UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1 to Schedule 13D)
TYCO TOYS, INC.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
90212810
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(CUSIP Number)
With a copy to:
Jonathan Kagan Timothy G. Massad, Esq.
Corporate Advisors, L.P. Cravath, Swaine & Moore
One Rockefeller Plaza 825 Eighth Avenue
New York, New York 10020 New York, N.Y. 10019
212-632-6253 212-474-1154
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
November 17, 1996
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D,
and is filing this Schedule because of Rule 13d-1(b)(3) or (4), check
the following box [ ].
Check the following box if a fee is being paid with the statement [ ].
(A fee is not required only if the reporting person: (1) has a
previous statement on file reporting beneficial ownership of more than
five percent of the class of securities described in Item 1; and (2)
has filed no amendment subsequent thereto reporting beneficial
ownership of five percent or less of such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to the
liabilities of that section of the Act but shall be subject to all
other provisions of the Act (however, see the Notes).
<PAGE>
CUSIP No. 90212810 13D Page 2 of 83 Pages
- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Corporate Partners, L.P.
- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2 (d) OR 2(e) [ ]
- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY ---------------------------------------------------------
OWNED BY
EACH 8 SHARED VOTING POWER
REPORTING -0-
PERSON WITH ---------------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- ------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,789,785 shares of Common Stock, assuming conversion of all
shares of convertible preferred stock beneficially owned by
Corporate Partners, L.P.
- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
12.09%, assuming conversion of all shares of convertible
preferred stock beneficially owned by Corporate Partners, L.P.
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14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 90212810 13D Page 3 of 83 Pages
- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Corporate Offshore Partners, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2 (d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Bermuda
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY ---------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH -0-
REPORTING ---------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
-0-
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- ------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
341,145 shares of Common Stock assuming conversion of all
shares of convertible preferred stock beneficially owned by
Corporate Offshore Partners, L.P. (See Item 5).
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.97%, assuming conversion of all shares of convertible
preferred stock beneficially owned by Corporate Offshore
Partners, L.P.
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14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 90212810 13D Page 4 of 83 Pages
- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
State Board of Administration of Florida
- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2 (d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Florida
- ------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY ---------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH -0-
REPORTING ---------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
-0-
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
500,325 shares of Common Stock assuming conversion of all
shares of convertible preferred stock owned by the State
Board of Administration of Florida.
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.42%, assuming conversion of all shares of convertible
preferred stock owned by the State Board of Administration of
Florida (See Item 5).
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14 TYPE OF REPORTING PERSON*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 90212810 13D Page 5 of 83 Pages
- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Corporate Advisors, L.P.
- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [x]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
Not applicable
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2 (d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY ---------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 5,631,255
REPORTING ---------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
-0-
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER
5,631,255
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,631,255 shares of Common Stock assuming conversion of all
shares of convertible preferred stock beneficially owned by
Corporate Partners, L.P., Corporate Offshore Partners, L.P.
and the State Board of Administration of Florida.
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.92% assuming conversion of all shares of convertible
preferred stock beneficially owned by Corporate Partners,
L.P., Corporate Offshore Partners, L.P. and the State Board
of Administration of Florida.
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14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 90212810 13D Page 6 of 83 Pages
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1 NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
LFCP Corp.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
Not applicable
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2 (d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY ---------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 5,631,255
REPORTING ---------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
-0-
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER
5,631,255
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,631,255 shares of Common Stock assuming conversion of all
shares of convertible preferred stock beneficially owned by
Corporate Partners, L.P., Corporate Offshore Partners, L.P.
and the State Board of Administration of Florida.
- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.92% assuming assuming conversion of all shares of
convertible preferred stock beneficially owned by Corporate
Partners, L.P., Corporate Offshore Partners, L.P. and the
State Board of Administration of Florida.
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
This Amendment No. 1 to the Schedule 13D filed on April 15, 1994
is filed on behalf of Corporate Partners, L.P., Corporate Offshore
Partners, L.P., State Board of Administration of Florida, Corporate
Advisors, L.P. and LFCP Corp. Capitalized terms used herein and not
defined herein shall have the meaning assigned to such terms in the
Statement.
Item 3. Source and Amount of Funds or Other Consideration
Item 3 of the Statement is hereby amended by adding the following
paragraph after the third paragraph of such Item 3:
Additional Shares have been issued as dividends on the
Initial Shares pursuant to the Certificate of Designation in the
following amounts: 5,119 Additional Shares to Corporate Partners;
361 Additional Shares to Corporate Offshore Partners; and 532
Additional Shares to the State Board. Thus, Corporate Partners
currently holds a total of 45,617 Shares, Corporate Offshore
Partners holds a total of 3,249 Shares, and the State Board holds
a total of 4,765 Shares.
Item 4. Purpose of Transaction
Item 4 of the Statement is hereby amended by deleting the last
paragraph of such Item 4 and replacing it with the following three
paragraphs:
As also noted in Item 6, on November 17, 1996, Mattel, Inc.,
a Delaware corporation ("Parent"), Truck Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Parent
("Subsidiary"), and the Company entered into an Agreement and
Plan of Merger (the "Merger Agreement"), pursuant to which, among
other things, Subsidiary is to be merged (the "Merger") into the
Company on the Effective Date (as defined therein) upon the terms
and subject to the conditions thereof, and in connection
therewith, (i) each outstanding share of Common Stock (other than
shares owned by Parent, the Company or their respective
subsidiaries) will be converted into a number of shares of common
stock of Parent determined pursuant to the Exchange Ratio (as
defined therein) and (ii) each share of Preferred Stock will be
converted into a share of Series B Preferred Stock of Parent,
with economic terms as nearly equivalent as possible to, and with
the same voting and other rights as correspond to, the Preferred
Stock (the "Parent Series B Preferred Stock").
Also on November 17, 1996, in connection with the Merger
Agreement, the Partnerships, Corporate Advisors and the State
Board (referred to herein as the "Company Series B Preferred
Stockholders") and the Parent entered into a Stockholders
<PAGE>
Agreement (the "Stockholders Agreement") pursuant to which each
Company Series B Preferred Stockholder agreed: (i) to vote all of
its Preferred Stock, together with any other shares of capital
stock of the Company acquired after the date thereof and prior to
the termination thereof, in which it has the right to vote in
favor of the approval and adoption of the Merger Agreement; (ii)
not to sell, pledge, transfer or otherwise dispose of its
Preferred Stock prior to the Effective Date of the Merger
Agreement or the earlier termination of the Merger Agreement in
accordance with its terms, except as expressly permitted by the
Stockholders Agreement or as may be required by the Certificate
of Designation; (iii) not to directly or indirectly encourage or
solicit or hold discussions or negotiations with, or provide any
information to, any person, entity or group (other than the
Parent or an affiliate thereof, or the Company in connection with
the Merger) concerning any other Acquisition Proposal (as defined
in the Merger Agreement), provided that this third clause shall
not be binding on the State Board to the extent that Corporate
Advisors does not have the authority to act for the State Board
with respect to such matters. Under the Stockholders Agreement,
each Company Series B Preferred Stockholder and Parent further
agree that on the Effective Date each share of Preferred Stock
beneficially owned by such Company Series B Preferred Stockholder
shall be converted or exchanged for one share of Parent Series B
Preferred Stock. Under the Stockholders Agreement, each Company
Series B Preferred Stockholder and Parent further agree that on
the Effective Date Parent shall, pursuant to a writing
satisfactory to the Company Series B Preferred Stockholders,
assume and be bound by all obligations of the Company under the
Registration Rights Agreement dated April 15, 1994 between the
Purchasers and Company, and Parent and the Company Series B
Stockholders agree that such agreement shall be amended to
pertain to the Parent Series B Preferred Stock (and the
securities which may be issued on conversion or exchange thereof)
in lieu of the Preferred Stock. In addition, under the Merger
Agreement the directors of the Subsidiary immediately prior to
the Effective Date shall be the directors of the Surviving
Corporation (as defined in the Merger Agreement) and the officers
of the Company immediately prior to the Effective Date shall be
the officers of the Surviving Corporation, in each case until
their respective successors are duly elected and qualified.
Currently, the Reporting Persons have two designees who are
serving as directors of the Company, Jonathan Kagan and David
Golub. Neither the Merger Agreement nor the Stockholders
Agreement addresses whether such persons will continue to be
directors.
Other than as described above and as contemplated by the
Merger Agreement, neither any Reporting Person nor, to the
<PAGE>
best knowledge of each Reporting Person, any person identified in
Appendix A, has any present plans or proposals which relate to or
would result in: (a) the acquisition by any person of additional
securities of the Company, or the disposition of securities of
the Company; (b) an extraordinary corporate transaction, such as
a merger, reorganization or liquidation, involving the Company or
any of its subsidiaries; (c) a sale or transfer of a material
amount of assets of the Company or of any of its subsidiaries;
(d) any change in the present Board of Directors or management of
the Company, including any plans or proposals to change the
number or term of directors or to fill any existing vacancies on
the board; (e) any material change in the present capitalization
or dividend policy of the Company; (f) any other material change
in the Company's business or corporate structure; (g) changes in
the Company's charter, by-laws or instruments corresponding
thereto or other actions which may impede the acquisition of
control of the Company by any person; (h) causing a class of
securities of the Company to be delisted from a national
securities exchange or to cease to be authorized to be quoted in
an inter-dealer quotation system of a registered national
securities association; (i) a class of equity securities of the
Company becoming eligible for termination of registration
pursuant to Section 12(g)(4) of the Exchange Act; or (j) any
action similar to any of those enumerated above.
Item 5. Interest of Securities of Issuer
Items 5(a) through (c) of the Statement are hereby amended by
replacing the first paragraph of such Items 5(a) through (c) with the
following paragraph:
As set forth above, on April 15, 1994, (i) Corporate
Partners purchased from the Company 40,498 Initial Shares, (ii)
Corporate Offshore Partners purchased from the Company 2,888
Initial Shares, and (iii) the State Board purchased from the
Company 4,233 Initial Shares. Also as set forth above, as a
result of Additional Shares issued as dividends subsequent to
April 15, 1994, at present (i) Corporate Partners beneficially
owns 45,617 Shares, (ii) Corporate Offshore Partners beneficially
owns 3,249 Shares, and (iii) the State Board beneficially owns
4,765 Shares. Thus, as to each Purchaser, giving effect to the
conversion of all Shares owned by such Purchaser (but not to the
conversion of Shares beneficially owned by any other Purchaser)
and using the current conversion price of $10.00 per share of
Common Stock, (i) Corporate Partners beneficially owns 4,789,785
shares of Common Stock representing 12.09% of the outstanding
shares of Common Stock, (ii) Corporate Offshore Partners
beneficially owns 341,145 shares of Common Stock representing
0.97% of the outstanding shares of Common Stock, (iii) the State
Board
<PAGE>
beneficially owns 500,325 of Common Stock representing 1.42% of
the outstanding shares of Common Stock. By virtue of Corporate
Advisors' relationship with the Partnerships and the State Board
and LFCP Corp.'s relationship with Corporate Advisors, Corporate
Advisors and LFCP Corp. each may be deemed to beneficially own
5,631,255 shares of Common Stock representing 13.92% of the
outstanding shares of Common Stock (assuming the conversion of
all Shares owned by the Purchasers). Neither the Partnerships nor
the State Board has any power to vote or dispose or to direct the
disposition of the Shares indicated above as owned by it.
Corporate Advisors as general partner of the Partnerships and as
investment manager over the Shares owned by the State Board,
which are held in a custody account, and LFCP Corp., as general
partner of Corporate Advisors, may be deemed to have shared power
to vote or to direct the vote, and to dispose or to direct the
disposition, of the Shares. The percentages calculated in this
Item 5 are based upon 34,826,668 shares of Common Stock
outstanding as of November 17, 1996, as represented by the
Company in the Merger Agreement.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer
Item 6 of the Statement is hereby amended by adding the following
two paragraphs after the first paragraph of such Item 6:
As noted in Item 4, on November 17, 1996, Parent,
Subsidiary, and the Company entered into a Merger Agreement (the
"Merger Agreement") pursuant to which, among other things,
Subsidiary is to be merged (the "Merger") into the Company on the
Effective Date (as defined therein) upon the terms and subject to
the conditions thereof, and in connection therewith, (i) each
outstanding share of Common Stock (other than shares owned by
Parent, the Company or their respective subsidiaries) will be
converted into a number of shares of common stock of Parent
determined pursuant to the Exchange Ratio (as defined therein)
and (ii) each share of Preferred Stock will be converted into a
share of Series B Preferred Stock of Parent, with economic terms
as nearly equivalent as possible to, and with the same voting and
other rights as correspond to, the Preferred Stock (the "Parent
Series B Preferred Stock").
Also on November 17, 1996, in connection with the Merger
Agreement, the Company Series B Preferred Stockholders and the
Parent entered into a Stockholders Agreement (the "Stockholders
Agreement") pursuant to which each Company Series B Preferred
Stockholder agreed: (i) to vote all of its Preferred Stock,
together with any other shares of capital
<PAGE>
stock of the Company acquired after the date thereof and prior to
the termination thereof, in which it has the right to vote in
favor of the approval and adoption of the Merger Agreement; (ii)
not to sell, pledge, transfer or otherwise dispose of its
Preferred Stock prior to the Effective Date of the Merger
Agreement or the earlier termination of the Merger Agreement in
accordance with its terms, except as expressly permitted by the
Stockholders Agreement or as may be required by the Certificate
of Designation; (iii) not to directly or indirectly encourage or
solicit or hold discussions or negotiations with, or provide any
information to, any person, entity or group (other than the
Parent or an affiliate thereof, or the Company in connection with
the Merger) concerning any other Acquisition Proposal (as defined
in the Merger Agreement), provided that this third clause shall
not be binding on the State Board to the extent that Corporate
Advisors does not have the authority to act for the State Board
with respect to such matters. Under the Stockholders Agreement,
each Company Series B Preferred Stockholder and Parent further
agree that on the Effective Date each share of Preferred Stock
beneficially owned by such Company Series B Preferred Stockholder
shall be converted or exchanged for one share of Parent Series B
Preferred Stock. Under the Stockholders Agreement, each Company
Series B Preferred Stockholder and Parent further agree that on
the Effective Date Parent shall, pursuant to a writing
satisfactory to the Company Series B Preferred Stockholders,
assume and be bound by all obligations of the Company under the
Registration Rights Agreement dated April 15, 1994 between the
Purchasers and Company, and Parent and the Company Series B
Preferred Stockholders agree that such agreement shall be amended
to pertain to the Parent Series B Preferred Stock (and the
securities which may be issued on conversion or exchange thereof)
in lieu of the Preferred Stock. In addition, under the Merger
Agreement, the directors of the Subsidiary immediately prior to
the Effective Date shall be the directors of the Surviving
Corporation (as defined in the Merger Agreement) and the officers
of the Company immediately prior to the Effective Date shall be
the officers of the Surviving Corporation, in each case until
their respective successors are duly elected and qualified.
Currently, the Reporting Persons have two designees who are
serving as directors of the Company, Jonathan Kagan and David
Golub. Neither the Merger Agreement nor the Stockholders
Agreement addresses whether such persons will continue to be
directors.
<PAGE>
Item 7. Material to be Filed as Exhibits
Item 7 of the Statement is hereby amended by adding the following
Exhibits after Exhibit 6:
Exhibit 99.7 - Agreement and Plan of Merger dated November 17, 1996
between Parent, Subsidiary, and the Company.
Exhibit 99.8 - Stockholders Agreement dated November 17, 1996
between Parent and the Company Series B Preferred Stockholders.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this Statement is
true, complete and correct.
Dated: November 21, 1996.
CORPORATE PARTNERS, L.P.,
by: Corporate Advisors, L.P.,
General Partner
by: LFCP Corp.,
General Partner
by: /s/ Jonathan Kagan
------------------
Name: Jonathan Kagan
Title: President
CORPORATE OFFSHORE PARTNERS, L.P.,
by: Corporate Advisors, L.P.,
General Partner
by: LFCP Corp.,
General Partner
by: /s/ Jonathan Kagan
------------------
Name: Jonathan Kagan
Title: President
STATE BOARD OF ADMINISTRATION OF
FLORIDA,
by: Corporate Advisors, L.P.,
Attorney-in-Fact
by: LFCP Corp.,
General Partner
by: /s/ Jonathan Kagan
------------------
Name: Jonathan Kagan
Title: President
<PAGE>
CORPORATE ADVISORS, L.P.,
by: LFCP Corp.
General Partner
by: /s/ Jonathan Kagan
------------------
Name: Jonathan Kagan
Title: President
LFCP CORP.,
by: /s/ Jonathan Kagan
------------------
Name: Jonathan Kagan
Title: President
<PAGE>
Exhibit 99.7 - Agreement and Plan of
Merger dated November 17,
1996 between Parent,
Subsidiary, and the Company.
<PAGE>
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
NOVEMBER 17, 1996
AMONG
MATTEL, INC.,
TRUCK ACQUISITION CORP.
AND
TYCO TOYS, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
Section 1.1 The Merger............................................ 1
Section 1.2 Effective Date of the Merger.......................... 2
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation.......................... 2
Section 2.2 By-Laws............................................... 2
Section 2.3 Board of Directors; Officers.......................... 2
Section 2.4 Effects of Merger..................................... 2
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio........................................ 2
Section 3.2 Parent to Make Certificates Available................. 4
Section 3.3 Dividends; Transfer Taxes............................. 5
Section 3.4 No Fractional Shares.................................. 5
Section 3.5 Company Shareholders' Meeting......................... 6
Section 3.6 Closing of the Company's Transfer Books............... 6
Section 3.7 Assistance in Consummation of the Merger.............. 7
Section 3.8 Closing............................................... 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.1 Organization and Qualification........................ 7
Section 4.2 Capitalization........................................ 8
Section 4.3 Subsidiaries.......................................... 8
Section 4.4 Authority Relative to this Merger Agreement........... 9
Section 4.5 Reports and Financial Statements...................... 10
Section 4.6 Absence of Certain Changes or Events.................. 11
Section 4.7 Litigation............................................ 11
Section 4.8 Information in Disclosure Documents, Registration
Statements, Etc..................................... 12
Section 4.9 Employee Benefit Plans................................ 12
Section 4.10 ERISA................................................. 13
Section 4.11 Takeover Provisions Inapplicable...................... 13
Section 4.12 Parent Action......................................... 14
Section 4.13 Compliance with Applicable Laws....................... 14
Section 4.14 Liabilities........................................... 14
Section 4.15 Taxes................................................. 15
Section 4.16 Certain Agreements.................................... 15
Section 4.17 Patents, Trademarks, Etc.............................. 16
<PAGE>
Section 4.18 Product Liability..................................... 16
Section 4.19 Environment........................................... 16
Section 4.20 Title to Assets; Liens................................ 17
Section 4.21 Parent Ownership of Stock............................. 17
Section 4.22 [Reserved]............................................ 17
Section 4.23 Accounting Matters.................................... 17
Section 4.24 No Material Adverse Effect............................ 17
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Section 4A.1 Organization.......................................... 18
Section 4A.2 Capitalization........................................ 18
Section 4A.3 Authority Relative to this Merger
Agreement........................................... 18
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 5.1 Organization and Qualification........................ 19
Section 5.2 Capitalization........................................ 19
Section 5.3 Subsidiaries.......................................... 20
Section 5.4 Authority Relative to this Merger
Agreement........................................... 21
Section 5.5 Reports and Financial Statements...................... 22
Section 5.6 Absence of Certain Changes or Events.................. 22
Section 5.7 Litigation............................................ 23
Section 5.8 Information in Disclosure Documents................... 23
Section 5.9 Employee Benefit Plans................................ 24
Section 5.10 ERISA................................................. 24
Section 5.11 Takeover Provisions Inapplicable...................... 25
Section 5.12 Company Action........................................ 25
Section 5.13 Fairness Opinion...................................... 26
Section 5.14 Financial Advisor..................................... 26
Section 5.15 Compliance with Applicable Laws....................... 26
Section 5.16 Liabilities........................................... 27
Section 5.17 Taxes................................................. 27
Section 5.18 Certain Agreements.................................... 27
Section 5.19 Accounts Receivable................................... 28
Section 5.20 Inventory............................................. 28
Section 5.21 Patents, Trademarks, Etc.............................. 29
Section 5.22 Product Liability..................................... 29
Section 5.23 Environment........................................... 29
Section 5.24 Title to Assets; Liens................................ 29
Section 5.25 Accounting Matters.................................... 30
Section 5.26 No Material Adverse Effect............................ 30
<PAGE>
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company
Pending the Merger.................................. 30
Section 6.2 Conduct of Business by Parent and Sub
Pending the Merger.................................. 33
Section 6.3 Notice of Breach...................................... 33
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information................................ 33
Section 7.2 Registration Statement/Proxy Statement................ 34
Section 7.3 Compliance with the Securities Act.................... 34
Section 7.4 Stock Exchange Listing................................ 35
Section 7.5 Employment Arrangements............................... 35
Section 7.6 Indemnification....................................... 36
Section 7.7 Antitrust Filings; Best Efforts;
Notification........................................ 36
Section 7.8 Additional Agreements................................. 38
Section 7.9 No Solicitation....................................... 40
Section 7.10 Dividend Adjustment................................... 41
Section 7.11 Takeover Provisions Inapplicable...................... 42
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation
to Effect the Merger................................ 42
Section 8.2 Conditions to Obligation of the Company
to Effect the Merger................................ 43
Section 8.3 Conditions to Obligations of Parent and
Sub to Effect the Merger............................ 44
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination........................................... 45
Section 9.2 Effect of Termination................................. 46
Section 9.3 Amendment............................................. 48
Section 9.4 Waiver................................................ 48
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations,
Warranties and Agreements........................... 48
Section 10.2 Notices............................................... 48
Section 10.3 Fees and Expenses..................................... 49
<PAGE>
Section 10.4 Publicity............................................. 50
Section 10.5 Specific Performance.................................. 50
Section 10.6 Interpretation........................................ 50
Section 10.7 Miscellaneous......................................... 50
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Merger Agreement"),
dated as of November 17, 1996, by and among Mattel, Inc., a Delaware
corporation ("Parent"), Truck Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), and Tyco
Toys, Inc., a Delaware corporation (the "Company"):
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent, Sub and the
Company have approved the acquisition of the Company by Parent;
WHEREAS, the Boards of Directors of Parent, Sub and the
Company have approved the merger of Sub into the Company (the
"Merger"), upon the terms and subject to the conditions set forth
herein;
WHEREAS, certain significant stockholders of the Company
have entered into a support agreement, dated as of the date hereof,
pursuant to which such stockholders have agreed to vote in favor of
the transaction and to consent to the treatment of the Company Series
B Preferred Stock (as defined below) as contemplated by this
Agreement;
WHEREAS, for federal income tax purposes, it is intended
that the Merger shall qualify as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code");
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a "pooling of interests";
NOW, THEREFORE, in consideration of the foregoing premises
and the representations, warranties and agreements contained herein,
the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions hereof, on the Effective Date (as defined below in Section
1.2), Sub shall be merged into the Company and the separate existence
of Sub shall thereupon cease, and the name of the Company, as the
surviving corporation in the Merger
<PAGE>
(the "Surviving Corporation"), shall by virtue of the Merger remain
"Tyco Toys, Inc."
Section 1.2 Effective Date of the Merger. The Merger shall
become effective when a properly executed Certificate of Merger is
duly filed with the Secretary of State of the State of Delaware, which
filing shall be made as soon as practicable after the closing of the
transactions contemplated by this Merger Agreement in accordance with
Section 3.8. When used in this Merger Agreement, the term "Effective
Date" shall mean the date and time at which such filing shall have
been made.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. The Certificate of
Incorporation of Sub shall be the Certificate of Incorporation of the
Surviving Corporation after the Effective Date, and thereafter may be
amended in accordance with its terms and as provided by law and this
Merger Agreement.
Section 2.2 By-Laws. The By-laws of Sub as in effect on the
Effective Date shall be the By-laws of the Surviving Corporation.
Section 2.3 Board of Directors; Officers. The directors of
Sub immediately prior to the Effective Date shall be the directors of
the Surviving Corporation and the officers of the Company immediately
prior to the Effective Date shall be the officers of the Surviving
Corporation, in each case until their respective successors are duly
elected and qualified.
Section 2.4 Effects of Merger. The Merger shall have the
effects set forth in Section 259 of the Delaware General Corporation
Law (the "DGCL").
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio. As of the Effective Date, by
virtue of the Merger and without any action on the part of any holder
of any capital stock of the Company:
(a) All shares of capital stock of the Company which are
held by the Company or any subsidiary of the Company, and
<PAGE>
any shares of capital stock of the Company owned by Parent, Sub or any
other subsidiary of Parent, shall be cancelled.
(b) Subject to Section 3.4, each remaining outstanding share
of common stock, $0.01 par value, of the Company ("Company Common
Stock") issued and outstanding immediately prior to the Effective Date
shall be converted into a number of fully paid and nonassessable
shares of the common stock, $1.00 par value, of Parent ("Parent Common
Stock") equal to the Exchange Ratio. The "Exchange Ratio" shall mean
the quotient (rounded to the nearest 1/100,000) obtained by dividing
(i) $12.50 by (ii) the average of the high and low sales prices of
Parent Common Stock as reported on the New York Stock Exchange, Inc.
("NYSE") Composite Tape on each of the ten consecutive trading days
immediately preceding the fifth trading date prior to the Effective
Date, but in no event shall the Exchange Ratio be more than .51129 or
less than .37791. One nonvoting preference share purchase right
issuable pursuant to the Rights Agreement dated as of February 7, 1992
between Parent and The First National Bank of Boston or any other
purchase right issued in substitution thereof (the "Parent Rights")
shall be issued together with and shall attach to each share of Parent
Common Stock issued pursuant to Sections 3.1(b), (c), (g) and (h) or
upon conversion of the Parent Series B Preferred Stock (as defined
below) issued pursuant to Section 3.1(d).
(c) Subject to Section 3.4, each remaining outstanding share
of Series C Mandatorily Convertible Redeemable Preferred Stock, par
value $.10 per share, of the Company (the "Company Series C Preferred
Stock") issued and outstanding immediately prior to the Effective Date
shall be converted into a number of fully paid and nonassessable
shares of Parent Common Stock equal to the product of (i) 20.4925 and
(ii) the Exchange Ratio.
(d) Subject to Section 3.4, each of the remaining
outstanding shares of Series B Preferred Stock, par value $.10 per
share, of the Company (the "Company Series B Preferred Stock"), issued
and outstanding immediately prior to the Effective Date shall each be
converted into a share of Series B Preferred Stock, par value $1.00
per share, of Parent (the "Parent Series B Preferred Stock"), with
economic terms as nearly equivalent as possible to, and with the same
voting and other rights as correspond to the Company Series B
Preferred Stock.
(e) In the event of any stock dividend, stock split,
reclassification, recapitalization, combination or exchange of shares
with respect to, or rights issued in respect of, Parent Common Stock
after the date it is calculated and prior to the
<PAGE>
Effective Date, the Exchange Ratio shall be adjusted accordingly.
(f) Each issued and outstanding share of capital stock of
Sub shall be converted into and become one fully paid and
nonassessable share of common stock, $.01 par value, of the Surviving
Corporation.
(g) Subject to Section 3.4, each of the outstanding rights
with respect to Company Common Stock pursuant to stock options
("Company Stock Options") granted under the Company Benefit Plans (as
defined herein) shall be converted into and become the right to
receive a number of shares of Parent Common Stock equal to its fair
value as of the Effective Date as mutually agreed between Parent and
the Company.
(h) Subject to Section 3.4, each vested Restricted Stock
Unit as of the Effective Date under the Company's Deferred Stock Unit
Plan shall be converted into and become the right to receive a number
of shares of Parent Common Stock equal to the Exchange Ratio, which
the parties have determined to be the "fair value" of such unit.
Subject to Section 3.4, each unvested Restricted Stock Unit as of the
Effective Date under the Company's Deferred Stock Unit Plan shall be
converted into and become the right to receive a number of shares of
Parent Common Stock equal to .3272 multiplied by the Exchange Ratio,
which the parties have determined to be the "fair value" of such unit.
Section 3.2 Parent to Make Certificates Available. Prior to
the Effective Date, Parent shall select The First National Bank of
Boston or such other person or persons reasonably satisfactory to the
Company to act as Exchange Agent for the Merger (the "Exchange
Agent"). As soon as practicable after the Effective Date, Parent shall
make available, and each holder of Company Common Stock, Company
Series B Preferred Stock, Company Series C Preferred Stock, Company
Stock Options or Company Restricted Stock Units to be converted
pursuant to Section 3.1 (each, a "Company Holder") will be entitled to
receive, upon surrender to the Exchange Agent of one or more
certificates representing such stock (or in the case of Company
Restricted Stock Units and Company Stock Options, the relevant
agreement or other evidence of right and interest in such Restricted
Stock Units or Company Stock Options) ("Certificates") for
cancellation, certificates representing the number of shares of Parent
Common Stock or Parent Series B Preferred Stock, as the case may be,
into which such shares or options are converted in the Merger and cash
in consideration of fractional shares as provided in Section 3.4. Such
shares of Parent Common Stock or Parent Series B Preferred Stock
<PAGE>
issued in the Merger shall each be deemed to have been issued at the
Effective Date.
Section 3.3 Dividends; Transfer Taxes. No dividends or other
distributions that are declared or made on Parent Common Stock will be
paid to persons entitled to receive certificates representing Parent
Common Stock pursuant to this Merger Agreement until such persons
surrender their Certificates representing Company Common Stock,
Company Series C Preferred Stock, Company Stock Options or Company
Restricted Stock Units, as the case may be. Upon such surrender, there
shall be paid to the person in whose name the certificates
representing such Parent Common Stock shall be issued any dividends or
other distributions which shall have become payable with respect to
such Parent Common Stock in respect of a record date after the
Effective Date. In no event shall the person entitled to receive such
dividends be entitled to receive interest on such dividends. In the
event that any certificates for any shares of Parent Common Stock or
Parent Series B Preferred Stock, as the case may be, are to be issued
in a name other than that in which the Certificates representing
shares of Company Common Stock, Company Series B Preferred Stock,
Company Series C Preferred Stock, Company Stock Options or Company
Restricted Stock Units, as the case may be, surrendered in exchange
therefor are registered, it shall be a condition of such exchange that
the person requesting such exchange shall pay to the Exchange Agent
any transfer or other taxes required by reason of the issuance of
certificates for such shares of Parent Common Stock or Parent Series B
Preferred Stock, as the case may be in a name other than that of the
registered holder of the Certificate surrendered, or shall establish
to the satisfaction of the Exchange Agent that such tax has
been paid or is not applicable. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a Company Holder for any shares of Parent
Common Stock or dividends thereon or any shares of Parent
Series B Preferred Stock, as the case may be, delivered to a
public official pursuant to any applicable escheat laws.
Section 3.4 No Fractional Shares. No certificates or scrip
representing less than one full share of Parent Common Stock shall be
issued upon the surrender for exchange of Certificates representing
Company Common Stock, Company Series C Preferred Stock, Company Stock
Options or Company Restricted Stock Units pursuant to Section 3.1(b),
(c), (g) or (h). In lieu of any such fractional share, each Company
Holder who would otherwise have been entitled to a fraction of a share
of Parent Common Stock upon surrender of Certificates for exchange
pursuant to Section 3.1(b), (c), (g) or (h) shall be paid upon such
surrender cash (without interest) in an amount equal to
<PAGE>
such holder's proportionate interest in the net proceeds from the sale
or sales in the open market by the Exchange Agent, on behalf of all
such holders, of the aggregate fractional Parent Common Stock issued
pursuant to this Section 3.4. As soon as practicable following the
Effective Date, the Exchange Agent shall determine the excess of (i)
the number of full shares of Parent Common Stock delivered to the
Exchange Agent by Parent over (ii) the aggregate number of full shares
of Parent Common Stock to be distributed to holders of Company Common
Stock, Company Series C Preferred Stock, Company Stock Options or
Company Restricted Stock Units (such excess being herein called the
"Excess Shares"), and the Exchange Agent, as agent for the former
Company Holders, shall sell the Excess Shares at the prevailing prices
on the NYSE. The sale of the Excess Shares by the Exchange Agent shall
be executed on the NYSE through one or more member firms of the NYSE
and shall be executed in round lots to the extent practicable. Parent
shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of Excess
Shares. Until the net proceeds of such sale have been distributed to
the former Company Holders, the Exchange Agent will hold such proceeds
in trust for such former stockholders (the "Fractional Securities
Fund"). As soon as practicable after the determination of the amount
of cash to be paid to former Company Holders in lieu of any fractional
interests, the Exchange Agent shall make available in accordance with
this Merger Agreement such amounts to such former stockholders.
Section 3.5 Company Shareholders' Meeting. The Company shall
take all action necessary, in accordance with applicable law and its
Restated Certificate of Incorporation and By-laws, to convene a
special meeting of the holders of capital stock of the Company
entitled to vote thereat (the "Company Meeting") as promptly as
practicable for the purpose of considering and taking action upon this
Merger Agreement. Subject to Section 7.9 hereof, the Board of
Directors of the Company will recommend that holders of any capital
stock of the Company entitled to vote thereon vote in favor of and
approve the Merger and the adoption of the Merger Agreement at the
Company Meeting. At the Company Meeting, all of the shares of Company
Common Stock, Company Series B Preferred Stock and Company Series C
Preferred Stock then owned by Parent, Sub, or any other subsidiary of
Parent, or with respect to which Parent, Sub, or any other subsidiary
of Parent holds the power to direct the voting, will be voted in favor
of approval of the Merger and adoption of this Merger Agreement.
Section 3.6 Closing of the Company's Transfer Books. At the
close of business on the Effective Date, the stock
<PAGE>
transfer books of the Company shall be closed and no transfer of any
shares of capital stock of the Company shall be made thereafter. In
the event that, after the Effective Date, Certificates are presented
to the Surviving Corporation, they shall be cancelled and exchanged
for the securities of Parent and/or cash as provided in Sections
3.1(b), (c), (d), (g) or (h) and 3.4.
Section 3.7 Assistance in Consummation of the Merger. Each
of Parent, Sub and the Company shall provide all reasonable assistance
to, and shall cooperate with, each other to bring about the
consummation of the Merger as soon as possible in accordance with the
terms and conditions of this Merger Agreement. Parent shall cause Sub
to perform all of its obligations in connection with this Merger
Agreement.
Section 3.8 Closing. The closing of the transactions
contemplated by this Merger Agreement shall take place (i) at the
offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New
York, New York 10019, at 9:00 A.M. local time on the day which is at
least one business day after the day on which the last of the
conditions set forth in Article VIII is fulfilled or waived or (ii) at
such other time and place as Parent and the Company shall agree in
writing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company, except as set
forth in a disclosure schedule delivered by Parent concurrently
herewith (the "Parent Disclosure Schedule"), as follows:
Section 4.1 Organization and Qualification. Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the corporate power to
carry on its business as it is now being conducted or currently
proposed to be conducted. Parent is duly qualified as a foreign
corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under
lease or the nature of its activities make such qualification
necessary, except where the failure to be so qualified will not,
individually or in the aggregate, have a Parent Material Adverse
Effect. As used in this Agreement, "Parent Material Adverse Effect"
shall mean a material adverse effect on the business, properties,
assets, financial condition, or results of operations of Parent and
its subsidiaries taken as a whole, except for (i) adverse changes
<PAGE>
resulting from general economic, financial or market conditions, (ii)
adverse changes resulting from conditions or circumstances generally
affecting the toy industry, or (iii) adverse changes resulting from
the announcement or pendency of this Merger Agreement or the Merger.
Section 4.2 Capitalization. The authorized capital stock of
Parent consists of 600,000,000 shares of Parent Common Stock,
3,000,000 shares of preferred stock, $1.00 par value, and 20,000,000
shares of preference stock, $0.01 par value. As of November 11, 1996,
279,057,614 shares of Parent Common Stock were validly issued and
outstanding, fully paid and nonassessable and 7,223,289 shares of
Parent Common Stock were held in treasury. As of November 11, 1996, no
shares of preferred stock or preference stock were issued and
outstanding. As of November 11, 1996, there were no bonds, debentures,
notes or other indebtedness having the right to vote on any matters on
which the Parent's shareholders may vote issued or outstanding. As of
November 11, 1996, except for employee stock options to acquire
14,088,204 shares of Parent Common Stock, the award of an aggregate of
683,593 shares of restricted stock to certain executive officers of
Parent (the "Restricted Stock Issuance") and the Parent Rights and,
except as set forth on Schedule 4.2 and as provided herein, there are
no options, warrants, calls or other rights, agreements or commitments
presently outstanding obligating Parent to issue, deliver or sell
shares of its capital stock or debt securities, or obligating Parent
to grant, extend or enter into any such option, warrant, call or other
such right, agreement or commitment. All of the shares of Parent
Common Stock issuable in accordance with this Merger Agreement in
exchange for Company Common Stock at the Effective Date in accordance
with this Merger Agreement will be, when so issued, duly authorized,
validly issued, fully paid and nonassessable.
Section 4.3 Subsidiaries. The only "Significant
Subsidiaries" (as such term is defined in Rule 1-02 of Regulation S-X
of the Securities and Exchange Commission (the "Commission")
("Significant Subsidiaries") of Parent are those set forth on Schedule
4.3. Each Significant Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the corporate power to carry on
its business as it is now being conducted or currently proposed to be
conducted. Each Significant Subsidiary is duly qualified as a foreign
corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification
necessary except where the failure to be so qualified will not have a
Parent Material Adverse Effect. All the outstanding shares
<PAGE>
of capital stock of each Significant Subsidiary are validly issued,
fully paid and nonassessable and those owned by Parent or by a
Significant Subsidiary of Parent are owned free and clear of any
liens, claims or encumbrances. There are no existing options,
warrants, calls or other rights, agreements or commitments of any
character relating to the issued or unissued capital stock or other
securities of any of the Significant Subsidiaries of Parent. Except as
set forth in Parent's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 and except for wholly owned subsidiaries which
are formed after the date hereof in the ordinary course of business,
Parent does not directly or indirectly own any interests in any other
corporation, partnership, joint venture or other business association or
entity which are material to Parent and its subsidiaries
taken as a whole.
Section 4.4 Authority Relative to this Merger Agreement.
Parent has the corporate power to enter into this Merger Agreement and
to carry out its obligations hereunder. The execution and delivery of
this Merger Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by Parent's Board of
Directors. This Merger Agreement constitutes a valid and binding
obligation of Parent enforceable in accordance with its terms except
as enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally
and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before
which any proceeding therefor may be brought. No other corporate
proceedings on the part of Parent are necessary to authorize the
Merger Agreement and the transactions contemplated hereby. Parent is
not subject to or obligated under (i) any charter, by-law, indenture
or other loan document provision (other than the Credit Agreement
dated as of March 10, 1995, among Parent, the Banks named therein and
Bank of America National Trust and Savings Association, as amended
(the "Parent Credit Agreement")) or (ii) any other contract, license,
franchise, permit, order, decree, concession, lease, instrument,
judgment, statute, law, ordinance, rule or regulation applicable to
Parent or any of its subsidiaries or their respective properties or
assets, which would be breached or violated, or under which there
would be a default (with or without notice or lapse of time, or both),
or under which there would arise a right of termination, cancellation
or acceleration of any obligation or the loss of a material benefit,
by its executing and carrying out this Merger Agreement other than, in
the case of clause (ii) only, (A) any breaches, violations, defaults,
terminations, cancellations, accelerations or losses which, either
singly or in the aggregate, will not have a Parent Material Adverse
Effect or prevent the consummation of the transactions
<PAGE>
contemplated hereby and (B) the laws and regulations referred to in
the next sentence. Except as referred to herein or in connection, or
in compliance, with the provisions of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the Securities
Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and other
governmental approvals required under the applicable laws of any
foreign jurisdiction ("Foreign Laws") and the environmental,
corporation, securities or blue sky laws or regulations of the various
states, no filing or registration with, or authorization, consent or
approval of, any public body or authority is necessary for the
consummation by Parent of the Merger or the other transactions
contemplated by this Merger Agreement, other than filings,
registrations, authorizations, consents or approvals the failure of
which to make or obtain would not have a Parent Material Adverse
Effect or prevent the consummation of the transactions contemplated
hereby.
Section 4.5 Reports and Financial Statements. Parent has, to
the extent such documents were requested by the Company, previously
furnished the Company with true and complete copies of its (i) Annual
Reports on Form 10-K for the three fiscal years ended December 31,
1995, as filed with the Commission, (ii) Quarterly Reports on Form
10-Q for the quarters ended March 31, 1996, June 30, 1996 and
September 30, 1996, as filed with the Commission, (iii) proxy
statements related to all meetings of its shareholders (whether annual
or special) since December 31, 1994, and (iv) all other reports or
registration statements filed by Parent with the Commission since
December 31, 1994, except registration statements on Form S-8 relating
to employee benefit plans, which are all the documents (other than
preliminary material) that Parent was required to file with the
Commission since that date (clauses (i) through (iv) being referred to
herein collectively as the "Parent SEC Reports"). As of their
respective dates, the Parent SEC Reports complied in all material
respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the
Commission thereunder applicable to such Parent SEC Reports. As of
their respective dates, the Parent SEC Reports did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and
unaudited interim financial statements of Parent included in the
Parent SEC Reports comply as to form
<PAGE>
in all material respects with applicable accounting requirements and
with the published rules and regulations of the Commission with
respect thereto, and the financial statements included in the Parent
SEC Reports have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a
consistent basis (except as may be indicated therein or in the notes
thereto or in Schedule 4.5 to the Parent Disclosure Schedule) and
fairly present the financial position of Parent and its subsidiaries
as at the dates thereof and the results of their operations and
changes in financial position for the periods then ended subject, in
the case of the unaudited interim financial statements, to normal
year-end audit adjustments and any other adjustments described
therein.
Section 4.6 Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Reports, since September 30, 1996, there
has not been (i) any transaction, commitment, dispute or other event
or condition (financial or otherwise) of any character (whether or not
in the ordinary course of business), individually or in the aggregate,
having a Parent Material Adverse Effect (other than as a result of
changes in laws or regulations of general applicability); (ii) any
damage, destruction or loss, whether or not covered by insurance,
which, insofar as reasonably can be foreseen, in the future would have
a Parent Material Adverse Effect; (iii) any declaration, setting
aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to the capital stock of Parent
(except for regularly scheduled cash dividends out of current earnings
at a rate not greater than the rate in effect on September 30, 1996);
or (iv) any entry into any commitment or transaction material to
Parent and its subsidiaries taken as a whole (including, without
limitation, any borrowing or sale of assets) except in the ordinary
course of business consistent with past practice.
Section 4.7 Litigation. Except as disclosed in the Parent
SEC Reports, there is no suit, action or proceeding pending or, to the
knowledge of Parent, threatened against or affecting Parent or any of
its subsidiaries which, alone or in the aggregate, is likely, insofar
as Parent reasonably foresees, to have a Parent Material Adverse
Effect, nor is there any judgment, decree, injunction, rule or order
of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against Parent or any of its
subsidiaries having, or which, insofar as Parent reasonably foresees,
in the future could have, either alone or in the aggregate, any such
Parent Material Adverse Effect.
<PAGE>
Section 4.8 Information in Disclosure Documents,
Registration Statements, Etc. None of the information with respect to
Parent or Sub to be included or incorporated by reference in (i) the
Registration Statement to be filed with the Commission by Parent on
Form S-4 under the Securities Act for the purpose of registering the
shares of Parent Common Stock to be issued in the Merger (the
"Registration Statement") and (ii) the proxy statement of the Company
(the "Proxy Statement") required to be mailed to the shareholders of
the Company in connection with the Merger will, in the case of the
Proxy Statement or any amendments or supplements thereto, at the time
of the mailing of the Proxy Statement and any amendments or
supplements thereto, and at the time of the Company Meeting to be held
in connection with the Merger, or, in the case of the Registration
Statement, at the time it becomes effective and at the Effective Date,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they are made, not misleading. The Registration Statement will comply
as to form in all material respects with the provisions of the
Securities Act, and the rules and regulations promulgated thereunder.
Section 4.9 Employee Benefit Plans. Except as disclosed in
the Parent SEC Reports, there are no material employee benefit or
compensation plans, agreements or arrangements, including "employee
benefit plans," as defined in Section 3 (3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and including, but
not limited to, plans, agreements or arrangements relating to former
employees, including, but not limited, to retiree medical plans,
maintained by Parent or any of its subsidiaries or material collective
bargaining agreements to which Parent or any of its subsidiaries is a
party (together, the "Benefit Plans"). To the best knowledge of
Parent, no default exists with respect to the obligations of Parent or
any of its subsidiaries under any such Benefit Plan, which default,
alone or in the aggregate, would have a Parent Material Adverse
Effect. Since January 1, 1996, there have been no disputes or
grievances subject to any grievance procedure, unfair labor practice
proceedings, arbitration or litigation under such Benefit Plans, which
have not been finally resolved, settled or otherwise disposed of, nor
is there any default, or any condition which, with notice or lapse of
time or both, would constitute such a default, under any such Benefit
Plans, by Parent or its subsidiaries or, to the best knowledge of
Parent and its subsidiaries, any other party thereto, which failure to
resolve, settle or otherwise dispose of or default, alone or in the
aggregate, would have a Parent Material Adverse Effect. Since January
1, 1996, there have been no strikes, lockouts or work stoppages or
slowdowns, or to
<PAGE>
the best knowledge of Parent and its subsidiaries, jurisdictional
disputes or organizing activity occurring or threatened with respect
to the business or operations of Parent or its subsidiaries which have
had or would have a Parent Material Adverse Effect.
Section 4.10 ERISA. All Benefit Plans have been administered
in accordance, and are in compliance with the applicable provisions of
ERISA, except where such failures to administer or comply would not
have a Parent Material Adverse Effect. Each of the Benefit Plans which
is intended to meet the requirements of Section 401(a) of the Code has
been determined by the Internal Revenue Service to be "qualified,"
within the meaning of such section of the Code, and Parent knows of no
fact which is likely to have an adverse effect on the qualified status
of such plans. None of the Benefit Plans which are defined benefit
pension plans have incurred any "accumulated funding deficiency"
(whether or not waived) as that term is defined in Section 412 of the
Code and the fair market value of the assets of each such plan equals
or exceeds the accrued liabilities of such plan. To the best knowledge
of Parent, there are not now nor have there been any non-exempt
"prohibited transactions," as such term is defined in Section 4975 of
the Code or Section 406 of ERISA, involving Parent's Benefit Plans
which could subject Parent or its subsidiaries to the penalty or tax
imposed under Section 502(i) of ERISA or Section 4975 of the Code. No
Benefit Plan which is subject to Title IV of ERISA has been completely
or partially terminated; no proceedings to completely or partially
terminate any Benefit Plan have been instituted within the meaning of
Subtitle C of said Title IV of ERISA; and no reportable event within
the meaning of Section 4043(c) of said Subtitle C for which the 30 day
notice requirement has been waived of ERISA has occurred with respect
to any Benefit Plan. Neither the Parent nor any of its subsidiaries
has made a complete or partial withdrawal, within the meaning of
Section 4201 of ERISA, from any multiemployer plan which has resulted
in, or is reasonably expected to result in, any withdrawal liability
to the Parent or any of its subsidiaries except for any such liability
which would not have a Parent Material Adverse Effect. Neither the
Parent nor any of its subsidiaries has engaged in any transaction
described in Section 4069 of ERISA within the last five years except
for any such transaction which would not have a Parent Material
Adverse Effect.
Section 4.11 Takeover Provisions Inapplicable. As of the
date hereof and at all times on or prior to the Effective Date,
Section 203 of the DGCL and the Parent Rights are, and shall be,
inapplicable to the Merger and the transactions contemplated by this
Merger Agreement.
<PAGE>
Section 4.12 Parent Action. The Board of Directors of Parent
(at a meeting duly called and held) has by the requisite vote of
directors (a) approved the Merger in accordance with the DGCL, (b)
taken any necessary steps to render Section 203 of the DGCL and the
Parent Rights inapplicable to the Merger and the transactions
contemplated by this Merger Agreement, and (c) adopted any necessary
resolution having the effect of causing Parent not to be subject, to
the extent permitted by applicable law, to any state takeover law that
may purport to be applicable to the Merger and the transactions
contemplated by this Merger Agreement.
Section 4.13 Compliance with Applicable Laws. Parent and its
subsidiaries hold all permits, licenses, variances, exemptions, orders
and approvals of all courts, administrative agencies or commissions or
other governmental authorities or instrumentalities, domestic or
foreign (each, a "Governmental Entity"), except for such permits,
licenses, variances, exemptions, orders and approvals the failure of
which, individually or in the aggregate, to hold would not have a
Parent Material Adverse Effect (the "Parent Permits"). To the
knowledge of Parent, Parent and its subsidiaries are in compliance
with the terms of the Parent Permits, except for such failures to
comply, which singly or in the aggregate, would not have a Parent
Material Adverse Effect. To the knowledge of Parent, except as
disclosed in the Parent SEC Reports filed prior to the date of this
Merger Agreement, the businesses of Parent and its subsidiaries are
not being conducted in violation of any law, ordinance or regulation
of any Governmental Entity, except for possible violations which
individually or in the aggregate do not and would not have a Parent
Material Adverse Effect. To the knowledge of Parent, except as
disclosed in the Parent SEC Reports, no investigation or review by any
Governmental Entity with respect to Parent or any of its subsidiaries
is pending, or, to the knowledge of Parent, threatened, nor has any
Governmental Entity indicated an intention to conduct the same, other
than those the outcome of which would not have a Parent Material
Adverse Effect.
Section 4.14 Liabilities. As of September 30, 1996, neither
Parent nor any of its subsidiaries has any material liabilities or
obligations (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to
the consolidated financial statements prepared in accordance with GAAP
which are not disclosed or provided for in the most recent Parent SEC
Reports. To the best knowledge of Parent, there was no basis, as of
September 30, 1996, for any claim or liability (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a
<PAGE>
balance sheet or in the related notes to the consolidated financial
statements prepared in accordance with GAAP which is or would have a
Parent Material Adverse Effect, not reflected in the Parent SEC
Reports.
Section 4.15 Taxes. Each of Parent and its subsidiaries has
filed all tax returns required to be filed by any of them and has paid
(or Parent has paid on its behalf), or has set up an adequate reserve
for the payment of, all taxes required to be paid in respect of the
periods covered by such returns. The information contained in such tax
returns are true, complete and accurate in all respects. Neither
Parent nor any subsidiary of Parent is delinquent in the payment of
any tax, assessment or governmental charge. No deficiencies for any
taxes have been proposed, asserted or assessed against Parent or any
of its subsidiaries that have not been finally settled or paid in full
and no requests for waivers of the time to assess any such tax are
pending. The federal income tax returns of Parent and each of its
subsidiaries consolidated in such returns have been examined by and
settled with the Internal Revenue Service for all years through
December 31, 1991. For the purposes of this Merger Agreement, the term
"tax" shall include all federal, state, local and foreign income,
profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise and other taxes, duties and assessments
of any nature whatsoever together with all interest, penalties and
additions imposed with respect to such amounts. No representation
contained in this Section 4.15 (each, a "Parent Relevant
Representation") shall be deemed to be untrue unless all untruths of
Parent Relevant Representations cumulatively would be expected to have
a Parent Material Adverse Effect.
Section 4.16 Certain Agreements. Except as disclosed on the
Parent Disclosure Schedule or in the Parent SEC Reports filed prior to
the date of this Merger Agreement, neither Parent nor any of its
subsidiaries is a party to any oral or written (i) agreement,
contract, indenture or other instrument relating to Indebtedness (as
defined below) in an amount exceeding $10,000,000 or (ii) other
contract, agreement or commitment (except those entered into in the
ordinary course of business) having a Parent Material Adverse Effect.
"Indebtedness" means any liability in respect of (A) borrowed money,
(B) capitalized lease obligations, (C) the deferred purchase price of
property or services (other than trade payables in the ordinary course
of business) and (D) guarantees of any of the foregoing incurred by
any person other than the Parent, as appropriate, or any of their
respective subsidiaries, except that Indebtedness shall not include
short term credit facilities entered into in the ordinary course of
business. Neither the
<PAGE>
Parent nor any of its subsidiaries is in default (with or without
notice or lapse of time, or both) under any indenture, note, credit
agreement, loan document, lease, license or other agreement including,
but not limited to, any Benefit Plan, whether or not such default has
been waived, which default, alone or in the aggregate with other such
defaults, would have a Parent Material Adverse Effect.
Section 4.17 Patents, Trademarks, Etc. To the knowledge of
Parent, Parent and its subsidiaries have all patents, trademarks,
trade names, service marks, trade secrets, copyrights and other
proprietary intellectual property rights and licenses as are necessary
in connection with the businesses of Parent and its subsidiaries, the
lack of which would have a Parent Material Adverse Effect, and Parent
does not have any knowledge of any conflict with the rights of Parent
and its subsidiaries therein or any knowledge of any conflict by them
with the rights of others therein which, insofar as reasonably can be
foreseen, could, individually or in the aggregate, have a Parent
Material Adverse Effect.
Section 4.18 Product Liability. Parent is not aware of any
claim, or the basis of any claim, against Parent or any of its
subsidiaries for injury to person or property of employees or any
third parties suffered as a result of the sale of any product or
performance of any service by Parent or any of its subsidiaries,
including claims arising out of the defective or unsafe nature of its
products or services, which could, individually or in the aggregate,
have a Parent Material Adverse Effect. Parent and its subsidiaries
have, and on the Effective Date will have, full and adequate insurance
coverage for potential product liability claims against it.
Section 4.19 Environment. (i) As used herein, the term
"Environmental Laws" means all federal, state, local or Foreign Laws
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without
limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or
industrial, toxic or hazardous substances or wastes into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of chemicals, pollutants, contaminants, or industrial, toxic or
hazardous substances or wastes, as well as all authorizations, codes,
decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder.
<PAGE>
(ii) To the knowledge of Parent, except as set forth in the
Parent SEC Reports and except as set forth on Schedule 4.19, there
are, with respect to Parent or any of its subsidiaries, no past or
present violations of Environmental Laws, releases of any material
into the environment, actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give rise to
any common law environmental liability or any liability under the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("CERCLA") or similar state or local laws, which liabilities,
either individually or in the aggregate, would have a Parent Material
Adverse Effect.
Section 4.20 Title to Assets; Liens. Except as disclosed in
the Parent SEC Reports, to the extent material to the business or
operations of Parent and its subsidiaries, taken as a whole, Parent
has good and marketable title to all of its inventory, accounts
receivable, property, equipment and other assets, and such assets are
free and clear of any material mortgages, liens, charges,
encumbrances, or title defects of any nature whatsoever, except for
such mortgages, liens, charges, encumbrances or title defects which
would not materially and adversely affect the value of such property
as carried on the Parent's financial statements contained in the
Parent SEC Reports or would not have a Parent Material Adverse Effect.
Parent and its subsidiaries have valid and enforceable leases for the
premises and the equipment, furniture and fixtures purported to be
leased by them except for leases, the failure of which to have or be
enforceable, would not have a Parent Material Adverse Effect.
Section 4.21 Parent Ownership of Stock. As of the date
hereof Parent does not beneficially own any shares of Company Common
Stock other than pursuant to the terms of this Merger Agreement.
Section 4.22 [Reserved]
Section 4.23 Accounting Matters. Except as set forth on
Schedule 4.23, neither Parent nor, to its best knowledge, any of its
affiliates, has through the date hereof, taken or agreed to take any
action nor are they aware of any circumstances which currently exist
that would prevent Parent from accounting for the business combination
to be effected by the Merger as a "pooling of interests."
Section 4.24 No Material Adverse Effect. Except as disclosed
in the Parent SEC Reports, Parent is not aware of any fact which,
alone or together with another fact, is likely to result in a Parent
Material Adverse Effect.
<PAGE>
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Parent and Sub jointly and severally represent and warrant
to the Company as follows:
Section 4A.1 Organization. Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Sub has not engaged in any business (other than
certain organizational matters) since it was incorporated.
Section 4A.2 Capitalization. The authorized capital stock of
Sub consists of 1,000 shares of common stock, par value $0.01 per
share, 1,000 shares of which are validly issued and outstanding, fully
paid and nonassessable and are owned by Parent free and clear of all
liens, claims and encumbrances.
Section 4A.3 Authority Relative to this Merger Agreement.
Sub has the corporate power to enter into this Merger Agreement and to
carry out its obligations hereunder. The execution and delivery of
this Merger Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by its Board of
Directors and sole shareholder, and no other corporate proceedings on
the part of Sub are necessary to authorize this Merger Agreement and
the transactions contemplated hereby. Except as referred to herein or
in connection, or in compliance, with the provisions of the HSR Act,
the Securities Act, the Exchange Act, the Foreign Laws and the
environmental, corporation, securities or blue sky laws or regulations
of the various states, no filing or registration with, or
authorization, consent or approval of, any public body or authority is
necessary for the consummation by Sub of the Merger or the
transactions contemplated by this Merger Agreement, other than
filings, registrations, authorizations, consents or approvals the
failure to make or obtain would not prevent the consummation of the
transactions contemplated hereby. The Merger Agreement constitutes a
valid and binding obligation of Sub enforceable in accordance with its
terms except as enforcement may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies,
including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought.
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, except as set
forth in a disclosure schedule delivered by the Company concurrently
herewith (the "Company Disclosure Schedule"), as follows:
Section 5.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the corporate power to
carry on its business as it is now being conducted or currently
proposed to be conducted. The Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified will not have a
Company Material Adverse Effect. As used in this Agreement, "Company
Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets, financial condition, or results of
operations of the Company and its subsidiaries taken as a whole,
except for (i) adverse changes resulting from general economic,
financial or market conditions, (ii) adverse changes resulting from
conditions or circumstances generally affecting the toy industry, or
(iii) adverse changes resulting from the announcement or pendency of
this Merger Agreement or the Merger. Complete and correct copies as of
the date hereof of the Articles of Incorporation and By-laws of the
Company and each of its Significant Subsidiaries have, to the extent
requested, been delivered to Parent as part of the Company Disclosure
Schedule.
Section 5.2 Capitalization. The authorized capital stock of
the Company consists of 75,000,000 shares of Company Common Stock,
1,000,000 shares of Company Series B Preferred Stock, and 772,800
shares of Company Series C Preferred Stock. As of November 11, 1996,
34,826,668 shares of Company Common Stock, 53,631 shares of Company
Series B Preferred Stock and 772,800 shares of Company Series C
Preferred Stock were validly issued and outstanding, fully paid and
nonassessable, and 190,490 shares of Company Common Stock were held in
treasury and there have been no material changes in such numbers of
shares through the date hereof. As of the date hereof, there are no
bonds, debentures, notes or other indebtedness having the right to
vote on any matters on which the Company's shareholders may vote
issued or outstanding. As of November 11, 1996, except for (i)
employee stock options to acquire 1,749,306 shares of Company Common
Stock, (ii) the rights (the
<PAGE>
"Company Rights") issued pursuant to the Rights Agreement dated as of
September 8, 1988, between the Company and Manufacturers Hanover Trust
Company, as Rights Agent, (the "Company Rights Agreement"), (iii)
5,631,255 shares of capital stock of the Company issuable upon
conversion of the Company Series B Preferred Stock, up to 21,464,520
shares of capital stock of the Company issuable upon conversion of the
Company Series C Preferred Stock and 1,603,400 shares of capital stock
of the Company issuable upon conversion of any Indebtedness
convertible into shares of capital stock of the Company there are no
options, warrants, calls or other rights, agreements or commitments
presently outstanding obligating the Company to issue, deliver or sell
shares of its capital stock or debt securities, or obligating the
Company to grant, extend or enter into any such option, warrant, call
or other such right, agreement or commitment, and there have been no
material changes in such numbers through the date hereof. As of the
date hereof the conversion ratio for the Company Series C Preferred
Stock is 20.4925.
Section 5.3 Subsidiaries. Except for wholly owned
subsidiaries which were formed after the date hereof in the ordinary
course of business, the only Significant Subsidiaries of the Company
are those named in the Company SEC Reports. Each Significant
Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and
has the corporate power to carry on its business as it is now being
conducted or currently proposed to be conducted. Each Significant
Subsidiary is duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its
activities makes such qualification necessary except where the failure
to be so qualified will not have a Company Material Adverse Effect.
All the outstanding shares of capital stock of each Significant
Subsidiary are validly issued, fully paid and nonassessable and those
owned by the Company or by a subsidiary of the Company are owned free
and clear of any liens, claims or encumbrances. There are no existing
options, warrants, calls or other rights, agreements or commitments of
any character relating to the issued or unissued capital stock or
other securities of any of the Significant Subsidiaries of the
Company. Except as set forth in the Company's Annual Report on Form
10-K for the year ended December 31, 1995 and except for wholly owned
subsidiaries which are formed after the date hereof in the ordinary
course of business, the Company does not directly or indirectly own
any interest in any other corporation, partnership, joint venture or
other business association or entity.
<PAGE>
Section 5.4 Authority Relative to this Merger Agreement. The
Company has the corporate power to enter into this Merger Agreement,
subject to the requisite approval of this Merger Agreement by the
holders of (i) Company Common Stock, Company Series B Preferred Stock
and Company Series C Preferred Stock voting together as a single class
and (ii) Company Series C Preferred Stock voting separately as a
class, and to carry out its obligations hereunder. The execution and
delivery of this Merger Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the
Company's Board of Directors. This Merger Agreement constitutes a
valid and binding obligation of the Company enforceable in accordance
with its terms except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be
brought. Except for the requisite approval of the holders of (i)
Company Common Stock, Company Series B Preferred Stock and Company
Series C Preferred Stock voting together as a class and (ii) Company
Series C Preferred Stock voting separately as a class, no other
corporate proceedings on the part of the Company are necessary to
authorize this Merger Agreement and the transactions contemplated
hereby. The Company is not subject to or obligated under (i) any
charter, by-law, indenture or other loan document provision (other
than as set forth in the Company Disclosure Schedule) or (ii) any
other contract, license, franchise, permit, order, decree, concession,
lease, instrument, judgment, statute, law, ordinance, rule or
regulation applicable to the Company or any of its subsidiaries or
their respective properties or assets which would be breached or
violated, or under which there would be a default (with or without
notice or lapse of time, or both), or under which there would arise a
right of termination, cancellation or acceleration of any obligation
or the loss of a material benefit, by its executing and carrying out
this Merger Agreement, other than, in the case of clause (ii) only,
(A) any breaches, violations, defaults, terminations, cancellations,
accelerations or losses which, either singly or in the aggregate, will
not have a Company Material Adverse Effect or prevent the consummation
of the transactions contemplated hereby and (B) the laws and
regulations referred to in the next sentence. Except as referred to
herein or, with respect to the Merger or the transactions contemplated
thereby, in connection, or in compliance, with the provisions of the
HSR Act, the Securities Act, the Exchange Act, the Foreign Laws and
the environmental, corporation, securities or blue sky laws or
regulations of the various states, no filing or registration with, or
authorization, consent or approval of, any public body or authority is
necessary for the consummation by the Company of the
<PAGE>
Merger or the other transactions contemplated hereby, other than
filings, registrations, authorizations, consents or approvals the
failure of which to make or obtain would not have a Company Material
Adverse Effect or prevent the consummation of the transactions
contemplated hereby and thereby.
Section 5.5 Reports and Financial Statements. The Company
has previously furnished Parent with true and complete copies of its
(i) Annual Report on Form 10-K for the year ended December 31, 1995,
as filed with the Commission, (ii) Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1996, June 30, 1996 and September 30,
1996, as filed with the Commission, (iii) proxy statements related to
all meetings of its shareholders (whether annual or special) since
December 31, 1994 and (iv) all other reports or registration
statements filed by the Company with the Commission since December 31,
1994, except registration statements on Form S-8 relating to employee
benefit plans, which are all the documents (other than preliminary
material) that the Company was required to file with the Commission
since that date (clauses (i) through (iv) being referred to herein
collectively as the "Company SEC Reports"). As of their respective
dates, the Company SEC Reports complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the Commission
thereunder applicable to such Company SEC Reports. As of their
respective dates, the Company SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
The audited consolidated financial statements and unaudited interim
financial statements of the Company included in the Company SEC
Reports comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations
of the Commission with respect thereto, and the financial statements
included in the Company SEC Reports, have been prepared in accordance
with GAAP applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the financial
position of the Company and its subsidiaries as at the dates thereof
and the results of their operations and changes in financial posi-
tion for the periods then ended subject, in the case of the unaudited
interim financial statements, to normal year-end audit adjustments and
any other adjustments described therein.
Section 5.6 Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Reports or as set forth on Schedule 5.6
of the Company Disclosure Schedule, since September 30, 1996, there
has not been (i) any transaction, commitment, dispute or other event
or condition (financial or
<PAGE>
otherwise) of any character (whether or not in the ordinary course of
business) individually or in the aggregate having a Company Material
Adverse Effect (other than as a result of changes in laws or
regulations of general applicability); (ii) any damage, destruction or
loss, whether or not covered by insurance, which, insofar as
reasonably can be foreseen, in the future would have a Company
Material Adverse Effect; (iii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock
or property) with respect to the capital stock of the Company (except
for required dividends on the Company Series C Preferred Stock at the
rate of 8.25%, payable in cash and required dividends on the Company
Series B Preferred Stock at the rate of 6.00% payable in cash (the
"Regular Company Dividends") in effect on September 30, 1996), or (iv)
any entry into any commitment or transaction material to the Company
and its subsidiaries taken as a whole (including, without limitation,
any borrowing or sale of assets) except in the ordinary course of
business consistent with past practice.
Section 5.7 Litigation. Except as disclosed in the Company's
SEC Reports or as set forth on Schedule 5.7 of the Company Disclosure
Schedule, there is no suit, action or proceeding pending or, to the
knowledge of the Company, threatened against or affecting the Company
or any of its subsidiaries which, either alone or in the aggregate, is
likely, insofar as the Company reasonably foresees, to have a Company
Material Adverse Effect, nor is there any judgment, decree,
injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against
the Company or any of its subsidiaries having, or which, insofar as
the Company reasonably foresees, in the future could have, either
alone or in the aggregate, any such Company Material Adverse Effect.
Section 5.8 Information in Disclosure Documents. None of the
information with respect to the Company or its subsidiaries to be
included or incorporated by reference in the Proxy Statement or the
Registration Statement will, in the case of the Proxy Statement or any
amendments or supplements thereto, at the time of the mailing of the
Proxy Statement and any amendments or supplements thereto, and at the
time of the Company Meeting to be held in connection with the Merger,
or, in the case of the Registration Statement, at the time it becomes
effective and at the Effective Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. The
Proxy Statement will comply
<PAGE>
as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
Section 5.9 Employee Benefit Plans. Except as disclosed in
the Company SEC Reports or as set forth on Schedule 5.9, there are no
material employee benefit or compensation plans, agreements or
arrangements, including "employee benefit plans," as defined in
Section 3(3) of ERISA, and including, but not limited to, plans,
agreements or arrangements relating to former employees, including,
but not limited to, retiree medical plans, maintained by the Company
or any of its subsidiaries or material collective bargaining
agreements to which the Company or any of its subsidiaries is a party
(together, the "Company Benefit Plans"). To the best knowledge of the
Company, no default exists with respect to the obligations of the
Company or any of its subsidiaries under such Company Benefit Plan,
which default, alone or in the aggregate, would have a Company
Material Adverse Effect. Since January 1, 1996, there have been no
disputes or grievances subject to any grievance procedure, unfair
labor practice proceedings, arbitration or litigation under such
Company Benefit Plans, which have not been finally resolved, settled
or otherwise disposed of, nor is there any default, or any condition
which, with notice or lapse of time or both, would constitute such a
default, under any such Company Benefit Plans, by the Company or its
subsidiaries or, to the best knowledge of the Company and its
subsidiaries, any other party thereto, which failure to resolve,
settle or otherwise dispose of or default, alone or in the aggregate,
would have a Company Material Adverse Effect. Since December 31, 1995,
there have been no strikes, lockouts or work stoppages or slowdowns,
or to the best knowledge of the Company and its subsidiaries,
jurisdictional disputes or organizing activity occurring or threatened
with respect to the business or operations of the Company or its
subsidiaries which have had or would have a Company Material Adverse
Effect. Except as set forth on Schedule 5.9, neither the execution of
the Merger Agreement nor the consummation of the transactions
contemplated hereby will (either alone or upon the occurrence of
additional events or acts) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or
benefit to any employee of the Company or any of its subsidiaries.
Section 5.10 ERISA. All Company Benefit Plans have been
administered in accordance, and are in compliance, with the applicable
provisions of ERISA, except where such failures to administer or
comply would not have a Company Material Adverse Effect. Each of the
Company Benefit Plans which is intended to meet the requirements of
Section 401(a) of the Code
<PAGE>
has been determined by the Internal Revenue Service to be "qualified,"
within the meaning of such section of the Code, and the Company knows
of no fact which is likely to have an adverse effect on the qualified
status of such plans. None of the Company Benefit Plans which are
defined benefit pension plans have incurred any "accumulated funding
deficiency" (whether or not waived) as that term is defined in Section
412 of the Code and the fair market value of the assets of each such
plan equal or exceed the accrued liabilities of such plan. To the best
knowledge of the Company, there are not now nor have there been any
non-exempt "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, involving the
Company's Benefit Plans which could subject the Company, its
subsidiaries or Parent to the penalty or tax imposed under Section
502(i) of ERISA or Section 4975 of the Code. No Company Benefit Plan
which is subject to Title IV of ERISA has been completely or partially
terminated; no proceedings to completely or partially terminate any
Company Benefit Plan have been instituted within the meaning of
Subtitle C of said Title IV of ERISA; and no reportable event within
the meaning of Section 4043(c) of said Subtitle C for which the 30-day
notice requirement has been waived of ERISA has occurred with respect
to any Company Benefit Plan. Neither the Company nor any of its
subsidiaries has made a complete or partial withdrawal, within the
meaning of Section 4201 of ERISA, from any multiemployer plan which
has resulted in, or is reasonably expected to result in, any
withdrawal liability to the Company or any of its subsidiaries except
for any such liability which would not have a Company Material Adverse
Effect. Neither the Company nor any of its subsidiaries has engaged in
any transaction described in Section 4069 of ERISA within the last
five years except for any such transaction which would not have a
Company Material Adverse Effect.
Section 5.11 Takeover Provisions Inapplicable. As of the
date hereof and at all times on or prior to the Effective Date,
Section 203 of the DGCL, the Company Rights Agreement and Article IX
of the Company's Restated Certificate of Incorporation are, and shall
be, inapplicable to the Merger and the transactions contemplated by
this Merger Agreement.
Section 5.12 Company Action. The Board of Directors of the
Company (at a meeting duly called and held) has by the requisite vote
of directors (a) determined that the Merger is advisable and fair and
in the best interests of the Company and its shareholders, (b)
approved the Merger in accordance with the provisions of Section 251
of the DGCL, (c) recommended the approval of this Merger Agreement and
the Merger by the holders of the Company Common Stock, Company Series
B Preferred Stock and Company Series C Preferred Stock and directed
that the
<PAGE>
Merger be submitted for consideration by the Company's shareholders
entitled to vote thereon at the Company Meeting, (d) taken all
necessary steps to render Article IX of the Company's Restated
Certificate of Incorporation inapplicable to the Merger and the
transactions contemplated by this Merger Agreement, (e) taken all
necessary steps to render the Company Rights Agreement inapplicable to
the Merger and the transactions contemplated by this Merger Agreement,
(f) taken all necessary steps to approve any actions necessary or
appropriate to consummate the transactions contemplated by this Merger
Agreement with respect to the GECC Debt and the 2002 Indenture (each
as defined herein) and (g) adopted any necessary resolution having the
effect of causing the Company not to be subject, to the extent
permitted by applicable law, to any state takeover law that may
purport to be applicable to the Merger and the transactions
contemplated by this Merger Agreement.
Section 5.13 Fairness Opinion. The Company has received the
opinion of Allen & Company, financial advisors to the Company, dated
the date hereof, to the effect that the consideration to be received
by the Company's shareholders in the Merger is fair to the
shareholders of the Company from a financial point of view.
Section 5.14 Financial Advisor. Except for Allen & Company,
no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger or
the transactions contemplated by this Merger Agreement based upon
arrangements made by or on behalf of the Company, and the fees and
commissions payable to Allen & Company as contemplated by this Section
will be the amount set forth in that certain letter, dated November
17, 1996, from Allen & Company to the Company.
Section 5.15 Compliance with Applicable Laws. The Company
and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities, except
for such permits, licenses, variances, exemptions, orders and
approvals the failure of which, individually or in the aggregate, to
hold would not have a Company Material Adverse Effect (the "Company
Permits"). To the knowledge of the Company, the Company and its
subsidiaries are in compliance with the terms of the Company Permits,
except for such failures to comply which, singly or in the aggregate,
would not have a Company Material Adverse Effect. To the knowledge of
the Company, except as disclosed in the Company SEC Reports filed
prior to the date of this Merger Agreement, the businesses of the
Company and its subsidiaries are not being conducted in
<PAGE>
violation of any law, ordinance or regulation of any Governmental
Entity, except for possible violations which individually or in the
aggregate do not and would not have a Company Material Adverse Effect.
To the knowledge of the Company, no investigation or review by any
Governmental Entity with respect to the Company or any of its
subsidiaries is pending, or, to the knowledge of the Company,
threatened, nor has any Governmental Entity indicated an intention to
conduct the same, other than those the outcome of which would not have
a Company Material Adverse Effect.
Section 5.16 Liabilities. As of September 30, 1996, neither
the Company nor any of its subsidiaries has any material liabilities
or obligations (absolute, accrued, contingent or otherwise) of a
nature required to be disclosed on a balance sheet or in the related
notes to the consolidated financial statements prepared in accordance
with GAAP which are not disclosed or provided for in the most recent
Company SEC Reports. To the best knowledge of the Company, there was
no basis, as of September 30, 1996, for any claim or liability
(absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the
consolidated financial statements prepared in accordance with GAAP
which is or would have a Company Material Adverse Effect, not
reflected in the Company SEC Reports.
Section 5.17 Taxes. Each of the Company and its subsidiaries
has filed all tax returns required to be filed by any of them and has
paid (or the Company has paid on its behalf), or has set up an
adequate reserve for the payment of, all taxes required to be paid in
respect of the periods covered by such returns. The information
contained in such tax returns is true, complete and accurate. Neither
the Company nor any subsidiary of the Company is delinquent in the
payment of any tax, assessment or governmental charge. No deficiencies
for any taxes have been proposed, asserted or assessed against the
Company or any of its subsidiaries that have not been finally settled
or paid in full and no requests for waivers of the time to assess any
such tax are pending. No representation contained in this Section 5.17
(each, a "Relevant Representation") shall be deemed to be untrue
unless all untruths of Relevant Representations cumulatively would be
expected to have a Company Material Adverse Effect.
Section 5.18 Certain Agreements. Except as disclosed on the
Company Disclosure Schedule or in the Company SEC Reports filed prior
to the date of this Merger Agreement, neither the Company nor any of
its subsidiaries is a party to any oral or written (i) agreement,
contract, indenture or other instrument relating to Indebtedness in an
amount exceeding
<PAGE>
$2,000,000, (ii) agreement which, after giving effect to the
transactions contemplated by this Merger Agreement, purports to
restrict or bind Parent or any of its subsidiaries other than the
Surviving Corporation and its subsidiaries in any respect that could
have a Parent Material Adverse Effect or (iii) contract, agreement or
commitment (except those entered into in the ordinary course of
business) having a Company Material Adverse Effect. Neither the
Company nor any of its subsidiaries is in default (or would be in
default with notice or lapse of time, or both) under any indenture,
note, credit agreement, loan document, lease, license or other
agreement including, but not limited to, any Company Benefit Plan,
whether or not such default has been waived, which default, alone or
in the aggregate with other such defaults, would have a Company
Material Adverse Effect. Except as set forth on Schedule 5.18, none of
the Company or any of its subsidiaries is a party to and bound by any
contract, agreement, commitment, plan, arrangement or other
understanding which upon execution of this Merger Agreement or
consummation of the transactions contemplated hereby will (either
alone or upon the occurrence of additional acts or events) result in
any material payment becoming due from the Company or Parent or any of
their subsidiaries.
Section 5.19 Accounts Receivable. As of the date hereof, the
accounts receivable of the Company and its subsidiaries as reflected
in the most recent financial statements contained in the Company SEC
Reports, to the extent uncollected on the date hereof, and the
accounts receivable reflected on the books of the Company and its
subsidiaries as of the date hereof are valid and existing and
represent monies due, and the Company as of the date hereof, has made
reserves reasonably considered adequate for receivables not
collectible in the ordinary course of business, and (subject to the
aforesaid reserves) are subject to no refunds or other adjustments and
to no defenses, rights of setoff, assignments, restrictions, en-
cumbrances or conditions enforceable by third parties on or affecting
any thereof, except for such refunds, adjustments, defenses, rights of
setoff, assignments, restrictions, encumbrances or conditions as would
not, individually or in the aggregate, have a Company Material Adverse
Effect.
Section 5.20 Inventory. As of the date hereof, the
inventories of the Company and its subsidiaries as reflected in the
most recent financial statements contained in the Company SEC Reports
except for normal year-end adjustments made in accordance with GAAP
applied consistently with prior periods, (i) are carried as provided
in the Company SEC Reports not in excess of the lower of cost or net
realizable value and (ii) do not include any inventory which is
obsolete, surplus or not
<PAGE>
usable or saleable in the lawful and ordinary course of business of
the Company and its subsidiaries as heretofore conducted, in each case
net of reserves provided therefor.
Section 5.21 Patents, Trademark, Etc. To the knowledge of
the Company, the Company and its subsidiaries have all patents,
trademarks, trade names, service marks, trade secrets, copyrights and
licenses and other proprietary intellectual property rights and
licenses as are necessary in connection with the businesses of the
Company and its subsidiaries, the lack of which would have a Company
Material Adverse Effect, and the Company does not have any knowledge
of any conflict with the rights of the Company and its subsidiaries
therein or any knowledge of any conflict by them with the rights of
others therein which, insofar as reasonably can be foreseen, could,
individually or in the aggregate, have a Company Material Adverse
Effect.
Section 5.22 Product Liability. The Company is not aware of
any claim, or the basis of any claim, against the Company or any of
its subsidiaries for injury to person or property of employees or any
third parties suffered as a result of the sale of any product or
performance of any service by the Company or any of its subsidiaries,
including claims arising out of the defective or unsafe nature of its
products or services, which could, individually or in the aggregate,
have a Company Material Adverse Effect. The Company and its
subsidiaries have, and on the Effective Date will have, full and
adequate insurance coverage for potential product liability claims
against it.
Section 5.23 Environment. To the knowledge of the Company,
there are, except as set forth in the Company SEC Reports, with
respect to the Company or any of its subsidiaries, no past or present
violations of Environmental Laws, releases of any material into the
environment, actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to any
common law liability or any liability under CERCLA or similar state or
local laws, which liabilities, either individually or in the
aggregate, would have a Company Material Adverse Effect.
Section 5.24 Title to Assets; Liens. To the extent material
to the business or operations of the Company and its subsidiaries,
taken as a whole, the Company has good and marketable title to all of
its inventory, accounts receivable, property, equipment and other
assets, and except as disclosed in the Company's SEC Reports such
assets are free and clear of any material mortgages, liens, charges,
encumbrances, or title defects of any nature whatsoever, except for
such mortgages,
<PAGE>
liens, charges, encumbrances or title defects which would not
materially and adversely affect the value of such property as carried
on the Company's financial statements contained in the Company SEC
Reports or would not have a Company Material Adverse Effect. The
Company and its subsidiaries have valid and enforceable leases for the
premises and the equipment, furniture and fixtures purported to be
leased by them, except for leases, the failure of which to have or be
enforceable, would not have a Company Material Adverse Effect.
Section 5.25 Accounting Matters. Neither the Company nor, to
its best knowledge, any of its affiliates, has through the date
hereof, taken or agreed to take any action nor are they aware of any
circumstances which currently exist that would prevent Parent from
accounting for the business combination to be effected by the Merger
as a "pooling of interests."
Section 5.26 No Material Adverse Effect. Except as disclosed
in the Company SEC Reports, the Company is not aware of any fact
which, alone or together with another fact, is likely to result in a
Company Material Adverse Effect.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the
Merger. Prior to the Effective Date, unless Parent shall otherwise
agree in writing:
(i) the Company shall, and shall cause its subsidiaries to,
carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore
conducted, and shall, and shall cause its subsidiaries to, use
their diligent efforts to preserve intact their present business
organizations, keep available the services of their present
officers and employees and preserve their relationships with
customers, suppliers and others having business dealings with
them to the end that their goodwill and ongoing businesses shall
be unimpaired at the Effective Date. The Company shall, and shall
cause its subsidiaries to, (A) maintain insurance coverages and
its books, accounts and records in the usual manner consistent
with prior practices; (B) comply in all material respects with
all laws, ordinances and regulations of Governmental Entities
applicable to the Company and its subsidiaries; (C) maintain and
keep its properties and equipment in good repair, working order
and
<PAGE>
condition, ordinary wear and tear excepted; and (D) perform in
all material respects its obligations under all contracts and
commitments to which it is a party or by which it is bound, in
each case other than where the failure to so maintain, comply or
perform, either individually or in the aggregate, would not
result in a Company Material Adverse Effect;
(ii) except as required by this Merger Agreement or as
permitted pursuant to Section 7.10 hereof, the Company shall not
and shall not propose to (A) sell or pledge or agree to sell or
pledge any capital stock owned by it in any of its subsidiaries,
(B) amend its Restated Certificate of Incorporation or Bylaws,
(C) split, combine or reclassify its outstanding capital stock or
issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for
shares of capital stock of the Company, or declare, set aside or
pay any dividend or other distribution payable in cash, stock or
property (other than Regular Company Dividends), or (D) directly
or indirectly redeem, purchase or otherwise acquire or agree to
redeem, purchase or otherwise acquire any shares of Company
capital stock;
(iii) the Company shall not, nor shall it permit any of its
subsidiaries to, (A) except as required by this Merger Agreement,
issue, deliver or sell or agree to issue, deliver or sell any
additional shares of, or rights of any kind to acquire any shares
of, its capital stock of any class, any Indebtedness or any
option, rights or warrants to acquire, or securities convertible
into, shares of capital stock other than issuances of Company
Common Stock pursuant to the exercise of employee stock options
outstanding on the date hereof or the conversion of Company
Series C Preferred Stock, Company Series B Preferred Stock or
Indebtedness of the Company; (B) acquire, lease or dispose or
agree to acquire, lease or dispose of any capital assets or any
other assets other than in the ordinary course of business, (C)
incur additional Indebtedness or encumber or grant a security
interest in any asset or enter into any other material
transaction other than in each case in the ordinary course of
business; (D) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity
interest in, or by any other manner, any business or any
corporation, partnership, association or other business
organization or division thereof, in each case in this Clause (D)
which are material, individually or in the aggregate, to the
Company and its subsidiaries taken as a whole, except that the
Company may create new wholly owned subsidiaries in the
<PAGE>
ordinary course of business; or (E) enter into any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(iv) except as set forth in the Company Disclosure Schedule,
the Company shall not, nor shall it permit, any of its
subsidiaries to, except as required to comply with applicable law
and except as provided in Section 7.5 hereof, (A) adopt, enter
into, terminate or amend any bonus, profit sharing, compensation,
severance, termination, stock option, pension, retirement,
deferred compensation, employment or other Company Benefit Plan,
agreement, trust, fund or other arrangement for the benefit or
welfare of any director, officer or current or former employee,
(B) increase in any manner the compensation or fringe benefit of
any director, officer or employee (except for normal increases in
the ordinary course of business that are consistent with past
practice and that, in the aggregate, do not result in a material
increase in benefits or compensation expense to the Company and
its subsidiaries relative to the level in effect prior to such
amendment), (C) pay any benefit not provided under any existing
plan or arrangement, (D) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement
or Company Benefit Plan (including, without limitation, the grant
of stock options, stock appreciation rights, stock based or stock
related awards, performance units or restricted stock, or the
removal of existing restrictions in any benefit plans or
agreements or awards made thereunder), (E) take any action to
fund or in any other way secure the payment of compensation or
benefits under any employee plan, agreement, contract or
arrangement or Company Benefit Plan other than in the ordinary
course of business consistent with past practice, or (F) adopt,
enter into, amend or terminate any contract, agreement,
commitment or arrangement to do any of the foregoing;
(v) the Company shall not, nor shall it permit any of its
subsidiaries to, make any investments in non-investment grade
securities provided, however, that the Company will be permitted
to create new wholly owned subsidiaries in the ordinary course
of business; and
(vi) the Company shall not, nor shall it permit any of its
subsidiaries to, take or cause to be taken any action, whether
before or after the Effective Date, which would disqualify the
Merger as a "pooling of interests" for accounting purposes or as
a "reorganization" within the meaning of Section 368(a) of the
Code.
<PAGE>
Section 6.2 Conduct of Business by Parent and Sub Pending
the Merger. (a) Parent. Prior to the Effective Date, unless the
Company shall otherwise agree in writing or except as otherwise
required by this Merger Agreement: (i) Parent shall, and shall cause
its subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, and shall, and shall cause its material
subsidiaries to, use their best efforts to preserve intact their
present business organizations, keep available the services of their
present officers and employees and preserve their relationships with
customers, suppliers and others having business dealings with them to
the end that their goodwill and ongoing businesses shall be unimpaired
at the Effective Date, provided, however, that nothing contained
herein shall prevent Parent from creating new wholly owned
subsidiaries in the ordinary course of business as long as the
creation of such subsidiaries (either alone or in the aggregate) will
not have a Parent Material Adverse Effect; and (ii) the Parent shall
not, nor shall it permit any of its subsidiaries to, take or cause to
be taken any action, whether before or after the Effective Date, which
would disqualify the Merger as a "pooling of interests" for accounting
purposes or as a reorganization within the meaning of Section 368(a)
of the Code.
(b) Sub. During the period from the date of this Merger
Agreement to the Effective Date, Sub shall not engage in any
activities of any nature except as provided in or contemplated by this
Merger Agreement.
Section 6.3 Notice of Breach. Each party shall promptly give
written notice to the other party upon becoming aware of the
occurrence or, to its knowledge, impending or threatened occurrence,
of any event which would cause or constitute a breach of any of its
representations, warranties or covenants contained or referenced in
this Merger Agreement and will use its best efforts to prevent or
promptly remedy the same. Any such notification shall not be deemed an
amendment of the Company Disclosure Schedule or the Parent Disclosure
Schedule.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. Each of the Company and
Parent and their respective subsidiaries shall afford to the other and
to the other's accountants, counsel and other representatives full
access during normal business hours
<PAGE>
(and at such other times as the parties may mutually agree) throughout
the period prior to the Effective Date to all of its properties,
books, contracts, commitments, records and personnel and, during such
period, each shall furnish promptly to the other (i) a copy of each
report, schedule and other document filed or received by it pursuant
to the requirements of federal or state securities laws, and (ii) all
other information concerning its business, properties and personnel as
the other may reasonably request. Each of the Company and Parent shall
hold, and shall cause their respective employees and agents to hold,
in confidence all such information in accordance with the terms of the
Confidentiality Agreements, dated September 28, 1995 (as extended by
letter agreement, dated October 14, 1996) and November 8, 1996 between
Parent and the Company (the "Confidentiality Agreements").
Section 7.2 Registration Statement/Proxy Statement. (a) As
promptly as practicable after the execution of this Merger Agreement,
the Company and Parent shall prepare and the Company shall file with
the Commission preliminary proxy materials which shall constitute the
preliminary Proxy Statement and a preliminary prospectus with respect
to the Parent Common Stock to be issued in connection with the Merger.
As promptly as practicable after comments are received from the
Commission with respect to the preliminary proxy materials and after
the furnishing by the Company and Parent of all information required
to be contained therein, the Company shall file with the Commission
the definitive Proxy Statement and Parent shall file with the
Commission the Registration Statement and Parent and the Company shall
use all reasonable efforts to cause the Registration Statement to
become effective as soon thereafter as practicable.
(b) Parent and the Company shall make all necessary filings
with respect to the Merger, under the Securities Act and the Exchange
Act and the rules and regulations thereunder, under applicable blue
sky or similar securities laws and shall use all reasonable efforts to
obtain required approvals and clearances with respect thereto.
Section 7.3 Compliance with the Securities Act. (a) Prior to
the Effective Date the Company shall cause to be delivered to Parent
an opinion (satisfactory to counsel for Parent) of the general counsel
of the Company or such law firm as may be reasonably satisfactory to
Parent, identifying all persons who were, in his or its opinion, at
the time of the Company Meeting convened in accordance with Section
3.5, "affiliates" of the Company as that term is used in paragraphs
(c) and (d) of Rule 145 under the Securities Act (the "Affiliates").
<PAGE>
(b) The Company shall use its diligent efforts to obtain a
written agreement from each person who is identified as a possible
Affiliate in the opinion referred to in clause (a) above, in the form
previously approved by the parties, that he or she will not offer to
sell, sell or otherwise dispose of any of the capital stock of Parent
issued to him or her pursuant to the Merger, except in compliance with
Rule 145 or another exemption from the registration requirements of
the Securities Act. The Company shall deliver such written agreements
to Parent on or prior to the Effective Date. The Company shall use its
diligent efforts to cause each person who is identified as an
Affiliate in such opinion to deliver to Parent, on or prior to the
earlier of (i) the mailing of the Proxy Statement/Prospectus or (ii)
the thirtieth day prior to the Effective Date, a written agreement, in
the form to be approved by the parties hereto, that such Affiliate
will not thereafter sell or in any other way reduce such Affiliate's
risk relative to any Parent Common Stock received in the Merger
(within the meaning of the Commission's Financial Reporting Release
No. 1, "Codification of Financing Reporting Policies" Section 201.01 (47
F.R. 21030) (April 15, 1982)), until such time as financial results
(including combined sales and net income) covering at least 30 days of
post-merger operations have been published, except as permitted by
Staff Accounting Bulletin No. 76 issued by the Commission. As soon as
is reasonably practicable but in no event later than 45 days after the
end of the first month ending at least 30 days after the Effective
Date, Parent will publish results including at least 30 days of
combined operations of Parent and the Company as referred to in the
written agreements provided for by this Section 7.3(b).
Section 7.4 Stock Exchange Listing. Parent shall use its
best efforts to list on the NYSE, upon official notice of issuance,
the shares of Parent Common Stock to be issued pursuant to the Merger.
Section 7.5 Employment Arrangements. (a) After the Effective
Date, Parent shall, or shall cause the Surviving Corporation to, honor
in accordance with their terms, all employment, severance, consulting
and other compensation contracts between the Company or any of its
subsidiaries and any current or former director, officer or employee
thereof, and all provisions for vested benefits or other vested
amounts earned or accrued through the Effective Date under any Company
Benefit Plan, each as of the date hereof except for changes thereto
which are (i) not material, (ii) permitted by this Merger Agreement,
(iii) set forth on Schedule 7.5 hereto, or (iv) otherwise agreed to by
the parties hereto.
<PAGE>
(b) For a period of six months after the Effective Date,
Parent shall provide, or shall cause the Surviving Corporation to
provide, generally to the officers and employees of the Surviving
Corporation and its subsidiaries employee benefits, including, without
limitation, pension benefits, health and welfare benefits, and
severance arrangements, on terms and conditions in the aggregate that
are no less favorable as those provided under the Company Benefit
Plans as of the date hereof.
Section 7.6 Indemnification. (a) From and after the
Effective Date, Parent shall indemnify, defend and hold harmless the
officers, directors and employees of the Company (the "Indemnified
Parties") against all losses, expenses, claims, damages or liabilities
arising out of the transactions contemplated by this Merger Agreement
to the fullest extent permitted or required under applicable law.
Parent agrees that all rights to indemnification existing in favor of
the directors, officers or employees of the Company as provided in the
Company's Restated Certificate of Incorporation or By-Laws, as in
effect as of the date hereof, with respect to matters occurring
through the Effective Date, shall survive the Merger and shall
continue in full force and effect for a period of not less than six
years from the Effective Date. Parent agrees to cause Surviving
Corporation to maintain in effect for not less than two years after
the Effective Date the current policies of directors and officers'
liability insurance maintained by the Company with respect to matters
occurring prior to the Effective Date; provided, however, that
Surviving Corporation shall not be required to pay an annual premium
for such insurance in excess of $410,000, but in such case shall
purchase as much coverage as possible for such amount.
(b) In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated by
this Merger Agreement is commenced, whether before or after the
Effective Date, the parties hereto agree to cooperate and use their
respective reasonable efforts to vigorously defend against and respond
thereto.
Section 7.7 Antitrust Filings; Best Efforts; Notification.
(a) The Company and Parent shall use their best efforts to file in
connection with the Merger and the transactions contemplated hereby as
soon as practicable (i) notifications under the HSR Act, and (ii) such
notifications and filings as may be required under any Antitrust Laws
(as defined below). The Company and Parent shall use their best
efforts to take all action necessary, proper and advisable under
applicable laws and regulations with respect to the following: (x) to
cause the expiration or termination of the applicable waiting periods
under the HSR Act as soon as practicable, including,
<PAGE>
without limitation, by responding as promptly as practicable to any
inquiries received from the Federal Trade Commission (the "FTC") or
the Antitrust Division of the Department of Justice (the "Antitrust
Division") or any state or local governmental entity for additional
information or documentation, (y) with regards to the proper national
and multinational authorities to cause the expiration or termination
of applicable waiting periods, the satisfaction of such other filing
requirements, or the issuance of such approvals, consents or
authorizations as may be required with respect to the Antitrust Laws
of any foreign jurisdiction, and (z) to avoid the entry of any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, under any Antitrust Law, that would have the effect of
prohibiting, preventing or restricting consummation of the
transactions contemplated by this Merger Agreement or of imposing any
material limitation on the conduct of the businesses of the Company or
Parent following consummation of such transactions; provided, however,
that Parent shall not be required to take any action if Parent
determines, in its sole discretion, that it is not in its best
interest to do so.
(b) The Company and Parent shall, in connection with the
efforts referenced in the foregoing paragraph to obtain all requisite
approvals and authorizations for the transactions contemplated by this
Merger Agreement under Antitrust Laws, (i) cooperate in all respects
with each other in connection with any filing or submission and in
connection with any investigation or other inquiry; (ii) promptly
inform the other party of any communication to it from any
Governmental Entity and permit the other party to review in advance
any proposed communication from it to any Governmental Entity or third
party; and (iii) not arrange for or participate in any meeting with
any Governmental Entity in respect of any filings, investigation or
other inquiry without consulting with each other in advance, and, to
the extent permitted by such Governmental Entity, giving the other
party the opportunity to attend and participate thereat. The Company
shall not enter into any proposed understanding, undertaking, or
agreement with any Governmental Entity in connection with the
transactions contemplated by this Merger Agreement without the prior
written consent of Parent. Parent shall keep the Company reasonably
informed of determinations made pursuant to the proviso of the last
sentence of Section 7.7(a), Section 7.7(c) and of Section 7.7(d).
(c) In connection with the foregoing, if any administrative
or judicial action or proceeding is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Merger
Agreement as violative of any Antitrust Law, each of Parent and the
Company shall cooperate and use its respective best efforts to contest
and resist any such
<PAGE>
action or proceeding and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and that
prohibits, prevents, or restricts consummation of the transactions
contemplated by this Merger Agreement or imposes any material
limitation on the conduct of the businesses of the Company or Parent
following consummation of such transactions, unless and until Parent,
in its sole discretion, determines that to contest or litigate such
matters is not in its best interest.
(d) If any objections are asserted with respect to the
transactions contemplated hereby under any Antitrust Law or if any
suit is instituted challenging any of the transactions contemplated
hereby as violative of any Antitrust Law or regulation, Parent and the
Company, if requested by Parent, shall take such action as may be
required or proposed (i) by the applicable Governmental Entity in
order to resolve any such objections as such Governmental Entity may
have to such transactions under such Antitrust Law, or (ii) by any
domestic or foreign court or similar tribunal, in any suit brought by
a private party or Governmental Entity challenging the transactions
contemplated hereby as violative of any Antitrust Law, in order to
avoid the entry of, or to effect the dissolution of, any injunction,
temporary restraining order or other order that has the effect of
preventing the consummation of any of such transactions or would
otherwise deprive Parent or any of its affiliates of any material
benefit of the ownership and control its assets or operations after
the Effective Date; provided, however, that the Company shall not be
required to commit to or to implement any action that is to be
consummated prior to the Effective Date; and provided, further, that,
other provisions of this Section 7.7 notwithstanding, Parent shall not
be required to take any action pursuant to this Section 7.7(d) if
Parent determines, in its sole discretion, that it is not in Parent's
best interest to do so.
(e) "Antitrust Law" means the Sherman Act, as amended, the
Clayton Act, as amended, the HSR Act, the Federal Trade Commission
Act, as amended, all other federal, state, or foreign statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines,
and other laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization,
restraint of trade or lessening of competition through merger or
acquisition.
Section 7.8 Additional Agreements. (a) Subject to the terms
and conditions herein provided (including, without limitation, Section
7.7), each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all
<PAGE>
actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Merger Agreement,
including using all reasonable efforts to obtain all necessary
waivers, consents and approvals, to effect all necessary registrations
and filings (including, but not limited to, filings with all
applicable Governmental Entities) and to lift any injunction or other
legal bar to the Merger (and, in such case, to proceed with the Merger
as expeditiously as possible), subject to the appropriate vote of the
shareholders of the Company. Notwithstanding the foregoing, but
subject to Section 7.7, there shall be no action required to be taken
and no action will be taken in order to consummate and make effective
the transactions contemplated by this Merger Agreement if such action,
either alone or together with another action, would result in a
Company Material Adverse Effect or a Parent Material Adverse Effect.
(b) In case at any time after the Effective Date any further
action is necessary or desirable to carry out the purposes of this
Merger Agreement, the proper officers and/or directors of Parent, the
Company and the Surviving Corporation shall take all such necessary
action.
(c) Following the Effective Date, Parent shall use its best
efforts to conduct the business, and shall cause the Surviving
Corporation to use its best efforts to conduct its business, except as
otherwise contemplated by this Merger Agreement, in a manner which
would not jeopardize the characterization of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
(d) (i) The Company shall, effective at the Effective Date,
repay all obligations of it and its subsidiaries under the credit
agreements, revolving credit facilities and receivable funding
facilities with General Electric Capital Corporation set forth on
Schedule 7.8(d) (the "GECC Debt") and obtain a release of all
obligations, liens and security,interests thereunder (and Parent shall
use reasonable efforts to cooperate with the Company with respect to
the foregoing and shall provide funding with respect thereto, to the
extent the Company does not have sufficient cash as of the Effective
Date to repay all such obligations), and (ii) Parent shall cause the
Company to comply with its obligations under that certain Indenture
dated as of August 15, 1992 pursuant to which the Company issued its
10 1/8% Senior Subordinated Notes due August 2002 (the "2002
Indenture") pursuant to Article 5 thereof and (iii) Parent will cause
the Company to comply with the covenants and obligations set forth
in the Company's Convertible
<PAGE>
Subordinated Notes, dated September 30, 1991 in the aggregate amount
of $16,034,000.
(e) After the date hereof, the Company shall establish a
plan to provide payments to employees who remain employed by the
Company through the Effective Date and, unless involuntarily
terminated without cause by Parent earlier, for six months thereafter.
Payments under such plan shall be made by the Company on the six month
anniversary of the Effective Date or at such earlier time after the
Effective Date as an eligible employee's employment with the Company
or its affiliates shall be terminated involuntarily without cause. The
Company and Parent shall, in writing, mutually select Company
employees eligible to participate in the plan. In no event shall the
aggregate payments under the plan exceed $10,000,000.
Section 7.9 No Solicitation. Subject to the fiduciary duties
of the Board of Directors of the Company as advised by outside
counsel, neither the Company nor any of its subsidiaries shall,
directly or indirectly, take (nor shall the Company authorize or
permit its subsidiaries, officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other
agents or affiliates, to take) any action to (i) encourage, solicit or
initiate the submission of any Acquisition Proposal, (ii) enter into
any agreement with respect to any Acquisition Proposal or (iii)
participate in any way in discussions or negotiations with, or furnish
any information to, any person in connection with, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal. The Company will promptly communicate to Parent any
solicitation received by the Company and the terms of any proposal or
inquiry, including the identity of the person and its affiliates
making the same, that it may receive in respect of any such
transaction, or of any such information requested from it or of any
such negotiations or discussions being sought to be initiated with it.
"Acquisition Proposal" shall mean any proposed (A) merger,
consolidation or similar transaction involving the Company, (B) sale,
lease or other disposition directly or indirectly by merger,
consolidation, share exchange or otherwise of assets of the Company or
its subsidiaries representing 30% or more of the consolidated assets
of the Company and its subsidiaries, (C) issue, sale, or other
disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities (or options, rights or
warrants to purchase, or securities convertible into, such securities)
representing 30% or more of the voting power of the Company or (D)
transaction in which any person shall acquire beneficial ownership (as
such term is defined in Rule 13d-3 under the Exchange Act), or the
right to
<PAGE>
acquire beneficial ownership or any "group" (as such term is defined
under the Exchange Act) shall have been formed which beneficially owns
or has the right to acquire beneficial ownership of 15% or more of the
outstanding Company Common Stock.
Section 7.10 Dividend Adjustment. (a) Except in the
circumstances described in the next paragraph, prior to the Effective
Date the Company and Parent may, in lieu of their respective regular
quarterly dividends covering the period described in the next
sentence, each declare a special dividend on Company Common Stock and
Parent Common Stock, respectively, to holders of record of such shares
as of the record date established therefor (which record date shall be
prior to the Effective Date) with a payment date which is the same as
the Effective Date. Such special dividend may be in an amount per
share not greater than the product of (A) a fraction, (i) the
numerator of which equals the number of days between the payment date
with respect to the most recent regular common stock dividend paid by
the Company or Parent, as the case may be, and the Effective Date and
(ii) the denominator of which equals 91, and (B) the amount of the
regular quarterly cash dividend per share of Company Common Stock or
Parent Common Stock most recently paid by the Company or Parent, as
the case may be, prior to the Effective Date.
(b) If the Effective Date occurs after a regularly scheduled
record date for dividends on the Parent Common Stock and before the
regularly scheduled record date for dividends on Company Common Stock
that next succeeds such Parent record date, then the Company may
declare a special dividend on the Company Common Stock to holders of
record of such shares as of the record date established therefor
(which record date shall be prior to the Effective Date) with a
payment date which is the same as the payment date for dividends on
the Parent Common Stock to which such Parent record date relates. Such
special dividend may be in an amount per share not greater than the
product of (A) a fraction, (i) the numerator of which equals the
number of days between the payment date with respect to the most
recent regular common stock dividend paid by the Company and such
payment date for the Parent Common Stock and (ii) the denominator of
which equals 91, and (B) the amount of the regular quarterly cash
dividend per share of Company Common Stock most recently paid by the
Company prior to the Effective Date.
(c) This section shall be interpreted and, in circumstances
where necessary, appropriately modified so as to give effect to its
intent, namely, that dividends on the Company Common Stock and Parent
Common Stock shall be paid in such a manner as to result in the
periods covered by such dividends,
<PAGE>
giving effect to the Merger and anticipated dividend payment dates
thereafter, being synchronous.
Section 7.11 Takeover Provisions Inapplicable. The Company
shall (a) take all action (including, if required, redeeming all of
the outstanding Company Rights or amending or terminating the Company
Rights Agreement) so that the entering into of this Agreement nor the
consummation of the transactions contemplated hereby shall not and
will not result in the grant of any rights to any person under the
Company Rights Agreement to purchase or receive additional shares of
capital stock of the Company or enable or require the Company Rights
to be exercised, distributed or triggered in any way and (b) take all
action as may be necessary to render Article IX of the Company's
Restated Certificate of Incorporation inapplicable to this Merger
Agreement and the transactions contemplated hereby.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the
Merger shall be subject to the fulfillment at or prior to the
Effective Date of the following conditions:
(a) This Merger Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requisite vote of
the holders of (i) the Company Common Stock, the Company Series B
Preferred Stock and the Company Series C Preferred Stock voting
together as a class and (ii) the Company Series C Preferred Stock
voting separately as a class.
(b) The Parent Common Stock issuable in the Merger shall
have been authorized for listing on the NYSE upon official notice of
issuance.
(c) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated and any
authorization, consent or approval required under any Antitrust Law
shall have been obtained or any waiting period applicable to the
review of the transactions contemplated hereby shall have expired or
been terminated.
(d) The Registration Statement shall have become effective
in accordance with the provisions of the Securities Act. No stop order
suspending the effectiveness of the Registration Statement shall have
been issued by the Commission and remain in effect.
<PAGE>
(e) No preliminary or permanent injunction or other order by
any court or other judicial or administrative body of competent
jurisdiction which prohibits or prevents the consummation of the
Merger shall have been issued and remain in effect (each party
agreeing to use its best efforts to have any such injunction lifted).
(f) Parent and the Company shall have received letters from
Price Waterhouse LLP and Deloitte & Touche LLP, respectively, to the
effect that the Merger qualifies for "pooling of interests" accounting
treatment if consummated in accordance with this Merger Agreement.
Section 8.2 Conditions to Obligation of the Company to
Effect the Merger. The obligation of the Company to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Date
of the additional following conditions, unless waived by the Company:
(a) Parent and Sub shall have performed in all material
respects their agreements contained in this Merger Agreement required
to be performed on or prior to the Effective Date and the
representations and warranties of Parent and Sub contained in this
Merger Agreement shall be true in all material respects when made and
on and as of the Effective Date as if made on and as of such date,
except (i) as contemplated or permitted by this Merger Agreement, (ii)
for representations and warranties which are by their express
provisions made as of a specific date or dates, which were or will be
true in all material respects at such time or times as stated therein,
and (iii) that if the Effective Date occurs after the nine month
anniversary of the date hereof pursuant to the second proviso of
Section 9.1(b), then the representations and warranties need only be
true as of the nine month anniversary of the date of this Merger
Agreement, and the Company shall have received a certificate of the
President or Chief Executive Officer or a Vice President of Parent to
that effect.
(b) The Company shall have received a favorable opinion of
Baer Marks & Upham LLP, based upon certain factual representations of
the Company, Parent and Sub reasonably requested by such counsel,
dated the Effective Date, to the effect that the Merger will
constitute a "reorganization" for federal income tax purposes within
the meaning of Section 368(a) of the Code.
(c) The consummation of the Merger and the other
transactions contemplated hereby shall not give rise to any Parent
Right becoming exercisable for any security or asset of any person.
<PAGE>
Section 8.3 Conditions to Obligations of Parent and Sub to
Effect the Merger. The obligations of Parent and Sub to effect the
Merger shall be subject to the fulfillment at or prior to the
Effective Date of the additional following conditions, unless waived
by Parent:
(a) The Company shall have performed in all material
respects its agreements contained in this Merger Agreement required to
be performed on or prior to the Effective Date and the representations
and warranties of the Company contained in this Merger Agreement shall
be true in all material respects when made and on and as of the
Effective Date as if made on and as of such date, except (i) as
contemplated or permitted by this Merger Agreement, (ii) for
representations and warranties which are by their express provisions
made as of a specific date or dates which were or will be true in all
material respects at such date or dates, and (iii) that if the
Effective Date occurs after the nine month anniversary of the date
hereof pursuant to the second proviso of Section 9.1(b), then the
representations and warranties need only be true as of the nine month
anniversary of the date of this Merger Agreement, and Parent and Sub
shall have received a certificate of the President or Chief Executive
Officer or a Vice President of the Company to that effect.
(b) Parent shall have received a letter of Deloitte & Touche
LLP, the Company's independent auditors, dated a date within two
business days before the date on which the Registration Statement
shall become effective and addressed to Parent, in form and substance
reasonably satisfactory to Parent and customary in scope and substance
for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
(c) Parent shall have received a favorable opinion of
Wachtell, Lipton, Rosen & Katz, based upon certain factual
representations of the Company and Parent reasonably requested by such
counsel, to the effect that the Merger will be treated for Federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Code.
(d) (Reserved)
(e) Company shall have obtained all consents, appeals,
releases or authorizations from, and shall have made all filings and
registrations ("Consents") to or with, any person, including but not
limited to any Governmental Entity necessary to be obtained or made in
order to consummate the transactions contemplated by this Agreement,
unless the failure to obtain such Consents would not, individually or
in the aggregate, have
<PAGE>
a Company Material Adverse Effect, except as contemplated by
Section 8.3(f).
(f) Parent shall have received the written opinion of Baer
Marks & Upham LLP, dated the Effective Date, to the effect that
execution of this Merger Agreement did not, and that consummation of
the Merger will not, violate any provision of or give any rise to any
termination right or to other additional rights to any person under,
the agreement set forth on Schedule 8.3(f) hereto, unless written
consent by the other party thereto in form and substance reasonably
satisfactory to Parent is obtained by the Company prior to the
Effective Date.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Merger Agreement may be
terminated at any time prior to the Effective Date, whether before or
after approval by the shareholders of the Company:
(a) by mutual consent of the Board of Directors of Parent
and the Board of Directors of the Company;
(b) by either Parent or the Company if the Merger shall not
have been consummated on or before the nine month anniversary of
the date hereof, provided, that the terminating party is not
otherwise in material breach of its representations, warranties
or obligations under this Merger Agreement, and provided,
further, that if the conditions set forth in Section 8.1(c) or
Section 8.1(f) shall not have been satisfied prior to the nine
month anniversary of the date hereof, then the Company may not
terminate the Merger Agreement until the one year anniversary of
the date hereof;
(c) by the Company if any of the conditions specified in
Sections 8.1 and 8.2 have not been met or waived by the Company
at such time as such condition is no longer capable of
satisfaction;
(d) by Parent if any of the conditions specified in Sections
8.1 and 8.3 have not been met or waived by Parent at such time as
such condition is no longer capable of satisfaction;
(e) by Parent if (i) the Company's Board of Directors shall
have withdrawn, modified in a manner adverse to
<PAGE>
Parent, or refrained from making its recommendation concerning
the Merger referred to in Section 3.5 hereof, or shall have
disclosed its intention to change such recommendation, or (ii)
the Company shall have entered into an agreement with a third
party (other than a customary confidentiality agreement) with
respect to an Acquisition Proposal;
(f) by the Company if, pursuant to Section 7.9, the Company
shall have entered into an agreement with respect to an
Acquisition Proposal, provided that prior to such termination the
Company shall have paid to Parent the Company Breakup Fee (as
defined in Section 9.2); or
(g) by Parent if any requirements or conditions are imposed,
or proposed to be imposed, upon either Parent or the Company or
any of their respective affiliates by any Governmental Entity in
connection with the authorization, consent or approval of such
Governmental Entity (or the expiration or termination of any
waiting period applicable to such Governmental Entity's review of
the transactions contemplated by this Merger Agreement) under any
Antitrust Law in connection with the consummation of the
transactions contemplated hereby, or by any domestic or foreign
court or similar tribunal in any suit brought by a private party
or Governmental Entity challenging the transactions contemplated
hereby as violative of any Antitrust Law, which, in the
reasonable opinion of Parent, would materially restrict or limit
the operations of Parent or the Company or any of their
respective affiliates or otherwise deprive Parent or any of its
affiliates of any material benefit of the ownership and control
of its assets or operations after the Effective Date. For
purposes of this paragraph, the term "Governmental Entity" shall
not include any foreign governmental entity other than those of
Canada and the European Community.
Section 9.2 Effect of Termination. (a) In the event of
termination of this Merger Agreement by either Parent or the Company,
as provided above, this Merger Agreement shall forthwith become void
and (except for the willful breach of this Merger Agreement by any
party hereto) there shall be no liability on the part of either the
Company, Parent or Sub or their respective officers or directors;
provided that Sections 9.2, 10.3 and 10.7 shall survive the
termination.
(b) The Company shall make payment to Parent (by wire
transfer or cashiers check) of a breakup fee in the amount of
$40,000,000 (the "Company Breakup Fee") in the event this
<PAGE>
Merger Agreement is terminated and at the time of such termination
Parent is not in material breach of any representation, warranty or
material covenant contained herein (i) by either party pursuant to
Section 9.1(c) or 9.1(d) if the Company's shareholders shall not have
approved and adopted the Merger and this Merger Agreement and prior to
the vote of the Company's shareholders an Acquisition Proposal shall
have been made and within one year of such termination (x) the Company
shall have entered into a definitive agreement with a third party
providing for the acquisition of the Company or a majority of the
Company's assets or voting securities by such third party or the
consolidation or merger of the Company pursuant to which the Company's
stockholders will hold less than a majority of the outstanding voting
securities of the resulting corporation immediately following
consummation of such transaction or (y) any third party shall have
acquired beneficial ownership of more than 20% of the outstanding
voting securities of the Company (the "Threshold Amount") other than
an acquisition of securities from the Company in capital raising
transactions without the intention or effect of constituting a Change
in Control (as defined in the Credit Agreement, dated as of February
22, 1995 between the Company and certain of its subsidiaries and
General Electric Capital Corporation), provided, however that with
respect to this clause (y) if a third party acquires beneficial
ownership of voting securities of the Company in excess of the
Threshold Amount without the approval of the Board of Directors of the
Company and the Company Rights are not redeemed, then the Company
Breakup Fee will not be payable unless and until a third party
acquires in excess of 50% of the outstanding voting securities of the
Company or (ii) by Parent pursuant to Section 9.1(e); or (iii) by the
Company pursuant to Section 9.1(f).
(c) Parent shall make payment to the Company (by wire
transfer or cashiers check) in the amount of $15,000,000 (the "Parent
Breakup Fee") in the event this Merger Agreement is terminated by the
Company or Parent under Section 9.1(b) or by Parent under Section
9.1(g), if, in either case, (i) all conditions to the obligations of
Parent and the Company specified in Article VIII have been satisfied
(other than the condition specified in Section 8.1(c) or the condition
specified in Section 8.1(f), but only, in the case of the condition
specified in Section 8.1(c), if the failure of such condition to be
satisfied is in respect of injunctions or orders issued under the
Antitrust Laws of the United States, and only, in the case of the
condition specified in Section 8.1(f), if the failure of such
condition to be satisfied is not related to any terms or provisions of
the Company's benefit plans or securities and not caused by any action
taken by the Company), (ii) the Company shall not be in material
breach of any representation, warranty
<PAGE>
or material covenant contained herein, and (iii) the Company shall
have satisfied its obligations pursuant to Section 3.5, Section
6.1(vi) (in the case of the condition specified in Section 8.1(f)) and
Section 7.7 (in the case of the condition specified in Section
8.1(c)).
Section 9.3 Amendment. This Merger Agreement may be amended
by the parties hereto, by or pursuant to action taken by their
respective Boards of Directors, at any time before or after approval
hereof by the shareholders of the Company, but, after such
approval, no amendment shall be made which changes the ratios at which
any class of capital stock of the Company is to be converted into
capital stock of Parent as provided in Section 3.1 or which in any way
materially adversely affects the rights of such shareholders, without
the further approval of such shareholders. This Merger Agreement may
not be amended except by an instrument in writing signed on behalf of
each of the parties hereto.
Section 9.4 Waiver. At any time prior to the Effective Date,
the parties hereto, by or pursuant to action taken by their respective
Boards of Directors, may (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii)
waive any inaccuracies in the representations and warranties contained
herein or in any documents delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein
provided, however, that no such waiver shall materially adversely
affect the rights the shareholders of the Company and Parent. Any
agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed
on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations, Warranties and
Agreements. No representations, warranties or agreements in this
Merger Agreement shall survive the Merger, except for the agreements
contained in Sections 3.1, 3.2, 3.3, 3.4, 3.6, 3.7, the agreements
referred to in Sections 7.5, 7.6, 7.7, 7.8, 10.1, 10.3 and 10.7 and in
the last sentence of Section 7.3(b).
Section 10.2 Notices. All notices or other communications
under this Merger Agreement shall be in writing and shall be given
(and shall be deemed to have been duly given upon receipt) by delivery
in person, by cable, telegram, telex,
<PAGE>
telecopy or other standard form of telecommunications, or by
registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to the Company:
Tyco Toys, Inc.
6000 Midlantic Drive
Mt. Laurel, New Jersey 08054
Attention: R. Michael Kennedy, Jr., Esq.
General Counsel
Telecopy No.: (609) 273-2885
With a copy to:
Baer Marks & Upham LLP
805 Third Avenue 20th Floor
New York, New York 10022
Attention: Joel M. Handel, Esq.
Telecopy No.: (212) 702-5797
If to Parent or Sub:
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245-5012
Attention: Barnett Rosenberg, Esq.
General Counsel
Telecopy No.: (310) 252-2567
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
Telecopy No.: (212) 403-2000
or to such other address as any party may have furnished to the other
parties in writing in accordance with this Section.
Section 10.3 Fees and Expenses. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this
Merger Agreement and the transactions contemplated by this Merger
Agreement shall be paid by the party incurring such expenses, except
that the Parent and Company agree to each pay 50% of all printing
expenses incurred by the parties hereto.
<PAGE>
Section 10.4 Publicity. So long as this Merger Agreement is
in effect, Parent, Sub and the Company agree to consult with each
other in issuing any press release or otherwise making any public
statement with respect to the transactions contemplated by this Merger
Agreement, and none of them shall issue any press release or make any
public statement prior to such consultation, except as may be required
by law or by obligations pursuant to any listing agreement with any
national securities exchange. The commencement of litigation relating
to this Merger Agreement or the transactions contemplated hereby or
any proceedings in connection therewith shall not be deemed a
violation of this Section 10.4.
Section 10.5 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event that any of the
provisions of this Merger Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Merger Agreement and to
enforce specifically the terms and provisions hereof in any court of
the United States or any state having Jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in
equity.
Section 10.6 Interpretation. When a reference is made in
this Merger Agreement to subsidiaries of Parent or the Company, the
word "subsidiaries" means corporations more than 50% of whose
outstanding voting securities are directly or indirectly owned by
Parent or the Company, as the case may be. The headings contained in
this Merger Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Merger
Agreement.
Section 10.7 Miscellaneous. This Merger Agreement (including
the documents and instruments referred to herein) (a) constitutes the
entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof (other than as
provided in the Confidentiality Agreements, as the same may be
amended); (b) except as provided in the last sentence of Section
7.3(b), Sections 7.5 and 7.6, is not intended to confer upon any other
person any rights or remedies hereunder; (c) shall not be assigned by
operation of law or otherwise, except that Sub shall have the right to
assign to Parent or any direct wholly owned subsidiary of Parent any
and all rights and obligations of Sub under this Merger Agreement; and
(d) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Delaware
(without giving effect to the provisions thereof
<PAGE>
relating to conflicts of law). This Merger Agreement may be executed
in two or more counterparts which together shall constitute a single
agreement.
[Remainder of Page Intentionally Blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Merger Agreement to be signed by their respective officers thereunder
duly authorized all as of the date first written above.
MATTEL, INC.
By /s/ Harry J. Pearce
-------------------
Name: Harry J. Pearce
Title: Vice Chairman
TRUCK ACQUISITION CORP.
By /s/ Ned Mansour
---------------
Name: Ned Mansour
Title: President
TYCO TOYS, INC.
By /s/ Ned Mansour
---------------
Name: Ned Mansour
Title: President of Corporate
Operations
<PAGE>
Exhibit 99.8 - Stockholders Agreement dated
November 17, 1996 between Parent
and the Company Series B Preferred
Stockholders.
<PAGE>
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of November 17, 1996, by
and among Mattel, Inc., a Delaware corporation ("Parent"), Corporate
Partners, L.P., a Delaware limited partnership ("Corporate Partners"),
Corporate Offshore Partners, L.P., a Bermuda limited partnership
("Offshore Partners"), The State Board Administration of Florida, a
body corporate organized under the constitution of the State of
Florida (the "State Board", and together with Corporate Partners and
Offshore Partners, the "Stockholders"), and Corporate Advisors, L.P.,
a Delaware limited partnership ("Corporate Advisors").
WITNESSETH:
WHEREAS, the Stockholders collectively beneficially own
Shares of capital stock ("Company Shares") of Tyco Toys, Inc., a
Delaware corporation (the "Company"), as set forth on Schedule I
hereto; and
WHEREAS, Parent and Company have entered into an Agreement
and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), pursuant to which, among other things, a subsidiary of
Parent will be merged with and into the Company (the "Merger"); and
WHEREAS, as a condition to its willingness to enter into the
Merger Agreement, Parent has required that the Stockholders agree, and
the Stockholders have agreed, to enter into and abide by the terms of
this Stockholders Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements set forth herein and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Ownership of Company Shares. Each Stockholder represents
and warrants that such Stockholder has or shares the right to vote and
dispose of the number of Company Shares set forth opposite such
Stockholder's name on Schedule I hereto, subject to such restrictions
as may be applicable under law and the Stock Purchase Agreement for
Series B Voting Convertible Exchangeable Preferred Stock dated April
15, 1994 between the Stockholders and Tyco Toys, Inc. (the "Stock
Purchase Agreement").
<PAGE>
2. Agreements of the Stockholders. Each Stockholder
covenants and agrees that during the term of this Stockholders
Agreement:
(a) such Stockholder shall, at any meeting of the Company's
stockholders called for such purpose (including at any
postponements and adjournments thereof), vote, or cause to be
voted, all Company Shares, together with any other shares of
capital stock of the Company acquired after the date hereof and
prior to the termination hereof, in which such stockholder has
the right to vote in favor of approval and adoption of the Merger
Agreement;
(b) except as otherwise expressly permitted hereby and
except as may be required by the Company Certificate of
Designation, such Stockholder shall not, prior to the Effective
Date (as defined in the Agreement) or the earlier termination of
the Merger Agreement in accordance with its terms, sell, pledge,
transfer or otherwise dispose of such Stockholder's Company
Shares; and
(c) such Stockholder shall not in its capacity as a
stockholder of the Company directly or indirectly encourage or
solicit or hold discussions or negotiations with, or provide any
information to, any person, entity or group (other than Parent or
an affiliate thereof) concerning any Acquisition Proposal (as
defined in the Merger Agreement) (and other than Company in
connection with the Merger); provided that this clause (c) shall
not be binding on the State Board to the extent that Corporate
Advisors does not have the authority to act for the State Board
with respect to the subject matter of this clause (c).
3. Treatment of Series B Shares. (a) Subject to the terms
and conditions of this Stockholders Agreement, each Stockholder and
Parent agree that on the Effective Date as part of the Merger each
share of the Series B Voting Convertible Exchangeable Preferred Stock,
par value $.10 per share ("Series B Shares") beneficially owned by
such Stockholder shall be converted into or exchanged for one share of
a series of preferred stock of Parent having economic terms as nearly
equivalent as possible to, and with the same voting and other rights
as, the Series B Stock, including the right to convert into common
stock of Parent (the "Parent Series B Stock", and such conversion or
exchange hereby referred to as the "Series B Shares Treatment"), and
each Stockholder hereby waives any rights such
<PAGE>
Stockholder might otherwise have pursuant to Section 3 or Section 4 of
the Certificate of Designation for the Series B Shares in effect as of
the date hereof (the "Certificate of Designation") with respect to
such shares solely as a result of the Merger, other than to receive
such Parent Series B Stock.
(b) In the event that the Series B Treatment is deemed or
considered to be, or is determined to require, an amendment to the
Certificate of Designation or to the Restated Certificate of
Incorporation of Company, as amended as of the date hereof (the
"Certificate of Incorporation"), each Stockholder hereby agrees to
vote all of its Company Shares in favor of any amendment to the
Certificate of Designation or the Certificate of Incorporation as may
be necessary to effectuate the Series B Shares Treatment.
(c) From and after the Effective Date, Parent agrees to pay
any and all dividends and distributions on the Parent Series B Shares
(including accrued and unpaid dividends on the Series B Shares) when
due (or, if past due as of the Effective Date, then on the Effective
Date).
4. Authority of Corporate Advisors to Act for the State
Board. (a) Subject to Section 7(b), the State Board and Corporate
Advisors each represents to Parent that Corporate Advisors has full
power and authority, pursuant to the provisions of an Investment
Management Agreement, dated as of June 17, 1988 (the "Management
Agreement"), to act on behalf of the State Board in connection with
the transactions contemplated by this Stockholders Agreement (except
as set forth in the proviso in Section 2(c) hereof) and that Parent
can rely on any action taken by Corporate Advisors in connection
therewith as if such action were taken by the State Board.
(b) Subject to Section 7(b), so long as the Management
Agreement remains in effect without amendment of the provisions
granting Corporate Advisors the authority to act on behalf of the
State Board, any and all actions that are required or permitted to be
taken by the State Board pursuant to this Stockholders Agreement may
be taken by Corporate Advisors on behalf of the State Board and any
and all notices required to be given by Parent to the State
Board pursuant to this Stockholders Agreement may be given
to Corporate Advisors in lieu of giving such notice to the
State Board; provided, however, that the provisions of this
sentence shall not relieve the State Board of any of its
obligations pursuant to this Stockholders Agreement. Parent
shall be entitled to assume that, and to act in reliance on
the assumption that, the Management Agreement remains in
effect without amendment of any
<PAGE>
such provisions unless and until it receives written notice from the
State Board to the contrary.
5. Successors and Assigns. A Stockholder may not sell,
pledge, transfer, convert or otherwise dispose of its Company Shares
except to another Stockholder without the prior written consent of
Parent, which consent shall be granted or withheld in Parent's sole
discretion.
6.(a) Representations and Warranties of Parent. Parent makes
the following representations and warranties to each Stockholder:
(i) Parent has all requisite corporate power and authority
to enter into this Stockholders Agreement and the Merger Agreement and
to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Stockholders Agreement and the Merger
Agreement and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate
action on the part of Parent. Parent has duly executed and delivered
this Stockholders Agreement and the Merger Agreement and this
Stockholders Agreement and the Merger Agreement constitute its legal,
valid and binding obligations enforceable against it in accordance
with their respective terms except as may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be
brought.
(ii) Parent is not subject to or obligated under (A) any
charter, by-law, indenture or other loan document provision (other
than the Credit Agreement dated as of March 10, 1995, among Parent,
the Banks named therein and Bank of America National Trust and Savings
Association, as amended (the "Parent Credit Agreement")) or (B) any
other contract, license, franchise, permit, order, decree, concession,
lease, instrument, judgment, statute, law, ordinance, rule or
regulation applicable to Parent or any of its subsidiaries or their
respective properties or assets, which would be breached or violated,
or under which there would be a default (with or without notice or
lapse of time, or both), or under which there would arise a right of
termination, cancellation or acceleration of any obligation or the
loss of a material benefit, by execution and delivery of this
Stockholders Agreement and the Merger Agreement, and the consummation
of the transactions contemplated hereby and thereby (including the
issuance of the Parent Series B Stock, the issuance of shares of
common stock of Parent upon the conversion and the compliance by
Parent with the terms of
<PAGE>
such securities (collectively, the "Securities")) other than, in the
case of clause (B) only, (X) any breaches, violations, defaults,
terminations, cancellations, accelerations or losses which, either
singly or in the aggregate, will not have a Parent Material Adverse
Effect (as defined in the Merger Agreement) or prevent the
consummation of the transactions contemplated hereby or thereby,
including the issuance of such Securities and compliance by Parent
with the terms thereof and (Y) the laws and regulations referred to in
the next sentence. Except as referred to herein or in connection, or
in compliance, with the provisions of the Hart-Scott-Rodino Antitrust
Improvements Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
other governmental approvals required under the applicable laws of any
foreign jurisdiction ("Foreign Laws") and the environmental,
corporation, securities or blue sky laws or regulations of the various
states, no filing or registration with, or authorization, consent or
approval of, any public body or authority is necessary for the
consummation by Parent of the Merger or the other transactions
contemplated by this Merger Agreement (including the issuance of the
Securities), other than filings, registrations, authorizations,
consents or approvals the failure of which to make or obtain would not
have a Parent Material Adverse Effect or prevent the consummation of
the transactions contemplated hereby or thereby, including the
issuance of the Securities and compliance by Parent with the terms
thereof.
(iii) Status of Shares. The shares of Parent Series B Stock will be,
prior to the Effective Date, duly authorized by all necessary
corporate action on the part of Parent and upon their issuance will be
validly issued and outstanding, fully paid and nonassessable and free
and clear of any liens. The shares of common stock of Parent issuable
upon conversion or exchange of the shares of Parent Series B Stock or
the Parent Notes will be, prior to the Effective Date validly reserved
for issuance, and upon issuance upon such conversion or exchange will
be validly issued and outstanding, fully paid and nonassessable, and
free and clear of any liens. The notes of Parent issuable upon
exchange of the Shares (the "Parent Notes") will be, prior to issuance
thereof, duly authorized by all necessary corporate action on the part
of Parent, and when issued and exchanged for shares of Parent Series B
Stock, will constitute valid and binding obligations of Parent,
enforceable in accordance with their term except as may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be
brought. The shares of common stock of
<PAGE>
Parent issuable upon conversion or exchange of the Series B Shares
will be authorized for listing upon notice of issuance on the
principal trading market on which shares of common stock of Parent are
traded at such time. The issuance of the Parent Series B Shares in the
Merger will not be subject to any preemptive rights.
(b) Representations or Warranties of the Stockholders. Each
Stockholder makes the following representations, on its own behalf, to
Parent:
(i) Stockholder has all requisite power and authority to
enter into this Stockholders Agreement. The execution and delivery of
this Stockholders Agreement and the consummation of the transactions
contemplated hereby are duly authorized by all necessary partnership
or other action on the part of Stockholder. Stockholder has duly
executed and delivered this Stockholders Agreement and this
Stockholders Agreement constitutes its legal, valid and binding
obligations enforceable against it in accordance with their respective
terms except as may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally
and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before
which any proceeding therefor may be brought.
(ii) Stockholder is not subject to or obligated under (A) any charter,
by-law, partnership agreement, indenture or other loan document
provision or (B) any other contract, license, franchise, permit,
order, decree, concession, lease, instrument, judgment, statute, law,
ordinance, rule or regulation applicable to Stockholder or any of its
affiliates or their respective properties or assets, which would be
breached or violated, or under which there would be a default (with or
without notice or lapse of time, or both), or under which there would
arise a right of termination, cancellation or acceleration of any
obligation or the loss of a material benefit, by execution and
delivery of this Stockholders Agreement and the consummation of the
transactions contemplated hereby other than, in the case of clause (B)
only, the Stock Purchase Agreement (for which the Company has pursuant
hereto given its consent to the execution of and the consummation of
the transactions contemplated by this Stockholders Agreement) any
breaches, violations, defaults, terminations, cancellations,
accelerations or losses which, either singly or in the aggregate, will
not prevent the consummation of the transactions contemplated by this
Stockholders Agreement.
7. Other Agreements. (a) Registration Rights. Parent agrees
with Stockholders that on the Effective Date,
<PAGE>
Parent shall, pursuant to a writing satisfactory to the Stockholders,
assume and be bound by all obligations of the Company under the
Registration Rights Agreement dated April 15, 1994 between the
Stockholders and Company, and Parent and Stockholders agree that such
agreement shall be amended to pertain to the Parent Series B Stock
(and the securities which may be issued on conversion or exchange
thereof) in lieu of the Series B Stock.
(b) Exempt Voting Securities. Notwithstanding anything to
the contrary contained in this Agreement, Parent and Shareholder agree
that (i) the restrictions and obligations contained in Section 2 shall
not apply to any voting securities of Company acquired or held by the
State Board with respect to which Corporate Advisors does not have
sole or shared voting or dispositive power with respect thereto
pursuant to the Management Agreement, which voting securities shall
include Company Shares if such Shares are released from the custody
account maintained by Corporate Advisors on behalf of the State Board
pursuant to the Management Agreement, and (ii) the State Board shall
not be bound by the obligations or prohibitions set forth in Section
2(c); provided, however, that the foregoing shall not be deemed to be
a limitation of any of the obligations imposed by this Agreement upon
Corporate Advisors, acting on behalf of the State Board.
8. Termination. (a) The parties agree and intend that this
Stockholders Agreement be a valid and binding agreement enforceable
against the parties hereto and that damages and other remedies at law
for the breach of this Stockholders Agreement are inadequate. This
Stockholders Agreement may be terminated at any time prior to the
Closing Date by mutual written consent of the parties hereto and shall
be automatically terminated in the event that the Merger Agreement is
terminated in accordance with its terms.
(b) This Stockholders Agreement may also be terminated by
the Stockholders in their sole discretion in the event that (i) the
Effective Date shall not have occurred on or prior to the one-year
anniversary of the date hereof, (ii) Section 3.1(d) of the Merger
Agreement shall have been amended or modified, without the prior
written consent of the Stockholders, if such amendment or modification
is adverse to the interests of the Stockholders or (iii) any other
amendment or modification of the Merger Agreement shall have been made
without the prior written consent of the Stockholders which amendment
is adverse to the interests of the Stockholders with respect to the
transactions contemplated hereby or by the Merger Agreement.
<PAGE>
9. Notices, Etc. All notices required by or otherwise with
respect to this Stockholders Agreement shall be in writing and shall
be deemed to have been duly given to any party when delivered
personally (by courier service or otherwise), or when delivered by
telecopy and confirmed by return telecopy, in each case to the
applicable addresses set forth below:
(a) if to Parent:
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245-5012
Attention: Barnett Rosenberg, Esq.
General Counsel
Telecopy: (310) 252-2567
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein
Telecopy: (212) 403-2000
Telephone: (212) 403-1000
(b) If to Corporate Partners, Offshore Partners,
Corporate Advisors or the State Board:
c/o Corporate Partners, L.P.
One Rockefeller Center
New York, New York 10020
Attention: Jonathan Kagan
Telecopy: (212) 332-5581
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Timothy G. Massad
Telecopy: (212) 474-3700
Telephone: (212) 474-1000
10. Governing Law. This Stockholders Agreement shall be
governed by the laws of the State of Delaware without giving effect to
the principles of conflicts of laws thereof.
<PAGE>
11. Counterparts. This Stockholders Agreement may be
executed in one or more counterparts, all of which shall be considered
one and the same and each of which shall be deemed an original.
12. Headings. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholders Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned, intending to be
legally bound, has caused this Stockholders Agreement to be duly
executed and delivered on the date first set forth above.
MATTEL, INC.
By: /s/ Ned Mansour
---------------
Name: Ned Manosur
Title: President
CORPORATE PARTNERS, L.P.
CORPORATE OFFSHORE PARTNERS, L.P.
By: Corporate Advisors, L.P.,
General Partner
By: LPCP Corp., General Partner
By: /s/ David Golub
---------------
Name: David Golub
Title: Secretary
THE STATE BOARD OF ADMINISTRATION
OF FLORIDA
By: Corporate Advisors, L.P.,
Attorney in Fact
By: LFCP Corp., General Partner
By: /s/ David Golub
---------------
Name: David Golub
Title: Secretary
CORPORATE ADVISORS, L.P.
By: LFCP Corp., General Partner
By: /s/ David Golub
---------------
Name: David Golub
Title: Secretary
<PAGE>
By executing this Stockholders Agreement in the space
provided below the Company hereby consents to the execution,
delivery and performance of this Stockholders Agreement by
each Stockholder and agrees that the same shall not
constitute a breach of any provision of the Stock Purchase
Agreement and acknowledges that the Stockholders shall
retain and be entitled to all rights under the Certificate
of Designation in the event of the termination of this
Stockholders Agreement prior to the occurrence of the Series
B Treatment.
TYCO TOYS, INC.
By: /s/ Harry J. Pearce
-------------------
Name: Harry J. Pearce
Title: Vice Chairman
<PAGE>
SCHEDULE 1
Number of Shares
Name Of Tyco Series B
- ----------------------------- Preferred Stock
Corporate Partners, LP. 45,617*
Corporate Offshore
Partners, L.P. 3,249*
State Board of
Administration of Florida 4,765*
Total 53,631
- -------------------
* Notwithstanding the foregoing, Corporate Advisors as
general partner of Corporate Partners and Offshore
Partners, and as investment manager over the Shares
owned by the State Board, which are held in a custody
account, may be deemed to have the power to vote or to
direct the vote, and to dispose or to direct the
disposition, of the Shares.
