision of his Employment Agreement, or with respect to any reason
whatsoever, including any matters not related to those claims.
3. TERMINATION OF EMPLOYMENT AND DIRECTORSHIP; CONSULTING SERVICES:
3.1 Except as expressly set forth herein, effective as of the
Termination Date, the Employment Agreement shall terminate and Mattel and
its subsidiaries and affiliates shall have no further obligation or
liability thereunder.
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3.3 Beginning with the first annual meeting of Mattel's stockholders
following the date of this Agreement, Mansour shall not seek re-election as
a member of the Board, and Mattel shall have no obligation to nominate or
cause Mansour to be elected as a member of the Board.
3.4 Effective as of the Termination Date, Mansour's status as an
officer and employee of Mattel shall terminate, and Mattel shall engage
Mansour as a non-exclusive consultant to Mattel for the period commencing
on the Termination Date and ending on December 31, 2000 (the "Consulting
Period"). As a consultant, Mansour shall provide services from his office
located at his residence, unless requested by the Chief Executive Officer
of Mattel, or his designee, to travel within the United States, or appear
at Mattel's offices, in the ordinary course of completing assignments,
which Mattel agrees to assign with reasonable notice provided, and
consisting of expectations consistent with Mansour's experience and
expertise. In no event shall the services requested of Mansour during the
Consulting Period require performance which exceeds 20 hours in any one
month. As consideration for actual services rendered and/or Mansour's
continuing agreement to remain available for assignments on an "on-call"
basis, Mattel shall pay Mansour $8,000 on a monthly (less all amounts
required to be withheld under applicable law) during the Consulting Period.
Mansour's eligibility for Mattel-provided benefits during the Consulting
Period shall be limited to those benefits expressly set forth herein.
Mansour specifically agrees and acknowledges that as of the Termination
Date, Mansour shall be ineligible for the receipt of stock option grants,
participation in any incentive programs, including Mattel's Management
Incentive Plan and Mattel's Long Term Incentive Plan, paid vacations or
paid holidays. During the Consulting Period, Mansour shall be entitled to
receive reimbursement for all reasonable expenses incurred by Mansour in
accordance with the policies and practices of Mattel as in effect from time
to time with respect to consultants of Mattel.
4. PAYMENT AND OTHER BENEFITS UPON TERMINATION:
4.1 On the Termination Date, Mattel shall pay or cause to be paid to
Mansour a lump-sum cash payment (the "Payment") in an amount equal to
$5,780,062.00, less all applicable withholding taxes. The Payment is
exclusive of any amounts to which Mansour may be entitled under any
deferred compensation plan, pension plan or other retirement plan
maintained by Mattel. At Mansour's election, any or all of the Payment may
be deferred by Mansour pursuant to any deferred compensation plan
maintained by Mattel in which Mansour is eligible to participate, subject
to the terms and conditions of such plan.
4.2 For the period beginning on the Termination Date and ending on
the earlier to occur of the third anniversary of the Termination Date or
the date upon which Mansour accepts other full-time employment (such
period, the "Benefits Continuation Period"), Mattel shall provide to
Mansour at Mattel's expense medical, dental, prescription drug and vision
care group insurance in accordance with the coverage in effect immediately
prior to the Termination Date (the last 18 months of Mansour's coverage
under such insurance shall be deemed to be participation under an election
to continue such benefits under the Consolidated Omnibus Budget
Reconciliation Act at
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<PAGE>
Mattel's expense). From and after the third anniversary of the Termination
Date, Mattel shall provide health insurance to Mansour and his dependents
in accordance with the terms and conditions of Mattel's Retiree Medical
Plan.
4.3 Exhibit "B" hereto sets forth a list of outstanding stock options
held by Mansour under Mattel's stock option plans. Mansour shall be
entitled to continue to hold and exercise stock options previously granted
to him as provided for in Mattel's stock option plans and applicable stock
option agreements (as modified or amended from time to time and Alan Kaye's
letter dated February 10, 2000) and, with respect to "premium price stock
options," as modified by the provisions of Exhibit "B" hereto. In the event
that any previously granted stock options shall be repriced prior to the
expiration date for any Mattel senior executives, options granted to
Mansour shall be similarly repriced.
4.4 Mansour may continue to use the car leased by Mattel that is in
Mansour's possession on the Termination Date until the third anniversary of
the Termination Date, at which time Mansour may purchase the car for $1.00.
Except as set forth in the following sentence, as of the Termination Date,
all expenses related to such leased car, including but not limited to
repairs and maintenance, shall be the sole responsibility of Mansour.
Notwithstanding the foregoing, Mansour may continue to use the Company's
credit card for gasoline and associated expenses and Mattel shall pay
Mansour's car phone expenses during the Consulting Period.
4.5 Upon the termination of the Consulting Period, Mansour agrees to
return to Mattel all credit cards in his possession which were provided to
him by Mattel for any purpose.
4.6 Upon the Termination Date, Mattel agrees to transfer to Mansour
the PC computers currently provided to Mansour for business purposes.
Thereafter Mansour will be responsible for costs of maintenance and all
modem connections. Mansour shall not be required to reimburse Mattel for
such transfer.
4.7 Effective as of the Termination Date, Mattel shall credit Mansour
with enhanced benefits under Mattel's 1994 Supplemental Executive
Retirement Plan (the "SERP") in accordance with the terms set forth on
Exhibit "C" hereto. Notwithstanding anything contained in the SERP or any
applicable election form delivered by Mansour thereunder, Mansour's
benefits under the SERP shall commence as of the Termination Date.
4.8 For the three year period immediately following the Termination
Date, Mattel shall provide Mansour with financial planning services in
accordance with the policies of Mattel as in effect from time to time with
respect to executives employed by Mattel.
4.9 Mattel shall continue to provide Mansour with life insurance
coverage under Mattel's Key Executive Life Insurance Program (in which he
is vested for life) on
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substantially the same terms and conditions as such insurance coverage is
provided to Mansour immediately prior to the Termination Date, subject to
the terms and conditions of such program as in effect from time to time.
4.10 In lieu of providing Mansour with outplacement services, Mattel
shall pay Mansour a lump-sum cash payment in an amount equal to $20,000
(less all applicable withholding taxes) on the Termination Date.
4.11 During the Benefits Continuation Period, Mattel shall provide to
Mansour, at Mattel's expense, continuation of country-club membership
"signatory/representative" status as in effect immediately prior to the
Termination Date (including the payment by Mattel of normal club dues, fees
and any assessments and the un-spent quarterly minimum expenses. Mansour
will be responsible for green fees, cart fees, and the purchase of any
product and food). Upon the termination of the Benefits Continuation
Period, Mattel shall cause the membership to be transferred to Mansour at
no cost to Mansour (but subject to tax reporting as imputed income
applicable to the year in which the membership is transferred).
4.12 For the three year period immediately following the Termination
Date, Mattel shall reimburse Mansour for the actual cost incurred by
Mansour in maintaining the home security system existing at Mansour's
residence as of the date hereof.
5. COSTS AND FEES: Mattel shall promptly pay or reimburse Mansour for all
costs and fees actually incurred by Mansour in the negotiation, preparation and
delivery of this Agreement, including, without limitation, reasonable attorneys
fees; provided, however, that the aggregate amount of Mattel's obligation under
this paragraph 5 shall not exceed Five Thousand Dollars ($5,000). Except as
otherwise provided herein, each party hereto shall bear their own costs and
attorney's fees.
6. RELEASE OF CLAIMS: In consideration of the payments and promises
provided for herein, and except for rights created by this Agreement, and except
for any indemnification rights Mansour may have as an officer and/or director of
Mattel under Delaware law, the Mattel Articles of Incorporation or By-laws,
any Directors and Officers liability insurance, or otherwise, Mansour hereby
releases, remises and forever discharges Mattel, its affiliates, subsidiaries,
subsidiary entitles and the owners, stockholders, predecessors, successors,
assigns, employees, officers, directors, counsel, and agents and Mattel hereby
releases, remises and forever discharges Mansour, and his successors, assignees,
counsel, and agents from any and all claims, demands, and cause or causes of
action heretofore arising out of, connected with or incidental to the dealings
between the parties hereto prior to the effective date hereof, including,
without limitation on the generality of the foregoing, any and all claims,
demands and cause or causes of action arising out of the employment, or
termination of employment of Mansour. This includes a release of any rights or
claims Mansour may have under Title VII of the Civil Rights Act of 1964, as
amended by the Civil Rights Act of 1991, which prohibits discrimination in
employment based on race, color, national origin, religion or sex; the
California Fair Employment and Housing Act, which prohibits discrimination based
on race, color, national origin, ancestry, physical handicap, medical condition,
marital status, sex or age; the Age
4
<PAGE>
Discrimination in Employment Act which prohibits age discrimination over the age
of forty (40); the Americans With Disability Act, which prohibits discrimination
based on physical handicap; the Equal Pay Act, which prohibits paying men and
women unequal pay for equal work; or any other federal, state or local laws or
regulations prohibiting employment discrimination.
6.1 Mansour shall have a period of twenty-one (21) days to review and
consider this Agreement before signing it.
6.2 Mansour may revoke this Agreement within seven (7) days after he
signs it by delivering a written notice of revocation to Mattel's Senior
Vice President of Human Resources at Mattel's headquarters so that it is
received by him not later than the close of business on that day. In the
event of such revocation, it shall not be effective and Mansour shall not
receive the payments and other benefits provided for herein.
6.3 This Agreement does not waive or release any rights or claims
which Mansour has under the Age Discrimination in Employment Act which
arise after the execution of this Agreement.
7. REPRESENTATIONS AND WARRANTIES: Each of the parties to this Agreement
represents, warrants, and agrees as follows:
7.1 Each party has received independent legal advice from its
attorneys, with respect to the advisability of making the settlement
provided herein, with respect to the advisability of executing this
Agreement, and with respect to the meaning of California Civil Code Section
1542. By executing this Agreement, Mansour acknowledges that he has read
it, discussed it with his attorneys, and has executed it in reliance upon
the advice of his attorneys with respect to each of these matters.
7.2 No party (nor any officer, agent, employee, representative, or
attorneys of or for any party), has made any statement or representation to
any other party regarding any fact relied upon in entering into this
Agreement, and each party does not rely upon any statement, representation
or promise of any other party (or of any officer, agent, employee,
representative, or attorney for the other party), in executing this
Agreement, or in making the settlement provided for herein, except as
expressly stated in this Agreement.
7.3 Each party to this Agreement has made such investigation of the
facts pertaining to this settlement and this Agreement and of all the
matters pertaining thereto as it deems necessary.
7.4 Each party executing this Agreement, or in the case of Mattel, a
responsible officer thereof, has read this Agreement and understands the
contents hereof. The officer executing this Agreement on behalf of Mattel
is empowered to do so and thereby binds Mattel.
5
<PAGE>
7.5 Neither party has heretofore exercised its sole power to assign,
transfer, or grant, or purport to assign, transfer, or grant, any of the
claims, demands, and cause or causes of action disposed of by this
Agreement.
7.6 Each term of this Agreement is contractual and not merely a
recital.
7.7 Mansour and Mattel are aware that they may hereafter discover
claims or facts in addition to or different from those they now know or
believe to be true with respect to the matters related herein.
Nevertheless, and except as herein provided, it is their intention to
fully, finally and forever settle and release all claims relative thereto
which do now exist, or heretofore have existed between Mattel and Mansour.
In furtherance of such intention, the releases given herein shall be and
remain in effect as full and complete releases of all such matters,
notwithstanding the discovery of existence of any additional or different
claims or facts relative thereto.
7.8 It is expressly understood and agreed by Mansour that the sums
specified to be paid by or on behalf of Mattel to him, pursuant to
paragraph 3 above, as well as the other benefits provided for in paragraphs
4 and 5, shall be in lieu of any and all amounts of which Mansour is now or
may become entitled to from Mattel for any and all claims released, as
described in paragraph 6 of this Agreement.
7.9 Mansour agrees not to initiate, or cause to be initiated against
Mattel, its affiliates, subsidiaries and the shareholders, directors,
officers and employees, any compliance review, suit, action, appeal,
investigation or proceeding of any kind, or participate in same,
individually or as a representative or member of a class, unless compelled
by law, under any contract (express or implied), tort, law, or regulation
(federal, state or local), pertaining in any way whatsoever to the matters
herein released, nor shall he be entitled to receive any payment from any
such proceeding.
7.10 The parties hereto agree that each and every provision of Part
10 "Confidential Information," contained in the Employment Agreement,
including, without limitation, the non-disclosure provisions of the
Employee Confidential Information and Inventions Agreement, previously
executed by Mansour, shall by this reference, be incorporated in this
Agreement. Any material violation of this provision by Mansour which
causes adverse economic results to Mattel shall disqualify him from
exercising any of the stock options he may hold under the Premium Price
Stock Option Plan as modified by the provisions of Exhibit "B" hereto.
7.11 Except as to disclosures required by law, or otherwise made by
Mattel, Mansour agrees not to disclose the terms of this Agreement to
anyone other than the attorneys involved in this matter, his accountants or
tax preparers or his immediate family; and shall forthwith instruct such
attorneys, accountants or tax preparers and his immediate family not to
disclose the terms and conditions of this Agreement to anyone. Mansour
acknowledges and agrees that any disclosure of information contrary to the
terms of this paragraph would cause Mattel injury and damage. Any material
violation of this provision by Mansour which causes adverse economic
results to Mattel shall
6
<PAGE>
disqualify him from exercising any of the stock options he may hold under
the Premium Price Stock Option Plan as modified by the provisions of
Exhibit "B" hereto.
7.12 Mansour agrees that he will refrain from making any statements
about Mattel or its senior executives which would disparage, or reflect
unfavorably upon the image or reputation of Mattel or any such senior
executives. Mattel agrees to refrain from making any statements about
Mansour which would disparage, or reflect unfavorably upon the image or
reputation of Mansour. Any material violation of this provision by Mansour
which causes adverse economic results to Mattel shall disqualify him from
exercising any of the stock options he may hold under the Premium Price
Stock Option Plan as modified by the provisions of Exhibit "B" hereto.
7.13 Mansour agrees that he shall not seek employment with Mattel,
its affiliates, or subsidiaries, which are known to him, at any time in the
future, and that such parties have no obligation to employ, hire, rehire,
or to consider him for hire, other than to continue his employment until
the Termination Date, subject to the terms of the Employment Agreement, and
his consultancy during the Consulting Period. Mansour's forbearance from
seeking employment is purely contractual and voluntary, and does not
constitute discrimination or retaliation in any respect.
7.14 Mansour agrees that for a period ending on the first anniversary
of the Termination Date, he will not directly or indirectly, recruit or
solicit any of Mattel's employees to accept employment with any other
employer. Any material violation of this provision by Mansour which causes
adverse economic results to Mattel shall disqualify him from exercising any
of the stock options he may hold under the Premium Price Stock Option Plan
as modified by the provisions of Exhibit "B" hereto.
7.15 Mansour agrees that during the Consulting Period, he will not
accept a position as a director, officer, employee, partner, consultant or
otherwise with any competitor toy company of Mattel with annual sales in
excess of $2 Billion. Nothing contained in this Section 7.15 shall in any
way affect Mansour's convenants or obligations under the SERP or Mattel's
stock option plans and applicable stock option agreements pursuant to which
Mansour has been granted stock options. Any material violation of this
provision by Mansour which causes adverse economic results to Mattel shall
disqualify him from exercising any of the stock options he may hold under
the Premium Price Stock Option Plan as modified by the provisions of
Exhibit "B" hereto.
7.16 Mansour agrees that after the Termination Date, upon the request
of Mattel, he shall cooperate with and assist Mattel in undertaking and
preparing for legal and other proceedings relating to the affairs of Mattel
and its subsidiaries. Mansour shall be reimbursed for the reasonable
expenses he incurs in connection with any such cooperation and/or
assistance, and, after the Termination Date, shall receive from Mattel
reasonable per diem compensation in connection therewith.
7
<PAGE>
7.17 The parties will execute all such further and additional
documents consistent herewith as shall be reasonable, convenient, necessary
or desirable to carry out the provisions of this Agreement.
7.18 Mattel agrees that it will provide to Mansour, at his request,
an appropriate letter of recommendation to prospective employers of
Mansour. Mansour agrees to request that all prospective employers direct
their requests for reference information to Mattel's senior human resources
executive. Mattel agrees that requests for reference information concerning
Mansour which it receives shall be directed to its senior human resources
executive.
7.19 The parties hereto acknowledge and agree that they have
previously entered into an Indemnity Agreement substantially in the form of
Exhibit "E" hereto (as amended from time to time, the "Indemnity
Agreement"). Each of Mattel and Mansour hereby reaffirm their respective
rights and obligations under the Indemnity Agreement and agree to comply
with the terms and conditions thereof.
8. SETTLEMENT: This Agreement affects the settlement of claims which are
denied and contested, and nothing contained herein shall be construed as an
admission by any party hereto of any liability of any kind to any other party.
Each of the parties hereto denies any liability in connection with any claim and
intends merely to avoid litigation and buy its peace.
9. MISCELLANEOUS:
9.1 This Agreement shall be deemed to have been executed and
delivered within the State of California, and the rights and obligations of
the parties hereto shall be construed and enforced in accordance with, and
governed by, the laws of the State of California.
9.2 Mansour acknowledges and agrees that this Agreement includes the
entire agreement and understanding between the parties with regard to
Mansour's employment, the termination thereof, and all amounts to which
Mansour shall be entitled whether during the term of employment or upon
termination thereof. Except as expressly provided herein, this Agreement
supersedes all prior and contemporaneous oral and written agreements and
discussions, including, without limitation, the Employment Agreement. This
Agreement may be amended only by an agreement in writing signed by all
parties. Mansour also acknowledges and agrees that his right to receive
the payments and other benefits set forth in Sections 3, 4 and 5 of this
Agreement is contingent upon Mansour's execution and acceptance, on the
Termination Date, of the terms and conditions of, and the effectiveness of
the General Release of All Claims (the "Release") attached hereto as
Exhibit "D." If Mansour fails to execute the Release on the Termination
Date and/or Mansour revokes the Release within seven (7) days after such
execution,, then Mansour shall not thereafter be entitled to any payments
or other benefits to which Mansour would otherwise be entitled under
Sections 3, 4 and 5 of this Agreement.
8
<PAGE>
9.3 This Agreement is binding upon and shall inure to the benefit of
the parties hereto, their respective agents, employees, representatives,
officers, directors, divisions, subsidiaries, affiliates, heirs,
predecessors, successors in interest and shareholders.
9.4 Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the
same shall not be construed against any party.
9.5 Should any provisions of this Agreement be declared or determined
by any court to be illegal or invalid, the validity of the remaining parts,
terms or provisions shall not be affected thereby and said illegal or
invalid part, term or provision shall be deemed not to be a part of this
Agreement.
9.6 Mattel and Mansour each specifically waive the benefit of the
provisions of Section 1542 of the Civil Code of the State of California, as
follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his settlement
with the debtor."
9.7 The parties hereto agree that each and every provision of Part 8
"Arbitration of Disputes" contained in the Employment Agreement, shall by
this reference, be incorporated in this Agreement and shall apply to any
issue, controversy or dispute which may arise with respect to the
interpretation or application of this Agreement.
9.8 All notices and other communications shall be in writing; shall
be delivered by hand or mailed by registered or certified mail, return
receipt requested, postage prepaid, to the other party; and shall be deemed
delivered upon actual receipt; and shall be addressed as follows:
To Mattel:
Mattel Inc.
333 Continental Blvd.
El Segundo, California 90245
Attention: Senior Vice President, Human Resources
To Mansour:
Mr. Ned Mansour
9
<PAGE>
or to such other address as either party, in writing shall have
furnished to the other.
9.9 This Agreement consisting of ___ pages is made and entered into
on and as of March 22, 2000 in Los Angeles County, California and is
effective as of this date.
3/23/2000 /s/ Ned Mansour
- ------------ --------------------------------------------
Date NED MANSOUR
MATTEL, INC.
3/23/2000
- ------------ By /s/ Alan Kaye
Date ----------------------
Alan Kaye
Its Senior Vice President, Human Resources
--------------------------------------
10
<PAGE>
EXHIBIT 99.5
================================================================================
Credit Agreement (364-Day Facility)
Dated as of March 31, 2000
among
Mattel, Inc.
Bank of America, N.A.,
as Administrative Agent
Citicorp USA, Inc.,
as Syndication Agent
ABN AMRO Bank N.V.,
as Documentation Agent
and
The Other Financial
Institutions Party Hereto
Banc of America Securities LLC,
as Sole Lead Arranger and Sole Book Manager
[LOGO OF BANK OF AMERICA GOES HERE]
================================================================================
<PAGE>
MATTEL INC.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS................................................... 1
1.01 Certain Defined Terms....................................... 1
1.02 Other Definitional Provisions............................... 12
SECTION 2. THE COMMITMENTS............................................... 12
2.01 The Commitments............................................. 12
2.02 Loan Accounts and Notes..................................... 12
2.03 Borrowing Procedure......................................... 13
2.04 Conversion and Continuation Elections....................... 13
2.05 Reduction and Termination of Commitments.................... 14
2.06 Voluntary Prepayments....................................... 15
2.07 Repayment of Loans.......................................... 15
2.08 Interest on the Loans....................................... 15
2.09 Fees........................................................ 15
2.10 Calculation of Interest and Fees............................ 16
2.11 Payments by the Company..................................... 16
2.12 Payments by the Banks to the Administrative Agent........... 17
2.13 Sharing of Payments, Etc.................................... 18
SECTION 3. PAYMENTS IN GENERAL........................................... 18
3.01 Taxes....................................................... 19
3.02 Capital Adequacy............................................ 21
3.03 Illegality.................................................. 21
3.04 Increased Costs and Reduction of Return..................... 22
3.05 Funding Losses.............................................. 22
3.06 Inability to Determine Rates................................ 23
3.07 Survival.................................................... 23
SECTION 4. CONDITIONS PRECEDENT.......................................... 23
4.01 Conditions to Effectiveness................................. 23
4.02 Conditions to All Loans..................................... 24
SECTION 5. REPRESENTATIONS AND WARRANTIES................................ 25
5.01 Organization and Powers..................................... 25
5.02 Good Standing............................................... 25
5.03 Material Subsidiaries....................................... 25
5.04 Authorization of Borrowing.................................. 25
5.05 No Conflict................................................. 26
5.06 Governmental Consents....................................... 26
5.07 Binding Obligation.......................................... 26
5.08 Financial Condition......................................... 26
5.09 Changes, Etc................................................ 26
5.10 Title to Properties......................................... 27
5.11 Litigation; Adverse Facts................................... 27
5.12 Payment of Taxes............................................ 27
5.13 Agreements.................................................. 27
5.14 Performance................................................. 27
5.15 Governmental Regulation..................................... 28
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
5.16 Employee Benefit Plans...................................... 28
5.17 Environmental Matters....................................... 28
5.18 Disclosure.................................................. 28
5.19 Subordination Agreements.................................... 28
5.20 Year 2000................................................... 28
SECTION 6. AFFIRMATIVE COVENANTS......................................... 29
6.01 Reporting and Information Requirements...................... 29
6.02 Corporate Existence, Etc.................................... 31
6.03 Payment of Taxes and Claims; Tax Consolidation.............. 31
6.04 Maintenance of Properties; Insurance........................ 32
6.05 Inspection of Property and Books and Records................ 32
6.06 Use of Proceeds of Loans.................................... 32
6.07 Environmental Laws.......................................... 32
6.08 Subordination Agreements.................................... 32
SECTION 7. NEGATIVE COVENANTS............................................ 33
7.01 Secured Indebtedness........................................ 33
7.02 Liens....................................................... 33
7.03 Restriction on Fundamental Changes.......................... 33
7.04 Sale or Discount of Receivables............................. 34
7.05 Consolidated Funded Indebtedness to Total Capitalization.... 34
7.06 Interest Coverage Ratio..................................... 34
7.07 ERISA....................................................... 35
7.08 Margin Regulations.......................................... 35
7.09 Independence of Covenants................................... 35
SECTION 8. EVENTS OF DEFAULT............................................. 35
8.01 Events of Default........................................... 35
8.02 Remedies.................................................... 37
8.03 Rights Not Exclusive........................................ 38
SECTION 9. THE ADMINISTRATIVE AGENT...................................... 38
9.01 Appointment and Authorization............................... 38
9.02 Delegation of Duties........................................ 38
9.03 Liability of Administrative Agent........................... 38
9.04 Reliance by Administrative Agent............................ 39
9.05 Notice of Default........................................... 39
9.06 Credit Decision............................................. 40
9.07 Indemnification............................................. 40
9.08 Administrative Agent in Individual Capacity................. 41
9.09 Successor Administrative Agent.............................. 41
9.10 Syndication Agent and Documentation Agent................... 41
SECTION 10. MISCELLANEOUS................................................ 42
10.01 Assignments, Participations, Etc............................ 42
10.02 Survival of Warranties and of Certain Agreements............ 44
10.03 Failure or Indulgence Not Waiver; Remedies Cumulative....... 44
10.04 Fees and Expenses........................................... 44
10.05 Set Off..................................................... 44
10.06 Notices..................................................... 45
10.07 Severability................................................ 45
10.08 Amendments and Waivers...................................... 45
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
10.09 Obligations Several......................................... 46
10.10 Certain Changes............................................. 46
10.11 Headings.................................................... 46
10.12 Applicable Law.............................................. 46
10.13 Successors and Assigns...................................... 47
10.14 Counterparts................................................ 47
10.15 Indemnity................................................... 47
SIGNATURE PAGES S-1
</TABLE>
EXHIBITS
Form of:
A Note
B Notice of Borrowing
C Notice of Conversion/Continuation
D Officers' Certificate
E Opinion of Assistant General Counsel of Company
F-1 Fisher-Price Continuing Guaranty
F-2 Mattel Sales Continuing Guaranty
G-1 Fisher-Price Subordination Agreements
G-2 Mattel Sales Subordination Agreements
H Notice of Assignment and Acceptance
SCHEDULES
1.01 Commitments and Pro Rata Shares
5.03 Material Subsidiaries of Company
5.11 Material Litigation
7.02 Certain Liens
-iii-
<PAGE>
MATTEL, INC.
CREDIT AGREEMENT (364-Day facility)
This CREDIT AGREEMENT (364-DAY FACILITY) (this "Agreement") is dated as of
March 31, 2000 and is entered into by and among MATTEL, INC., a Delaware
corporation (the "Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE
PAGES HEREOF (individually referred to herein as a "Bank" and collectively as
the "Banks"), Bank of America, N.A., as administrative agent for the Banks (in
such capacity, the "Administrative Agent"), Citicorp USA, Inc., as syndication
agent (in such capacity, the "Syndication Agent") and ABN AMRO Bank N.V., as
documentation agent (in such capacity, the "Documentation Agent").
RECITAL
The Company has requested that the Banks provide a revolving line of
credit, and the Banks and the Administrative Agent are willing to do so on the
terms and conditions set forth herein.
In consideration of the mutual covenants and agreements herein contained,
the parties hereto covenant and agree as follows:
Section 1.
DEFINITIONS.
1.01 Certain Defined Terms. The following terms used in this Agreement
shall have the following meanings:
"Administrative Agent" has the meaning assigned to that term in the
--------------------
introduction to this Agreement.
"Administrative Agent's Office" means Administrative Agent's address and,
-----------------------------
as appropriate, account as set forth on Schedule 10.06 or such other address or
--------------
account as Administrative Agent hereafter may designate by written notice to the
Company and the Banks.
"Administrative Agent-Related Persons" means Administrative Agent and any
------------------------------------
successor agent arising under Section 9.09, together with their respective
------------
Affiliates (including, in the case of Bank of America, the Arranger), and the
officers, directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Affiliate", as applied to any Person, means any other Person directly or
---------
indirectly controlling, controlled by or under common control with, that Person.
For the purposes of this definition, "control" (including with correlative
meanings, the terms "controlling", "controlled by" and "under common control
with"), as applied to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities or by contract
or otherwise.
-1-
<PAGE>
"Agreement" means this Credit Agreement, as it may hereafter be amended,
---------
supplemented, restated or otherwise modified from time to time.
"Applicable Amount" means the commitment fee, utilization fee or the margin
-----------------
applicable to Loans (expressed in basis points per annum) set forth in the chart
below opposite the second highest rating issued by S&P, Moody's or Duff & Phelps
on the Company's senior unsecured long-term debt:
<TABLE>
<CAPTION>
Senior Unsecured Long- Commitment Utilization Eurodollar Rate Base Rate
Term Debt Ratings Fee Fee Loans + Loans +
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A or higher by S&P 8.0 12.5 32.0 00.0
A2 or higher by Moody's
A or higher by Duff & Phelps
- ----------------------------------------------------------------------------------------------------------------------------------
A- by S&P 10.0 12.5 40.0 00.0
A3 by Moody's
A- by Duff & Phelps
- ----------------------------------------------------------------------------------------------------------------------------------
BBB+ by S&P 11.0 12.5 62.5 00.0
Baa1 by Moody's
BBB+ by Duff & Phelps
- ----------------------------------------------------------------------------------------------------------------------------------
BBB by S&P 13.0 12.5 75.0 00.0
Baa2 by Moody's
BBB by Duff & Phelps
- ----------------------------------------------------------------------------------------------------------------------------------
BBB- by S&P 17.5 12.5 112.5 25.0
Baa3 by Moody's
BBB- by Duff & Phelps
- ----------------------------------------------------------------------------------------------------------------------------------
None of above criteria satisfied 20.0 12.5 125.0 37.5
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Any change in the commitment fee, utilization fee or the margin applicable
to Loans shall become effective upon any public announcement of any change in
the above ratings that requires such a change according to the above chart.
"Arranger" means Banc of America Securities LLC.
--------
"Bank" has the meaning assigned to that term in the introduction to this
----
Agreement, together with any other financial institutions that become a party
hereto as a "Bank" pursuant to Section 10.01.
"Bank Affiliate" means a Person engaged primarily in the business of
--------------
commercial banking and that is a Subsidiary of a Bank or of a Person of which a
Bank is a Subsidiary.
"Bank of America" means Bank of America, N.A..
---------------
"Base Rate" means a fluctuating rate per annum which is the higher of (a)
---------
the Federal Funds Rate plus one-half of one percent (1/2%) per annum and (b) the
rate of interest publicly
-2-
<PAGE>
announced from time to time by Bank of America as its prime rate, as in effect
on such date of determination. The prime rate is set by Bank of America based on
various factors including Bank of America's costs and desired return, general
economic conditions, and other factors, and is used as a reference point for
pricing some loans. Bank of America may make loans at, above or below the rate
announced by it as its prime rate.
"Base Rate Loans" means Loans made by the Banks bearing interest at rates
---------------
determined by reference to the Base Rate.
"Business Day" means any day other than a Saturday, Sunday or other day on
------------
which commercial banks in New York City, New York, San Francisco, California or
Dallas, Texas are authorized or required by law to close and, if the applicable
Business Day relates to any Eurodollar Rate Loan, means such a day on which
dealings are carried on in the applicable offshore dollar interbank market.
"Capital Assets" means, as at any date of determination, those assets of a
--------------
Person that would, in conformity with GAAP, be classified as property, plant or
equipment on the balance sheet of that Person.
"Capital Lease" as applied to any Person, means any lease of any property
-------------
(whether real, personal or mixed) by that Person as lessee which would, in
conformity with GAAP, be required to be accounted for as a capital lease on the
balance sheet of that Person other than, in the case of the Company or any of
its Subsidiaries, any such lease under which the Company or any of its
Subsidiaries is the lessor.
"Combined Purchasers' Investments" means an amount equal to the sum of (a)
--------------------------------
the Purchasers' Investments under the Receivables Purchase Agreement plus (b)
----
the analogous amount under Other Permitted Accounts Receivable Financing
Facilities relating to the sales of accounts receivable of Domestic Subsidiaries
(without duplication for accounts receivable sold to a Subsidiary of the Company
and then sold to a third party purchaser).
"Commitment" means, for each Bank, the amount set forth under "Commitment"
----------
on Schedule 1.01, as such amount may be adjusted pursuant to Section 2.05.
------------- ------------
"Company Party" means the Company or any Person (except the Banks, the
-------------
Administrative Agent, the Syndication Agent, the Documentation Agent and the
Arranger and any of their respective Affiliates) from time to time party to a
Loan Document.
"Consolidated Funded Indebtedness" means, at any date of determination, for
--------------------------------
the Company and its Subsidiaries on a consolidated basis, the sum of (a) all
obligations and liabilities, whether current or long-term, for borrowed money,
(b) that portion of obligations with respect to Capital Leases which is
capitalized on the consolidated balance sheet of the Company and its
Subsidiaries, and (c) all guaranties of unconsolidated funded obligations for
borrowed money, all determined in conformity with GAAP.
"Consolidated Net Income" for any period, means the net income (or loss) of
-----------------------
the Company and its Subsidiaries on a consolidated basis for such period taken
as a single accounting period determined in conformity with GAAP.
-3-
<PAGE>
"Consolidated Tangible Net Worth" means, as at any date of determination,
-------------------------------
the net worth of the Company and its Subsidiaries on a consolidated basis minus
-----
foreign exchange currency translation adjustments and intangible assets, all
determined in conformity with GAAP.
"Contingent Obligation", as applied to any Person, means, without
---------------------
duplication, any direct or indirect liability, contingent or otherwise, of that
Person (i) with respect to any indebtedness, lease, dividend or other obligation
of another if the primary purpose or intent thereof by the Person incurring the
Contingent Obligation is to provide assurance to the obligee of such obligation
of another that such obligation of another will be paid or discharged, or that
any agreements relating thereto will be complied with, or that the holders of
such obligation will be protected (in whole or in part) against loss in respect
thereof or (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings. Contingent Obligations shall include, without limitation, (a) the
direct or indirect guaranty, endorsement (otherwise than for collection or
deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another and
(b) any liability of such Person for the obligations of another through any
agreement (contingent or otherwise) (x) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise) or (y) to maintain the
solvency or any balance sheet item, level of income or financial condition of
another, if in the case of any agreement described under subclauses (x) or (y)
of this sentence the primary purpose or intent thereof is as described in the
preceding sentence. The amount of any Contingent Obligation shall be equal to
the amount of the obligation so guaranteed or otherwise supported. The amount
of any Contingent Obligation denominated in a currency other than Dollars shall
be equal to the Dollar Equivalent of such Contingent Obligation.
"Contractual Obligation" as applied to any Person, means any provision of
----------------------
any security issued by that Person or of any material indenture, mortgage, deed
of trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.
"Default" means any event or circumstance which, with the giving of notice,
-------
the lapse of time, or both, would (if not cured or otherwise remedied during
such time) constitute an Event of Default.
"Documentation Agent" means ABN AMRO Bank N.V. in its capacity as
-------------------
documentation agent.
"Dollars" means lawful money of the United States of America.
-------
"Domestic Subsidiary" means a Subsidiary of the Company that is
-------------------
incorporated in a jurisdiction of the United States of America.
"Duff & Phelps" means Duff & Phelps Credit Rating Co. or any successor
-------------
thereto (including Fitch ICBA or any affiliates thereof).
-4-
<PAGE>
"Effective Date" means the date on which all the conditions in Section 4.01
-------------- ------------
are satisfied or waived.
"Eligible Assignee" means (i) a commercial bank organized under the laws of
-----------------
the United States, or any state thereof, and having a combined capital and
surplus of at least $100,000,000; (ii) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located in the
country in which it is organized or another country which is also a member of
the OECD; and (iii) a Person that is primarily engaged in the business of
commercial banking and that is (A) a Subsidiary of a Bank, (B) a Subsidiary of a
Person of which a Bank is a Subsidiary, or (C) a Person of which a Bank is a
Subsidiary.
"Environmental Claims" means all claims, however asserted, by any
--------------------
Governmental Person or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
------------------
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Person, in each case relating
to environmental, health, safety and land use matters.
"ERISA" means, at any time, the Employee Retirement Income Security Act of
-----
1974, as amended from time to time and any successor statute, and the rules and
regulations promulgated thereunder.
"ERISA Affiliate", as applied to any Person, means any trade or business
---------------
(whether or not incorporated) which is a member of a group of which that Person
is a member and which is under common control within the meaning of Section
414(b) and 414(c) of the Internal Revenue Code.
"Eurodollar Rate Loans" means Loans bearing interest at rates determined by
---------------------
reference to the Eurodollar Rate as provided in Section 2.08(a).
---------------
"Eurodollar Rate" means for any Interest Period with respect to any
---------------
Eurodollar Rate Loan, a rate per annum determined by Administrative Agent
pursuant to the following formula:
Eurodollar Rate = Eurodollar Base Rate
-------------------------------------------
1.00 - Eurodollar Reserve Percentage
-5-
<PAGE>
Where,
"Eurodollar Base Rate" means, for such Interest Period:
--------------------
(a) the rate per annum equal to the rate determined by Administrative
Agent to be the offered rate that appears on the page of the Telerate
screen that displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on the first day of
such Interest Period) with a term equivalent to such Interest Period,
determined as of approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, or
(b) in the event the rate referenced in the preceding subsection (a)
does not appear on such page or service or such page or service shall cease
to be available, the rate per annum equal to the rate determined by
Administrative Agent to be the offered rate on such other page or other
service that displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on the first day of
such Interest Period) with a term equivalent to such Interest Period,
determined as of approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, or
(c) in the event the rates referenced in the preceding subsections (a)
and (b) are not available, the rate per annum determined by Administrative
Agent as the rate of interest (rounded upward to the next 1/100th of 1%) at
which deposits in Dollars for delivery on the first day of such Interest
Period in same day funds in the approximate amount of the Eurodollar Rate
Loan being made, continued or converted by Administrative Agent (or its
Affiliate) in its capacity as a Bank and with a term equivalent to such
Interest Period would be offered by Bank of America's London Branch to
major banks in the offshore Dollar market at their request at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period.
"Eurodollar Reserve Percentage" means, for any day during any Interest
-----------------------------
Period, the reserve percentage (expressed as a decimal, rounded upward to
the next 1/100th of 1%) in effect on such day, whether or not applicable to
any Bank, under regulations issued from time to time by the Board of
Governors of the Federal Reserve System for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities"). The Eurodollar Rate for each
outstanding Eurodollar Rate Loan shall be adjusted automatically as of the
effective date of any change in the Eurodollar Reserve Percentage.
The determination of the Eurodollar Reserve Percentage and the
Eurodollar Base Rate by Administrative Agent shall be conclusive in the
absence of manifest error.
"Event of Default" means any of the events set forth in Section 8.01.
---------------- ------------
"Exchange Act" means, at any time, the Securities Exchange Act of 1934, as
------------
amended from time to time, and any successor statute, and the rules and
regulations promulgated thereunder.
-6-
<PAGE>
"Federal Funds Rate" means the weighted average of the rates on overnight
------------------
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day of determination (or if such
day of determination is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transaction received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
---------------------
System or any successor thereof.
"Fisher-Price" means Fisher-Price, Inc., a Delaware corporation.
------------
"Fisher-Price Guaranty" means the Continuing Guaranty signed by Fisher-
---------------------
Price substantially in the form of Exhibit F-1 hereto, as amended, supplemented,
restated or otherwise modified from time to time.
"Fisher-Price Subordination Agreement" means the Fisher-Price Subordination
------------------------------------
Agreement substantially in the form of Exhibit G-1 attached hereto signed by the
Company and certain Affiliates of the Company with respect to which Fisher-Price
has material outstanding obligations, as it may hereafter be amended,
supplemented, restated or otherwise modified from time to time.
"Funding Date" means the Business Day of the funding of a Loan.
------------
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Governmental Person" means the government of the United States or any
-------------------
foreign government or the government of any state or locality therein, any
political subdivision or any governmental, quasi-governmental, judicial, public
or statutory instrumentality, authority, body or entity, or other regulatory
bureau, authority, body or entity of the United States, any foreign government
or any state or locality therein, including the Federal Deposit Insurance
Company, the Comptroller of the Currency or the Federal Reserve Board.
"Governmental Rule" means any law, statute, rule, regulation, ordinance,
-----------------
order, judgment, guidelines or decision of any Governmental Person.
"Indebtedness", as applied to any Person, means (i) all indebtedness for
------------
borrowed money, (ii) that portion of obligations with respect to Capital Leases
which is required to be capitalized on a balance sheet in conformity with GAAP,
(iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
which purchase price is (y) due more than twelve months from the date of
incurrence of the obligation
-7-
<PAGE>
in respect thereof, or (z) evidenced by a promissory note and (v) all
indebtedness secured by any Lien on any property or asset owned or held by that
Person regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is non-recourse to the credit of that Person. The
amount of any Indebtedness shall be the principal amount of and all interest,
premium, if any, and other fees and expenses accrued on any of the foregoing.
"Interest Payment Date" means, with respect to any Eurodollar Rate Loan,
---------------------
the last day of each Interest Period applicable to such Loan and, with respect
to any Base Rate Loan, the last day of each calendar quarter, and with respect
to all Loans, the Maturity Date; provided, however, that if any Interest Period
-------- -------
for a Eurodollar Rate Loan exceeds three months, interest shall also be paid on
the date which falls three months after the beginning of such Interest Period.
"Interest Period" means, with respect to any Eurodollar Rate Loan, the
---------------
period commencing on the Business Day the Eurodollar Rate Loan is disbursed or
continued or on the date on which a Loan is converted into a Eurodollar Rate
Loan and ending on the date one, two, three or six months thereafter, as
selected by the Company in its Notice of Borrowing or Notice of
Conversion/Continuation; provided that:
--------
(i) if any Interest Period pertaining to a Eurodollar Rate Loan
would otherwise end on a day which is not a Business Day, that Interest
Period shall be extended to the next succeeding Business Day unless the
result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on
the immediately preceding Business Day;
(ii) any Interest Period pertaining to a Eurodollar Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period; and
(iii) no Interest Period shall extend beyond the Maturity Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
---------------------
to the date hereof and from time to time hereafter, and the rules and
regulations promulgated thereunder.
"Lending Office" means, with respect to any Bank, the office or offices of
--------------
the Bank specified as its "Lending Office" under its name on Schedule 10.06, or
--------------
such other office or offices of the Bank as it may from time to time specify to
the Company and the Administrative Agent in writing.
"Lien" means any lien, mortgage, pledge, security interest, charge or
----
encumbrance of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to give any kind
of security interest).
"Loan Documents" means this Agreement, any Notes, the Mattel Sales
--------------
Guaranty, the Fisher-Price Guaranty, the Mattel Sales Subordination Agreement,
the Fisher-Price Subordination Agreement and all documents and instruments
delivered in connection herewith or therewith; provided, however, that for the
-------- -------
avoidance of doubt, "Loan Documents" shall not
-8-
<PAGE>
include documents included in the definition of "Loan Documents" under that
certain Second Amended and Restated Credit Agreement dated as of March 11, 1998,
among the Company, the banks from time to time party thereto and Bank of America
as agent thereunder, except to the extent that any document or instrument
delivered in connection therewith is also delivered in connection herewith.
"Loans" has the meaning set forth in Section 2.01.
----- ------------
"Margin Stock" has the meaning assigned to the term "Margin Stock" in
------------
Regulation U of the Federal Reserve Board as in effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect upon the
-----------------------
business, operations, properties, assets, business prospects or condition
(financial or otherwise) of the Company and its Subsidiaries, taken as a whole,
or (ii) a material impairment of the ability of the Company to perform the
Obligations or of the Banks to enforce the Obligations.
"Material Subsidiary" means Mattel Sales, Fisher-Price, or any other
-------------------
Subsidiary of the Company which meets any of the following conditions:
(a) the Company's and its Subsidiaries' investments in, and advances
to, the Subsidiary exceed 10 percent of the total assets of the Company and
its Subsidiaries consolidated as of the end of the most recently completed
fiscal year (for a proposed business combination to be accounted for as a
pooling of interest, this condition is also met when the number of common
shares exchanged or to be exchanged by the Company exceeds 10 percent of
its total common shares outstanding at the date the combination is
initiated); or
(b) the Company and its other Subsidiaries' proportionate share of the
total assets (after intercompany eliminations) of the Subsidiary exceeds 10
percent of the total assets of the Company and its Subsidiaries
consolidated as of the end of the most recently completed fiscal year; or
(c) the Company and its other Subsidiaries' equity in the income from
continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principles of the Subsidiary
exceeds 10 percent of such income of the Company and its Subsidiaries
consolidated for the most recently completed fiscal year.
For purpose of meeting the prescribed income test the following guidance
should be applied:
(i) When a loss has been incurred by either the Company and its
Subsidiaries consolidated or the tested Subsidiary, but not both, the
equity in the income or loss of the tested Subsidiary should be excluded
from the income of the Company and its Subsidiaries consolidated for
purposes of the computation.
(ii) If income of the Company and its Subsidiaries consolidated for
the most recent fiscal year is at least 10 percent lower than the average
of the income for the last
-9-
<PAGE>
five years, such average income should be substituted for purposes of the
computation. Any loss years should be omitted for purposes of computing
average income.
(iii) Where the test involves combined entities, as in the case of
determining whether summarized financial data should be presented, entities
reporting losses shall not be aggregated with entities reporting income.
"Mattel Sales" means Mattel Sales Corp., a California corporation.
------------
"Mattel Sales Guaranty" means the Continuing Guaranty signed by Mattel
---------------------
Sales substantially in the form of Exhibit F-2 hereto, as amended, supplemented,
restated or otherwise modified from time to time.
"Mattel Sales Subordination Agreement" means the Mattel Sales Subordination
------------------------------------
Agreement substantially in the form of Exhibit G-2 attached hereto signed by the
Company and certain Affiliates of the Company with respect to which Mattel Sales
has material outstanding obligations, as it may hereafter be amended,
supplemented, restated or otherwise modified from time to time.
"Maturity Date" means March 29, 2001.
-------------
"Moody's" means Moody's Investors Service, Inc. or any successor thereto.
-------
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
------------------
4001(a)(3) of ERISA which is maintained for employees of the Company or any
ERISA Affiliate of the Company.
"Note" means a promissory note of the Company payable to the order of a
----
Bank substantially in the form of Exhibit A hereto, evidencing the Loans made by
such Bank to the Company.
"Notice of Borrowing" means a notice substantially in the form of Exhibit B
-------------------
hereto with respect to a proposed borrowing pursuant to Section 2.03(a).
---------------
"Notice of Conversion/Continuation" means a notice given by the Company to
---------------------------------
the Administrative Agent pursuant to Section 2.04, in substantially the form of
------------
Exhibit C hereto.
"Obligations" means all obligations of every nature of the Company, Fisher-
-----------
Price and Mattel Sales from time to time owed to the Administrative Agent, the
Banks or any other Person required to be indemnified hereunder, or any of them,
under any Loan Document.
"Officers' Certificate" means a certificate substantially in the form of
---------------------
Exhibit D hereto executed on behalf of the Company by two different officers of
the Company, one of which shall be (a) its Chairman of the Board (if an
officer), one of its Presidents, one of its Executive Vice Presidents, or one of
its Senior Vice Presidents, and the other one of which shall be (b) its Chief
Financial Officer, its Treasurer, one of its Assistant Treasurers, or its
Controller, delivered to the Banks by the Company pursuant to Section 6.01(c).
---------------
-10-
<PAGE>
"Other Permitted Accounts Receivable Financing Facility" means a financing
------------------------------------------------------
arrangement (other than the Receivables Purchase Agreement) entered into in the
ordinary course of business under which accounts receivable of the Company,
Mattel Sales, Fisher-Price or any other Subsidiary are periodically sold
directly to third party purchasers, or sold to a Subsidiary of the Company
formed for such purpose which in turn sells such accounts receivable to third
party purchasers; provided, however, that in connection with any such financing
-------- -------
arrangement:
(a) there is no recourse to any seller of such accounts receivable on
account of the creditworthiness of the obligor on such accounts receivable;
and
(b) no negative pledge or Lien is created on any accounts receivables
not actually sold or discounted.
"Participant" has the meaning set forth in Section 10.01.
----------- -------------
"Pension Plan" means any employee plan which is subject to Section 412 of
------------
the Internal Revenue Code and which is maintained for employees of the Company
or any ERISA Affiliate of the Company other than a Multiemployer Plan.
"Person" means any individual, partnership, corporation (including a
------
business trust), joint stock company, joint venture, trust, bank, trust company,
unincorporated association or other entity or a government or any agency or
political subdivision thereof.
"Pro Rata Share" means with respect to each Bank the percentage set forth
--------------
opposite such Bank's name on Schedule 1.01.
-------------
"Purchasers' Investment" has the meaning set forth in the Receivables
----------------------
Purchase Agreement.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
------------------------------
dated as of March 11, 1998, among Mattel Factoring, Inc., as transferor, the
Company, as guarantor and servicer, the purchasers party thereto and the
Receivables Purchase Administrative Agent, as it may be amended, supplemented,
restated or otherwise modified from time to time.
"Regulation D" means Regulation D of the Federal Reserve Board as in effect
------------
from time to time.
"Requisite Banks" means, as at any date of determination, Banks having at
---------------
least 51% of the then aggregate unpaid principal amount of the Loans (or if no
Loans are then outstanding, Banks having at least 51% of the combined
Commitments).
"Responsible Officer" means the Chief Executive Officer, the Chief
-------------------
Financial Officer, the Treasurer or an Assistant Treasurer of the Company or any
officer of the Company designated by any of the above. Any document or
certificate hereunder that is signed by a Responsible Officer shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of the Company and such Responsible
Officer shall be conclusively presumed to have acted on behalf of the Company.
-11-
<PAGE>
"Securities Act" means, at any time, the Securities Act of 1933, as amended
--------------
from time to time, and any successor statute, and the rules and regulations
promulgated thereunder.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-
---
Hill Companies, Inc., or any successor thereto.
"Subsidiary" means any corporation, association or other business entity of
----------
which more than 50% of the total voting power of shares of stock entitled to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more of the
other Subsidiaries of that Person or a combination thereof.
"Syndication Agent" means Citicorp USA, Inc. in its capacity as syndication
-----------------
agent.
1.02 Other Definitional Provisions.
References to "Sections" shall be to Sections of this Agreement unless
otherwise specifically provided. Any of the terms defined in Section 1.01 may,
------------
unless the context otherwise requires, be used in the singular or the plural
depending on the reference.
Section 2.
THE COMMITMENTS.
2.01 The Commitments.
Each Bank hereby severally agrees to make advances to the Company ("Loans")
until the Maturity Date on the terms and conditions set forth in this Agreement
in an aggregate principal amount not exceeding such Bank's Commitment; provided,
--------
however, that the outstanding principal amount of all Loans hereunder shall not
- -------
exceed the combined Commitments. Within the limits of each Bank's Commitment,
and subject to the other terms and conditions hereof, the Company may borrow
under this Section 2.01, prepay pursuant to Section 2.06 and reborrow pursuant
------------
to this Section 2.01.
------------
2.02 Loan Accounts and Notes.
(a) Subject to Section 2.02(b), the Loans made by each Bank shall be
---------------
evidenced by one or more loan accounts maintained by such Bank in the ordinary
course of business. The loan accounts or records maintained by the
Administrative Agent and each Bank shall be conclusive absent manifest error of
the amount of the Loans made by the Banks to the Company and the interest and
payments thereon. Any failure to record or any error in doing so shall not,
however, limit or otherwise affect the obligation of the Company hereunder to
pay any amount owing with respect to the Loans.
(b) Upon the written request of any Bank made through the Administrative
Agent, the Loans made by such Bank may be evidenced by one or more Notes,
instead of loan accounts. Each such Bank shall endorse on the schedules annexed
to its Note(s), the date, amount and maturity of each Loan made by it and the
amount of each payment of principal made by the Company with respect thereto.
Each such Bank is irrevocably authorized by the Company to endorse the schedules
annexed to its Note(s) and each Bank's record shall be conclusive absent
manifest error; provided, however, that the failure of a Bank to make, or an
-------- -------
error in making, a
-12-
<PAGE>
notation thereon with respect to any Loan shall not limit or otherwise affect
the obligations of the Company hereunder or under any such Note to such Bank.
2.03 Borrowing Procedure.
(a) Whenever the Company desires to borrow hereunder, it shall deliver
irrevocable telephonic notice to the Administrative Agent followed immediately
by written notice in the form of a Notice of Borrowing, which telephonic notice
must be received by the Administrative Agent no later than (i) 8:00 a.m.
(California time) on the proposed Funding Date in the case of Base Rate Loans
and (ii) 9:00 a.m. (California time) three Business Days in advance of the
proposed Funding Date in the case of Eurodollar Rate Loans, specifying (A) the
proposed Funding Date which shall be a Business Day, (B) the amount of the
proposed borrowing, (C) whether the proposed borrowing shall consist of Base
Rate Loans or Eurodollar Rate Loans, and (D) in the case of Eurodollar Rate
Loans, the requested Interest Period. Base Rate Loans made on any Funding Date
shall be in an aggregate minimum amount of $1,000,000 and integral multiples of
$500,000 in excess of that amount. Eurodollar Rate Loans made on any Funding
Date shall be in an aggregate minimum amount of $5,000,000 and integral
multiples of $500,000 in excess of that amount.
(b) Promptly (and normally within two hours) after receipt of a Notice of
Borrowing (or telephone notice in lieu thereof), the Administrative Agent shall
notify each Bank of the proposed borrowing. Each Bank shall make available to
the Administrative Agent its Pro Rata Share of the amount (if any) by which the
principal amount of the proposed borrowing exceeds the principal amount of the
Loans (if any) maturing on the Funding Date, in same day funds, by remitting
such funds to Administrative Agent's Office no later than 11:00 a.m. (California
time) on the Funding Date. Upon satisfaction of the conditions set forth in
Section 4.02, the Administrative Agent shall make available to the Company on
- ------------
such Funding Date the aggregate of the amounts (if any) so made available by the
Banks by causing an amount of same day funds equal to such aggregate amount (if
any) received by the Administrative Agent to be credited to the account of the
Company at such office of Bank of America. To the extent that Eurodollar Rate
Loans made by the Banks mature on any Funding Date, the Banks shall apply the
proceeds of the Loans made on such Funding Date, to the extent thereof, to the
repayment of such maturing Loans, such Loans and repayments intended to be a
contemporaneous exchange.
2.04 Conversion and Continuation Elections.
(a) The Company may upon irrevocable written notice to the Administrative
Agent: (i) elect to convert any Base Rate Loans (or any part thereof in an
amount not less than $5,000,000 or an integral multiple of $500,000 in excess
thereof) on any Business Day into Eurodollar Rate Loans; (ii) elect to convert
any Eurodollar Rate Loans (or any part thereof) on the last day of any Interest
Period therefor into Base Rate Loans in an amount not less than $1,000,000 or an
integral multiple of $500,000 in excess thereof; or (iii) elect to continue any
Eurodollar Rate Loans (or any part thereof in an amount not less than $5,000,000
or an integral multiple of $500,000 in excess thereof) on the last day of any
Interest Period therefor; provided, that if the aggregate amount of Eurodollar
--------
Rate Loans shall have been reduced, by payment, prepayment, or conversion of
part thereof to be less than $5,000,000, the Eurodollar Rate Loans
-13-
<PAGE>
shall automatically convert into Base Rate Loans, and on and after such date the
right of the Company to continue such Loans as Eurodollar Rate Loans shall
terminate.
(b) Each conversion or continuation shall be made upon irrevocable
telephonic notice to the Administrative Agent followed immediately by written
notice in the form of a Notice of Conversion/ Continuation, which telephonic
notice must be received by the Administrative Agent prior to (i) 9:00 a.m.
(California time) at least three Business Days in advance of the conversion or
continuation date, if the Loans are to be converted into or continued as
Eurodollar Rate Loans and (ii) 9:00 a.m. (California time) on the conversion or
continuation date, if the Loans are to be converted into Base Rate Loans,
specifying: (A) the proposed conversion or continuation date; (B) the aggregate
amount of Loans to be converted or continued; (C) the nature of the proposed
conversion or continuation; and (D) the duration of the requested Interest
Period, if applicable.
(c) If upon the expiration of any Interest Period applicable to Eurodollar
Rate Loans, the Company has failed to select a new Interest Period to be
applicable to such Eurodollar Rate Loans or type of Loan or if any Default or
Event of Default shall then exist, the Company shall be deemed to have elected
to convert such Eurodollar Rate Loans into Base Rate Loans effective as of the
expiration date of such current Interest Period.
(d) Upon receipt of a Notice of Conversion/Continuation, the
Administrative Agent will promptly notify each Bank thereof, or, if no timely
notice is provided, the Administrative Agent will promptly notify each Bank of
the details of any automatic conversion. All conversions and continuations shall
be made pro rata according to the respective outstanding principal amounts of
the Loans with respect to which the notice was given held by each Bank.
(e) Unless the Requisite Banks shall otherwise agree, after the occurrence
of and during the continuance of a Default or Event of Default, the Company may
not elect to have a Loan be made as, or converted into or continued as, a
Eurodollar Rate Loan.
(f) Notwithstanding any other provision contained in this Agreement, after
giving effect to any conversion or continuation of any Loans, there shall not be
more than five different Interest Periods in effect.
2.05 Reduction and Termination of Commitments.
The Company may from time to time, upon not less than three Business Days'
prior written notice written or telephonic notice confirmed in writing to the
Administrative Agent, reduce or terminate the combined Commitments. The
Administrative Agent shall promptly notify the Banks of such request. Any
partial reduction of the Commitments shall be in an aggregate minimum amount of
$10,000,000 and integral multiples of $1,000,000 in excess of that amount. Any
reduction of the combined Commitments shall be applied to each Bank in
accordance with such Bank's Pro Rata Share thereof. All accrued commitment fees
to, but not including the effective date of any reduction or termination of the
Commitments, shall be paid on the effective date of such reduction or
termination. No reduction or termination of the Commitments shall be permitted
if, after giving effect thereto and to any prepayments made on the effective
date thereof, the outstanding principal amount of the Loans would exceed the
combined Commitments as so reduced. Any reduction or termination of the
Commitments shall be permanent.
-14-
<PAGE>
2.06 Voluntary Prepayments. The Company may, upon not less than one
Business Days' prior written or telephonic notice confirmed in writing to the
Administrative Agent (in the case of a prepayment of a Base Rate Loan) or three
Business Days' prior written or telephonic notice confirmed in writing to the
Administrative Agent (in the case of a prepayment of a Eurodollar Rate Loan)
(which notice the Administrative Agent will promptly transmit by telecopy, telex
or telephone to each Bank), at any time and from time to time prepay (i) any
Eurodollar Rate Loans in whole or in part in an aggregate minimum amount of
$3,000,000 and integral multiples of $500,000 in excess of that amount so long
as the unpaid balance is not less than $5,000,000; or (ii) any Base Rate Loans
in whole or in part in an aggregate minimum amount of $1,000,000 and integral
multiples of $100,000 in excess of that amount; provided that in the event of
--------
any such prepayment of any Eurodollar Rate Loans, the Company shall be obligated
to reimburse the Banks in respect thereof pursuant to Section 3.05. If such
------------
notice of prepayment does not specify how such prepayment shall be applied, it
shall be applied first to Base Rate Loans to the full extent thereof before
application to Eurodollar Rate Loans, as determined by the Administrative Agent.
All prepayments of Eurodollar Rate Loans shall be applied to the payment of any
interest that has accrued to the date of such prepayment before application to
principal. Prepayments of Base Rate Loans shall be applied to principal only.
2.07 Repayment of Loans. Each Loan shall mature and the Company shall repay
the unpaid principal amount of each Loan on the Maturity Date.
2.08 Interest on the Loans.
(a) Subject to Section 2.08(c), the Loans shall bear interest on the
---------------
unpaid principal amount thereof from the Funding Date through maturity (whether
by acceleration or otherwise) at a rate per annum equal to (i) with respect to
Eurodollar Rate Loans, the Eurodollar Rate plus the Applicable Amount for
----
Eurodollar Rate Loans or (ii) with respect to Base Rate Loans, the Base Rate
plus the Applicable Amount for Base Rate Loans.
- ----
(b) Subject to Section 2.08(c), from and after the Effective Date,
---------------
interest shall be payable in arrears on the Loans on each Interest Payment Date
applicable to that Loan. Interest paid on the date of any partial prepayment of
Loans hereunder shall be paid in respect of the portion of the Loans so prepaid.
(c) Any principal payments on the Loans not paid when due and, to the
extent permitted by applicable law, any interest payments on the Loans not paid
when due, in each case whether at stated maturity, by notice of prepayment, by
acceleration or otherwise, shall thereafter bear interest payable upon demand at
a rate which is 2% per annum in excess of the rate of interest otherwise payable
under this Agreement.
2.09 Fees.
(a) The Company agrees to pay a commitment fee equal to the Applicable
Amount for the commitment fee on the daily average unused portion of the
Commitment from the date of this Agreement until the Maturity Date. The Company
shall pay the commitment fee to the Administrative Agent for distribution to
each Bank in accordance with its Pro Rata Share. The commitment fee shall be
calculated on the basis of a 360-day year and the actual number of days
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<PAGE>
elapsed and shall be payable quarterly in arrears on the last Business Day of
each calendar quarter, for all amounts accrued to such date, and on the Maturity
Date; provided that, in connection with any reduction or termination of the
--------
Commitment pursuant to Section 2.05, the accrued fee calculated on the portion
------------
so terminated or reduced for the period ending on such date shall also be paid
on the date of such reduction or termination.
(b) The Company agrees to pay a utilization fee equal to the Applicable
Amount therefor on the daily average principal amount of all outstanding Loans
on each day that the aggregate principal amount of outstanding Loans exceeds
33.00% of the combined Commitments. The Company shall pay the utilization fee
to the Administrative Agent for distribution to each Bank in accordance with its
Pro Rata Share. The utilization fee shall be calculated on the basis of a 360-
day year and the actual number of days elapsed and shall be payable quarterly in
arrears on the last Business Day of each calendar quarter, for all amounts
accrued to such date, and on the Maturity Date; provided that, in connection
--------
with any reduction or termination of the Commitment pursuant to Section 2.05,
------------
the accrued fee calculated on the portion so terminated or reduced for the
period ending on such date shall also be paid on the date of such reduction or
termination.
(c) The Company shall pay to the Administrative Agent for the account of
each Bank an upfront fee as agreed upon between the Company and the Arranger.
(d) The Company shall pay to the Administrative Agent for the account of
itself and the Arranger a structuring and arrangement fee as agreed upon between
the Company, the Administrative Agent and the Arranger.
(e) The Company shall pay to the Administrative Agent for its own account
an annual administrative fee as agreed upon between the Company and the
Administrative Agent.
2.10 Calculation of Interest and Fees.
(a) Interest on all Loans and fees payable under this Agreement shall be
computed on the basis of a 360-day year and the actual number of days elapsed in
the period during which it accrues. In computing interest on any Loan, the date
of the making of the Loan or the first day of an Interest Period, as the case
may be, shall be included and the date of payment shall be excluded; provided
--------
that, if a Loan is repaid on the same day on which it is made, one day's
interest shall be paid on that Loan.
(b) Any change in the interest rate on a Loan resulting from a change in
the Applicable Amount or Eurodollar Reserve Percentage shall become effective as
of the opening of business on the day on which such change in the Applicable
Amount or Eurodollar Reserve Percentage becomes effective. Each determination
of an interest rate by the Administrative Agent pursuant hereto shall be
conclusive and binding on the Company and the Banks in the absence of manifest
error.
2.11 Payments by the Company.
(a) All payments of principal, interest and fees hereunder and under any
Notes shall be made without setoff, counterclaim, recoupment or any other
deduction, in same day funds and
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<PAGE>
delivered to the Administrative Agent at the Administrative Agent's Office for
the account of the Banks or the Administrative Agent not later than 11:00 a.m.
(California time) on the date due. The Administrative Agent will promptly
distribute to each Bank its Pro Rata Share (or other applicable share as
expressly provided herein) of such principal, interest, fees or other amounts in
like funds received. Any payment which is received by the Administrative Agent
after that time shall be deemed to have been paid by the Company on the next
succeeding Business Day and any applicable interest or fee shall continue to
accrue.
(b) Subject to the provisions in the definition of "Interest Period",
whenever any payment hereunder shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless the Administrative Agent shall have received notice from the
Company prior to the date on which any payment is due to the Banks hereunder
that the Company will not make such payment in full as and when required
hereunder, the Administrative Agent may assume that the Company has made such
payment in full to the Administrative Agent on such date in immediately
available funds and the Administrative Agent may (but shall not be so required),
in reliance upon such assumption, cause to be distributed to each Bank on such
due date an amount equal to the amount then due such Bank. If and to the extent
the Company shall not have made such payment in full to the Administrative
Agent, each Bank shall repay to the Administrative Agent on demand such amount
distributed to such Bank, together with interest thereon for each day from the
date such amount is distributed to such Bank until the date such Bank repays
such amount to the Administrative Agent, at the Federal Funds Rate as in effect
for each such day.
2.12 Payments by the Banks to the Administrative Agent.
(a) Unless the Administrative Agent shall have received notice from a Bank
on the Effective Date or, with respect to each borrowing after the Effective
Date, by 12:00 noon (California time) one Business Day prior to the date of any
proposed borrowing of Eurodollar Rate Loans, or by 10:00 a.m. (California time)
on the date of any proposed borrowing of Base Rate Loans, that such Bank will
not make available to the Administrative Agent as and when required hereunder
for the account of the Company the amount of that Bank's Pro Rata Share of the
borrowing, the Administrative Agent may assume that each Bank has made such
amount available to the Administrative Agent in immediately available funds on
the Funding Date and the Administrative Agent may (but shall not be so
required), in reliance upon such assumption, make available to the Company on
such date a corresponding amount. If and to the extent any Bank shall not have
made its full amount available to the Administrative Agent in immediately
available funds and the Administrative Agent in such circumstances has made
available to the Company such amount, that Bank shall on the next Business Day
following the date of such borrowing make such amount available to the
Administrative Agent, together with interest at the Federal Funds Rate for and
determined as of each day during such period. A notice of the Administrative
Agent submitted to any Bank with respect to amounts owing under this Section
-------
2.12(a) shall be conclusive, absent manifest error. If such amount is so made
- -------
available, such payment to the Administrative Agent shall constitute such Bank's
Loan on the date of borrowing for all purposes of this Agreement. If such
amount is not made available to the Administrative
-17-
<PAGE>
Agent on the next Business Day following the date of such borrowing, the
Administrative Agent shall notify the Company of such failure to fund and, upon
demand by the Administrative Agent, the Company shall pay such amount to the
Administrative Agent for the Administrative Agent's account, together with
interest thereon for each day elapsed since the date of such borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Loans
comprising such borrowing.
(b) The failure of any Bank to make any Loan on any date of borrowing
shall not relieve any other Bank of any obligation hereunder to make a Loan on
the date of such borrowing, but no Bank shall be responsible for the failure of
any other Bank to make the Loan to be made by such other Bank on the date of any
borrowing.
2.13 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its Pro Rata Share of payments on account of
the Loans obtained by all the Banks, such Bank shall forthwith (a) notify the
Administrative Agent of such fact, and (b) purchase from the other Banks such
participations in the Loans made by them as shall be necessary to cause such
purchasing Bank to share the excess payment ratably with each of them; provided,
--------
however, that if all or any portion of such excess payment is thereafter
- -------
recovered from the purchasing Bank, such purchase shall to that extent be
rescinded and each other Bank shall repay to the purchasing Bank the purchase
price paid therefor, together with an amount equal to such paying Bank's Pro
Rata Share (according to the proportion of (i) the amount of such paying Bank's
required repayment to (ii) the total amount so recovered from the purchasing
Bank) of any interest or other amount paid or payable by the purchasing Bank in
respect of the total amount so recovered. The Company agrees that any Bank so
purchasing a participation from another Bank pursuant to this Section 2.13 may,
------------
to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Bank were the direct creditor of the Company in the amount of such
participation. The Administrative Agent will keep records (which shall be
conclusive and binding in the absence of manifest error) of participations
purchased pursuant to this Section 2.13 and will in each case notify the Banks
------------
following any such purchases or repayments.
Section 3.
PAYMENTS IN GENERAL.
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<PAGE>
3.01 Taxes.
(a) Subject to Section 3.01(d) and Section 3.01(g), any and all payments
--------------- ---------------
by the Company to each Bank or the Administrative Agent under this Agreement
shall be made free and clear of, and without deduction or withholding for, any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Bank and the Administrative Agent, such taxes (including income taxes or
franchise taxes) as are imposed on or measured by each Bank's or the
Administrative Agent's net income by the jurisdiction under the laws of which
such Bank or the Administrative Agent, as the case may be, is organized or
maintains a Lending Office or any political subdivision thereof (all such non-
excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes").
(b) In addition, the Company shall pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents
(hereinafter referred to as "Other Taxes").
(c) Subject to Section 3.01(g), the Company shall indemnify and hold
---------------
harmless each Bank and the Administrative Agent for the full amount of Taxes or
Other Taxes (including without limitation, any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 3.01) paid by such Bank
------------
or the Administrative Agent and any liability (including penalties, interest,
additions to tax and expenses) arising therefrom or with respect thereto.
Payment under this indemnification shall be made within 30 days from the date
such Bank or the Administrative Agent makes written demand therefor.
(d) If the Company shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank
or the Administrative Agent, then, subject to Section 3.01(g): (i) the sum
---------------
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 3.01) such Bank or the Administrative Agent, as the case may be,
------------
receives an amount equal to the sum it would have received had no such
deductions been made; (ii) the Company shall make such deductions, and (iii) the
Company shall pay the full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law.
(e) Within 30 days after the date of any payment by the Company of Taxes
or Other Taxes, the Company shall furnish to the Administrative Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Administrative Agent.
(f) Each Bank that is a "foreign corporation, partnership or trust" within
the meaning of the Internal Revenue Code shall deliver to the Administrative
Agent, prior to receipt of any payment subject to withholding under the Internal
Revenue Code (or after accepting an assignment of an interest herein), two duly
signed completed copies of either IRS Form W-8BEN or any successor thereto
(relating to such Bank and entitling it to an exemption from, or reduction of,
withholding tax on all payments to be made to such Bank by the Company pursuant
to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all
payments to be
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<PAGE>
made to such Bank by the Company pursuant to this Agreement) or such other
evidence satisfactory to the Company and the Administrative Agent that such Bank
is entitled to an exemption from U.S. withholding tax. Thereafter and from time
to time, each such Bank shall (i) promptly submit to the Administrative Agent
such additional duly completed and signed copies of one of such forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may then be available under then current United
States laws and regulations to avoid, or such evidence as is satisfactory to the
Company and the Administrative Agent of any available exemption from or
reduction of, United States withholding taxes in respect of all payments to be
made to such Bank by the Company pursuant to this Agreement, (ii) promptly
notify the Administrative Agent of any change in circumstances which would
modify or render invalid any claimed exemption or reduction, and (iii) take such
steps as shall not be materially disadvantageous to it, in the reasonable
judgment of such Bank, and as may be reasonably necessary (including the re-
designation of its Lending Office) to avoid any requirement of applicable laws
that the Company make any deduction or withholding for taxes from amounts
payable to such Bank. If such Bank fails to deliver the above forms or other
documentation, then the Administrative Agent may withhold from any interest
payment to such Bank an amount equivalent to the applicable withholding tax
imposed by Sections 1441 and 1442 of the Internal Revenue Code, without
reduction. If any Governmental Person asserts that the Administrative Agent did
not properly withhold any tax or other amount from payments made in respect of
such Bank, such Bank shall indemnify the Administrative Agent therefor,
including all penalties and interest, any taxes imposed by any jurisdiction on
the amounts payable to the Administrative Agent under this Section, and costs
and expenses (including costs and expenses of attorneys to the Administrative
Agent) of the Administrative Agent. The obligation of the Banks under this
Section shall survive the payment of all Obligations and the resignation or
replacement of the Administrative Agent.
(g) The Company will not be required to pay any additional amounts in
respect of Taxes pursuant to Section 3.01(d) to any Bank for the account of any
---------------
Lending Office of such Bank: (i) if the obligation to pay such additional
amounts would not have arisen but for a failure by such Bank to comply with its
obligations under Section 3.01(f) in respect of such Lending Office; or (ii) if
---------------
such Bank shall have delivered to the Company the form(s) in respect of such
Lending Office pursuant to Section 3.01(f), and such Bank shall not be entitled
---------------
to exemption from deduction or withholding of United States Federal income tax
in respect of payments by the Company hereunder for the account of such Lending
Office for any reason other than a change in United States law or regulations or
in the official interpretation of such law or regulations by any Governmental
Person charged with the interpretation or administration thereof (whether or not
having the force of law) after the date of delivery of such form(s)
(h) If, at any time, the Company requests any Bank to deliver any forms or
other documentation pursuant to Section 3.01(f), then the Company shall, on
---------------
demand of such Bank through the Administrative Agent, reimburse such Bank for
any costs and expenses (including expenses of outside legal counsel and the
allocated costs of in-house counsel) reasonably incurred by such Bank in the
preparation or delivery of such forms or other documentation.
(i) If the Company is required to pay additional amounts to any Bank or
the Administrative Agent pursuant to Section 3.01(d), then such Bank shall use
---------------
its reasonable best efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Lending
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<PAGE>
Office so as to eliminate any such additional payment by the Company which may
thereafter accrue if such change in the judgment of such Bank is not otherwise
disadvantageous to such Bank.
(j) The agreements and obligations of the Company contained in this
Section 3.01 shall survive the payment in full of all other Obligations.
- ------------
3.02 Capital Adequacy. If (a) any adoption of or any change in or in the
interpretation of any law, rule or regulation, or (b) compliance with any
guideline, request or directive of any central bank or other Governmental Person
or quasi-governmental authority exercising control over banks or financial
institutions generally or any court (whether or not having the force of law), or
(c) any change in the force or effectiveness of the regulations set forth at 12
C.F.R. Part 3 (Appendix A), 12 C.F.R. Part 225 (Appendix A), 12 C.F.R. Part 208
(Appendix A) or 12 C.F.R. Part 325 (Appendix A) requires that the commitments of
any Bank hereunder (including, without limitation, commitments and obligations
in respect of Loans) be treated as an asset or otherwise be included for
purposes of calculating the appropriate amount of capital to be maintained by
such Bank or any corporation controlling such Bank (a "Change in Law"), the
result of which is to reduce the rate of return on such Bank's capital as a
consequence of such commitments to a level below that which such Bank could have
achieved but for such Change in Law, taking into consideration such Bank's
policies with respect to capital adequacy, by an amount which such Bank deems to
be material, the Bank shall deliver to the Company a statement of the amount
necessary to compensate such Bank for the reduction in the rate of return on its
capital attributable to such commitments (the "Capital Compensation Amount").
The Bank shall determine the Capital Compensation Amount in good faith, using
reasonable attribution and averaging methods. The Bank shall from time to time
notify the Company of the amount so determined. Such amount shall be due and
payable by the Company to such Bank ten Business Days after such notice is
given. As soon as practicable after any Change in Law, each Bank shall submit to
the Company estimates of the Capital Compensation Amounts that would be payable
as a function of such Bank's commitments hereunder.
3.03 Illegality.
(a) If any Bank shall determine that any Governmental Rule or any change
therein or in the interpretation or administration thereof has made it unlawful,
or that any Governmental Person has asserted that it is unlawful, for any Bank
or its Lending Office to make Eurodollar Rate Loans, then, on notice thereof by
the Bank to the Company through the Administrative Agent, the obligation of the
Bank to make Eurodollar Rate Loans shall be suspended until the Bank shall have
notified the Administrative Agent and the Company that the circumstances giving
rise to such determination no longer exists.
(b) If a Bank shall determine that any Governmental Rule or any change
therein or in the interpretation or administration thereof has made it unlawful,
or that any Governmental Person has asserted that it is unlawful, for any Bank
or its Lending Office to maintain any Eurodollar Rate Loan, the Company shall
prepay all Eurodollar Rate Loans of the Bank then outstanding, together with
interest accrued thereon, or convert all Eurodollar Rate Loans of the Bank then
outstanding to Base Rate Loans pursuant to Section 2.04, either on the last day
------------
of the Interest Period thereof if the Bank may lawfully continue to maintain
such Eurodollar Rate
-21-
<PAGE>
Loans to such day, or promptly, if the Bank may not lawfully continue to
maintain such Eurodollar Rate Loans, together with any amounts required to be
paid in connection therewith pursuant to Section 3.05.
------------
(c) If the obligation of any Bank to make or maintain Eurodollar Rate
Loans has been terminated, the Company may elect, by giving notice to the Bank
through the Administrative Agent that all Loans which would otherwise be made by
the Bank as Eurodollar Rate Loans shall be instead Base Rate Loans.
(d) Before giving any notice to the Administrative Agent pursuant to this
Section 3.03, the affected Bank shall designate a different Lending Office with
- ------------
respect to its Eurodollar Rate Loans if such designation will avoid the need for
giving such notice or making such demand and will not, in the judgment of the
Bank, be illegal or otherwise disadvantageous to the Bank.
3.04 Increased Costs and Reduction of Return. If any Bank shall determine
that, due to either (a) the introduction of or any change (other than any change
by way of imposition of or increase in reserve requirements included in the
calculation of the Eurodollar Rate) in or in the interpretation of any law or
regulation or (b) the compliance with any guideline or request from any
Governmental Person (whether or not having the force of law), there shall be any
increase in the cost to such Bank of agreeing to make or making, funding or
maintaining any Eurodollar Rate Loans, then the Company shall be liable for, and
shall from time to time, upon demand therefor by such Bank (with a copy of such
demand to the Administrative Agent), pay to such Bank, additional amounts as are
sufficient to compensate such Bank for such increased costs. Each Bank agrees to
notify the Company of the occurrence of such an increased cost event promptly
after obtaining knowledge thereof.
3.05 Funding Losses. The Company agrees to reimburse each Bank and to hold
each Bank harmless from any loss or expense which the Bank may sustain or incur
as a consequence of: (a) the failure of the Company to make any payment or
prepayment of principal of any Eurodollar Rate Loan (including payments made
after any acceleration thereof); (b) the failure of the Company to borrow,
continue or convert a Loan after the Company has given (or is deemed to have
given) a Notice of Borrowing or a Notice of Conversion/ Continuation; (c) the
failure of the Company to make any prepayment after the Company has given a
notice in accordance with Section 2.06; or (d) the prepayment of a Eurodollar
------------
Rate Loan for any reason on a day which is not the last day of the Interest
Period with respect thereto; including any such loss or expense arising from the
liquidation or reemployment of funds obtained by it to maintain its Eurodollar
Rate Loans hereunder or from fees payable to terminate the deposits from which
such funds were obtained. Solely for purposes of calculating amounts payable by
the Company to the Banks under this Section 3.03(b) and Sections 3.04 and 3.05,
--------------- ------------- -----
each Eurodollar Rate Loan made by a Bank (and each related reserve, special
deposit or similar requirement) shall be conclusively deemed to have been funded
at the Eurodollar Rate used in determining the Eurodollar Rate for such
Eurodollar Rate Loan by a matching deposit or other borrowing in the interbank
eurodollar market for a comparable amount and for a comparable period, whether
or not such Eurodollar Rate Loan is in fact so funded. This covenant shall
survive the payment in full of all other Obligations.
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<PAGE>
3.06 Inability to Determine Rates. If Administrative Agent shall have
determined that for any reason adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for any requested Interest Period with respect
to a proposed Eurodollar Rate Loan, or if the Requisite Banks advise the
Administrative Agent in writing that the Eurodollar Rate applicable for any
requested Interest Period with respect to a proposed Eurodollar Rate Loan does
not adequately and fairly reflect the cost to such Banks of funding such Loan,
the Administrative Agent will forthwith give notice of such determination to the
Company and each Bank. Thereafter, the obligation of the Banks to make or
maintain Eurodollar Rate Loans hereunder shall be suspended until the
Administrative Agent upon the instruction of the Requisite Banks revokes such
notice in writing. Upon receipt of such notice, the Company may revoke any
Notice of Borrowing or Notice of Conversion/ Continuation then submitted by it.
If the Company does not revoke such notice with respect to Loans, the Banks
shall make, convert or continue the Loans, as proposed by the Company, in the
amount specified in the applicable notice submitted by the Company, but such
Loans shall be made, converted or continued as Base Rate Loans instead of
Eurodollar Rate Loans.
3.07 Survival. The agreements and obligations of the Company in this
Section 3 shall survive the payment of all other Obligations.
- ---------
Section 4.
CONDITIONS PRECEDENT.
4.01 Conditions to Effectiveness. The effectiveness of the Agreement is
subject to satisfaction of the following conditions precedent:
(a) The Company shall deliver to the Administrative Agent and Banks (or to
the Administrative Agent for the Banks with sufficient originally executed
copies for each Bank, except for any Notes):
(i) This Agreement, duly executed and delivered by the Company, the
Administrative Agent and all Banks;
(ii) A Note, duly executed and delivered by the Company, drawn to
the order of each Bank requesting a Note, with appropriate insertions;
(iii) The Mattel Sales Guaranty and the Fisher-Price Guaranty, duly
executed and delivered by Mattel Sales and Fisher-Price, respectively;
(iv) the Mattel Sales Subordination Agreement and the Fisher-Price
Subordination Agreement duly executed and delivered by the Company and each
Affiliate of the Company to whom Mattel Sales or Fisher-Price owes any
material outstanding obligations;
(v) Copies of the resolutions of the board of directors or the
executive committee of each Company Party approving and authorizing the
execution, delivery and performance by such Company Party of each Loan
Document to which it is a party,
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<PAGE>
certified as of the Effective Date by the secretary or an assistant
secretary of such Company Party;
(vi) A certificate of the secretary or assistant secretary of each
Company Party, certifying the names and true signatures of the officers of
such Company Party authorized to execute and deliver the Loan Documents to
which it is a party;
(vii) The articles or certificate of incorporation or organization of
each Company Party as in effect on the Effective Date, certified by the
secretary of state of the state of its incorporation or formation as of a
recent date and the bylaws or operating agreement of each Company Party as
in effect on the Effective Date, certified by the secretary or assistant
secretary of such Company Party as of the Effective Date;
(viii) A good standing certificate for each Company Party from the
secretary of state of its state of incorporation or formation dated as of a
recent date;
(ix) Executed copies of one or more favorable written opinions of
Christopher O'Brien, Esq., Assistant General Counsel of the Company, dated
as of the Effective Date, substantially in the form of Exhibit E hereto
relating to the Company Parties and as to such other matters as the
Administrative Agent and the Banks may reasonably request; and
(x) A certificate signed by one of the officers authorized to
deliver an Officers' Certificate certifying (A) that the conditions
specified in Sections 4.01(d) and (e) have been satisfied, (B) that there
---------------- ---
has been no event or circumstance since the date of the audited financial
statements dated December 31, 1999 referred to in Section 5.08 which has a
------------
Material Adverse Effect; and (C) the current ratings on the Company's long-
term unsecured Indebtedness by S&P, Moody's and Duff & Phelps.
(b) The Company shall have paid all fees payable pursuant to Sections
--------
2.09(b), (c), (d) and (e).
- ------- --- --- ---
(c) The Company shall have performed in all material respects all
agreements which this Agreement provides shall be performed by it on or before
the Effective Date.
(d) The representations and warranties of each Company Party contained in
any Loan Document shall be true, correct and complete in all material respects
on and as of the Effective Date.
(e) No Default or Event of Default shall exist.
4.02 Conditions to All Loans. The obligation of each Bank to make any Loan
is subject to the following further conditions precedent that, as of the
applicable Funding Date:
(a) The Administrative Agent shall have received on or before that Funding
Date a Notice of Borrowing signed by a Responsible Officer on behalf of the
Company in writing delivered to the Administrative Agent;
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<PAGE>
(b) The representations and warranties of the Company contained in any
Loan Document (except the representation and warranty contained in Section 5.09
------------
and, in the case of a borrowing of Loans where the aggregate principal amount of
the Loans being made on that Funding Date equals or is less than the aggregate
principal amount of Loans maturing on that Funding Date, the representation and
warranty contained in Section 5.11), shall be true, correct and complete in all
------------
material respects on and as of that Funding Date (except to the extent that such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct in all material respects as of such earlier
date), to the same extent as though made on and as of that Funding Date; and
(c) No Default or Event of Default shall exist or shall result from such
borrowing or continuation or conversion.
Each Notice of Borrowing submitted by the Company hereunder shall
constitute a representation and warranty by the Company hereunder, as of the
Funding Date, that the conditions in Section 4.02 are satisfied or waived.
------------
Section 5.
REPRESENTATIONS AND WARRANTIES.
In order to induce the Banks and the Administrative Agent to enter into
this Agreement and to make any extension of credit hereunder, the Company
represents and warrants to each Bank and the Administrative Agent that the
following statements are true, correct and complete:
5.01 Organization and Powers.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware; and, except for changes in the
ordinary course of business or as permitted or contemplated by this Agreement,
each of the Material Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation; and each has all requisite corporate power and authority to own
and operate its properties, to carry on its business as now conducted and
proposed to be conducted and, in the case of the Company, to enter into this
Agreement, a Fisher-Price Subordination Agreement and a Mattel Sales
Subordination Agreement, to issue the Notes and to carry out the transactions
contemplated hereby and thereby.
5.02 Good Standing.
The Company and, except for changes in the ordinary course of business or
as permitted or contemplated by this Agreement, each Material Subsidiary is in
good standing wherever necessary to carry on its present business and
operations, except in jurisdictions in which the failure to be in good standing
has or will have no Material Adverse Effect.
5.03 Material Subsidiaries.
Except for changes in the ordinary course of business or as permitted or
contemplated by this Agreement, Schedule 5.03 correctly sets forth the name,
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jurisdiction of incorporation and ownership interest of the Company in each of
its Material Subsidiaries as of the date hereof.
5.04 Authorization of Borrowing.
The execution, delivery and performance of each Loan Document to which it
is a party, and acknowledgement of the Fisher-Price Subordination
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Agreement and the Mattel Sales Subordination Agreement and the issuance,
delivery and payment of the Notes have been duly authorized by all necessary
corporate action by the Company.
5.05 No Conflict. The execution, delivery and performance by the Company of
this Agreement and the acknowledgement of the Fisher-Price Subordination
Agreement, the Mattel Sales Subordination Agreement and the issuance, delivery
and payment of the Notes do not and will not (a) violate the Restated
Certificate of Incorporation or Bylaws of the Company, (b) violate any provision
of law applicable to the Company, or any material order, judgment or decree of
any court or other agency of government binding on the Company, the violation of
which would result in a Material Adverse Effect, (c) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of the Company, (d) result in or require the
creation or imposition of any material lien, security interest, charge or
encumbrance of any nature whatsoever upon any of its material properties or
assets, or (e) require any approval of stockholders or any approval or consent
of any Person under any Contractual Obligation of the Company.
5.06 Governmental Consents. The execution, delivery and performance by the
Company of each Loan Document to which it is a party and each agreement,
document, or instrument required hereunder, the acknowledgment of the Fisher-
Price Subordination Agreement, Mattel Sales Subordination Agreement, and the
issuance, delivery and payment of the Notes do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any Federal, state or other governmental authority or regulatory
body or other such person.
5.07 Binding Obligation. This Agreement is, and each other Loan Document to
which it is a party, when executed and delivered hereunder will be, the legally
valid and binding obligations of the Company, enforceable against it in
accordance with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable
principles relating to or limiting creditors' rights generally.
5.08 Financial Condition. The Company has heretofore delivered to the Banks
a consolidated balance sheet of the Company and its Subsidiaries for the fiscal
year ended December 31, 1999 and related consolidated statements of income,
shareholders' equity and changes in financial position of the Company and its
Subsidiaries for such fiscal year, audited by Price Waterhouse. All such
statements were prepared in accordance with GAAP and fairly present the
consolidated financial position of the Company and its Subsidiaries as at the
date thereof and the consolidated results of operations and statement of cash
flow of the Company and its Subsidiaries for the period then ended. Neither the
Company nor any of its Subsidiaries has any material Contingent Obligation,
liability for taxes or long-term lease which as of the date of this Agreement,
individually or in the aggregate, would, if it became absolute, result in a
Material Adverse Effect which is not reflected in the foregoing statements or in
the notes thereto.
5.09 Changes, Etc. Since December 31, 1999, there has been no event or
events that have, either individually or in the aggregate, resulted in a
Material Adverse Effect.
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5.10 Title to Properties. The Company and its Subsidiaries have good,
sufficient and legal title to all the properties and assets reflected in the
consolidated balance sheet referred to in Section 5.08 except as set forth in
------------
said balance sheet or in the notes thereto, except for assets acquired or
disposed of in the ordinary course of business or as otherwise permitted by this
Agreement since December 31, 1999 and except for immaterial defects in title as
could not, individually or in the aggregate, have a Material Adverse Effect.
5.11 Litigation; Adverse Facts. Except as set forth on Schedule 5.11,
------------
there is no action, suit, proceeding or arbitration (whether or not purportedly
on behalf of the Company or any of its Subsidiaries) at law or in equity or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or any of the Company's or such Subsidiaries'
properties which, in the reasonable judgment of the Company and its executive
officers (assuming adverse determination of facts which the Company in good
faith believes it would not successfully prove, and considering damages which in
their best judgment is the maximum that would be awarded upon, and the
likelihood of, an adverse determination of the claim or the amount which
reflects their best judgment as to that required to be paid to settle the
claims) would result in a Material Adverse Effect and there is no basis known to
such executive officers for any such action, suit or proceeding. Neither the
Company nor any of its Subsidiaries is (i) in violation of any applicable law
which could result in a Material Adverse Effect, or (ii) subject to or in
default with respect to any final judgment, writ, injunction, decree, rule or
regulation of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which could result in a Material Adverse Effect. There is no action,
suit, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries which
provides a reasonable basis for questioning the validity or the enforceability
of any Loan Document.
5.12 Payment of Taxes. All tax returns and reports of the Company and its
Material Subsidiaries required to be filed by any of them have been timely
filed, and all taxes, assessments, fees and other governmental charges upon the
Company and its Subsidiaries and upon their respective properties, assets,
income and franchises which are due and payable have been paid when due and
payable or bonded against, except to the extent permitted by Section 6.03. The
------------
Company knows of no proposed tax assessment against it or any of its
Subsidiaries that would result in a Material Adverse Effect.
5.13 Agreements. Neither the Company nor any of its Subsidiaries is a party
to or is subject to any material agreement or instrument or charter or other
internal restriction which results in a Material Adverse Effect.
5.14 Performance. Neither the Company nor any of its Subsidiaries is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Contractual Obligation of the Company,
and no condition exists which, with the giving of notice or the lapse of time or
both, would constitute such a default, except, in any such case, where the
consequences, direct or indirect, of such default or defaults, if any, would not
result in a Material Adverse Effect.
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<PAGE>
5.15 Governmental Regulation. Neither the Company nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940 or to any Federal or state statute or regulation
limiting its ability in any material way to incur Indebtedness for money
borrowed.
5.16 Employee Benefit Plans. The Company and each of its ERISA Affiliates
is in compliance in all material respects with any applicable provisions of
ERISA and the regulations and published interpretations thereunder with respect
to all Pension Plans. Neither the Company nor any of its ERISA Affiliates has
participated in or participates in any Multiemployer Plan the withdrawal from
which may result in any liability to any party in an amount in excess of
$1,000,000.
5.17 Environmental Matters. The Company conducts in the ordinary course of
business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that such Environmental Laws and
Environmental Claims could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.18 Disclosure. No representation or warranty of the Company contained in
this Agreement or any other document, certificate or written statement furnished
to the Banks by the Company since January 1, 2000 for use in connection with the
transactions contemplated by this Agreement as of the date of this Agreement
contains any untrue statement of a material fact or omits to state a material
fact (known to the officers of the Company in the case of any document or fact
not furnished by it) necessary in order to make the statements contained herein
or therein not misleading except to the extent that any such statement or
omission that was untrue or misleading at the time made or that subsequently
became untrue or misleading has been superseded or corrected by information
provided to the Banks prior to the date of this Agreement. The projections and
pro forma financial information contained in such written materials are based
upon good faith estimates and assumptions believed by the Company to be
reasonable at the time made, it being recognized by the Banks that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
from the projected results. There is no fact known to the officers of the
Company as of the date of this Agreement (other than matters of a general
economic nature) which materially adversely affects the business, operations,
property, assets or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, which has not been disclosed herein or in the
written materials referred to in Section 5.08 other than as disclosed in writing
------------
to the Banks on or before the date hereof.
5.19 Subordination Agreements. Neither Fisher-Price nor Mattel Sales has
any material outstanding obligations to any Affiliate of the Company which has
not signed a Fisher-Price Subordination Agreement or a Mattel Sales
Subordination Agreement, respectively.
5.20 Year 2000. The Company has (a) completed a review and assessment of
all areas within its and each of its Subsidiaries' business and operations
(including those affected by customers and vendors) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications and devices containing imbedded computer chips used by the
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<PAGE>
Company or any of its Subsidiaries (or their respective customers and vendors)
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999), (b)
developed a plan and timeline for addressing the Year 2000 Problem on a timely
basis, and (c) substantially completed implementation of that plan in accordance
with that timetable. The Year 2000 Problem has not resulted in, and the Company
reasonably believes that the Year 2000 Problem will not result in, a Material
Adverse Effect.
Section 6.
AFFIRMATIVE COVENANTS.
The Company agrees from the Effective Date until payment in full of all
Obligations and termination of the Commitments, unless Requisite Banks shall
otherwise give prior written consent, the Company will perform all covenants in
this Section 6.
---------
6.01 Reporting and Information Requirements.
The Company will maintain, and cause each of its Subsidiaries to maintain,
a system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. The Company will deliver to the Administrative Agent and to each
Bank:
(a) as soon as practicable and in any event not later than 55 days after
the end of each of the first three fiscal quarters of the Company, consolidated
balance sheets of the Company and its Subsidiaries as at the end of such period
and for the fiscal year to date and the related consolidated statements of
income, consolidated statements of stockholders' equity and consolidated
statements of cash flow all in reasonable detail and certified by the Chief
Financial Officer, Executive Vice President Finance or the Treasurer of the
Company that the consolidated statements (and to the best of his or her belief,
the consolidating statements) and other materials required by this clause (a)
fairly present the financial condition of the Company and its Subsidiaries as at
the dates indicated and the results of their operations for the periods
indicated, subject to changes resulting from year-end audit and normal year-end
adjustments;
(b) as soon as practicable and in any event not later than 100 days after
the end of each fiscal year of the Company, consolidated and consolidating
balance sheets of the Company and its Subsidiaries as at the end of such year
and the related consolidated (and, as to statements of income only, consolidated
and consolidating) statements of income, stockholders' equity and cash flow of
the Company and its Subsidiaries for such fiscal year, setting forth in each
case, in comparative form the consolidated figures for the previous year, all in
reasonable detail and (i) in the case of such consolidated financial statements,
accompanied by a report thereon of Price Waterhouse or other independent
accountants of recognized national standing selected by the Company which report
shall state that such consolidated financial statements present fairly the
financial position of the Company and its Subsidiaries as at the dates indicated
and the results of their operations and their cash flow for the periods
indicated in conformity with GAAP and that the examination by such accountants
in connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards and (ii) in the case of
such consolidating financial statements, certified by the chief financial or
accounting officer of the Company;
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<PAGE>
(c) together with each delivery of financial statements of the Company and
its Subsidiaries pursuant to clauses (a) and (b) above, an Officers' Certificate
(i) stating that the signers have reviewed the terms of this Agreement and the
Notes and have made, or caused to be made under their supervision, a review in
reasonable detail of the transactions and condition of the Company and its
Subsidiaries during the accounting period covered by such financial statements
and that such review has not disclosed the existence during or at the end of
such accounting period, and that the signers do not have knowledge of the
existence as at the date of the Officers' Certificate, of any condition or event
which constitutes an Event of Default or Default, or, if any such condition or
event existed or exists, specifying the nature and period of existence thereof,
and (ii) demonstrating in reasonable detail compliance during (to the extent
required) and at the end of such accounting periods with the restrictions
contained in Sections 7.05 and 7.06.
------------- ----
(d) together with each delivery of consolidated financial statements of
the Company and its Subsidiaries pursuant to clause (b) above, a written
statement by the independent accountants giving the report thereon (i) stating
that their audit examination has included a review of the terms of this
Agreement and the Notes as they relate to accounting matters, and (ii) stating
whether, in connection with their audit examination, any condition or event
which constitutes an Event of Default or Default has come to their attention,
and if such a condition or event has come to their attention, specifying the
nature and period of existence thereof; provided that such accountants shall not
--------
be liable by reason of any failure to obtain knowledge of any such Event of
Default or Default that would not be disclosed in the course of their audit
examination. The Administrative Agent shall have the right, from time to time,
to discuss the affairs of the Company directly with such independent certified
public accountants;
(e) promptly upon receipt thereof, copies of all reports submitted to the
Company (including, without limitation, the Company's Board of Directors) by the
Company's independent accountants in connection with each annual, interim or
special audit of the consolidated financial statements of the Company made by
such accountants, including, without limitation, any comment letter submitted by
such accountants to management in connection with their annual audit;
(f) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its security holders or by any Subsidiary of the
Company to its security holders other than the Company or another Subsidiary,
and, promptly upon their becoming effective, and in any event within 15 days of
filing, all regular and periodic reports and all registration statements and
prospectuses that have been filed by the Company or any of its Subsidiaries with
any securities exchange or with the Securities and Exchange Commission or any
Governmental Person succeeding to any of its functions, and all press releases
and other statements made available generally by the Company or any Subsidiary
to the public concerning material developments in the business of the Company
and its Subsidiaries;
(g) promptly upon any executive officer of the Company obtaining knowledge
(i) of any condition or event which constitutes an Event of Default or Default,
or becoming aware that the Administrative Agent or any Bank has given any notice
or taken any other action with respect to a claimed Event of Default or Default
under this Agreement, (ii) of any condition or
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<PAGE>
event which would be required to be disclosed in a current report filed by the
Company with the Securities and Exchange Commission on Form 8-K (Items 1, 2, 4
and 6 of such Form as in effect on the date hereof) if the Company were required
to file such reports under the Exchange Act, (iii) that any Person has given any
notice to the Company or any Subsidiary of the Company or taken any other action
with respect to a claimed default or event or condition of the type referred to
in Section 8.01, (iv) of the institution of any litigation involving an alleged
------------
liability of the Company or any of its Subsidiaries equal to or greater than
$20,000,000 or any adverse determination in any litigation involving a potential
liability of the Company or any of its Subsidiaries equal to or greater than
$20,000,000, or (v) of a Material Adverse Effect, in each case an Officers'
Certificate specifying the nature and period of existence of any such condition
or event, or specifying the notice given or action taken by such holder or
Person and the nature of such claimed default, Event of Default, Default, event
or condition, and what action the Company has taken, is taking and proposes to
take with respect thereto;
(h) as soon as available but no later than March 31 of each year, copies
of the Company's consolidated financial plan for the then current fiscal year as
customarily prepared for internal use;
(i) promptly after the acquisition of any Material Subsidiary, notice of
such acquisition;
(j) promptly upon any executive officer of the Company obtaining
knowledge, notice of any change in the ratings on the Company's long-term
unsecured Indebtedness by S&P, Moody's and, Duff & Phelps;
(k) promptly after any discovery or determination thereof, notice that the
Year 2000 Problem (as defined in Section 5.20) has resulted in, or is reasonably
------------
expected to result in, a Material Adverse Effect; and
(l) with reasonable promptness, such other information and data with
respect to the Company or any of its Subsidiaries as from time to time may be
reasonably requested by any Bank or the Administrative Agent, including any
financial reports regularly prepared by the Company for internal use.
6.02 Corporate Existence, Etc. Except as permitted or not prohibited in
Section 7.03, the Company will at all times preserve and keep in full force and
- ------------
effect its corporate existence and rights and franchises material to its
business and those of each of its Material Subsidiaries; provided that the
--------
corporate existence and the rights and franchises of any Material Subsidiary may
be terminated or permitted to lapse if such termination or lapse is in the best
interest of the Company, is approved by the Board of Directors of the Company
and is not materially disadvantageous to the holder of any Note.
6.03 Payment of Taxes and Claims; Tax Consolidation. The Company will, and
will cause each of its Material Subsidiaries to, pay all taxes, assessments and
other governmental charges imposed upon it or any of its properties or assets or
in respect of any of its franchises, business, income or property before any
penalty or interest accrues thereon, and all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
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have become due and payable and which by law have or may become a Lien upon any
of its properties or assets, prior to the time when any penalty or fine shall be
incurred with respect thereto; provided that no such charge or claim need be
--------
paid if being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor. The Company will not, nor will it permit any Material Subsidiary
to, file or consent to the filing of any consolidated income tax return with any
Person (other than the Company or a Subsidiary of the Company).
6.04 Maintenance of Properties; Insurance. Except as permitted or not
prohibited in Section 7.03, the Company will maintain or cause to be maintained
------------
in good repair, working order and condition all material properties (other than
obsolete properties) used or useful in the business of the Company and its
Material Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals, substitutions and replacements thereof. The
Company will maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to its properties and business and
the properties and business of its Material Subsidiaries against loss or damage
of the kinds customarily insured against by corporations of established
reputation engaged in the same or similar businesses and similarly situated, of
such types and in such amounts as are customarily carried under similar
circumstances by such other corporations; provided that the Company may maintain
a program of self insurance for the Company and its Material Subsidiaries in
accordance with sound business practices.
6.05 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each of its Subsidiaries to maintain proper books of
record and account, in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of the Company and such Subsidiaries.
The Company will permit any authorized representatives designated by any Bank at
the expense of that Bank, to visit and inspect any of the properties of the
Company or any of its Subsidiaries, including its and their financial and
accounting records, and to make copies and take extracts therefrom (but not
records relating to intellectual property), and to discuss its and their
affairs, finances and accounts with its and their officers and independent
public accountants, all upon reasonable notice and at such reasonable times
during normal business hours and as often as may be reasonably requested.
6.06 Use of Proceeds of Loans. The Company shall use the proceeds of Loans
for general corporate purposes, including, without limitation, lending to its
Subsidiaries and acquiring other Persons or businesses so long as the
acquisition is approved by the board of directors of the Person being acquired.
6.07 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws, except where the failure to do so could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.08 Subordination Agreements. If from time to time Fisher-Price or Mattel
Sales has any material outstanding obligations owing to any Affiliate of the
Company which has not
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signed a Fisher-Price Subordination Agreement or a Mattel Sales Subordination
Agreement, respectively, the Company shall cause such Affiliate to execute
deliver a Fisher-Price Subordination Agreement or a Mattel Sales Subordination
Agreement, as the case may be, and deliver to the Administrative Agent a
signature and incumbency certificate of the officers of each such Affiliate and
cause Fisher-Price or Mattel Sales, as the case may be, to acknowledge each such
agreement.
Section 7.
NEGATIVE COVENANTS.
The Company agrees from the Effective Date until payment in full of all
Obligations and termination of the Commitments, unless Requisite Banks shall
otherwise give prior written consent, the Company will perform all covenants in
this Section 7.
---------
7.01 Secured Indebtedness. Other than as permitted under Section 7.02, the
------------
Company will not, and will not permit any of its Material Subsidiaries to,
directly or indirectly incur, assume, guaranty or otherwise become directly or
indirectly liable with respect to any Indebtedness which (a) is senior to the
Obligations, (b) has any priority of payment over the Obligations or (c) is
secured by Liens on any of the Company's or any Subsidiary's assets.
7.02 Liens. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of the Company or any
Subsidiary except:
(a) Liens securing Indebtedness for borrowed money not exceeding
$100,000,000 in the aggregate at any time;
(b) Liens existing on the date hereof;
(c) Liens securing Indebtedness under the Receivables Purchase Agreement;
(d) Liens securing Indebtedness under Other Permitted Accounts Receivable
Financing Facilities;
(e) Liens listed on Schedule 7.02; and
-------------
(f) Liens on newly-acquired Capital Assets; provided that such Liens on
--------
Capital Assets located in the United States shall not secure Indebtedness for
borrowed money in excess of $25,000,000.
7.03 Restriction on Fundamental Changes.
(a) The Company shall not, and shall not permit any of its Material
Subsidiaries to, engage in any material line of business substantially different
from those lines of business carried on by it on the date hereof; provided,
--------
however, that the Company may engage in the production and sale of consumer
- -------
software products related to the Company's existing lines of business.
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(b) the Company shall not, and shall not suffer or permit any of its
Material Subsidiaries to, merge, consolidate with or into, or convey, transfer,
lease or otherwise dispose of whether in one transaction or in a series of
transactions, all or substantially all, of its assets to or in favor of any
Person, except:
(i) (A) the Company may merge or consolidate with any other Person
provided that the Company shall be the continuing or surviving corporation,
and (B) any Material Subsidiary may merge or consolidate with any other
Person provided that the Company or a Material Subsidiary shall be the
continuing or surviving corporation; provided, further, that (1) if any
-------- -------
transaction shall be between a Subsidiary and a wholly-owned Subsidiary,
the wholly-owned Subsidiary shall be the continuing or surviving
corporation, (2) no Default or Event of Default shall result from such
merger or consolidation, and (3) except where a wholly-owned Subsidiary
merges or consolidates with another wholly-owned Subsidiary or the Company,
no Default or Event of Default shall exist prior to such merger or
consolidation; and
(ii) any Subsidiary of the Company may sell all or substantially all
of its assets (upon voluntary liquidation or otherwise), to the Company or
another Wholly-Owned Subsidiary of the Company.
7.04 Sale or Discount of Receivables. The Company will not, and will not
permit any of its Domestic Subsidiaries to, directly or indirectly, sell with or
without recourse, or discount or otherwise sell for less than the face value
thereof any of its notes or accounts receivable, except:
(a) discounts offered in the ordinary course of business for early payment
of accounts receivable and negotiated settlements of bad debts and disputed
accounts receivable in the ordinary course of business;
(b) sales of accounts receivable under the Receivables Purchase Agreement
and agreements entered into in connection therewith;
(c) sales of accounts receivable under Other Permitted Accounts Receivable
Financing Facilities; and
(d) sales of accounts receivable where the Company believes in good faith
that the collectibility of such accounts receivable is or may be jeopardized by
the distressed financial condition of the obligor under such accounts
receivable.
7.05 Consolidated Funded Indebtedness to Total Capitalization. The Company
shall not permit the ratio of the sum of (a) Consolidated Funded Indebtedness
plus (b) Combined Purchasers' Investments to the sum of (x) Consolidated Funded
- ----
Indebtedness plus (y) Combined Purchasers' Investments plus (z) the consolidated
---- ----
net worth of the Company and its Subsidiaries on a consolidated basis determined
in conformity with GAAP to exceed 60% at the end of each of the first three
fiscal quarters in each fiscal year and 50% at the end of each fiscal year.
7.06 Interest Coverage Ratio. The Company shall not permit, as of the last
day of each fiscal quarter, the ratio of (a) the sum of (i) its net income from
continuing operations, for the four consecutive fiscal quarters ending on such
date, before (A) special items, (B) minority
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interest, (C) gains on reacquisition of debt, plus (ii) income taxes accrued for
----
the four consecutive fiscal quarters ending on such date, plus (iii) interest
----
accrued for the four consecutive fiscal quarters ending on such date, excluding
capitalized interest and without regard to interest income plus (iv)
----
depreciation and amortization for the four consecutive fiscal quarters ending on
such date to (b) interest incurred for the four consecutive fiscal quarters
ending on such date, including capitalized interest and without regard to
interest income, to be less than 3.50 to 1.
7.07 ERISA. The Company will not, and will not permit any of its ERISA
Affiliates to, permit the actuarial present value of all benefit liabilities
under all Pension Plans to exceed the fair market value of the assets of such
Pension Plans (excluding Pension Plans with assets greater than vested benefits)
allocable to such benefit liabilities by more than $10,000,000. As used in this
Section 7.08, the terms "actuarial present value" and "benefit liabilities" have
- ------------
the meanings specified in Section 4001 of ERISA.
7.08 Margin Regulations. No portion of the proceeds of any borrowing under
this Agreement shall be used by the Company for the purpose of "purchasing" or
"carrying" any Margin Stock or used in any manner which might cause such
borrowing or the application of such proceeds to violate Regulation U,
Regulation T, or Regulation X of the Federal Reserve Board or any other
regulation of the Federal Reserve Board or to violate the Exchange Act, in each
case as in effect on the date or dates of such borrowing and the use of such
proceeds.
7.09 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of an Event of Default or Default if such action is taken or
condition exists.
Section 8.
EVENTS OF DEFAULT.
8.01 Events of Default. Any of the following conditions or events shall
constitute an "Event of Default:"
(a) Failure to Make Payments When Due. (i) Failure by the Company to pay
any required payment of principal under this Agreement or of any Loan or any
Notes, when due, whether at stated maturity, by acceleration, by notice of
prepayment or otherwise, (ii) failure by the Company to pay any required payment
of interest under this Agreement or on any Loan or any Note or any fees payable
pursuant to Section 2 for a period of five days or more after the date such
---------
payment is due, or (iii) failure by any Company Party to pay any other amount
due under this Agreement within 90 days after written notice thereof; or
(b) Default in Other Agreements. (i) Failure of the Company, Fisher-Price,
Mattel Sales or any of its Material Subsidiaries to pay or any default in the
payment of any principal or interest on any Indebtedness in an amount exceeding
$15,000,000 or any default in any other obligation for the payment of money in
an amount in excess of $15,000,000 beyond any period of grace allowed; or (ii)
any breach or default (unless cured or waived) with respect to any other
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term of any evidence of such other Indebtedness for borrowed money in an amount
exceeding $15,000,000 or of any loan agreement, mortgage, indenture or other
agreement relating thereto, and such breach or default continues after the
applicable grace or notice period, if any, specified in the document relating
thereto, if the effect of such failure, default or breach is to cause, or to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to cause, with
the giving of notice if required, such Indebtedness for borrowed money to become
or be declared due prior to its stated maturity; or
(c) Breach of Certain Covenants. Failure of the Company to perform or
comply with any term or condition contained in Sections 6.01(g), 6.02 or Section
---------------- ---- -------
7 of this Agreement; or
- -
(d) Breach of Warranty. Any of the Company's, Fisher-Price's or Mattel
Sales' representations or warranties made in any Loan Document in writing
pursuant hereto or in connection herewith shall be false in any material respect
on the date as of which made; or
(e) Other Defaults Under Loan Documents or Receivables Purchase Agreement.
Failure of the Company, Fisher-Price, Mattel Sales or Mattel Factoring, Inc., to
perform or comply with any other term or condition contained in any Loan
Document or the Receivables Purchase Agreement, in each case to the extent it is
a party thereto, other than the conditions referred to in Subsections (a), (b),
(c) and (d) above, and such default shall not have been remedied or waived
within 30 days after receipt of notice from the Administrative Agent or any Bank
of such default; or
(f) Involuntary Bankruptcy; Appointment of Receiver, etc. (i) A court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of the Company or any of its Material Subsidiaries in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, which decree or order is not stayed, or (ii) any other
similar relief shall be granted under any applicable federal or state or
applicable foreign law; a petition for an involuntary case shall be filed
against the Company or any of its Material Subsidiaries under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or other
officer having similar powers over the Company or any of its Material
Subsidiaries, or over all or substantially all of its property, shall have been
entered; or an interim receiver, trustee or other custodian of the Company or
any of its Material Subsidiaries for all or substantially all of the property of
the Company or any of its Material Subsidiaries shall be appointed
involuntarily; and the continuance of any such events in clause (ii) for 45 days
unless dismissed, bonded or discharged; or
(g) Voluntary Bankruptcy; Appointment of Receiver, etc. The Company or any
of its Material Subsidiaries shall have an order for relief entered with respect
to it or commence a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or shall consent to the entry
of an order for relief in any involuntary case, or to the conversion from an
involuntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, liquidator, sequestrator, trustee or other
custodian for all or substantially all of its property; the making by the
Company or any of its Material Subsidiaries of any assignment for the benefit of
creditors; or the inability or failure of the Company or any of its Material
Subsidiaries, or the admission by the Company or any of
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its Material Subsidiaries in writing of its inability, to generally pay its
debts as such debts become due; or the Board of Directors of the Company or any
of its Material Subsidiaries adopts any resolution or otherwise takes action to
approve any of the foregoing; or
(h) Judgments. Any final money judgment involving in any case an amount
in excess of $20,000,000 or in excess of $40,000,000 in the aggregate at any one
time for all final judgments shall be entered or filed against the Company or
any Material Subsidiary or any of their respective assets and shall remain
undischarged, unvacated, unbonded or unstayed for a period of 45 days or in any
event later than five days prior to the date of any proposed sale thereunder; or
(i) Dissolution. Any order, judgment or decree shall be entered against
the Company or any Material Subsidiary decreeing the dissolution or split up of
the Company and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
(j) ERISA. (i) any Pension Plan maintained by the Company or any of its
ERISA Affiliates shall be terminated within the meaning of Title IV of ERISA, or
(ii) a trustee shall be appointed by an appropriate United States district court
to administer any Pension Plan, or (iii) the Pension Benefit Guaranty
Corporation (or any successor thereto) shall institute proceedings to terminate
any Pension Plan or to appoint a trustee to administer any Pension Plan, or (iv)
the Company or any of its ERISA Affiliates shall withdraw (under Section 4063 of
ERISA) from a Pension Plan, if, as of the date of the event listed in clauses
(i)-(iv) above or any subsequent date, any of the Company or its ERISA
Affiliates has any liability (such liability to include, without limitation, any
liability to the Pension Benefit Guaranty Corporation, or any successor thereto,
or to any other party under Sections 4062, 4063 or 4064 of ERISA or any other
provision of law) resulting from or otherwise associated with the events listed
in clauses (i)-(iv) above for unfunded guarantied vested benefits under the
Pension Plans which exceeds the current value of assets accumulated in such
Pension Plan by more than $10,000,000; or
(k) Loss of Property. All, or a substantial part of, the property, assets
or business of the Company or any Material Subsidiary shall be condemned or
seized and such condemnation or seizure shall have (after taking into account
any insurance or condemnation award) a Material Adverse Effect; or
(l) Cessation of Business. The Company or any Material Subsidiary shall at
any time voluntarily or involuntarily suspend its business or a substantial part
thereof which would constitute a substantial part of, and would have a Material
Adverse Effect; or
(m) Servicer Default. A Servicer Default (as defined in the Receivables
Purchase Agreement) shall occur and be continuing;
8.02 Remedies. If any Event of Default occurs, the Administrative Agent
shall, at the request of, or may, with the consent of, the Requisite Banks, (a)
declare the Commitment of each Bank to make Loans to be terminated, whereupon
such Commitments shall forthwith be terminated; (b) declare the unpaid principal
amount of all outstanding Loans, all interest accrued and unpaid thereon, and
all other amounts owing or payable hereunder or under any other Loan
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<PAGE>
Document to be immediately due and payable; without presentment, demand, protest
or other notice of any kind, all of which are hereby expressly waived by the
Company; and (c) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or applicable
law; provided, however, that upon the occurrence of any event specified in
-------- -------
paragraph (f) or (g) of Section 8.01 above (in the case of clause (ii) of
------------
paragraph (f) upon the expiration of the 45-day period mentioned therein), the
obligation of each Bank to make Loans shall automatically terminate and the
unpaid principal amount of all outstanding Loans and all interest and other
amounts as aforesaid shall automatically become due and payable without further
act of the Administrative Agent or any Bank.
8.03 Rights Not Exclusive. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
Section 9.
THE ADMINISTRATIVE AGENT.
9.01 Appointment and Authorization. Each Bank hereby irrevocably appoints,
designates and authorizes the Administrative Agent to take such action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to it
by the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the
Administrative Agent have or be deemed to have any fiduciary relationship with
any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Administrative Agent.
9.02 Delegation of Duties. The Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agent or attorney-in-
fact that it selects with reasonable care.
9.03 Liability of Administrative Agent. None of the Administrative Agent-
Related Persons shall (i) be liable for any action taken or omitted to be taken
by any of them under or in connection with this Agreement or any other Loan
Document (except for its own gross negligence or willful misconduct), or (ii) be
responsible in any manner to any of the Banks for any recital, statement,
representation or warranty made by the Company or any Subsidiary or Affiliate of
the Company, or any officer thereof, contained in this Agreement or in any other
Loan Document, or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under or
in connection with, this Agreement or any other Loan Document, or for the value
of any Collateral or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for
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<PAGE>
any failure of the Company or any other party to any Loan Document to perform
its obligations hereunder or thereunder. No Administrative Agent-Related Person
shall be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the Properties,
books or records of the Company or any of the Company's Subsidiaries or
Affiliates.
9.04 Reliance by Administrative Agent. (a) The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to the Company), independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Requisite Banks as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Banks against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action. The Administrative Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Requisite Banks and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions specified
in Sections 4.01 and 4.02, each Bank that has executed this Agreement shall be
------------- ----
deemed to have consented to, approved or accepted or to be satisfied with each
document or other matter either sent by the Administrative Agent to such Bank
for consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Bank, unless an
officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from the Bank
prior to any borrowing specifying its objection thereto and either such
objection shall not have been withdrawn by notice to the Administrative Agent to
that effect or the Bank shall not have made available to the Administrative
Agent the Bank's ratable portion of such borrowing.
9.05 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Administrative Agent for the account of the Banks,
unless the Administrative Agent shall have received written notice from a Bank
or the Company referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give prompt notice thereof to the Banks. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
requested by the Requisite Banks in accordance with Section 8; provided,
--------- --------
however, that unless and until the Administrative Agent shall have received any
- -------
such request, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable or in the best interest of the
Banks.
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<PAGE>
9.06 Credit Decision. Each Bank expressly acknowledges that none of the
Administrative Agent-Related Persons has made any representation or warranty to
it and that no act by the Administrative Agent hereinafter taken, including any
review of the affairs of the Company and its Subsidiaries shall be deemed to
constitute any representation or warranty by the Administrative Agent to any
Bank. Each Bank represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company and
its Subsidiaries, and all applicable bank regulatory laws relating to the
transactions contemplated thereby, and made its own decision to enter into this
Agreement and extend credit to the Company hereunder. Each Bank also represents
that it will, independently and without reliance upon the Administrative Agent
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other documents
expressly herein required to be furnished to the Banks by the Administrative
Agent, the Administrative Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of any of the
Administrative Agent-Related Persons.
9.07 Indemnification. Whether or not the transactions contemplated hereby
shall be consummated, the Banks shall indemnify upon demand the Administrative
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), ratably
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind whatsoever which may at any time (including at any time following the
repayment of the Loans and the termination or resignation of the related
Administrative Agent) be imposed on, incurred by or asserted against any such
Person any way relating to or arising out of this Agreement or any document
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by any such Person
under or in connection with any of the foregoing; provided, however, that no
-------- -------
Bank shall be liable for the payment to the Administrative Agent-Related Persons
of any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from such
Person's gross negligence or willful misconduct. Without limitation of the
foregoing, each Bank shall reimburse the Administrative Agent upon demand for
its ratable share of any costs or out-of-pocket expenses (including fees and
expenses of counsel and the allocated cost of in-house counsel) incurred by the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein to the extent that the
Administrative Agent is not reimbursed for such expenses by or on behalf of the
Company. Without limiting the generality of the foregoing, if the Internal
Revenue Service or any other Governmental Person of the United States or other
jurisdiction asserts a claim that the Administrative Agent did not properly
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withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered, was not properly executed, or because such
Bank failed to notify the Administrative Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax ineffective,
or for any other reason) such Bank shall indemnify the Administrative Agent
fully for all amounts paid, directly or indirectly, by the Administrative Agent
as tax or otherwise, including penalties and interest, and including any taxes
imposed by any jurisdiction on the amounts payable to the Administrative Agent
under this Section, together with all costs and expenses (including fees and
expenses of counsel and the allocated cost of in-house counsel). The obligation
of the Banks in this Section shall survive the payment of all Obligations
hereunder.
9.08 Administrative Agent in Individual Capacity. Bank of America and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory or other business with the Company and its
Subsidiaries and Affiliates as though Bank of America were not the
Administrative Agent hereunder and without notice to or consent of the Banks.
With respect to its Loans, Bank of America shall have the same rights and powers
under this Agreement as any other Bank and may exercise the same as though it
were not the Administrative Agent, and the terms "Bank" and "Banks" shall
include Bank of America in its individual capacity.
9.09 Successor Administrative Agent. The Administrative Agent may, and at
the request of the Requisite Banks shall, resign as Administrative Agent upon 30
days' notice to the Banks. If the Administrative Agent shall resign as
Administrative Agent under this Agreement, the Requisite Banks shall appoint
from among the Banks a successor agent for the Banks which successor agent shall
be approved by the Company. If no successor agent is appointed prior to the
effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Banks and the
Company, a successor agent from among the Banks. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Administrative Agent and the
term "Administrative Agent" shall mean such successor agent and the retiring
Administrative Agent's appointment, powers and duties as Administrative Agent
shall be terminated. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Section 9 and Sections
--------- --------
10.04 and 10.15 shall inure to its benefit as to any actions taken or omitted to
- ----- -----
be taken by it while it was Administrative Agent under this Agreement. If no
successor agent has accepted appointment as Administrative Agent by the date
which is 30 days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Banks shall perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Requisite Banks
appoint a successor agent as provided for above.
9.10 Syndication Agent and Documentation Agent. None of the Banks
identified on the facing page or signature pages of this Agreement as the
Syndication Agent or the Documentation Agent shall have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Banks as such. Without limiting the foregoing, none of
the Banks so identified as the Syndication Agent or the Documentation Agent
shall have or be deemed to have any fiduciary relationship with any Bank. Each
Bank
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acknowledges that it has not relied, and will not rely, on any of the Banks so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.
Section 10.
MISCELLANEOUS.
10.01 Assignments, Participations, Etc.
(a) From time to time following the Effective Date, each Bank may assign
to one or more Eligible Assignees all or any portion of its Commitment and
outstanding Loans; provided that (i) such assignment, if not to a Bank or an
--------
Affiliate of the assigning Bank, shall be consented to by the Company at all
times other than during the existence of a Default or Event of Default and by
the Administrative Agent (which approval of the Company shall not be
unreasonably withheld or delayed), (ii) a copy of a duly signed and completed
Assignment and Acceptance in the form of Exhibit H ("Assignment and Acceptance")
--------- -------------------------
shall be delivered to the Administrative Agent and the Company, (iii) except in
the case of an assignment (A) to an Affiliate of the assigning Bank or to
another Bank or (B) of the entire remaining Commitment of the assigning Bank,
the portion of the Commitment assigned shall not be less than $10,000,000, (iv)
the assigning Bank shall have delivered any Note or Notes subject to the
assignment to the Administrative Agent, and (v) the effective date of any such
assignment shall be as specified in the Assignment and Acceptance, but not
earlier than the date which is five Business Days after the date the
Administrative Agent has received the Assignment and Acceptance. Upon
satisfaction of the conditions set forth in the prior sentence, any forms
required by Section 3.01(f) and payment of the requisite fee described below,
---------------
the assignee named therein shall be a Bank for all purposes of this Agreement
effective as of the specified effective date to the extent of the Assigned
Interest (as defined in such Assignment and Acceptance), and the assigning Bank
shall be released from any further obligations under this Agreement to the
extent of such Assigned Interest. Until satisfaction of the conditions set forth
herein to any assignment, the Company and Administrative Agent may continue to
deal solely and directly with the assigning Bank in connection the Assigned
Interest. Upon request following satisfaction of the conditions set forth herein
to any assignment, the Company shall execute and deliver new or replacement
Notes to the assigning Bank and the assignee Bank to evidence Loans made by
them. The Administrative Agent's consent to any assignment shall not be deemed
to constitute any representation or warranty by any Administrative Agent-Related
Person as to any matter.
(b) After receipt of a completed Assignment and Acceptance, and receipt of
an assignment fee of $3,500 from such Eligible Assignee or such assigning Bank
(including in the case of assignments to Affiliates of assigning Banks), the
Administrative Agent shall, promptly following the effective date thereof,
provide to Borrower and Banks a revised Schedule 10.06 giving effect thereto.
--------------
(c) Upon advance written notice to the Company, any Bank may at any time
sell to one or more commercial banks or other Persons not Affiliates of the
Company (a "Participant") participating interests in any Loans, the Commitment
-----------
of that Bank and the other interests of that Bank (the "originating Bank")
hereunder and under the other Loan Documents; provided, however, that (i) the
-------- -------
originating Bank's obligations under this Agreement shall remain
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unchanged, (ii) the originating Bank shall remain solely responsible for the
performance of such obligations, (iii) the Company and the Administrative Agent
shall continue to deal solely and directly with the originating Bank in
connection with the originating Bank's rights and obligations under this
Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant
any participating interest under which the Participant shall have rights to
approve any amendment to, or any consent or waiver with respect to this
Agreement except to the extent such amendment, consent or waiver would require
unanimous consent as described in the first proviso to Section 10.08. The
-------------
Company hereby acknowledges and agrees that any such disposition will give rise
to a direct obligation of the Company to the Participant and the Participant
shall be entitled to the benefit of Sections 3.01, 3.04 and 10.15 as if it were
------------- ---- -----
a "Bank." In the case of any such participation, the Participant shall not have
any rights under this Agreement, or any of the other Loan Documents, and all
amounts payable by the Company hereunder shall be determined as if such Bank had
not sold such participation, except that if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Bank under
this Agreement.
(d) Notwithstanding any other provision in this Agreement, any Bank may at
any time create a security interest in, or pledge, all or any portion of its
rights under and interest in this Agreement and the Note(s) held by it in favor
of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR (S)203.14, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.
(e) Each Bank agrees to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all information provided to
it by the Company or any Subsidiary of the Company, or by the Administrative
Agent on such Company's or Subsidiary's behalf, in connection with this
Agreement or any other Loan Document, and neither it nor any of its Affiliates
shall use any such information for any purpose or in any manner other than
pursuant to the terms contemplated by this Agreement; except to the extent such
information (i) was or becomes generally available to the public other than as a
result of a disclosure by the Bank, or (ii) was or becomes available on a non-
confidential basis from a source other than the Company, provided that such
source is not bound by a confidentiality agreement with the Company known to the
Bank; provided, however, that any Bank may disclose such information (A) at the
-------- -------
request or pursuant to any requirement of any Governmental Person to which the
Bank is subject or in connection with an examination of such Bank by any such
authority; (B) pursuant to subpoena or other court process and when required to
do so in accordance with the provisions of any applicable Governmental Rule;
provided, that a Bank shall disclose only the information required by such
- --------
request and shall notify the Company in advance of such disclosure so that the
Company may seek an appropriate protective order, and (C) to such Bank's
Affiliates, independent auditors and other professional advisors provided such
Persons are obligated to keep such information confidential. Notwithstanding the
foregoing, the Company authorizes each Bank to disclose to any Assignee or
Participant and to any prospective Assignee or Participant, such financial and
other information in such Bank's possession concerning the Company or its
Subsidiaries which has been delivered to Administrative Agent or the Banks
pursuant to this
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Agreement or which has been delivered to the Administrative Agent or the Banks
by the Company in connection with the Banks' credit evaluation of the Company
prior to entering into this Agreement; provided that, unless otherwise agreed by
--------
the Company, such Assignee or Participant agrees in writing to such Bank to keep
such information confidential to the same extent required of the Banks
hereunder.
10.02 Survival of Warranties and of Certain Agreements.
(a) All agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement, the making of the Loans
hereunder and the execution and delivery of any Notes.
(b) Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of the Company set forth in Sections 2.09, 3, 10.04 and
------------- - -----
10.15 and the agreements of the Banks set forth in Sections 2.13, 9, 10.01(a),
- ----- ---- - --------
10.01(e) and 10.05 shall survive the payment of the Obligations by the Company
- -------- -----
and the termination of this Agreement.
10.03 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of any Bank or any holder of any Note in the exercise of any
power, right or privilege hereunder or under any Note shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Agreement or any
Notes are cumulative to and not exclusive of, any rights or remedies otherwise
available.
10.04 Fees and Expenses. Whether or not the transactions contemplated
hereby shall be consummated, the Company agrees to pay within 30 days after
submission of an invoice therefor (a) all the actual and reasonable out-of-
pocket costs and expenses of preparation of the Loan Documents and all the costs
of furnishing all opinions by counsel for the Company (including without
limitation any opinions requested by the Banks as to any legal matters arising
hereunder), and of the Company's performance of and compliance with all
agreements and conditions contained therein on its part to be performed or
complied with; (b) the cost of delivering to the Banks any Notes pursuant to the
provisions of this Agreement; (c) the reasonable fees, expenses and
disbursements of the Administrative Agent and the Administrative Agent's counsel
(including the allocated cost of Administrative Agent's inhouse counsel and
staff) in connection with the negotiation, preparation, execution and
administration of the Loan Documents and the Loans and any amendments and
waivers hereto; and (d) after the occurrence of an Event of Default, all actual
and reasonable out-of-pocket costs and expenses (including reasonable fees of
law firms engaged by the Banks and the reasonable estimate of the allocable
costs of counsel in the staff of legal departments of the Banks and costs of
settlement) incurred by the Administrative Agent and each Bank in enforcing any
Obligations or in collecting any payments due from the Company hereunder or
under any Notes by reason of such Event of Default or in connection with any
refinancing or restructuring of any Loan Document in the nature of a "work-out"
or of any insolvency or bankruptcy proceeding.
10.05 Set Off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of and during the
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continuance of any Event of Default (after the giving of any notice and the
expiration of any grace period contained in the definition thereof), each Bank
and each subsequent holder of any Note is hereby authorized by the Company at
any time or from time to time, without notice to the Company, or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate any and all deposits (including, but not limited to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured but not
including trust accounts) and any other indebtedness at any time held or owing
by that Bank or that subsequent holder or any Bank Affiliate thereof to or for
the credit or the account of the Company and to apply any such amounts in
accordance with the provisions of Section 2.13 irrespective of whether or not
------------
that Bank or that subsequent holder shall have made any demand hereunder and
each such Bank Affiliate is hereby irrevocably authorized to permit such setoff
and appropriation.
10.06 Notices. Unless otherwise specifically provided herein, any notice
or other communication herein required or permitted to be given shall be in
writing and may be personally served, telecopied, telexed or sent by United
States mail and shall be deemed to have been given upon delivery in person,
receipt of telecopy or telex or four Business Days after deposit in the United
States mail, registered or certified, with postage prepaid and properly
addressed. For the purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this Section 10.06) shall
-------------
be as set forth under each party's name on Schedule 10.06.
--------------
10.07 Severability. In case any provision in or obligation under this
Agreement or any Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
10.08 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company therefrom, shall be effective unless the same shall be
in writing and signed by the Requisite Banks and the Company, and acknowledged
by the Administrative Agent, and then such waiver shall be effective only in the
specific instance and for the specific purpose for which given; provided,
--------
however, that no such waiver, amendment, or consent shall, unless in writing and
- -------
signed by all the Banks and the Company, and acknowledged by the Administrative
Agent, do any of the following:
(a) increase or extend any Bank's Commitment or subject any Bank to any
additional obligations;
(b) postpone or delay any date fixed for any payment of principal,
interest, fees or other amounts due to the Banks (or any of them) hereunder or
under any Loan Document;
(c) reduce the principal of, or the rate of interest specified herein on
any Loan, or of any fees or other amounts payable hereunder or under any Loan
Document;
(d) change any Bank's Pro Rata Share or of the aggregate unpaid principal
amount of any extension of credit which shall be required for the Banks or any
of them to take any action hereunder;
-45-
<PAGE>
(e) amend this Section 10.08 or Section 2.13;
------------- ------------
(f) amend Section 2.01, the definitions of "Pro Rata Share" or "Requisite
------------
Banks;" or
(g) discharge any Guarantor;
provided further, that no amendment, waiver or consent shall, unless in writing
- -------- -------
and signed by the Administrative Agent in addition to the Requisite Banks or all
the Banks, as the case may be, affect the rights or duties of the Administrative
Agent under any Loan Document. No notice to or demand on the Company in any
case shall entitle the Company to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 10.08 shall be
-------------
binding upon each holder of any Notes at the time outstanding, each future
holder of the Notes and, if signed by the Company, on the Company.
10.09 Obligations Several. The obligation of each Bank hereunder is
several, and no Bank shall be responsible for any obligation or commitment of
any other Bank hereunder. Nothing contained in this Agreement and no action
taken by Banks pursuant hereto shall be deemed to constitute Banks to be a
partnership, an association, a joint venture or another entity.
10.10 Certain Changes. If (a) any changes in accounting principles from
those used in the preparation of the financial statements referred to in Section
-------
5.08 hereafter occasioned by the promulgation of rules, regulations,
- ----
pronouncements and opinions by or requested by the Financial Accounting
Standards Board or the American Institute of Certified Public Accounts (or
successors thereto or agencies with similar functions) result in a change in the
method of calculation of financial covenants, standards or terms found in
Sections 1, 6 and 7, or (b) the Company changes the manner in which its fiscal
- ---------- - -
year, fiscal quarters and fiscal months are determined, the parties hereto agree
to enter into negotiations in order to amend the appropriate provisions of this
Agreement so as to equitably reflect such changes with the desired result that
the criteria for evaluating the Company's financial condition and operations or
establishing limitations hereunder shall be the same after such changes as if
such changes had not been made.
10.11 Headings. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
10.12 Applicable Law.
(a) This Agreement, any Notes and the other Loan Documents shall be
governed by, and shall be construed and enforced in accordance with, the
internal laws of the State of California, without regard to conflicts of laws
principles.
(b) Any legal action or proceeding with respect to this Agreement and any
other Loan Documents may be brought in the courts of the State of California or
of the United States for the Central District of California, and by execution
and delivery of this Agreement, each of the Company, the Administrative Agent
and the Banks consents, for itself and in respect of its property, to the non-
exclusive jurisdiction of those courts. Each of the Company, the Administrative
Agent and the Banks irrevocably waives any objection, including any objection
-46-
<PAGE>
to the laying of venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any action or proceeding in such
jurisdiction in respect of this Agreement or any document related hereto. The
Company, the Administrative Agent and the Banks each waive personal service of
any summons, complaint or other process, which may be made by any other means
permitted by California law.
10.13 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent and each Bank.
10.14 Counterparts. This Agreement and any amendments, waivers, consents,
or supplements may be executed in any number of counterparts, and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument.
10.15 Indemnity. Whether or not the transactions contemplated hereby are
consummated, the Company shall indemnify and hold the Administrative Agent-
Related Persons, and each Bank and each of its respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
------------------
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including reasonable fees and out-of-pocket expenses of counsel and the
allocated cost of internal counsel) of any kind or nature whatsoever which may
at any time (including at any time following repayment of the Loans and the
termination, resignation or replacement of the Administrative Agent or
replacement of any Bank) be imposed on, incurred by or asserted against any such
Person arising out of this Agreement or any document contemplated by or referred
to herein, or the transactions contemplated hereby, or any action taken or
omitted by any such Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or proceeding (including
any proceeding of the type referred to in Section 8.01(f) or (g) or appellate
--------------- ---
proceeding) related to or arising out of this Agreement or the Loans or the use
of the proceeds thereof, whether or not any Indemnified Person is a party
thereto (all the foregoing, collectively, the "Indemnified Liabilities");
-----------------------
provided, that the Company shall have no obligation hereunder to any Indemnified
- --------
Person with respect to Indemnified Liabilities resulting from the gross
negligence or willful misconduct of such Indemnified Person. The agreements in
this Section shall survive payment of all other Obligations.
-47-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement
(364-Day Facility) to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.
MATTEL, INC.
By: /s/ William Stavro
-----------------------------
William Stavro
Senior Vice President and
Treasurer
S-1
<PAGE>
AGENT: BANK OF AMERICA, N.A.,
as Administrative Agent
By: /s/ Gina Meador
-------------------------------
Gina Meador
Vice President
BANKS: BANK OF AMERICA, N.A., as a Bank
By: /s/ Robert W. Troutman
-------------------------------
Robert W. Troutman
Managing Director
S-2
<PAGE>
CITICORP USA, INC.,
as Syndication Agent and a Bank
By: /s/ William Royer
-------------------------------------
Name: William Royer
-----------------------------------
Title: Attorney-In-Fact
----------------------------------
S-3
<PAGE>
ABN AMRO Bank N.V.,
as Documentation Agent and a Bank
By: /s/ Ellen M. Coleman
-------------------------------------
Name: Ellen M. Coleman
-----------------------------------
Title: Group Vice President
-----------------------------------
By: /s/ Mitsoo Iravani
-------------------------------------
Name: Mitsoo Iravani
-----------------------------------
Title: Assistant Vice President
----------------------------------
S-4
<PAGE>
BANK ONE, NA
By: /s/ Stephanie A. Mack
-------------------------------------
Name: Stephanie A. Mack
----------------------------------
Title: Commercial Banking Officer
----------------------------------
S-5
<PAGE>
BANQUE NATIONALE DE PARIS, LOS
ANGELES AGENCY
By: /s/ Clive Bettles
----------------------------------------
Name: Clive Bettles
--------------------------------------
Title: Senior Vice President & Manager
-------------------------------------
By: /s/ Mitchell M. Ozawa
-------------------------------------
Name: Mitchell M. Ozawa
-----------------------------------
Title: Vice President
----------------------------------
S-6
<PAGE>
BARCLAYS BANK PLC
By: /s/ Marlene Wechselblatt
-------------------------------------
Name: Marlene Wechselblatt
-----------------------------------
Title: Vice President
----------------------------------
S-7
<PAGE>
FLEET NATIONAL BANK
By: /s/ Jorge A. Schwarz
-------------------------------------
Name: Jorge A. Schwarz
-------------------------------------
Title: Director
-------------------------------------
S-8
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ V. Timiraos
-------------------------------------
Name: Vicente L. Timiraos
-------------------------------------
Title: Joint General Manager
-------------------------------------
S-9
<PAGE>
SOCIETE GENERALE, NEW YORK
BRANCH
By: /s/ Robert Petersen
-------------------------------------
Name: Robert Petersen
-------------------------------------
Title: Director
-------------------------------------
S-10
<PAGE>
STANDARD CHARTERED BANK
By: /s/ Sylvia D. Rivera
-------------------------------------
Name: Sylvia D. Rivera
-------------------------------------
Title: Vice President
-------------------------------------
By: /s/ M. Machado-Schammel
-------------------------------------
Name: M. Machado-Schammel
-------------------------------------
Title: Senior Vice President
-------------------------------------
S-11
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By: /s/ Debbie A. Greene
-------------------------------------
Name: DEBBIE A. GREENE
-------------------------------------
Title: VICE PRESIDENT
-------------------------------------
S-12
<PAGE>
WELLS FARGO BANK
By: /s/ Catherine M. Wallace
-------------------------------------
Name: CATHERINE M. WALLACE
-------------------------------------
Title: VICE PRESIDENT
-------------------------------------
By: /s/ Frieda Youlios
-------------------------------------
Name: FRIEDA YOULIOS
-------------------------------------
Title: Vice President
-------------------------------------
S-13
<PAGE>
CREDIT SUISSE FIRST BOSTON
By: /s/ Thomas G. Muoio
-------------------------------------
Name: THOMAS G. MUOIO
-----------------------------------
Title: VICE PRESIDENT
----------------------------------
By: /s/ Karl M. Studer
-------------------------------------
Name: KARL M. STUDER
-----------------------------------
Title: DIRECTOR
----------------------------------
S-14
<PAGE>
EXHIBIT 99.6
FIFTH AMENDMENT TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") is made and dated as of March 31, 2000, among MATTEL, INC., a
Delaware corporation (the "Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE
SIGNATURE PAGES HEREOF (individually referred to herein as a "Bank" and
collectively as the "Banks"), and BANK OF AMERICA, N.A., as the agent for the
Banks (the "Agent"), and amends the Second Amended and Restated Credit Agreement
dated as of March 11, 1998 among the Company, the Banks and the Agent, as
amended by a First Amendment to Second Amended and Restated Credit Agreement
dated as of July 2, 1998, a Second Amendment to Second Amended and Restated
Credit Agreement dated as of December 14, 1998, a Third Amendment to Second
Amended and Restated Credit Agreement dated as of March 26, 1999 and a Fourth
Amendment to Second Amended and Restated Credit Agreement dated as of October
20, 1999 (as so amended, the "Agreement").
RECITAL
The Company, the Banks and the Agent desire to amend the Agreement on the
terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. Terms. All terms used herein shall have the same meanings as in the
Agreement unless otherwise defined herein. All references to the Agreement
shall mean the Agreement as hereby amended.
2. Amendments. The Company, the Banks and the Agent hereby agree to amend
the Agreement as follows:
2.1 The following definitions in Section 1.1 of the Agreement (Certain
Defined Terms) are amended and restated in their entirety as follows:
"`Applicable Amount' means the commitment fee, utilization fee or the
-----------------
margin applicable to Loans (expressed in basis points per annum) set forth
in the chart below opposite the second highest rating issued by S&P,
Moody's or Duff & Phelps on the Company's senior unsecured long-term debt:
-1-
<PAGE>
<TABLE>
<CAPTION>
Senior Unsecured Long-Term Debt Ratings Commitment Utilization Eurodollar Rate Base Rate
Fee Fee Loans + Loans +
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A or higher by S&P 9.5 12.5 32.0 00.0
A2 or higher by Moody's
A or higher by Duff & Phelps
- -------------------------------------------------------------------------------------------------------------------------------
A- by S&P 12.0 12.5 40.0 00.0
A3 by Moody's
A- by Duff & Phelps
- -------------------------------------------------------------------------------------------------------------------------------
BBB+ by S&P 13.0 12.5 62.5 00.0
Baa1 by Moody's
BBB+ by Duff & Phelps
- -------------------------------------------------------------------------------------------------------------------------------
BBB by S&P 15.0 12.5 75.0 00.0
Baa2 by Moody's
BBB by Duff & Phelps
- -------------------------------------------------------------------------------------------------------------------------------
BBB- by S&P 20.0 12.5 112.5 25.0
Baa3 by Moody's
BBB- by Duff & Phelps
- -------------------------------------------------------------------------------------------------------------------------------
None of above criteria satisfied 25.0 12.5 125.0 37.5
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
"Any change in the commitment fee, utilization fee or the margin
applicable to Loans shall become effective upon any public announcement of
any change in the above ratings that requires such a change according to
the above chart."
"`Bank' has the meaning assigned to that term in the introduction to
----
this Agreement, together with any other financial institutions that become
a party hereto as a "Bank" pursuant to Section 10.1."
"'Duff & Phelps'" means Duff & Phelps Credit Rating Co. or any
--------------
successor thereto (including Fitch ICBA or any affiliates thereof).
"`Eurodollar Rate' means for any Interest Period with respect to any
---------------
Eurodollar Rate Loan, a rate per annum determined by Agent pursuant to the
following formula:
"Eurodollar Rate = Eurodollar Base Rate
------------------------------------
1.00 - Eurodollar Reserve Percentage
"Where,
"`Eurodollar Base Rate' means, for such Interest Period:
--------------------
-2-
<PAGE>
"(a) the rate per annum equal to the rate determined by Agent
to be the offered rate that appears on the page of the Telerate screen
that displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on the first day
of such Interest Period) with a term equivalent to such Interest
Period, determined as of approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period, or
"(b) in the event the rate referenced in the preceding
subsection (a) does not appear on such page or service or such page or
service shall cease to be available, the rate per annum equal to the
rate determined by Agent to be the offered rate on such other page or
other service that displays an average British Bankers Association
Interest Settlement Rate for deposits in Dollars (for delivery on the
first day of such Interest Period) with a term equivalent to such
Interest Period, determined as of approximately 11:00 a.m. (London
time) two Business Days prior to the first day of such Interest
Period, or
"(c) in the event the rates referenced in the preceding
subsections (a) and (b) are not available, the rate per annum
determined by Agent as the rate of interest (rounded upward to the
next 1/100th of 1%) at which deposits in Dollars for delivery on the
first day of such Interest Period in same day funds in the approximate
amount of the Eurodollar Rate Loan being made, continued or converted
by Agent (or its Affiliate) in its capacity as a Bank and with a term
equivalent to such Interest Period would be offered by Bank of
America's London Branch to major banks in the offshore Dollar market
at their request at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period.
"`Eurodollar Reserve Percentage' means, for any day during any
-----------------------------
Interest Period, the reserve percentage (expressed as a decimal,
rounded upward to the next 1/100th of 1%) in effect on such day,
whether or not applicable to any Bank, under regulations issued from
time to time by the Board of Governors of the Federal Reserve System
for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"). The Eurodollar Rate for each outstanding
Eurodollar Rate Loan shall be adjusted automatically as of the
effective date of any change in the Eurodollar Reserve Percentage.
"The determination of the Eurodollar Reserve Percentage and the
Eurodollar Base Rate by Agent shall be conclusive in the absence of
manifest error."
"`Governmental Person' means the government of the United States or
-------------------
any foreign government or the government of any state or locality therein,
any political subdivision or any governmental, quasi-governmental,
judicial, public or statutory instrumentality, authority, body or entity,
or other regulatory bureau, authority, body or entity of the United
-3-
<PAGE>
States, any foreign government or any state or locality therein, including
the Federal Deposit Insurance Company, the Comptroller of the Currency or
the Federal Reserve Board."
"`Loan Documents' means this Agreement, any Notes, the Mattel Sales
--------------
Guaranty, the Fisher-Price Guaranty, the Mattel Sales Subordination
Agreement, the Fisher-Price Subordination Agreement and all documents and
instruments delivered in connection herewith or therewith; provided,
--------
however, that for the avoidance of doubt, "Loan Documents" shall not
-------
include documents included in the definition of "Loan Documents" under that
certain Credit Agreement (364-Day Facility) dated as of March 31, 2000
among the Company, the banks from time to time party thereto and Bank of
America as administrative agent thereunder, except to the extent that any
document or instrument delivered in connection therewith is also delivered
in connection herewith."
"'Moody's' means Moody's Investors Service, Inc. or any successor
--------
thereto.
"'S&P' means Standard & Poor's Ratings Services, a division of The
----
McGraw-Hill Companies, Inc., or any successor thereto.
2.2 The definition of "Interest Payment Date" in Section 1.1 of the
Agreement is amended by deleting "respectively," in the proviso thereto.
2.3 The first paragraph of the definition of "Material Subsidiary" in
Section 1.1 of the Agreement (Certain Defined Terms) is amended and restated in
its entirety as follows:
"`Material Subsidiary" means Mattel Sales, Fisher-Price, or any other
-------------------
Subsidiary of the Company which meets any of the following conditions:"
2.4 Section 2.8(a) of the Agreement (Interest on Loans) is amended and
restated in its entirety as follows:
"(a) Subject to Section 2.8(c), the Loans shall bear interest on the
unpaid principal amount thereof from the Funding Date through maturity
(whether by acceleration or otherwise) at a rate per annum equal to (i)
with respect to Eurodollar Rate Loans, the Eurodollar Rate plus the
----
Applicable Amount for Eurodollar Rate Loans or (ii) with respect to Base
Rate Loans the Base Rate plus the Applicable Amount for Base Rate Loans."
----
2.5 Section 2.9 of the Agreement (Fees) is amended by inserting a new
subsection (d) immediately after subsection (c) as follows:
"(d) The Company agrees to pay a utilization fee equal to the
Applicable Amount therefor on the daily average principal amount of all
outstanding Loans on each day that the aggregate principal amount of
outstanding Loans exceeds 33.00% of the Aggregate Loan Commitment. The
Company shall pay the utilization fee to the Agent for distribution to each
Bank in accordance with its Pro Rata Share. The utilization fee shall be
calculated on the basis of a 360-day year and the actual number of days
elapsed and shall be payable quarterly in arrears on the last Business Day
of each calendar quarter, for all amounts
-4-
<PAGE>
accrued to such date, and on the Termination Date; provided that, in
--------
connection with any reduction or termination of the Loan Commitment
pursuant to Section 2.5, the accrued utilization fee calculated on the
portion so terminated or reduced for the period ending on such date shall
also be paid on the date of such reduction or termination."
2.6 Section 2.10 of the Agreement (Calculation of Fees and Interest) is
amended by deleting "Reserve Percentage," after "Applicable Amount" therein.
2.7 Section 4.2(b) of the Agreement is amended by inserting the following
wording after the words "shall be true, correct and complete in all material
respects on and as of that Funding Date" before the comma:
"(except to the extent that such representations and warranties
expressly refer to an earlier date, in which case they shall be true and
correct as of such earlier date)"
2.8 Section 5.8 (Financial Condition) and Section 5.9 (Changes, Etc.) of
the Agreement are amended by deleting the date "December 31, 1996" wherever it
appears and inserting the date "December 31, 1999" in lieu thereof.
2.9 Section 5.18 of the Agreement (Disclosure) is amended by deleting the
date "December 31, 1997" and inserting the date "January 1, 2000" in lieu
thereof.
2.10 Section 7.5 of the Agreement (Consolidated Funded Indebtedness to
Total Capitalization) is amended and restated in its entirety as follows:
"7.5 Consolidated Funded Indebtedness to Total Capitalization. The
Company shall not permit the ratio of the sum of (a) Consolidated Funded
Indebtedness plus (b) Combined Purchasers' Investments to the sum of (x)
----
Consolidated Funded Indebtedness plus (y) Combined Purchasers' Investments
----
plus (z) the consolidated net worth of the Company and its Subsidiaries on
----
a consolidated basis determined in conformity with GAAP to exceed 60% at
the end of each of the first three fiscal quarters in each fiscal year and
50% at the end of each fiscal year."
2.11 Section 8.1(b) of the Agreement is amended and restated in its
entirety as follows:
"(b) Default in Other Agreements. (i) Failure of the Company,
Fisher-Price, Mattel Sales or any of its Material Subsidiaries to pay
or any default in the payment of any principal or interest on any
Indebtedness in an amount exceeding $15,000,000 or any default in any
other obligation for the payment of money in an amount in excess of
$15,000,000 beyond any period of grace allowed; or (ii) any breach or
default (unless cured or waived) with respect to any other term of any
evidence of such other Indebtedness for borrowed money in an amount
exceeding $15,000,000 or of any loan agreement, mortgage, indenture or
other agreement relating thereto, and such breach or default continues
after the applicable grace or notice period, if any, specified in the
document relating thereto, if the effect of such failure, default or
breach is to cause, or to permit the holder or holders of such
Indebtedness
-5-
<PAGE>
(or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness for borrowed money to become or be
declared due prior to its stated maturity; or"
2.12 Section 8.1(m) of the Agreement is amended and restated in its
entirety as follows:
"(m) Servicer Default. A Servicer Default (as defined in the
Receivables Purchase Agreement) shall occur and be continuing;"
2.13 Section 10.1 of the Agreement (Assignments; Participations) is amended
by deleting subsections (a), (b) and (c) and inserting the following new
subsections (a) (b) and (c) as follows:
"(a) From time to time following the Effective Date, each Bank may
assign to one or more Eligible Assignees all or any portion of its Loan
Commitment and outstanding Loans; provided that (i) such Bank concurrently
--------
assigns a ratable portion of its Purchaser Commitment and its Percentage of
the Purchasers' Investment under the Receivables Purchase Agreement, (ii)
such assignment, if not to a Bank or an Affiliate of the assigning Bank,
shall be consented to by the Company at all times other than during the
existence of a Default or Event of Default and by the Agent (which approval
of the Company shall not be unreasonably withheld or delayed), (iii) a copy
of a duly signed and completed Assignment and Acceptance in the form of
Exhibit I (`Assignment and Acceptance') shall be delivered to the Agent and
---------
the Company, (iv) except in the case of an assignment (A) to an Affiliate
of the assigning Bank or to another Bank or (B) of the entire remaining
Commitment of the assigning Bank, the portion of the Aggregate Facilities
Commitment assigned shall not be less than $10,000,000, (v) the assigning
Bank shall have delivered any Note or Notes subject to the assignment to
the Agent and (vi) the effective date of any such assignment shall be as
specified in the Assignment and Acceptance, but not earlier than the date
which is five Business Days after the date the Agent has received the
Assignment and Acceptance. Upon satisfaction of the conditions set forth
in the prior sentence, any forms required by Section 3.1(f) and payment of
--------------
the requisite fee described below, the assignee named therein shall be a
Bank for all purposes of this Agreement effective as of the specified
effective date to the extent of the Assigned Interest (as defined in such
Assignment and Acceptance), and the assigning Bank shall be released from
any further obligations under this Agreement to the extent of such Assigned
Interest. Until satisfaction of the conditions set forth herein to any
assignment, the Company and Agent may continue to deal solely and directly
with the assigning Bank in connection the Assigned Interest. Upon request
following satisfaction of the conditions set forth herein to any
assignment, the Company shall execute and deliver new or replacement Notes
to the assigning Bank and the assignee Bank to evidence Loans made by them.
The Agent's consent to any assignment shall not be deemed to constitute any
representation or warranty by any Agent-Related Person as to any matter.
"(b) After receipt of a completed Assignment and Acceptance, and
receipt of an assignment fee of $2,500 from such Eligible Assignee or such
assigning Bank (including in the case of assignments to Affiliates of
assigning Banks), the Agent shall, promptly
-6-
<PAGE>
following the effective date thereof, provide to Borrower and Banks a
-------
revised Schedule 10.6 giving effect thereto.
"(c) intentionally left blank"
2.14 Section 10.2(b) of the Agreement is amended and restated in its
entirety as follows:
"(b) Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of the Company set forth in Sections 2.9, 3,
------------ -
10.4 and 10.15 and the agreements of the Banks set forth in Sections 2.13,
---- ----- ----
9, 10.1(a), 10.1(e) and 10.5 shall survive the payment of the Obligations
- ------- ------- ----
by the Company and the termination of this Agreement."
2.15 The chart at the end of the last line of Section I.G of Attachment 1
to Exhibit D to the Agreement (Officers' Certificate) is amended and restated in
its entirety as follows:
<TABLE>
<CAPTION>
Maximum
Period Percentage
----------------------------------------------------------------
<S> <C>
First 3 fiscal quarters of each fiscal year 60%
End of each fiscal year 50%
</TABLE>
2.16 Exhibit I to the Agreement is amended and restated in its entirety as
set forth in Exhibit I hereto.
2.17 Schedules 5.3 (Material Subsidiaries of Company), 5.11 (Material
Litigation) and 7.2 (Certain Liens) are amended and restated in their entirety
as set forth in Schedules 5.3, 5.11 and 7.2, respectively, hereto.
3. Representations and Warranties. The Company represents and warrants
to the Banks and the Agent:
3.1 Authorization. The execution, delivery and performance of this
Amendment by the Company has been duly authorized by all necessary corporate
action by the Company and has been duly executed and delivered by the Company.
3.2 Binding Obligation. This Amendment and the Agreement are legal,
valid and binding agreements of the Company, enforceable in accordance with
their respective terms, except to the extent enforceability thereof may be
limited by applicable law relating to bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or limiting creditors' rights
generally or by the application of general principles of equity.
3.3 No Legal Obstacle to Agreements. Neither the execution of this
Amendment, the making by the Company of any borrowings under the Agreement, as
amended hereby, nor the performance of the Agreement by the Company has
constituted or resulted in or will constitute or result in a breach of the
provisions of any material agreement, or the violation of any law, judgment,
-7-
<PAGE>
decree or governmental order, rule or regulation applicable to the Company, or
result in the creation under any material agreement of any security interest,
lien, charge, or encumbrance upon any of the assets of the Company. No approval
or authorization of any Governmental Person is required to be obtained by the
Company to permit the execution, delivery or performance by the Company of this
Amendment, the Agreement as amended hereby, or the transactions contemplated
hereby or thereby, or the making of any borrowing by the Company under the
Agreement, as amended hereby.
3.4 Incorporation of Certain Representations. The representations and
warranties set forth in Section 5 of the Agreement are true and correct in all
material respects on and as of the date hereof as though made on and as of the
date hereof except to the extent such representations and warranties expressly
relate to an earlier date, in which case such representations and warranties
were true and correct in all material respects on and as of such earlier date.
3.5 Default. No Default or Event of Default under the Agreement has
occurred and is continuing.
4. Conditions, Effectiveness. The effectiveness of this Amendment shall
be subject to the delivery of the following to the Agent in form and substance
satisfactory to the Agent:
4.1 Corporate Resolutions. A copy of a resolution or resolutions passed
by the Board of Directors of the Company, certified by the Secretary or an
Assistant Secretary of the Company as being in full force and effect on the date
hereof, authorizing the amendments to the Agreement herein provided for and the
execution, delivery and performance of this Amendment and any note or other
instrument or agreement required hereunder.
4.2 Authorized Signatories. A certificate, signed by the Secretary or an
Assistant Secretary of the Company dated the date hereof, as to the incumbency
of the person or persons authorized to execute and deliver this Amendment and
any instrument or agreement required hereunder on behalf of the Company.
4.3 Amendment Fee. Payment of an amendment fee to the Agent for the
account of each Bank approving this Amendment by 12:00 Noon (California time) on
March 15, 2000 equal to 5 basis points of such Bank's Commitment under the
Agreement plus its Purchaser Commitment as a Purchaser under the Receivables
----
Purchase Agreement.
5. Miscellaneous.
5.1 Effectiveness of the Agreements. Except as hereby amended, the
Agreement shall remain in full force and effect.
5.2 Waivers. This Amendment is specific in time and in intent and does
not constitute, nor should it be construed as, a waiver of any other right,
power or privilege under the Agreement, or under any agreement, contract,
indenture, document or instrument mentioned in the Agreement; nor does it
preclude any exercise thereof or the exercise of any other right, power or
privilege, nor shall any future waiver of any right, power, privilege or default
hereunder, or under any agreement,
-8-
<PAGE>
contract, indenture, document or instrument mentioned in the Agreement,
constitute a waiver of any other default of the same or of any other term or
provision.
5.3 Counterparts. This Amendment may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument. This Amendment shall become effective
as of the effective date written above upon the Company, the Requisite Banks and
the Agent signing a copy hereof, and Fisher-Price and Mattel Sales consenting
hereto, whether the same or counterparts, and the same shall have been delivered
to the Agent.
5.4 Jurisdiction. This Amendment, and any instrument or agreement
required hereunder, shall be governed by and construed under the laws of the
State of California.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to
Second Amended and Restated Credit Agreement to be duly executed and delivered
as of the date first written above.
MATTEL, INC.
By: /s/ William Stavro
----------------------------------
William Stavro
Senior Vice President and
Treasurer
S-1
<PAGE>
BANK OF AMERICA, N.A., as Agent
By: /s/ Gina Meador
----------------------------------
Gina Meador
Vice President
BANK OF AMERICA, N.A., as a Bank
By: /s/ Robert W. Troutman
----------------------------------
Robert W. Troutman
Managing Director
S-2
<PAGE>
THE CHASE MANHATTAN BANK
By: /s/ William P. Rindfuss
----------------------------------
Name: William P. Rindfuss
--------------------------------
Title: Vice President
-------------------------------
S-3
<PAGE>
FLEET NATIONAL BANK
By: /s/ Jorge A. Schwarz
----------------------------------
Name: Jorge A. Schwarz
--------------------------------
Title: Director
-------------------------------
S-4
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By: /s/ Debbie A. Greene
----------------------------------
Name: Debbie A. Greene
--------------------------------
Title: Vice President
-------------------------------
S-6
<PAGE>
ABN AMRO BANK N.V.
By: /s/ Ellen M. Coleman
----------------------------------
Name: Ellen M. Coleman
--------------------------------
Title: Group Vice President
-------------------------------
By: /s/ Mitsoo Iravani
----------------------------------
Name: Mitsoo Iravani
--------------------------------
Title: Assistant Vice President
-------------------------------
S-7
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Ronald L. Watterworth
----------------------------------
Name: Ronald L. Watterworth
--------------------------------
Title: Vice President
-------------------------------
S-8
<PAGE>
BANQUE NATIONALE DE PARIS
By: /s/ Clive Bettles
----------------------------------
Name: Clive Bettles
--------------------------------
Title: Senior Vice President & Manager
-------------------------------
By: /s/ Mitchell M. Ozawa
----------------------------------
Name: Mitchell M. Ozawa
--------------------------------
Title: Vice President
-------------------------------
S-9
<PAGE>
DRESDNER BANK AG, New York and Grand Cayman
Branches
By: /s/ A. Richard Morris
----------------------------------
Name: A. Richard Morris
--------------------------------
Title: First Vice President
-------------------------------
By: /s/ Xinyue Jasmine Geffner
----------------------------------
Name: Xinyue Jasmine Geffner
--------------------------------
Title: Assistant Vice President
-------------------------------
S-10
<PAGE>
MANUFACTURERS & TRADERS TRUST CO.
By: /s/ Christopher Kania
----------------------------------
Name: Christopher Kania
--------------------------------
Title: Vice President
-------------------------------
S-12
<PAGE>
CITICORP USA, INC.
By: /s/ William Royer
----------------------------------
Title: Attorney-in-Fact
-------------------------------
S-13
<PAGE>
SOCIETE GENERALE, NEW YORK BRANCH
By: /s/ Robert Petersen
----------------------------------
Name: Robert Petersen
--------------------------------
Title: Director
-------------------------------
S-14
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ V. Timiraos
----------------------------------
Name: Vicente L. Timiraos
--------------------------------
Title: Joint General Manager
-------------------------------
S-15
<PAGE>
THE NORTHERN TRUST COMPANY
By: /s/ Jaron Grimm
----------------------------------
Name: Jaron Grimm
--------------------------------
Title: Vice President
-------------------------------
S-16
<PAGE>
CONSENT OF MATTEL SALES CORP. AND FISHER PRICE, INC.
TO FIFTH AMENDMENT TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
The undersigned Mattel Sales Corp. and Fisher-Price, Inc., as guarantors
under their respective First Amended and Restated Continuing Guaranties, dated
as of March 13, 1997 (the "Continuing Guaranties") and signatories to the Mattel
Sales Subordination Agreement and Fisher Price Subordination Agreement,
respectively, (the "Subordination Agreements"), hereby consent to the Fifth
Amendment to Second Amended and Restated Credit Agreement dated as of the date
first written above, among Mattel, Inc., the Banks named therein and Bank of
America, N.A., as agent, represent and warrant that there is no defense,
counterclaim or offset of any type or nature under such Continuing Guaranties or
the Subordination Agreements before or after giving effect thereto and reaffirm
their obligations thereunder.
Dated as March 31, 2000.
FISHER-PRICE, INC.
MATTEL SALES CORP.
By: /s/ William Stavro
-----------------------------
William Stavro
Senior Vice President and
Treasurer
-1-
<PAGE>
EXHIBIT 99.7
FIRST AMENDMENT TO
RECEIVABLES PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT (this "Amendment")
is made and dated as of March 31, 2000, among Mattel Factoring, Inc., a Delaware
corporation, as transferor (the "Transferor"), Mattel, Inc., a Delaware
----------
corporation ("Mattel"), as servicer (the "Servicer") and as guarantor (the
------ --------
"Guarantor"), the financial institutions party hereto as purchasers (together
- ----------
with any successors and assigns, the "Purchasers") and Bank of America, N.A.
----------
(f/k/a/ NationsBank of Texas, N.A.), as the agent for the Purchasers (in such
capacity, together with any successors and assigns, the "Agent"), and amends the
-----
Receivables Purchase Agreement dated as of March 11, 1998 among the Transferor,
the Servicer, the Guarantor, the Purchasers and the Agent (the "Agreement").
RECITAL
Each Seller Party, the Purchasers and the Agent desire to amend the
Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. Terms. All terms used herein shall have the same meanings as in the
Agreement unless otherwise defined herein. All references to the Agreement shall
mean the Agreement as hereby amended.
2. Amendments. Each Seller Party, the Purchasers and the Agent hereby
agree to amend the Agreement as follows:
2.1 The chart in the definition of "Applicable Margin" in Section 1.1 of
the Agreement (Certain Defined Terms) is amended and restated in its entirety as
follows:
<TABLE>
<CAPTION>
S&P/Moody's/ Applicable Margin
Duff & Phelps
- -----------------------------------------------------------------------
<S> <C>
AA-/Aa3/AA- or higher 30.0 bps
- -----------------------------------------------------------------------
A/A2/A or higher 44.5 bps
- -----------------------------------------------------------------------
A-/A3/A- 52.5 bps
- -----------------------------------------------------------------------
</TABLE>
2.2 Section 3.2(a)(ii) of the Agreement is amended by inserting "with
respect to the Obligor on the Listed Receivables being purchased" after
"Termination Event" in both places where such wording appears.
2.3 Section 10.1(i) of the Agreement is amended and restated in its
entirety as follows:
-1-
<PAGE>
"(i) any short-term unsecured debt rating assigned to an Obligor by
S&P, Moody's or Duff falls below `A-2,' `P-2' or `D-2,' respectively, or
the second highest long-term unsecured debt rating assigned to an Obligor
by S&P, Moody's or Duff falls below `A-', `A3' or `A-,' respectively."
2.4 Section 10.2 of the Agreement is amended by inserting "provided,
however, that with respect to a Termination Event described in Section 10.1(e)
or (i), only the commitment of the Purchasers to purchase undivided interests in
the Receivables of the affected Obligor shall be terminated" at the end of the
first sentence before the period.
3. Representations and Warranties. Each Seller Party severally
represents and warrants, as to itself alone, as applicable, to the Agent and the
Purchasers as follows:
3.1 Authorization. The execution, delivery and performance of this
Amendment by such Seller Party has been duly authorized by all necessary
corporate action by such Seller Party and has been duly executed and delivered
by such Seller Party.
3.2 Binding Obligation. This Amendment and the Agreement are legal, valid
and binding agreements of such Seller Party, enforceable in accordance with
their respective terms, except to the extent enforceability thereof may be
limited by applicable law relating to bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or limiting creditors' rights
generally or by the application of general principles of equity.
3.3 No Legal Obstacle to Agreements. Neither the execution of this
Amendment nor the performance of the Agreement by such Seller Party has
constituted or resulted in or will constitute or result in a breach of the
provisions of any material agreement, or the violation of any law, judgment,
decree or governmental order, rule or regulation applicable to such Seller
Party, or result in the creation under any material agreement of any security
interest, lien, charge, or encumbrance upon any of the assets of such Seller
Party other than pursuant to the Agreement. No approval or authorization of any
Person is required to be obtained by such Seller Party to permit the execution,
delivery or performance by such Seller Party of this Amendment.
3.4 Incorporation of Certain Representations. The representations and
warranties of each Seller Party set forth in Article V of the Agreement are true
and correct as to itself alone in all material respects on and as of the date
hereof as though made on and as of the date hereof except to the extent such
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties were true and correct in all material
respects on and as of such earlier date.
3.5 Default. No event has occurred and is continuing, or would result
from this Amendment, which constitutes a Servicer Default.
4. Conditions, Effectiveness. The effectiveness of this Amendment shall
be subject to the compliance by each Seller Party with its agreements herein
contained, and to the delivery of the following to the Agent in form and
substance satisfactory to the Agent:
-2-
<PAGE>
4.1 Corporate Resolutions. A copy of a resolution or resolutions passed
by the Board of Directors of each Seller Party, certified by the Secretary or an
Assistant Secretary of each Seller Party as being in full force and effect on
the date hereof, authorizing the amendments to the Agreement herein provided for
and the execution, delivery and performance of this Amendment.
4.2 Authorized Signatories. A certificate, signed by the Secretary or an
Assistant Secretary of each Seller Party dated the date hereof, as to the
incumbency of the person or persons authorized to execute and deliver this
Amendment and any instrument or agreement required hereunder on behalf of each
Seller Party.
5. Miscellaneous.
5.1 Effectiveness of the Agreements. Except as hereby amended, the
Agreement shall remain in full force and effect.
5.2 Waivers. In connection with the purchase of any Receivables prior to
the date of this Amendment, the Purchasers and the Agent hereby waive any
condition precedent under Section 3.2(a)(ii) or Termination Event under Section
10.1(i) of the Agreement relating to the debt ratings of Toys "R" Us, Inc. This
Amendment is specific in time and in intent and does not constitute, nor should
it be construed as, a waiver of any other right, power or privilege under the
Agreement, or under any agreement, contract, indenture, document or instrument
mentioned in the Agreement; nor does it preclude any exercise thereof or the
exercise of any other right, power or privilege, nor shall any future waiver of
any right, power, privilege or default hereunder, or under any agreement,
contract, indenture, document or instrument mentioned in the Agreement,
constitute a waiver of any other default of the same or of any other term or
provision.
5.3 Counterparts. This Amendment may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument. This Amendment shall become effective
as of the effective date written above upon each Seller Party, the Requisite
Purchasers and the Agent signing a copy hereof, whether the same or
counterparts, and the same shall have been delivered to the Agent.
5.4 Jurisdiction. This Amendment, and any instrument or agreement
required hereunder, shall be governed by and construed under the laws of the
State of California.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Receivables Purchase Agreement to be duly executed and delivered as of the date
first written above.
MATTEL FACTORING INC., as Transferor
MATTEL, INC., as Guarantor and Servicer
By: /s/ William Stavro
-------------------------------
William Stavro
Senior Vice President and
Treasurer
S-1
<PAGE>
BANK OF AMERICA, N.A., as Agent
By:/s/ Gina Meador
--------------------------------------
Gina Meador
Vice President
BANK OF AMERICA, N.A., as a Purchaser
By:/s/ Robert W. Troutman
--------------------------------------
Robert W. Troutman
Managing Director
S-2
<PAGE>
THE CHASE MANHATTAN BANK
By:/s/ William P. Rindfuss
--------------------------------------
Title: Vice President
-----------------------------------
S-3
<PAGE>
FLEET NATIONAL BANK
By:/s/ Jorge A. Schwarz
--------------------------------------
Title: Director
-----------------------------------
S-4
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By:/s/ Debbie A. Greene
--------------------------------------
Title: Vice President
-----------------------------------
S-5
<PAGE>
ABN AMRO BANK N.V.
By: /s/ Ellen M. Coleman
--------------------------------------
Ellen M. Coleman
Title: Group Vice President
-----------------------------------
By: /s/ Mitsoo Iravani
--------------------------------------
Mitsoo Iravani
Title: Assistant Vice President
-----------------------------------
S-6
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Ronald L. Watterworth
-------------------------------------
Title: Vice Pres.
-----------------------------------
S-7
<PAGE>
BANQUE NATIONALE DE PARIS
By: /s/ Clive Bettles
--------------------------------------
Title: Senior Vice President & Manager
-----------------------------------
By: /s/ Mitchell M. Ozawa
--------------------------------------
Title: Vice President
-----------------------------------
S-8
<PAGE>
DRESDNER BANK AG, New York and Grand
Cayman Branches
By: /s/ A. Richard Morris
--------------------------------------
A. Richard Morris
Title: First Vice President
-----------------------------------
By: /s/ Xinyue Jasmine Geffner
--------------------------------------
Xinyue Jasmine Geffner
Title: Assistant Vice President
-----------------------------------
S-9
<PAGE>
MANUFACTURERS & TRADERS TRUST CO.
By: /s/ Christopher Kania
--------------------------------------
Title: Vice President
-----------------------------------
S-10
<PAGE>
CITICORP USA, INC.
By: /s/ William Royer
--------------------------------------
Title: Attorney-in-Fact
-----------------------------------
S-11
<PAGE>
SOCIETE GENERALE, NEW YORK
BRANCH
By: /s/ Robert Petersen
--------------------------------------
Robert Petersen
Title: Director
-----------------------------------
S-12
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Vicente L. Timiraos
--------------------------------------
Title: Joint General Manager
-----------------------------------
S-13
<PAGE>
THE NORTHERN TRUST COMPANY
By: /s/ Jaron Grimm
--------------------------------------
Title: Vice President
-----------------------------------
S-14
