Delaware 95-1567322
(State or other jurisdiction of incorporation
or organization) (I.R.S. Employer Identification No.)
|
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $1.00 par value New York Stock Exchange
(and the associated Preference Share Purchase Pacific Exchange, Inc.
Rights)
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the registrant as of the close of business on March 6, 2000 was $4,228,362,307.
Number of shares outstanding of registrant's common stock, $1.00 par value,
(including 3,109,270 common shares issuable upon exchange of outstanding
exchangeable shares of Softkey Software Products Inc.) as of March 6, 2000:
Portions of the Mattel, Inc. 2000 Notice of Annual Meeting of Stockholders and Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after the close of the registrant's fiscal year (Incorporated into Part III).
Mattel, Inc. ("Mattel") designs, manufactures, and markets a broad variety of family products on a worldwide basis through both sales to retailers and direct to consumers. Mattel's business is dependent in great part on its ability each year to redesign, restyle and extend existing core products and product lines, to design and develop innovative new products and product lines, and successfully market those products and product lines. Mattel plans to continue to focus on its traditional portfolio of brands which have historically had worldwide sustainable appeal. For a description of Mattel's portfolio of brands, see "Products--Toy Marketing."
Mattel has undertaken significant steps in recent years to augment its portfolio of brands with additional product lines. In March 1997, Mattel completed its merger with Tyco Toys, Inc. ("Tyco"), which at the time was the third largest toy company in the US. As a result of the merger, Mattel added the Matchbox(R), Tyco(R) Electric Racing, Tyco(R) Radio Control, Sesame Street(R), Magna Doodle(R), and View Master(R) brands in their portfolio. In July 1998, Mattel completed its acquisition of Pleasant Company, a Wisconsin- based direct marketer of books, dolls, clothing, accessories and activity products included under the American Girl(R) brand name. In May 1999, Mattel merged with The Learning Company, Inc. ("Learning Company"), a developer and publisher of a broad range of high quality branded consumer software for personal computers sold both in North America and internationally. The merger added the Carmen Sandiego(TM), Reader Rabbit(R), The Oregon Trail(R), National Geographic(R), American Greetings(R), The Print Shop(R), Riven(R) and Myst(R) brands to Mattel's portfolio. The merger was accounted for as a pooling of interests, which means that for accounting and financial reporting purposes, the two companies were treated as if they had always been combined.
The above acquisitions are part of a strategic plan by Mattel to better position itself as a consumer products company that provides its core customers--children--with products that meet their preferences in an increasingly interactive and technology-driven world. The strategy has three components.
First, Mattel is communicating with consumers more directly. Pleasant Company is a premier direct marketer, using catalog and on-line sales over the Internet as primary sales and marketing techniques. Learning Company has a significant presence on the Internet. Mattel hopes to expand marketing of its products through the individual sites of its world-renowned brands linked through the nexus of Mattel.com. Through this Internet presence, Mattel.com can showcase its brands in ways that will benefit Mattel's traditional retailers. In addition, Mattel has worked with strategic and venture capital partners to create stand-alone on-line ventures utilizing Learning Company assets, such as Genealogy.com, LLC and GoodHome, LLC, in which Mattel retains an equity interest.
The second component of Mattel's strategy is to combine its traditional and recently acquired brands with new technologies, including software, electronic games, interactive toys and new media. Through its integration of Learning Company and Mattel Media into the Mattel Interactive division, Mattel has one of the leading consumer software operations in the world. Mattel's joint venture with Intel is focused on producing high-technology, interactive toys that appeal to increasingly technology-oriented children and teenagers.
The third component of the strategy is the implementation of a "market by market" approach to Mattel International. Mattel intends to grow its international business by adapting products to local tastes, economic conditions and price requirements. Mattel has seen the success of this approach in the first product category for which it was implemented, the Wheels products, which saw international sales growth of 20% in 1999. Mattel's 1999 strategic distribution agreement with Bandai Co. Ltd. ("Bandai"), the largest toy company in Japan, to distribute Mattel products in Japan demonstrates how this strategy may be implemented in many forms.
Mattel was incorporated in California in 1948 and reincorporated in Delaware in 1968. Its executive offices are located at 333 Continental Boulevard, El Segundo, California 90245-5012, telephone (310) 252-2000. Mattel maintains its primary worldwide web site at www.mattel.com.
"Mattel" refers to Mattel, Inc. and its subsidiaries as a whole, unless the context requires otherwise. Mattel's reportable segments are separately managed business units and include Toy Marketing, Consumer Software and Operations. The Toy Marketing segment is divided on a geographic basis between domestic and international. The domestic Toy Marketing segment is divided into USA Toys, US Fisher-Price/Tyco Preschool and Other. USA Toys principally sells products in Girls, Entertainment and Wheels categories. US Fisher-Price/Tyco Preschool principally sells products in the Infant and Preschool categories. The Other segment principally sells specialty products in the Girls category. The International Toy Marketing segment sells products in all toy categories. The Consumer Software segment consists of educational, productivity and entertainment software products developed and sold by the Learning Company division on a worldwide basis. The Operations segment manufactures toy products, which are sold to the Toy Marketing segments. Products sold by the Consumer Software segment are manufactured by third parties. For additional information with respect to Mattel's business segment reporting, see Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations--Business Segment Results" and Note 8 to the Consolidated Financial Statements.
Competition and Industry Background
Most of Mattel's revenues are derived from its Toy Marketing segments. Competition in the toy industry is intense and is based primarily on price, quality and play value. In recent years, the toy industry has experienced rapid consolidation driven, in part, by the desire of industry competitors to offer a range of products across a broader variety of categories. Mattel competes on a worldwide basis with several large toy companies, including Hasbro, Inc. and many small toy companies. Toy companies have pursued a strategy of focusing on core product lines, which are expected to be marketed for an extended period of time, and have historically provided relatively consistent growth in sales and profitability. By focusing on core product lines, toy manufacturers have been able to reduce their reliance on new product introductions and the associated risk and volatility. The juvenile products market, in which Fisher-Price is one of the leading companies, is more fragmented. The more significant competitors in this area include: Century Products Company, Graco Children's Products, Inc. and Evenflo Company, Inc.
The toy industry is also experiencing a shift toward greater consolidation of retail distribution channels, such as large specialty toy stores and discount retailers, including Wal-Mart, Toys R Us, Target, Kmart and Kay Bee Toys, which have increased their overall share of the retail market. This consolidation has resulted in an increased reliance among retailers on the large toy companies because of their financial stability and ability to support products through advertising and promotion and to distribute products on a national basis. These retailers' growing acceptance of electronic data interchange has provided toy manufacturers with an ability to more closely monitor consumers' acceptance of a particular product or product line and has provided retailers with the ability to more closely monitor their inventory levels.
Over the last ten years, toy companies based in the US have expanded their international marketing and manufacturing operations. Mattel believes a strong international distribution system can add significantly to the sales volume of core product lines within its international Toy Marketing segment, and extend the life cycles of newly-developed products.
The consumer software market has grown over the past few years, but experienced a slowdown in 1999. The overall growth in this market is a result of several major trends, including the increasing installed base of PCs in the home, the improved multimedia capabilities of PCs and the increasing demand for a greater number of high quality, affordably priced software applications. In addition, consumers are exposed to software purchase opportunities from a wide variety of sources and with increased frequency. The Internet has increased
The demand for a large number and broad spectrum of value-priced software products is having a significant impact on consumer software distribution. The distribution of consumer software has expanded beyond traditional software retailers and computer stores to include mass merchandisers, price clubs and superstores. As demand for consumer software has grown with improvements in multimedia technology, consumers have also grown more sophisticated in their expectations for software, requiring increasingly easy to use, content rich products. Furthermore, competition has continued to increase among new and existing multimedia software publishers, increasing price pressure and competition for limited retail shelf space. This competition has been characterized by increased emphasis on channel marketing, coupon rebate programs and advertising. As this trend continues, it will become increasingly important for companies to achieve greater sell-through unit volumes by relying on brand name recognition, to establish strong relationships with retailers and to consistently launch new product offerings with state-of-the-art capabilities and rich content.
The consumer software industry is very competitive and is characterized by rapid changes in technology and customer requirements. Mattel competes for retail shelf space and general consumer awareness with a number of companies that market consumer software, including Microsoft Corporation, The Walt Disney Company, Hasbro, Inc., IBM Corporation and Havas S.A. Mattel encounters competition from both established companies, including the largest companies in the industry, and new companies that may develop comparable or superior products. In addition, the delivery of software via media other than CD-ROM, including console cartridge and the Internet, has become increasingly important.
In 1999, the production, assembly and distribution of consumer software products for sale in North America, with certain exceptions (including duplication of CD-ROM disks, school channel products and certain OEM products), was performed primarily by two units of Bertelsmann AG. Mattel believes that its existing production capacity is sufficient to handle anticipated increases in volume and titles into the foreseeable future. Manufacturing and assembly of consumer software products for sale internationally take place primarily at third-party facilities.
Seasonality
Sales of toy products at retail are seasonal, with a majority of retail sales occurring during the period from September through December. Consequently, shipments of toy products to retailers are typically greater in each of the third and fourth quarters than in the first and second quarters combined. As the large toy retailers become more efficient in their control of inventory levels, this seasonality increases. See "Risk Factors."
In anticipation of this seasonal increase in retail sales, Mattel significantly increases its production in advance of the peak selling period, resulting in a corresponding build-up of inventory levels in the first three quarters of the year. In addition, Mattel and others in the toy industry develop sales, advertising, promotion and merchandising programs with the retailers to encourage them to purchase merchandise in periods other than the peak holiday selling season. These programs, together with seasonal shipping patterns, result in significant peaks in the third and fourth quarters in the respective levels of inventories and accounts receivable, which result in seasonal working capital financing requirements. See "Seasonal Financing."
In the fourth quarter of 1998, Mattel's domestic Toy Marketing segment experienced unanticipated cutbacks in buying by toy retailers due to a shift by these retailers to just-in-time inventory management systems. See "Risk Factors." Under just-in-time inventory management systems, retailers are timing reorders so that they are being filled by suppliers closer to the time of purchase by consumers, rather than maintaining large on-hand inventories to meet consumer demand. To respond to such shifts, Mattel took appropriate actions to adjust its own shipping to more of a just-in-time pattern. As a result, products that would have previously been shipped in advance of expected consumer demand will be shipped closer to the time they are expected to be purchased by the consumer.
Mattel's portfolio of brands can be grouped in the following four categories:
. Girls--including Barbie(R) fashion dolls and accessories, collector dolls, Fashion Magic(R), American Girl(R), Cabbage Patch Kids(R) and Polly Pocket(R);
. Infant and Preschool--including Fisher-Price(R), Disney preschool and plush, Power Wheels(R), Sesame Street(R), See N Say, Magna Doodle(R), View-Master(R) and Blues Clues(R);
. Wheels--including Hot Wheels(R), Matchbox(R), Tyco(R) Electric Racing and Tyco(R) Radio Control; and
. Entertainment--including Disney, Nickelodeon(R), games and puzzles.
In order to provide greater flexibility in the manufacturing and delivery of products, and as part of a continuing effort to reduce manufacturing costs, Mattel has concentrated production of most of its core brands in company-owned facilities and generally uses independent contractors for the production of non-core products and CD-ROMs.
With respect to new product introductions, Mattel's strategy is to begin production on a limited basis until a product's initial success has been proven in the marketplace. The production schedule is then modified to meet anticipated demand. Mattel further limits its risk by generally having independent contractors manufacture new product lines in order to minimize capital expenditures associated with new product introductions. This strategy has reduced inventory risk and significantly limited the potential loss associated with new product introductions.
The Consumer Software segment develops, publishes and markets software products for PCs in the following categories: education, reference and lifestyle, productivity, entertainment and Internet-related. The educational products educate across every age, from young children to adults, striving for recognition from retailers, parents, teachers and students as the leader in educational and reference software. This segment's strategy is to leverage its name brands and breadth of content by selling across a range of price points and through multiple distribution channels.
New product introductions for all segments during 1999 included:
. Intel(R)Play(TM) QX3(TM) microscope and CD-ROM
. Generation Girl(TM) Barbie(R), Millennium Princess(TM) Barbie(R), and Barbie(R) Airplane
. My Size(TM) Kelly(R) and Kelly Club(TM) dolls,
. Nickelodeon(R) Snooze & Surprise(TM) Dil
. Hot Wheels(R) Ferrari products and Formula One die cast vehicles
. Tyco(R) RC X-Treme Cycle(TM) motorcycle
. Fisher-Price(R)Infant-to-Toddler Soothing Rocker
. Fisher-Price(R) Harley-Davidson(R) Power Wheels(R) child size motorcycle
. Fisher-Price(R) Briarberry Collection(TM)
. Educational Software CD-ROMS including Reader Rabbit(R), Clue Finders(R), Carmen Sandiego(R), and Oregon Trail(R); Pokemon(R), Fisher Price(R), Arthur(R), Little Bear(R) and Sesame Street(R) series; Reference
New product introductions planned for all segments during 2000 include:
. Intel(R)Play(TM) Computer Sound Morpher handheld sound recorder and CD-
ROM
. Intel(R)Play(R) Movie Creator(TM) digital video camera with editing software
. Jewel Girl(TM) Barbie(R) doll with a redesigned athletic natural physique with "soft" torso, wider hips, bellybutton and smaller bust and Barbie(R) accessories such as 2000 Model Volkswagen Beetle vehicle and Barbie(R) Rock 'N Roll Radio House(TM)
. Nickelodeon(R) Sing & Swing(TM) Angelica
. Max Steel(TM) line of high-tech designed action figures and vehicles
. Hot Wheels(R) Monster Jam(TM) WCW(TM), a line of 1:64 scale version of United States Hot Rod Association monster trucks featuring World Championship Wrestling(TM) decoration
. Hot Wheels(R) X-V Extreme skateboard figures and playset and electric racing sets including X-Treme MotoCross(TM)
. Matchbox(R) Mega-Rig(R) modular vehicle playsets including themes such as arctic submarine and jungle hovercraft
. Tyco(R) RC Speed Wrench(TM) truck with 8 interchangeable wheels
. Tyco(R) RC Racin' Ratz(TM) line of vehicles with headlights
. American Girls Collection(R) Samantha and Molly adventure CD-ROMS
. Fisher-Price(R) Intelli-Table(TM) developed with Microsoft Corporation
. Fisher-Price(R) voice controlled Robotic Puppy
. Fisher-Price(R) Jammin' Draw(TM)
. Educational Software CD-ROMS including Scooby Doo(R), Pokemon(R), Reader Rabbit(R), Carmen Sandiego(R) and Arthur(R); Reference and LifestyleSoftware CD-ROMS including For Dummies(R), National Geographic and Mad Magazine based products, Productivity Software CD-ROMS including American Greetings(R) and PrintShop(R) series; Entertainment Software CD-ROMS including brand based products such Barbie(R), Hot Wheels(R), Nickelodeon(R), Fisher-Price(R) and Cabbage Patch Kids(R); as well as entertainment titles such as Pool of Radiance(TM), Earth 2150(R), Reach For The Stars(TM) and Close Combat(R) PC, Nintendo(R)GameBoy(R) and Sony(R) PlayStation(R) platforms
International Operations
Revenues from Mattel's international operations, including Toy Marketing and Consumer Software, represented approximately 28% of total consolidated net sales in 1999. Generally, products marketed internationally are the same as those marketed domestically, although some are developed or adapted for particular international markets. Mattel's products are sold directly in Canada and most European, Asian and Latin American countries, and through agents and distributors in those countries where Mattel has no direct presence. See "Licenses and Distribution Agreements." For a description of a number of the risks associated with Mattel's international operations, see "Risk Factors."
In 1999, Mattel entered into distribution agreements with Bandai, Japan's largest toymaker, pursuant to which Mattel will distribute certain Bandai products in Latin America and on a case-by-case basis in the US,
The strength of the US dollar relative to other currencies can significantly affect the revenues and profitability of Mattel's international operations. From time to time, Mattel enters into foreign currency forward exchange and option contracts primarily as hedges of inventory purchases, sales and other intercompany transactions denominated in foreign currencies to limit the effect of exchange rate fluctuations on the results of operations and cash flows. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--Financial Instruments and --Foreign Currency Risk" and Note 6 to the Consolidated Financial Statements. For financial information by geographic area, see Note 8 to the Consolidated Financial Statements.
Product Design and Development
Through its product design and development group, Mattel regularly refreshes, redesigns and extends existing toy product lines and develops innovative new toy product lines. Mattel's success is dependent on its ability to continue this activity. See "Risk Factors." Product design and development are principally conducted by a group of professional designers and engineers employed by Mattel.
Independent toy designers and developers bring products to Mattel and are generally paid a royalty on the net selling price of products licensed by Mattel. These independent toy designers may also create different products for other toy companies.
Mattel devotes substantial resources to product design and development. During the years ended December 31, 1999, 1998 and 1997, Mattel spent approximately $208 million, $275 million and $246 million, respectively, in connection with the design and development of products for the Toy Marketing segment, exclusive of royalty payments. See Note 10 to the Consolidated Financial Statements.
Internal product development efforts related to consumer software are designed to result in efficient and timely product introductions focusing on "core code" development. Where possible, Mattel specifies, develops and manages (or purchases) one base of source code from which many products are created. Using one base of source code permits Mattel to maximize programming efficiency because the investment of time and capital in developing the base source code is shared among multiple products and additional programming time is minimized. As a result, production schedules are more predictable and development costs are lower since the underlying code for new programs has previously been tested and debugged and the software already documented. Even with these "core codes", Mattel must continuously update and improve the content and the technology of its products in order to remain competitive.
In certain instances, Mattel's internally developed products contain components that have been developed by outside developers or authors and are licensed by Mattel. Mattel generally pays these outside developers/authors royalties based on a percentage of net sales or on a work-for-hire basis.
Amortization of software development costs included in cost of goods sold was $64.3 million, $20.2 million, and $12.1 million for the years ended December 31, 1999, 1998 and 1997, respectively. See Note 1 to the Consolidated Financial Statements.
Mattel supports its product lines with extensive advertising and consumer promotions. Advertising continues at varying levels throughout the year and peaks during the Christmas season. Advertising includes television and radio commercials, and magazine and newspaper advertisements. Promotions include in- store displays, coupons, merchandising materials and major events focusing on products and tie-ins with various consumer products companies. Separately, a total of twenty-five BARBIE Boutiques are located in F.A.O. Schwarz toy stores, including the "BARBIE on Madison" boutique at the F.A.O. Schwarz flagship store in New York City. In November 1998, Mattel opened its first store, American Girl Place(TM), in Chicago featuring children's products from Pleasant Company.
During the years ended December 31, 1999, 1998 and 1997, Mattel spent approximately $946 million (17% of net sales), $918 million (16% of net sales), and $846 million (16% of net sales) respectively, on worldwide advertising and promotion.
During the year ended December 31, 1999, Mattel's two largest customers, Wal-Mart and Toys R Us, accounted for approximately 33% of consolidated net sales. See "Risk Factors."
Mattel's products are sold throughout the world. Products within the domestic Toy Marketing segment are distributed directly to large retailers, including discount and free-standing toy stores, chain stores, department stores, other retail outlets and, to a limited extent, wholesalers. Discount toy stores continue to increase their market share. Products within the international Toy Marketing segment are sold directly in Canada and most European, Asian and Latin American countries, and through agents and distributors in those countries where Mattel has no direct presence.
Mattel has also been focusing on direct-to-consumer sales, through both its direct-to-consumer catalogue business and by taking advantage of e-commerce over the Internet. During 1998 and 1999, Mattel introduced websites that support its numerous core products. Consumers can purchase many of Mattel's products over the Internet, including Barbie(R) collector dolls, Mattel Media(R) software products, and Hot Wheels(R) and Matchbox(R) collectibles. Mattel believes that increasing its focus on direct-to-consumer sales will help to maximize sales of its products and create a better balance between direct- to-consumer sales and sales to traditional retailers. The Other segment markets its products, including the American Girl(R) brand, via direct-to-consumer catalogs and over the Internet.
In general, Mattel's major domestic and international customers review its toy product lines and product concepts for the upcoming year at showings beginning in late summer and at the American International Toy Fair in New York in February.
Through its marketing research departments, Mattel conducts basic consumer research and product testing and monitors demographic factors and trends. This information assists Mattel in evaluating consumer acceptance of products, including whether there is increasing or decreasing demand for its products.
The Consumer Software segment distributes its consumer software products through retail, direct response, on-line, OEM and school channels within North America and through international channels throughout Europe and the Pacific Rim.
Retail Channels. The Consumer Software segment has relationships with the national retailers and direct distributors responsible for most of the nation's software sales. The segment's retail distribution strategy is to foster strong direct relationships with large retailers through a broad product offering, active participation in channel management and innovative merchandising. For a discussion of problems related to the Consumer Software retail channels in 1999, see "Risk Factors."
Original Equipment Manufacturers. The OEM sales strategy is to assist hardware manufacturers and on-line services to differentiate their product lines and to introduce Mattel's brands to new computer hardware buyers. This segment licenses its software products to OEMs (including IBM, Apple, Compaq, Hewlett-Packard, America On-Line and Patriot Computers), which typically purchase products in higher volumes and at lower prices than retail stores and distributors.
School Channel. The school channel focuses its efforts on the unique needs of the school market through targeted and specialized marketing and services. Products are sold directly to schools and school districts through field based direct sales representatives, telemarketing and direct mail. Sales are also made through authorized resellers and distributors including Educational Resources and Ingram Micro. Through Mattel's subsidiary Learning Services Inc., this segment publishes an educational software catalog for teachers and schools marketing products from most educational software publishers under the Learning Services brand.
Operations Segment
The Operations segment manufactures toy products, either in company-owned facilities and by independent contractors, which are sold to the Toy Marketing segment. Products are also purchased from unrelated entities that design, develop and manufacture the products. In order to provide greater flexibility in the manufacture and delivery of products, and as part of a continuing effort to reduce manufacturing costs, Mattel has concentrated production of most of its core products in Mattel's facilities and generally uses independent contractors for the production of non-core products and CD-ROMs. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--Manufacturing Risk."
Mattel's primary toy manufacturing facilities are located in the states of Kentucky and Oregon, and in Mexico, China, Indonesia, Malaysia, Thailand and Italy. Mattel also utilizes independent contractors to manufacture products in the US, Europe, Mexico, the Far East and Australia. To help avoid disruption of its product supply due to political instability, civil unrest, economic instability, changes in government policies and other risks, Mattel produces many of its key products in more than one facility. During 1999, Mattel closed three of its higher cost manufacturing facilities. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Restructuring and Other Charges" and Note 7 to the Consolidated Financial Statements. Mattel believes that its existing production capacity at its toy manufacturing facilities is sufficient to handle expected volume in the foreseeable future.
Mattel bases its production schedules for toy products on customer orders, modified by historical trends, results of market research and current market information. The actual shipments of products ordered and the order cancellation rate are affected by consumer acceptance of the product line, the strength of competing products, marketing strategies of retailers and overall economic conditions. Unexpected changes in these factors can result in a lack of product availability or excess inventory in a particular product line.
All foreign countries in which Mattel's products are manufactured (principally China, Indonesia, Malaysia and Mexico) currently enjoy "normal trade relations" ("NTR") status under US tariff laws, which provides a favorable category of US import duties. As a result of continuing concerns in the US Congress regarding China's human rights policies, and disputes regarding Chinese trade policies, including the country's inadequate protection of US intellectual property rights, there has been, and may be in the future, opposition to the annual
The loss of NTR status for China would result in a substantial increase in the import duty for toys manufactured in China and imported into the US and would result in increased costs for Mattel and others in the toy industry. See "Risk Factors." The impact of such an event on Mattel could be somewhat mitigated by Mattel's ability to source product for the US market from countries other than China and ship products manufactured in China to markets outside the US. As a result, Mattel has expanded its production capacity in other countries. Other factors, including Mattel's ability to pass along the added costs through price increases and the pricing policies of vendors in China, could also mitigate the impact of a loss of China's NTR status.
With the implementation of the Uruguay Round agreement effective January 1, 1995, all US duties on dolls and traditional toys were completely eliminated. Canada also eliminated its tariffs on dolls and most toy categories in 1995, with the exception of certain toy sets and board games that will have their duties eliminated over ten years. Meanwhile, both the European Union and Japan are in the process of implementing Uruguay Round tariff concessions that reduced their tariffs on dolls by 40 percent and 15 percent, respectively, as of January 1, 1999, and will lead to the phased elimination of their duties on several other toy categories by January 1, 2004.
Virtually all of Mattel's raw materials are available from numerous suppliers. Prices for resin and packaging materials began rising late 1999, and this trend is continuing into year 2000. Mattel has long-term agreements in place with major suppliers which allows them to only pass on their actual raw material cost increases.
Commitments
In the normal course of business, Mattel enters into contractual arrangements for future purchases of goods and services to ensure availability and timely delivery, and to obtain and protect Mattel's right to create and market certain products. Certain of these commitments routinely contain provisions for guaranteed or minimum expenditures during the term of the contracts. Current and future commitments for guaranteed payments reflect Mattel's focus on expanding its product lines through alliances with businesses in other industries.
As of December 31, 1999, the Operations segment had outstanding commitments for 2000 purchases of inventory of approximately $92 million. Licensing and similar agreements with terms extending through the year 2007 contain provisions for future guaranteed minimum payments aggregating approximately $346 million for both the Toy Marketing and Consumer Software segments. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--Commitments" and Note 6 to the Consolidated Financial Statements.
Licenses and Distribution Agreements
License agreements with third parties permit Mattel to utilize the trademark, character or product of the licensor in its product line across all marketing segments. Mattel's level of licensing activity has expanded in recent years. Royalty expense during the years ended December 31, 1999, 1998 and 1997 was approximately $309 million, $234 million and $226 million, respectively. See "Product Design and Development" and Note 6 to the Consolidated Financial Statements.
Mattel distributes finished products that are independently designed and manufactured. Mattel also licenses a number of its trademarks, characters and other property rights to others for use in connection with the sale of non-toy and other products that do not compete with Mattel's products.
In January 2000, Mattel and Warner Bros. Worldwide Consumer Products signed a licensing agreement making Mattel the worldwide master toy licensee for the literary characters from the Harry Potter books published by J.K. Rowling as well as for feature film and television properties developed by Warner Bros. Pictures featuring the Harry Potter characters. Mattel's worldwide toy licensing agreement involves the first two Harry Potter books and theatrical films. This agreement contains minimum royalty guarantees and has a term of four years, provided that the second theatrical film is released prior to January 1, 2003. If the second theatrical film is released subsequent to January 1, 2003, the agreement will be extended to a date twelve months after the release of the second theatrical film. Pursuant to the agreement, Mattel issued Warner Bros. Consumer Products a stock warrant to purchase 3.0 million shares of Mattel's common stock. This warrant became fully vested and exercisable upon signing of the licensing agreement.
Financial Instruments
To limit the impact associated with the exposure to currency exchange rate fluctuations, Mattel enters into foreign currency forward exchange and option contracts primarily to hedge its purchase of inventory, sales and other intercompany transactions denominated in foreign currencies. These contracts are intended to fix a portion of Mattel's product cost and intercompany cash flows, and thereby limit the effect of foreign currency fluctuations on Mattel's results of operations and cash flows. Mattel does not trade in financial instruments for speculative purposes.
For additional information regarding foreign currency contracts, see "International Operations" above, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--Foreign Currency Risk", and Note 6 to the Consolidated Financial Statements.
Seasonal Financing
Mattel's financing of seasonal working capital typically grows throughout the first half of the year and peaks in the third or fourth quarter, when accounts receivable are at their highest due to increased sales volume and sales programs, and when inventories are at their highest in anticipation of expected second half sales volume. See "Seasonality." Mattel expects to finance its seasonal working capital requirements for the coming year by using existing and internally generated cash, issuing commercial paper and selling certain trade receivables under its committed revolving credit facility, and using various short-term bank lines of credit. See "Risk Factors." In addition, Mattel avails itself of individual short-term foreign credit lines with a number of banks, which will be used as needed to finance seasonal working capital requirements of certain foreign affiliates.
Mattel maintains and periodically amends or replaces an unsecured committed revolving credit agreement with a commercial bank group that is used as the primary source of financing the seasonal working capital requirements of its domestic and certain foreign affiliates. The agreement in effect during 1999 consisted of a committed unsecured facility providing a total of up to $1.0 billion in seasonal financing (a five-year facility that expires in 2003). Within the facility, up to $700.0 million was a standard revolving credit line available for advances and backup for commercial paper issuances. Interest was charged at various rates selected by Mattel, ranging from market commercial paper rates to the bank reference rate. The remaining $300.0 million was available for nonrecourse purchases of certain trade accounts receivable of Mattel by the commercial bank group providing the credit line. The agreement required Mattel to comply with certain financial covenants for
Mattel is currently in the process of negotiating a 364 day, $400 million companion facility to its existing $1.0 billion credit facility, with essentially the same group of commercial banks. The terms and conditions of the companion facility will be similar to the existing $1.0 billion facility. Mattel expects to have the companion facility in place by the end of April 2000.
Mattel believes the amounts available under its committed revolving credit facility, its uncommitted money market facility and its foreign credit lines will be adequate to meet its seasonal financing requirements.
Trademarks, Copyrights, and Patents
Most of Mattel's products are sold under trademarks, trade names and copyrights and a number of those products incorporate patented devices or designs. Trade names and trademarks are significant assets of Mattel in that they provide product recognition and acceptance worldwide.
Mattel customarily seeks patent, trademark or copyright protection covering its products, and it owns or has applications pending for US and foreign patents covering many of its products. A number of these trademarks and copyrights relate to product lines that are significant to Mattel's business and operations. Mattel believes its rights to these properties are adequately protected but there can be no assurance that its rights can be successfully asserted in the future or will not be invalidated, circumvented or challenged. See "Risk Factors."
Mattel also licenses a number of its trademarks, characters and other property rights to others for use in connection with the sale of non-toy and other products that do not compete with Mattel's products.
Consistent with industry practice in the Consumer Software segment, Mattel does not have signed license agreements with the end-users of its software products, and its software products do not contain mechanisms to inhibit unauthorized copying. Instead, Mattel relies on the copyright laws to prevent unauthorized distribution of its software. Mattel also relies on a combination of trade secret, patent, trademark and other proprietary rights, laws and license agreements to protect its proprietary rights. Existing copyright laws afford only limited protection. It may be possible for unauthorized third parties to copy Mattel's software products or to obtain and use information Mattel regards as proprietary.
Policing unauthorized use and distribution of Mattel's software products is difficult, and while it is difficult to determine the extent to which such use or distribution exists, software piracy can be expected to be a persistent problem. These problems are particularly acute in certain international markets such as South America, the Middle East, the Pacific Rim and the Far East, and the laws of certain countries in which Mattel's products are or may be distributed provide less protection than those of the US.
Government Regulations
Mattel's toy products sold in the US are subject to the provisions of the Consumer Product Safety Act, the Federal Hazardous Substances Act, the Flammable Fabrics Act, and the Food, Drug and Cosmetics Act, and the regulations promulgated thereunder. The Consumer Product Safety Act and the Federal Hazardous Substances Act enable the Consumer Product Safety Commission to exclude from the market consumer products that fail to comply with applicable product safety regulations or otherwise create a substantial risk of injury, and articles that contain excessive amounts of a banned hazardous substance. The Consumer Product Safety Commission may also require the recall and repurchase or repair by the manufacturer of articles that are banned. Similar laws exist in some states and cities and in various international markets. See Item 3 "Legal Proceedings."
Mattel maintains a quality control program to ensure product safety compliance with the various federal, state and international requirements. Notwithstanding the foregoing, there can be no assurance that all of Mattel's products are or will be hazard-free. Any material product recall could have a material adverse effect on Mattel's results of operations and financial condition and could also negatively effect Mattel's reputation and the sales of other Mattel products.
Mattel's advertising is subject to The Children's Television Act of 1990 and the rules promulgated by the US Federal Communications Commission as well as laws of certain countries that place certain limitations on television commercials during children's programming. Mattel is subject to various other federal, state and local laws and regulations applicable to its business. Mattel believes that it is in substantial compliance with these laws and regulations.
Effects of Inflation
Inflation rates in the US and in major foreign countries where Mattel does business have not had a significant impact on its results of operations or financial condition during the three year period ended December 31, 1999. The US Consumer Price Index increased 2.7% in 1999, 1.6% in 1998 and 1.7% in 1997. Mattel receives some protection from the impact of inflation from high turnover of inventories and its ability to pass on higher prices to customers.
Employees
The total number of persons employed by Mattel and its subsidiaries at any one time varies because of the seasonal nature of its manufacturing operations. At December 31, 1999, Mattel's total number of employees, including its international operations, was approximately 31,000.
Risk Factors
This Risk Factors section is written to be responsive to the Securities and Exchange Commission's "Plain English" guidelines. In this section the words "we", "our", "ours" and "us" refer only to Mattel, Inc. and its subsidiaries and not any other person.
Set forth below and elsewhere in this Form 10-K and in other documents we file with Securities and Exchange Commission are important risks and uncertainties that could cause our actual results of operations, business and financial condition to differ materially form the results contemplated by the forward-looking statements contained in this Form 10-K. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--Cautionary Statement."
We may not realize the expected benefits from the merger with Learning Company, such as cost savings, operating efficiencies, revenue enhancements and other synergies, due to difficulties integrating Mattel and Learning Company.
We merged with Learning Company with the expectation that the merger would result in a number of benefits, including cost savings, operating efficiencies, revenue enhancements and other synergies. Due to the factors explained in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of
Our Consumer Software segment, the Learning Company division, experienced significant performance shortfalls in 1999 that may continue.
Our Learning Company division reported pre-tax losses of $205.5 million in 1999. The negative results were caused by a combination of factors, including:
. a decrease in sales of the division's products;
. higher proportion of sales of relatively lower priced and lower margin products;
. greater use of rebates due to competitive pressures;
. higher price and marketing concessions to retailers; and
. increased bad debt write-offs because of certain financially troubled distributors.
We have recently formulated a plan aimed at correcting the problems, including:
. more strict sales control policy with distributors and retailers;
. decreased use of rebates to consumers and price and marketing concessions to distributors and retailers;
. new divisional management;
. shifts in product mix towards higher margin products; and
. expansion into game consoles and the Internet.
There can be no assurance that the Learning Company division's results will improve in 2000. In particular, the decrease in sales of the division's CD-ROM products may continue. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--1999 Compared to 1998-- Consolidated Results."
In response to industry trends, we are implementing a business strategy emphasizing initiatives such as products incorporating software and other interactive features, other high technology products and the use of marketing and sales over the Internet.
We have developed a business strategy to adapt to several trends that in recent years have combined to change the toy business. These trends include:
. increasing use of high technology;
. the advent of the Internet;
. the mass popularity of video games and hand-held electronic games; and
. the phenomenon of children outgrowing toys at younger ages, particularly in favor of interactive and high technology products.
In response to these changes, we have increased our development of toys which incorporate technology and interactive features, enlarged our software business, combined our traditional brands with new play platforms and invested in an Internet strategy. There can be no assurance that this strategy will help us increase or maintain our sales or earnings in the future, or that our investments in these initiatives will be profitable.
Recently, there has been substantial turnover in our senior management and we are in the process of searching for a new Chief Executive Officer. Our future success will depend to a significant extent on the continued service of our remaining senior management and other key employees and the hiring of new qualified employees, including a new Chief Executive Officer. In general, competition for highly-skilled business, product development, technical and other personnel is becoming more intense due to lower overall unemployment rates and competition with Internet or other startup companies. Competition for employees in the consumer and interactive software business is particularly intense. The high market valuations, large equity positions offered to key employees and creative talent, and the potential for rapid stock price appreciation of Internet companies make their compensation packages attractive to new employees as well as to employees who are already working in more mature companies. This situation makes it difficult for us to retain and attract senior management and other key employees to all portions of our business. Accordingly, we expect to experience increased compensation costs that may not be offset through either improved productivity or higher prices.
We cannot assure you that we will be successful in continuously recruiting new personnel and in retaining existing personnel. Any significant delay in finding a qualified Chief Executive Officer, the loss of other key employees or our inability to attract additional qualified employees could have a material adverse effect on our business, financial condition and results of operations.
The consumer software industry is dynamic and highly competitive, and we cannot assure you that we will grow or maintain our market share in this market.
The process of developing software products such as those we offer is extremely complex and is becoming more complex and expensive over time. Our consumer software product development expense levels are based largely on expectations regarding future sales. Accordingly, operating results would be disproportionately adversely affected by a decrease in sales or a failure to meet our sales expectations due to delays in new product introductions or lower than expected demand. If we do not accurately anticipate and successfully adapt our consumer software products to emerging platforms, environments and technologies, or new products are not launched when planned or do not achieve anticipated revenues, it could have a material adverse effect on our business, financial condition and results of operations.
Rapid changes in technology, product obsolescence and advances in computer software and hardware require us to develop or acquire new products and to enhance our existing products on a timely basis. The consumer software marketplace has recently experienced a higher emphasis on on-line and Internet- related services and content tailored for this new distribution channel. To the extent that demand increases for on-line products and content, the demand for our existing consumer software products may decline. There can be no assurance that we will be able to maintain market share and otherwise compete successfully in the future, or that the market for our products will not erode.
Companies with substantial bases of intellectual property content in the motion picture and media industries, sophisticated product marketing and technical abilities and/or financial resources that may not need to realize an immediate profit or return on investment have increasingly entered the consumer software market. These competitors include: Microsoft Corporation, The Walt Disney Company, Hasbro, Inc., IBM Corporation and Havas S.A. For example, technology companies have begun to acquire greater access to branded content, and content-oriented companies have begun to acquire greater technological capabilities. To the extent that competitors achieve a performance, price or distribution advantage, we could be adversely affected. Furthermore, increased consolidation of the consumer software market may impact future growth potential and performance.
There can be no assurance that we will be able to effectively compete in existing distribution channels or new and emerging channels, such as the Internet, cable or telephone line delivery modes.
Our business and operating results depend largely upon the appeal of our toy products. Our continued success in the toy industry will depend on our ability to redesign, restyle and extend our existing core products and product lines and to develop, introduce and gain customer acceptance of new products and product lines. However, consumer preferences in this industry are continuously changing and are difficult to predict. Individual products typically have short life cycles. There can be no assurance that:
. any of our current products or product lines will continue to be popular for any significant period of time;
. any new products and product lines introduced by us will achieve an adequate degree of market acceptance; or
. any new products' life cycles will be sufficient to permit us to recover development, manufacturing, marketing and other costs of the products.
A decline in the popularity of our existing products and product lines or the failure of new products and product lines to achieve and sustain market acceptance and to produce acceptable margins could have a material adverse effect on our business, financial condition and results of operations.
We are involved in several litigation matters in which the outcome is uncertain and could entail significant expense.
As described under Item 3 "Legal Proceedings", we are currently involved in a number of litigation matters including a number of purported securities class action claims stemming from the merger with Learning Company and the performance of the Learning Company division in the second half of 1999. The pending litigation against us and our directors, regardless of the outcome, may result in substantial costs and expenses and significantly divert the attention of our management. There can be no assurance that we will be able to achieve a favorable settlement of the pending litigation or obtain a favorable resolution of such litigation if it is not settled. An unfavorable resolution of the pending litigation could have a material adverse effect on our business, financial condition and results of operations.
Our business is dependent on our two largest customers, which together accounted for approximately 33% of Mattel's net sales in fiscal 1999.
A small number of our customers account for a large share of our net sales. For the year ended December 31, 1999, our two largest customers, Wal-Mart and Toys R Us, in the aggregate accounted for approximately 33% of net sales, and our ten largest customers in the aggregate accounted for approximately 54% of net sales. If some of these customers were to cease doing business with us, or to significantly reduce the amount of their purchases from us, it could have a material adverse effect on our business, financial condition and results of operations.
The toy business is seasonal and therefore our annual operating results will depend, in large part, on our sales during the relatively brief holiday season.
Sales of toy products at retail are seasonal, with a majority of retail sales occurring during the period from September through December. This seasonality is increasing as large toy retailers become more efficient in their control of inventory levels through the just-in-time inventory management systems. As a result, our annual operating results will depend, in large part, on our sales during the relatively brief holiday season. This seasonal pattern requires significant use of working capital mainly to manufacture inventory during the year, prior to the holiday season, and requires accurate forecasting of demand for products during the holiday season. Failure to accurately predict and respond to consumer demand may have a material adverse effect on our business, financial condition and results of operations.
We expect to satisfy our future long-term capital needs in part through the issuance of debt securities. For example, in 2000 we will be required to pay back over $300 million of our currently outstanding debt securities and we presently intend to issue new debt securities to raise the necessary funds. The interest rate, selling price, initial offering discount or any premium offered for our debt securities will be based on a number of factors, including:
. our ratings with major credit rating agencies;
. the prevailing interest rates being paid by other companies similar to us; and
. the overall condition of the financial and credit markets at the time of the initial distribution of the debt securities.
The condition of the credit markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future. Fluctuations in these factors could make it difficult for us to sell debt securities or require us to offer higher interest rates in order to sell new debt securities.
In addition, credit rating agencies continually revise their ratings for the companies that they follow, such as us. The credit rating agencies also evaluate the consumer products or family entertainment industry as a whole and may change their credit rating for us based on their overall view of our industry. Recently, our credit rating was reduced by several credit rating agencies and we cannot assure you that our credit rating will not continue to be reduced. A negative change in our rating could make it more difficult for us to sell our debt securities and require us to offer higher interest rates. If we are required to offer higher interest rates in order to sell our new debt securities, the increased interest costs could have an adverse effect on our financial condition and results of operations.
Our sales and manufacturing operations outside the US subject us to risks normally associated with international operations.
We own and operate manufacturing facilities and utilize third-party manufacturers principally in China, Indonesia, Malaysia and Mexico. Such sales and manufacturing operations are subject to the risks normally associated with international operations, including:
. currency conversion risks and currency fluctuations;
. limitations, including taxes, on the repatriation of earnings;
. political instability, civil unrest and economic instability;
. greater difficulty enforcing intellectual property rights and weaker laws protecting such rights;
. greater difficulty and expense in conducting business abroad;
. complications in complying with foreign laws and changes in governmental policies;
. transportation delays and interruptions; and
. the imposition of tariffs.
These risks could negatively impact our international sales and manufacturing operations, which could have a material adverse effect on our business, financial condition and results of operations.
All foreign countries in which our products are manufactured currently enjoy "normal trade relations" status under US tariff laws, which provides a favorable category of US import duties. As a result of continuing concerns in the US Congress regarding China's human rights policies, and disputes regarding Chinese trade policies, including the country's inadequate protection of US intellectual property rights, there has been, and
We are dependent on our intellectual property rights and we cannot assure you that we will be able to successfully protect such rights.
We rely on a combination of trade secret, copyright, trademark, patent and other proprietary rights laws to protect our rights to valuable intellectual property related to our brands. We also rely on license and other agreements to establish ownership rights and to maintain confidentiality. We cannot assure you that such intellectual property rights can be successfully asserted in the future or will not be invalidated, circumvented or challenged. Technological developments and the Internet may create new risks to our ability to protect our intellectual property. In addition, laws of certain foreign countries in which our products may be sold do not protect intellectual property rights to the same extent as the laws of the US. The failure to protect our proprietary information and any successful intellectual property challenges or infringement proceedings against us could have a material adverse effect on our business, financial condition and results of operations.
We have anti-takeover provisions in place that may make it more difficult for a third party to acquire us without our consent, which may adversely effect our stock price.
We have in place a stockholder rights plan which provides for the issuance of preferred stock purchase rights designed to protect our stockholders from abusive takeover tactics by causing substantial dilution to a person or group that attempts to acquire 15% or more of our stock on terms not approved by our board of directors. Additionally, our board of directors can, without obtaining stockholder approval, issue shares of preferred stock having rights, including the right to vote as a class on any proposed change of control, that could adversely affect the voting power of holders of our common stock. Our charter documents also contain additional provisions intended to reduce the risk of abusive takeover tactics, including specifying procedures for director nominations by stockholders and submission of other proposals by stockholders at meetings, and restricting the ability of stockholders to call special meetings. Certain agreements to which we are a party, including loan and employment agreements and stock option plans, contain provisions that impose increased costs upon us in the event of a change of control. Further, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which prohibits us from engaging in a "business combination" with an "interested stockholder" for a period of three years after the person becomes an interested stockholder unless approval is received in a prescribed manner. The existence of these anti-takeover provisions may make it substantially more difficult for a third party to acquire control of us or accumulate large blocks of our common stock, which could adversely affect our stock price.
The current executive officers of Mattel, all of whom are appointed annually by the board of directors and serve at the pleasure of the board, are as follows:
Executive
Officer
Name Age Position Since
---- --- -------------------------------------- ---------
Ronald M. Loeb......... 67 Acting Chief Executive Officer and a
Director of Mattel, Inc. 2000
Pleasant T. Rowland.... 59 Vice Chairman of the Board of Mattel,
Inc. and President, Pleasant Company 1998
Matthew C. Bousquette.. 41 President, Boys/Entertainment 1999
Adrienne Fontanella.... 41 President, Girls/Barbie 1999
Neil B. Friedman....... 52 President, Fisher-Price Brands 1999
Bernard Stolar......... 53 President, Mattel Interactive 2000
Joseph C. Gandolfo..... 57 President, Worldwide Manufacturing
Operations and a Director of Mattel,
Inc. 1990
Ned Mansour............ 51 President, Mattel, Inc. and a Director
of Mattel, Inc. 1992
Kevin M. Farr.......... 42 Chief Financial Officer 1996
William Stavro......... 60 Senior Vice President and Treasurer 1993
Robert Normile......... 40 Senior Vice President, General Counsel
and Secretary 1999
|
Mr. Loeb has been acting Chief Executive Officer since February 2000 and a member of the Board of Directors since 1970. He is currently Senior Vice President and General Counsel of Williams-Sonoma, Inc., a consumer products company. Mr. Loeb is a retired partner of the law firm of Irell & Manella LLP.
Ms. Rowland has been Vice Chairman of the Board of Mattel, Inc. and President, Pleasant Company since July 1998. Ms. Rowland has been President of Pleasant Company since 1986 when she founded that company.
Mr. Bousquette has been President, Boys/Entertainment since March 1999. From May 1998 to March 1999, he was Executive Vice President and General Manager- Boys Toys. From 1995 to 1998, he was General Manager. He joined Mattel in December 1993 as Senior Vice President-Marketing for Activity Toys, and had previously worked for Mattel from 1984 to 1988 in Boys Toys marketing.
Ms. Fontanella has been President, Girls/Barbie since March 1999. From November 1998 to March 1999, she was General Manager and Senior Vice President- Worldwide Barbie Licensing and Collectibles. From February to November 1998, she was Senior Vice-President-Worldwide Barbie Licensing New Ventures. She joined Mattel in May 1996 as Vice President. Prior to joining Mattel, she held senior positions within the cosmetics industry, including chairman of January Productions from 1995 to 1996.
Mr. Friedman has been President, Fisher-Price Brands since March 1999. From August 1996 to March 1999, he was President-Tyco Preschool. For more than five years prior to that time, he was President of MCA/Universal Merchandising, Executive Vice President and Chief Operating Officer of Lionel Leisure, Inc., and President of Aviva/Hasbro.
Mr. Stolar has been President, Mattel Interactive since January 2000. From July 1996 to August 1999, he served as President and Chief Operating Officer of Sega of America, Inc., a consumer electronics company. From April 1994 until July 1996, he was Executive Vice President of Sony Computers of America, a consumer electronics company.
Mr. Gandolfo has been President, Worldwide Manufacturing Operations since April 1990 and a member of the Board of Directors since May 1997.
Mr. Farr has been Chief Financial Officer since February 2000. From September 1996 to February 2000, he was Senior Vice President and Corporate Controller. From June 1993 to September 1996, he served as Vice President, Tax. Prior to that he served as Senior Director, Taxes from August 1992 to June 1993.
Mr. Normile has been Senior Vice President, General Counsel and Secretary since March 1999. He served as Vice President, Associate General Counsel and Secretary from July 1998 to March 1999. From August 1994 to March 1999, he served as Assistant General Counsel and Assistant Secretary. From June 1992 to August 1994, he served as Assistant General Counsel. Prior to that, he was associated with the law firms of Latham & Watkins and Sullivan & Cromwell.
Mr. Stavro has been Senior Vice President and Treasurer since May 1995. From November 1993 to May 1995, he was Vice President & Treasurer. From March 1992 to November 1993, he was Vice President & Assistant Treasurer. Prior to that he was Assistant Treasurer for more than five years.
Mattel owns its corporate headquarters in El Segundo, California, consisting of 335,000 square feet, which is subject to a $43.0 million mortgage, and an adjacent 55,000 square foot office building. Mattel also leases buildings in El Segundo consisting of approximately 250,000 square feet, which are primarily used for its design and development and audio visual departments. Fisher-Price owns its headquarters facilities in East Aurora, New York, consisting of approximately 390,000 square feet. Pleasant Company owns its headquarters facilities in Middleton, Wisconsin, consisting of approximately 395,000 square feet.
Mattel maintains sales offices in California, Illinois, New York, North Carolina and Texas, and warehouse and distribution facilities in California, Kentucky and Texas. Mattel owns a computer facility in Phoenix, Arizona. Internationally, Mattel has its principal offices and/or warehouse space in Australia, Brazil, Canada, France, Germany, Hong Kong, Italy, Mexico, The Netherlands, Spain, and the United Kingdom. Mattel's principal manufacturing facilities are located in China, Indonesia, Italy, Malaysia, Mexico, Thailand and the US. See "Manufacturing."
Most of Mattel's facilities are occupied under leases and, for the most part, are fully utilized, although excess manufacturing capacity exists from time to time based on product mix and demand. With respect to leases that are scheduled to expire during the next twelve months, Mattel may negotiate new lease agreements, renew leases or utilize alternative facilities. See Note 6 to the Consolidated Financial Statements.
Power Wheels(R) Recall and Related Matters
On October 22, 1998, Mattel announced that Fisher-Price, in cooperation with the Consumer Product Safety Commission, would conduct a voluntary recall involving up to 10 million battery-powered Power Wheels(R) ride-on vehicles. The recall did not result from any serious injury, and involves the replacement of electronic components that may overheat, particularly when consumers make alterations to the product. The recall involves vehicles sold nationwide since 1984 under nearly 100 model names. Additionally, Fisher-Price has been notified by the Consumer Product Safety Commission that the Commission is considering whether Fisher-Price may be subject to a fine for delayed reporting of the facts underlying the recall.
In the third quarter of 1998, Mattel recognized a $38.0 million pre-tax charge related to the recall. During the second and fourth quarters of 1999, Mattel recognized additional pre-tax charges totaling $20.0 million related to the recall.
On October 13, 1995, Michelle Greenwald filed a complaint (Case No. YC 025 008) against Mattel in Superior Court of the State of California, County of Los Angeles. Ms. Greenwald is a former employee whom Mattel terminated in July 1995. Her complaint sought $50 million in general and special damages, plus punitive damages, for breach of oral, written and implied contract, wrongful termination in violation of public policy and violation of California Labor Code Section 970. Ms. Greenwald claimed that her termination resulted from complaints she made to management concerning general allegations that Mattel did not account properly for sales and certain costs associated with sales and more specific allegations that Mattel failed to account properly for certain royalty obligations to The Walt Disney Company. On December 5, 1996, Mattel's motion for summary adjudication of Ms. Greenwald's public policy claim was granted. On March 7, 1997, Mattel filed a motion for summary judgment on the remaining causes of action. On December 9, 1997, Mattel's motion for summary judgment of Ms. Greenwald's remaining claims was granted. On February 4, 1998, Ms. Greenwald appealed from the dismissal of her suit. The appeal has been fully briefed, and a hearing took place on March 3, 2000. Mattel intends to continue to defend the action vigorously, including the appeal.
Toys R Us and Related Matters
On October 2, 1997, the Attorney General of the State of New York filed in the United States District Court, Eastern District of New York (Case No. CV 97 5714), an action against Toys R Us, Mattel and certain other toy manufacturers alleging that the defendants had violated federal antitrust laws and entered into vertical and horizontal arrangements that had the effect of restricting sales to the warehouse clubs. The attorneys general from forty-three other states, the District of Columbia and the Commonwealth of Puerto Rico joined this action. Following the filing of the New York action, a series of private treble damage class actions under the federal antitrust laws were filed in various federal district courts. The parties later agreed to have these related actions transferred to the Eastern District of New York to be consolidated by the Judicial Panel on Multiple Litigation before Nina Gershon, United States District Judge. Private class actions were also filed in state courts in Alabama, California, and New Jersey, asserting claims under state antitrust law. These state court actions were coordinated with the federal court actions.
Subsequent mediation efforts resulted in a Settlement Agreement and Release as to Mattel, Inc., Fisher-Price, and Tyco, effective April 6, 1999. Pursuant to the terms of the Settlement Agreement and Release, Mattel agreed to make a cash payment and a toy contribution, both of which were made in the fourth quarter of 1999. As a result of a dispute between the parties as to the selection of the toys to be contributed, Mattel negotiated a Supplemental Toy Contribution Agreement and made a supplemental toy contribution in December 1999. Final Judgment and Order of Dismissal was entered by Judge Gershon on February 17, 2000 that effectively dismissed with prejudice the claims asserted by the state and private federal and state court plaintiffs, including the claims of any person represented in either a parens patriae or private class capacity.
Litigation Related to Business Combination
On December 16, 21, and 23, 1998, several stockholders of the legal entity The Learning Company, Inc. that merged into Mattel ("Old Learning Company") filed six separate purported class action complaints in the Court of Chancery of the State of Delaware in and for New Castle County against Old Learning Company and Old Learning Company's board of directors for alleged breaches of fiduciary duties in connection with the May 1999 merger. The six complaints were consolidated. The consolidated complaint named Mattel as an additional defendant, claiming that Mattel aided and abetted the alleged breaches of fiduciary duty. On March 9, 2000, the plaintiffs filed a notice and order of dismissal dismissing the action without prejudice. Upon approval by the court, the consolidated action will be formally dismissed.
Following Mattel's announcement on October 4, 1999 that it expected an earnings shortfall at its Learning Company division in the third quarter of 1999, several of Mattel's shareholders filed purported class action complaints in the United States District Court for the Central District of California, the United States District Court for the Southern District of New York and the United States District Court for Massachusetts naming Mattel and certain of its officers and directors as defendants. The complaints generally allege, among other things, that the defendants made false or misleading statements that artificially inflated the price of Mattel's common stock by overstating the revenues and net income of Mattel, including its Learning Company division, and by falsely representing that the May 1999 Learning Company acquisition would be immediately accretive to Mattel's 1999 and 2000 financial results.
Two of the purported class action complaints are brought on behalf of the former stockholders of Broderbund Software, Inc. ("Broderbund") who acquired shares of Old Learning Company in exchange for their Broderbund common stock in connection with the Old Learning Company-Broderbund merger on August 31, 1998. Mattel has been named as a defendant as the successor-in-interest to Old Learning Company. The complaints generally allege that that the Old Learning Company-Broderbund Registration Statement on Form S-4 filed on or about July 14, 1998 in connection with the merger was materially false.
On November 23, 1999, Mattel (along with other defendants named in the federal securities lawsuits) filed a motion and brief before the Judicial Panel on Multidistrict Litigation seeking to transfer all of the federal actions to the United States District Court for the Central District of California for Coordinated or Consolidated Pretrial Proceedings. On March 3, 2000, the Judicial Panel on Multidistrict Litigation granted Mattel's motion.
In addition, a Mattel stockholder filed a derivative complaint on behalf and for the benefit of Mattel in the Superior Court of the State of California, County of Los Angeles. The complaint alleges that Mattel's directors breached their fiduciary duties, wasted corporate assets and grossly mismanaged Mattel in connection with Mattel's acquisition of Learning Company and seeks both monetary and injunctive relief. On February 10, 2000, the court sustained defendants' demurrer and dismissed the complaint with leave to amend.
Mattel believes the lawsuits are without merit and intends to defend them vigorously.
Environmental
Fisher-Price. Fisher-Price has executed a consent order with the State of New York involving a remedial action/feasibility study for one of its manufacturing plants. Currently, Fisher-Price is negotiating an additional consent order which will outline the specific clean up strategy for the site. Mattel anticipates that the New York State Department of Environmental Quality will issue their Record of Decision in March 2000. The ultimate liability associated with this cleanup presently is estimated to be less than $1,425,000, approximately $1,030,500 of which has been incurred through December 31, 1999.
Beaverton, Oregon. Mattel operates a manufacturing facility on a leased property in Beaverton, Oregon that was acquired as part of the Tyco merger. In March 1998, samples of groundwater used by the facility for process water and drinking water disclosed elevated levels of certain chemicals, including trichloroethylene. Mattel immediately closed the water supply and self-reported the sample results to the Oregon Department of Environmental Quality and the Oregon Health Division. Mattel also implemented a community outreach program to employees, former employees and surrounding landowners.
In November 1998, Mattel and another potentially responsible party entered into a consent order with the Oregon Department of Environmental Quality to conduct a remedial investigation/feasibility study at the property, to propose an interim remedial action measure and to continue the community outreach program. In the second quarter of 1999, Mattel recorded a $14.0 million pre-tax charge for environmental remediation costs related to this property, based on the completion and approval of the remediation plan and feasibility study.
Mattel is also involved in various other litigation and legal matters, including claims related to intellectual property, product liability and labor, which Mattel is addressing or defending in the ordinary course of business. Management believes that any liability which may potentially result upon resolution of such matters will not have a material adverse effect on Mattel's business, financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
For information regarding the markets in which Mattel's common stock, par value $1.00 per share, is traded, see the cover page hereof. Information regarding the high and low closing prices of the common stock for the last two calendar years is incorporated herein by reference to the Consolidated Financial Statements filed with this report. See Item 14 of Part IV.
As of March 6, 2000, Mattel had approximately 52,000 holders of record of its common stock.
Mattel paid dividends on its common stock of $0.07 per share in January 1998 and $0.08 per share in April, July and October 1998 and January and April 1999. Mattel paid dividends on its common stock of $0.09 per share in July and October 1999. The payment of dividends on common stock is at the discretion of Mattel's board of directors and is subject to customary limitations.
Item 6. Selected Financial Data
The following table sets forth for the periods indicated the selected consolidated financial data for Mattel. This information should be read in conjunction with the Consolidated Financial Statements included elsewhere herein and in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations." The selected consolidated balance sheet data as of December 31, 1997, 1996 and 1995 and the selected consolidated financial data for the years ended December 31, 1996 and 1995 are derived from audited Consolidated Financial Statements not included herein. The selected consolidated financial data for the years ended December 31, 1999, 1998 and 1997 and as of December 31, 1999 and 1998 are derived from audited Consolidated Financial Statements included elsewhere herein.
For the Year Ended December 31(a)
----------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(In thousands, except per share and percentage
information)
Operating Results:
Net sales............... $5,514,950 $5,621,207 $5,455,547 $5,064,860 $4,708,452
Gross profit............ 2,601,040 2,913,303 2,819,660 2,590,078 2,292,309
% of net sales........ 47.2% 51.8% 51.7% 51.1% 48.7%
Operating profit(b)..... 40,866 520,100 113,828 315,827 614,541
% of net sales........ 0.7% 9.3% 2.1% 6.2% 13.1%
Income (loss) before
income taxes and
extraordinary item..... (110,743) 391,632 1,216 188,898 506,243
(Benefit) provision for
income taxes........... (28,370) 185,579 179,327 166,936 197,246
Income (loss) before
extraordinary item..... (82,373) 206,053 (178,111) 21,962 308,997
Extraordinary item--loss
on early retirement of
debt................... -- -- (4,610) -- --
Net income (loss)....... (82,373) 206,053 (182,721) 21,962 308,997
Income (Loss) Per Common
Share(c):
Income (loss) before
extraordinary item
Basic................. (0.21) 0.51 (0.51) 0.04 0.88
Diluted............... (0.21) 0.47 (0.51) 0.04 0.86
Net income (loss)
Basic................. (0.21) 0.51 (0.52) 0.04 0.88
Diluted............... (0.21) 0.47 (0.52) 0.04 0.86
Dividends Declared Per
Common Share(c)........ 0.35 0.31 0.27 0.24 0.19
|
As of Year End(a)
-----------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(In thousands)
Financial Position:
Cash and marketable
securities............. $ 275,024 $ 469,213 $ 883,903 $ 811,284 $ 715,440
Accounts receivable,
net.................... 1,270,005 1,150,051 1,253,343 1,033,066 926,626
Inventories............. 544,296 644,270 468,226 463,212 429,110
Total assets............ 5,127,022 5,147,385 4,512,843 4,607,008 4,394,801
Short-term borrowings... 369,549 199,006 52,618 53,924 76,443
Long-term liabilities... 1,346,811 1,333,548 1,110,722 1,121,350 1,266,079
Stockholders' equity.... 1,962,687 2,170,803 1,933,338 2,109,787 1,897,176
|
(b) Represents income from operations before interest expense and (benefit) provision for income taxes.
(c) Per share data reflect the retroactive effect of stock splits distributed to stockholders in March 1996 and January 1995, and the mergers with Learning Company and Tyco in 1999 and 1997, respectively.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Summary
The following discussion should be read in conjunction with Mattel's consolidated financial statements and notes thereto, and the information included elsewhere herein. This discussion and the accompanying consolidated financial statements and notes thereto have been prepared to reflect the retroactive effect of Mattel's merger with Learning Company in May 1999. The merger was accounted for as a pooling of interests, which means that for accounting and financial reporting purposes and the discussion herein, the two companies are treated as if they have always been combined.
Mattel designs, manufactures, and markets a broad variety of family products on a worldwide basis through both sales to retailers and direct to consumers. Mattel's business is dependent in great part on its ability each year to redesign, restyle and extend existing core products and product lines, to design and develop innovative new products and product lines, and to successfully market those products and product lines. Mattel plans to continue to focus on its portfolio of traditional brands which have historically had worldwide sustainable appeal. The recent acquisitions of Pleasant Company and Learning Company are part of Mattel's strategic plan to better position itself as a consumer products company that provides its core customers--children--with products that meet their preferences in an increasingly interactive and technology-driven world. The strategy has three components: first, Mattel is communicating with consumers more directly. Second, Mattel is combining its traditional and recently acquired brands with new technologies, including software, electronic games, interactive toys and new media. Through its integration of Learning Company and Mattel Media into the Mattel Interactive division, Mattel has one of the leading consumer software operations in the world. Mattel's joint venture with Intel is focused on producing high- technology, interactive toys that appeal to increasingly technology-oriented children and teenagers. Third, Mattel is implementing a "market by market" approach to Mattel International. Mattel intends to grow its international business by adapting products to local tastes, economic conditions and price requirements.
Mattel's portfolio of brands can be grouped in the following categories:
. Girls--including Barbie(R) fashion dolls and accessories, collector dolls, Fashion Magic(R), American Girl(R), Cabbage Patch Kids(R) and Polly Pocket(R)
. Infant and Preschool--including Fisher-Price(R), Disney preschool and plush, Power Wheels(R), Sesame Street(R), See 'N Say(R), Magna Doodle(R), View-Master(R) and Blue's Clues(R)
. Entertainment--including Disney, Nickelodeon(R), games and puzzles
. Consumer Software--including Reader Rabbit(R), Carmen Sandiego(TM), The Oregon Trail(R), Myst(R) and The Print Shop(R)
The following is a percentage analysis of operating results for the past three years:
For the Year
--------------------
1999 1998 1997
----- ----- -----
Net sales............................................ 100.0% 100.0% 100.0%
===== ===== =====
Gross profit......................................... 47.2% 51.8% 51.7%
Advertising and promotion expenses................... 17.2 16.3 15.5
Other selling and administrative expenses............ 21.6 20.3 18.6
Amortization of intangibles.......................... 1.7 2.3 8.9
Restructuring and other charges...................... 6.3 2.8 6.3
Charge for incomplete technology..................... -- 1.0 0.4
Other income, net.................................... (0.3) (0.2) (0.1)
----- ----- -----
Operating profit..................................... 0.7 9.3 2.1
Interest expense..................................... 2.7 2.3 2.1
----- ----- -----
Income (loss) before income taxes and extraordinary
item................................................ (2.0)% 7.0% -- %
===== ===== =====
|
1999 Compared to 1998
Net loss for 1999 was $82.4 million or $0.21 per diluted share as compared to net income of $206.1 million or $0.47 per diluted share in 1998. The 1999 results were negatively impacted by restructuring and other charges totaling $346.0 million, approximately $265 million after-tax or $0.64 per diluted share, related to the Mattel restructuring plan, the merger and integration of Learning Company, and other nonrecurring charges. See "Restructuring and Other Charges." Additionally, Mattel's 1999 results were negatively impacted by the results of operations of its Learning Company division, which reported a pre- tax loss of $205.5 million for the full year 1999. The 1998 results of operations were negatively impacted by nonrecurring charges, including an incomplete technology write-off of $56.8 million related to the acquisition of Mindscape, Inc. in March 1998, restructuring and other charges of $113.3 million related to 1998 acquisitions and one-time charges of $44.0 million in connection with the voluntary recall of Power Wheels(R) ride-on vehicles and a Toys R Us-related antitrust litigation settlement. Total 1998 nonrecurring charges of approximately $163 million after-tax impacted the earnings by $0.39 per diluted share.
The negative results of the Learning Company division in 1999 were attributable to a number of factors. In 1999, Learning Company experienced a decrease in sales of CD-ROM products at retail and a higher proportion of sales of relatively lower priced and lower margin products. During the second half of 1999, Learning Company was in the process of revising its distribution channel arrangements. These changes in distribution terms combined with the general weakness in the CD-ROM market resulted in increased product returns. Significant price and promotional competition caused the Learning Company division to incur higher than anticipated price concessions and marketing expenses, including increased use of rebate programs, price protection and advertising. In addition, increased bad debt reserves of approximately $56 million, including $35 million related to one of Learning Company's major distributors, contributed to its operating loss.
Mattel is also currently undertaking a comprehensive review of its entire interactive business to identify additional opportunities to improve operating productivity and realize costs savings. Following this review, Mattel expects to incur pre-tax reorganizational charges totaling approximately $75 million to $100 million in the first quarter of 2000. These charges are designed to streamline the infrastructure, product development cycle and operations of Mattel Interactive.
Net sales for 1999 were $5.5 billion, a decrease of 2% from $5.6 billion in 1998. Sales to customers within the US remained relatively flat and accounted for 72% and 71% of consolidated net sales in 1999 and 1998, respectively. Sales to customers outside the US were down 6%, including an unfavorable foreign exchange effect of approximately $22 million due to the generally stronger US dollar relative to 1998. At comparable foreign exchange rates, sales internationally declined by 4%, partially due to unfavorable industry-wide trends, especially the shift amongst European retailers to just-in-time inventory management. Mattel plans to grow its international business by adapting products to local tastes, economic conditions and price requirements. To accomplish this goal, Mattel continues to work on an extensive market- specific strategy aimed at improving sales of its core product lines in international markets. In addition, Mattel's September 1999 distribution agreement with Bandai, the largest toy company in Japan, to distribute certain Mattel products in Japan is also part of Mattel's strategy for international growth and market penetration.
Sales in the Girls category decreased 3% largely due to declines in Barbie(R) and Cabbage Patch Kids(R) products, partially offset by incremental sales of American Girl(R) products resulting from the Pleasant Company acquisition. Pleasant Company was acquired in July 1998 and therefore the results of operations for 1998 only reflect six months of results. Sales in the Infant and Preschool category declined 3%, largely attributable to last year's success of Sesame Street(R) products, including "Tickle Me Elmo' and decreased sales of Disney's Winnie the Pooh(R) products, partially offset by an increase in sales of core Fisher-Price(R) and Power Wheels(R) products. Sales in the Wheels category grew 6%, demonstrating continued strength in Hot Wheels(R), Matchbox(R), and Tyco(R) Radio Control. Sales in the Entertainment category, including Disney and Nickelodeon(R), increased 11% largely due to this year's success of toys associated with Disney's feature motion picture "Toy Story II". Sales of Learning Company consumer software products decreased 8%, mainly due to a decrease in sales of CD-ROM products at retail and a higher proportion of sales of relatively lower priced and lower margin products. This decrease was partially offset by an increase in licensing revenues of approximately $50 million largely generated from licensing agreements, including Genealogy.com, LLC in the third quarter of 1999 and GoodHome, LLC in the second quarter of 1999. Mattel views e-commerce and licensing transactions to be a significant source of potential revenues for its Learning Company division and intends to continue to attempt to leverage the value of its Internet properties through joint ventures, licensing and other similar transactions.
Gross profit, as a percentage of net sales, was 47.2% in 1999, down from
51.8% in 1998, largely due to lower profit margins at Learning Company.
Excluding the Learning Company division, gross profit was 47.8% in 1999, down
1.6 percentage points from 1998 mainly due to overall change in product mix,
higher ocean freight costs and slightly higher product costs due to
strengthening currencies in countries where Mattel manufactures its products.
As a percentage of net sales, advertising and promotion expenses increased
nearly
Interest expense increased $23.1 million, primarily due to increased short- and long-term borrowings to fund Learning Company's cash requirements and to finance Mattel's 1998 acquisitions.
Mattel's reportable segments are separately managed business units and include Toy Marketing, Consumer Software and Operations. The Toy Marketing segment is divided on a geographic basis between domestic and international. The domestic Toy Marketing segment is further divided into USA Toys, US Fisher- Price/Tyco Preschool and Other. USA Toys principally sells products in the Girls, Entertainment and Wheels categories. US Fisher-Price/Tyco Preschool principally sells products in the Infant and Preschool categories. The Other segment principally sells specialty products in the Girls category. The International Toy Marketing segment sells products in all toy categories. The Consumer Software segment consists of educational, productivity and entertainment software products developed and sold by Learning Company on a worldwide basis. The Operations segment manufactures toy products, which are sold to the Toy Marketing segments. Additional financial information regarding Mattel's business segments can be found in Note 8 to the Consolidated Financial Statements.
The USA Toys segment sales reached $2.2 billion, consistent with 1998. This segment achieved these results through increased sales of Barbie(R), Entertainment and Wheels products. The US Fisher-Price/Tyco Preschool segment sales grew by 4% mainly due to increased sales of core Fisher-Price(R) and Power Wheels(R) products, partially offset by lower sales of Tyco Preschool products as a result of last year's success of Sesame Street(R) products, including "Tickle Me Elmo'. Sales in the Other segment increased by 24% due to incremental sales resulting from the July 1998 acquisition of Pleasant Company. The International Toy Marketing segment sales decrease of 7% was partially attributable to the unfavorable foreign exchange effect due to the generally stronger US dollar relative to 1998 and unfavorable industry-wide trends, especially the shift by European retailers to just-in-time inventory management. Mattel expects this trend to continue worldwide. By brand, the International Toy Marketing segment experienced lower sales of Barbie(R) and Infant and Preschool products, partially offset by sales increases in Wheels and Entertainment products. The Consumer Software segment sales decreased 8%, mainly due to a decrease in sales of CD-ROM products at retail and a higher proportion of sales of relatively lower priced and lower margin products.
Operating profit in the USA Toys and International Toy Marketing segments declined by 7% and 28%, respectively. The decline in operating profit in each of these segments was largely attributable to lower sales volume and unfavorable shift in product mix, partially offset by lower advertising costs. The US Fisher-Price/Tyco Preschool segment operating profit increased 8%, largely due to a favorable shift in product mix and lower advertising and overhead spending to support the Fisher-Price(R) product line. The Other segment operating profit declined by 73%, largely due to incremental amortization and overhead expenses resulting from the July 1998 acquisition of Pleasant Company. The Consumer Software segment realized an operating loss of $205.5 million in 1999 compared to a profit of $114.3 million in 1998. The negative results of the Learning Company division in 1999 were attributable to a number of factors. In 1999, Learning Company experienced a decrease in sales of CD-ROM products at retail and a higher proportion of sales of relatively lower priced and lower margin products. During the second half of 1999, Learning Company was in the process of revising its distribution channel arrangements. These changes in distribution terms combined with the general weakness in the CD-ROM market resulted in increased product returns. Significant price and promotional competition
1998 Compared to 1997
Net income for 1998 was $206.1 million or $0.47 per diluted share as compared to a loss of $182.7 million or $0.52 per diluted share in 1997. Profitability for 1998 was negatively impacted by nonrecurring charges, including an incomplete technology write-off of $56.8 million related to the acquisition of Mindscape, Inc. in March 1998, restructuring and other charges of $113.3 million related to 1998 acquisitions and one time charges of $44.0 million in connection with the voluntary recall of Power Wheels(R) ride-on vehicles and a Toys R Us-related antitrust litigation settlement. Total 1998 nonrecurring charges of approximately $163 million after tax impacted earnings by $0.39 per diluted share. Profitability for 1997 was impacted by restructuring and other charges of $343.6 million related to the Mattel restructuring plan, the merger and integration of Tyco, and other Learning Company merger charges. The 1997 results also included an incomplete technology write-off of $20.3 million related to products being developed by Creative Wonders L.L.C., Parsons Technology Inc., and Living Books and an extraordinary charge of $4.6 million after-tax for the early retirement of debt assumed as part of the Tyco merger. Total 1997 nonrecurring charges of approximately $286.2 million after-tax impacted earnings by $0.77 per diluted share.
Net sales for 1998 reached $5.6 billion, an increase of 3% from $5.5 billion in 1997. Sales to customers within the US increased 6% and accounted for 71% and 69% of consolidated net sales in 1998 and 1997, respectively. Sales to customers outside the US were down 4%, including an unfavorable foreign exchange effect due to the generally stronger US dollar relative to 1997.
Sales in the Girls category decreased 4% largely due to a 14% decline in Barbie(R) products, as a result of high retail inventory levels entering 1998 and domestic toy retailers shift to a just-in-time buying pattern. As a result of the Pleasant Company acquisition in July 1998, the American Girl(R) brand contributed $213.2 million in sales, which helped to partially offset the decline in Barbie(R). Sales in the Infant and Preschool category decreased 3%, largely attributable to declines in Sesame Street(R) and Fisher-Price(R) products, partially offset by an increase in Disney's Winnie the Pooh(R). Sales in the Wheels category grew 21%, reflecting growth in both Hot Wheels(R) and Matchbox(R) vehicles and playsets. Sales in the Entertainment category, which includes Disney and Nickelodeon(R), increased 14% largely due to the 1998 introduction of toys associated with the feature motion pictures "A Bug's Life" and "The Rugrats Movie". Sales of Learning Company consumer software products increased 35%, mainly due to the acquisition of Mindscape, Inc. which added $188.1 million to 1998 sales, introduction of new software titles such as The ClueFinders(TM) 4th Grade Adventures, Arthur's(R) Computer Adventures, and upgraded products.
Gross profit as a percentage of net sales remained relatively constant at 51.8% compared to 51.7% in 1997. As a percentage of net sales, advertising and promotion expenses increased approximately one percentage point to 16.3%, and selling and administrative expenses increased 1.7 percentage points to 20.3%. Both ratios increased relative to 1997 as a result of unanticipated cutbacks in buying by domestic toy retailers due to a continuing shift by these retailers to just-in-time inventory management. To respond to such shifts, Mattel took appropriate actions to adjust its own shipping to more of a just-in-time pattern. As a result, toy products that would have previously been shipped in December of 1998 were shipped closer to the time that they were purchased by the consumer. Amortization of intangibles decreased by $357.5 million, mainly as a result of completed amortization of intangibles related to certain Learning Company's acquisitions, partially offset by amortization resulting from the 1998 acquisitions of Pleasant Company, Sofsource, Inc., Bluebird Toys PLC ("Bluebird") and Mindscape, Inc.
Other income, net increased $8.3 million, mainly due to an $11.1 million gain realized on sale of investments.
The USA Toys segment sales were down 5% in 1998 compared to 1997, largely due to lower sales of Barbie(R) products, as a result of high retail inventory levels entering 1998 and domestic toy retailers shift to a just-in-time buying pattern. This decrease was partially offset by increased sales of Wheels and Entertainment products. The US Fisher-Price/Tyco Preschool segment sales declined by 13% due to decreased sales of Sesame Street(R) and Fisher-Price(R) products. Sales in the Other segment increased to $256.1 million in 1998 from $58.3 million in 1997 due to American Girl(R) sales generated from the July 1998 acquisition of Pleasant Company. The International Toy Marketing segment sales decreased 1% due to lower sales of Barbie(R) products, partially offset by stronger sales of Wheels and Infant/Preschool products. Consumer Software segment sales increased 35%, mainly due to the acquisition of Mindscape, Inc. which added $188.1 million to 1998 net sales, introduction of new software titles such as The ClueFinders(TM) 4th Grade Adventures and Arthur's(R) Computer Adventures, and upgraded products.
Operating profit in the USA Toys and International Toys Marketing segments declined by 27% and 29%, respectively. The decline in operating profit in each of these segments was largely attributable to lower sales volume and unfavorable shift in product mix. The US Fisher-Price/Tyco Preschool segment operating profit increased 11%, driven by improved profitability in the Fisher- Price(R) product line, partially offset by unfavorable shift in product mix of Tyco Preschool products. The Other segment operating profit increased to $20.2 million in 1998 from $7.3 million in 1997 mainly due to the July 1998 acquisition of Pleasant Company. The Consumer Software segment realized profit of $114.3 million in 1998 compared to a loss of $312.5 million in 1997, largely due to increased sales and lower amortization.
Income Taxes
The effective income tax rate for 1999 was 25.6%, favorably impacted by domestic losses incurred by Learning Company, and by income earned in foreign jurisdictions taxed at lower rates. This represents a substantial reduction from 1998 and 1997, during which the effective income tax rates were in excess of the US federal tax rate of 35%. The reduction in the tax rate is the result of a decrease in the amount of non-deductible items, particularly the write-off of incomplete technology and other non-deductible expenses incurred in connection with business acquisitions, that unfavorably impacted the 1998 and 1997 tax rates.
Pre-tax losses from US operations as a percentage of the consolidated pre- tax income was less than the sales to US customers as a percentage of the consolidated gross sales. This difference results from operating losses, amortization of intangibles and corporate headquarters expenses incurred in the US that decreased US pre-tax income, and foreign profits related to sales ultimately made to US customers.
Financial Position
Mattel's cash position was $275.0 million, compared to $469.2 million as of the end of 1998. Cash decreased $194.2 million primarily due to the payment of restructuring and integration costs related to the Learning Company merger, repayment of Learning Company's credit lines and the termination of Learning Company's receivable factoring facilities. Accounts receivable, net increased by $120.0 million to $1,270.0 million at year end 1999 principally due to the cancellation of Learning Company's receivable factoring facilities. Inventories decreased by $100.0 million to $544.3 million at year end 1999, reflecting Mattel's shift to just-in-time production and shipping programs, partially offset by higher Learning Company
Short-term borrowings increased $170.5 million compared to 1998 year end, primarily due to the funding of Learning Company's cash requirements.
A summary of Mattel's capitalization is as follows:
As of Year End
-------------------------------
1999 1998
------------ ------------
(In millions, except
percentage information)
Senior notes................................. $ 601.0 18% $ 601.0 17%
Medium-term notes............................ 540.5 17 540.5 16
Other long-term debt obligations............. 42.4 1 43.0 1
-------- --- -------- ---
Total long-term debt......................... 1,183.9 36 1,184.5 34
Other long-term liabilities.................. 162.9 5 149.1 4
Stockholders' equity......................... 1,962.7 59 2,170.8 62
-------- --- -------- ---
$3,309.5 100% $3,504.4 100%
======== === ======== ===
|
Total long-term debt remained approximately the same at year end 1999 compared to year end 1998. Although $301.0 million of the senior notes are maturing in 2000, they have been classified as long term in the consolidated balance sheet at December 31, 1999 since management has the ability and intent to repay these obligations upon maturity with proceeds from the issuance of other long-term debt instruments. Despite the recent rating agency downgrades of Mattel's long-term debt, Mattel's long-term debt rating continues to be investment grade and the downgrades are not expected to impact Mattel's ability to access the capital markets to implement the refinancing. However, the rating agency downgrades will have a negative impact on the pricing spread over the Treasury rates and could cause Mattel to pay a slightly higher interest rate on the issued debt than it otherwise would have paid. See Item 1 "Risk Factors." Mattel expects to satisfy its future long-term capital needs through the retention of corporate earnings and the issuance of long-term debt instruments. In November 1998, Mattel filed its current universal shelf registration statement allowing it to issue up to $400.0 million of debt and equity securities, all of which was available to be issued as of December 31, 1999. Stockholders' equity of $2.0 billion at year end 1999 decreased $208.1 million from year end 1998, primarily due to dividend declarations on common and preferred stock, Mattel's net loss position due to restructuring and other nonrecurring charges, treasury stock purchases and unfavorable effect of currency translation adjustments, partially offset by cash received from exercise of employee stock options.
Liquidity and Capital Resources
Mattel's primary sources of liquidity over the last three years have been cash on hand at the beginning of the year, cash flows generated from operations, long-term debt issuances and short-term seasonal borrowings. Operating activities generated cash flows of $58.6 million during 1999, compared to $571.7 million in 1998 and $503.4 million in 1997. The decrease in cash flows from operating activities in 1999 is largely due to the negative impact of Learning Company's results.
Mattel invested its cash flows during the last three years mainly in the acquisitions of Pleasant Company, Sofsource, Inc., Bluebird and Mindscape, Inc., additions to tooling in support of new products, and construction of new manufacturing facilities.
Seasonal Financing
Mattel expects to finance its seasonal working capital requirements for the coming year by using existing and internally generated cash, issuing commercial paper and selling certain trade receivables under its commited revolving credit facility and using various short-term bank lines of credit. Mattel's domestic committed unsecured credit facility provides up to a total of $1.0 billion in short-term borrowings from a commercial bank group. This facility provides for up to $700.0 million in advances and backup for commercial paper issuances, and up to an additional $300.0 million for nonrecourse purchases of certain trade accounts receivable by the bank group over the next three years. Under its domestic credit facility, Mattel is required to meet financial covenants for consolidated debt-to-capital and interest coverage. Currently Mattel is in compliance with such covenants.
Mattel is currently in the process of negotiating a 364 day, $400 million companion facility to its existing $1.0 billion credit facility, with essentially the same group of commercial banks. The terms and conditions of the companion facility will be similar to the existing $1.0 billion credit facility. Mattel expects to have the companion facility in place by the end of April 2000.
Mattel also expects to have approximately $370 million of individual short- term foreign credit lines with a number of banks available in 2000, which will be used as needed to finance seasonal working capital requirements of certain foreign affiliates.
Business Combinations
Mattel and Learning Company completed the following business combinations during the last three years. Each transaction has been accounted for as a pooling of interests, which means the companies involved in the transaction are treated as if they had always been combined for accounting and financial reporting purposes.
In May 1999, Mattel completed its merger with Leaning Company, after which Learning Company was merged with and into Mattel, with Mattel being the surviving corporation. Each share of Learning Company Series A Preferred Stock was then converted into 20 shares of Learning Company common stock immediately prior to the consummation of the merger. Pursuant to the merger agreement, each outstanding share of Learning Company common stock was converted into 1.2 shares of Mattel common stock upon consummation of the merger. As a result, approximately 126 million Mattel common shares were issued in exchange for all shares of Learning Company common stock outstanding as of the merger date. The outstanding share of Learning Company special voting stock was converted into one share of Mattel Special Voting Preferred Stock. Each outstanding exchangeable share of Learning Company's Canadian subsidiary, Softkey Software Products Inc., remains outstanding, but upon consummation of the merger became exchangeable for 1.2 shares of Mattel common stock.
In August 1998, Learning Company completed its merger with Broderbund, a publisher and developer of consumer software for the home and school market. Under the merger agreement, each outstanding share of
In March 1997, Mattel completed its merger with Tyco. Under the merger agreement, each Tyco common stockholder received 0.48876 shares of Mattel common stock for each share of Tyco common stock outstanding, which resulted in the issuance of approximately 17 million Mattel common shares. Tyco restricted stock units and stock options outstanding as of the merger date were exchanged for approximately 0.6 million Mattel common shares. In addition, each share of Tyco Series B and Series C preferred stock was converted into like Mattel preferred stock.
Learning Company also merged with Palladium Interactive, Inc. and P.F. Magic, Inc. in 1998 and TEC Direct, Inc., Microsystems Software, Inc., Skills Bank Corporation and Learning Company Services, Inc. in 1997, each of which were accounted for as poolings of interests. The consolidated financial statements have not been retroactively restated for the results of operations and financial position of these companies as the effect of each acquisition individually and in the aggregate on Learning Company's balance sheet and results of operations was less than three percent.
Acquisitions
Mattel and Learning Company acquired the following companies during the years ended December 31, 1998 and 1997. Each of these acquisitions was accounted for using the purchase method of accounting. The results of operations of the acquired companies have been included in Mattel's consolidated financial statements from their respective dates of acquisition. Intercompany accounts and transactions between the acquired companies and Mattel, as applicable, have been eliminated.
Method of (Assets)/Liabilities Incomplete
Month Price Payment Assumed Intangibles Technology
------- ------ ---------- -------------------- ----------- ----------
(In millions)
1998
Pleasant Company........ July $715.0 Cash $(25.0) $690.0 $ --
Bluebird Toys PLC....... June 80.0 Cash (20.0) 60.0 --
Sofsource, Inc. ........ June 45.0 Stock 6.7 36.8 14.9
Mindscape, Inc. ........ March 152.6 Cash/stock 6.4 119.0 40.0
1997
Creative Wonders,
L.L.C. ................ October $ 37.8 Cash $ 7.3 $ 44.0 $ 1.1
Parsons Technology...... August 31.0 Cash (11.7) 9.3 10.0
|
The acquisition price includes investment advisor and other directly-related expenses, as applicable. The portion of the purchase price allocated to incomplete technology was charged to expense in the year of acquisition.
Mattel also made other minor acquisitions during the last three years which were accounted for using the purchase method. These acquisitions resulted in the issuance of 0.4 million shares of common stock in the year ended December 31, 1997.
New Venture
In the third quarter of 1999, Mattel executed stock purchase and distribution agreements with Bandai, the largest toy company in Japan. In the purchase agreement, Mattel acquired approximately five percent of the outstanding common stock of Bandai. The distribution agreements allow Bandai to distribute certain Mattel products in Japan, while Mattel was granted the right to distribute certain Bandai products in Latin America. Mattel and Bandai will discuss other distribution opportunities in the U.S. on a case-by-case basis.
In 1999 Mattel incurred restructuring and other nonrecurring charges totaling $346.0 million, approximately $265 million after-tax or $0.64 per diluted share.
During the first quarter of 1999, Mattel incurred a nonrecurring pre-tax charge of $3.9 million, largely related to the restructuring and integration of acquisitions made by its Learning Company division in the fourth quarter of 1998.
During the second quarter of 1999, Mattel completed its merger with Learning Company and finalized a previously announced plan of restructuring and integration. These actions, along with other one-time events, resulted in a nonrecurring pre-tax charge against operations of $345.0 million. In the fourth quarter of 1999, Mattel incurred an additional $23.5 million charge relating to its restructuring and integration plan and other one-time charges which had previously not met the requirement for accrual. In addition, Mattel reversed $26.4 million of the second quarter charge based on lower than anticipated costs and revisions to previous estimates. The impact of these new developments combined with the initial second quarter charge resulted in a full year nonrecurring charge of $342.1 million. Of the pre-tax restructuring and integration charges totaling $307.0 million, approximately $132 million was spent in 1999, $111 million is expected to be spent in 2000 and the remaining $64 million represents non-cash charges. Total cash outlay is expected to be funded from existing cash balances and internally generated cash flows from operations.
The restructuring and integration plan, expected to be substantially complete by June 2000, provides for the consolidation and realignment of Mattel's operations. The plan was aimed at leveraging global resources in areas of manufacturing, marketing and distribution, eliminating duplicative functions worldwide and achieving improved operating efficiencies. The plan, which was designed to reduce product costs and overhead spending and recognize synergy savings, resulted in actual cost savings of approximately $40 million in 1999. Mattel expects savings of approximately $350 million over the next three years. The realized cost savings for 1999 and beyond is lower than the previously estimated savings of approximately $50 million and $400 million, respectively, largely due to not realizing the revenue synergies with Learning Company. These savings are net of anticipated incremental integration related spending of approximately $12 million. This incremental spending includes approximately $3 million for capital investment at existing manufacturing facilities as well as network consolidation, and charges for the relocation of employees and movement of equipment, employee transition/training, and manufacturing start-up costs.
The following are the major restructuring and integration initiatives:
. Consolidation of the Infant and Preschool businesses;
. Consolidation of the domestic and international back-office functions;
. Consolidation of direct marketing operations;
. Realignment of the North American sales force;
. Termination of various international distributor contracts; and
. Closure of three higher cost manufacturing facilities.
Adjustments Balance
----------------- Total Amounts Dec. 31,
Plan (Credits) Charges Charges Incurred 1999
---- --------- ------- ------- -------- --------
(In millions)
Severance and other
compensation.................. $108 $(13) $18 $113 $ (30) $ 83
Distributor, license and other
contract terminations......... 57 (2) -- 55 (45) 10
Writedown of assets............ 42 (2) -- 40 (40) --
Lease termination costs........ 22 (4) -- 18 -- 18
---- ---- --- ---- ----- ----
Total restructuring costs and
asset writedowns............ 229 (21) 18 226 (115) 111
Merger-related transaction and
other costs................... 86 (5) -- 81 (76) 5
Other nonrecurring charges..... 30 -- 5 35 (16) 19
---- ---- --- ---- ----- ----
Total restructuring, asset
writedowns and other
charges..................... $345 $(26) $23 $342 $(207) $135
==== ==== === ==== ===== ====
|
In the fourth quarter of 1999, Mattel adjusted its restructuring and integration plan and other nonrecurring charges, resulting in a net reduction of approximately $3 million. The credits to the restructuring plan of approximately $26 million were mainly due to Mattel's recent decision not to close certain of its marketing offices and one of its manufacturing facilities. The remaining credits include other changes in estimates and lower than anticipated costs compared to the previous estimates for completed components of the plan. Approximately 900 employees will not be terminated as a result these changes.
The fourth quarter restructuring charge of approximately $18 million relates to the termination of an additional 150 Learning Company employees at its domestic offices. This action was taken to further consolidate the operations of Learning Company's domestic offices. The fourth quarter other nonrecurring charge relates to a $4.0 million increase to the reserve for the October 1998 recall of Mattel's Power Wheels(R) vehicles and a $1.1 million additional charge related to the Toys R Us-related antitrust litigation settlement.
A description of the components of the restructuring and other nonrecurring charges is as follows:
Severance and other compensation costs relate to the termination of approximately 3,300 employees around the world. Approximately 2,300 of these employees are hourly workers located in certain of Mattel's manufacturing facilities, of which approximately 2,200 were employed in the manufacturing facility in Kuala Lumpur, which ceased operations in September 1999. The remainder of the work force reductions consists of downsizing sales and marketing groups in the US, Europe and Asia-Pacific regions as well as the elimination of duplicate administrative personnel following the consolidation of back-office functions, the majority of which are in Europe. As of December 31, 1999, approximately $30 million had been paid to nearly 2,700 terminated employees. Cash severance payments will extend beyond the completion of the workforce reductions due to the severance payment options available to affected employees.
Mattel terminated its sponsorship agreements related to certain attractions for a total cost of $37.5 million, inclusive of the writeoff of related capitalized costs. The cash portion of this charge was paid as of July 1999. Mattel also recognized a $17.5 million charge, mainly related to settlements for termination of certain foreign distributor agreements in conjunction with the realignment of its sales and distribution network.
Mattel's restructuring plan resulted in the impairment of certain long-lived assets related to the operations being closed. The sum of the undiscounted future cash flows of these assets was not sufficient to cover the carrying amount of these assets. As a result, these long-lived assets were written down to fair market value and will be depreciated over their remaining useful lives. Fair value of the impaired assets was determined by either third-party appraisals or past experience in disposing of similar assets. Buildings and, to the extent possible, equipment will be sold while the remainder of the impaired assets will be abandoned when taken out of service.
Lease termination costs include penalties imposed upon canceling existing leases and future obligations under long-term rental agreements at facilities being vacated following the merger and realignment.
Merger-related transaction costs consist of investment banking fees, legal, accounting and printing costs, registration fees and other costs recognized in connection with the merger. Also included in this amount are the contractual change of control payments arising from the merger. The majority of all merger- related transaction costs were paid during the second quarter of 1999.
Other nonrecurring charges principally include an additional $20.0 million related to the October 1998 recall of Mattel's Power Wheels vehicles and $14.0 million for environmental remediation costs related to a manufacturing facility on a leased property in Beaverton, Oregon, based on the completion and approval of the remediation plan and feasibility study.
Mattel is currently undertaking a comprehensive review of its entire interactive business to identify additional opportunities to improve operating productivity and realize costs savings. Following this review, Mattel expects to incur pre-tax reorganizational charges totaling approximately $75 million to $100 million in the first quarter of 2000. These charges are designed to streamline the infrastructure, product development cycle and operations of Mattel Interactive. Additionally, compensation expense of approximately $50 million, including forgiveness of certain executive loans, will be incurred in the first quarter of 2000 related to the recent departure of certain senior executives.
Litigation
On October 22, 1998, Mattel announced that Fisher-Price, in cooperation with the Consumer Product Safety Commission, would conduct a voluntary recall involving up to 10 million battery-powered Power Wheels(R) ride-on vehicles. The recall did not result from any serious injury, and involves the replacement of electronic components that may overheat, particularly when consumers make alterations to the product. The recall involves vehicles sold nationwide since 1984 under nearly 100 model names. Additionally, Fisher-Price has been notified by the Consumer Product Safety Commission that the Commission is considering whether Fisher-Price may be subject to a fine for delayed reporting of the facts underlying the recall.
In the third quarter of 1998, Mattel recognized a $38.0 million pre-tax charge related to the recall. During the second and fourth quarters of 1999, Mattel recognized additional pre-tax charges totaling $20.0 million related to the recall.
On October 13, 1995, Michelle Greenwald filed a complaint (Case No. YC 025 008) against Mattel in Superior Court of the State of California, County of Los Angeles. Ms. Greenwald is a former employee whom Mattel terminated in July 1995. Her complaint sought $50 million in general and special damages, plus punitive damages, for breach of oral, written and implied contract, wrongful termination in violation of public policy and violation of California Labor Code Section 970. Ms. Greenwald claimed that her termination resulted from complaints she made to management concerning general allegations that Mattel did not account properly for sales and certain costs associated with sales and more specific allegations that Mattel failed to account properly for certain royalty obligations to The Walt Disney Company. On December 5, 1996, Mattel's motion for summary adjudication of Ms. Greenwald's public policy claim was granted. On March 7, 1997, Mattel filed a motion for summary judgment on the remaining causes of action. On December 9, 1997, Mattel's motion for summary judgment of Ms. Greenwald's remaining claims was granted. On February 4, 1998, Ms. Greenwald
On October 2, 1997, the Attorney General of the State of New York filed in the United States District Court, Eastern District of New York (Case No. CV 97 5714), an action against Toys R Us, Mattel and certain other toy manufacturers alleging that the defendants had violated federal antitrust laws and entered into vertical and horizontal arrangements that had the effect of restricting sales to the warehouse clubs. The attorneys general from forty-three other states, the District of Columbia and the Commonwealth of Puerto Rico joined this action. Following the filing of the New York action, a series of private treble damage class actions under the federal antitrust laws were filed in various federal district courts. The parties later agreed to have these related actions transferred to the Eastern District of New York to be consolidated by the Judicial Panel on Multiple Litigation before Nina Gershon, United States District Judge. Private class actions were also filed in state courts in Alabama, California, and New Jersey, asserting claims under state antitrust law. These state court actions were coordinated with the federal court actions.
Subsequent mediation efforts resulted in a Settlement Agreement and Release as to Mattel, Inc., Fisher-Price, and Tyco, effective April 6, 1999. Pursuant to the terms of the Settlement Agreement and Release, Mattel agreed to make a cash payment and a toy contribution, both of which were made in the fourth quarter of 1999. As a result of a dispute between the parties as to the selection of the toys to be contributed, Mattel negotiated a Supplemental Toy Contribution Agreement and made a supplemental toy contribution in December 1999. Final Judgment and Order of Dismissal was entered by Judge Gershon on February 17, 2000 that effectively dismissed with prejudice the claims asserted by the state and private federal and state court plaintiffs, including the claims of any person represented in either a parens patriae or private class capacity.
On December 16, 21, and 23, 1998, several stockholders of the legal entity The Learning Company, Inc. that merged into Mattel ("Old Learning Company") filed six separate purported class action complaints in the Court of Chancery of the State of Delaware in and for New Castle County against Old Learning Company and Old Learning Company's board of directors for alleged breaches of fiduciary duties in connection with the May 1999 merger. The six complaints were consolidated. The consolidated complaint named Mattel as an additional defendant, claiming that Mattel aided and abetted the alleged breaches of fiduciary duty. On March 9, 2000, the plaintiffs filed a notice and order of dismissal dismissing the action without prejudice. Upon approval by the court, the consolidated action will be formally dismissed.
Following Mattel's announcement on October 4, 1999 that it expected an earnings shortfall at its Learning Company division in the third quarter of 1999, several of Mattel's shareholders filed purported class action complaints in the United States District Court for the Central District of California, the United States District Court for the Southern District of New York and the United States District Court for Massachusetts naming Mattel and certain of its officers and directors as defendants. The complaints generally allege, among other things, that the defendants made false or misleading statements that artificially inflated the price of Mattel's common stock by overstating the revenues and net income of Mattel, including its Learning Company division, and by falsely representing that the May 1999 Learning Company acquisition would be immediately accretive to Mattel's 1999 and 2000 financial results.
On November 23, 1999, Mattel (along with other defendants named in the federal securities lawsuits) filed a motion and brief before the Judicial Panel on Multidistrict Litigation seeking to transfer all of the federal actions to the United States District Court for the Central District of California for Coordinated or Consolidated Pretrial Proceedings. On March 3, 2000, the Judicial Panel on Multidistrict Litigation granted Mattel's motion.
In addition, a Mattel stockholder filed a derivative complaint on behalf and for the benefit of Mattel in the Superior Court of the State of California, County of Los Angeles. The complaint alleges that Mattel's directors breached their fiduciary duties, wasted corporate assets and grossly mismanaged Mattel in connection with Mattel's acquisition of Learning Company and seeks both monetary and injunctive relief. On February 10, 2000, the court sustained defendants' demurrer and dismissed the complaint with leave to amend.
Mattel believes the lawsuits are without merit and intends to defend them vigorously.
Fisher-Price. Fisher-Price has executed a consent order with the State of New York involving a remedial action/feasibility study for one of its manufacturing plants. Currently, Fisher-Price is negotiating an additional consent order which will outline the specific clean up strategy for the site. Mattel anticipates that the New York State Department of Environmental Quality will issue their Record of Decision in March 2000. The ultimate liability associated with this cleanup presently is estimated to be less than $1,425,000, approximately $1,030,500 of which has been incurred through December 31, 1999.
Beaverton, Oregon. Mattel operates a manufacturing facility on a leased property in Beaverton, Oregon that was acquired as part of the Tyco merger. In March 1998, samples of groundwater used by the facility for process water and drinking water disclosed elevated levels of certain chemicals, including trichloroethylene. Mattel immediately closed the water supply and self-reported the sample results to the Oregon Department of Environmental Quality and the Oregon Health Division. Mattel also implemented a community outreach program to employees, former employees and surrounding landowners.
In November 1998, Mattel and another potentially responsible party entered into a consent order with the Oregon Department of Environmental Quality to conduct a remedial investigation/feasibility study at the property, to propose an interim remedial action measure and to continue the community outreach program. In the second quarter of 1999, Mattel recorded a $14.0 million pre-tax charge for environmental remediation costs related to this property, based on the completion and approval of the remediation plan and feasibility study.
Mattel is also involved in various other litigation and legal matters, including claims related to intellectual property, product liability and labor, which Mattel is addressing or defending in the ordinary course of business. Management believes that any liability which may potentially result upon resolution of such matters will not have a material adverse effect on Mattel's business, financial condition or results of operations.
Commitments
In the normal course of business, Mattel enters into contractual arrangements for future purchases of goods and services to ensure availability and timely delivery, and to obtain and protect Mattel's right to create and market certain products. These arrangements include commitments for future inventory purchases and royalty
As of December 31, 1999, the Operations segment had outstanding commitments for 2000 purchases of inventory of approximately $92 million. Licensing and similar agreements with terms extending through the year 2007 contain provisions for future guaranteed minimum payments aggregating approximately $346 million.
Foreign Currency Risk
Mattel's results of operations and cash flows can be impacted by exchange rate fluctuations. To limit the exposure associated with exchange rate movements, Mattel enters into foreign currency forward exchange and option contracts primarily to hedge its purchase of inventory, sales and other intercompany transactions denominated in foreign currencies. Mattel's results of operations can also be affected by the translation of foreign revenues and earnings into US dollars.
Market risk exposures exist with respect to the settlement of foreign currency transactions during the year because currency fluctuations cannot be predicted with certainty. Mattel seeks to mitigate its exposure to market risk by monitoring its currency exchange exposure for the year and partially or fully hedging such exposure. In addition, Mattel manages its exposure through the selection of currencies used for foreign borrowings and intercompany invoicing. Mattel does not trade in financial instruments for speculative purposes.
Mattel's foreign currency forward exchange contracts that were used to hedge firm foreign currency commitments as of December 31, 1999 and 1998 are shown in the following table.
These contracts generally mature within 18 months from the date of execution. Contracts outstanding at year-end mature during the next 13 months. All contracts are against the US dollar and are maintained by reporting units with a US dollar functional currency, with the exception of the Indonesian rupiah contracts that are maintained by an entity with a rupiah functional currency.
Buy Sell
------------------------------- -------------------------------
Weighted Weighted
Contract Average Fair Contract Average Fair
Amount Contract Rate Value Amount Contract Rate Value
-------- ------------- -------- -------- ------------- --------
(In thousands of US dollars)
1999
Euro.................... $ 92,445 1.01 $ 90,922 $253,096 1.05 $244,448
British pounds
sterling............... 6,316 1.61 6,332 16,679 1.65 16,433
Canadian dollar......... 7,604 1.45 7,619 40,679 .68 41,498
Japanese yen............ -- -- -- 19,412 116 19,557
Australian dollar....... -- -- -- 8,438 .64 8,661
Swiss franc............. 14,893 1.58 14,798 -- -- --
Indonesian rupiah....... 19,455 7,676 20,998 -- -- --
Singapore dollar........ -- -- -- 4,066 1.68 4,091
Thai bhat............... 3,990 39.59 4,207 -- -- --
-------- -------- -------- --------
$144,703 $144,876 $342,370 $334,688
======== ======== ======== ========
1998
German mark............. $ 19,119 1.67 $ 18,984 $144,660 1.68 $145,688
Italian lira............ 20,014 1,764.00 21,155 68,358 1,660.00 67,950
Hong Kong dollar........ 55,829 8.02 57,790 -- -- --
French franc............ 27,435 5.62 27,536 9,105 5.82 9,479
British pounds
sterling............... 6,548 0.60 6,415 66,856 0.61 66,950
Canadian dollar......... 16,144 1.55 16,545 18,794 1.46 18,119
Spanish peseta.......... 5,625 142.30 5,577 2,899 148.23 2,997
Dutch guilder........... 5,079 1.89 5,050 8,086 1.96 8,342
Japanese yen............ -- -- -- 12,501 116.00 12,759
Australian dollar....... 4,988 1.66 5,268 21,610 1.58 21,732
Belgian franc........... -- -- -- 11,641 35.46 11,871
Swiss franc............. 18,341 1.37 18,251 -- -- --
Mexican peso............ -- -- -- 22,000 10.02 21,956
Indonesian rupiah....... 10,000 15,720.50 19,183 -- -- --
Singapore dollar........ -- -- -- 3,962 1.64 3,943
Brazilian real.......... -- -- -- 2,500 1.25 2,554
-------- -------- -------- --------
$189,122 $201,754 $392,972 $394,340
======== ======== ======== ========
|
Manufacturing Risk
Mattel owns and operates manufacturing facilities and utilizes third-party manufacturers throughout Asia, primarily in China, Indonesia, Malaysia and Thailand. A risk of political instability and civil unrest exists in these countries, which could temporarily or permanently damage Mattel's manufacturing operations located there. Mattel's business, financial position and results of operations would be negatively impacted by a significant disruption to its manufacturing operations or suppliers.
Inflation rates in the US and in major foreign countries where Mattel does business have not had a significant impact on its results of operations or financial position during the three years ended December 31, 1999. The US Consumer Price Index increased 2.7% in 1999, 1.6% in 1998 and 1.7% in 1997. Mattel receives some protection from the impact of inflation from high turnover of inventories and its ability to pass on higher prices to consumers.
To address the year 2000 issue, in early 1998 Mattel established an in-house project team and initiated a comprehensive plan to assess, remediate and test Mattel's internal systems, hardware and processes, including key operational, manufacturing and financial systems. The plan also included steps to verify that all key third-party suppliers and customers were taking measures to ensure their own readiness and timely implementation. All phases of the year 2000 readiness plan were completed as scheduled. To date, Mattel has not experienced any year 2000 issues with its internal operating systems or with its third party customers and suppliers. In addition, Mattel did not experience any loss in revenues due to the year 2000 issue.
All software products currently available for sale to consumers and under development are year 2000 compliant. However, several discontinued products sold in the past may not operate as intended on certain computers due to the year 2000 issue.
As of December 31, 1999, Mattel spent a total of approximately $13 million in connection with addressing the year 2000 issue. Any additional charges are expected to be minimal. These costs were largely due to the use of internal resources dedicated to achieving year 2000 compliance, and were charged to expense as incurred. All costs of addressing the year 2000 issue were funded from internally generated cash.
Although unlikely given that Mattel has not experienced any year 2000 issues to date, there can be no assurance that any future unforeseen year 2000 issues or year 2000 issues relating to possibly non-compliant software products will not materially adversely affect Mattel's results of operations, liquidity and financial position or adversely affect Mattel's relationships with customers, vendors or others.
Euro Conversion
On January 1, 1999, a single currency called the euro was introduced in Europe. Eleven of the fifteen member countries of the European Union adopted the euro as their common legal currency on that date. Fixed conversion rates between these countries' existing currencies, "legacy currencies", and the euro were established on that date. The legacy currencies are scheduled to remain legal tender in these participating countries through July 1, 2002. During the transition period, parties may settle transactions using the euro or a participating country's legacy currency.
Certain of Mattel's European facilities adopted the euro as their functional currency in 1999. The cost of system modifications to accommodate the euro was not material to Mattel's results of operations. Based on currently available information, the euro conversion has not had a material adverse impact on Mattel's business or financial condition.
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. It also requires that gains or losses resulting from changes in the values of those derivatives be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. Mattel is required to adopt this statement for its fiscal year beginning January 1, 2001. Management believes the adoption of this statement will not have a material impact on Mattel's financial position or results of operations.
Certain written and oral statements made or incorporated by reference from time to time by Mattel or its representatives in this Form 10-K, other filings or reports with the Securities and Exchange Commission, press releases, conferences, or otherwise, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Mattel is including this Cautionary Statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any such forward-looking statements. Forward-looking statements include any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and forward-looking statements can be identified by the use of terminology such as "believe," "anticipate," "expect," "estimate," "may," "will," "should," "project," "continue," "plans," "aims," "intends," "likely," or other words or phrases of similar terminology. Management cautions you that forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. For a discussion of some of the factors that may cause actual results to differ materially from those suggested by forward- looking statements, please read carefully the information under Item 1 "Risk Factors" on pages 13 to 18 of this Form 10-K. In addition to the Risk Factors and other important factors detailed herein and from time to time in other reports filed by Mattel with the Securities and Exchange Commission, including Forms 8-K, 10-Q and 10-K, the following important factors could cause actual results to differ materially from those suggested by any forward-looking statements.
. Marketplace Risks
--Increased competitive pressure, both domestically and internationally, which may negatively affect the sales of Mattel's products
--Changes in public and consumer taste, which may negatively affect Mattel's toy and consumer software business
--Significant changes in the play patterns of children, whereby they are increasingly attracted to more developmentally advanced products at younger ages, which may affect brand loyalty and the perceived value of and demand for Mattel's products
--Possible weaknesses in economic conditions, both domestically and internationally, which may negatively affect the sales of Mattel's products and the costs associated with manufacturing and distributing these products
. Financing Considerations
--Currency fluctuations, which may affect Mattel's reportable income
--Significant changes in interest rates, both domestically and internationally, which may negatively affect Mattel's cost of financing both its operations and investments
. Other Risks
--Inability to successfully complete licensing and e-commerce deals in a timely fashion, which may reduce Mattel's ability to realize the full value of its intellectual property rights
--Development of new technologies, including the Internet, which may create new risks to Mattel's ability to protect its intellectual property rights
--Changes in laws or regulations, both domestically and internationally, including those affecting the Internet, consumer products or environmental activities or trade restrictions, which may lead to increased costs or interruption in normal business operations of Mattel
--Current and future litigation, governmental proceedings or environmental matters, which may lead to increased costs or interruption in normal business operations of Mattel
--Labor disputes, which may lead to increased costs or disruption of any of Mattel's operations
Item 8. Financial Statements and Supplementary Data
The information required by Item 8 of Part II is incorporated herein by reference to the Consolidated Financial Statements filed with this report. See Item 14 of Part IV.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 10. Directors and Executive Officers of the Registrant
Information required under this Item relating to members of Mattel's board of directors is incorporated by reference herein from its 2000 Notice of Annual Meeting of Stockholders and Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after December 31, 1999. The information with respect to the executive officers of Mattel appears under the heading "Executive Officers of the Registrant" in Part I herein.
Item 11. Executive Compensation
The information required under this Item is incorporated by reference herein from Mattel's 2000 Notice of Annual Meeting of Stockholders and Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after December 31, 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this Item is incorporated by reference herein from Mattel's 2000 Notice of Annual Meeting of Stockholders and Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after December 31, 1999.
Item 13. Certain Relationships and Related Transactions
The information required under this Item is incorporated by reference herein from Mattel's 2000 Notice of Annual Meeting of Stockholders and Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after December 31, 1999.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Consolidated Financial Statements of Mattel, Inc.
Report of Independent Accountants..................................... F-1 Consolidated Balance Sheets as of December 31, 1999 and 1998.......... F-2 Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997................................................. F-4 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997................................................. F-5 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997.................................... F-6 Notes to Consolidated Financial Statements............................ F-8 |
2. Financial Statement Schedule for the years ended December 31, 1999, 1998 and 1997(1)
3. Exhibits (Listed by numbers corresponding to Item 601 of Regulation S-K)
2.0 Agreement and Plan of Merger, dated as of December 13, 1998, between
Mattel and The Learning Company, Inc. (incorporated by reference to
Exhibit 2.1 of Mattel's Current Report on Form 8-K, dated December 15,
1998)
3.0 Restated Certificate of Incorporation of Mattel (incorporated by
reference to Exhibit 3.0 to Mattel's Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 001-05647)
3.1 Certificate of Amendment of Restated Certificate of Incorporation of
Mattel (incorporated by reference to Exhibit B to Mattel's Proxy
Statement dated March 23, 1996)
3.2 Certificate of Amendment of Restated Certificate of Incorporation of
Mattel (incorporated by reference to Exhibit B to Mattel's Proxy
Statement dated March 30, 1998)
3.3* By-laws of Mattel, as amended to date
3.4 Certificate of Designations, Preferences, Rights and Limitations of
Special Voting Preferred Stock of Mattel (incorporated by reference to
Exhibit 3.0 to Mattel's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999)
4.0 Rights Agreement, dated as of February 7, 1992, between Mattel and The
First National Bank of Boston, as Rights Agent (incorporated by
reference to Exhibit 1 to Mattel's Registration Statement on Form 8-A,
dated February 12, 1992)
4.1 Amendment No. 1 to Rights Agreement, dated as of May 13, 1999, between
Mattel and BankBoston, N.A. (incorporated by reference to Exhibit 4 to
Mattel's Registration Statement on Form 8-A/A dated May 13, 1999)
4.2 Amendment No. 2 to Rights Agreement, dated as of November 4, 1999,
between Mattel and BankBoston, N.A. (incorporated by reference to
Exhibit 4.3 to Mattel's Registration Statement on Form 8-A/A dated
November 12, 1999)
4.3 Specimen Stock Certificate with respect to Mattel's Common Stock
(incorporated by reference to Mattel's Current Report on Form 8-A, dated
February 28, 1996)
4.4 Indenture dated as of February 15, 1996 between Mattel and Chase Trust
Company of California, as Trustee (incorporated by reference to Exhibit
4.1 to Mattel's Current Report on Form 8-K dated April 11, 1996)
|
4.5 Plan of Arrangement of Softkey Software Products Inc. under Section 182
of the Business Corporations Act (Ontario) (incorporated by reference
to Exhibit 4.4 of Learning Company's Registration Statement on Form S-
3, Registration No. 333-40549)
4.6 Voting and Exchange Trust Agreement, dated as of February 4, 1994 among
Learning Company, Softkey Software Products Inc. and R-M Trust Company,
as Trustee (incorporated by reference to Exhibit 4.3 to Learning
Company's Registration Statement on Form S-3, Registration
No. 333-40549)
4.7 Support Agreement, dated as of February 4, 1994 between Learning Company
and Softkey Software Products Inc. (incorporated by reference to
Exhibit 99.4 of Mattel's Form S-4, Registration No. 333-71587)
4.8 Voting and Exchange Trust Supplement dated as of May 12, 1999 between
Mattel, Learning Company, Softkey Software Products Inc. and CIBC
Mellon Trust Company, as Trustee (incorporated by reference to Exhibit
99.3 of Mattel's Quarterly Report of Form 10-Q for the quarterly period
ended March 31, 1999)
4.9 Support Agreement Amending Agreement dated as of May 12, 1999 between
Mattel, Learning Company and Softkey Software Products Inc.
(incorporated by reference to Exhibit 99.4 of Mattel's Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1999)
4.10 Rights Agreement dated as of May 13, 1999 between Softkey Software
Products Inc., Mattel and CIBC Mellon Trust Company, as Trustee
(incorporated by reference to Exhibit 99.5 of Mattel's Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1999)
4.11 Warrant to Purchase Shares of Common Stock of Mattel, Inc., dated as of
June 27, 1996 (incorporated by reference to Exhibit 4.6 to Mattel's
Annual Report on Form 10-K for the year ended December 31, 1998)
(Mattel has not filed certain long-term debt instruments under which the
principal amount of securities authorized to be issued does not exceed
10% of its total assets. Copies of such agreements will be provided to
the Securities and Exchange Commission upon request.)
10.0 Second Amended and Restated Credit Agreement dated as of March 11, 1998
among Mattel, the Banks named therein and Bank of America National
Trust and Savings Association, as Agent (incorporated by reference to
Exhibit 99.0 to Mattel's Current Report on Form 8-K dated August 21,
1998)
10.1 Receivables Purchase Agreement dated as of March 11, 1998 among Mattel,
Mattel Factoring, Inc., the Banks named therein and NationsBank of
Texas, N.A., as Agent (incorporated by reference to Exhibit 99.1 to
Mattel's Current Report on Form 8-K dated August 21, 1998)
10.2 Distribution Agreement dated November 12, 1997 among Mattel, Morgan
Stanley & Co. Incorporated and Credit Suisse First Boston Corporation
(incorporated by reference to Exhibit 1.0 to Mattel's Current Report on
Form 8-K dated November 12, 1997)
Executive Compensation Plans and Arrangements of Mattel
10.3 Form of Indemnity Agreement between Mattel and its directors and certain
of its executive officers (incorporated by reference to Exhibit B to
Notice of Annual Meeting of Stockholders of Mattel dated March 24,
1987)
10.4 Amended and Restated Employment Agreement dated January 1, 1997 between
Mattel and Jill E. Barad (incorporated by reference to Exhibit 10.0 to
Mattel's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997)
10.5 Amended and Restated Employment Agreement dated July 29, 1996 between
Mattel and Ned Mansour (incorporated by reference to Exhibit 10.13 to
Mattel's Annual Report on Form 10-K for the year ended December 31,
1996)
10.6* Executive Employment Agreement dated January 31, 2000 between Mattel and
Adrienne Fontanella
|
10.7* Loan Agreement dated October 29, 1999 between Mattel and Adrienne
Fontanella
10.8* Amendment to Employment Agreement and Stock Option Grant Agreements
between Mattel and Adrienne Fontanella
10.9* Executive Employment Agreement dated January 31, 2000 between Mattel
and Matthew C. Bousquette
10.10* Loan Agreement dated October 29, 1999 between Mattel and Matthew C.
Bousquette
10.11* Amendment to Employment Agreement and Stock Option Grant Agreements
between Mattel and Matthew C. Bousquette
10.12* Executive Employment Agreement dated January 31, 2000 between Mattel
and Neil B. Friedman
10.13* Loan Agreement dated October 29, 1999 between Mattel and Neil B.
Friedman
10.14* Amendment to Employment Agreement and Stock Option Grant Agreements
between Mattel and Neil B. Friedman
10.15 Mattel, Inc. Management Incentive Plan (incorporated by reference to
Exhibit 10.15 to Mattel's Annual Report on Form 10-K for the year
ended December 31, 1995)
10.16* Amendment No. 1 to Mattel, Inc. Management Incentive Plan.
10.17 Mattel, Inc. Long-Term Incentive Plan (incorporated by reference to
Exhibit 10.16 to Mattel's Annual Report on Form 10-K for the year
ended December 31, 1995)
10.18 Amended and Restated Mattel Long-Term Incentive Plan (incorporated by
reference to Appendix A to Mattel's Proxy Statement dated April 26,
1999)
10.19* Amendment No. 1 to Amended and Restated Mattel Long-Term Incentive Plan
10.20 Mattel, Inc. Deferred Compensation Plan for Non-Employee Directors
(incorporated by reference to Exhibit 10.12 to Mattel's Annual Report
on Form 10-K for the year ended December 31, 1998)
10.21 Mattel, Inc. Amended & Restated Supplemental Executive Retirement Plan
as of May 1, 1996 (incorporated by reference to Exhibit 10.2 to
Mattel's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996)
10.22* Amendment No. 1 to Mattel, Inc. Amended & Restated Supplemental
Executive Retirement Plan
10.23 Mattel, Inc. Deferred Compensation Plan (incorporated by reference to
Exhibit 10.14 to Mattel's Annual Report on Form 10-K for the year
ended December 31, 1998)
10.24* Amendment No. 1 to Mattel, Inc. Deferred Compensation Plan
10.25 The Fisher-Price, Inc. Pension Plan (1989 Restatement) (incorporated by
reference to Exhibit 10(l) to Fisher-Price's Registration Statement on
Form 10 dated June 28, 1991)
10.26 The Fisher-Price Section 415 Excess Benefit Plan (incorporated by
reference to Exhibit 10(n) to Fisher-Price's Registration Statement on
Form 10 dated June 28, 1991)
10.27 Mattel, Inc. Personal Investment Plan, April 1, 1997 Restatement
(incorporated by reference to Exhibit 99.3 to Mattel's Current Report
on Form 8-K dated August 21, 1998)
10.28 Mattel, Inc. PIP Excess Plan (incorporated by reference to Exhibit
10.18 to Mattel's Annual Report on Form 10-K for the year ended
December 31, 1998)
10.29* Amendment No. 1 to Mattel, Inc. PIP Excess Plan
10.30 Pleasant Company Retirement Savings Plan and Trust Agreement, dated
July 1, 1995 (incorporated by reference to Exhibit 10.19 to Mattel's
Annual Report on Form 10-K for the year ended December 31, 1998)
10.31 Mattel, Inc. 1990 Stock Option Plan (incorporated by reference to
Exhibit A to the Notice of Annual Meeting of Stockholders and Proxy
Statement of Mattel dated March 15, 1990)
|
10.32 Amendment No. 1 to the Mattel, Inc. 1990 Stock Option Plan
(incorporated by reference to the information under the heading
"Amendment to Mattel 1990 Stock Option Plan" on page F-1 of the Joint
Proxy Statement/Prospectus of Mattel and Fisher-Price included in
Mattel's Registration Statement on Form S-4, Registration No. 33-
50749)
10.33 Amendment No. 2 to the Mattel, Inc. 1990 Stock Option Plan
(incorporated by reference to Exhibit A to Mattel's Proxy Statement
dated March 22, 1995)
10.34* Amendment No. 3 to Mattel, Inc. 1990 Stock Option Plan
10.35 Form of Award Agreement evidencing award of stock appreciation rights
granted pursuant to the Mattel, Inc. 1990 Stock Option Plan to certain
executive officers of Mattel ("Award Agreement") (incorporated by
reference to Exhibit 10.12 to Mattel's Annual Report on Form 10-K for
the year ended December 31, 1991)
10.36 Form of First Amendment to Award Agreement (incorporated by reference
to Exhibit 10.21 to Mattel's Annual Report on Form 10-K for the year
ended December 31, 1993)
10.37 Notice of Grant of Stock Options and Grant Agreement (incorporated by
reference to Exhibit 99.0 to Mattel's Current Report on Form 8-K dated
May 31, 1994)
10.38 Grant Agreement for a Non-Qualified Stock Option (incorporated by
reference to Exhibit 99.1 to Mattel's Current Report on Form 8-K dated
May 31, 1994)
10.39 Award Cancellation Agreement (incorporated by reference to Exhibit 99.2
to Mattel's Current Report on Form 8-K dated May 31, 1994)
10.40 Amended and Restated Mattel, Inc. 1996 Stock Option Plan (the "1996
Plan") (incorporated by reference to Exhibit 10.2 to Mattel's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1996)
10.41 Amendment to Amended and Restated Mattel, Inc. 1996 Stock Option Plan
(incorporated by reference to Exhibit 4.2 to Mattel's Registration
Statement on Form S-8 dated March 26, 1999)
10.42* Amendment No. 2 to Amended and Restated Mattel 1996 Stock Option Plan
10.43* Form of Option Agreement for Outside Directors under the 1996 Plan, as
amended
10.44* Form of Option Agreement under the 1996 Plan, as amended
10.45 Mattel, Inc. 1997 Premium Price Stock Option Plan (incorporated by
reference to Exhibit A to Mattel's Proxy Statement dated March 30,
1998)
10.46 First Amendment to the Mattel, Inc. 1997 Premium Price Stock Option
Plan (incorporated by reference to Exhibit 10.0 to Mattel's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998)
10.47 Second Amendment to the Mattel, Inc. 1997 Premium Price Stock Option
Plan (incorporated by reference to Exhibit 10.26 to Mattel's Annual
report on Form 10-K for the year ended December 31, 1998)
10.48* Amendment No. 3 to the Mattel, Inc. 1997 Premium Price Stock Option
Plan
10.49 Form of Option and TLSAR Agreement under the Mattel, Inc. 1997 Premium
Price Stock Option Plan (25% Premium Grant), as amended (incorporated
by reference to Exhibit 10.1 to Mattel's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998)
10.50 Form of Option and TLSAR Agreement under the Mattel, Inc. 1997 Premium
Price Stock Option Plan (33 1/3% Premium Grant), as amended
(incorporated by reference to Exhibit 10.2 to Mattel's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998)
10.51* Mattel 1999 Stock Option Plan
10.52* Form of Option Agreement under the Mattel 1999 Stock Option Plan (Two
Year Vesting)
10.53* Form of Option Agreement under the Mattel 1999 Stock Option Plan (Three
Year Vesting)
|
11.0* Computation of Income per Common and Common Equivalent Share
12.0* Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings
to Combined Fixed Charges and Preferred Stock Dividends
21.0* Subsidiaries of the Registrant
23.0* Consent of PricewaterhouseCoopers LLP
24.0* Power of Attorney (on page 50 of Form 10-K)
27.0* Financial Data Schedule (EDGAR filing only)
|
(b) Reports on Form 8-K
Mattel filed the following Current Reports on Form 8-K during the quarterly period ended December 31, 1999:
Financial
Date of Report Items Reported Statements Filed
-------------- -------------- ----------------
October 19, 1999............................. 5, 7 None
October 22, 1999............................. 5, 7 None
November 12, 1999............................ 5, 7 None
November 12, 1999............................ 5, 7 None
|
(c) Exhibits Required by Item 601 of Regulation S-K
See Item (3) above
(d) Financial Statement Schedule
See Item (2) above
Copies of Form 10-K (which includes Exhibit 24.0), Exhibits 11.0, 12.0, 21.0 and 23.0 and the Annual Report to Stockholders are available to stockholders of the Company without charge. Copies of other Exhibits can be obtained by stockholders of the Company upon payment of twelve cents per page for such Exhibits. Written requests should be sent to Secretary, Mattel, Inc., 333 Continental Boulevard, El Segundo, California 90245-5012.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
/s/ Kevin M. Farr
By: _________________________________
Kevin M. Farr
Chief Financial Officer
|
Date: As of March 10, 2000
We, the undersigned directors and officers of Mattel, Inc. do hereby severally constitute and appoint Ronald M. Loeb, Ned Mansour, Robert Normile, Christopher O'Brien, and John L. Vogelstein, and each of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or any of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically, but without limitation, power and authority to sign for us or any of us, in our names in the capacities indicated below, any and all amendments hereto; and we do each hereby ratify and confirm all that said attorneys and agents, or any one of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ William D. Rollnick Director and Acting Chairman March 10, 2000
____________________________________ of the Board
William D. Rollnick
/s/ Ronald M. Loeb Director and Acting Chief March 10, 2000
____________________________________ Executive Officer
Ronald M. Loeb
/s/ Kevin M. Farr Chief Financial Officer March 10, 2000
____________________________________ (principal financial and
Kevin M. Farr accounting officer)
/s/ Harold Brown Director March 10, 2000
____________________________________
Harold Brown
/s/ Tully M. Friedman Director March 10, 2000
____________________________________
Tully M. Friedman
/s/ Joseph C. Gandolfo Director and President, March 10, 2000
____________________________________ Worldwide Manufacturing
Joseph C. Gandolfo Operations
|
Signature Title Date
--------- ----- ----
/s/ Ned Mansour Director and President, March 10, 2000
____________________________________ Mattel, Inc.
Ned Mansour
/s/ Andrea L. Rich Director March 10, 2000
____________________________________
Andrea L. Rich
/s/ Pleasant T. Rowland Vice Chairman of the Board March 10, 2000
____________________________________ and President, Pleasant
Pleasant T. Rowland Company
/s/ Christopher A. Sinclair Director March 10, 2000
____________________________________
Christopher A. Sinclair
/s/ John L. Vogelstein Director March 10, 2000
____________________________________
John L. Vogelstein
/s/ Ralph V. Whitworth Director March 10, 2000
____________________________________
Ralph V. Whitworth
|
To the Board of Directors and Stockholders of Mattel, Inc.
In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 45 present fairly, in all material respects, the financial position of Mattel, Inc. and its subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 14(a)(2) on page 45 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of Mattel's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP _____________________________________ PRICEWATERHOUSECOOPERS LLP |
Los Angeles, California
February 2, 2000
December 31, December 31,
1999 1998
------------ ------------
(In thousands)
ASSETS
------
Current Assets
Cash and short-term investments.................... $ 275,024 $ 469,213
Accounts receivable, less allowances of $229.2
million at December 31, 1999 and $125.1 million at
December 31, 1998................................. 1,270,005 1,150,051
Inventories........................................ 544,296 644,270
Prepaid expenses and other current assets.......... 330,702 371,772
---------- ----------
Total current assets............................. 2,420,027 2,635,306
---------- ----------
Property, Plant and Equipment
Land............................................... 35,930 35,113
Buildings.......................................... 276,880 271,580
Machinery and equipment............................ 611,948 569,428
Capitalized leases................................. 23,271 23,271
Leasehold improvements............................. 84,333 98,400
---------- ----------
1,032,362 997,792
Less: accumulated depreciation..................... 474,026 422,020
---------- ----------
558,336 575,772
Tools, dies and molds, net......................... 191,158 187,349
---------- ----------
Property, plant and equipment, net................. 749,494 763,121
---------- ----------
Other Noncurrent Assets
Intangibles, net................................... 1,393,315 1,484,634
Other assets....................................... 564,186 264,324
---------- ----------
$5,127,022 $5,147,385
========== ==========
|
The accompanying notes are an integral part of these statements.
Consolidated results for 1998 have been restated retroactively for the effects of the May 1999 merger with Learning Company, accounted for as a pooling of interests. See Note 7.
December 31, December 31,
1999 1998
------------ ------------
(In thousands, except
share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings.............................. $ 369,549 $ 199,006
Current portion of long-term liabilities........... 3,173 33,666
Accounts payable................................... 360,609 362,467
Accrued liabilities................................ 825,874 748,837
Income taxes payable............................... 258,319 299,058
---------- ----------
Total current liabilities........................ 1,817,524 1,643,034
---------- ----------
Long-Term Liabilities
6-3/4% senior notes, due 2000...................... 100,000 100,000
5-1/2% senior notes, due 2000...................... 200,955 200,955
6% senior notes, due 2003.......................... 150,000 150,000
6-1/8% senior notes, due 2005...................... 150,000 150,000
Medium-term notes.................................. 540,500 540,500
Mortgage note...................................... 42,380 43,007
Other.............................................. 162,976 149,086
---------- ----------
Total long-term liabilities...................... 1,346,811 1,333,548
---------- ----------
Stockholders' Equity
Preferred stock, Series A $0.01 par value, $200.00
liquidation preference per share, 750.0 thousand
shares authorized, issued and outstanding at
December 31, 1998................................. -- 8
Preferred stock, Series C $1.00 par value, $125.00
liquidation preference per share, 772.8 thousand
shares authorized; 771.9 thousand shares issued
and outstanding at December 31, 1998.............. -- 772
Special voting preferred stock $1.00 par value,
$10.00 liquidation preference per share, one share
authorized, issued and outstanding, representing
the voting rights of 3.2 million and 5.2 million
outstanding exchangeable shares at December 31,
1999 and 1998, respectively....................... -- --
Common stock $1.00 par value, 1.0 billion shares
authorized; 433.6 million shares and 405.1 million
shares issued in 1999 and 1998, respectively...... 433,563 405,114
Additional paid-in capital......................... 1,728,954 1,845,222
Deferred compensation.............................. -- (12,265)
Treasury stock at cost; 12.0 million shares and
14.3 million shares in 1999 and 1998,
respectively...................................... (361,825) (495,347)
Retained earnings.................................. 401,642 625,197
Accumulated other comprehensive loss............... (239,647) (197,898)
---------- ----------
Total stockholders' equity....................... 1,962,687 2,170,803
---------- ----------
$5,127,022 $5,147,385
========== ==========
Commitments and Contingencies (See accompanying
notes.)
|
The accompanying notes are an integral part of these statements.
Consolidated results for 1998 have been restated retroactively for the effects of the May 1999 merger with Learning Company, accounted for as a pooling of interests. See Note 7.
For the Year
----------------------------------
1999 1998 1997
---------- ---------- ----------
(In thousands, except per share
amounts)
Net Sales................................. $5,514,950 $5,621,207 $5,455,547
Cost of sales............................. 2,913,910 2,707,904 2,635,887
---------- ---------- ----------
Gross Profit.............................. 2,601,040 2,913,303 2,819,660
Advertising and promotion expenses........ 945,955 917,665 846,448
Other selling and administrative
expenses................................. 1,190,915 1,144,801 1,013,091
Restructuring and other charges........... 345,996 157,314 343,606
Amortization of intangibles............... 91,847 129,689 487,199
Charge for incomplete technology.......... -- 56,826 20,300
Interest expense.......................... 151,609 128,468 112,612
Other income, net......................... (14,539) (13,092) (4,812)
---------- ---------- ----------
Income (Loss) Before Income Taxes and Ex-
traordinary Item......................... (110,743) 391,632 1,216
(Benefit) provision for income taxes...... (28,370) 185,579 179,327
---------- ---------- ----------
Income (Loss) Before Extraordinary Item... (82,373) 206,053 (178,111)
Extraordinary item--loss on early
retirement of debt....................... -- -- (4,610)
---------- ---------- ----------
Net Income (Loss)......................... (82,373) 206,053 (182,721)
Preferred stock dividend requirements..... 3,980 7,960 10,505
---------- ---------- ----------
Net Income (Loss) Applicable to Common
Shares................................... $ (86,353) $ 198,093 $ (193,226)
========== ========== ==========
Basic Income (Loss) Per Common Share......
Income (loss) before extraordinary item... $ (0.21) $ 0.51 $ (0.51)
Extraordinary item--loss on early
retirement of debt....................... -- -- (0.01)
---------- ---------- ----------
Net income (loss)......................... $ (0.21) $ 0.51 $ (0.52)
========== ========== ==========
Weighted average number of common shares.. 414,186 390,210 369,870
========== ========== ==========
Diluted Income (Loss) Per Common Share....
Income (loss) before extraordinary item... $ (0.21) $ 0.47 $ (0.51)
Extraordinary item--loss on early
retirement of debt....................... -- -- (0.01)
---------- ---------- ----------
Net income (loss)......................... $ (0.21) $ 0.47 $ (0.52)
========== ========== ==========
Weighted average number of common and
common equivalent shares................. 414,186 421,707 369,870
========== ========== ==========
Dividends Declared Per Common Share....... $ 0.35 $ 0.31 $ 0.27
========== ========== ==========
|
The accompanying notes are an integral part of these statements.
Consolidated results for all periods presented have been restated retroactively for the effects of the May 1999 merger with Learning Company, accounted for as a pooling of interests. See Note 7.
Consolidated results for 1997 have been restated retroactively for the effects of the March 1997 merger with Tyco, accounted for as a pooling of interests. See Note 7.
For the Year
---------------------------------
1999 1998 1997
--------- ----------- ---------
(In thousands)
Cash Flows From Operating Activities:
Net (loss) income......................... $ (82,373) $ 206,053 $(182,721)
Adjustments to reconcile net (loss) income
to net cash flows from operating
activities:
Noncash restructuring and integration
charges................................ 63,700 32,380 115,559
Depreciation............................ 199,830 179,135 164,060
Amortization............................ 98,769 133,549 489,937
Charge for incomplete technology........ -- 56,826 32,467
Loss on early retirement of debt, net of
tax.................................... -- -- 4,610
Increase (decrease) from changes in
assets and liabilities:
Accounts receivable................... (167,052) 141,583 (247,406)
Inventories........................... 82,077 (61,508) (48,923)
Prepaid expenses and other current
assets............................... (84,636) (26,873) (127,595)
Accounts payable, accrued liabilities
and income taxes payable............. (42,263) (104,275) 253,729
Deferred income taxes................. (7,151) (999) 64,015
Other, net............................ (2,315) 15,793 (14,344)
--------- ----------- ---------
Net cash flows from operating
activities......................... 58,586 571,664 503,388
--------- ----------- ---------
Cash Flows From Investing Activities:
Purchases of tools, dies and molds........ (107,017) (114,387) (96,006)
Purchases of other property, plant and
equipment................................ (104,572) (162,132) (136,439)
Payment for acquisitions, net of cash
acquired................................. (5,863) (938,647) (115,231)
Proceeds from sale of business and other
property, plant and equipment............ 10,033 18,667 31,484
Investment in other long-term assets...... (70,671) (10,783) (7,816)
Other, net................................ (612) (1,484) 566
--------- ----------- ---------
Net cash flows used for investing
activities......................... (278,702) (1,208,766) (323,442)
--------- ----------- ---------
Cash Flows From Financing Activities:
Short-term borrowings, net................ 179,595 131,810 3,193
Proceeds from issuance of notes........... -- 350,000 310,000
Proceeds from issuance of Softkey
warrants................................. -- 134,346 57,462
Payments of long-term debt................ (30,254) (106,421) (265,499)
Exercise of stock options including
related tax benefit...................... 81,291 170,233 72,290
Purchase of treasury stock................ (75,507) (351,093) (242,505)
Sale of treasury stock.................... -- -- 71,248
Issuance of preferred stock............... -- -- (10,701)
Payment of dividends on common and
preferred stock.......................... (125,673) (97,970) (84,537)
Other, net................................ (670) (6,968) (1,083)
--------- ----------- ---------
Net cash flows from (used) for
financing activities............... 28,782 223,937 (90,132)
Effect of Exchange Rate Changes on Cash..... (2,855) (1,525) (17,195)
--------- ----------- ---------
(Decrease) Increase in Cash and Short-term
Investments................................ (194,189) (414,690) 72,619
Cash and Short-term Investments at Beginning
of Year.................................... 469,213 883,903 811,284
--------- ----------- ---------
Cash and Short-term Investments at End of
Year....................................... $ 275,024 $ 469,213 $ 883,903
========= =========== =========
|
The accompanying notes are an integral part of these statements
Consolidated results for all periods presented have been restated retroactively for the effects of the May 1999 merger with Learning Company, accounted for as a pooling of interests. See Note 7.
Consolidated results for 1997 have been restated retroactively for the effects of the March 1997 merger with Tyco, accounted for as a pooling of interests. See Note 7.
Accumulated
Additional Other Total Stock-
Preferred Common Paid-In Treasury Deferred Retained Comprehensive holders'
Stock Stock Capital Stock Compensation Earnings Income (Loss) Equity
--------- -------- ---------- --------- ------------ --------- ------------- ------------
(In thousands)
Balance, December 31,
1996................... $827 $369,190 $1,233,753 $(215,999) $ -- $ 820,024 $ (98,008) $2,109,787
Comprehensive (loss):
Net (loss)............. (182,721) (182,721)
Unrealized gain on
securities............ 719 719
Currency translation
adjustments........... (113,177) (113,177)
---- -------- ---------- --------- -------- --------- --------- ----------
Comprehensive (loss).... (182,721) (112,458) (295,179)
Net income of Broderbund
for the three months
ended November 30, 1996
not included in results
of operations.......... 8,895 8,895
Purchase of treasury
stock.................. (480) (14,094) (227,932) (242,506)
Issuance of treasury
stock.................. (45,486) 158,511 113,025
Exercise of stock
options................ 2,135 36,655 38,790
Shares issued for
acquisitions........... 4,362 13,591 (6,193) 11,760
Issuance of Series A
Preferred Stock........ 8 202,025 202,033
Issuance of Softkey
warrants............... 57,462 57,462
Conversion of 7% Notes.. 893 15,141 16,034
Conversion of preferred
stock.................. (55) 2,761 (2,706) --
Conversion of
exchangeable shares.... 88 (88) --
Shares issued under
employee stock purchase
plan................... 62 1,208 1,270
Dividends declared on
common stock........... (77,528) (77,528)
Dividends declared on
preferred stock........ (10,505) (10,505)
---- -------- ---------- --------- -------- --------- --------- ----------
Balance, December 31,
1997................... 780 379,011 1,497,461 (285,420) -- 551,972 (210,466) 1,933,338
Comprehensive income:
Net income............. 206,053 206,053
Unrealized gain on
securities............ 10,249 10,249
Currency translation
adjustments........... 2,319 2,319
---- -------- ---------- --------- -------- --------- --------- ----------
Comprehensive income.... 206,053 12,568 218,621
Net income of Broderbund
for the month ended
December 31, 1997 not
included in results of
operations............. 209 209
Purchase of treasury
stock.................. (351,393) (351,393)
Issuance of treasury
stock.................. (65,210) 141,466 76,256
Exercise of stock
options................ 4,682 76,749 81,431
Shares issued for
acquisitions........... 5,503 111,011 (34,646) 81,868
Issuance of Softkey
warrants............... 134,346 134,346
Conversion of
exchangeable shares.... 10,900 (10,900) --
Conversion of 5-1/2%
Notes.................. 4,122 88,880 93,002
Issuance of nonvested
stock.................. 840 12,071 (12,265) 646
|
Accumulated
Additional Other Total Stock-
Preferred Common Paid-In Treasury Deferred Retained Comprehensive holders'
Stock Stock Capital Stock Compensation Earnings Income (Loss) Equity
--------- --------- ----------- ---------- ------------ --------- ------------- ------------
(In thousands)
Shares issued under
employee stock purchase
plan................... 56 814 870
Dividends declared on
common stock........... (90,431) (90,431)
Dividends declared on
preferred stock........ (7,960) (7,960)
----- --------- ----------- ---------- -------- --------- ---------- -----------
Balance, December 31,
1998................... 780 405,114 1,845,222 (495,347) (12,265) 625,197 (197,898) 2,170,803
Comprehensive (loss):
Net (loss)............ (82,373) (82,373)
Unrealized gain on
securities:
Unrealized holding
gains................. 3,184 3,184
Less: reclassification
adjustment for
realized gains
included in net
(loss)................ (11,143) (11,143)
Currency translation
adjustments........... (33,790) (33,790)
----- --------- ----------- ---------- -------- --------- ---------- -----------
Comprehensive (loss)... (82,373) (41,749) (124,122)
Conversion of Series A
Preferred Stock........ (8) 18,000 (17,992) --
Redemption of Series C
Preferred Stock........ (772) 6,382 (51,834) 46,224 --
Purchase of treasury
stock.................. (75,507) (75,507)
Issuance of treasury
stock.................. (87,300) 134,977 47,677
Exercise of stock
options................ 1,447 28,018 29,465
Shares issued for
acquisitions........... 241 5,306 5,547
Conversion of
exchangeable shares.... 2,342 (2,342) --
Shares issued under
employee stock purchase
plan................... 37 719 756
Tax adjustment related
to 1987 quasi-
reorganization......... 33,400 33,400
Exercise of warrants... (24,243) 27,828 3,585
Nonvested stock
activity............... 12,265 12,265
Dividends declared on
common stock........... (137,202) (137,202)
Dividends declared on
preferred stock........ (3,980) (3,980)
----- --------- ----------- ---------- -------- --------- ---------- -----------
Balance, December 31,
1999................... $ -- $ 433,563 $ 1,728,954 $ (361,825) $ -- $ 401,642 $ (239,647) $ 1,962,687
===== ========= =========== ========== ======== ========= ========== ===========
|
The accompanying notes are an integral part of these statements.
Consolidated results for all periods presented have been restated retroactively for the effects of the May 1999 merger with Learning Company, accounted for as a pooling of interests. See Note 7.
Consolidated results for December 31, 1996 have been restated retroactively for the effects of the March 1997 merger with Tyco, accounted for as a pooling of interests. See Note 7.
Note 1--Summary of Significant Accounting Policies
The consolidated financial statements include the accounts of Mattel. All significant intercompany accounts and transactions have been eliminated in consolidation, and certain amounts in the financial statements for prior years have been reclassified to conform with the current year presentation. Investments in joint ventures and other companies are accounted for by the equity method or cost basis depending upon the level of the investment and/or Mattel's ability to exercise influence over operating and financial policies. Financial data for all periods presented reflect the retroactive effect of the merger, accounted for as a pooling of interests, with Learning Company consummated in May 1999 (see Note 7). Financial data for 1997 reflect the retroactive effect of the merger, accounted for as a pooling of interests, with Tyco consummated in March 1997 (see Note 7).
Preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Assets and liabilities of foreign subsidiaries are translated into US dollars at fiscal year-end exchange rates. Income, expense and cash flow items are translated at weighted average exchange rates prevailing during the fiscal year. The resulting currency translation adjustments are recorded as a component of other comprehensive income (loss) within stockholders' equity.
Cash includes cash equivalents, which are highly liquid investments with maturities of three months or less when purchased. Because of the short maturities of these instruments, the carrying amount is a reasonable estimate of fair value.
Marketable securities, comprised principally of investments in private and publicly-traded securities, are stated at market value and classified as securities available-for-sale. Unrealized gains or losses are reported as a component of other comprehensive income (loss) within stockholders' equity until realized. Quoted market prices, which approximated cost as of the balance sheet dates, are reasonable estimates of the portfolio's fair value. These marketable securities, which had a cost basis of $2.1 million and $2.7 million as of December 31, 1999 and 1998, respectively, are shown in the consolidated balance sheets as part of other assets.
Inventories, net of an allowance for excess quantities and obsolescence, are stated at the lower of cost or market. Cost is determined by the first-in, first-out method.
Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over estimated useful lives of 10 to 40 years for buildings, 3 to 10 years for machinery and equipment, and 10 to 20 years, not to exceed the lease term, for leasehold improvements. Tools, dies and molds are amortized using the straight-line method over three years.
Intangible assets consist of the excess of purchase price over the fair value of net assets acquired in purchase acquisitions, and the cost of acquired patents and trademarks. Intangible assets are amortized using the straight-line method over periods ranging from 2 to 40 years. Accumulated amortization was $1,327.8 million and $1,236.8 million as of December 31, 1999 and 1998, respectively.
The carrying value of fixed and intangible assets is periodically reviewed to identify and assess any impairment by evaluating the operating performance and future undiscounted cash flows of the underlying assets.
Revenue from the sale of toy products is recognized upon shipment. Accruals for customer discounts and rebates, and defective returns are recorded as the related revenues are recognized.
Revenue from the sale of software products is recognized upon shipment, provided that no significant obligations remain outstanding and collection of the receivable is probable. Costs related to insignificant post shipment obligations are accrued when revenue is recognized for the sale of the related products. Allowances for good returns are provided at the time of sale and allowances for price protection are provided at the time of commitment and are charged against revenues. The allowances for good returns and doubtful accounts are developed based on an evaluation of historical and expected sales experience and by channel of distribution, and are based on information available as of the reporting date. To the extent the future market, sell- through experience, customer mix, channels of distribution, product pricing and general economic and competitive conditions change, the estimated reserves required for returns and allowances may also change. Revenues from royalty and licensing arrangements are recognized as earned based upon performance or product shipments.
Costs of media advertising are expensed the first time the advertising takes place, except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits. Direct-response advertising consists primarily of catalogue production and mailing costs that are generally amortized within three months from the date catalogues are mailed. Advertising costs associated with customer benefit programs are accrued as the related revenues are recognized. Costs related to various end-user coupon rebate programs are expensed at the time sales are made and are estimated based on the expected coupon redemption rate on a product-by-product basis and are adjusted to actual at the end of each reporting period.
Costs for new software products and enhancements to existing software products are expensed as incurred until technological feasibility has been established. Once technological feasibility is established, software development costs are capitalized until the related product is launched. Capitalized software development costs are amortized on a product-by-product basis using the straight-line method over the estimated economic life of the product, which is generally twelve months from when the product is launched, which approximates the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product. As of December 31, 1999 and 1998, Mattel had net capitalized software development costs of $73.1 million and $24.3 million, respectively, which are included in the consolidated balance sheets as part of other current assets. Amortization of software development costs included in cost of goods sold was $64.3 million, $20.2 million and $12.1 million for the years ended December 31, 1999, 1998 and 1997, respectively.
Mattel has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. Accordingly, no compensation cost has been recognized in the results of operations for nonqualified stock options granted under Mattel's plans as such options are granted at not less than the quoted market price of Mattel's common stock on the date of grant.
Mattel accounts for certain income and expense items differently for financial reporting and income tax purposes. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the differences are expected to reverse.
Share and per share data for all periods presented in these financial statements reflect the retroactive effects of the May 1999 Learning Company merger. The 1997 share and per share data presented in these financial statements reflect the retroactive effects of the March 1997 Tyco merger.
In the 1997 fourth quarter, Mattel adopted Statement of Financial Accounting Standards No. 128, Earnings per Share. Accordingly, data for 1997 have been restated to present basic and diluted income (loss) per common share.
Basic income (loss) per common share is computed by dividing earnings available to common stockholders by the weighted average number of common shares and common shares obtainable upon the exchange of the exchangeable shares of Mattel's Canadian subsidiary, Softkey Software Products Inc., outstanding during each period. Earnings available to common stockholders represent reported net income (loss) less preferred stock dividend requirements.
Diluted income (loss) per common share is computed by dividing diluted earnings available to common stockholders by the weighted average number of common shares, common shares obtainable upon the exchange of the exchangeable shares of Mattel's Canadian subsidiary, Softkey Software Products Inc., and other common equivalent shares outstanding during each period. The calculation of common equivalent shares assumes the exercise of dilutive stock options and warrants, net of assumed treasury share repurchases at average market prices, and conversion of dilutive preferred stock and convertible debt, as applicable.
A reconciliation of earnings available to common stockholders and diluted earnings available to common stockholders and the related weighted average shares for the years ended December 31 follows (in thousands):
1999 1998 1997
----------------- ----------------- ------------------
Earnings Shares Earnings Shares Earnings Shares
-------- ------- -------- ------- --------- -------
Income (loss) before
extraordinary item..... $(82,373) $206,053 $(178,111)
Extraordinary item--loss
on early retirement of
debt................... -- -- (4,610)
-------- -------- ---------
Net income (loss)....... (82,373) 206,053 (182,721)
Less: preferred stock
dividend requirements.. (3,980) (7,960) (10,505)
-------- -------- ---------
Earnings available to
common stockholders.... $(86,353) 414,186 $198,093 390,210 $(193,226) 369,870
Dilutive securities:
Dilutive stock
options.............. 8,685
Warrants.............. 4,812
Preferred stock....... 18,000
-------- ------- -------- ------- --------- -------
Diluted earnings
available to common
stockholders........... $(86,353) 414,186 $198,093 421,707 $(193,226) 369,870
======== ======= ======== ======= ========= =======
|
Premium price stock options totaling 16.9 million, other nonqualified stock options totaling 23.2 million, convertible debt, preferred stock and warrants were excluded from the calculation of diluted earnings per share in 1999 because they were anti-dilutive. Premium price options totaling 18.7 million, Series C preferred stock and convertible debt were excluded from the calculation of diluted earnings per share 1998 because they were anti-dilutive. Convertible debt, preferred stock and warrants were excluded from the calculation of diluted earnings per share in 1997 because they were anti- dilutive.
Mattel enters into foreign currency forward exchange and option contracts primarily as hedges of inventory purchases, sales and other intercompany transactions denominated in foreign currencies to limit the effect of exchange rate fluctuations on its results of operations and cash flows. Mattel does not enter into contracts for speculative purposes. Gains and losses related to firm commitments, which qualify for hedge accounting, are deferred and are recognized in the results of operations, balance sheet, and statement of cash flows as part of the underlying transaction. Contracts that do not qualify for hedge accounting are marked to market with gains and losses recognized in the results of operations currently. If a derivative previously designated as a hedge of a foreign currency commitment is terminated prior to the transaction date of the related commitment, the resultant gain or loss is recognized at the time of maturity of the original contract as a component of other income, net.
Note 2--Income Taxes
Consolidated pre-tax income (loss) consists of the following (in thousands):
For the Year
------------------------------
1999 1998 1997
--------- -------- ---------
US operations................................ $(388,382) $(25,271) $(373,836)
Foreign operations........................... 277,639 416,903 375,052
--------- -------- ---------
$(110,743) $391,632 $ 1,216
========= ======== =========
|
The (benefit) provision for current and deferred income taxes consists of the following (in thousands):
For the Year
----------------------------
1999 1998 1997
-------- -------- --------
Current
Federal.................................... $ 9,816 $ 61,434 $101,916
State...................................... 7,400 6,500 24,796
Foreign.................................... 59,400 110,300 82,628
-------- -------- --------
76,616 178,234 209,340
-------- -------- --------
Deferred
Federal.................................... (121,506) 18,179 (26,335)
State...................................... 3,420 2,366 1,587
Foreign.................................... 13,100 (13,200) (7,962)
-------- -------- --------
(104,986) 7,345 (32,710)
-------- -------- --------
(Benefit) provision including extraordinary
item........................................ (28,370) 185,579 176,630
Benefit allocated to extraordinary item...... -- -- 2,697
-------- -------- --------
Total (benefit) provision for income taxes... $(28,370) $185,579 $179,327
======== ======== ========
|
Deferred income taxes are provided principally for net operating loss carryforwards, certain reserves, depreciation, employee compensation-related expenses, acquired technology, and certain other expenses that are recognized in different years for financial statement and income tax purposes. Mattel's deferred income tax assets (liabilities) were comprised of the following (in thousands):
As of Year End
--------------------
1999 1998
--------- ---------
Operating loss and tax credit carryforwards............ $ 426,836 $ 254,770
Sales allowances and inventory reserves................ 118,729 122,178
Deferred compensation.................................. 40,372 37,022
Excess of tax basis over book basis.................... 22,142 21,917
Restructuring and integration charges.................. 68,091 23,030
Postretirement benefits................................ 12,790 12,842
Acquired technology.................................... 9,181 6,170
Other.................................................. 48,858 42,000
--------- ---------
Gross deferred income tax assets..................... 746,999 519,929
--------- ---------
Excess of book basis over tax basis.................... (37,800) (30,851)
Retirement benefits.................................... (19,933) (15,570)
Deferred intangible assets............................. (54,791) (20,329)
Other.................................................. (26,407) (9,159)
--------- ---------
Gross deferred income tax liabilities................ (138,931) (75,909)
Deferred income tax asset valuation allowances......... (234,206) (175,144)
--------- ---------
Net deferred income tax assets......................... $ 373,862 $ 268,876
========= =========
|
Management considered all available evidence and determined that a valuation allowance of $234.2 million was required as of December 31, 1999 for certain tax credit and net operating loss carryforwards that would likely expire prior to their utilization. However, management feels it is more likely than not that Mattel will generate sufficient taxable income in the appropriate carryforward periods to realize the benefit of the remaining net deferred tax assets of $373.9 million.
Differences between the (benefit) provision for income taxes at the US federal statutory income tax rate and the (benefit) provision in the consolidated statements of operations were as follows (in thousands):
For the Year
----------------------------
1999 1998 1997
-------- -------- --------
(Benefit) provision at federal statutory
rates........................................ $(38,760) $136,927 $ 426
Increase (decrease) resulting from:
Losses without income tax benefit........... 33,553 1,821 1,468
Foreign earnings taxed at different rates,
including withholding taxes................ (63,616) (34,221) (40,803)
State and local taxes, net of federal
benefit.................................... 6,165 5,763 17,149
Non-deductible amortization, merger and
restructuring charges...................... 29,391 65,493 139,363
Effect of change in valuation allowance..... -- (8,766) 50,679
Other....................................... 4,897 18,562 11,045
-------- -------- --------
Total (benefit) provision for income
taxes.................................... $(28,370) $185,579 $179,327
======== ======== ========
|
Appropriate US and foreign income taxes have been provided for earnings of foreign subsidiary companies that are expected to be remitted in the near future. The cumulative amount of undistributed earnings of foreign subsidiaries that Mattel intends to permanently invest and upon which no deferred US income taxes have been provided is $1.4 billion at December 31, 1999. The additional US income tax on the unremitted foreign earnings, if repatriated, would be offset in whole or in part by foreign tax credits.
As of December 31, 1999, Mattel has US net operating loss carryforwards totaling $740.2 million and credit carryforwards of $53.4 million for federal income tax purposes. The net operating loss carryforwards expire during the years 2000 to 2019, while $49.2 million of the tax credits expire during the years 2000 to 2010 with the remainder having no expiration date. Utilization of these loss and credit carryforwards are subject to annual limitations, and Mattel has established a valuation allowance for the carryforwards which are not expected to be utilized. The goodwill recorded in connection with Tyco's 1991 acquisition of Matchbox and Learning Company's 1998 acquisition of Mindscape, Inc. have been reduced by the tax effect of the portion of the net operating losses which Mattel expects to utilize.
Certain foreign subsidiaries have net operating loss carryforwards totaling $219.6 million ($135.4 million with no expiration date, $82.5 million expiring during the years 2000 to 2004, and $1.7 million expiring after 2004).
Generally accepted accounting principles require that tax benefits related to the exercise by employees of nonqualified stock options be credited to additional paid-in capital. In 1999, 1998 and 1997, nonqualified stock options exercised resulted in credits to additional paid-in capital totaling $15.0 million, $38.7 million and $20.2 million, respectively.
The Internal Revenue Service has completed its examination of the Mattel, Inc. federal income tax returns through December 31, 1994.
Note 3--Employee Benefits
Mattel and certain of its subsidiaries have retirement plans covering substantially all employees of these companies. Expense related to these plans totaled $18.6 million, $20.0 million and $19.0 million in 1999, 1998 and 1997, respectively.
Mattel provides defined benefit pension plans, which satisfy the requirements of the Employee Retirement Income Security Act of 1974 ("ERISA"). With the exception of the Fisher-Price Pension Plan, activity related to Mattel's pension plans, including those of foreign affiliates, was not significant during any year.
The components of net pension income for the Fisher-Price Pension Plan, based upon a December valuation date for the year ended December 31, 1999 and an October valuation date for the years ended December 31, 1998 and 1997, are detailed below (in thousands):
For the Period Ended
----------------------------
1999 1998 1997
-------- -------- --------
Service cost.................................. $ 2,829 $ 2,508 $ 2,594
Interest cost................................. 14,655 10,929 10,327
Expected return on plan assets................ (27,237) (18,949) (16,163)
Amortization of:
Unrecognized prior service cost............. 88 108 134
Unrecognized net asset...................... (1,284) (2,569) (2,569)
Plan amendment loss (gain).................... 1,386 1,154 (826)
-------- -------- --------
Net pension income............................ $ (9,563) $ (6,819) $ (6,503)
======== ======== ========
|
Reconciliation of the funded status of Fisher-Price's domestic pension plan to the related prepaid asset included in the consolidated balance sheets is as follows (in thousands):
As of Year End
-----------------
1999 1998
-------- -------
Funded status of the plan................................. $ 65,401 $41,335
Unrecognized net gain..................................... (19,551) (4,438)
Unrecognized prior service cost........................... 692 1,366
Unrecognized net transition asset......................... -- (1,285)
-------- -------
Prepaid pension asset..................................... $ 46,542 $36,978
======== =======
|
Reconciliation of the assets and liabilities of Fisher-Price's domestic pension plan are as follows (in thousands):
As of Year End
------------------
1999 1998
-------- --------
Change in Plan Assets
Plan assets at fair value, beginning of year........... $197,912 $202,887
Actual return on plan assets........................... 35,588 2,793
Benefits paid.......................................... (10,707) (7,768)
-------- --------
Plan assets at fair value, end of year................. $222,793 $197,912
======== ========
Change in Projected Benefit Obligation
Projected benefit obligation, beginning of year........ $156,577 $142,078
Service cost........................................... 2,829 2,508
Interest cost.......................................... 14,655 10,929
Plan amendments........................................ 2,003 1,154
Actuarial (gain) loss.................................. (7,965) 7,676
Benefits paid.......................................... (10,707) (7,768)
-------- --------
Projected benefit obligation, end of year.............. $157,392 $156,577
======== ========
|
For the Period
-------------------
1999 1998 1997
----- ----- -----
Assumptions:
Weighted average discount rate.......................... 8.00% 7.50% 7.75%
Rate of future compensation increases................... 4.00% 4.00% 4.00%
Long-term rate of return on plan assets................. 11.00% 11.00% 11.00%
|
During 1999, Mattel applied for a determination letter from the Internal Revenue Service related to its planned conversion of the Fisher-Price Pension Plan from a career-average plan to a cash balance plan. As of December 31, 1999, the proposed cash balance plan is under review by the Internal Revenue Service.
Domestic employees are eligible to participate in 401(k) savings plans sponsored by Mattel or its subsidiaries, which are defined contribution plans satisfying ERISA requirements. Mattel also maintains unfunded supplemental executive retirement plans which are nonqualified defined benefit plans covering certain key executives. For 1999, 1998 and 1997, the accumulated and vested benefit obligations and related expenses of these plans were not significant.
Mattel provides a deferred compensation plan which permits certain officers and key employees to elect to defer portions of their compensation. The deferred compensation plan, together with certain contributions made by Mattel and employees to an excess benefit plan, earn various rates of return. The liability for these plans as of December 31, 1999 and 1998 was $65.1 million and $47.8 million, respectively. Mattel's contribution to these plans and the related administrative expense were not significant to the results of operations during any year.
Mattel has purchased group trust-owned life insurance contracts designed to assist in funding these programs. The cash surrender value of these policies, valued at $55.7 million and $40.7 million as of December 31, 1999 and 1998, respectively, are held in an irrevocable rabbi trust which is included in other assets in the consolidated balance sheets.
Fisher-Price has an unfunded postretirement health insurance plan covering certain eligible domestic employees hired prior to January 1, 1993. Details of the expense for the Fisher-Price plan recognized in the consolidated statements of operations for the years ended December 31, 1999, 1998 and 1997 are as follows (in thousands):
For the Year
--------------------
1999 1998 1997
------ ------ ------
Service cost........................................... $ 224 $ 218 $ 284
Interest cost.......................................... 2,531 2,416 2,465
------ ------ ------
Net postretirement benefit cost........................ $2,755 $2,634 $2,749
====== ====== ======
|
Amounts included in the consolidated balance sheets for this plan are as follows (in thousands):
As of Year End
----------------
1999 1998
------- -------
Current retirees....................................... $29,988 $25,140
Fully eligible active employees........................ 3,013 4,222
Other active employees................................. 4,162 4,239
------- -------
Accumulated postretirement benefit obligation.......... 37,163 33,601
Unrecognized net loss.................................. (6,254) (1,716)
------- -------
Accrued postretirement benefit liability............... $30,909 $31,885
======= =======
|
Reconciliation of the liabilities of Fisher-Price's postretirement health insurance plan are as follows (in thousands):
As of Year End
----------------
1999 1998
------- -------
Change in Accumulated Postretirement Benefit
Obligation
Accumulated postretirement benefit obligation,
beginning of year................................. $33,601 $33,315
Service cost....................................... 224 218
Interest cost...................................... 2,531 2,416
Actuarial loss..................................... 4,538 503
Benefits paid, net of participant contributions.... (3,731) (2,851)
------- -------
Accumulated postretirement benefit obligation, end
of year........................................... $37,163 $33,601
======= =======
|
The discount rates used in determining the accumulated postretirement benefit obligation were 8.00% for 1999, 7.50% for 1998 and 7.75% for 1997. For all participants, the health care cost trend rate for expected claim costs was assumed to be 5.50% in 1999 and remaining constant thereafter. A one percentage point increase or decrease in the assumed health care cost trend rate for each future year would have the following effect on the accumulated postretirement benefit obligation and the service and interest cost recognized as of and for the year ended December 31, 1999 (in thousands):
One Percentage
Point
-----------------
Increase Decrease
-------- --------
Accumulated postretirement benefit obligation............. $3,729 $(3,188)
Service and interest cost................................. 284 (239)
|
Domestic employees of Mattel participate in a contributory postretirement benefit plan. The ongoing costs and obligations associated with the Mattel, Inc. plan are not significant to the financial position and results of operations during any year.
In June 1999, the stockholders approved the Amended and Restated Mattel Long-Term Incentive Plan ("Amended and Restated LTIP"). The Amended and Restated LTIP is a three-year plan available to certain key executives of Mattel, Inc. Awards are based upon the financial performance of Mattel over a three-year period and are paid in the quarter following the end of the three- year measurement period. No expense was recorded in 1999 for awards under the Amended and Restated LTIP. Amounts charged to operating expense in 1998 and 1997 under the 1996--1998 LTIP were $10.8 million and $13.8 million, respectively.
Mattel also has annual incentive compensation plans for officers and key employees based on Mattel's performance and subject to certain approvals of the Compensation/Options Committee of the board of directors. No expense was recorded in 1999 for awards under these plans. For the years ended December 31, 1998 and 1997, $11.7 million and $23.2 million, respectively, were charged to operating expense for awards under these plans. For the year ended December 31, 1999, $22.0 million was charged to operating expense related to a special award. This special broad-based employee award was approved by Mattel's board of directors and was designed to provide a competitive compensation level to retain and motivate employees of Mattel.
Prior to the May 1999 merger, Learning Company maintained the 1990 Long-Term Equity Incentive Plan for certain senior executives. Under this plan, 0.8 million shares of nonvested stock were issued during 1998. The aggregate fair market value of the nonvested stock was being amortized to compensation expense over the restriction period. At the time of the 1999 merger, the nonvested stock became fully vested as a result of change of control provisions and the remaining unamortized amount of $12.3 million was charged to operating expense in 1999.
Prior to the March 1997 merger, Tyco had a Long-Term Incentive Plan for certain senior executives, under which Tyco awarded Restricted Stock Units ("RSU"). The aggregate fair market value of the RSUs was being amortized to compensation expense by Tyco over the restriction period. At the time of the 1997 merger, the RSUs were converted into approximately 244 thousand shares of Mattel common stock which approximated the fair value of the RSUs on the merger consummation date and the remaining unamortized amount of $5.1 million was charged to operating expense.
Note 4--Seasonal Financing and Long-Term Debt
Mattel maintains and periodically amends or replaces an unsecured committed revolving credit agreement with a commercial bank group that is used as the primary source of financing the seasonal working capital requirements of its domestic and certain foreign affiliates. The agreement in effect during 1999 consisted of a committed unsecured facility providing a total of up to $1.0 billion in seasonal financing (a five-year facility that expires in 2003). Within the facility, up to $700.0 million was a standard revolving credit line available for advances and backup for commercial paper issuances. Interest was charged at various rates selected by Mattel, ranging from market commercial paper rates to the bank reference rate. The remaining $300.0 million was available for nonrecourse purchases of certain trade accounts receivable of Mattel by the commercial bank group providing the credit line. The agreement required Mattel to meet financial covenants for consolidated debt-to-capital and interest coverage and Mattel was in compliance with such covenants during 1999. This agreement will continue to be in effect during 2000. In addition, Mattel avails itself of uncommitted domestic facilities provided by certain banks to issue short-term money market loans.
To meet seasonal borrowing requirements of certain foreign affiliates, Mattel negotiates individual financing arrangements, generally with the same group of banks that provided credit in the prior year. Foreign credit lines total approximately $370 million, a portion of which is used to support letters of credit. Mattel expects to extend these credit lines throughout 2000 and believes available amounts will be adequate to meet its seasonal financing requirements. Mattel also enters into agreements with banks of its foreign affiliates for nonrecourse sales of certain of its foreign subsidiary receivables.
TLC Multimedia Inc., a wholly-owned subsidiary of Learning Company, had a revolving line of credit, of which $40.0 million was outstanding as of December 31, 1998. Learning Company was also party to a receivables purchase agreement for nonrecourse sales of certain domestic trade accounts receivable, of which $75.0 million was utilized as of December 31, 1998. Learning Company had a European accounts receivable facility for sales with recourse of certain European trade accounts receivable of up to $25.0 million, which was fully utilized as of December 31, 1998. Upon consummation of the May 1999 merger, all outstanding borrowings under the revolving line of credit and the European accounts receivable facility were repaid and the revolving line of credit and the domestic and European accounts receivable facilities were terminated by Mattel.
Interest rates charged on Mattel's working capital credit lines are adjusted on a periodic basis; therefore, the carrying amounts of such obligations are a reasonable approximation of their fair value. Information relating to Mattel's domestic and foreign credit lines and other short-term borrowings is summarized as follows (in thousands):
For the Year
--------------------------------
1999 1998 1997
---------- ---------- --------
Balance at end of year
Domestic.................................. $ 293,744 $ 119,175 $ 35,150
Foreign................................... 75,805 79,831 17,468
Maximum amount outstanding
Domestic.................................. $1,207,000 $1,076,600 $558,000
Foreign................................... 117,000 141,000 67,000
Average borrowing
Domestic.................................. $ 573,100 $ 400,800 $178,000
Foreign................................... 40,000 58,000 40,000
Weighted average interest rate on average
borrowing
Domestic (computed daily)................. 5.5% 5.6% 5.7%
Foreign (computed monthly)................ 33.0% 20.3% 11.9%
|
6 -3/4% Senior Notes
In May 1993, Mattel issued $100.0 million aggregate principal amount of 6 - 3/4% Senior Notes maturing May 15, 2000. Interest is payable semiannually on the fifteenth day of May and November. At December 31, 1999 and 1998, the bid prices for the 6 -3/4% Senior Notes, as provided by one of the underwriters, were $999.40 and $1,014.00, respectively, based on a par value of $1,000.00. As of December 31, 1999, the 6- 3/4% Senior Notes are classified in the consolidated balance sheets as a long-term liability because management has the ability and intent to repay this obligation upon maturity with proceeds from the issuance of other long-term debt instruments.
5 -1/2% Senior Convertible Notes ("5- 1/2% Notes")
In October 1995, Learning Company issued $350.0 million aggregate principal amount of 5 -1/2% Notes maturing November 1, 2000. Interest is payable semiannually on the first day of May and November. The 5 -1/2% Notes are convertible at the option of the holders into common stock at $53.00 per share. The terms of the 5 -1/2% Notes provide for early redemption at the option of the issuer, in whole or in part, at any time on or after November 2, 1998 at redemption prices equal to 102.2% of the principal amount reducing annually to 100% by November 1, 2000. During the years ended December 31, 1998 and 1997, Learning Company repurchased $6.0 million and $28.0 million, respectively, of 5 -1/2% Notes. In June 1998, Learning Company repurchased $96.7 million of 5 - 1/2% Notes in exchange for issuance of 4.1 million shares of common stock. At December 31, 1999 and 1998, the bid prices for the 5 -1/2% Notes, as provided by one of the underwriters, were $980.00 and $985.00, respectively, based on a par value of $1,000.00. As of December 31, 1999, the 5 -1/2% Senior Notes are classified in the consolidated balance sheets as a long-term liability because management has the ability and intent to repay this obligation upon maturity with proceeds from the issuance of other long-term debt instruments.
Mattel assumed Learning Company's obligations related to the 5 -1/2% Notes upon consummation of the May 1999 merger. As a result, the 5 -1/2% Notes are now convertible at the option of the holders into a number of shares of Mattel common stock determined by dividing the principal amount of the notes to be converted by the $53.00 conversion price and multiplying the resulting number by 1.2.
In December 1995, Tribune Company made an investment in Learning Company in the form of $150.0 million aggregate principal amount of 5 -1/2% Notes. These notes were sold by Tribune Company during 1997 in a private transaction to an investor group prior to the issuance by Learning Company of 750.0 thousand shares of Series A Convertible Participating Preferred Stock ("Series A Preferred Stock") and were surrendered by the investor group for the shares of the Series A Preferred Stock.
6% and 6 -1/8% Senior Notes
In July 1998, Mattel issued $300.0 million aggregate principal amount of senior notes, $150.0 million of which were 6% Senior Notes maturing July 15, 2003 and $150.0 million of which were 6 -1/8% Senior Notes maturing July 15, 2005. Interest is payable semiannually on the fifteenth day of January and July. At December 31, 1999 and 1998, the bid prices for the 6% and 6 -1/8% Senior Notes, as provided by one of the underwriters, were $929.20 and $1,004.40, respectively, for the 6% Senior Notes and $884.60 and $998.65, respectively, for the 6 -1/8% Senior Notes, based on a par value of $1,000.00.
Medium-Term Notes ("MT Notes")
During the 1994 third quarter, Mattel commenced a program for the issuance of debt and equity securities under various shelf registration statements. In November 1998, Mattel filed its current universal shelf registration statement allowing the issuance of up to $400.0 million of debt and equity securities, all of which was available to be issued as of December 31, 1999. The following is a summary of MT Notes currently outstanding (in millions, except bid prices):
Bid Price (b)
---------------------------------------
Year Issued Amount Maturity Date Rate (a) 1999 1998
----------- ------ ------------- ------------ ------------------ --------------------
1994.................... $ 50.5 12/01--12/04 8.48%--8.55% $1,008.57--$991.65 $1,052.61--$1,112.70
1995.................... 130.0 04/02--05/07 7.01%--7.65% 937.40-- 963.78 1,043.20-- 1,051.34
1997.................... 310.0 11/04--07/12 6.70%--7.49% 867.40-- 912.10 1,021.59-- 1,073.45
1998.................... 50.0 11/13 6.50%--6.61% 777.50-- 786.30 990.52-- 1,000.85
|
In 1990, Mattel borrowed $45.0 million under a mortgage agreement collateralized by its headquarters office facility in El Segundo, California. Interest accrues at 10.15% and monthly principal and interest payments are due through December 2005. The fair value of the original mortgage note, estimated by discounting future cash flows at interest rates currently available for debt with the same credit rating, similar terms and maturity date, was approximately $46 million and $51 million at December 31, 1999 and 1998, respectively.
7% Convertible Subordinated Notes ("7% Notes")
Upon consummation of the March 1997 merger, Mattel assumed Tyco's $16.0 million obligation related to the 7% Notes. On September 10, 1997, the holder converted all of the 7% Notes into 892.7 thousand shares of Mattel common stock.
10 -1/8% Senior Subordinated Notes ("10 -1/8% Notes")
Upon consummation of the March 1997 merger, Mattel assumed Tyco's $126.5 million obligation related to the 10 -1/8% Notes. On August 15, 1997, Mattel exercised its option and redeemed the 10 -1/8% Notes at 103.797% of par together with accrued interest. In the third quarter of 1997, Mattel recognized a pre-tax extraordinary loss of $7.3 million, and a related income tax benefit of $2.7 million, as a result of the early retirement.
6 -7/8% Senior Notes
Mattel's $100.0 million of 6 -7/8% Senior Notes issued in August 1992 were repaid upon maturity on August 1, 1997.
The aggregate amounts of long-term debt and other obligations maturing in the next five years are as follows (in thousands):
MT Mortgage
Senior Notes Notes Note Other Total
------------ ------- -------- ------ --------
2000.............................. $301,000 $ -- $600 $2,500 $304,100
2001.............................. -- 30,500 700 500 31,700
2002.............................. -- 30,000 800 200 31,000
2003.............................. 150,000 30,000 800 200 181,000
2004.............................. -- 50,000 900 200 51,100
|
Note 5--Stockholders' Equity
Mattel is authorized to issue 20.0 million shares of $0.01 par value preference stock, of which none is currently outstanding. There are 2.0 million shares of $0.01 par value preference stock designated as Series E Junior Participating Preference Stock in connection with a distribution of Preference Share Purchase Rights (the "Rights") to Mattel's common stockholders. The Rights may be exercised by their holders to purchase shares of Mattel's Series E Junior Participating Preference Stock upon the occurrence of a change of control as defined in the rights agreement. The Rights will expire on February 17, 2002, unless the agreement is further extended or the Rights are earlier redeemed or exchanged by Mattel.
Mattel is authorized to issue 3.0 million shares of $1.00 par value preferred stock, of which 771.9 thousand shares were outstanding as of December 31, 1998.
During 1997, Learning Company issued 750.0 thousand shares of Series A Preferred Stock to an investor group in exchange for $150.0 million of 5- 1/2% Notes. Just prior to the consummation of the May 1999 merger, each share of Series A Preferred Stock was converted into 20 shares of Learning Company common stock, and the resale restrictions expired.
An extraordinary loss of approximately $61 million was recognized upon conversion of the 5- 1/2% Notes into the Series A Preferred Stock due to the appreciation of the underlying common stock between the date the conversion agreement was signed and the date the preferred stock was issued. The resulting income tax benefit related to the extraordinary loss was also estimated to be approximately $61 million. As a result, the extraordinary loss, net of tax, was determined to be immaterial and was not disclosed as a separate item in the consolidated statement of operations for the year ended December 31, 1997.
--Series C Mandatorily Convertible Redeemable Preferred Stock ("Series C Preferred Stock")
During 1996, Tyco sold 772.8 thousand shares of Series C Preferred Stock. Each share of Series C Preferred Stock was converted into like Mattel preferred stock as a result of the March 1997 merger. Series C Depositary Shares ("Depositary Shares"), each representing one twenty-fifth of a share of Series C Preferred Stock, totaling 19.3 million shares, were sold by the depositary as part of the above offering. Each Depositary Share was converted into a like Mattel depositary share as a result of the March 1997 merger. On July 1, 1999, all outstanding shares of Series C Preferred Stock (and the related Depositary Shares) were converted by the holders into 7.7 million shares of Mattel common stock pursuant to terms of the certificate of designations.
--Series B Voting Convertible Exchangeable Preferred Stock ("Series B Preferred Stock")
During 1994, Tyco sold 47.6 thousand shares of Series B Preferred Stock to a private investment group. Each share of Series B Preferred Stock was converted into like Mattel preferred stock as a result of the March 1997 merger. On December 2, 1997, all outstanding shares of Series B Preferred Stock were converted by the holders into 2.8 million shares of Mattel common stock.
Mattel is authorized to issue one share of $1.00 par value Special Voting Preferred Stock, which was issued in exchange for one share of Learning Company special voting stock in connection with the May 1999 merger. The par value and liquidation preference of the Special Voting Preferred Stock are $1.00 and $10.00 per share, respectively. The Special Voting Preferred Stock has a number of votes equal to the number of outstanding exchangeable shares which are not owned by Mattel, its subsidiaries or any entity controlled by Mattel. The Special Voting Preferred Stock votes together with the holders of Mattel's common stock as a single class on all matters on which the holders of Mattel's common stock may vote. No dividends are paid on the Special Voting Preferred Stock. The Special Voting Preferred Stock will be redeemed for $10.00 on February 4, 2005, the redemption date for the exchangeable shares, unless the board of directors of Mattel's subsidiary, Softkey Software Products Inc., extends or accelerates the redemption date.
In May 1998, the stockholders of Mattel approved an amendment to Mattel's Restated Certificate of Incorporation that increased the number of shares of authorized common stock from 600.0 million to 1.0 billion in order to accommodate issuance of common stock in connection with possible future mergers and other financing transactions, future stock dividends or splits, future awards pursuant to Mattel's stock option plans, warrant exercises, and other general corporate purposes.
As of December 31, 1999 and 1998, there were 3.2 million and 5.2 million outstanding exchangeable shares, respectively, which were not owned by Mattel, its subsidiaries or any entity controlled by Mattel. As a
result of the May 1999 merger, each exchangeable share is convertible at the option of the holder, without additional payment, for the right to receive 1.2 shares of Mattel common stock until February 4, 2005. On that date, any exchangeable shares not previously converted will be redeemed at the current market price of Mattel's common stock multiplied by 1.2. The redemption price will be paid in the form of Mattel common stock, plus cash equal to any unpaid dividends. The board of directors of Mattel's subsidiary, Softkey Software Products Inc., may extend the automatic redemption date at its option and may accelerate the automatic redemption date if the number of outstanding exchangeable shares is less than 0.5 million. Holders of exchangeable shares are entitled to receive dividends declared on Mattel's common stock multiplied by 1.2 as if the exchangeable shares had been converted into common stock. Holders of exchangeable shares vote their shares through the Special Voting Preferred Stock at the rate of 1.2 votes per exchangeable share on all matters on which the holders of Mattel's common stock may vote. As a result of the 1999 merger, each exchangeable share will include the right to acquire exchangeable shares under a rights agreement issued by Softkey Software Products Inc. These rights have an economically equivalent value to the Rights attached to Mattel's common stock.
During the years ended December 31, 1999, 1998 and 1997, 1.9 million, 9.1 million and 0.1 million exchangeable shares, respectively, were converted by the holders into common stock at the rate of 1.2 common shares per exchangeable share.
In 1997 and 1998, Mattel's Canadian subsidiary, Softkey Software Products Inc., issued 4.1 million and 8.7 million warrants in private placements in Canada for net proceeds of $57.5 million and $134.3 million, respectively. Each warrant was subsequently exchanged in accordance with its provisions into one exchangeable share without additional payment during 1998.
In 1996, the stockholders of Mattel approved the Mattel 1996 Stock Option Plan. Under this plan, incentive stock options, nonqualified stock options, stock appreciation rights, nonvested stock awards, and shares of common stock may be granted to officers, key employees, and other persons providing services to Mattel. In addition, nonqualified stock options may be granted to members of Mattel's board of directors who are not employees of Mattel.
Generally, options are exercisable contingent upon the grantees' continued employment with Mattel. Nonqualified stock options are granted at not less than 100% of the fair market value of Mattel's common stock on the date of grant, generally vest at the rate of 25% per year of service, and usually expire within ten years from the date of grant. The 1996 Stock Option Plan provides that up to 1.5% of Mattel's outstanding common stock as of the first day of each calendar year will be available for awards under the plan. Grants made to individual participants cannot exceed 1.0 million shares in any single calendar year. On February 4, 1999, Mattel's board of directors approved an amendment to the 1996 Stock Option Plan authorizing an additional 6.0 million shares for grant in connection with new employees of businesses acquired by Mattel. The aggregate number of shares of common stock available for grant under the 1996 Stock Option Plan may not exceed 50.0 million shares. This plan expires on December 31, 2005. Mattel's previous plans, the 1982 and 1990 Stock Option Plans, expired on April 14, 1992 and December 31, 1996, respectively. All outstanding awards under these plans continue to be exercisable under the terms of their respective grant agreements.
In November 1999, the Compensation/Options Committee of Mattel's board of directors approved the Mattel 1999 Stock Option Plan. Under this plan, nonqualified stock options, stock appreciation rights and nonvested stock awards may be granted to key employees who are not officers, directors or consultants of
Mattel. Generally, options are exercisable contingent upon the grantee's continued employment with Mattel. Nonqualified stock options are granted at not less than 100% of the fair market value of Mattel's common stock on the date of grant, and expire within ten years from the date of grant. Options granted under the 1999 Stock Option Plan vest on a schedule determined by the Compensation/Options Committee. Grants made in 1999 vest over three years at six month intervals, at a rate of 10% for each six-month period during the first year and at a rate of 20% per six month period thereafter. Grants made to individual participants cannot exceed 1.0 million shares in any single calendar year. The aggregate number of shares of common stock available for grant under the 1999 Stock Option Plan may not exceed 12.8 million shares. This plan expires on December 31, 2009.
The fair value of Mattel options granted has been estimated using the Black- Scholes pricing model. The expected life of these options used in this calculation has been determined using historical exercise patterns. The following weighted average assumptions were used in determining fair value:
1999 1998 1997
----- ----- -----
Expected life (in years)................................ 3.90 3.60 3.40
Risk-free interest rate................................. 6.34% 4.61% 5.69%
Volatility factor....................................... 18.46% 15.80% 17.40%
Dividend yield.......................................... 0.84% 0.83% 0.86%
|
The weighted average fair value of Mattel options granted during 1999, 1998 and 1997 were $4.85, $7.32 and $4.86, respectively.
The following is a summary of stock option information and weighted average exercise prices for Mattel's stock option plans during the year (options in thousands):
1999 1998 1997
-------------- -------------- --------------
Number Price Number Price Number Price
------ ------ ------ ------ ------ ------
Outstanding at January 1......... 16,075 $27.02 17,307 $21.73 13,310 $18.05
Options granted................ 18,208 20.45 3,680 41.66 7,443 25.79
Options exercised.............. (201) 20.93 (4,284) 17.80 (2,807) 14.89
Options canceled............... (1,872) 28.14 (628) 29.79 (639) 22.44
------ ------ ------
Outstanding at December 31....... 32,210 $23.28 16,075 $27.02 17,307 $21.73
====== ====== ======
Exercisable at December 31....... 10,813 $23.89 5,645 $20.48 5,999 $16.29
====== ====== ======
Available for grant at December
31.............................. 9,234 2,358 1,072
====== ====== ======
|
The following table summarizes information about the weighted average remaining contractual life (in years) and the weighted average exercise prices for Mattel stock options outstanding as of December 31, 1999 (options in thousands):
Options
Options Outstanding Exercisable
------------------------------------------- -------------------------
Exercise Price Remaining
Ranges Number Life Price Number Price
-------------- ------ --------- ------ ------ ------
$ 4.69 to $13.56 389 5.20 $11.59 259 $10.77
13.69 to 13.69 7,010 9.84 13.69 -- --
14.00 to 22.40 3,090 4.65 16.17 2,990 16.05
22.50 to 22.50 3,816 9.04 22.50 1 22.50
22.56 to 25.63 3,125 6.76 24.47 1,811 24.57
25.75 to 25.75 5,063 7.11 25.75 3,162 25.75
25.94 to 26.25 592 6.93 26.15 507 26.14
26.38 to 26.38 5,440 9.42 26.38 947 26.38
26.50 to 41.38 826 7.64 33.37 410 31.40
42.00 to 42.00 2,859 8.10 42.00 726 42.00
------ ------
$ 4.69 to $42.00 32,210 8.13 $23.28 10,813 $23.89
====== ======
|
Prior to the March 1997 merger, Tyco had various incentive and non-qualified stock option plans that provided benefits for eligible participants. Effective with the 1997 merger, all stock options previously granted and outstanding under these plans were exchanged for approximately 363 thousand Mattel common shares, which approximated the fair value of the options as of the merger consummation date.
In November 1997, the Compensation/Options Committee of the board of directors approved the Mattel, Inc. 1997 Premium Price Stock Option Plan, which was subsequently approved by Mattel's stockholders at the May 1998 meeting. Under this plan, premium price options may be granted to officers and other key employees of Mattel. Grants made to individual participants cannot exceed 4.5 million shares in any three consecutive calendar years. Grants under the 1997 Premium Price Stock Option Plan in 1997 were intended to replace annual grants under the 1996 Stock Option Plan until the end of 2000.
The exercise price of premium price options is calculated at 25% and 33- 1/3% above Mattel's six-month average stock price prior to the date of grant. Options are forfeited unless Mattel's common stock price reaches the premium exercise price within two years from the date of grant for options with a 25% premium price and within three years from the date of grant for options with a 33- 1/3% premium price. Options granted under the plan may not be exercised for three years and expire five years from the date of grant. Each option includes a Tandem Limited Stock Appreciation Right which gives the holder the right to receive cash, shares of common stock or any combination of cash and common stock upon the occurrence of a change of control as defined in the plan. On February 4, 1999, Mattel's board of directors approved an amendment to the 1997 Premium Price Stock Option Plan authorizing an additional 3.0 million shares for grant in connection with new employees of businesses acquired by Mattel, bringing the aggregate number of shares of common stock available for grant under this plan to 24.0 million. This plan expires on December 31, 2002.
The following is a summary of stock option information and weighted average exercise prices for premium price options during the year (options in thousands):
1999 1998 1997
-------------- ------------- -------------
Number Price Number Price Number Price
------ ------ ------ ------ ------ ------
Outstanding at January 1........... 18,661 $44.04 17,661 $43.58 --
Options granted.................. 3,420 35.00 1,000 52.15 17,661 $43.58
Options exercised................ -- -- --
Options canceled................. (5,139) 39.71 -- --
------ ------ ------
Outstanding at December 31......... 16,942 $43.53 18,661 $44.04 17,661 $43.58
====== ====== ======
Exercisable at December 31......... -- -- --
====== ====== ======
Available for grant at December
31................................ 7,058 2,339 3,339
====== ====== ======
|
The fair value of premium price options granted has been estimated using the Black-Scholes pricing model. The following assumptions were used in determining fair value:
1999 1998 1997
----- ----- -----
Expected life (in years)................................ 5.00 5.00 5.00
Risk-free interest rate................................. 5.16% 5.80% 6.33%
Volatility factor....................................... 39.90% 25.50% 24.10%
Dividend yield.......................................... 0.89% 0.83% 0.86%
|
The fair value of options granted during 1999, 1998 and 1997 was $5.37, $5.10 and $4.79 for 25% premium price options and $5.48, $4.92 and $4.86 for 33- 1/3% premium price options, respectively.
The following table summarizes information about the remaining contractual life (in years) and the exercise prices for premium price options outstanding as of December 31, 1999 (options in thousands):
Options Outstanding
-------------------------------------------------------------------------------------
Remaining
Number Life Price
------ --------- ------
660 4.25 $35.24
660 4.25 37.59
7,364 2.85 42.31
7,258 2.85 44.87
500 3.54 50.46
500 3.54 53.83
------
16,942 $43.53
======
|
Prior to the May 1999 merger, Learning Company and its subsidiaries had various incentive and nonqualified stock option plans that provided benefits for eligible employees and non-employee directors. Effective with the 1999 merger, each outstanding option under these plans was converted into an option to purchase 1.2 shares of Mattel common stock. The exercise price of such options was adjusted by dividing the Learning Company option price by 1.2. Other than options granted under some plans assumed by Learning Company in connection with recent acquisitions, all Learning Company stock options vested and became fully exercisable as a result of the 1999 merger.
The fair value of Learning Company options granted prior to the 1999 merger, and during the years ended 1998 and 1997 has been estimated using the Black- Scholes pricing model. The expected life of these options used in this calculation has been determined using historical exercise patterns. The following weighted average assumptions were used in determining fair value:
1999 1998 1997
----- ----- -----
Expected life (in years)................................ 4.00 6.00 4.00
Risk-free interest rate................................. 6.35% 5.13% 6.00%
Volatility factor....................................... 51.00% 68.00% 75.00%
Dividend yield.......................................... -- -- --
|
The weighted average fair value of Learning Company options granted prior to the 1999 merger, and during the years ended 1998 and 1997 were $9.83, $10.14 and $8.81, respectively.
The following is a summary of stock option information and weighted average exercise prices for Learning Company's stock option plans during the year (options in thousands):
1999 1998 1997
-------------- -------------- --------------
Number Price Number Price Number Price
------ ------ ------ ------ ------ ------
Outstanding at January 1......... 17,626 $14.30 16,396 $14.43 14,694 $18.63
Options assumed in
acquisitions.................. -- -- -- -- 860 3.98
Options granted................ 1,415 21.12 8,979 15.29 9,695 11.12
Options exercised.............. (5,278) 10.99 (4,660) 8.77 (1,489) 7.43
Options canceled............... (3,083) 15.94 (3,089) 21.70 (7,364) 16.12
------ ------ ------
Outstanding at December 31....... 10,680 $16.19 17,626 $14.30 16,396 $14.43
====== ====== ======
Exercisable at December 31....... 9,473 $15.41 6,602 $15.04 7,154 $13.05
====== ====== ======
Available for grant at December
31.............................. -- 4,709 3,270
====== ====== ======
|
The following table summarizes information about the weighted average remaining contractual life (in years) and the weighted average exercise prices for Learning Company stock options outstanding as of December 31, 1999 (options in thousands):
Options
Options Outstanding Exercisable
------------------------------------------- -------------------------
Exercise Price Remaining
Ranges Number Life Price Number Price
-------------- ------ --------- ------ ------ ------
$ 0.58 to $ 5.63 232 6.87 $ 3.90 222 $ 3.90
6.54 to 12.92 2,026 7.54 10.87 2,016 10.88
12.97 to 23.49 7,361 7.32 15.89 6,479 15.34
24.06 to 34.51 1,025 7.14 29.38 727 29.55
79.92 to 79.92 36 0.83 79.92 29 79.92
------ -----
$ 0.58 to $79.92 10,680 7.31 $16.19 9,473 $15.41
====== =====
|
In March 1997, in order to provide a competitive employment environment for staff retention and hiring, Learning Company instituted an option exchange program under which certain employees (other than employee directors) with options exercisable at $8.67 per share or higher were given the opportunity to exchange such options for options with an exercise price of $8.67 per share. A total of 4.4 million options were exchanged and have been included in the canceled and granted totals for the year ended December 31, 1997.
Mattel, Tyco and Learning Company each adopted the disclosure-only provisions of SFAS No. 123. Accordingly, no compensation cost has been recognized in the results of operations for nonqualified stock options granted under these plans during the years ended December 31, 1999, 1998 and 1997. Had compensation cost for nonqualified stock options been determined based on their fair value at the date of grant consistent with the method of accounting prescribed by SFAS No. 123, Mattel's net income (loss) and earnings per share would have been adjusted as follows (amounts in millions except per share data):
For the Year Ended
------------------------
1999 1998 1997
------- ------ -------
Net income (loss)
As reported........................................ $ (82.4) $206.1 $(182.7)
Stock option plans................................. (30.1) (67.1) (38.6)
Premium price stock option plan.................... (20.1) (21.1) --
------- ------ -------
Pro forma income (loss)........................ $(132.6) $117.9 $(221.3)
======= ====== =======
Income (loss) per share
Basic
As reported...................................... $ (0.21) $ 0.51 $ (0.52)
Stock option and premium price option plans...... (0.12) (0.17) (0.11)
------- ------ -------
Pro forma basic income (loss).................. $ (0.33) $ 0.34 $ (0.63)
======= ====== =======
Diluted
As reported...................................... $ (0.21) $ 0.47 $ (0.52)
Stock option and premium price option plans...... (0.12) (0.16) (0.11)
------- ------ -------
Pro forma diluted income (loss)................ $ (0.33) $ 0.31 $ (0.63)
======= ====== =======
|
The pro forma effect on Mattel's 1998 and 1997 net income is not indicative of the pro forma effect in future years, because it does not take into consideration the pro forma expense related to grants made prior to 1995.
In December 1999, 751.4 thousand warrants were exercised for an equal number of common shares by the holder in accordance with the terms of the warrant agreement. In June 1999, 114.2 thousand common shares were issued to a warrant holder in a cashless exercise in accordance with the terms of the warrant agreement. As of December 31, 1999, all stock subscription warrants previously outstanding had been exercised.
In 1996, Mattel entered into a licensing agreement with Disney Enterprises, Inc. Pursuant to this agreement, Mattel issued Disney a warrant to purchase 3.0 million shares of Mattel's common stock at an exercise price of $27.375 per share. This warrant expires no later than April 2, 2004. The warrant's fair value of $26.4 million was determined using the Black-Scholes pricing model, assuming an expected life of eight years, a dividend yield of 0.88%, a risk- free interest rate of 6.17%, and a volatility factor of 27.60%.
The fair value of the warrant is amortized as a component of royalty expense as the related properties are introduced over the period the related revenues are recognized. During 1999, 1998 and 1997, $5.6 million, $3.2 million and $1.1 million, respectively, was recognized in the results of operations related to this warrant.
In December 1997, Learning Company stockholders approved the 1997 Employee Stock Purchase Plan, which provided certain eligible employees with the opportunity to purchase shares of common stock at a price of 85% of the price listed on the New York Stock Exchange at various specified purchase dates. The plan met the criteria established in SFAS No. 123 for noncompensatory employee stock purchase plans and therefore, no compensation expense was recorded in connection with this plan. During the years ended December 31, 1999 and 1998, approximately 37 thousand and 56 thousand shares, respectively, were purchased by employees under this plan. As a result of the May 1999 merger, the 1997 Employee Stock Purchase Plan was terminated.
Prior to their merger with Learning Company, Broderbund also had an employee stock purchase plan. During the year ended December 31, 1997, approximately 62 thousand shares were purchased by employees under this plan. As a result of the merger with Learning Company, the Broderbund employee stock purchase plan was terminated.
Mattel's common stock repurchase plan, initiated in May 1990, provides for the repurchase of common shares to fund Mattel's stock option plans. The number of shares to be repurchased is authorized on an annual basis by the board of directors based upon anticipated reissuance needs. During 1999, 1998, and 1997, Mattel repurchased 4.0 million, 9.7 million, and 6.5 million shares, respectively.
A regular quarterly cash dividend has been declared by the Mattel board of directors on Mattel's common stock since the second quarter of 1990. The board of directors increased the quarterly cash dividend from $0.08 per common share to $0.09 per common share in the second quarter of 1999. Learning Company did not pay dividends on its common stock during 1999 prior to the May merger and during the years ended December 31, 1998 and 1997.
Note 6--Commitments and Contingencies
Mattel routinely enters into noncancelable lease agreements for premises and equipment used in the normal course of business. The following table shows the future minimum obligations under lease commitments in effect at December 31, 1999 (in thousands):
Capitalized Operating
Leases Leases
----------- ---------
2000.................................................. $ 300 $ 49,000
2001.................................................. 300 37,800
2002.................................................. 300 20,500
2003.................................................. 300 15,100
2004.................................................. 300 13,900
Thereafter............................................ 9,200 10,300
------- --------
$10,700(a) $146,600
======= ========
|
Rental expense under operating leases amounted to $75.2 million, $66.6 million and $71.5 million for 1999, 1998 and 1997, respectively, net of sublease income of $0.6 million, $0.5 million and $0.3 million in 1999, 1998 and 1997, respectively.
In the normal course of business, Mattel enters into contractual arrangements to obtain and protect Mattel's right to create and market certain products and for future purchases of goods and services to ensure availability and timely delivery. Such arrangements include royalty payments pursuant to licensing agreements and commitments for future inventory purchases. Certain of these commitments routinely contain provisions for guaranteed or minimum expenditures during the terms of the contracts. Current and future commitments for guaranteed payments reflect Mattel's focus on expanding its product lines through alliances with businesses in other industries.
The largest commitment involves Mattel's agreements with The Walt Disney Company and Disney Enterprises, Inc. The licensing agreement with The Walt Disney Company, which contains annual minimum royalty guarantees, permits Mattel to use the Disney name and certain characters on preschool and infant products through September 2002.
The agreement with Disney Enterprises, Inc. grants Mattel exclusive worldwide rights (with certain exceptions) to produce toys based on all children-oriented Disney television and film properties introduced. This agreement spans three years, with Mattel having the right for up to two additional years to market merchandise from film properties produced during the second and third years. The initial term of the agreement may be renewed for an additional three-year period upon mutual consent. This agreement contains minimum royalty guarantees that are contingent upon the number and nature of the properties introduced by Disney. Commitments for 2000 introductions are expected to approximate $10 million payable over a three-year period. Pursuant to the agreement, Mattel issued Disney a stock warrant, valued at $26.4 million, to purchase 3.0 million shares of Mattel's common stock.
In January 2000, Mattel and Warner Bros. Worldwide Consumer Products signed a licensing agreement making Mattel the worldwide master toy licensee for the literary characters from the Harry Potter books published by J.K. Rowling as well as for feature film and television properties developed by Warner Bros. Pictures featuring the Harry Potter characters. Mattel's worldwide toy licensing agreement involves the first two Harry Potter books and theatrical films. This agreement contains minimum royalty guarantees and has a term of four years, provided that the second theatrical film is released prior to January 1, 2003. If the second theatrical film is released subsequent to January 1, 2003, the agreement will be extended to a date twelve months after the release of the second theatrical film. Pursuant to the agreement, Mattel issued Warner Bros. Consumer Products a stock warrant to purchase 3.0 million shares of Mattel's common stock. This warrant became fully vested and exercisable upon signing of the licensing agreement.
Licensing and related agreements provide for terms extending from 2000 through 2007 and contain provisions for future minimum payments as shown in the following table (in thousands):
Minimum
Payments
--------
2000................................................................ $134,000
2001................................................................ 104,000
2002................................................................ 69,000
2003................................................................ 15,000
2004................................................................ 18,000
Thereafter.......................................................... 6,000
--------
$346,000
========
|
Royalty expense for the years ended December 31, 1999, 1998 and 1997 was $308.6 million, $234.2 million and $225.8 million, respectively.
As of December 31, 1999, Mattel had outstanding commitments for 2000 purchases of inventory of approximately $92 million.
To limit the exposure associated with exchange rate movements, Mattel enters into foreign currency forward exchange and option contracts primarily as hedges of inventory purchases, sales and other intercompany transactions denominated in foreign currencies. These contracts generally have maturity dates of up to 18 months. Gains or losses related to firm commitments, which qualify for hedge accounting, are deferred and are recognized in the results of operations as part of the underlying transaction. Contracts that do not qualify for hedge accounting are marked to market with gains and losses recognized in the results of operations. Had Mattel not entered into hedges to limit the effect of exchange rate fluctuations on results of operations and cash flows, 1999 pre- tax income would have been reduced by approximately $16 million.
As of December 31, 1999 and 1998, Mattel held the following contracts to sell foreign currencies (in thousands):
1999 1998
----------------- -----------------
Fair Fair
Amount Value Amount Value
-------- -------- -------- --------
Forwards................................. $342,370 $334,688 $392,972 $394,340
======== ======== ======== ========
|
Fair value for forwards reflects the amount, based on dealer quotes, Mattel would receive at maturity for contracts involving the same currencies and maturity dates, if they had been entered into as of year-end 1999 and 1998, respectively.
As of December 31, 1999 and 1998, Mattel held $144.7 million and $189.1 million, respectively, of foreign currency forward exchange contracts to purchase foreign currencies. The fair value of these contracts was $144.9 million and $201.8 million as of December 31, 1999 and 1998, respectively. Fair value reflects the amount, based on dealer quotes, Mattel would pay at maturity for contracts involving the same currencies and maturity dates, if they had been entered into as of year-end 1999 and 1998, respectively.
The following table summarizes Mattel's foreign currency contracts by major currency as of December 31, 1999 and 1998 (in thousands of US dollars):
1999 1998
----------------- -----------------
Buy Sell Buy Sell
-------- -------- -------- --------
US dollar............................... $342,370 $144,703 $392,972 $189,122
Euro.................................... 92,445 253,096 -- --
British pounds sterling................. 6,316 16,679 6,548 66,856
Canadian dollar......................... 7,604 40,679 16,144 18,794
Indonesian rupiah....................... 19,455 -- 10,000 --
Japanese yen............................ -- 19,412 -- 12,501
Swiss franc............................. 14,893 -- 18,341 --
Australian dollar....................... -- 8,438 4,988 21,610
Hong Kong dollar........................ -- -- 55,829 --
French franc............................ -- -- 27,435 9,105
Italian lira............................ -- -- 20,014 68,358
German mark............................. -- -- 19,119 144,660
Spanish peseta.......................... -- -- 5,625 2,899
Dutch guilder........................... -- -- 5,079 8,086
Mexican peso............................ -- -- -- 22,000
Belgian franc........................... -- -- -- 11,641
Other (under $5,000).................... 3,990 4,066 -- 6,462
-------- -------- -------- --------
$487,073 $487,073 $582,094 $582,094
======== ======== ======== ========
|
In order to minimize the risk of counterparty non-performance, Mattel executes its foreign currency forward exchange and option contracts with financial institutions believed to be credit-worthy, generally those that provide Mattel with its working capital lines of credit.
Market risk exposures exist with respect to the settlement of foreign currency transactions during the year because currency fluctuations cannot be predicted with certainty. Mattel seeks to mitigate its exposure to market risk by monitoring its currency exchange exposure for the year and partially or fully hedging such exposure. In addition, Mattel manages its exposure through the selection of currencies used for international borrowings and intercompany invoicing. Mattel does not trade in financial instruments for speculative purposes.
On October 22, 1998, Mattel announced that Fisher-Price, in cooperation with the Consumer Product Safety Commission, would conduct a voluntary recall involving up to 10 million battery-powered Power Wheels(R) ride-on vehicles. The recall did not result from any serious injury, and involves the replacement of electronic components that may overheat, particularly when consumers make alterations to the product. The recall involves vehicles sold nationwide since 1984 under nearly 100 model names. Additionally, Fisher-Price has been notified by the Consumer Product Safety Commission that the Commission is considering whether Fisher-Price may be subject to a fine for delayed reporting of the facts underlying the recall.
In the third quarter of 1998, Mattel recognized a $38.0 million pre-tax charge related to the recall. During the second and fourth quarters of 1999, Mattel recognized additional pre-tax charges totaling $20.0 million related to the recall.
On October 13, 1995, Michelle Greenwald filed a complaint (Case No. YC 025 008) against Mattel in Superior Court of the State of California, County of Los Angeles. Ms. Greenwald is a former employee whom Mattel terminated in July 1995. Her complaint sought $50 million in general and special damages, plus punitive damages, for breach of oral, written and implied contract, wrongful termination in violation of public policy and violation of California Labor Code Section 970. Ms. Greenwald claimed that her termination resulted from complaints she made to management concerning general allegations that Mattel did not account properly for sales and certain costs associated with sales and more specific allegations that Mattel failed to account properly for certain royalty obligations to The Walt Disney Company. On December 5, 1996, Mattel's motion for summary adjudication of Ms. Greenwald's public policy claim was granted. On March 7, 1997, Mattel filed a motion for summary judgment on the remaining causes of action. On December 9, 1997, Mattel's motion for summary judgment of Ms. Greenwald's remaining claims was granted. On February 4, 1998, Ms. Greenwald appealed from the dismissal of her suit. The appeal has been fully briefed, and a hearing took place on March 3, 2000. Mattel intends to continue to defend the action vigorously, including the appeal.
On October 2, 1997, the Attorney General of the State of New York filed in the United States District Court, Eastern District of New York (Case No. CV 97 5714), an action against Toys R Us, Mattel and certain other toy manufacturers alleging that the defendants had violated federal antitrust laws and entered into vertical and horizontal arrangements that had the effect of restricting sales to the warehouse clubs. The attorneys general from forty-three other states, the District of Columbia and the Commonwealth of Puerto Rico joined this action. Following the filing of the New York action, a series of private treble damage class actions under the federal antitrust laws were filed in various federal district courts. The parties later agreed to have these related actions transferred to the Eastern District of New York to be consolidated by the Judicial Panel on Multiple Litigation before Nina Gershon, United States District Judge. Private class actions were also filed in state courts in Alabama, California, and New Jersey, asserting claims under state antitrust law. These state court actions were coordinated with the federal court actions.
Subsequent mediation efforts resulted in a Settlement Agreement and Release as to Mattel, Inc., Fisher-Price, and Tyco, effective April 6, 1999. Pursuant to the terms of the Settlement Agreement and Release, Mattel agreed to make a cash payment and a toy contribution, both of which were made in the fourth quarter of 1999. As a result of a dispute between the parties as to the selection of the toys to be contributed, Mattel negotiated a Supplemental Toy Contribution Agreement and made a supplemental toy contribution in December 1999. Final Judgment and Order of Dismissal was entered by Judge Gershon on February 17, 2000 that effectively dismissed with prejudice the claims asserted by the state and private federal and state court plaintiffs, including the claims of any person represented in either a parens patriae or private class capacity.
On December 16, 21, and 23, 1998, several stockholders of the legal entity The Learning Company, Inc. that merged into Mattel ("Old Learning Company") filed six separate purported class action complaints in the Court of Chancery of the State of Delaware in and for New Castle County against Old Learning Company and Old Learning Company's board of directors for alleged breaches of fiduciary duties in connection with the May 1999 merger. The six complaints were consolidated. The consolidated complaint named Mattel as an additional defendant, claiming that Mattel aided and abetted the alleged breaches of fiduciary duty. On March 9, 2000, the plaintiffs filed a notice and order of dismissal dismissing the action without prejudice. Upon approval by the court, the consolidated action will be formally dismissed.
Following Mattel's announcement on October 4, 1999 that it expected an earnings shortfall at its Learning Company division in the third quarter of 1999, several of Mattel's shareholders filed purported class action complaints in the United States District Court for the Central District of California, the United States District Court for the Southern District of New York and the United States District Court for Massachusetts naming Mattel and certain of its officers and directors as defendants. The complaints generally allege, among other things, that the defendants made false or misleading statements that artificially inflated the price of Mattel's common stock by overstating the revenues and net income of Mattel, including its Learning Company division, and by falsely representing that the May 1999 Learning Company acquisition would be immediately accretive to Mattel's 1999 and 2000 financial results.
Two of the purported class action complaints are brought on behalf of the former stockholders of Broderbund who acquired shares of Old Learning Company in exchange for their Broderbund common stock in connection with the Old Learning Company-Broderbund merger on August 31, 1998. Mattel has been named as a defendant as the successor-in-interest to Old Learning Company. The complaints generally allege that that the Old Learning Company-Broderbund Registration Statement on Form S-4 filed on or about July 14, 1998 in connection with the merger was materially false.
On November 23, 1999, Mattel (along with other defendants named in the federal securities lawsuits) filed a motion and brief before the Judicial Panel on Multidistrict Litigation seeking to transfer all of the federal actions to the United States District Court for the Central District of California for Coordinated or Consolidated Pretrial Proceedings. On March 3, 2000, the Judicial Panel on Multidistrict Litigation granted Mattel's motion.
In addition, a Mattel stockholder filed a derivative complaint on behalf and for the benefit of Mattel in the Superior Court of the State of California, County of Los Angeles. The complaint alleges that Mattel's directors breached their fiduciary duties, wasted corporate assets and grossly mismanaged Mattel in connection with Mattel's acquisition of Learning Company and seeks both monetary and injunctive relief. On February 10, 2000, the court sustained defendants' demurrer and dismissed the complaint with leave to amend.
Mattel believes the lawsuits are without merit and intends to defend them vigorously.
Fisher-Price has executed a consent order with the State of New York involving a remedial action/feasibility study for one of its manufacturing plants. Currently, Fisher-Price is negotiating an additional consent order which will outline the specific clean up strategy for the site. Mattel anticipates that the New York State Department of Environmental Quality will issue their Record of Decision in March 2000. The ultimate liability associated with this cleanup presently is estimated to be less than $1,425,000, approximately $1,030,500 of which has been incurred through December 31, 1999.
--Beaverton, Oregon
Mattel operates a manufacturing facility on a leased property in Beaverton, Oregon that was acquired as part of the Tyco merger. In March 1998, samples of groundwater used by the facility for process water and drinking water disclosed elevated levels of certain chemicals, including trichloroethylene. Mattel immediately closed the water supply and self-reported the sample results to the Oregon Department of Environmental Quality and the Oregon Health Division. Mattel also implemented a community outreach program to employees, former employees and surrounding landowners.
In November 1998, Mattel and another potentially responsible party entered into a consent order with the Oregon Department of Environmental Quality to conduct a remedial investigation/feasibility study at the property, to propose an interim remedial action measure and to continue the community outreach program. In the second quarter of 1999, Mattel recorded a $14.0 million pre-tax charge for environmental remediation costs related to this property, based on the completion and approval of the remediation plan and feasibility study.
Mattel is also involved in various other litigation and legal matters, including claims related to intellectual property, product liability and labor, which Mattel is addressing or defending in the ordinary course of business. Management believes that any liability which may potentially result upon resolution of such matters will not have a material adverse effect on Mattel's business, financial condition or results of operations.
Note 7--Acquisitions and Nonrecurring Items
In May 1999, Mattel completed its merger with Learning Company, after which Learning Company was merged with and into Mattel, with Mattel being the surviving corporation. Each share of Learning Company Series A Preferred Stock was converted into 20 shares of Learning Company common stock immediately prior to the consummation of the merger. Pursuant to the merger agreement, each outstanding share of Learning Company common stock was then converted into 1.2 shares of Mattel common stock upon consummation of the merger. As a result, approximately 126 million Mattel common shares were issued in exchange for all shares of Learning Company common stock outstanding as of the merger date. The outstanding share of Learning Company special voting stock was converted into one share of Mattel Special Voting Preferred Stock. Each outstanding exchangeable share of Learning Company's Canadian subsidiary, Softkey Software Products Inc., remains outstanding, but upon consummation of the merger became exchangeable for 1.2 shares of Mattel common stock.
This transaction has been accounted for as a pooling of interests, and accordingly, financial information for periods prior to the merger reflect retroactive restatement of the companies' combined financial position and operating results. For periods preceding the merger, there were no material intercompany transactions which required elimination from the combined consolidated results of operations and there were no adjustments necessary to conform the accounting practices of the two companies.
Selected financial information for the combining entities included in the consolidated statements of operations for the three years ended December 31, 1999 is shown below. Although the merger was effective on May 13, 1999, interim financial information for the combining companies was not available as of that date; therefore, information for and as of March 31, 1999 has been presented.
March Dec. 31, Dec. 31,
31, 1999 1998 1997
-------- ---------- ----------
(In thousands)
Net sales
Mattel...................................... $692,116 $4,781,892 $4,834,616
Learning Company............................ 186,843 839,315 620,931
-------- ---------- ----------
Combined.................................. $878,959 $5,621,207 $5,455,547
======== ========== ==========
Net income (loss)
Mattel...................................... $(17,856) $ 332,264 $ 285,184
Learning Company(a)(b)...................... 22,905 (126,211) (467,905)
-------- ---------- ----------
Combined.................................. $ 5,049 $ 206,053 $ (182,721)
======== ========== ==========
|
In August 1998, Learning Company completed its merger with Broderbund, a publisher and developer of consumer software for the home and school market. The stock-for-stock transaction was approved by the stockholders of Broderbund, after which Broderbund became a wholly-owned subsidiary of Learning Company. Under the merger agreement, each outstanding share of Broderbund common stock was converted into 0.80 shares of Learning Company common stock and resulted in the issuance of approximately 17 million shares of Learning Company common stock.
This transaction was accounted for as a pooling of interests, and accordingly, financial information for periods prior to the merger reflect the retroactive restatement of the companies' combined financial position and operating results. The consolidated statement of stockholders' equity for the year ended December 31, 1998 has been adjusted to include Broderbund's unrealized gain on securities of $0.5 million (included in comprehensive income) and net income of $0.2 million for the month ended December 31, 1997. Broderbund's net sales and operating expenses for the month ended December 31, 1997 were $28.7 million and $28.0 million, respectively. The consolidated statements of operations, cash flows and stockholders' equity for the years ended December 31, 1997 have been combined with those of Broderbund for the twelve-month period ended November 30, 1997. The consolidated statement of stockholders' equity for the year ended December 31, 1997 has been adjusted to include Broderbund's net income of $8.9 million for the period from September 1, 1996 through November 30, 1996.
In March 1997, Mattel completed its merger with Tyco, accounted for as a pooling of interests. Under the merger agreement, each outstanding share of Tyco common stock was converted into 0.48876 Mattel common shares and resulted in the issuance of approximately 17 million Mattel common shares. Tyco restricted stock units and stock options outstanding as of the merger date were exchanged for approximately 0.6 million Mattel common shares. In addition, each share of Tyco Series B and Series C Preferred Stock was converted into like Mattel preferred stock. Financial information for periods prior to the merger reflect the retroactive restatement of the companies' combined financial position and operating results.
Learning Company also merged with Palladium Interactive, Inc. and P.F. Magic, Inc. in 1998 and TEC Direct, Inc., Microsystems Software, Inc., Skills Bank Corporation and Learning Services Inc. in 1997, each of which were accounted for as poolings of interests. The consolidated financial statements have not been retroactively restated for the results of operations and financial position of these companies as the effect of each acquisition individually and in the aggregate on Learning Company's balance sheet and results of operations was less than three percent. The consolidated statements of stockholders' equity for the years ended December 31, 1998 and 1997 have been adjusted to include the historical results of operations of the acquired companies of $34.6 million and $6.2 million, respectively. A total of 1.6 million and 3.8 million common shares were issued in the years ended December 31, 1998 and 1997, respectively, as a result of these mergers.
Mattel acquired the following companies during the years ended December 31, 1998 and 1997. Each of these acquisitions were accounted for using the purchase method of accounting. The results of operations of the acquired companies have been included in Mattel's consolidated financial statements from their respective dates of acquisition. Intercompany accounts and transactions between the acquired companies and Mattel, as applicable, have been eliminated.
(Assets)/
Method of Liabilities Incomplete
Month Price Payment Assumed Intangibles Technology
------- ------ ---------- ----------- ----------- ----------
(In millions)
1998
Pleasant Company........ July $715.0 Cash $(25.0) $690.0 $ --
Bluebird Toys PLC....... June 80.0 Cash (20.0) 60.0 --
Sofsource, Inc.......... June 45.0 Stock 6.7 36.8 14.9
Mindscape, Inc.......... March 152.6 Cash/stock 6.4 119.0 40.0
1997
Creative Wonders,
L.L.C.................. October $ 37.8 Cash $ 7.3 $ 44.0 $ 1.1
Parsons Technology...... August 31.0 Cash (11.7) 9.3 10.0
|
The acquisition price includes investment advisor and other directly-related expenses, as applicable. The portion of the purchase price allocated to incomplete technology was charged to expense in the year of acquisition.
Mattel also made other minor acquisitions during the last three years, which were accounted for using the purchase method. These acquisitions resulted in the issuance of 0.4 million shares of common stock in the year ended December 31, 1997.
The unaudited pro forma results of operations for 1998 acquisitions accounted for using the purchase method of accounting are as follows:
Acquired Pro Forma
Mattel Companies Combined
---------- --------- ----------
(In thousands, except per share
data)
1998
Net sales.................................... $5,621,207 $ 103,862 $5,725,069
Income before extraordinary item............. 206,053 (102,175) 103,878
Net income................................... 206,053 (102,175) 103,878
Basic income per share....................... 0.51 0.24
Diluted income per share..................... 0.47 0.22
1997
Net sales.................................... $5,455,547 $ 550,659 $6,006,206
Loss before extraordinary item............... (178,111) (61,827) (239,938)
Net loss..................................... (182,721) (61,827) (244,548)
Basic loss per share
Loss before extraordinary item............. (0.51) (0.65)
Net loss................................... (0.52) (0.66)
Diluted loss per share
Loss before extraordinary item............. (0.51) (0.65)
Net loss................................... (0.52) (0.66)
|
The amounts shown for acquired companies assumes that Mattel's 1998 acquisitions occurred on January 1, 1997. These unaudited pro forma results of operations have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on the date indicated, or which may result in the future. Pro forma adjustments have been made to reflect the amortization of intangible assets and goodwill capitalized as a result of the acquisitions, incremental interest expense that would have been incurred as a result of financing the acquisition of Pleasant Company as of January 1, 1997, and elimination of intercompany sales and margins related to the acquisition of Bluebird.
In 1999, Mattel incurred restructuring and other nonrecurring charges totaling $346.0 million, approximately $265 million after-tax or $0.64 per diluted share.
During the first quarter of 1999, Mattel incurred a nonrecurring pre-tax charge of $3.9 million, largely related to the restructuring and integration of acquisitions made by its Learning Company division in the fourth quarter of 1998.
During the second quarter of 1999, Mattel completed its merger with Learning Company and finalized a previously announced plan of restructuring and integration. These actions, along with other one-time events, resulted in a nonrecurring pre-tax charge against operations of $345.0 million. In the fourth quarter of 1999, Mattel incurred an additional $23.5 million charge relating to its restructuring and integration plan and other one-time charges which had previously not met the requirement for accrual. In addition, Mattel reversed $26.4 million of the second quarter charge based on lower than anticipated costs and revisions to previous estimates. The impact of these new developments combined with the initial second quarter charge resulted in a
full year nonrecurring charge of $342.1 million. Of the total pre-tax charges, approximately $278 million represents cash expenditures.
The restructuring and integration plan, expected to be substantially complete by June 2000, provides for the consolidation and realignment of Mattel's operations. The plan was aimed at leveraging global resources in areas of manufacturing, marketing and distribution, eliminating duplicative functions worldwide and achieving improved operating efficiencies. The following are the major restructuring and integration initiatives:
. Consolidation of the Infant and Preschool businesses;
. Consolidation of the domestic and international back-office functions;
. Consolidation of direct marketing operations;
. Realignment of the North American sales force;
. Termination of various international distributor contracts; and
. Closure of three higher cost manufacturing facilities.
Components of the restructuring and other nonrecurring charges, including related adjustments, are as follows:
Adjustments Balance
----------------- Total Amounts Dec. 31,
Plan (Credits) Charges Charges Incurred 1999
---- --------- ------- ------- -------- --------
(In millions)
Severance and other
compensation.................. $108 $(13) $18 $113 $ (30) $ 83
Distributor, license and other
contract terminations......... 57 (2) -- 55 (45) 10
Writedown of assets............ 42 (2) -- 40 (40) --
Lease termination costs........ 22 (4) -- 18 -- 18
---- ---- --- ---- ----- ----
Total restructuring costs and
asset writedowns............ 229 (21) 18 226 (115) 111
Merger-related transaction and
other costs................... 86 (5) -- 81 (76) 5
Other nonrecurring charges..... 30 -- 5 35 (16) 19
---- ---- --- ---- ----- ----
Total restructuring, asset
writedowns and other
charges..................... $345 $(26) $23 $342 $(207) $135
==== ==== === ==== ===== ====
|
In the fourth quarter of 1999, Mattel adjusted its restructuring and integration plan and other nonrecurring charges, resulting in a net reduction of approximately $3 million. The credits to the restructuring plan of approximately $26 million were mainly due to Mattel's recent decision not to close certain of its marketing offices and one of its manufacturing facilities. The remaining credits include other changes in estimates and lower than anticipated costs compared to the previous estimates for completed components of the plan. Approximately 900 employees will not be terminated as a result these changes.
The fourth quarter restructuring charge of approximately $18 million relates to the termination of an additional 150 Learning Company employees at its domestic offices. This action was taken to further consolidate the operations of Learning Company's domestic offices. The fourth quarter other nonrecurring charge relates to a $4.0 million increase to the reserve for the October 1998 recall of Mattel's Power Wheels(R) vehicles and a $1.1 million additional charge related to the Toys R Us-related antitrust litigation settlement.
A description of the components of the restructuring charges is as follows:
Severance and other compensation costs relate to the termination of approximately 3,300 employees around the world. Approximately 2,300 of these employees are hourly workers located in certain of Mattel's manufacturing facilities, of which approximately 2,200 were employed in the manufacturing facility in Kuala Lumpur, which ceased operations in September 1999. The remainder of the work force reductions consists of downsizing sales and marketing groups in the US, Europe and Asia-Pacific regions as well as the elimination of duplicate administrative personnel following the consolidation of back-office functions, the majority of which are in Europe. As of December 31, 1999, approximately $30 million had been paid to nearly 2,700 terminated employees. Cash severance payments will extend beyond the completion of the workforce reductions due to the severance payment options available to affected employees.
Mattel terminated its sponsorship agreements related to certain attractions for a total cost of $37.5 million, inclusive of the writeoff of related capitalized costs. The cash portion of this charge was paid as of July 1999. Mattel also recognized a $17.5 million charge, mainly related to settlements for termination of certain foreign distributor agreements in conjunction with the realignment of its sales and distribution network.
Mattel's restructuring plan resulted in the impairment of certain long-lived assets related to the operations being closed. The sum of the undiscounted future cash flows of these assets was not sufficient to cover the carrying amount of these assets. As a result, these long-lived assets were written down to fair market value and will be depreciated over their remaining useful lives. Fair value of the impaired assets was determined by either third-party appraisals or past experience in disposing of similar assets. Buildings and, to the extent possible, equipment will be sold while the remainder of the impaired assets will be abandoned when taken out of service. Nearly all of the revenue- generating activities related to these assets will continue as a result of more effective utilization of other assets. A significant portion of the fixed asset writedowns is concentrated in the Operations and Learning Company segments. In addition, other asset writeoffs include approximately $10 million of goodwill related to a recently acquired software business, which was closed following the merger with Learning Company.
Lease termination costs include penalties imposed upon canceling existing leases and future obligations under long-term rental agreements at facilities being vacated following the merger and realignment.
Merger-related transaction costs consist of investment banking fees, legal, accounting and printing costs, registration fees and other costs recognized in connection with the merger. Also included in this amount is the contractual change of control payments arising from the merger. The majority of all merger- related transaction costs were paid during the second quarter of 1999.
In 1998 Learning Company incurred restructuring charges related to the integration of the business operations of Broderbund and Mindscape, Inc. as a result of their respective acquisitions.
In 1997 Mattel incurred restructuring and integration charges related to the integration of the business operations of Tyco as a result of its acquisition and further restructuring of the business operations of Mattel. In 1997 Learning Company also incurred charges related to the integration of the business operations of Creative Wonders, L.L.C., Learning Services, Inc., Skills Bank Corporation, Microsystems Software, Inc. and TEC Direct, Inc. as a result of their respective acquisitions.
In the third quarter of 1998, Mattel recognized a $38.0 million pre-tax charge related to a voluntary recall of certain Power Wheels(R) ride-on vehicles. During the second and fourth quarters of 1999, Mattel recognized an additional pre-tax charge totaling $20.0 million related to the recall.
In the second quarter of 1999, Mattel recorded a $14.0 million pre-tax charge for environmental remediation costs related to a manufacturing facility on a leased property in Beaverton, Oregon, based on the completion and approval of the remediation plan and feasibility study.
In the fourth quarter of 1998, Mattel recognized a $6.0 million pre-tax charge related to the settlement of the Toys R Us-related antitrust litigation. In the fourth quarter of 1999, Mattel recognized an additional $1.1 million in connection with this matter. Mattel made all required cash and toy contributions during the fourth quarter of 1999.
The charge for incomplete technology for the years ended December 31, 1998 and 1997 relates to products being developed by acquired companies at the time of their acquisitions. In each case, Learning Company believed such products had not yet reached technological feasibility, had no future alternative use as of the date of acquisition, and required additional development to complete the software technology and products. In order to develop the acquired incomplete technology into commercially viable products, Learning Company was required to complete the development of proprietary code, development of the artistic and graphic works, and design of the remaining storyboards. During the two year period ended December 31, 1999, Learning Company spent a total of approximately $25 million to complete the development of acquired incomplete technology related to 1998 acquisitions. In order to complete the development of acquired incomplete technology, Learning Company spent approximately $0.5 million in 1998 related to 1997 acquisitions.
Note 8--Segment Information
In the 1998 fourth quarter, Mattel adopted Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information. This statement supersedes Statement of Financial Accounting Standards No. 14, Financial Reporting for Segments of a Business Enterprise, replacing the "industry segment" approach with the "management" approach. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of Mattel's reportable segments. This statement requires disclosure of certain information by reportable segment, geographic area and major customer.
The tables below present information about segment revenues, operating profit and assets. Mattel's reportable segments are separately managed business units and include toy marketing, toy manufacturing, and consumer software sales and development. The Toy Marketing segment is divided on a geographic basis between domestic and international. The domestic Toy Marketing segment is further divided into USA Toys, US Fisher-Price/Tyco Preschool and Other. USA Toys principally sells products in the Girls, Entertainment and Wheels categories. US Fisher-Price/Tyco Preschool principally sells products in the Infant and Preschool categories. The Other segment principally sells specialty products in the Girls category. The International Toy Marketing segment sells products in all toy categories. The Consumer Software segment consists of educational, productivity and entertainment software products developed and sold by Learning Company on a worldwide basis. The Operations segment manufactures toy products, which are sold to the Toy Marketing segments based on intercompany transfer prices. Such prices are based on manufacturing costs plus a profit
margin. Segment revenues do not include sales adjustments such as trade discounts and other allowances. However, such adjustments are included in the determination of segment profit from operations. Segment profit from operations represents income before restructuring and other charges, interest expense, and provision for income taxes. The consolidated total profit from operations presented in the following tables represents income before income taxes and extraordinary item as reported in the consolidated statements of operations. The segment assets are comprised of accounts receivable and inventories, net of applicable reserves and allowances.
For the Year
-------------------------------------
1999 1998 1997
----------- ----------- -----------
(In thousands)
Revenues
Toy Marketing
USA Toys........................... $ 2,199,329 $ 2,207,018 $ 2,330,658
US Fisher-Price/Tyco Preschool..... 941,208 902,018 1,030,906
Other ............................. 316,902 256,089 58,330
International...................... 1,596,449 1,712,509 1,733,605
Learning Company..................... 770,488 839,315 620,931
Operations........................... 1,426,167 1,488,502 1,554,047
----------- ----------- -----------
Segment total.................... 7,250,543 7,405,451 7,328,477
Elimination of intersegment sales.... (1,426,167) (1,486,320) (1,552,029)
Sales adjustments.................... (309,426) (297,924) (320,901)
----------- ----------- -----------
Net sales........................ $ 5,514,950 $ 5,621,207 $ 5,455,547
=========== =========== ===========
|
For the Year
-------------------------------
1999 1998 1997
--------- --------- ---------
(In thousands)
Operating Profit (Loss)
Toy Marketing
USA Toys.................................. $ 322,755 $ 348,142 $ 478,579
US Fisher-Price/Tyco Preschool............ 105,519 97,813 87,742
Other .................................... 5,433 20,235 7,300
International............................. 112,222 156,207 218,659
Learning Company............................ (205,472) 114,344 (312,478)
Operations.................................. 223,952 151,905 144,058
--------- --------- ---------
Segment total........................... 564,409 888,646 623,860
Restructuring and other charges............. (345,996) (157,314) (343,606)
Charge for incomplete technology............ -- (56,826) (20,300)
Interest expense............................ (151,609) (128,468) (112,612)
Corporate and other......................... (177,547) (154,406) (146,126)
--------- --------- ---------
Income (loss) before income taxes....... $(110,743) $ 391,632 $ 1,216
========= ========= =========
|
As of Year End
----------------------------------
1999 1998 1997
---------- ---------- ----------
(In thousands)
Assets
Toy Marketing
USA Toys............................. $ 570,892 $ 571,976 $ 588,154
US Fisher-Price/Tyco Preschool....... 230,237 279,773 337,680
Other ............................... 96,538 71,575 --
International........................ 566,203 602,063 538,099
Learning Company....................... 302,818 226,913 201,309
Operations............................. 60,796 88,613 73,048
---------- ---------- ----------
Segment total...................... 1,827,484 1,840,913 1,738,290
Corporate and other.................... (13,183) (46,592) (16,721)
---------- ---------- ----------
Accounts receivable and
inventories, net.................. $1,814,301 $1,794,321 $1,721,569
========== ========== ==========
|
For the Year
--------------------------
1999 1998 1997
-------- -------- --------
(In thousands)
Depreciation/Amortization*
Toy Marketing
USA Toys......................................... $ 75,745 $ 61,510 $ 51,358
US Fisher-Price/Tyco Preschool................... 38,673 41,376 43,926
Other ........................................... 27,912 14,071 --
International.................................... 52,366 49,234 45,024
Learning Company................................... 51,820 97,779 464,086
Operations......................................... 28,859 25,629 32,145
-------- -------- --------
Segment total.................................. 275,375 289,599 636,539
Corporate and other................................ 23,224 23,085 17,458
-------- -------- --------
Depreciation and amortization.................. $298,599 $312,684 $653,997
======== ======== ========
|
The Toy Marketing segments sell a broad variety of children's toy products, which are grouped into four major categories: Girls, Infant and Preschool, Entertainment and Wheels. Learning Company is a leading publisher of consumer software for the personal computer. The table below presents revenues from external customers by category:
For the Year
----------------------------------
1999 1998 1997
---------- ---------- ----------
(In thousands)
Girls.................................... $2,082,841 $2,136,354 $2,217,400
Infant and Preschool..................... 1,635,286 1,684,196 1,739,900
Wheels................................... 759,813 714,506 590,700
Entertainment............................ 531,540 479,891 421,700
Other.................................... 44,408 64,869 185,817
---------- ---------- ----------
5,053,888 5,079,816 5,155,517
Sales adjustments........................ (309,426) (297,924) (320,901)
---------- ---------- ----------
Toy category........................... 4,744,462 4,781,892 4,834,616
Learning Company......................... 770,488 839,315 620,931
---------- ---------- ----------
Consolidated total....................... $5,514,950 $5,621,207 $5,455,547
========== ========== ==========
|
The tables below present information by geographic area. Revenues are attributed to countries based on location of customer. Long-lived assets principally include net property, plant and equipment, and goodwill.
For the Year
--------------------------------
1999 1998 1997
---------- ---------- ----------
(In thousands)
Net Sales
United States............................... $3,983,217 $3,998,823 $3,770,540
International............................... 1,531,733 1,622,384 1,685,007
---------- ---------- ----------
Consolidated total.......................... $5,514,950 $5,621,207 $5,455,547
========== ========== ==========
|
As of Year End
--------------------------------
1999 1998 1997
---------- ---------- ----------
(In thousands)
Long-Lived Assets
United States............................... $1,477,202 $1,580,625 $ 770,147
International............................... 675,202 635,238 518,198
---------- ---------- ----------
2,152,404 2,215,863 1,288,345
Corporate and other......................... 257,786 245,985 229,625
---------- ---------- ----------
Consolidated total.......................... $2,410,190 $2,461,848 $1,517,970
========== ========== ==========
|
Credit is granted to customers on an unsecured basis, and generally provides for extended payment terms, which result in a substantial portion of trade receivables being collected during the latter half of the year. Mattel's two largest customers accounted for the following percentage of consolidated net sales and net accounts receivable:
1999 1998 1997
---- ---- ----
Worldwide sales for the year ended............................ 33% 28% 30%
Accounts receivable as of December 31......................... 27% 26% 36%
|
Note 9--Quarterly Financial Information (Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- ---------- ---------- ----------
(In thousands, except per share amounts)
Year Ended December 31, 1999(a)
Net sales........................ $878,959 $1,040,154 $1,825,247 $1,770,590
Gross profit..................... 438,497 512,501 867,286 782,756
Advertising and promotion ex-
penses.......................... 116,759 136,475 296,436 396,285
Other selling and administrative
expenses........................ 259,494 245,134 331,934 354,353
Amortization of intangibles...... 23,009 19,419 22,765 26,654
Restructuring and other
charges(b)...................... 3,889 345,000 -- (2,893)
Other income, net................ (4,038) (3,961) (846) (5,694)
Income (loss) before income tax-
es.............................. 10,254 (261,880) 175,978 (35,095)
Net income (loss)................ 5,049 (204,334) 135,333 (18,421)
Preferred stock dividend require-
ments........................... (1,990) (1,990) -- --
Net income (loss) applicable to
common shares................... 3,059 (206,324) 135,333 (18,421)
Basic income (loss) per common
share:
Net income (loss).............. $ 0.01 $ (0.50) $ 0.32 $ (0.04)
Weighted average number of com-
mon shares.................... 396,480 409,040 425,148 425,680
Diluted income (loss) per common
share:
Net income (loss).............. $ 0.01 $ (0.50) $ 0.32 $ (0.04)
Weighted average number of
common and common equivalent
shares........................ 422,264 409,040 429,455 425,680
Dividends declared per common
share........................... $ 0.08 $ 0.09 $ 0.09 $ 0.09
Common stock market price:
High........................... $ 27.81 $ 29.00 $ 26.69 $ 16.88
Low............................ 21.50 22.88 19.00 11.81
Year Ended December 31, 1998(a)
Net sales........................ $884,500 $1,033,509 $1,884,843 $1,818,355
Gross profit..................... 439,888 509,240 996,090 968,085
Advertising and promotion ex-
penses.......................... 119,175 135,030 281,726 381,734
Other selling and administrative
expenses........................ 242,092 263,402 278,059 361,248
Amortization of intangibles...... 49,600 33,091 20,674 26,324
Charge for incomplete
technology(c)................... 40,000 16,826 -- --
Restructuring and other
charges(d)...................... 15,230 20,887 97,088 24,109
Other (income) expense, net(e)... (2,147) (7,922) 8,870 (11,893)
Income (loss) before income tax-
es.............................. (47,156) 29,757 267,327 141,704
Net income (loss)................ (55,957) 4,578 168,734 88,698
Preferred stock dividend require-
ments........................... (1,990) (1,990) (1,990) (1,990)
Net income (loss) applicable to
common shares................... (57,947) 2,588 166,744 86,708
Basic income (loss) per common
share:
Net income (loss).............. $ (0.15) $ 0.01 $ 0.42 $ 0.22
Weighted average number of com-
mon shares.................... 376,364 384,596 399,218 397,237
Diluted income (loss) per common
share:
Net income (loss).............. $ (0.15) $ 0.01 $ 0.39 $ 0.20
Weighted average number of
common and common equivalent
shares........................ 376,364 423,407 435,123 424,296
Dividends declared per common
share........................... $ 0.07 $ 0.08 $ 0.08 $ 0.08
Common stock market price:
High........................... $ 45.63 $ 43.63 $ 42.31 $ 39.63
Low............................ 35.63 36.00 28.00 21.69
|
(b) Represents integration and restructuring charges in the second quarter of
1999 related to the Learning Company merger, and other nonrecurring
charges. The nonrecurring credit for the fourth quarter of 1999 represents
net adjustments made to the restructuring and nonrecurring charges recorded
in the second quarter of 1999.
(c) Primarily represents the writeoff of products being developed by Mindscape,
Inc. and Sofsource, Inc. that had not reached technological feasibility as
of the dates of their acquisitions in the first and second quarters of
1998, respectively. These products had no alternative future use and
additional development costs would have been required to complete the
software technology.
(d) Includes restructuring charges in the third quarter related to the merger
with Broderbund, a nonrecurring charge in the third quarter related to a
voluntary recall of certain Power Wheels(R) ride-on vehicles, and a one-
time charge in the fourth quarter in connection with the Toys R Us-related
antitrust litigation settlement, which reduced diluted earnings per share
by $0.06 and $0.01, respectively.
(e) Includes unrealized foreign currency exchange losses in the third quarter
that were partially recovered in the fourth quarter.
Note 10--Supplemental Financial Information
As of Year End
---------------------
1999 1998
---------- ----------
(In thousands)
Inventories include the following:
Raw materials and work in process..................... $ 48,569 $ 48,473
Finished goods........................................ 495,727 595,797
---------- ----------
$ 544,296 $ 644,270
========== ==========
Prepaid expenses and other current assets include the
following:
Deferred income taxes................................. $ 91,545 $ 215,370
Other................................................. 239,157 156,402
---------- ----------
$ 330,702 $ 371,772
========== ==========
Intangibles, net include the following:
Goodwill.............................................. $1,274,643 $1,335,183
Other................................................. 118,672 149,451
---------- ----------
$1,393,315 $1,484,634
========== ==========
Other assets include the following:
Deferred income taxes................................. $ 296,805 $ 55,342
Other................................................. 267,381 208,982
---------- ----------
$ 564,186 $ 264,324
========== ==========
Short-term borrowings include the following:
Notes payable......................................... $ 121,805 $ 121,006
Commercial paper...................................... 247,744 78,000
---------- ----------
$ 369,549 $ 199,006
========== ==========
Accrued liabilities include the following:
Advertising and promotion............................. $ 186,558 $ 164,543
Restructuring and other charges....................... 170,845 85,623
Royalties............................................. 109,399 112,839
Other................................................. 359,072 385,832
---------- ----------
$ 825,874 $ 748,837
========== ==========
|
For the Year
--------------------------
1999 1998 1997
-------- -------- --------
(In thousands)
Selling and administrative expenses include the
following:
Research and development.......................... $207,664 $274,820 $246,337
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest........................................ $147,530 $124,087 $124,234
Income taxes.................................... 79,099 102,163 113,496
Noncash investing and financing activities:
Common stock issued for acquisitions:
Settlement of earn-out agreements............. $ 5,547 $ 5,572 $ 2,023
Sofsource, Inc. .............................. -- 45,000 --
Mindscape, Inc. .............................. -- 30,000 --
Other......................................... -- -- 7,321
Conversion of 5 -1/2% Notes..................... -- 96,695 202,033
Conversion of 7% Notes.......................... -- -- 16,034
Increase in paid-in capital due to value of in-
the-money employee stock options acquired in
connection with acquisitions................... -- -- 2,969
|
Note 11--New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. It also requires that gains or losses resulting from changes in the values of those derivatives be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. Mattel is required to adopt this statement for its fiscal year beginning January 1, 2001. Management believes the adoption of this statement will not have a material impact on Mattel's consolidated financial position or results of operations.
Balance
at Additions Balance
Beginning Charged to Net at End
of Year Operations Deductions of Year
--------- ---------- ------------ --------
Allowance for Doubtful Accounts
Year Ended December 31, 1999.... $125,077 $386,497 $(282,339)(a) $229,235
Year Ended December 31, 1998.... 78,380 161,804 (115,107)(a) 125,077
Year Ended December 31, 1997.... 63,811 104,695 (90,126)(a) 78,380
Allowance for Inventory
Obsolescence
Year Ended December 31, 1999.... $ 70,169 $ 58,298 $ (82,139)(b) $ 46,328
Year Ended December 31, 1998.... 46,610 69,842 (46,283)(b) 70,169
Year Ended December 31, 1997.... 46,753 56,180 (56,323)(b) 46,610
|
(b) Primarily represents relief of previously established reserves resulting from the disposal of related inventory, raw materials, write-downs and currency translation adjustments, partially offset by beginning balances from acquired companies.
S-1
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall each year fix, which date shall be within thirteen months subsequent to the later of the date of incorporation or the last annual meeting of stockholders.
Section 2. Special Meetings.
Special meetings of the stockholders, for any purpose or purposes prescribed in the notice of the meeting, may be called by the Board of Directors or the chief executive officer and shall be held at such place, on such date, and at such time as they or he shall fix.
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the stockholders shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held to each stockholder entitled to vote at such meeting, except as otherwise provided herein, in the Restated Certificate of Incorporation or required by law.
When a meeting is adjourned to another place, date, or time, written
notice need not be given of the adjourned meeting if the place, date, and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law.
If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then except as otherwise required by law, those present at such adjourned meeting shall constitute a quorum, and all matters shall be determined by a majority of the votes cast at such meeting.
Section 5. Organization.
Such person as the Board of Directors may have designated or, in the absence of such a person, the highest ranking officer of the corporation who is present shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the Secretary of the corporation, the secretary of the meeting shall be such person as the chairman appoints.
Section 6. Conduct of Business.
The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him in order.
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing filed in accordance with the procedure established for the meeting.
Each stockholder shall have one vote for every share of stock entitled to vote which is registered in his name on the record date for the meeting, except as otherwise provided herein or required by law. As provided by the Certificate of Incorporation, at all elections of directors each stockholder who is entitled to vote shall be entitled to as many votes as shall equal the number of votes which (except for the provisions as to cumulative voting contained in the Certificate of Incorporation) he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them as he may see fit.
All voting, except for the election of directors and where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or his proxy, a stock vote shall be taken. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. Every vote
All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law, all other matters shall be determined by a majority of the votes cast.
Section 8. Stock List.
A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.
Section 9. Business Brought Before the Meeting,
At any annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting or any adjournment thereof (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the corporation who is entitled to vote with respect thereto and who complies with the notice procedures set forth in this Section 9. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder's notice must be delivered or mailed to and received at the principal executive offices of the corporation not less than thirty (30) days prior to the date of the annual meeting the close of business on the 90/th/ day nor earlier than the 120/th/ day prior to the anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120/th/ day prior to such annual meeting and not later than the 90/th/ day prior to such annual meeting or the 10/th/ day following the day on which public announcement of the date of such meeting is first made by the corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. ("Public announcement" means disclosure in a press release, national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended). A stockholder's notice to the Secretary shall set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be
At any special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Board of Directors.
Section 10. Nomination for Election to Board.
Only persons who are properly nominated in accordance with the procedures set forth in these Bylaws shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders or any adjournment thereof at which directors are to be elected only (i) by or at the direction of the Board of Directors (ii) by any stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 10. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made by timely pursuant to timely and complete notice in writing to the Secretary of the corporation. For elections at an annual meeting, to be timely, a stockholder's notice must be delivered or mailed to and received at the principal executive offices of the corporation not later than the close of business on the 90/th/ day nor earlier than the 120/th/ day prior to the anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120/th/ day prior to such annual meeting and not later than the 90/th/ day prior to such annual meeting or the 10/th/ day following the day on which public announcement of the date of such meeting is first made by the corporation. In the event the corporation calls a special meeting of the stockholders for the purpose of electing one or more directors to the Board of Directors, a stockholder may
Section 11. Inspectors of Written Consent
In the event of the delivery, in the manner provided by ARTICLE V,
Section 3(b), to the corporation of the requisite written consent or consents to
take corporate action and/or any related revocation or revocations, the
corporation shall engage nationally recognized independent inspectors of
elections for the purpose of promptly performing a ministerial review of the
validity of the consents and revocations. For the purpose of permitting the
inspectors to perform such review, no action by written consent without a
Section 12. Effectiveness of Written Consent
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the date
the earliest dated written consent was received in accordance with ARTICLE V,
Section 3(b), a written consent or consents signed by a sufficient number of
holders to take such action are delivered to the corporation in the manner
prescribed in ARTICLE V, Section 3(b).
Section 1. Number and Term of Office.
The Board of Directors shall consist of one or more members, the number thereof to be determined from time to time by resolution of the Board of Directors. Each director shall hold office until the annual meeting of stockholders next succeeding his election and until his successor is elected and qualified, except as otherwise provided herein or required by law.
The Chairman of the Board of Directors, if there be one, shall be a director and shall serve as Chairman of the Board of Directors at the pleasure of the Board of Directors. The Chairman of the Board of Directors shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board of Directors shall also perform such other duties and may exercise such other powers as may from time to time be assigned by these Bylaws or by the Board of Directors. If there shall be no Chairman of the Board of Directors, the Board may designate a director to act in place of a Chairman of the Board of Directors for any purpose.
Whenever the authorized number of directors is increased between annual meetings of the stockholders, a majority of the directors then in office shall have the power to elect such new directors for the balance of a term and until their successors are elected and qualified. Any decrease in the authorized number of directors shall not become effective until the expiration of the term of the directors then in office unless, at the time of such decrease, there shall be vacancies on the board which are being eliminated by the decrease.
Section 2. Vacancies.
If the office of any director becomes vacant by reason of death, resignation, disqualification, removal or other cause, a majority of the directors remaining in office, although less than a quorum, may elect a successor for the unexpired term and until his successor is elected and qualified.
Section 3. Regular Meetings.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by one-third of the directors then in office or by the chief executive officer and shall be held at such place, on such date, and at such time as they or he shall fix. Notice of the place, date and time of each such special meeting shall be given each director by whom it is not waived by mailing written notice not less than three days before the meeting or by telegraphing, sending by facsimile transmission or by electronic mail the same not less than eighteen hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting.
Section 5. Quorum.
At any meeting of the Board of Directors, one-third of the total number of the whole board, but not less than two, shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof.
Section 6. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted in such order and manner as the board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided herein or required by law.
Section 7. Powers.
The Board of Directors may, except as otherwise required by law, exercise all such power and do all such acts and things as may be exercised or done by the corporation, including, without limiting the generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or
(4) To remove any officer of the corporation with or without cause, from time to time to devolve the powers and duties of any officer upon any other person for the time being;
(5) To confer upon any officer of the corporation the power to appoint, remove and suspend subordinate officers and agents;
(6) To adopt from time to time such bonus or other compensation plans for directors, officers and agents of the corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers and agents of the corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with these Bylaws, for the management of the corporation's business and affairs.
Section 8. Compensation of Directors.
Directors, as such, may receive, pursuant to resolution of the Board of Directors, fixed fees and other compensation for their services as directors, including, without limitation, their services as members of committees of the directors.
Section 9. Action without Meeting.
Any action required or permitted to be taken at any meeting of the Board of Directors or of any Committee thereof may be taken without a meeting if all members of the Board or Committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board or Committee.
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the whole Board, may from time to time designate committees of the Board, including an Executive/Finance Committee, with the powers and duties it thereby confers, to serve at the pleasure of the Board and shall, for those committees and any others provided for herein, elect the director or directors to serve as the member or members, designating, if it desires, other directors as alternate members
Section 2. Executive/Finance Committee.
If the Board of Directors shall designate an Executive/Finance Committee, said Committee shall have the following powers:
During the intervals between meetings of the Board of Directors, that Committee shall have all of the powers and duties of the Board of Directors, except with respect to matters delegated to another committee and except as shall have been otherwise provided by the Board of Directors. All action taken by the Executive/Finance Committee since the last meeting of the Board of Directors shall be reported to the Board at its next meeting.
During the intervals between meetings of the Executive/Finance Committee, the chairman thereof shall have such of the powers and duties of such Committee as shall have been conferred upon him by the Board of Directors or the Committee.
Section 3. Conduct of Business.
Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-third of the members, but not less than two, shall constitute a quorum; and all matters shall be determined by a majority vote of the members present.
Section 4. Emergency Management Committee.
If as a result of a catastrophe or other emergency condition a quorum of any committee of the Board of Directors having power to act in the premises cannot readily be convened and a quorum of the Board of Directors cannot readily be convened, then all the powers and duties of the Board of Directors shall automatically vest and continue, until a quorum of the Board of Directors can be convened, in the Emergency Management Committee, which shall consist of all readily available members of the Board of Directors and two of whose members shall constitute a quorum. The Emergency Management Committee shall call a meeting of the Board of Directors as soon as circumstances permit for the purpose of filling any vacancies on the Board of Directors and its committees and taking such other action as may be appropriate.
Section 1. Generally.
The officers shall consist of a Chief Executive Officer, a President, one or more Vice Presidents (who may at the pleasure of the Board of Directors be designated as Senior Vice Presidents, Executive Vice Presidents, Vice Presidents in charge of a particular function such as Vice President- Administration, or merely Vice President), a Secretary, a Treasurer, a Controller, and such assistants to such officers as may from time to time be appointed by the Board of Directors.
Officers shall be elected by the Board of Directors, which shall consider that subject at its first meeting after every annual meeting of stockholders. Each officer shall hold his office at the pleasure of the Board of Directors and until his successor is elected and qualified or until his earlier resignation or removal. Any number of offices may be held by the same person.
The Board of Directors may appoint such other officers as the business of the corporation may require, each of whom shall have such authority and perform such duties as are provided in these Bylaws or as the Board of Directors or the Chief Executive Officer may from time to time specify.
Section 2. Chief Executive Officer
Subject to the provisions of these Bylaws and to the direction of the Board of Directors, the Chief Executive Officer of the Corporation shall have the responsibility for the general management and control of the affairs and business of the corporation and shall perform all duties and have all powers which are commonly incident to the office of chief executive or which are delegated to him by the Board of Directors.
The Chief Executive Officer shall have power to sign all stock certificates, contracts and other instruments of the corporation which are authorized. He shall have general supervision and direction of all of the other officers and agents of the corporation.
Section 3. President.
The President shall have such duties and powers as may from time to time be delegated to him by the Board of Directors or by the Chief Executive Officer. In the absence or disability of the Chief Executive Officer, or during the period of a vacancy in that office, he shall act as the chief executive officer of the corporation and shall have the duties and powers of such office.
Each of the Vice Presidents shall have such duties and powers as may from time to time be delegated to him by the Board of Directors, by the Chief Executive Officer, or by the President. In the absence or disability of the President, the Vice President designated by:
(a) the Board of Directors, or if no such designation is made, then by
(b) the Chief Executive Officer, or if no such designation is made, then by
(c) the President
shall have the duties and powers of the President.
Section 5. The Treasurer.
The Treasurer shall have the custody of all monies and securities of the corporation and shall keep regular books of account. He shall make such disbursement of the funds of the corporation as are proper and shall render from time to time an account of all such transactions and of the financial condition of the corporation. He shall have such other duties and powers as are commonly incident to this office or are delegated to him by the Board of Directors, by the Chief Executive Officer, or by the President.
Section 6. The Secretary.
The Board of Directors shall appoint a Secretary or, at its discretion, more than one Secretary, each of whom shall have such duties and other powers as are commonly incident to this office or are delegated to him or her by the Board of Directors, by the Chief Executive Officer, or by the President. A Secretary shall issue all authorized notices for, and shall keep minutes of, all meetings of the stockholders and the Board of Directors. A Secretary shall have charge of the corporate books.
Section 7. Delegation of Authority.
The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agents, notwithstanding any provision hereof.
Section 8. Removal.
Any officer of the corporation may be removed at any time, with or without cause, by the Board of Directors.
Section 9. Action with Respect to Securities of Corporation.
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the name of the corporation by, the Chief Executive Officer, or the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by him. Signatures required on such certificates may be manually signed by the transfer agent, registrar or officer, or such signatures may be facsimile.
Section 2. Transfer of Stock.
Transfers of stock shall be made only upon the transfer books of the corporation kept at an office of the corporation or by transfer agents designated to transfer shares of the stock of the corporation. Except where a certificate is issued in accordance with Section 4 of ARTICLE V of these Bylaws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Dates.
(a) The Board of Directors may fix a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of any meeting of stockholders, nor more than sixty (60) days prior to the time for the other action hereinafter described (except as otherwise set forth in paragraph (b) of this Section), as of which there shall be determined the stockholders who are entitled: to notice of or to vote at any meeting of stockholders or any adjournment thereof; to receive payment of any dividend or other distribution or allotment of any rights; or to exercise any rights with respect to any change, conversion or exchange of stock or with respect to any other lawful action.
(b) In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish.
Section 1. Right to Indemnification.
Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or person of whom he or she is the legal representative, is or was a director or officer of the corporation, including when any such director or officer is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director,
Section 2. Right of Claimant to Bring Suit.
If a claim under Section 1 of this ARTICLE VI, is not paid in full by the corporation within thirty days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not
Section 3. Non-Exclusivity of Rights.
The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this ARTICLE VI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, bylaw, agreement, vote of stockholders or otherwise. No repeal or modification of this ARTICLE VI shall in any way diminish or adversely affect the rights of any director, officer, employee or agent of the corporation hereunder in respect of any occurrence or matter arising prior to any such repeal or modification.
Section 4. Insurance.
The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. To the extent that the corporation maintains any policy or policies providing such insurance, each such director or officer, and each such agent or employee to which rights to indemnification have been granted as provided in Section 7 of this ARTICLE VI, shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such director, officer, employee or agent.
Section 5. Procedures for Indemnification
To obtain indemnification under this ARTICLE VI, a claimant shall submit to the corporation a written request, including therein or therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to indemnification. Upon written request by a claimant for indemnification pursuant to the first sentence of this Section 5, a determination, if required by applicable law, with respect to the claimant's entitlement thereto shall be made as follows: (1) if requested by the claimant, by independent legal counsel ( as hereinafter defined), or (2) if no request is made by the claimant for a determination by independent legal counsel, (i) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (ii) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by independent legal counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (iii) if a quorum of Disinterested Directors so directs, by the stockholders of the corporation. In the event the determination of entitlement to indemnification is to be made by independent legal counsel at the request of the claimant, the independent legal counsel shall be selected by the Board of
Section 6. Effect and Validity
If a determination shall have been made pursuant to ARTICLE VI,
Section 5 that the claimant is entitled to indemnification, the corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to ARTICLE VI, Section 2. The corporation shall be precluded from
asserting in any judicial proceeding commenced pursuant to ARTICLE VI, Section 2
that the procedures and presumptions of this ARTICLE VI are not valid, binding
and enforceable and shall stipulate in such proceeding that the corporation is
bound by all the provisions of this ARTICLE VI.
If any provision or provisions of this ARTICLE VI shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this ARTICLE VI (including, without limitation, each portion of any paragraph of this ARTICLE VI containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this ARTICLE VI (including, without limitation, each such portion of any paragraph of this ARTICLE VI containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
Section 7. Employees and Agents
The corporation may grant rights to indemnification, and rights to be paid by the corporation the expenses incurred in defending any proceeding in advance of its final disposition, to any employee or agent of the corporation, including when any such person is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the corporation, to the fullest extent of the provision of this ARTICLE VI with respect to the indemnification and advancement of expenses of directors and officers of the corporation.
Section 8. Definitions
For purposes of this ARTICLE VI:
(a) "Change of Control" means (i) The acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
(ii) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the corporation's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as through such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or
(iii) Consummation by the corporation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the corporation or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individual and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the corporation or all or substantially all of the corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the corporation or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination
(iv) Approval by the stockholders of the corporation of a complete liquidation or dissolution of the corporation.
(b) "Disinterested Director" means a director of the corporation who is not and was not a party to the matter in respect of which indemnification is sought by the claimant.
(c) "independent legal counsel" means a law firm, a member of a law firm, or an independent practitioner, that is experienced in matters of corporation law and shall include any person who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the corporation or the claimant in an action to determine the claimant's rights under this ARTICLE VI."
Section 1. Notices.
Whenever notice is required to be given to any stockholder, director, officer, or agent, such requirement shall not be construed to mean personal notice. Such notice may in every instance be effectively given by depositing a writing in a post office or letter box, in a postpaid, sealed wrapper, or by dispatching a prepaid telegram, addressed to such stockholder, director, officer, or agent at his or her address as the same appears on the books of the corporation. The time when such notice is dispatched shall be the time of the giving of the notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, director, officer or agent, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such stockholder, director, officer, or agent. Neither the business nor the purpose of any meeting need be specified in such a waiver.
Section 1. Facsimile Signatures.
In addition to the provisions for the use of facsimile signatures elsewhere specifically authorized in these bylaws, facsimile signatures of any officer or officers of the corporation may be used whenever and as authorized by the Board of Directors or the Executive Committee.
Section 2. Corporate Seal.
The Board of Directors shall provide a suitable seal, containing the name of the corporation, which seal shall be in charge of the Secretary. If and when so directed by the Board of Directors or by the Executive Committee, duplicates of the seal may be kept and used by the Treasurer or by any Assistant Secretary or Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of Directors, and each officer of the corporation shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or other records of the corporation, including reports made to the corporation by any of its officers, by an independent certified public accountant, or by an appraiser selected with reasonable care.
Section 4. Fiscal Year.
The fiscal year of the corporation shall terminate at the end of business on December 31 in each year, and the following year shall begin on the next day thereafter.
Section 5. Time Periods.
In applying any provision of these Bylaws which require that an act be done or not done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to any event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.
Section 6. Independent Accountants.
The Board of Directors shall appoint on an annual basis such firm of independent public accountants as it shall deem appropriate to examine the Company's financial books and records on at least an annual basis. The appointment of said independent accountants shall, at the next succeeding annual meeting of stockholders be presented to the stockholders of the Company for ratification. Should the stockholders fail to ratify the appointment by the Board of
Section 7. Gender.
Any reference to the masculine gender in these Bylaws shall be construed to mean the feminine gender, as the situation may demand.
Section 1. Amendments.
These Bylaws may be amended or repealed by the Board of Directors at any meeting or by the stockholders at any meeting.
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is entered into on January 31, 2000 and effective as of April 1, 1999 (the "Effective Date") between Mattel, Inc., a Delaware corporation ("Mattel") and Adrienne Fontanella (the "Executive").
1. Employment Period. Mattel hereby agrees to employ and continue in its employ the Executive, and the Executive hereby accepts such employment and agrees to remain in the employ of Mattel, for the period commencing on the Effective Date and ending on the third anniversary of such date, subject to earlier termination as provided herein (the "Employment Period"); provided that commencing on the first day of the month next following the effective date hereof, and on the first day of each month thereafter (the most recent of such dates is hereinafter referred to as the "Renewal Date"), the Employment Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to any Renewal Date Mattel or the Executive shall give notice to the other that the Employment Period shall not be so extended and shall be terminated.
2. Duties.
(a) Executive's Position and Duties. During the Employment Period, the Executive's position (including title(s), which is currently President of Girls/Barbie of Mattel), authority and responsibilities shall be similar to those held by the Executive on the date hereof with such additions and modifications, and consistent with responsibilities generally assigned to officers of Mattel as the Chief Executive Officer of Mattel may in her discretion and acting in good faith from time to time assign to the Executive. The Executive's services shall be performed in the greater Los Angeles, California area, provided, however, that the Executive may be required to travel on business from time to time generally consistent with the Executive's travel requirements as of the date of this Agreement.
(b) Full Time. The Executive agrees to devote the Executive's full business time to the business and affairs of Mattel and to use the Executive's best efforts to perform faithfully and efficiently the responsibilities assigned to the Executive hereunder to the extent necessary to discharge such responsibilities, except for (i) services on corporate, civic or charitable boards or committees not significantly interfering with the performance of such responsibilities which services have been approved by the Chief Executive Officer; (ii) periods of vacation and sick leave to which the Executive is entitled; and (iii) the management of personal investments and affairs. The Executive will not engage in any outside business activity (as distinguished from personal investment activity and affairs), including, but not limited to, activity as a consultant, agent, partner or officer, director or provide business services of any nature directly or indirectly to a corporation or other business enterprise, except that the Executive may continue to serve as an officer and/or director of January Productions, Inc.
(a) Base Salary. During the Employment Period, the Executive shall receive a base salary ("Base Salary") at a bi-weekly rate at least equal to the bi-weekly salary paid to the Executive by Mattel on the date of this Agreement. The Base Salary shall be reviewed from time to time in accordance with Mattel's policies and practices, but no less frequently than once every eighteen (18) months and may be increased at any time and from time to time by action of the Board of Directors of Mattel or the Compensation/Options Committee thereof or any individual having authority to take such action in accordance with Mattel's regular practices. Any increase in the Base Salary shall not serve to limit or reduce any other obligation of Mattel hereunder and, after any such increase, the Base Salary shall not be reduced.
(b) Bonus Programs. In addition to the Base Salary, the Executive shall be eligible to participate throughout the Employment Period in such cash, deferred bonus, annual bonus and long term bonus plans and programs ("Bonus Programs"), such as Mattel's Management Incentive Plan (the "MIP") and Long Term Incentive Plan (the "LTIP"), as may be in effect from time to time in accordance with Mattel's compensation practices and the terms and provisions of any such plans or programs as in effect from time to time; provided that the Executive's eligibility for and participation in each of the Bonus Programs shall be at a level and on terms and conditions no less favorable than those available to any other comparably situated executive or consultant.
(c) Incentive Plans. In addition to the Base Salary and participation in the Bonus Programs, during the Employment Period the Executive, shall be eligible to participate, subject to the terms and conditions thereof, in all incentive plans and programs, including, but not limited to, stock option plans and other equity based incentive plans, as may be in effect from time to time with respect to executives employed by Mattel at the Executive's level so as to reflect the Executive's responsibilities.
(d) Pension and Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's dependents, as the case may be, shall be eligible to participate in, subject to the terms and conditions thereof, all pension, profit sharing, medical, dental, disability, group life, accidental death and travel accident insurance plans and programs of Mattel as in effect from time to time with respect to executives employed by Mattel at the Executive's level so as to reflect the Executive's responsibilities.
(e) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the policies and practices of Mattel as in effect from time to time.
(f) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits (including automobile benefits, financial counseling, membership in
(g) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the policies and practices of Mattel as in effect from time to time.
(h) Stock Options. During the Employment Period, the Executive shall be entitled to participate in Mattel's stock option plans in accordance with the policies and practices of Mattel as in effect from time to time with respect to executives employed by Mattel at the Executive's level so as to reflect the Executive's responsibilities.
(i) Certain Amendments. Nothing herein shall be construed to prevent Mattel from amending, altering, eliminating or reducing any plans, benefits or programs set forth in Sections 3(b) through (h) so long as such actions do not result in a material diminution in the aggregate value of such compensation and benefits, except for across-the-board compensation and benefit reductions to which the Executive agrees and which affect all similarly situated executives of Mattel.
(j) Retention Loan. Mattel and the Executive have entered into that certain Loan Agreement (the "Loan Agreement") dated as of October 29, 1999, which provided, among other things, that the definitions of "Cause," "Change of Control," "Disability" and "Good Reason" contained in this Agreement supercede the definitions of such terms as set forth in the Loan Agreement.
(k) Travel and Relocation. In order to defray the expense of travel between New York and California by the Executive's spouse, Mattel shall reimburse the Executive for the cost of twenty-four (24) round-trip business class tickets for a two year period beginning as of the date this Agreement is entered into. In addition, in the event that the Executive's employment is terminated by Mattel other than for Cause or Disability or if the Executive terminates employment with Mattel for Good Reason or after a Change of Control, and if the Executive relocates to New York, New York, Mattel shall reimburse the Executive for the costs incurred by the Executive in relocating from Los Angeles, California to New York, New York pursuant to Mattel's relocation policy for senior executives, as it may be in effect from time to time with respect to executives employed by Mattel at the Executive's level, provided, however that in event of a Change of Control, such benefits shall not be less in the aggregate than the benefits which would have been provided to the Executive under Mattel's relocation policy as it was in effect immediately prior to the Change of Control.
(a) Death or Disability. This Agreement shall terminate automatically upon the Executive's death; provided that the Executive's Base Salary will be continued and paid for a period of six months thereafter. Mattel may terminate this Agreement, after having established the Executive's Disability, by giving to the Executive written notice of its intention to terminate the Executive's employment, and the Executive's employment with Mattel shall terminate effective on the 90th day after receipt of such notice (the "Disability Effective Date"). For purposes of this Agreement, the Executive's Disability shall occur and shall be deemed to have occurred only in the event that the Executive suffers a disability due to illness or injury which substantially and materially limits the Executive from performing each of the essential functions of the Executive's job, even with reasonable accommodation and becomes entitled to receive disability benefits under the Mattel Long-Term Disability Plan for exempt employees.
(b) Cause. Mattel may terminate the Executive's employment for "Cause" upon a determination of the Chief Executive Officer of Mattel that "Cause" exists. For purposes of this Agreement, "Cause" means (i) one or more factually substantiated willful acts of dishonesty on the Executive's part which are intended to result in the Executive's substantial personal enrichment at the expense of Mattel; (ii) repeated violations by the Executive of the Executive's obligations under Section 2 of this Agreement which are demonstrably willful and deliberate on the Executive's part and which resulted in material injury to Mattel; (iii) conduct of a factually substantiated criminal nature (commonly defined as a "felony" in criminal statutes) which has or which is more likely than not to have a material adverse effect on Mattel's reputation or standing in the community or on its continuing relationships with its customers or those who purchase or use its products; or (iv) factually substantiated fraudulent conduct in connection with the business or affairs of Mattel, regardless of whether said conduct is designed to defraud Mattel or others; provided that, in each case, the Executive has received written notice of the described activity, has been afforded a reasonable opportunity to cure or correct the activity described in the notice, and has failed to substantially cure, correct or cease the activity, as appropriate.
(c) Good Reason. The Executive may terminate the Executive's employment at any time for Good Reason. For purposes of this Agreement, "Good Reason" means the good faith determination by the Executive that any one or more of the following have occurred:
(i) without the express written consent of the Executive, any change(s) in any of the duties, authority, or responsibilities of the Executive which is (are) inconsistent in any substantial respect with the Executive's position, authority, duties, or responsibilities as contemplated by Section 2 of this Agreement;
(iii) any proposed termination by Mattel of the Executive's employment other than as permitted by this Agreement;
(iv) any failure by Mattel to obtain the assumption and agreement to perform this Agreement by a successor as contemplated by Section 11(b); or
(v) transferring the Executive outside of the greater Los Angeles, California area without the Executive's express written consent.
(d) Change of Control. "Change of Control" means:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of Mattel, including the
shares of common stock of Mattel issuable upon an exchange of Softkey
Exchangeable Shares that are not owned by Mattel or any corporation controlled
by Mattel (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of Mattel entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (i), the
following shall not constitute a Change of Control: (a) any acquisition directly
from Mattel, (b) any acquisition by Mattel or any corporation controlled by
Mattel, (c) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Mattel or any corporation controlled by Mattel, (d)
any acquisition by a Person of 20% of either the Outstanding Company Common
Stock or the Outstanding Company Voting Securities as a result of an acquisition
of common stock of Mattel by Mattel or of Softkey Exchangeable Shares by Softkey
which, by reducing the number of shares of common stock of Mattel or Softkey
Exchangeable Shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 20% or more of either the Outstanding
Company Common Stock or the Outstanding Company Voting Securities; provided,
however, that if a Person shall become the beneficial owner of 20% or more of
either the Outstanding Company Common Stock or the Outstanding Company Voting
Securities by reason of a share acquisition by Mattel or by Softkey as described
above and shall, after such share acquisition by Mattel or Softkey, become the
beneficial owner of any additional shares of common stock of Mattel, then such
acquisition shall constitute a Change of Control or (e) any acquisition pursuant
to a transaction which complies with clauses (a), (b) and (c) of subsection
(iii) of this Section 4(d); provided, further, however, that for purposes of
this subsection (i), any Investing Person (as such term is defined in the Rights
Agreement) shall be deemed not to be a beneficial owner of any Investment Shares
(as such term is defined in the Rights Agreement) and the holder of the
(ii) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Mattel's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as through such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(iii) consummation by Mattel of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of Mattel or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (a) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns Mattel or all or substantially all of Mattel's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (b) no Person (excluding any employee benefit plan (or related trust) of Mattel or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding share of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (c) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(iv) approval by the shareholders of Mattel of a complete liquidation or dissolution of Mattel.
For the purposes of this Section 4(d), (a) "Rights Agreement" means the Rights Agreement, dated as of February 7, 1992, as amended by an amendment dated as of May 13, 1999 and an amendment dated as of November 4, 1999 by and between Mattel and BankBoston
(e) Notice of Termination. Any termination of the Executive's employment
by Mattel for Cause or following a Change of Control or by the Executive for
Good Reason shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 15(b). Any termination by Mattel due to
Disability shall be given in accordance with Section 4(a). For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon; (ii) except in
the event of a termination following a Change of Control, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated; and
(iii) specifies the Date of Termination (defined below).
(f) Date of Termination. "Date of Termination" means the date of actual receipt of the Notice of Termination or any later date specified therein (but not more than fifteen (15) days after the giving of the Notice of Termination), as the case may be; provided that (i) if the Executive's employment is terminated by Mattel for any reason other than Cause or Disability, the Date of Termination is the date on which Mattel notifies the Executive of such termination; (ii) if the Executive's employment is terminated due to Disability, the Date of Termination is the Disability Effective Date; and (iii) if the Executive's employment is terminated due to the Executive's death, the Date of Termination shall be the date of death.
5. Obligations of Mattel upon Termination. Other than as specifically set forth or referenced in this Agreement, the Executive shall not be entitled to any benefits on or after the Date of Termination.
(a) Death. If the Executive's employment is terminated by reason of the Executive's death, this Agreement shall terminate without further obligations by Mattel to the Executive's legal representatives under this Agreement other than those obligations accrued hereunder or under the terms of the applicable Mattel plan or program which takes effect at the date of the Executive's death or as otherwise provided in Section 4(a) or this Section 5(a). As of the Date of Termination, the Executive's family shall be entitled to healthcare coverage and financial counseling benefits until the third anniversary of the Date of Termination.
(b) Disability. If the Executive's employment is terminated by reason of
the Executive's Disability, the Executive shall be entitled to receive after the
Disability Effective Date (i) disability benefits, if any, at least equal to
those then provided by Mattel to disabled executives and/or their families and
(ii) until the earlier of the third anniversary of the Date of Termination or
the date the Executive accepts other employment, those other benefits on the
terms described in Section 5(d)(v).
(d) Good Reason; Other Than for Cause or Disability. If Mattel terminates the Executive's employment other than for Cause or Disability or the Executive terminates the Executive's employment for Good Reason (in each case, other than within 18 months following a Change of Control as provided in Section 5(e)):
(i) Mattel shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:
(A) if not theretofore paid, the Executive's Base Salary through the Date of Termination at the rate in effect at the time of Notice of Termination was given;
(B) a current year bonus (the "Bonus") equal to the greater of (x) the average of the two highest annual bonuses received by the Executive under the MIP, or any successor plan, in the three years prior to the Date of Termination, including any years in which the Executive was paid no bonus, (the "Average Annual Bonus") and prorated to reflect the total number of full months the Executive is employed on an active and full time basis in the year in which termination occurs, (y) the annual bonus paid to the Executive, under the MIP or any successor plan, if any, for the 2000 or 2001 calendar year, whichever is greater, without proration, or (z) the target annual bonus (50%) for the Executive under the MIP for the 2000 calendar year;
(C) three times the sum of (x) the Executive's annual Base
Salary at the rate in effect at the time the Notice of Termination is given and
(y) the Bonus defined in Section 5(d)(i)(B), but without proration (and, in each
such case, without regard to any contributions by Mattel for the Executive's
benefit to any retirement or other investment plans).
(ii) Mattel shall pay the Executive a portion of any long-term incentive compensation that Executive would have received under the LTIP with respect to any performance period which is pending as of the Executive's Date of Termination as if the Executive had remained employed for the entire performance period, pro rated based on the number of full months of Executive's employment during the performance period over the total number of months in the performance period, which amount shall be payable at the end of the period in accordance with the terms of the LTIP and shall be net of any interim payments previously made to the Executive.
(iii) Any options granted to the Executive under Mattel's stock option plans, other than Mattel's 1997 Premium Price Stock Option Plan or any successor thereto (the
(iv) Mattel shall, promptly upon submission by the Executive of
supporting documentation, pay or reimburse to the Executive any costs and
expenses paid or incurred by the Executive which would have been payable under
Section 3(e) if the Executive's employment had not terminated.
(v) Until the earlier of (x) the third anniversary of the Date of Termination or (y) the date the Executive becomes gainfully employed in a substantially similar employment position, Mattel shall provide to the Executive at Mattel's expense:
(A) coverage under Mattel's medical, dental, prescription drug and vision care group insurance as in effect from time to time on the same terms and conditions as such insurance is available to active employees of Mattel (the last 18 months of the Executive's coverage under such insurance shall be deemed to be participation under an election to continue such benefits under the Consolidated Omnibus Budget Reconciliation Act at Mattel's expense);
(B) outplacement services at the expense of Mattel commensurate with those provided to terminated executives of comparable level and made available through and at the facilities of a reputable and experienced vendor;
(C) financial counseling and tax preparation services through the vendor engaged and paid for by Mattel;
(D) automobile benefits; provided however, that if such automobile is leased by Mattel, such benefits shall expire upon expiration of such lease. Upon expiration of the automobile benefits, at which time the Executive may purchase the car for either $100, if the automobile benefits terminate at the end of the lease term, or Mattel's book value, if the automobile benefits terminate on either the third anniversary of the Date of Termination or the date on which the Executive accepts other employment. As of the Date of Termination, all expenses related to such automobile, including but not limited to insurance, repairs, maintenance, gasoline, and car phone and associated expenses, shall be the sole responsibility of the Executive; and
(E) membership in one city or country club and related expenses. Mattel shall cause the membership to be transferred to the Executive at no cost to the Executive.
Notwithstanding the foregoing, if Mattel terminates the Executive's employment
other than for Cause or Disability or if the Executive terminates the
Executive's employment for Good Reason and such termination occurs within 18
months after the date upon which Mattel changes the person to whom the Executive
immediately reports, then (a) the Executive's "Average Annual Bonus" for the
purpose of calculating the amounts provided by clauses (d)(i)(B) and (d)(i)(C)
above shall be equal to the Executive's maximum targeted MIP bonus for the year
in which the termination of employment occurs and (b) the amount payable to the
Executive under clause (d)(ii) above shall be based on the maximum LTIP payment
that the Executive could have received with respect to the pending performance
period, rather than amount which would have been payable to the Executive had
the Executive remained employed for the entire performance period.
Notwithstanding the foregoing, the amounts payable with respect to a termination
of employment which is subject to the preceding sentence shall be prorated as
set forth in clauses (d)(i)(B) and (d)(ii).
(e) Change of Control. If, within 18 months following a Change of Control, the Executive terminates the Executive's employment for Good Reason or Mattel or the surviving entity terminates the Executive's employment other than for Cause or Disability or within the 30 day period immediately following the six (6) month anniversary of a Change of Control the Executive terminates the Executive's employment for any reason:
(i) Mattel shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:
(A) if not theretofore paid, the Executive's Base Salary through the Date of Termination at the rate in effect at the time of Notice of Termination was given;
(B) a current year bonus (the "Bonus Amount") equal to the greater of (x) the average of the two highest annual bonuses received by the Executive under the MIP, or any successor plan, in the three years prior to the Date of Termination, including any years in which the Executive was paid no bonus, and prorated to reflect the total number of full months the Executive is employed on an active and full time basis in the year in which termination occurs, (y) the annual bonus paid to the Executive, under the MIP or any successor plan, if any, for the 2000 or 2001 calendar year, whichever is greater, without proration, or (z) the target annual bonus (50%) for the Executive under the MIP for the 2000 calendar year;
(ii) Any options granted to the Executive under Mattel's stock option plans, other than Mattel's 1997 Premium Price Stock Option Plan or any successor thereto (the "Stock Option Plans"), shall become immediately exercisable and the Executive shall have a period of 90 days or such longer period of time as specified in the Stock Option Plans following the Date of Termination (but in no event past the expiration of the term of the option grant) to exercise all options granted under the Stock Option Plans then exercisable or which become exercisable pursuant to this clause (ii).
(iii) Mattel shall, promptly upon submission by the Executive of
supporting documentation, pay or reimburse to the Executive any costs and
expenses paid or incurred by the Executive which would have been payable under
Section 3(e) if the Executive's employment had not terminated.
(iv) Until the earlier of (x) the third anniversary of the Date of Termination or (y) the date the Executive becomes gainfully employed in a substantially similar employment position, Mattel shall provide to the Executive at Mattel's expense:
(A) coverage under Mattel's medical, dental, prescription drug and vision care group insurance as in effect from time to time on the same terms and conditions as such insurance is available to active employees of Mattel (the last 18 months of the Executive's coverage under such insurance shall be deemed to be participation under an election to continue such benefits under the Consolidated Omnibus Budget Reconciliation Act at Mattel's expense);
(B) outplacement services at the expense of Mattel commensurate with those provided to terminated executives of comparable level and made available through and at the facilities of a reputable and experienced vendor;
(C) financial counseling and tax preparation services through the vendor engaged and paid for by Mattel;
(D) automobile benefits; provided however, that if such automobile is leased by Mattel, such benefits shall expire upon expiration of such lease. Upon expiration of the automobile benefits, at which time the Executive may purchase the car for either $100, if the automobile benefits terminate at the end of the lease term, or Mattel's book value, if the automobile benefits terminate on either the third anniversary of the Date of Termination or the date on which the Executive accepts other employment. As of the Date of
(E) membership in one city or country club and related expenses. Mattel shall cause the membership to be transferred to the Executive at no cost to the Executive.
(v) If the Executive is a participant in the Mattel Supplemental Executive Retirement Plan, the Mattel Deferred Compensation Plan or the Mattel Retiree Medical Plan, the Executive shall be given credit for three years of service (in addition to actual service) and for three years of attained age to be added to the Executive's actual age for purposes of computing any service and age-related benefits for which the Executive is eligible under such plans.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by Mattel and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any stock option or other agreement with Mattel or any of its affiliated companies. Except as otherwise provided herein, amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of Mattel at or subsequent to the Date of Termination shall be payable in accordance with such plan or program.
7. No Set Off, Payment of Fees. Except as provided herein, Mattel's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which Mattel may have against the Executive or others. Mattel agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by Mattel or others of the validity or enforceability of, or liability under, any provision of this Agreement other than expenses relating to a claim by the Executive that the Executive terminated for Good Reason or that the termination for Cause was improper, in which case such fees and expenses shall be paid only if the Executive prevails in whole or in part. In the event that the Executive shall in good faith give a Notice of Termination for Good Reason and it shall thereafter be determined that Good Reason did not exist, the employment of the Executive shall, unless Mattel and the Executive shall otherwise mutually agree, be deemed to have terminated at the Date of Termination specified in such purported Notice of Termination by mutual consent of Mattel and the Executive and thereupon, the Executive shall be entitled to receive only those payments and benefits which the Executive would have been entitled to receive at such date.
8. Arbitration of Disputes.
One arbitrator shall be selected by the Executive, one by Mattel and the third by the two persons so selected, all in accordance with the then applicable arbitration rules of JAMS/Endispute then in effect. In the event that the arbitrator selected by the Executive and the arbitrator selected by Mattel are unable to agree upon a third arbitrator, then the third arbitrator shall be selected from a list of seven (each of whom shall be a member of the "Independent List" of retired judges with experience in resolving employment disputes) provided by the Los Angeles office of JAMS/Endispute with the parties striking names in order and the party striking first to be determined by the flip of a coin. The arbitration shall be held in a location mutually agreed upon by the parties. In the absence of agreement, the arbitration shall be held in Los Angeles, California.
(b) In consideration of the parties' agreement to submit to arbitration all disputes with regard to this Agreement and/or with regard to any alleged contract, or any other claim arising out of their conduct, the relationship existing hereunder or the continuation or termination of that relationship, and in further consideration of the anticipated expedition and the minimizing of expense resulting from this arbitration remedy, the arbitration provisions of this Agreement shall provide the exclusive remedy, and each party expressly waives any right the Executive or it may have to seek redress in any other forum.
(c) Any claim which either party has against the other party which could be submitted for resolution pursuant to this Section 8 must be presented in writing by the claiming party to the other within the period of the applicable statue of limitations.
(d) Mattel will pay all costs and expenses of the arbitration.
(e) Any decision and award or order of a majority of the arbitrators shall be binding upon the parties hereto and judgment thereon may be entered in the Superior Court of the State of California or any other court having jurisdiction.
(g) Any decision and award or order of a majority of the arbitrators shall be final and binding between the parties as to all claims which were raised in connection with the dispute to the full extent permitted by law. In all other cases, the parties agree that a decision of a majority of arbitrators shall be a condition precedent to the institution or maintenance of any legal, equitable, administrative, or other formal proceeding by Mattel or the Executive in connection with the dispute, and that the decision and opinion of the board of arbitrators may be presented in any other forum on the merits of the dispute.
9. General Release. The Executive acknowledges and agrees that this
Agreement includes the entire agreement and understanding between the parties
with regard to the Executive's employment, the termination thereof during the
Employment Period, and all amounts to which the Executive shall be entitled
whether during the term of employment or upon termination thereof. The
Executive also acknowledges and agrees that the Executive's right to receive
severance pay and other benefits pursuant to subsections (b), (d) and (e) of
Section 5 of this Agreement is contingent upon the Executive's compliance with
the covenants set forth in Section 10 of this Agreement and the Executive's
execution and acceptance of the terms and conditions of, and the effectiveness
of the General Release of All Claims (the "Release") attached hereto as Exhibit
"A." If the Executive fails to comply with the covenants set forth in Section
10 or if the Executive fails to execute the Release within twenty-one (21) days
of receipt of such Release, then the Executive shall not be entitled to any
severance payments or other benefits to which the Executive would otherwise be
entitled under subsections (b), (d) and (e) of Section 5 of this Agreement.
10. The Executive's Covenants.
(a) The Executive acknowledges that in the Executive's capacity in management, the Executive has had a great deal of exposure and access to a broad variety of commercially valuable proprietary information which is vital to the success of Mattel's business including, by way of illustration, past, current and future products and product concepts, marketing strategies, research and plans and information regarding employees. The Executive acknowledges that as a result of the Executive's knowledge of the above information and in consideration for the benefits offered by Mattel under this Agreement, the Executive hereby agrees to reaffirm and recognize the Executive's continuing obligations with respect to the use and disclosure of confidential and proprietary information of Mattel pursuant to the Mattel's policies as set forth in Mattel's form Executive Patent and Confidence Agreement, as revised from time to time, and by this reference made a part hereof. Pursuant thereto, the Executive acknowledges and agrees that Mattel shall be entitled to injunctive relief to prevent a threatened misappropriation of one or more of the Mattel's trade secrets or to halt an actual misappropriation of such trade secrets. The Executive shall hold in a fiduciary capacity for the benefit of Mattel all secret or confidential information, knowledge or data relating to Mattel or
(b) If the termination of the Executive's employment occurs prior to a Change of Control, the Executive agrees that eligibility for severance payments and other benefits under this Agreement are contingent upon the Executive's agreement and compliance with Mattel's requirement that the Executive does not accept employment nor an engagement as a consultant with a competitor whereupon such position is comparable to the position the Executive held with Mattel and where the Executive can not reasonably satisfy Mattel that the new employer is prepared to and/or does take adequate steps to preclude and to prevent inevitable disclosure of trade secrets, as prohibited under the Mattel's policies with respect to the use and disclosure of confidential and proprietary information, as set forth in Mattel's form Executive Patent and Confidence Agreement, as revised from time to time, and by this reference made a part hereof. If the Executive accepts employment or a consulting relationship with a competitor as described above, no further payments nor eligibility for benefits continuation will be available to the Executive as of the date the Executive commences such employment/consulting. It is a specific condition of this Agreement that so long as the Executive is receiving any payments or benefits under this Agreement with respect to a termination of the Executive's employment prior to a Change of Control, the Executive is obligated to immediately notify Mattel as to the specifics of the new position that the Executive is planing to commence as an employee or consultant for any company which is a competitor of Mattel.
(c) The Executive agrees that so long as the Executive is receiving any payments or benefits under this Agreement and for a period of 12 months thereafter, the Executive will not participate in recruiting any of Mattel's employees or in the solicitation of Mattel's employees, and the Executive will not communicate to any other person or entity, about the nature, quality or quantity of work, or any special knowledge or personal characteristics of any person employed by Mattel. If the Executive should wish to discuss possible employment with any then-current Mattel employee during the 12-month period set forth above, the Executive may request written permission to do so from the senior human resources officer of Mattel who may, in his/her discretion, grant a written exception to the no solicitation agreement set forth above, provided, however, the Executive agrees that the Executive will not discuss any such employment possibility with such employees prior to securing Mattel's permission. If Mattel should decline to grant such permission, the Executive agrees that the Executive will not at any time, either during or after the non- solicitation period set forth above, advise the employee concerned that he/she was the subject
11. Successors.
(a) This Agreement is personal to the Executive and without the prior written consent of Mattel shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon Mattel and its successors. Mattel shall require any successor to all or substantially all of the business and/or assets of Mattel, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, by an agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as Mattel would be required to perform if no such succession had taken place.
12. Amendment; Waiver. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and may be amended, modified or changed only by a written instrument executed by the Executive and Mattel. No provision of this Agreement may be waived except by a writing executed and delivered by the party sought to be charged. Any such written waiver will be effective only with respect to the event or circumstance described therein and not with respect to any other event or circumstance, unless such waiver expressly provides to the contrary.
13. Long Term Incentive Compensation Plan Payments After a Change of Control.
(a) In the event of a Change of Control during the Employment Period, Mattel shall pay the Executive a cash payment as provided under the provisions of the LTIP, as in effect immediately prior to the Change of Control.
(b) In addition, in the event of a Change of Control during the Employment Period, within thirty (30) days after the date of such Change of Control, Mattel shall pay the Executive any unpaid amounts to which the Executive is entitled with respect to any performance period under the LTIP, or any other successor long-term incentive compensation plan of Mattel, that has been completed as of the date of the Change of Control.
14. Certain Additional Payments by Mattel.
(a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any Payment (as defined below) would be subject to the Excise Tax (as defined below), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment
(b) Subject to the provisions of Section 14(c), all determinations required to be made under this Section 14, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by PricewaterhouseCooper LLP or such other nationally recognized certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to Mattel and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by Mattel. All fees and expenses of the Accounting Firm shall be borne solely by Mattel. Subject to Section 14(e) below, any Gross-Up Payment, as determined pursuant to this Section 14, shall be paid by Mattel to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon Mattel and the Executive. As a result of the uncertainty in the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by Mattel should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that Mattel exhausts its remedies pursuant to Section 14(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by Mattel to or for the benefit of the Executive.
(c) The Executive shall notify Mattel in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Mattel of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise Mattel of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to Mattel (or such shorter period ending on the date that any payment of taxes
(i) give Mattel any information reasonably requested by Mattel relating to such claim,
(ii) take such action in connection with contesting such claim as Mattel shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by Mattel,
(iii) cooperate with Mattel in good faith in order effectively to contest such claim, and
(iv) permit Mattel to participate in any proceedings relating to such claim;
provided, however, that Mattel shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 14(c), Mattel shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Mattel shall determine; provided, however, that if Mattel directs the Executive to pay such claim and sue for a refund, Mattel shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Mattel's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by Mattel pursuant to Section 14(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to Mattel's complying with the requirements of Section 14(c)) promptly pay to Mattel the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an
(e) Notwithstanding any other provision of this Section 14, Mattel may withhold and pay over to the Internal Revenue Service for the benefit of the Executive all or any portion of the Gross-Up Payment that it determines in good faith that it is or may be in the future required to withhold, and the Executive hereby consents to such withholding.
(f) Definitions. The following terms shall have the following meanings for purposes of this Section 14.
(i) An "Agreement Payment" shall mean a Payment paid or payable pursuant to this Agreement (disregarding this Section 14) and any payment relating to the Loan Agreement.
(ii) "Excise Tax" shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.
(iii) The "Net After-Tax Amount" of a Payment shall mean the Value of a Payment net of all taxes imposed on the Executive with respect thereto under Sections 1 and 4999 of the Code and applicable state and local law, determined by applying the highest marginal rates that are expected to apply to the Executive's taxable income for the taxable year in which the Payment is made.
(iv) "Parachute Value" of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a "parachute payment" under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
(v) A "Payment" shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise.
(vi) The "Safe Harbor Amount" means the maximum Parachute Value of all Payments that the Executive can receive without any Payments being subject to the Excise Tax.
(vii) "Value" of a Payment shall mean the economic present value of a Payment as of the date of the change of control for purposes of Section 280G of the Code, as
15. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
(b) All notices and other communications hereunder shall be in writing; shall be delivered by hand delivery to the other party or mailed by registered or certified mail, return receipt requested, postage prepaid; shall be deemed delivered upon actual receipt; and shall be addressed as follows:
or to such other address as either party shall have furnished to the other in writing in accordance herewith.
(c) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction.
(d) Mattel may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.
EXECUTIVE:
/s/ Adrienne Fontanella 2/1/00
----------------------------------
MATTEL: MATTEL, INC.,
a Delaware corporation
By: /s/ Jill E. Barad 1/31/00
------------------------------
|
ATTEST:
Exhibit "A"
1. For valuable consideration, the receipt and adequacy of which are hereby acknowledged, the undersigned ("Executive") does hereby on behalf of Executive and Executive's successors, assigns, heirs and any and all other persons claiming through Executive, if any, and each of them, forever relieve, release, and discharge Mattel, Inc. ("Mattel") and its respective predecessors, successors, assigns, owners, attorneys, representatives, affiliates, Mattel corporations, subsidiaries (whether or not wholly-owned), divisions, partners and their officers, directors, agents, employees, servants, executors, administrators, accountants, investigators, insurers, and any and all other related individuals and entities, if any, and each of them, in any and all capacities from any and all claims, debts, liabilities, demands, obligations, liens, promises, acts, agreements, costs and expenses (including, but not limited to attorneys' fees), damages, actions and causes of action, of whatever kind or nature, including, without limiting the generality of the foregoing, any claims arising out of, based upon, or relating to the hire, employment, remuneration (including salary; bonus; incentive or other compensation; vacation, sick leave or medical insurance benefits; or other benefits) or termination of Executive's employment with Mattel.
2. This release includes a release of any rights or claims Executive may have under the Age Discrimination in Employment Act, which prohibits age discrimination in employment as to individuals forty years of age and older; the Older Workers Benefit Protection Act, which prohibits discrimination against older workers in all Executive benefits; Title VII of the Civil Rights Act of 1964, as amended in 1991, which prohibits discrimination in employment based on race, color, national origin, religion or sex; the California Fair Employment and Housing Act, which prohibits discrimination based on race, color, religion, national origin, ancestry, physical or mental disability, medical condition, sex, pregnancy-related condition, marital status, age or sexual orientation; the Equal Pay Act, which prohibits paying men and women unequal pay for equal work; the Americans with Disabilities Act, which prohibits discrimination against qualified individuals with disabilities; or any other federal, state or local laws or regulations which prohibit employment discrimination, restrict an employer's right to terminate Executives, or otherwise regulate employment. This also includes a release by Executive of any claims for breach of contract, wrongful discharge and all claims for alleged physical or personal injury, emotional distress relating to or arising out of Executive's employment with Mattel or the termination of that employment; any claims under the WARN Act or any similar law, which requires, among other things, that advance notice be given of certain work force reductions; and all claims under the Employee Retirement Income Security Act, such as claims relating to pension or health plan benefits.
4. This release, as contained within this Agreement, covers both claims that
Executive knows about and those Executive may not know about. Executive
expressly waives all rights afforded by any statute (such as Section 1542 of the
Civil Code of the State of California) which limits the effect of a release with
respect to unknown claims. Executive understands the significance of
Executive's release of unknown claims and Executive's waiver of statutory
protection against a release of unknown claims (such as under Section 1542).
Section 1542 of the Civil Code of the State of California states as follows:
"A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor."
Notwithstanding the provisions of Section 1542, Executive expressly acknowledges that this release is intended to include both claims that Executive knows about and those Executive does not know or suspect to exist.
5. The provisions of this Agreement are severable, and if any part of it is found to be unenforceable, the other paragraphs shall remain fully valid and enforceable. This Agreement shall be construed in accordance with its fair meaning and in accordance with the laws of the state of California, without regard to conflicts of laws principles thereof.
6. Executive is strongly encouraged to consult with an attorney before signing this Agreement. Executive acknowledges that Executive has been advised of this right to consult an attorney and Executive understands that whether to do so is Executive's decision. Executive acknowledges that Mattel has advised Executive that Executive has twenty-one (21) days in which to consider whether Executive should sign this Release and has advised Executive that if Executive signs this Release, Executive has seven (7) days following the date on which Executive signs the Release to revoke it and that the Release will not be effective until after this seven-day period had lapsed.
PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
Date:
THIS LOAN AGREEMENT (the "Agreement") is entered into as of October 29, 1999, by and between Mattel, Inc., a Delaware corporation ("Lender") and Adrienne Fontanella ("Borrower"). Borrower and Lender are sometimes referred to in this Agreement as a "Party" or, collectively, as the "Parties."
WHEREAS, Borrower desires to obtain from Lender a loan in the principal amount of One Million Dollars ($1,000,000.00) (the "Loan"); and
WHEREAS, as an additional incentive to retain Borrower in the employ of Lender for a period of at three years from the date hereof, Lender desires to grant Borrower the Loan.
NOW, THEREFORE, in consideration of the terms and conditions herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Loan Terms.
(a) Principal Amount. Lender shall pay to the order of Borrower, on October 29, 1999, the principal sum of One Million Dollars ($1,000,000.00) (the "Principal").
(b) Interest. Interest shall accrue on the outstanding Principal amount at the rate of seven percent (7%) per annum, compounded annually.
(c) Promissory Note. Borrower's obligation to repay the Loan shall be evidenced by a promissory note substantially in the form attached as Exhibit A hereto (the "Note"). Borrower shall execute and deliver to Lender the Note concurrently with execution and delivery of this Agreement.
(d) Repayment. Borrower shall pay to the order of Lender the
Principal and accrued interest under the Note on October 30, 2002, provided,
however, that all Principal and accrued but unpaid interest shall become
immediately due and payable thirty (30) days after the date of Borrower's
termination of employment with Lender for any reason prior to October 30, 2002,
unless Borrower commences arbitration with respect to the grounds for such
termination of employment within such thirty (30) day period, in which case all
Principal and accrued but unpaid interest shall be due and payable five (5) days
after notice to Borrower of the entry of a final judgement in such arbitration.
Interest shall continue to accrue during any such arbitration. The Loan shall be
subject to forgiveness as provided below. The Loan shall be unsecured but with
full recourse against Borrower.
(f) Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below:
"Cause" shall mean a reasonable determination of the Chief Executive Officer of Lender that at least one of the following has occurred: (i) one or more factually substantiated willful acts of dishonesty on Borrower's part which are intended to result in Borrower's substantial personal enrichment at the expense of Lender; (ii) repeated violations by Borrower of Borrower's employment obligations to Lender which are demonstrably willful and deliberate on Borrower's part and which resulted in material injury to Lender; (iii) conduct of a factually substantiated criminal nature (commonly defined as a "felony" in criminal statutes) which has or which is more likely than not to have a material adverse effect on Lender's reputation or standing in the community or on its continuing relationships with its customers or those who purchase or use its products; or (iv) factually substantiated fraudulent conduct in connection with the business or affairs of Lender, regardless of whether said conduct is designed to defraud Lender or others; provided that, in each case, Borrower has received written notice of the described activity, has been afforded a reasonable opportunity to cure or correct the activity described in the notice, and has failed to substantially cure, correct or cease the activity, as appropriate.
"Change of Control" shall be deemed to have occurred if:
(i) any "Person," which shall mean a "person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than Lender, any trustee or other fiduciary holding securities under an employee benefit plan of Lender) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Lender representing 20% or more of the combined voting power of Lender's then outstanding voting securities;
(iii) the stockholders of Lender approve (I) a plan of complete liquidation of Lender or (II) the sale or other disposition by Lender of all or substantially all of Lender's assets unless the acquirer of the assets or its board of directors shall meet the conditions for a merger or consolidation in subparagraphs (iv)(I) or (iv)(II) below; or
(iv) the consummation of a merger or consolidation of Lender with any other entity other than:
(I) a merger or consolidation which results in the voting securities of Lender outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the surviving entity's outstanding voting securities immediately after such merger or consolidation; or
(II) a merger or consolidation which would result in the directors of Lender (who were directors immediately prior thereto) continuing to constitute at least 50% of all directors of the surviving entity immediately after such merger or consolidation.
In this paragraph (iv), "surviving entity" shall mean only an entity in which all of Lender's stockholders immediately before such merger or consolidation (determined without taking into account any stockholders properly exercising appraisal or similar rights) become stockholders by the terms of such merger or consolidation, and the phrase "directors of Lender (who were directors immediately prior thereto)" shall include only individuals who were directors of Lender at the beginning of the 24 consecutive month period preceding the date of such merger or consolidation.
"Disability" shall mean that Borrower suffers a disability due to illness or injury which substantially and materially limits Borrower from performing each of the essential functions of Borrower's job, even with reasonable accommodation and becomes entitled to receive disability benefits under Lender's Long-Term Disability Plan for exempt employees.
"Good Reason" shall mean the good faith determination by Borrower that any one or more of the following have occurred:
(i) without the express written consent of Borrower, any change(s) in any of the employment duties, authority, or responsibilities of Borrower which is (are) inconsistent in any substantial respect with Borrower's position, authority, duties, or responsibilities as of the date of this Agreement;
(iii) transferring Borrower outside of the greater Los Angeles, California area without Borrower's express written consent.
(g) Notwithstanding any other provision in this Agreement, in the event Borrower and Lender enter into an employment agreement after the date of this Agreement, the definition of "Cause," "Change of Control," "Disability," and "Good Reason" as provided in such employment agreement (or any amendments thereto) shall supercede the definitions in Section 1(f) of this Agreement.
2. Transfer of Notes. Borrower shall not assign or transfer any of Borrower's benefits or obligations arising under the Notes. Lender reserves the right to assign or transfer all or any part of, or any interest in, Lender's rights and benefits under this Agreement or the Note to any successor to all or part of its business or assets so long as any assignee or transferee expressly agrees to assume and perform this Agreement in the same manner and to the same extent as Lender would be required to perform if no such assignment or transfer had taken place.
3. Amendment; Waiver. This Agreement and the Note contain the entire agreement between the Parties with respect to the subject matter hereof and may be amended, modified or changed only by a written instrument executed by the Parties. No provision of this Agreement or the Note may be waived except by a writing executed and delivered by the Party sought to be charged. Any such written waiver will be effective only with respect to the event or circumstance described therein and not with respect to any other event or circumstance, unless such waiver expressly provides to the contrary.
4. Choice of Law. This Agreement shall be construed in accordance with and governed by the internal laws of the State of California, without reference to principles of conflict of laws.
5. Headings. The paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of the provisions hereof.
6. Notices. All notices and other communications hereunder shall be in writing; shall be delivered by hand delivery to the other party or mailed by registered or certified mail, return receipt requested, postage prepaid; shall be deemed delivered upon actual receipt; and shall be addressed as follows:
or to such other address as either party shall have furnished to the other in writing in accordance herewith.
7. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
8. Severability. If any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
9. No Third-Party Beneficiary Rights. The Parties do not intend to confer and this Agreement shall not be construed to confer any rights or benefits to any person, firm, group, corporation or entity other than the Parties.
[Signature Page Follows]
By: /s/ Alan Kaye
-------------------------------------------
Its: Senior Vice President, Human Resources
------------------------------------------
|
/s/ Adrienne Fontanella
---------------------------------------------
Adrienne Fontanella
|
$1,000,000.00 Date: October 29, 1999
Mattel, Inc. (herein referred to as "Holder") has agreed to advance to Adrienne Fontanella (herein referred to as "Maker") on October 29, 1999, $1,000,000.00, and for said value received Maker promises to repay to the order of Holder, the principal sum of $1,000,000.00 on or before October 30, 2002. Maker shall owe to Holder interest on the principal sum in an amount equal to 7% per annum, commencing on October 29, 1999, compounded annually, payable with principal on October 30, 2002.
If Maker fails to make any payment set forth above when due, Holder may elect to declare the entire unpaid principal amount, including all unpaid interest, immediately due and payable with or without notice.
In the event of the termination of Maker's employment with Holder for any reason, all outstanding principal and accrued interest hereunder is immediately due and payable, with or without notice, thirty (30) days after the date of such termination unless Maker commences arbitration as provided in that certain Loan Agreement (the "Loan Agreement"), dated as of October 29, 1999, between Holder and Maker, unless this note and the loan it evidences shall have been cancelled and forgiven pursuant to the terms of the Loan Agreement.
In the event of commencement of legal action to enforce payment of this note, the non-prevailing party agrees to pay the prevailing party's reasonable attorney's fees and court costs in connection therewith.
By: /s/ Adrienne Fontanella 12/21/99
----------------------------------------
Adrienne Fontanella Date
|
Witnessed by:
/s/ Alan Kaye 12-21-99
----------------------------------
Date
|
February 10, 2000
Ms. Adrienne Fontanella
President Girls/Barbie
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245-5012
Re: Amendment to Your Employment Agreement and Stock Option Grant Agreements
Dear Adrienne:
Pursuant to action taken by Mattel's Board of Directors and Compensation Committee on February 1, 2000 to amend Mattel's 1990 and 1996 Stock Option Plans (the "Plans") and to amend the Grant Agreements for Non-Qualified Stock Options ("Grant Agreements") with respect to all of the stock options which you hold under the Plans and which are outstanding as of February 1, 2000 (the "Outstanding Options"), this letter agreement constitutes an amendment to each of your Grant Agreements and your Employment Agreement with Mattel.
Notwithstanding any provision of your Grant Agreements or of your
Employment Agreement to the contrary, in the event that your employment with
Mattel is terminated (i) by Mattel without Cause (as defined in your Employment
Agreement), (ii) by you for Good Reason (as defined in your Employment
Agreement), (iii) by you for any reason during the 30-day period immediately
following the six (6) month anniversary of a Change of Control (as defined in
your Employment Agreement) or (iv) by reason of your death or Disability (as
defined in you Employment Agreement), all of the Outstanding Options shall
become immediately exercisable and you shall have until the date which is ten
(10) years from the date each Outstanding Option was granted to exercise such
Outstanding Option.
I would appreciate it if you would sign, date and return a copy of this letter agreement to me. As such, it will constitute a written amendment to your Grant Agreements and your Employment Agreement.
Sincerely yours,
Mattel, Inc.
By: /s/ Alan Kaye ------------------------- Alan Kaye Senior Vice President, Human Resources |
Agreed to and accepted by:
/s/ Adrienne Fontanella Dated: February 16, 2000 ---------------------------- Adrienne Fontanella |
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is entered into on January 31, 2000 and effective as of April 1, 1999 (the "Effective Date") between Mattel, Inc., a Delaware corporation ("Mattel") and Matthew C. Bousquette (the "Executive").
1. Employment Period. Mattel hereby agrees to employ and continue in its employ the Executive, and the Executive hereby accepts such employment and agrees to remain in the employ of Mattel, for the period commencing on the Effective Date and ending on the third anniversary of such date, subject to earlier termination as provided herein (the "Employment Period"); provided that commencing on the first day of the month next following the effective date hereof, and on the first day of each month thereafter (the most recent of such dates is hereinafter referred to as the "Renewal Date"), the Employment Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to any Renewal Date Mattel or the Executive shall give notice to the other that the Employment Period shall not be so extended and shall be terminated.
2. Duties.
(a) Executive's Position and Duties. During the Employment Period, the Executive's position shall be that of President of the Boys/Entertainment/ Wheels/Games Division of Mattel and the Executive shall have the authority and responsibilities similar to those held by the Executive on the date hereof with such additions and modifications, and consistent with responsibilities generally assigned to officers of Mattel as the Chief Executive Officer of Mattel may in her discretion and acting in good faith from time to time assign to the Executive. The Executive's services shall be performed in the greater Los Angeles, California area, provided, however, that the Executive may be required to travel on business from time to time generally consistent with the Executive's travel requirements as of the date of this Agreement.
(b) Full Time. The Executive agrees to devote the Executive's full
business time to the business and affairs of Mattel and to use the Executive's
best efforts to perform faithfully and efficiently the responsibilities assigned
to the Executive hereunder to the extent necessary to discharge such
responsibilities, except for (i) services on corporate, civic or charitable
boards or committees not significantly interfering with the performance of such
responsibilities which services have been approved by the Chief Executive
Officer; (ii) periods of vacation and sick leave to which the Executive is
entitled; and (iii) the management of personal investments and affairs. The
Executive will not engage in any outside business activity (as distinguished
from personal investment activity and affairs), including, but not limited to,
activity as a consultant, agent, partner or officer, or provide business
services of any nature directly or indirectly to a corporation or other business
enterprise.
(a) Base Salary. During the Employment Period, the Executive shall receive a base salary ("Base Salary") at a bi-weekly rate at least equal to the bi-weekly salary paid to the Executive by Mattel on the date of this Agreement. The Base Salary shall be reviewed from time to time in accordance with Mattel's policies and practices, but no less frequently than once every eighteen (18) months and may be increased at any time and from time to time by action of the Board of Directors of Mattel or the Compensation/Options Committee thereof or any individual having authority to take such action in accordance with Mattel's regular practices. Any increase in the Base Salary shall not serve to limit or reduce any other obligation of Mattel hereunder and, after any such increase, the Base Salary shall not be reduced.
(b) Bonus Programs. In addition to the Base Salary, the Executive shall be eligible to participate throughout the Employment Period in such cash, deferred bonus, annual bonus and long term bonus plans and programs ("Bonus Programs"), such as Mattel's Management Incentive Plan (the "MIP") and Long Term Incentive Plan (the "LTIP"), as may be in effect from time to time in accordance with Mattel's compensation practices and the terms and provisions of any such plans or programs as in effect from time to time; provided that the Executive's eligibility for and participation in each of the Bonus Programs shall be at a level and on terms and conditions no less favorable than those available to any other comparably situated executive or consultant.
(c) Incentive Plans. In addition to the Base Salary and participation in the Bonus Programs, during the Employment Period the Executive, shall be eligible to participate, subject to the terms and conditions thereof, in all incentive plans and programs, including, but not limited to, stock option plans and other equity based incentive plans, as may be in effect from time to time with respect to executives employed by Mattel at the Executive's level so as to reflect the Executive's responsibilities.
(d) Pension and Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's dependents, as the case may be, shall be eligible to participate in, subject to the terms and conditions thereof, all pension, profit sharing, medical, dental, disability, group life, accidental death and travel accident insurance plans and programs of Mattel as in effect from time to time with respect to executives employed by Mattel at the Executive's level so as to reflect the Executive's responsibilities. In addition, the Executive shall be credited for all years of employment service with Mattel for purposes of such plans and programs of Mattel, unless such crediting is prohibited by law or would adversely affect the tax status of the plan or program.
(e) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the policies and practices of Mattel as in effect from time to time.
(g) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the policies and practices of Mattel as in effect from time to time.
(h) Stock Options. During the Employment Period, the Executive shall be entitled to participate in Mattel's stock option plans in accordance with the policies and practices of Mattel as in effect from time to time with respect to executives employed by Mattel at the Executive's level so as to reflect the Executive's responsibilities.
(i) Certain Amendments. Nothing herein shall be construed to prevent Mattel from amending, altering, eliminating or reducing any plans, benefits or programs set forth in Sections 3(b) through (h) so long as such actions do not result in a material diminution in the aggregate value of such compensation and benefits, except for across-the-board compensation and benefit reductions to which the Executive agrees and which affect all similarly situated executives of Mattel.
(j) Retention Loan. Mattel and the Executive have entered into that certain Loan Agreement (the "Loan Agreement") dated as of October 29, 1999, which provided, among other things, that the definitions of "Cause," "Change of Control," "Disability" and "Good Reason" contained in this Agreement supercede the definitions of such terms as set forth in the Loan Agreement.
4. Termination.
(a) Death or Disability. This Agreement shall terminate automatically upon the Executive's death; provided that the Executive's Base Salary will be continued and paid for a period of six months thereafter. Mattel may terminate this Agreement, after having established the Executive's Disability, by giving to the Executive written notice of its intention to terminate the Executive's employment, and the Executive's employment with Mattel shall terminate effective on the 90th day after receipt of such notice (the "Disability Effective Date"). For purposes of this Agreement, the Executive's Disability shall occur and shall be deemed to have occurred only in the event that the Executive suffers a disability due to illness or injury which substantially and materially limits the Executive from performing each of the essential functions of the Executive's job, even with reasonable accommodation and becomes entitled to receive disability benefits under the Mattel Long-Term Disability Plan for exempt employees.
(c) Good Reason. The Executive may terminate the Executive's employment at any time for Good Reason. For purposes of this Agreement, "Good Reason" means the good faith determination by the Executive that any one or more of the following have occurred:
(i) without the express written consent of the Executive,
any change(s) in any of the duties, authority, or responsibilities of the
Executive which is (are) inconsistent in any substantial respect with the
Executive's position, authority, duties, or responsibilities as contemplated by
Section 2 of this Agreement;
(ii) any failure by Mattel to comply with any of the provisions of Section 3 of this Agreement, other than an insubstantial and inadvertent failure remedied by Mattel promptly after receipt of notice thereof given by the Executive;
(iii) any proposed termination by Mattel of the Executive's employment other than as permitted by this Agreement;
(iv) any failure by Mattel to obtain the assumption and agreement to perform this Agreement by a successor as contemplated by Section 11(b); or
(v) transferring the Executive outside of the greater Los Angeles, California area without the Executive's express written consent.
(d) Change of Control. "Change of Control" means:
(i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
(ii) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Mattel's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as through such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(iii) consummation by Mattel of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of Mattel or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (a) all or substantially all of the individuals and entities
(iv) approval by the shareholders of Mattel of a complete liquidation or dissolution of Mattel.
For the purposes of this Section 4(d), (a) "Rights Agreement" means the Rights Agreement, dated as of February 7, 1992, as amended by an amendment dated as of May 13, 1999 and an amendment dated as of November 4, 1999 by and between Mattel and BankBoston N.A., a national banking association, formerly, The First National Bank of Boston, and not giving effect to any amendments subsequent to November 4, 1999, (b) "Softkey" means Softkey Software Products Inc., an Ontario corporation, and (c) "Softkey Exchangeable Shares" means the Exchangeable Shares in the capital stock of Softkey.
(e) Notice of Termination. Any termination of the Executive's employment by Mattel for Cause or following a Change of Control or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 15(b). Any termination by Mattel due to Disability shall be given in accordance with Section 4(a). For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon; (ii) except in the event of a termination following a Change of Control, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated; and (iii) specifies the Date of Termination (defined below).
(f) Date of Termination. "Date of Termination" means the date of actual receipt of the Notice of Termination or any later date specified therein (but not more than fifteen
5. Obligations of Mattel upon Termination. Other than as specifically set forth or referenced in this Agreement, the Executive shall not be entitled to any benefits on or after the Date of Termination.
(a) Death. If the Executive's employment is terminated by reason of the Executive's death, this Agreement shall terminate without further obligations by Mattel to the Executive's legal representatives under this Agreement other than those obligations accrued hereunder or under the terms of the applicable Mattel plan or program which takes effect at the date of the Executive's death or as otherwise provided in Section 4(a) or this Section 5(a). As of the Date of Termination, the Executive's family shall be entitled to healthcare coverage and financial counseling benefits until the third anniversary of the Date of Termination.
(b) Disability. If the Executive's employment is terminated by reason of the Executive's Disability, the Executive shall be entitled to receive after the Disability Effective Date (i) disability benefits, if any, at least equal to those then provided by Mattel to disabled executives and/or their families and (ii) until the earlier of the third anniversary of the Date of Termination or the date the Executive accepts other employment, those other benefits on the terms described in Section 5(d)(v).
(c) Cause. If the Executive's employment is terminated for Cause or if the Executive terminates the Executive's employment without Good Reason, Mattel shall pay the Executive the Executive's full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and Mattel shall have no further obligations to the Executive under this Agreement.
(d) Good Reason; Other Than for Cause or Disability. If Mattel terminates the Executive's employment other than for Cause or Disability or the Executive terminates the Executive's employment for Good Reason (in each case, other than within 18 months following a Change of Control as provided in Section 5(e):
(i) Mattel shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:
(A) if not theretofore paid, the Executive's Base Salary through the Date of Termination at the rate in effect at the time of Notice of Termination was given;
(C) three times the sum of (x) the Executive's annual Base Salary at the rate in effect at the time the Notice of Termination is given and (y) the Bonus defined in Section 5(d)(i)(B), but without proration (and, in each such case, without regard to any contributions by Mattel for the Executive's benefit to any retirement or other investment plans).
(ii) Mattel shall pay the Executive a portion of any long- term incentive compensation that Executive would have received under the LTIP with respect to any performance period which is pending as of the Executive's Date of Termination as if the Executive had remained employed for the entire performance period, pro rated based on the number of full months of Executive's employment during the performance period over the total number of months in the performance period, which amount shall be payable at the end of the period in accordance with the terms of the LTIP and shall be net of any interim payments previously made to the Executive.
(iii) Any options granted to the Executive under Mattel's stock option plans, other than Mattel's 1997 Premium Price Stock Option Plan or any successor thereto (the "Stock Option Plans"), shall become immediately exercisable and the Executive shall have a period of 90 days following the Date of Termination (but in no event past the expiration of the term of the option grant) to exercise all options granted under the Stock Option Plans then exercisable or which become exercisable pursuant to this clause (iii).
(iv) Mattel shall, promptly upon submission by the Executive
of supporting documentation, pay or reimburse to the Executive any costs and
expenses paid or incurred by the Executive which would have been payable under
Section 3(e) if the Executive's employment had not terminated.
(v) Until the earlier of (x) the third anniversary of the Date of Termination or (y) the date the Executive becomes gainfully employed in a substantially similar employment position, Mattel shall provide to the Executive at Mattel's expense:
(A) coverage under Mattel's medical, dental, prescription drug and vision care group insurance as in effect from time to time on the same terms and conditions as such insurance is available to active employees of Mattel (the last 18 months of the
(B) outplacement services at the expense of Mattel commensurate with those provided to terminated executives of comparable level and made available through and at the facilities of a reputable and experienced vendor;
(C) financial counseling and tax preparation services through the vendor engaged and paid for by Mattel;
(D) automobile benefits; provided however, that if such automobile is leased by Mattel, such benefits shall expire upon expiration of such lease. Upon expiration of the automobile benefits, at which time the Executive may purchase the car for either $100, if the automobile benefits terminate at the end of the lease term, or Mattel's book value, if the automobile benefits terminate on either the third anniversary of the Date of Termination or the date on which the Executive accepts other employment. As of the Date of Termination, all expenses related to such automobile, including but not limited to insurance, repairs, maintenance, gasoline, and car phone and associated expenses, shall be the sole responsibility of the Executive; and
(E) membership in one city or country club and related expenses. Mattel shall cause the membership to be transferred to the Executive at no cost to the Executive.
(vi) If the Executive is a participant in the Mattel Supplemental Executive Retirement Plan, the Mattel Deferred Compensation Plan or the Mattel Retiree Medical Plan, the Executive shall be given credit for three years of service (in addition to actual service) and for three years of attained age to be added to the Executive's actual age for purposes of computing any service and age-related benefits for which the Executive is eligible under such plans.
Notwithstanding the foregoing, if Mattel terminates the Executive's employment
other than for Cause or Disability or if the Executive terminates the
Executive's employment for Good Reason and such termination occurs within 18
months after the date upon which Mattel changes the person to whom the Executive
immediately reports, then (a) the Executive's "Average Annual Bonus" for the
purpose of calculating the amounts provided by clauses (d)(i)(B) and (d)(i)(C)
above shall be equal to the Executive's maximum targeted MIP bonus for the year
in which the termination of employment occurs and (b) the amount payable to the
Executive under clause (d)(ii) above shall be based on the maximum LTIP payment
that the Executive could have received with respect to the pending performance
period, rather than amount which would have been payable to the Executive had
the Executive remained employed for the entire performance period.
Notwithstanding the foregoing, the amounts payable with respect to a termination
of
(e) Change of Control. If, within 18 months following a Change of Control, the Executive terminates the Executive's employment for Good Reason or Mattel or the surviving entity terminates the Executive's employment other than for Cause or Disability or within the 30 day period immediately following the six (6) month anniversary of a Change of Control the Executive terminates the Executive's employment for any reason:
(i) Mattel shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:
(A) if not theretofore paid, the Executive's Base Salary through the Date of Termination at the rate in effect at the time of Notice of Termination was given;
(B) a current year bonus (the "Bonus Amount") equal to the greater of (x) the average of the two highest annual bonuses received by the Executive under the MIP, or any successor plan, in the three years prior to the Date of Termination, including any years in which the Executive was paid no bonus, and prorated to reflect the total number of full months the Executive is employed on an active and full time basis in the year in which termination occurs, (y) the annual bonus paid to the Executive, under the MIP or any successor plan, if any, for the 2000 or 2001 calendar year, whichever is greater, without proration, or (z) the target annual bonus (50%) for the Executive under the MIP for the 2000 calendar year;
(C) three times the sum of (x) the Executive's annual Base Salary at the rate in effect at the time the Notice of Termination is given and (y) the Bonus Amount defined in Section 5(e)(i)(B), but without proration (and, in each such case, without regard to any contributions by Mattel for the Executive's benefit to any retirement or other investment plans).
(ii) Any options granted to the Executive under Mattel's stock option plans, other than Mattel's 1997 Premium Price Stock Option Plan or any successor thereto (the "Stock Option Plans"), shall become immediately exercisable and the Executive shall have a period of 90 days or such longer period of time as specified in the Stock Option Plans following the Date of Termination (but in no event past the expiration of the term of the option grant) to exercise all options granted under the Stock Option Plans then exercisable or which become exercisable pursuant to this clause (ii).
(iii) Mattel shall, promptly upon submission by the Executive
of supporting documentation, pay or reimburse to the Executive any costs and
expenses paid or incurred by the Executive which would have been payable under
Section 3(e) if the Executive's employment had not terminated.
(A) coverage under Mattel's medical, dental, prescription drug and vision care group insurance as in effect from time to time on the same terms and conditions as such insurance is available to active employees of Mattel (the last 18 months of the Executive's coverage under such insurance shall be deemed to be participation under an election to continue such benefits under the Consolidated Omnibus Budget Reconciliation Act at Mattel's expense);
(B) outplacement services at the expense of Mattel commensurate with those provided to terminated executives of comparable level and made available through and at the facilities of a reputable and experienced vendor;
(C) financial counseling and tax preparation services through the vendor engaged and paid for by Mattel;
(D) automobile benefits; provided however, that if such automobile is leased by Mattel, such benefits shall expire upon expiration of such lease. Upon expiration of the automobile benefits, at which time the Executive may purchase the car for either $100, if the automobile benefits terminate at the end of the lease term, or Mattel's book value, if the automobile benefits terminate on either the third anniversary of the Date of Termination or the date on which the Executive accepts other employment. As of the Date of Termination, all expenses related to such automobile, including but not limited to insurance, repairs, maintenance, gasoline, and car phone and associated expenses, shall be the sole responsibility of the Executive; and
(E) membership in one city or country club and related expenses. Mattel shall cause the membership to be transferred to the Executive at no cost to the Executive.
(v) If the Executive is a participant in the Mattel Supplemental Executive Retirement Plan, the Mattel Deferred Compensation Plan or the Mattel Retiree Medical Plan, the Executive shall be given credit for three years of service (in addition to actual service) and for three years of attained age to be added to the Executive's actual age for purposes of computing any service and age-related benefits for which the Executive is eligible under such plans.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by Mattel and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any stock option or other
7. No Set Off, Payment of Fees. Except as provided herein, Mattel's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which Mattel may have against the Executive or others. Mattel agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by Mattel or others of the validity or enforceability of, or liability under, any provision of this Agreement other than expenses relating to a claim by the Executive that the Executive terminated for Good Reason or that the termination for Cause was improper, in which case such fees and expenses shall be paid only if the Executive prevails in whole or in part. In the event that the Executive shall in good faith give a Notice of Termination for Good Reason and it shall thereafter be determined that Good Reason did not exist, the employment of the Executive shall, unless Mattel and the Executive shall otherwise mutually agree, be deemed to have terminated at the Date of Termination specified in such purported Notice of Termination by mutual consent of Mattel and the Executive and thereupon, the Executive shall be entitled to receive only those payments and benefits which the Executive would have been entitled to receive at such date.
8. Arbitration of Disputes.
(a) The parties agree that any disputes, controversies or claims which arise out of or relate to this Agreement, the Executive's employment or the termination of the Executive's employment, including, but not limited to, any claim relating to the purported validity, interpretation, enforceability or breach of this Agreement, and/or any other claim or controversy arising out of the relationship between the Executive and Mattel (or the nature of the relationship) or the continuation or termination of that relationship, including, but not limited to, claims that a termination was for Cause, or for Good Reason, claims for breach of covenant, breach of an implied covenant of good faith and fair dealing, wrongful termination, breach of contract, or intentional infliction of emotional distress, defamation, breach of right of privacy, interference with advantageous or contractual relations, fraud, conspiracy or other tort or property claims of any kind, which are not settled by agreement between the parties, shall be settled by expedited arbitration under the then applicable arbitration rules of JAMS/Endispute (or any other mutually agreed arbitrator) before a board of three arbitrators, as selected thereunder.
One arbitrator shall be selected by the Executive, one by Mattel and the third by the two persons so selected, all in accordance with the then applicable arbitration rules of JAMS/Endispute then in effect. In the event that the arbitrator selected by the Executive and the arbitrator selected by Mattel are unable to agree upon a third arbitrator, then the third arbitrator shall be selected from a list of seven (each of whom shall be a member of the "Independent List"
(b) In consideration of the parties' agreement to submit to arbitration all disputes with regard to this Agreement and/or with regard to any alleged contract, or any other claim arising out of their conduct, the relationship existing hereunder or the continuation or termination of that relationship, and in further consideration of the anticipated expedition and the minimizing of expense resulting from this arbitration remedy, the arbitration provisions of this Agreement shall provide the exclusive remedy, and each party expressly waives any right the Executive or it may have to seek redress in any other forum.
(c) Any claim which either party has against the other party which could be submitted for resolution pursuant to this Section 8 must be presented in writing by the claiming party to the other within the period of the applicable statue of limitations.
(d) Mattel will pay all costs and expenses of the arbitration.
(e) Any decision and award or order of a majority of the arbitrators shall be binding upon the parties hereto and judgment thereon may be entered in the Superior Court of the State of California or any other court having jurisdiction.
(f) Each of the above terms and conditions of this Section 8 shall have separate validity and the invalidity of any part thereof shall not affect the remaining parts.
(g) Any decision and award or order of a majority of the arbitrators shall be final and binding between the parties as to all claims which were raised in connection with the dispute to the full extent permitted by law. In all other cases, the parties agree that a decision of a majority of arbitrators shall be a condition precedent to the institution or maintenance of any legal, equitable, administrative, or other formal proceeding by Mattel or the Executive in connection with the dispute, and that the decision and opinion of the board of arbitrators may be presented in any other forum on the merits of the dispute.
9. General Release. The Executive acknowledges and agrees that this
Agreement includes the entire agreement and understanding between the parties
with regard to the Executive's employment, the termination thereof during the
Employment Period, and all amounts to which the Executive shall be entitled
whether during the term of employment or upon termination thereof. The
Executive also acknowledges and agrees that the Executive's right to receive
severance pay and other benefits pursuant to subsections (b), (d) and (e) of
Section 5 of this Agreement is contingent upon the Executive's compliance with
the covenants set forth in Section 10 of this Agreement and the Executive's
execution and acceptance of the terms and
10. The Executive's Covenants.
(a) The Executive acknowledges that in the Executive's capacity in management, the Executive has had a great deal of exposure and access to a broad variety of commercially valuable proprietary information which is vital to the success of Mattel's business including, by way of illustration, past, current and future products and product concepts, marketing strategies, research and plans and information regarding employees. The Executive acknowledges that as a result of the Executive's knowledge of the above information and in consideration for the benefits offered by Mattel under this Agreement, the Executive hereby agrees to reaffirm and recognize the Executive's continuing obligations with respect to the use and disclosure of confidential and proprietary information of Mattel pursuant to the Mattel's policies as set forth in Mattel's form Executive Patent and Confidence Agreement, as revised from time to time, and by this reference made a part hereof. Pursuant thereto, the Executive acknowledges and agrees that Mattel shall be entitled to injunctive relief to prevent a threatened misappropriation of one or more of the Mattel's trade secrets or to halt an actual misappropriation of such trade secrets. The Executive shall hold in a fiduciary capacity for the benefit of Mattel all secret or confidential information, knowledge or data relating to Mattel or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by Mattel or any of its affiliated companies and which shall not be public knowledge. After termination of the Executive's employment with Mattel, the Executive shall not, without the prior written consent of Mattel, communicate or divulge any such information, knowledge or data to anyone other than Mattel and those designated by it. The Executive further represents and agrees that, unless otherwise required by law, the Executive will keep the terms, amount and fact of this Agreement completely confidential, and that the Executive will not hereafter disclose any information concerning this Agreement to anyone other than Executive's immediate family and professional representatives who will be informed of and bound by this confidentiality clause.
(b) If the termination of the Executive's employment occurs prior to a Change of Control, the Executive agrees that eligibility for severance payments and other benefits under this Agreement are contingent upon the Executive's agreement and compliance with Mattel's requirement that the Executive does not accept employment nor an engagement as a consultant with a competitor whereupon such position is comparable to the position the Executive held with Mattel and where the Executive can not reasonably satisfy Mattel that the new employer is prepared to and/or does take adequate steps to preclude and to prevent inevitable disclosure of trade secrets, as prohibited under the Mattel's policies with respect to the use and disclosure of
(c) The Executive agrees that so long as the Executive is receiving any payments or benefits under this Agreement and for a period of 12 months thereafter, the Executive will not participate in recruiting any of Mattel's employees or in the solicitation of Mattel's employees, and the Executive will not communicate to any other person or entity, about the nature, quality or quantity of work, or any special knowledge or personal characteristics of any person employed by Mattel. If the Executive should wish to discuss possible employment with any then-current Mattel employee during the 12-month period set forth above, the Executive may request written permission to do so from the senior human resources officer of Mattel who may, in his/her discretion, grant a written exception to the no solicitation agreement set forth above, provided, however, the Executive agrees that the Executive will not discuss any such employment possibility with such employees prior to securing Mattel's permission. If Mattel should decline to grant such permission, the Executive agrees that the Executive will not at any time, either during or after the non- solicitation period set forth above, advise the employee concerned that he/she was the subject of a request under this paragraph or that Mattel refused to grant the Executive the right to discuss an employment possibility with him/her.
11. Successors.
(a) This Agreement is personal to the Executive and without the prior written consent of Mattel shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon Mattel and its successors. Mattel shall require any successor to all or substantially all of the business and/or assets of Mattel, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, by an agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as Mattel would be required to perform if no such succession had taken place.
12. Amendment; Waiver. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and may be amended, modified or changed only
13. Long Term Incentive Compensation Plan Payments After a Change of
Control.
(a) In the event of a Change of Control during the Employment Period, Mattel shall pay the Executive a cash payment as provided under the provisions of the LTIP, as in effect immediately prior to the Change of Control.
(b) In addition, in the event of a Change of Control during the Employment Period, within thirty (30) days after the date of such Change of Control, Mattel shall pay the Executive any unpaid amounts to which the Executive is entitled with respect to any performance period under the LTIP, or any other successor long-term incentive compensation plan of Mattel, that has been completed as of the date of the Change of Control.
14. Certain Additional Payments by Mattel.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any Payment
(as defined below) would be subject to the Excise Tax (as defined below), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 14(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Parachute Value of Payments (as defined below)
does not exceed 110% of the Safe Harbor Amount (as defined below), then no
Gross-Up Payment shall be made to the Executive and the Agreement Payments (as
defined below), in the aggregate, shall be reduced to (but not below zero) such
that the Parachute Value of all Payments equals the Safe Harbor Amount,
determined in such a manner as to maximize the Value of all Payments (as defined
below) actually made to the Executive.
(b) Subject to the provisions of Section 14(c), all determinations required to be made under this Section 14, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by PricewaterhouseCooper LLP or such other nationally recognized certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to Mattel and the Executive within 15
(c) The Executive shall notify Mattel in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Mattel of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise Mattel of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to Mattel (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Mattel notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) give Mattel any information reasonably requested by Mattel relating to such claim,
(ii) take such action in connection with contesting such claim as Mattel shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by Mattel,
(iii) cooperate with Mattel in good faith in order effectively to contest such claim, and
(iv) permit Mattel to participate in any proceedings relating to such claim;
provided, however, that Mattel shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 14(c), Mattel shall control all proceedings taken in connection with such contest and, at
(d) If, after the receipt by the Executive of an amount advanced by Mattel pursuant to Section 14(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to Mattel's complying with the requirements of Section 14(c)) promptly pay to Mattel the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by Mattel pursuant to Section 14(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and Mattel does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
(e) Notwithstanding any other provision of this Section 14, Mattel may withhold and pay over to the Internal Revenue Service for the benefit of the Executive all or any portion of the Gross-Up Payment that it determines in good faith that it is or may be in the future required to withhold, and the Executive hereby consents to such withholding.
(f) Definitions. The following terms shall have the following meanings for purposes of this Section 14.
(i) An "Agreement Payment" shall mean a Payment paid or payable pursuant to this Agreement (disregarding this Section 14) and any payment relating to the Loan Agreement.
(ii) "Excise Tax" shall mean the excise tax imposed by
Section 4999 of the Code, together with any interest or penalties imposed with
respect to such excise tax.
(iv) "Parachute Value" of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a "parachute payment" under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
(v) A "Payment" shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise.
(vi) The "Safe Harbor Amount" means the maximum Parachute Value of all Payments that the Executive can receive without any Payments being subject to the Excise Tax.
(vii) "Value" of a Payment shall mean the economic present
value of a Payment as of the date of the change of control for purposes of
Section 280G of the Code, as determined by the Accounting Firm using the
discount rate required by Section 280G(d)(4) of the Code.
15. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
(b) All notices and other communications hereunder shall be in writing; shall be delivered by hand delivery to the other party or mailed by registered or certified mail, return receipt requested, postage prepaid; shall be deemed delivered upon actual receipt; and shall be addressed as follows:
or to such other address as either party shall have furnished to the other in writing in accordance herewith.
(c) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction.
(d) Mattel may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(e) Mattel agrees to reimburse the Executive for the reasonable attorneys' fees and costs incurred by the Executive in connection with this Agreement and the Loan Agreement, in an aggregate amount not to exceed $10,000.
EXECUTIVE:
/s/ Matthew C Bousquette
----------------------------------
MATTEL: MATTEL, INC.,
a Delaware corporation
By: /s/ Jill E. Barad 1/31/00
-------------------------------
|
Its: Chief Executive Officer
ATTEST:
1. For valuable consideration, the receipt and adequacy of which are hereby acknowledged, the undersigned ("Executive") does hereby on behalf of Executive and Executive's successors, assigns, heirs and any and all other persons claiming through Executive, if any, and each of them, forever relieve, release, and discharge Mattel, Inc. ("Mattel") and its respective predecessors, successors, assigns, owners, attorneys, representatives, affiliates, Mattel corporations, subsidiaries (whether or not wholly-owned), divisions, partners and their officers, directors, agents, employees, servants, executors, administrators, accountants, investigators, insurers, and any and all other related individuals and entities, if any, and each of them, in any and all capacities from any and all claims, debts, liabilities, demands, obligations, liens, promises, acts, agreements, costs and expenses (including, but not limited to attorneys' fees), damages, actions and causes of action, of whatever kind or nature, including, without limiting the generality of the foregoing, any claims arising out of, based upon, or relating to the hire, employment, remuneration (including salary; bonus; incentive or other compensation; vacation, sick leave or medical insurance benefits; or other benefits) or termination of Executive's employment with Mattel.
2. This release includes a release of any rights or claims Executive may have under the Age Discrimination in Employment Act, which prohibits age discrimination in employment as to individuals forty years of age and older; the Older Workers Benefit Protection Act, which prohibits discrimination against older workers in all Executive benefits; Title VII of the Civil Rights Act of 1964, as amended in 1991, which prohibits discrimination in employment based on race, color, national origin, religion or sex; the California Fair Employment and Housing Act, which prohibits discrimination based on race, color, religion, national origin, ancestry, physical or mental disability, medical condition, sex, pregnancy-related condition, marital status, age or sexual orientation; the Equal Pay Act, which prohibits paying men and women unequal pay for equal work; the Americans with Disabilities Act, which prohibits discrimination against qualified individuals with disabilities; or any other federal, state or local laws or regulations which prohibit employment discrimination, restrict an employer's right to terminate Executives, or otherwise regulate employment. This also includes a release by Executive of any claims for breach of contract, wrongful discharge and all claims for alleged physical or personal injury, emotional distress relating to or arising out of Executive's employment with Mattel or the termination of that employment; any claims under the WARN Act or any similar law, which requires, among other things, that advance notice be given of certain work force reductions; and all claims under the Employee Retirement Income Security Act, such as claims relating to pension or health plan benefits.
4. This release, as contained within this Agreement, covers both claims that
Executive knows about and those Executive may not know about. Executive
expressly waives all rights afforded by any statute (such as Section 1542 of the
Civil Code of the State of California) which limits the effect of a release with
respect to unknown claims. Executive understands the significance of
Executive's release of unknown claims and Executive's waiver of statutory
protection against a release of unknown claims (such as under Section 1542).
Section 1542 of the Civil Code of the State of California states as follows:
"A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor."
Notwithstanding the provisions of Section 1542, Executive expressly acknowledges that this release is intended to include both claims that Executive knows about and those Executive does not know or suspect to exist.
5. The provisions of this Agreement are severable, and if any part of it is found to be unenforceable, the other paragraphs shall remain fully valid and enforceable. This Agreement shall be construed in accordance with its fair meaning and in accordance with the laws of the state of California, without regard to conflicts of laws principles thereof.
6. Executive is strongly encouraged to consult with an attorney before signing this Agreement. Executive acknowledges that Executive has been advised of this right to consult an attorney and Executive understands that whether to do so is Executive's decision. Executive acknowledges that Mattel has advised Executive that Executive has twenty-one (21) days in which to consider whether Executive should sign this Release and has advised Executive that if Executive signs this Release, Executive has seven (7) days following the date on which Executive signs the Release to revoke it and that the Release will not be effective until after this seven-day period had lapsed.
PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
Date:
-------------------- ---------------------
Executive
|
2 of 2
THIS LOAN AGREEMENT (the "Agreement") is entered into as of October 29, 1999, by and between Mattel, Inc., a Delaware corporation ("Lender") and Matthew C. Bousquette ("Borrower"). Borrower and Lender are sometimes referred to in this Agreement as a "Party" or, collectively, as the "Parties."
WHEREAS, Borrower desires to obtain from Lender a loan in the principal amount of One Million Dollars ($1,000,000.00) (the "Loan"); and
WHEREAS, as an additional incentive to retain Borrower in the employ of Lender for a period of at least three years from the date hereof, Lender desires to grant Borrower the Loan.
NOW, THEREFORE, in consideration of the terms and conditions herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Loan Terms.
(a) Principal Amount. Lender shall pay to the order of Borrower, on October 29, 1999, the principal sum of One Million Dollars ($1,000,000.00) (the "Principal").
(b) Interest. Interest shall accrue on the outstanding Principal amount at the rate of seven percent (7%) per annum, compounded annually.
(c) Promissory Note. Borrower's obligation to repay the Loan shall be evidenced by a promissory note substantially in the form attached as Exhibit A hereto (the "Note"). Borrower shall execute and deliver to Lender the Note
(d) Repayment. Borrower shall pay to the order of Lender the
Principal and accrued interest under the Note on October 30, 2002, provided,
however, that all Principal and accrued but unpaid interest shall become
immediately due and payable thirty (30) days after the date of Borrower's
termination of employment with Lender for any reason prior to October 30, 2002,
unless Borrower commences arbitration with respect to the grounds for such
termination of employment within such thirty (30) day period, in which case all
Principal and accrued but unpaid interest shall be due and payable five (5) days
after notice to Borrower of the entry of a final judgement in such arbitration.
Interest shall continue to accrue during any such arbitration. The Loan shall be
subject to forgiveness as provided below. The Loan shall be unsecured but with
full recourse against Borrower.
(f) Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below:
"Cause" shall mean a reasonable determination of the Chief Executive Officer of Lender that at least one of the following has occurred: (i) one or more factually substantiated willful acts of dishonesty on Borrower's part which are intended to result in Borrower's substantial personal enrichment at the expense of Lender; (ii) repeated violations by Borrower of Borrower's employment obligations to Lender which are demonstrably willful and deliberate on Borrower's part and which resulted in material injury to Lender; (iii) conduct of a factually substantiated criminal nature (commonly defined as a "felony" in criminal statutes) which has or which is more likely than not to have a material adverse effect on Lender's reputation or standing in the community or on its continuing relationships with its customers or those who purchase or use its products; or (iv) factually substantiated fraudulent conduct in connection with the business or affairs of Lender, regardless of whether said conduct is designed to defraud Lender or others; provided that, in each case, Borrower has received written notice of the described activity, has been afforded a reasonable opportunity to cure or correct the activity described in the notice, and has failed to substantially cure, correct or cease the activity, as appropriate.
"Change of Control" shall be deemed to have occurred if:
(i) any "Person," which shall mean a "person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than Lender, any trustee or other fiduciary holding securities under an employee benefit plan of Lender) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Lender representing 20% or more of the combined voting power of Lender's then outstanding voting securities;
(iii) the stockholders of Lender approve (I) a plan of complete liquidation of Lender or (II) the sale or other disposition by Lender of all or substantially all of Lender's assets unless the acquirer of the assets or its board of directors shall meet the conditions for a merger or consolidation in subparagraphs (iv)(I) or (iv)(II) below; or
(iv) the consummation of a merger or consolidation of Lender with any other entity other than:
(I) a merger or consolidation which results in the voting securities of Lender outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the surviving entity's outstanding voting securities immediately after such merger or consolidation; or
(II) a merger or consolidation which would result in the directors of Lender (who were directors immediately prior thereto) continuing to constitute at least 50% of all directors of the surviving entity immediately after such merger or consolidation.
In this paragraph (iv), "surviving entity" shall mean only an entity in which all of Lender's stockholders immediately before such merger or consolidation (determined without taking into account any stockholders properly exercising appraisal or similar rights) become stockholders by the terms of such merger or consolidation, and the phrase "directors of Lender (who were directors immediately prior thereto)" shall include only individuals who were directors of Lender at the beginning of the 24 consecutive month period preceding the date of such merger or consolidation.
"Disability" shall mean that Borrower suffers a disability due to illness or injury which substantially and materially limits Borrower from performing each of the essential functions of Borrower's job, even with reasonable accommodation and becomes entitled to receive disability benefits under Lender's Long-Term Disability Plan for exempt employees.
"Good Reason" shall mean the good faith determination by Borrower that any one or more of the following have occurred:
(i) without the express written consent of Borrower, any change(s) in any of the employment duties, authority, or responsibilities of Borrower which is (are) inconsistent in any substantial respect with Borrower's position, authority, duties, or responsibilities as of the date of this Agreement;
(iii) transferring Borrower outside of the greater Los Angeles, California area without Borrower's express written consent.
(g) Notwithstanding any other provision in this Agreement, in the event that Borrower and Lender enter into an employment agreement after the date of this Agreement, the definition of "Cause," "Change of Control," "Disability," and "Good Reason" as provided in such employment agreement (or any amendments thereto) shall supercede the definitions in Section 1(f) of this Agreement.
2. Transfer of Notes. Borrower shall not assign or transfer any of Borrower's benefits or obligations arising under the Notes. Lender reserves the right to assign or transfer all or any part of, or any interest in, Lender's rights and benefits under this Agreement or the Note to any successor to all or part of its business or assets so long as any assignee or transferee expressly agrees to assume and perform this Agreement in the same manner and to the same extent as Lender would be required to perform if no such assignment or transfer had taken place.
3. Amendment; Waiver. This Agreement and the Note contain the entire agreement between the Parties with respect to the subject matter hereof and may be amended, modified or changed only by a written instrument executed by the Parties. No provision of this Agreement or the Note may be waived except by a writing executed and delivered by the Party sought to be charged. Any such written waiver will be effective only with respect to the event or circumstance described therein and not with respect to any other event or circumstance, unless such waiver expressly provides to the contrary.
4. Choice of Law. This Agreement shall be construed in accordance with and governed by the internal laws of the State of California, without reference to principles of conflict of laws.
5. Headings. The paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of the provisions hereof.
6. Notices. All notices and other communications hereunder shall be in writing; shall be delivered by hand delivery to the other party or mailed by registered or certified mail, return receipt requested, postage prepaid; shall be deemed delivered upon actual receipt; and shall be addressed as follows:
or to such other address as either party shall have furnished to the other in writing in accordance herewith.
7. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
8. Severability. If any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
9. No Third-Party Beneficiary Rights. The Parties do not intend to confer and this Agreement shall not be construed to confer any rights or benefits to any person, firm, group, corporation or entity other than the Parties.
[Signature Page Follows]
By: /s/ Alan Kaye
------------------------------------------
Its: Senior Vice President, Human Resources
-----------------------------------------
|
/s/ Matthew C. Bousquette --------------------------------------------- Matthew C. Bousquette |
$1,000,000.00 Date: October 29, 1999
Mattel, Inc. (herein referred to as "Holder") has agreed to advance to Matthew C. Bousquette (herein referred to as "Maker") on October 29, 1999, $1,000,000.00, and for said value received Maker promises to repay to the order of Holder, the principal sum of $1,000,000.00 on or before October 30, 2002. Maker shall owe to Holder interest on the principal sum in an amount equal to 7% per annum, commencing on October 29, 1999, compounded annually, payable with principal on October 30, 2002.
If Maker fails to make any payment set forth above when due, Holder may elect to declare the entire unpaid principal amount, including all unpaid interest, immediately due and payable with or without notice.
In the event of the termination of Maker's employment with Holder for any reason, all outstanding principal and accrued interest hereunder is immediately due and payable, with or without notice, thirty (30) days after the date of such termination unless Maker commences arbitration as provided in that certain Loan Agreement (the "Loan Agreement"), dated as of October 29, 1999, between Holder and Maker, unless this note and the loan it evidences shall have been cancelled and forgiven pursuant to the terms of the Loan Agreement.
In the event of commencement of legal action to enforce payment of this note, the non-prevailing party agrees to pay the prevailing party's reasonable attorney's fees and court costs in connection therewith.
By: /s/ Matthew C. Bousquette -------------------------------------- Matthew C.Bousquette Date |
Witnessed by:
/s/ Alan Kaye 12-21-99
----------------------------
Date
|
February 10, 2000
Mr. Matthew Bousquette
President Boys/Entertainment
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245-5012
Re: Amendment to Your Employment Agreement and Stock Option Grant Agreements
Dear Matthew:
Pursuant to action taken by Mattel's Board of Directors and Compensation Committee on February 1, 2000 to amend Mattel's 1990 and 1996 Stock Option Plans (the "Plans") and to amend the Grant Agreements for Non-Qualified Stock Options ("Grant Agreements") with respect to all of the stock options which you hold under the Plans and which are outstanding as of February 1, 2000 (the "Outstanding Options"), this letter agreement constitutes an amendment to each of your Grant Agreements and your Employment Agreement with Mattel.
Notwithstanding any provision of your Grant Agreements or of your
Employment Agreement to the contrary, in the event that your employment with
Mattel is terminated (i) by Mattel without Cause (as defined in your Employment
Agreement), (ii) by you for Good Reason (as defined in your Employment
Agreement), (iii) by you for any reason during the 30-day period immediately
following the six (6) month anniversary of a Change of Control (as defined in
your Employment Agreement) or (iv) by reason of your death or Disability (as
defined in you Employment Agreement), all of the Outstanding Options shall
become immediately exercisable and you shall have until the date which is ten
(10) years from the date each Outstanding Option was granted to exercise such
Outstanding Option.
I would appreciate it if you would sign, date and return a copy of this letter agreement to me. As such, it will constitute a written amendment to your Grant Agreements and your Employment Agreement.
Sincerely yours,
Mattel, Inc.
By /s/ Alan Kaye -------------------------- Alan Kaye Senior Vice President, Human Resources |
Agreed to and accepted by:
/s/ Matthew C. Bousquette Dated: February 20, 2000 ---------------------------- Matthew Bousquette |
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is entered into on January 31, 2000 and effective as of April 1, 1999 (the "Effective Date") between Mattel, Inc., a Delaware corporation ("Mattel") and Neil B. Friedman (the "Executive").
1. Employment Period. Mattel hereby agrees to employ and continue in its employ the Executive, and the Executive hereby accepts such employment and agrees to remain in the employ of Mattel, for the period commencing on the Effective Date and ending on the third anniversary of such date, subject to earlier termination as provided herein (the "Employment Period"); provided that commencing on the first day of the month next following the effective date hereof, and on the first day of each month thereafter (the most recent of such dates is hereinafter referred to as the "Renewal Date"), the Employment Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to any Renewal Date Mattel or the Executive shall give notice to the other that the Employment Period shall not be so extended and shall be terminated.
2. Duties.
(a) Executive's Position and Duties. During the Employment Period, the Executive's position (including titles), authority and responsibilities shall be similar to those held by the Executive on the date hereof with such additions and modifications, and consistent with responsibilities generally assigned to officers of Mattel as the Chief Executive Officer of Mattel may in her discretion and acting in good faith from time to time assign to the Executive. The Executive's services shall be performed in the greater New York, New York area, provided, however, that the Executive may be required to travel on business from time to time generally consistent with the Executive's travel requirements as of the date of this Agreement.
(b) Full Time. The Executive agrees to devote the Executive's full
business time to the business and affairs of Mattel and to use the Executive's
best efforts to perform faithfully and efficiently the responsibilities assigned
to the Executive hereunder to the extent necessary to discharge such
responsibilities, except for (i) services on corporate, civic or charitable
boards or committees not significantly interfering with the performance of such
responsibilities which services have been approved by the Chief Executive
Officer; (ii) periods of vacation and sick leave to which the Executive is
entitled; and (iii) the management of personal investments and affairs. The
Executive will not engage in any outside business activity (as distinguished
from personal investment activity and affairs), including, but not limited to,
activity as a consultant, agent, partner or officer, director or provide
business services of any nature directly or indirectly to a corporation or other
business enterprise.
(a) Base Salary. During the Employment Period, the Executive shall receive a base salary ("Base Salary") at a bi-weekly rate at least equal to the bi-weekly salary paid to the Executive by Mattel on the date of this Agreement. The Base Salary shall be reviewed from time to time in accordance with Mattel's policies and practices, but no less frequently than once every eighteen (18) months and may be increased at any time and from time to time by action of the Board of Directors of Mattel or the Compensation/Options Committee thereof or any individual having authority to take such action in accordance with Mattel's regular practices. Any increase in the Base Salary shall not serve to limit or reduce any other obligation of Mattel hereunder and, after any such increase, the Base Salary shall not be reduced.
(b) Bonus Programs. In addition to the Base Salary, the Executive shall be eligible to participate throughout the Employment Period in such cash, deferred bonus, annual bonus and long term bonus plans and programs ("Bonus Programs"), such as Mattel's Management Incentive Plan (the "MIP") and Long Term Incentive Plan (the "LTIP"), as may be in effect from time to time in accordance with Mattel's compensation practices and the terms and provisions of any such plans or programs as in effect from time to time; provided that the Executive's eligibility for and participation in each of the Bonus Programs shall be at a level and on terms and conditions no less favorable than those available to any other comparably situated executive or consultant.
(c) Incentive Plans. In addition to the Base Salary and participation in the Bonus Programs, during the Employment Period the Executive, shall be eligible to participate, subject to the terms and conditions thereof, in all incentive plans and programs, including, but not limited to, stock option plans and other equity based incentive plans, as may be in effect from time to time with respect to executives employed by Mattel at the Executive's level so as to reflect the Executive's responsibilities.
(d) Pension and Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's dependents, as the case may be, shall be eligible to participate in, subject to the terms and conditions thereof, all pension, profit sharing, medical, dental, disability, group life, accidental death and travel accident insurance plans and programs of Mattel as in effect from time to time with respect to executives employed by Mattel at the Executive's level so as to reflect the Executive's responsibilities.
(e) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the policies and practices of Mattel as in effect from time to time.
(f) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits (including automobile benefits, financial counseling, membership in one city or country club and related expenses) of the kind and quality which are provided to executives at the Executive's level in accordance with the policies of Mattel as in effect from
(g) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the policies and practices of Mattel as in effect from time to time.
(h) Stock Options. During the Employment Period, the Executive shall be entitled to participate in Mattel's stock option plans in accordance with the policies and practices of Mattel as in effect from time to time with respect to executives employed by Mattel at the Executive's level so as to reflect the Executive's responsibilities.
(i) Certain Amendments. Nothing herein shall be construed to prevent Mattel from amending, altering, eliminating or reducing any plans, benefits or programs set forth in Sections 3(b) through (h) so long as such actions do not result in a material diminution in the aggregate value of such compensation and benefits, except for across-the-board compensation and benefit reductions to which the Executive agrees and which affect all similarly situated executives of Mattel.
(j) Retention Loan. Mattel and the Executive have entered into that certain Loan Agreement (the "Loan Agreement") dated as of October 29, 1999, which provided, among other things, that the definitions of "Cause," "Change of Control," "Disability" and "Good Reason" contained in this Agreement supercede the definitions of such terms as set forth in the Loan Agreement.
4. Termination.
(a) Death or Disability. This Agreement shall terminate automatically upon the Executive's death; provided that the Executive's Base Salary will be continued and paid for a period of six months thereafter. Mattel may terminate this Agreement, after having established the Executive's Disability, by giving to the Executive written notice of its intention to terminate the Executive's employment, and the Executive's employment with Mattel shall terminate effective on the 90th day after receipt of such notice (the "Disability Effective Date"). For purposes of this Agreement, the Executive's Disability shall occur and shall be deemed to have occurred only in the event that the Executive suffers a disability due to illness or injury which substantially and materially limits the Executive from performing each of the essential functions of the Executive's job, even with reasonable accommodation and becomes entitled to receive disability benefits under the Mattel Long-Term Disability Plan for exempt employees.
(b) Cause. Mattel may terminate the Executive's employment for "Cause" upon a determination of the Chief Executive Officer of Mattel that "Cause" exists. For purposes of this Agreement, "Cause" means (i) one or more factually substantiated willful acts of dishonesty on the Executive's part which are intended to result in the Executive's substantial personal enrichment at the expense of Mattel; (ii) repeated violations by the Executive of the
(c) Good Reason. The Executive may terminate the Executive's employment at any time for Good Reason. For purposes of this Agreement, "Good Reason" means the good faith determination by the Executive that any one or more of the following have occurred:
(i) without the express written consent of the Executive, any change(s) in any of the duties, authority, or responsibilities of the Executive which is (are) inconsistent in any substantial respect with the Executive's position, authority, duties, or responsibilities as contemplated by Section 2 of this Agreement;
(ii) any failure by Mattel to comply with any of the provisions of Section 3 of this Agreement, other than an insubstantial and inadvertent failure remedied by Mattel promptly after receipt of notice thereof given by the Executive;
(iii) any proposed termination by Mattel of the Executive's employment other than as permitted by this Agreement;
(iv) any failure by Mattel to obtain the assumption and agreement to perform this Agreement by a successor as contemplated by Section 11(b); or
(v) transferring the Executive outside of the greater New York, New York area without the Executive's express written consent.
(d) Change of Control. "Change of Control" means:
(i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of Mattel, including the shares of common stock of Mattel issuable upon an exchange of Softkey Exchangeable Shares that are not owned by Mattel or any corporation controlled by Mattel (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of Mattel entitled to vote generally in the election
(ii) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Mattel's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as through such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(iii) consummation by Mattel of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of Mattel or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (a) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns Mattel or all or substantially all of Mattel's assets either directly
(iv) approval by the shareholders of Mattel of a complete liquidation or dissolution of Mattel.
For the purposes of this Section 4(d), (a) "Rights Agreement" means the Rights Agreement, dated as of February 7, 1992, as amended by an amendment dated as of May 13, 1999 and an amendment dated as of November 4, 1999 by and between Mattel and BankBoston N.A., a national banking association, formerly, The First National Bank of Boston, and not giving effect to any amendments subsequent to November 4, 1999, (b) "Softkey" means Softkey Software Products Inc., an Ontario corporation, and (c) "Softkey Exchangeable Shares" means the Exchangeable Shares in the capital stock of Softkey.
(e) Notice of Termination. Any termination of the Executive's employment by Mattel for Cause or following a Change of Control or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 15(b). Any termination by Mattel due to Disability shall be given in accordance with Section 4(a). For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon; (ii) except in the event of a termination following a Change of Control, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated; and (iii) specifies the Date of Termination (defined below).
(f) Date of Termination. "Date of Termination" means the date of
actual receipt of the Notice of Termination or any later date specified therein
(but not more than fifteen (15) days after the giving of the Notice of
Termination), as the case may be; provided that (i) if the Executive's
employment is terminated by Mattel for any reason other than Cause or
Disability, the Date of Termination is the date on which Mattel notifies the
Executive of such termination; (ii) if the Executive's employment is terminated
due to Disability, the Date of Termination is the Disability Effective Date; and
(iii) if the Executive's employment is terminated due to the Executive's death,
the Date of Termination shall be the date of death.
(a) Death. If the Executive's employment is terminated by reason of the Executive's death, this Agreement shall terminate without further obligations by Mattel to the Executive's legal representatives under this Agreement other than those obligations accrued hereunder or under the terms of the applicable Mattel plan or program which takes effect at the date of the Executive's death or as otherwise provided in Section 4(a) or this Section 5(a). As of the Date of Termination, the Executive's family shall be entitled to healthcare coverage and financial counseling benefits until the third anniversary of the Date of Termination.
(b) Disability. If the Executive's employment is terminated by reason of to Executive's Disability, the Executive shall be entitled to receive after the Disability Effective Date (i) disability benefits, if any, at least equal to those then provided by Mattel to disabled executives and/or their families and (ii) until the earlier of the third anniversary of the Date of Termination or the date the Executive accepts other employment, those other benefits on the terms described in Section 5(d)(v).
(c) Cause. If the Executive's employment is terminated for Cause or if the Executive terminates the Executive's employment without Good Reason, Mattel shall pay the Executive the Executive's full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and Mattel shall have no further obligations to the Executive under this Agreement.
(d) Good Reason; Other Than for Cause or Disability. If Mattel terminates the Executive's employment other than for Cause or Disability or the Executive terminates the Executive's employment for Good Reason (in each case, other than within 18 months following a Change of Control as provided in Section 5(e):
(i) Mattel shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:
(A) if not theretofore paid, the Executive's Base Salary through the Date of Termination at the rate in effect at the time of Notice of Termination was given;
(B) a current year bonus (the "Bonus") equal to the greater of (x) the average of the two highest annual bonuses received by the Executive under the MIP, or any successor plan, in the three years prior to the Date of Termination, including any years in which the Executive was paid no bonus, (the "Average Annual Bonus") and prorated to reflect the total number of full months the Executive is employed on an active and full time basis in the year in which termination occurs, (y) the annual bonus paid to the Executive, under the MIP or any successor plan, if any, for the 2000 or 2001 calendar year, whichever is greater, without
(C) three times the sum of (x) the Executive's annual Base
Salary at the rate in effect at the time the Notice of Termination is given and
(y) the Bonus defined in Section 5(d)(i)(B), but without proration (and, in each
such case, without regard to any contributions by Mattel for the Executive's
benefit to any retirement or other investment plans).
(ii) Mattel shall pay the Executive a portion of any long-term incentive compensation that Executive would have received under the LTIP with respect to any performance period which is pending as of the Executive's Date of Termination as if the Executive had remained employed for the entire performance period, pro rated based on the number of full months of Executive's employment during the performance period over the total number of months in the performance period, which amount shall be payable at the end of the period in accordance with the terms of the LTIP and shall be net of any interim payments previously made to the Executive.
(iii) Any options granted to the Executive under Mattel's stock option plans, other than Mattel's 1997 Premium Price Stock Option Plan or any successor thereto (the "Stock Option Plans"), shall become immediately exercisable and the Executive shall have a period of 90 days following the Date of Termination (but in no event past the expiration of the term of the option grant) to exercise all options granted under the Stock Option Plans then exercisable or which become exercisable pursuant to this clause (iii).
(iv) Mattel shall, promptly upon submission by the Executive of
supporting documentation, pay or reimburse to the Executive any costs and
expenses paid or incurred by the Executive which would have been payable under
Section 3(e) if the Executive's employment had not terminated.
(v) Until the earlier of (x) the third anniversary of the Date of Termination or (y) the date the Executive becomes gainfully employed in a substantially similar employment position, Mattel shall provide to the Executive at Mattel's expense:
(A) coverage under Mattel's medical, dental, prescription drug and vision care group insurance as in effect from time to time on the same terms and conditions as such insurance is available to active employees of Mattel (the last 18 months of the Executive's coverage under such insurance shall be deemed to be participation under an election to continue such benefits under the Consolidated Omnibus Budget Reconciliation Act at Mattel's expense);
(B) outplacement services at the expense of Mattel commensurate with those provided to terminated executives of comparable level and made available through and at the facilities of a reputable and experienced vendor;
(D) automobile benefits; provided however, that if such automobile is leased by Mattel, such benefits shall expire upon expiration of such lease. Upon expiration of the automobile benefits, at which time the Executive may purchase the car for either $100, if the automobile benefits terminate at the end of the lease term, or Mattel's book value, if the automobile benefits terminate on either the third anniversary of the Date of Termination or the date on which the Executive accepts other employment. As of the Date of Termination, all expenses related to such automobile, including but not limited to insurance, repairs, maintenance, gasoline, and car phone and associated expenses, shall be the sole responsibility of the Executive; and
(E) membership in one city or country club and related expenses. Mattel shall cause the membership to be transferred to the Executive at no cost to the Executive.
(vi) If the Executive is a participant in the Mattel Supplemental Executive Retirement Plan, the Mattel Deferred Compensation Plan or the Mattel Retiree Medical Plan, the Executive shall be given credit for three years of service (in addition to actual service) and for three years of attained age to be added to the Executive's actual age for purposes of computing any service and age-related benefits for which the Executive is eligible under such plans.
Notwithstanding the foregoing, if Mattel terminates the Executive's employment
other than for Cause or Disability or if the Executive terminates the
Executive's employment for Good Reason and such termination occurs within 18
months after the date upon which Mattel changes the person to whom the Executive
immediately reports, then (a) the Executive's "Average Annual Bonus" for the
purpose of calculating the amounts provided by clauses (d)(i)(B) and (d)(i)(C)
above shall be equal to the Executive's maximum targeted MIP bonus for the year
in which the termination of employment occurs and (b) the amount payable to the
Executive under clause (d)(ii) above shall be based on the maximum LTIP payment
that the Executive could have received with respect to the pending performance
period, rather than amount which would have been payable to the Executive had
the Executive remained employed for the entire performance period.
Notwithstanding the foregoing, the amounts payable with respect to a termination
of employment which is subject to the preceding sentence shall be prorated as
set forth in clauses (d)(i)(B) and (d)(ii).
(e) Change of Control. If, within 18 months following a Change of Control, the Executive terminates the Executive's employment for Good Reason or Mattel or the surviving entity terminates the Executive's employment other than for Cause or Disability or within the 30 day period immediately following the six (6) month anniversary of a Change of Control the Executive terminates the Executive's employment for any reason:
(A) if not theretofore paid, the Executive's Base Salary through the Date of Termination at the rate in effect at the time of Notice of Termination was given;
(B) a current year bonus (the "Bonus Amount") equal to the greater of (x) the average of the two highest annual bonuses received by the Executive under the MIP, or any successor plan, in the three years prior to the Date of Termination, including any years in which the Executive was paid no bonus, and prorated to reflect the total number of full months the Executive is employed on an active and full time basis in the year in which termination occurs, (y) the annual bonus paid to the Executive, under the MIP or any successor plan, if any, for the 2000 or 2001 calendar year, whichever is greater, without proration, or (z) the target annual bonus for the Executive under the MIP for the 2000 calendar year;
(C) three times the sum of (x) the Executive's annual Base
Salary at the rate in effect at the time the Notice of Termination is given and
(y) the Bonus Amount defined in Section 5(e)(i)(B), but without proration (and,
in each such case, without regard to any contributions by Mattel for the
Executive's benefit to any retirement or other investment plans).
(ii) Any options granted to the Executive under Mattel's stock option plans, other than Mattel's 1997 Premium Price Stock Option Plan or any successor thereto (the "Stock Option Plans"), shall become immediately exercisable and the Executive shall have a period of 90 days or such longer period of time as specified in the Stock Option Plans following the Date of Termination (but in no event past the expiration of the term of the option grant) to exercise all options granted under the Stock Option Plans then exercisable or which become exercisable pursuant to this clause (ii).
(iii) Mattel shall, promptly upon submission by the Executive of
supporting documentation, pay or reimburse to the Executive any costs and
expenses paid or incurred by the Executive which would have been payable under
Section 3(e) if the Executive's employment had not terminated.
(iv) Until the earlier of (x) the third anniversary of the Date of Termination or (y) the date the Executive becomes gainfully employed in a substantially similar employment position, Mattel shall provide to the Executive at Mattel's expense:
(A) coverage under Mattel's medical, dental, prescription drug and vision care group insurance as in effect from time to time on the same terms and conditions as such insurance is available to active employees of Mattel (the last 18 months of the Executive's coverage under such insurance shall be deemed to be participation under an election to continue such benefits under the Consolidated Omnibus Budget Reconciliation Act at Mattel's expense);
(C) financial counseling and tax preparation services through the vendor engaged and paid for by Mattel;
(D) automobile benefits; provided however, that if such automobile is leased by Mattel, such benefits shall expire upon expiration of such lease. Upon expiration of the automobile benefits, at which time the Executive may purchase the car for either $100, if the automobile benefits terminate at the end of the lease term, or Mattel's book value, if the automobile benefits terminate on either the third anniversary of the Date of Termination or the date on which the Executive accepts other employment. As of the Date of Termination, all expenses related to such automobile, including but not limited to insurance, repairs, maintenance, gasoline, and car phone and associated expenses, shall be the sole responsibility of the Executive; and
(E) membership in one city or country club and related expenses. Mattel shall cause the membership to be transferred to the Executive at no cost to the Executive.
(v) If the Executive is a participant in the Mattel Supplemental Executive Retirement Plan, the Mattel Deferred Compensation Plan or the Mattel Retiree Medical Plan, the Executive shall be given credit for three years of service (in addition to actual service) and for three years of attained age to be added to the Executive's actual age for purposes of computing any service and age-related benefits for which the Executive is eligible under such plans.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by Mattel and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any stock option or other agreement with Mattel or any of its affiliated companies. Except as otherwise provided herein, amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of Mattel at or subsequent to the Date of Termination shall be payable in accordance with such plan or program.
7. No Set Off, Payment of Fees. Except as provided herein, Mattel's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which Mattel may have against the Executive or others. Mattel agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome
8. Arbitration of Disputes.
(a) The parties agree that any disputes, controversies or claims which arise out of or relate to this Agreement, the Executive's employment or the termination of the Executive's employment, including, but not limited to, any claim relating to the purported validity, interpretation, enforceability or breach of this Agreement, and/or any other claim or controversy arising out of the relationship between the Executive and Mattel (or the nature of the relationship) or the continuation or termination of that relationship, including, but not limited to, claims that a termination was for Cause, or for Good Reason, claims for breach of covenant, breach of an implied covenant of good faith and fair dealing, wrongful termination, breach of contract, or intentional infliction of emotional distress, defamation, breach of right of privacy, interference with advantageous or contractual relations, fraud, conspiracy or other tort or property claims of any kind, which are not settled by agreement between the parties, shall be settled by expedited arbitration under the then applicable arbitration rules of JAMS/Endispute (or any other mutually agreed arbitrator) before a board of three arbitrators, as selected thereunder.
One arbitrator shall be selected by the Executive, one by Mattel and the third by the two persons so selected, all in accordance with the then applicable arbitration rules of JAMS/Endispute then in effect. In the event that the arbitrator selected by the Executive and the arbitrator selected by Mattel are unable to agree upon a third arbitrator, then the third arbitrator shall be selected from a list of seven (each of whom shall be a member of the "Independent List" of retired judges with experience in resolving employment disputes) provided by the New York, New York office of JAMS/Endispute with the parties striking names in order and the party striking first to be determined by the flip of a coin. The arbitration shall be held in a location mutually agreed upon by the parties. In the absence of agreement, the arbitration shall be held in New York, New York.
(b) In consideration of the parties' agreement to submit to arbitration all disputes with regard to this Agreement and/or with regard to any alleged contract, or any other claim arising out of their conduct, the relationship existing hereunder or the continuation or termination of that relationship, and in further consideration of the anticipated expedition and the minimizing of expense resulting from this arbitration remedy, the arbitration provisions of this
(c) Any claim which either party has against the other party which could be submitted for resolution pursuant to this Section 8 must be presented in writing by the claiming party to the other within the period of the applicable statue of limitations.
(d) Mattel will pay all costs and expenses of the arbitration.
(e) Any decision and award or order of a majority of the arbitrators shall be binding upon the parties hereto and judgment thereon may be entered in the Superior Court of the State of California or any other court having jurisdiction.
(f) Each of the above terms and conditions of this Section 8 shall have separate validity and the invalidity of any part thereof shall not affect the remaining parts.
(g) Any decision and award or order of a majority of the arbitrators shall be final and binding between the parties as to all claims which were raised in connection with the dispute to the full extent permitted by law. In all other cases, the parties agree that a decision of a majority of arbitrators shall be a condition precedent to the institution or maintenance of any legal, equitable, administrative, or other formal proceeding by Mattel or the Executive in connection with the dispute, and that the decision and opinion of the board of arbitrators may be presented in any other forum on the merits of the dispute.
9. General Release. The Executive acknowledges and agrees that this
Agreement includes the entire agreement and understanding between the parties
with regard to the Executive's employment, the termination thereof during the
Employment Period, and all amounts to which the Executive shall be entitled
whether during the term of employment or upon termination thereof. The
Executive also acknowledges and agrees that the Executive's right to receive
severance pay and other benefits pursuant to subsections (b), (d) and (e) of
Section 5 of this Agreement is contingent upon the Executive's compliance with
the covenants set forth in Section 10 of this Agreement and the Executive's
execution and acceptance of the terms and conditions of, and the effectiveness
of the General Release of All Claims (the "Release") attached hereto as Exhibit
"A." If the Executive fails to comply with the covenants set forth in Section
10 or if the Executive fails to execute the Release within twenty-one (21) days
of receipt of such Release, then the Executive shall not be entitled to any
severance payments or other benefits to which the Executive would otherwise be
entitled under subsections (b), (d) and (e) of Section 5 of this Agreement.
10. The Executive's Covenants.
(a) The Executive acknowledges that in the Executive's capacity in management, the Executive has had a great deal of exposure and access to a broad variety of commercially valuable proprietary information which is vital to the success of Mattel's business
(b) If the termination of the Executive's employment occurs prior to a Change of Control, the Executive agrees that eligibility for severance payments and other benefits under this Agreement are contingent upon the Executive's agreement and compliance with Mattel's requirement that the Executive does not accept employment nor an engagement as a consultant with a competitor whereupon such position is comparable to the position the Executive held with Mattel and where the Executive can not reasonably satisfy Mattel that the new employer is prepared to and/or does take adequate steps to preclude and to prevent inevitable disclosure of trade secrets, as prohibited under the Mattel's policies with respect to the use and disclosure of confidential and proprietary information, as set forth in Mattel's form Executive Patent and Confidence Agreement, as revised from time to time, and by this reference made a part hereof. If the Executive accepts employment or a consulting relationship with a competitor as described above, no further payments nor eligibility for benefits continuation will be available to the Executive as of the date the Executive commences such employment/consulting. It is a specific condition of this Agreement that so long as the Executive is receiving any payments or benefits under this Agreement with respect to a termination of the Executive's employment prior to a Change of Control, the Executive is obligated to immediately notify Mattel as to the specifics of the new position that the Executive is planing to commence as an employee or consultant for any company which is a competitor of Mattel.
(c) The Executive agrees that so long as the Executive is receiving any payments or benefits under this Agreement and for a period of 12 months thereafter, the Executive
11. Successors.
(a) This Agreement is personal to the Executive and without the prior written consent of Mattel shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon Mattel and its successors. Mattel shall require any successor to all or substantially all of the business and/or assets of Mattel, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, by an agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as Mattel would be required to perform if no such succession had taken place.
12. Amendment; Waiver. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and may be amended, modified or changed only by a written instrument executed by the Executive and Mattel. No provision of this Agreement may be waived except by a writing executed and delivered by the party sought to be charged. Any such written waiver will be effective only with respect to the event or circumstance described therein and not with respect to any other event or circumstance, unless such waiver expressly provides to the contrary.
13. Long Term Incentive Compensation Plan Payments After a Change of
(a) In the event of a Change of Control during the Employment Period, Mattel shall pay the Executive a cash payment as provided under the provisions of the LTIP, as in effect immediately prior to the Change of Control.
(b) In addition, in the event of a Change of Control during the Employment Period, within thirty (30) days after the date of such Change of Control, Mattel shall pay the
14. Certain Additional Payments by Mattel.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any Payment
(as defined below) would be subject to the Excise Tax (as defined below), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 14(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Parachute Value of Payments (as defined below)
does not exceed 110% of the Safe Harbor Amount (as defined below), then no
Gross-Up Payment shall be made to the Executive and the Agreement Payments (as
defined below), in the aggregate, shall be reduced to (but not below zero) such
that the Parachute Value of all Payments equals the Safe Harbor Amount,
determined in such a manner as to maximize the Value of all Payments (as defined
below) actually made to the Executive.
(b) Subject to the provisions of Section 14(c), all determinations required to be made under this Section 14, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by PricewaterhouseCooper LLP or such other nationally recognized certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to Mattel and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by Mattel. All fees and expenses of the Accounting Firm shall be borne solely by Mattel. Subject to Section 14(e) below, any Gross-Up Payment, as determined pursuant to this Section 14, shall be paid by Mattel to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon Mattel and the Executive. As a result of the uncertainty in the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by Mattel should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that Mattel exhausts its remedies pursuant to Section 14(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has
(c) The Executive shall notify Mattel in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Mattel of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise Mattel of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to Mattel (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Mattel notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) give Mattel any information reasonably requested by Mattel relating to such claim,
(ii) take such action in connection with contesting such claim as Mattel shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by Mattel,
(iii cooperate with Mattel in good faith in order effectively to contest such claim, and
(iv) permit Mattel to participate in any proceedings relating to such claim;
provided, however, that Mattel shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 14(c), Mattel shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Mattel shall determine; provided, however, that if Mattel directs the Executive to pay such claim and sue for a refund, Mattel shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Mattel's control of
(d) If, after the receipt by the Executive of an amount advanced by Mattel pursuant to Section 14(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to Mattel's complying with the requirements of Section 14(c)) promptly pay to Mattel the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by Mattel pursuant to Section 14(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and Mattel does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
(e) Notwithstanding any other provision of this Section 14, Mattel may withhold and pay over to the Internal Revenue Service for the benefit of the Executive all or any portion of the Gross-Up Payment that it determines in good faith that it is or may be in the future required to withhold, and the Executive hereby consents to such withholding.
(f) Definitions. The following terms shall have the following meanings for purposes of this Section 14.
(i) An "Agreement Payment" shall mean a Payment paid or payable pursuant to this Agreement (disregarding this Section 14) and any payment relating to the Loan Agreement.
(ii) "Excise Tax" shall mean the excise tax imposed by
Section 4999 of the Code, together with any interest or penalties imposed with
respect to such excise tax.
(iii) The "Net After-Tax Amount" of a Payment shall mean the Value of a Payment net of all taxes imposed on the Executive with respect thereto under Sections 1 and 4999 of the Code and applicable state and local law, determined by applying the highest marginal rates that are expected to apply to the Executive's taxable income for the taxable year in which the Payment is made.
(iv) "Parachute Value" of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a "parachute payment" under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
(vi) The "Safe Harbor Amount" means the maximum Parachute Value of all Payments that the Executive can receive without any Payments being subject to the Excise Tax.
(vii) "Value" of a Payment shall mean the economic present
value of a Payment as of the date of the change of control for purposes of
Section 280G of the Code, as determined by the Accounting Firm using the
discount rate required by Section 280G(d)(4) of the Code.
15. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
(b) All notices and other communications hereunder shall be in writing; shall be delivered by hand delivery to the other party or mailed by registered or certified mail, return receipt requested, postage prepaid; shall be deemed delivered upon actual receipt; and shall be addressed as follows:
or to such other address as either party shall have furnished to the other in writing in accordance herewith.
(c) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction.
EXECUTIVE:
/s/ Neil B. Friedman ----------------------------------- |
MATTEL:
By: /s/ Jill E. Barad 1/31/00
--------------------------------
Its: Chief Executive Officer
-------------------------------
|
ATTEST:
Exhibit "A"
1. For valuable consideration, the receipt and adequacy of which are hereby acknowledged, the undersigned ("Executive") does hereby on behalf of Executive and Executive's successors, assigns, heirs and any and all other persons claiming through Executive, if any, and each of them, forever relieve, release, and discharge Mattel, Inc. ("Mattel") and its respective predecessors, successors, assigns, owners, attorneys, representatives, affiliates, Mattel corporations, subsidiaries (whether or not wholly-owned), divisions, partners and their officers, directors, agents, employees, servants, executors, administrators, accountants, investigators, insurers, and any and all other related individuals and entities, if any, and each of them, in any and all capacities from any and all claims, debts, liabilities, demands, obligations, liens, promises, acts, agreements, costs and expenses (including, but not limited to attorneys' fees), damages, actions and causes of action, of whatever kind or nature, including, without limiting the generality of the foregoing, any claims arising out of, based upon, or relating to the hire, employment, remuneration (including salary; bonus; incentive or other compensation; vacation, sick leave or medical insurance benefits; or other benefits) or termination of Executive's employment with Mattel.
2. This release includes a release of any rights or claims Executive may have under the Age Discrimination in Employment Act, which prohibits age discrimination in employment as to individuals forty years of age and older; the Older Workers Benefit Protection Act, which prohibits discrimination against older workers in all Executive benefits; Title VII of the Civil Rights Act of 1964, as amended in 1991, which prohibits discrimination in employment based on race, color, national origin, religion or sex; the California Fair Employment and Housing Act, which prohibits discrimination based on race, color, religion, national origin, ancestry, physical or mental disability, medical condition, sex, pregnancy-related condition, marital status, age or sexual orientation; the Equal Pay Act, which prohibits paying men and women unequal pay for equal work; the Americans with Disabilities Act, which prohibits discrimination against qualified individuals with disabilities; or any other federal, state or local laws or regulations which prohibit employment discrimination, restrict an employer's right to terminate Executives, or otherwise regulate employment. This also includes a release by Executive of any claims for breach of contract, wrongful discharge and all claims for alleged physical or personal injury, emotional distress relating to or arising out of Executive's employment with Mattel or the termination of that employment; any claims under the WARN Act or any similar law, which requires, among other things, that advance notice be given of certain work force reductions; and all claims under the Employee Retirement Income Security Act, such as claims relating to pension or health plan benefits.
4. This release, as contained within this Agreement, covers both claims that
Executive knows about and those Executive may not know about. Executive
expressly waives all rights afforded by any statute (such as Section 1542 of the
Civil Code of the State of California) which limits the effect of a release with
respect to unknown claims. Executive understands the significance of
Executive's release of unknown claims and Executive's waiver of statutory
protection against a release of unknown claims (such as under Section 1542).
Section 1542 of the Civil Code of the State of California states as follows:
"A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor."
Notwithstanding the provisions of Section 1542, Executive expressly acknowledges that this release is intended to include both claims that Executive knows about and those Executive does not know or suspect to exist.
5. The provisions of this Agreement are severable, and if any part of it is found to be unenforceable, the other paragraphs shall remain fully valid and enforceable. This Agreement shall be construed in accordance with its fair meaning and in accordance with the laws of the state of California, without regard to conflicts of laws principles thereof.
6. Executive is strongly encouraged to consult with an attorney before signing this Agreement. Executive acknowledges that Executive has been advised of this right to consult an attorney and Executive understands that whether to do so is Executive's decision. Executive acknowledges that Mattel has advised Executive that Executive has twenty-one (21) days in which to consider whether Executive should sign this Release and has advised Executive that if Executive signs this Release, Executive has seven (7) days following the date on which Executive signs the Release to revoke it and that the Release will not be effective until after this seven-day period had lapsed.
PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
Date: ______________________ _______________________________ Executive
2 of 2
THIS LOAN AGREEMENT (the "Agreement") is entered into as of October 29, 1999, by and between Mattel, Inc., a Delaware corporation ("Lender") and Neil B. Friedman ("Borrower"). Borrower and Lender are sometimes referred to in this Agreement as a "Party" or, collectively, as the "Parties."
WHEREAS, Borrower desires to obtain from Lender a loan in the principal amount of One Million Dollars ($1,000,000.00) (the "Loan"); and
WHEREAS, as an additional incentive to retain Borrower in the employ of Lender for a period of at least two years from the date hereof, Lender desires to grant Borrower the Loan.
NOW, THEREFORE, in consideration of the terms and conditions herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Loan Terms.
(a) Principal Amount. Lender shall pay to the order of Borrower, on October 29, 1999 (the "Loan Date"), the principal sum of One Million Dollars ($1,000,000.00) (the "Principal").
(b) Interest. Interest shall accrue on the outstanding Principal amount at the rate of seven percent (7%) per annum, compounded annually.
(c) Promissory Note. Borrower's obligation to repay the Loan shall be evidenced by a promissory note substantially in the form attached as Exhibit A hereto (the "Note"). Borrower shall execute and deliver to Lender the Note concurrently with execution and delivery of this Agreement.
(d) Repayment. Borrower shall pay to the order of Lender the Principal and accrued interest under the Note on October 30, 2002, provided, however, that all Principal and accrued, but unpaid, interest shall become immediately due and payable upon Borrower's termination of employment with Lender for any reason prior to the Loan Date and shall be subject to forgiveness as provided below. The Loan shall be unsecured but with full recourse against Borrower.
(e) Forgiveness. The Loan, and Borrower's obligation to repay all outstanding Principal and accrued interest thereunder, shall be forgiven and cancelled by Lender and the Note shall be cancelled on October 29, 2002 if Borrower is employed by Lender on October 29, 2002, or earlier upon the date of the termination of Borrower's employment with
(f) Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below:
"Cause" shall mean a reasonable determination of the Chief Executive Officer of Lender that at least one of the following has occurred: (i) one or more factually substantiated willful acts of dishonesty on Borrower's part which are intended to result in Borrower's substantial personal enrichment at the expense of Lender; (ii) repeated violations by Borrower of Borrower's employment obligations to Lender which are demonstrably willful and deliberate on Borrower's part and which resulted in material injury to Lender; (iii) conduct of a factually substantiated criminal nature (commonly defined as a "felony" in criminal statutes) which has or which is more likely than not to have a material adverse effect on Lender's reputation or standing in the community or on its continuing relationships with its customers or those who purchase or use its products; or (iv) factually substantiated fraudulent conduct in connection with the business or affairs of Lender, regardless of whether said conduct is designed to defraud Lender or others; provided that, in each case, Borrower has received written notice of the described activity, has been afforded a reasonable opportunity to cure or correct the activity described in the notice, and has failed to substantially cure, correct or cease the activity, as appropriate.
"Change of Control" shall be deemed to have occurred if:
(i) any "Person," which shall mean a "person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than Lender, any trustee or other fiduciary holding securities under an employee benefit plan of Lender) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Lender representing 20% or more of the combined voting power of Lender's then outstanding voting securities;
(ii) during any period of 24 consecutive months, individuals, who at the beginning of such period constitute the Board of Directors of Lender, and any new director whose election by the Board of Directors, or whose nomination for election by Lender's stockholders, was approved by a vote of at least one-half (1/2) of the directors then in office
(iii) the stockholders of Lender approve (I) a plan of complete liquidation of Lender or (II) the sale or other disposition by Lender of all or substantially all of Lender's assets unless the acquirer of the assets or its board of directors shall meet the conditions for a merger or consolidation in subparagraphs (iv)(I) or (iv)(II) below; or
(iv) the consummation of a merger or consolidation of Lender with any other entity other than:
(I) a merger or consolidation which results in the voting securities of Lender outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the surviving entity's outstanding voting securities immediately after such merger or consolidation; or
(II) a merger or consolidation which would result in the directors of Lender (who were directors immediately prior thereto) continuing to constitute at least 50% of all directors of the surviving entity immediately after such merger or consolidation.
In this paragraph (iv), "surviving entity" shall mean only an entity in which all of Lender's stockholders immediately before such merger or consolidation (determined without taking into account any stockholders properly exercising appraisal or similar rights) become stockholders by the terms of such merger or consolidation, and the phrase "directors of Lender (who were directors immediately prior thereto)" shall include only individuals who were directors of Lender at the beginning of the 24 consecutive month period preceding the date of such merger or consolidation.
"Disability" shall mean that Borrower suffers a disability due to illness or injury which substantially and materially limits Borrower from performing each of the essential functions of Borrower's job, even with reasonable accommodation and becomes entitled to receive disability benefits under Lender's Long-Term Disability Plan for exempt employees.
"Good Reason" shall mean the good faith determination by Borrower that any one or more of the following have occurred:
(i) without the express written consent of Borrower, any change(s) in any of the employment duties, authority, or responsibilities of Borrower which is (are) inconsistent in any substantial respect with Borrower's position, authority, duties, or responsibilities as of the date of this Agreement;
(ii) any failure by Lender to pay Borrower Borrower's salary or earned bonuses, other than an insubstantial and inadvertent failure remedied by Lender promptly after receipt of notice thereof given by Borrower; or
(g) Notwithstanding any other provision in this Agreement, in the event that Borrower and Lender enter into an amendment to the Employment Agreement, dated as of October 26, 1999, after the date of this Agreement, the definition of "Cause," "Change of Control," "Disability," and "Good Reason" as provided in such Employment Agreement, as amended, shall supercede the definitions in Section 1(f) of this Agreement.
2. Transfer of Notes. Borrower shall not assign or transfer any of Borrower's benefits or obligations arising under the Notes. Lender reserves the right to assign or transfer all or any part of, or any interest in, Lender's rights and benefits under this Agreement or the Note to any successor to all or part of its business or assets so long as any assignee or transferee expressly agrees to assume and perform this Agreement in the same manner and to the same extent as Lender would be required to perform if no such assignment or transfer had taken place.
3. Amendment; Waiver. This Agreement and the Note contain the entire agreement between the Parties with respect to the subject matter hereof and may be amended, modified or changed only by a written instrument executed by the Parties. No provision of this Agreement or the Note may be waived except by a writing executed and delivered by the Party sought to be charged. Any such written waiver will be effective only with respect to the event or circumstance described therein and not with respect to any other event or circumstance, unless such waiver expressly provides to the contrary.
4. Choice of Law. This Agreement shall be construed in accordance with and governed by the internal laws of the State of California, without reference to principles of conflict of laws.
5. Headings. The paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of the provisions hereof.
6. Notices. All notices and other communications hereunder shall be in writing; shall be delivered by hand delivery to the other party or mailed by registered or certified mail, return receipt requested, postage prepaid; shall be deemed delivered upon actual receipt; and shall be addressed as follows:
7. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
8. Severability. If any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
9. No Third-Party Beneficiary Rights. The Parties do not intend to confer and this Agreement shall not be construed to confer any rights or benefits to any person, firm, group, corporation or entity other than the Parties.
[Signature Page Follows]
/s/ Alan Kaye
By:________________________________________
Senior Vice President, Human Resources
Its:_______________________________________
|
/s/ Neil B. Friedman
__________________________________________
Neil B. Friedman
|
$1,000,000.00 Date: October 29, 1999
Mattel, Inc. (herein referred to as "Holder") has agreed to advance to Neil B. Friedman (herein referred to as "Maker") on October 29, 1999, $1,000,000.00, and for said value received Maker promises to repay to the order of Holder, the principal sum of $1,000,000.00 on or before October 30, 2002. Maker shall owe to Holder interest on the principal sum in an amount equal to 7% per annum, commencing on October 29, 1999, compounded annually, payable with principal on October 30, 2002.
If Maker fails to make any payment set forth above when due, Holder may elect to declare the entire unpaid principal amount, including all unpaid interest, immediately due and payable with or without notice.
In the event of the termination of Maker's employment with Holder for any reason, all outstanding principal and accrued interest hereunder is immediately due and payable, with or without notice.
This note and the loan it evidences shall be subject to cancellation and forgiveness under certain circumstances pursuant to the terms of that certain Loan Agreement, dated as of October 29, 1999, between Holder and Maker.
In the event of commencement of legal action to enforce payment of this note, Maker agrees to pay the Holder's reasonable attorney's fees and court costs in connection therewith.
By: /s/ Neil B. Friedman ______________________________________ Neil B. Friedman Date |
Witnessed by:
/s/ Alan Kaye 12/6/99
_________________________________________
Date
|
February 10, 2000
Mr. Neil Friedman
President Fisher-Price Brands
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245-5012
Re: Amendment to Your Employment Agreement and Stock Option Grant Agreements
Dear Neil:
Pursuant to action taken by Mattel's Board of Directors and Compensation Committee on February 1, 2000 to amend Mattel's 1990 and 1996 Stock Option Plans (the "Plans") and to amend the Grant Agreements for Non-Qualified Stock Options ("Grant Agreements") with respect to all of the stock options which you hold under the Plans and which are outstanding as of February 1, 2000 (the "Outstanding Options"), this letter agreement constitutes an amendment to each of your Grant Agreements and your Employment Agreement with Mattel.
Notwithstanding any provision of your Grant Agreements or of your
Employment Agreement to the contrary, in the event that your employment with
Mattel is terminated (i) by Mattel without Cause (as defined in your Employment
Agreement), (ii) by you for Good Reason (as defined in your Employment
Agreement), (iii) by you for any reason during the 30-day period immediately
following the six (6) month anniversary of a Change of Control (as defined in
your Employment Agreement) or (iv) by reason of your death or Disability (as
defined in you Employment Agreement), all of the Outstanding Options shall
become immediately exercisable and you shall have until the date which is ten
(10) years from the date each Outstanding Option was granted to exercise such
Outstanding Option.
I would appreciate it if you would sign, date and return a copy of this letter agreement to me. As such, it will constitute a written amendment to your Grant Agreements and your Employment Agreement.
Sincerely yours,
Mattel, Inc.
By /s/ Alan Kaye ________________________________ Alan Kaye Senior Vice President, Human Resources |
Agreed to and accepted by:
/s/ Neil Friedman __________________________________ Dated: February 16, 2000 Neil Friedman |
The Mattel, Inc. Management Incentive Plan (the "Plan") is hereby amended, effective November 4, 1999, as set forth below:
1. Section 2 of the Plan is hereby amended by adding new Sections 2.1, 2.2,
2.10, 2.11 and 2.12, reading in their entirety as follows:
2.1 Board. "Board" shall mean the Board of Directors of the Company.
2.2 Change in Control. "Change in Control" shall mean the occurrence of any of the following:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (1) the then outstanding shares
of common stock of the Company, including the shares of common stock
of the Company issuable upon an exchange of Softkey Exchangeable
Shares that are not owned by the Company or any corporation controlled
by the Company (the "Outstanding Company Common Stock") or (2) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (a), the following shall not constitute a
Change in Control: (1) any acquisition directly from the Company, (2)
any acquisition by the Company or any corporation controlled by the
Company, (3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company, (4) any acquisition by a Person of 20% of
either the Outstanding Company Common Stock or the Outstanding Company
Voting Securities as a result of an acquisition of common stock of the
Company by the Company or of Softkey Exchangeable Shares by Softkey
which, by reducing the number of shares of common stock of the Company
or Softkey Exchangeable Shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to
20% or more of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities; provided, however, that if a
Person shall become the beneficial owner of 20% or more of either the
Outstanding Company Common Stock or the Outstanding Company Voting
Securities by reason of a share acquisitions by the Company or by
Softkey as described above and shall, after such share acquisitions by
the Company or Softkey, become the beneficial owner of any additional
shares of common stock of the Company, then such acquisition shall
constitute a Change in Control or (5) any acquisition pursuant to a
transaction which complies with clauses (1), (2) and (3) of subsection
(c) of this Section; provided, further,
(b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(c) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding share of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (3) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
2.10 Rights Agreement. "Rights Agreement" shall mean the Rights Agreement, dated as of February 7, 1992, as amended by an amendment dated as of May 13, 1999 and an amendment dated as of November 4, 1999 by and between the Company and BankBoston N.A., a national banking association, formerly, The First National Bank of Boston, and not giving effect to any amendments subsequent to November 4, 1999.
2.11 Softkey. "Softkey" shall mean Softkey Software Products Inc., an Ontario corporation.
2.12 Softkey Exchangeable Shares. "Softkey Exchangeable Shares" shall mean the Exchangeable Shares (as defined in the Rights Agreement) in the capital stock of Softkey.
2. Current Sections 2.1 through 2.7 of the Plan are hereby renumbered as Sections 2.3 through 2.9.
3. Section 6.1 of the Plan is hereby amended by adding an additional sentence at the end thereof, reading in its entirety as follows: "Notwithstanding the foregoing, following a Change in Control, no amendment or termination of the Plan may adversely affect the rights of any Participant with respect to bonus opportunities for years beginning before the Change in Control without that Participant's written consent, including without limitation such rights under Article VII."
4. The Plan is hereby amended by adding a new Article VII, reading in its entirety as follows:
In the event of a Change in Control, each Participant who is employed by the Company or its successor as of the date of such Change in Control (the "CIC Date") shall receive (i) within 30 days after the CIC Date, any unpaid bonus amounts to which the Participant is entitled with respect to any year that ended on or before the CIC Date, and (ii) an interim cash payment with respect to the year in which such Change in Control occurs (the "CIC Year") equal to the amount that such Participant would have received if the target performance goals (as established by the Committee pursuant to Section 3.1 hereof) for the CIC Year had been achieved. Notwithstanding the foregoing, in the case of a Participant who is a party to any individual agreement under which the Participant is or may become entitled to bonus payments with respect to the CIC Year, the Company or its successor may make the right of such Participant to receive such interim cash payment conditional upon the execution by such Participant of a waiver of the right to receive such payments under the individual agreement to the extent they would duplicate such interim cash payment. Any amounts that thereafter become
* * *
IN WITNESS WHEREOF, the Company has caused this Amendment to the Plan to be executed, effective as of November 4, 1999.
By: /s/ Alan Kaye
-------------------------------
Name: Alan Kaye
Title: Senior Vice President Human Resources
|
The Amended and Restated Mattel Long-Term Incentive Plan (the "Plan") is hereby amended, effective November 4, 1999, as set forth below:
1. Section 2 of the Plan is hereby amended by adding new Sections 2.1, 2.2,
2.12, 2.13 and 2.14, reading in their entirety as follows:
2.1 Board. "Board" shall mean the Board of Directors of the Company.
2.2 Change in Control. "Change in Control" shall mean the occurrence of any of the following:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (1) the then outstanding shares
of common stock of the Company, including the shares of common stock
of the Company issuable upon an exchange of Softkey Exchangeable
Shares that are not owned by the Company or any corporation controlled
by the Company (the "Outstanding Company Common Stock") or (2) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (a), the following shall not constitute a
Change in Control: (1) any acquisition directly from the Company, (2)
any acquisition by the Company or any corporation controlled by the
Company, (3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company, (4) any acquisition by a Person of 20% of
either the Outstanding Company Common Stock or the Outstanding Company
Voting Securities as a result of an acquisition of common stock of the
Company by the Company or of Softkey Exchangeable Shares by Softkey
which, by reducing the number of shares of common stock of the Company
or Softkey Exchangeable Shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to
20% or more of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities; provided, however, that if a
Person shall become the beneficial owner of 20% or more of either the
Outstanding Company Common Stock or the Outstanding Company Voting
Securities by reason of a share acquisitions by the Company or by
Softkey as described above and shall, after such share acquisitions by
the Company or Softkey, become the beneficial owner of any additional
shares of common stock of the Company, then such acquisition shall
constitute a Change in Control or (5) any acquisition pursuant to a
transaction which complies with clauses (1), (2) and (3) of subsection
(c) of this Section; provided, further,
(b) Individuals who, as of the date hereof, constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(c) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding share of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (3) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
2.12 Rights Agreement. "Rights Agreement" shall mean the Rights Agreement, dated as of February 7, 1992, as amended by an amendment dated as of May 13, 1999 and an amendment dated as of November 4, 1999 by and between the Company and BankBoston N.A., a national banking association, formerly, The First National Bank of Boston, and not giving effect to any amendments subsequent to November 4, 1999.
2.13 Softkey. "Softkey" shall mean Softkey Software Products Inc., an Ontario corporation.
2.14 Softkey Exchangeable Shares. "Softkey Exchangeable Shares" shall mean the Exchangeable Shares (as defined in the Rights Agreement) in the capital stock of Softkey
2. Current Sections 2.1 through 2.9 of the Plan are hereby renumbered as Sections 2.3 through 2.11.
3. Section 6.1 of the Plan is hereby amended by adding an additional sentence at the end thereof, reading in its entirety as follows: "Notwithstanding the foregoing, following a Change in Control, no amendment or termination of the Plan may adversely affect the rights of any Participant with respect to bonus opportunities for Performance Periods that began before the Change in Control without that Participant's written consent, including without limitation such rights under Article VII."
4. The Plan is hereby amended by adding new Article VIII, reading in its entirety as follows:
In the event of a Change in Control, each Participant who is employed
by the Company or its successor as of the date of such Change in Control (the
"CIC Date") shall receive (i) within 30 days after the CIC Date, any unpaid
bonus amounts to which the Participant is entitled with respect to any
Performance Period that ended on or before the CIC Date, and (ii) an interim
cash payment for each Performance Period that commenced prior to the CIC Date
that has not been completed as of the CIC Date, equal to the amount that such
Participant would have received had the target Performance Objectives been
achieved with respect to each such Performance Period. Notwithstanding the
foregoing, in the case of a Participant who is a party to any individual
agreement under which the Participant is or may become entitled to payments with
respect to the same Performance Period(s), the Company or its successor may make
the right of such Participant to receive such interim cash payment under clause
(ii) conditional upon the execution by such Participant of a waiver of the right
to receive such payments under the individual agreement to the extent they would
duplicate such interim cash payment. Any bonus
* * *
IN WITNESS WHEREOF, the Company has caused this Amendment to the Plan to be executed, effective as of November 4, 1999.
By: /s/ Alan Kaye
------------------------------------
Name: Alan Kaye
Title: Senior Vice President Human
Resources
|
The Mattel, Inc. Amended and Restated Supplemental Executive Retirement Plan is hereby amended as set forth below:
1. Section 2.6 of the Plan is hereby amended and restated, effective as of November 4, 1999, to read in its entirety as follows:
2.6 Change in Control.
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of common stock of
the Company, including the shares of common stock of the Company issuable
upon an exchange of Softkey Exchangeable Shares that are not owned by the
Company or any corporation controlled by the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
shall not constitute a Change in Control: (A) any acquisition directly from
the Company, (B) any acquisition by the Company or any corporation
controlled by the Company, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, (D) any acquisition by a Person of
20% of either the Outstanding Company Common Stock or the Outstanding
Company Voting Securities as a result of an acquisition of common stock of
the Company by the Company or of Softkey Exchangeable Shares by Softkey
which, by reducing the number of shares of common stock of the Company or
Softkey Exchangeable Shares outstanding, increases the proportionate number
of shares beneficially owned by such Person to 20% or more of either the
Outstanding Company Common Stock or the Outstanding Company Voting
Securities; provided, however, that if a Person shall become the beneficial
owner of 20% or more of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities by reason of a share acquisition by
the Company or by Softkey as described above and shall, after such share
acquisition by the Company or Softkey, become the beneficial owner of any
additional shares of common stock of the Company, then such acquisition
shall constitute a Change of Control or (E) any acquisition pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 2.6; provided, further, however, that for purposes of
this subsection (i), any Investing Person (as such term is defined in the
Rights Agreement) shall be deemed not to be a beneficial owner of any
Investment Shares (as such term is defined in the Rights Agreement) and the
holder of the Mattel Special Voting Preferred Share (as such term is
(b) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as through such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or
(c) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding share of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
2. Section 2 of the Plan is hereby amended, effective as of November 4, 1999, by adding new subsections 2.21, 2.23 and 2.24, reading in their entirety as follows:
2.23. Softkey. Softkey Software Products Inc., an Ontario corporation.
2.24. Softkey Exchangeable Shares. The Exchangeable Shares (as such term is defined in the Rights Agreement) in the capital stock of Softkey.
3. Section 2 of the Plan is hereby amended, effective as of November 4, 1999, by renumbering the current subsections 2.21 and 2.22 as 2.22 and 2.25, respectively.
4. Section 5.1 of the Plan is hereby amended and restated, effective as of January 1, 2000, to read in its entirety as follows:
5.1 Benefit Accrual. Each employee who becomes a Participant under Section 3.1 and who remains in the employ of the Employer until age 60 and until he becomes vested under Section 5.4 shall be entitled to a monthly benefit beginning at age sixty (60) (or when there is a Termination, if later) and continuing for the Participant's lifetime. Such monthly amount, determined as of the Determination Date (as defined below), shall equal:
(a) for Participant's credited with at least five (5) years of Service but not more than fifteen (15) years of Service, one-twelfth (1/12th) of (i) times (ii) below, rounded to the nearest dollar, where
(i) is twenty-five percent (25%) of the Participant's Final Average Compensation, determined as of the Determination Date, and
(ii) is the fraction, not in excess of one (1), equal to the number of Months of Service credited to the Participant as of the Determination Date divided by one hundred eighty (180).
(b) for Participant's credited with more than fifteen (15) years of Service, one-twelfth (1/12th) of twenty-five percent (25%) of the Participant's Final Average Compensation, determined as of the Determination Date, plus an additional 0.1666% for each month of credited Service after fifteen (15) years up to a maximum total percentage of thirty-five percent (35%).
"Determination Date" shall mean the date of Termination or the date the Participant is no longer a full-time employee (scheduled to work a forty (40) hour work week).
IN WITNESS WHEREOF, Mattel, Inc. has caused this Amendment No.1 to the Mattel,Inc. Amended and Restated Supplemental Executive Retirement Plan to be executed, effective as set forth above.
By: /s/ Alan Kaye
__________________________________
Name: Alan Kaye
Title: Senior Vice President Human
Resources
|
The Mattel, Inc. Deferred Compensation Plan is hereby amended, effective as of November 4, 1999, as set forth below:
1. Section 2.5 of the Plan is hereby amended and restated in its entirety as follows:
2.5 Change in Control.
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of common stock of
the Company, including the shares of common stock of the Company issuable
upon an exchange of Softkey Exchangeable Shares that are not owned by the
Company or any corporation controlled by the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
shall not constitute a Change in Control: (A) any acquisition directly from
the Company, (B) any acquisition by the Company or any corporation
controlled by the Company, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, (D) any acquisition by a Person of
20% of either the Outstanding Company Common Stock or the Outstanding
Company Voting Securities as a result of an acquisition of common stock of
the Company by the Company or of Softkey Exchangeable Shares by Softkey
which, by reducing the number of shares of common stock of the Company or
Softkey Exchangeable Shares outstanding, increases the proportionate number
of shares beneficially owned by such Person to 20% or more of either the
Outstanding Company Common Stock or the Outstanding Company Voting
Securities; provided, however, that if a Person shall become the beneficial
owner of 20% or more of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities by reason of a share acquisition by
the Company or by Softkey as described above and shall, after such share
acquisition by the Company or Softkey, become the beneficial owner of any
additional shares of common stock of the Company, then such acquisition
shall constitute a Change of Control or (E) any acquisition pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 2.5; provided, further, however, that for purposes of
this subsection (i), any Investing Person (as such term is defined in the
Rights Agreement) shall be deemed not to be a beneficial owner of any
Investment Shares (as such term is defined in the Rights Agreement) and the
holder of the Mattel Special Voting Preferred Share (as such term is
defined in the Rights Agreement) shall be deemed not to be a beneficial
owner of such Mattel Special Voting Preferred Share; or
(c) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding share of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
2. Section 2 of the Plan is hereby amended by adding new subsections 2.28,
2.30 and 2.31, reading in their entirety as follows:
2.28. Rights Agreement. The Rights Agreement, dated as of February 7,
1992, as amended by an amendment dated as of May 13, 1999 and an amendment
dated as of
2.30. Softkey. Softkey Software Products Inc., an Ontario corporation.
2.31. Softkey Exchangeable Shares. The Exchangeable Shares (as such term is defined in the Rights Agreement) in the capital stock of Softkey.
3. Section 2 of the Plan is hereby amended by renumbering the current
subsections 2.28, 2.29, 2.30, 2.31, 2.32 and 2.33 as 2.29, 2.32, 2.33, 2.34,
2.35 and 2.36, respectively.
IN WITNESS WHEREOF, Mattel, Inc. has caused this Amendment No.1 to the Mattel, Inc. Deferred Compensation Plan to be executed, effective as of November 4, 1999.
/s/ Alan Kaye
By:__________________________________
Name: Alan Kaye
Title: Senior Vice President Human Resources
|
The Mattel, Inc. PIP Excess Plan is hereby amended, effective as of November 4, 1999, as set forth below:
1. Section 2.6 of the Plan is hereby amended and restated in its entirety as follows:
2.6 Change in Control.
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of common stock of
the Company, including the shares of common stock of the Company issuable
upon an exchange of Softkey Exchangeable Shares that are not owned by the
Company or any corporation controlled by the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
shall not constitute a Change in Control: (A) any acquisition directly from
the Company, (B) any acquisition by the Company or any corporation
controlled by the Company, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, (D) any acquisition by a Person of
20% of either the Outstanding Company Common Stock or the Outstanding
Company Voting Securities as a result of an acquisition of common stock of
the Company by the Company or of Softkey Exchangeable Shares by Softkey
which, by reducing the number of shares of common stock of the Company or
Softkey Exchangeable Shares outstanding, increases the proportionate number
of shares beneficially owned by such Person to 20% or more of either the
Outstanding Company Common Stock or the Outstanding Company Voting
Securities; provided, however, that if a Person shall become the beneficial
owner of 20% or more of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities by reason of a share acquisition by
the Company or by Softkey as described above and shall, after such share
acquisition by the Company or Softkey, become the beneficial owner of any
additional shares of common stock of the Company, then such acquisition
shall constitute a Change of Control or (E) any acquisition pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 2.6; provided, further, however, that for purposes of
this subsection (i), any Investing Person (as such term is defined in the
Rights Agreement) shall be deemed not to be a beneficial owner of any
Investment Shares (as such term is defined in the Rights Agreement) and the
holder of the Mattel Special Voting Preferred Share (as such term is
defined in the Rights Agreement) shall be deemed not to be a beneficial
owner of such Mattel Special Voting Preferred Share; or
(c) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding share of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
2. Section 2 of the Plan is hereby amended by adding new subsections 2.30,
2.32 and 2.33, reading in their entirety as follows:
2.30. Rights Agreement. The Rights Agreement, dated as of February 7,
1992, as amended by an amendment dated as of May 13, 1999 and an amendment
dated as of
2.32. Softkey. Softkey Software Products Inc., an Ontario corporation.
2.33. Softkey Exchangeable Shares. The Exchangeable Shares (as such term is defined in the Rights Agreement) in the capital stock of Softkey.
3. Section 2 of the Plan is hereby amended by renumbering the current
subsections 2.30, 2.31, 2.32, 2.33, 2.34 and 2.35 as 2.31, 2.34, 2.35, 2.36,
2.37 and 2.38, respectively.
IN WITNESS WHEREOF, Mattel, Inc. has caused this Amendment No.1 to the Mattel, Inc. PIP Excess Plan to be executed, effective as of November 4, 1999.
/s/ Alan Kaye
By:
-----------------------------
Name: Alan Kaye
Title: Senior Vice President Human Resources
|
The Mattel, Inc. 1990 Stock Option Plan (effective 5/10/95) (the "Plan") is hereby amended as set forth below.
1. Section 2 of the Plan is hereby amended, effective as of November 4, 1999, by adding the following new subsections (e), (l), (m), and (n) reading in their entirety as follows:
(e) "Cause" (1) "Cause" as defined in any individual employment agreement between the Company or an affiliate and the Participant, or (2) if there is no such individual employment agreement or if it does not define Cause: (A) an act or acts of dishonesty on the Participant's part that are intended to result in the Participant's substantial personal enrichment at the expense of the Company; (B) repeated violations by the Participant of the Participant's obligations to the Company that are demonstrably willful and deliberate on the Participant's part and that resulted in material injury to the Company; (C) conduct of a criminal nature that has, or that is more likely than not to have a material adverse effect on the Company's reputation or standing in the community, or on its continuing relationships with its customers or those who purchase or use its products; or (d) fraudulent conduct in connection with the business or affairs of the Company, regardless of whether said conduct is designed to defraud the Company or others.
(l) "Rights Agreement" the Rights Agreement, dated as of February 7, 1992, as amended by an amendment dated as of May 13, 1999 and an amendment dated as of November 4, 1999 by and between the Company and BankBoston N.A., a national banking association, formerly, The First National Bank of Boston, and not giving effect to any amendments subsequent to November 4, 1999.
(m) "Softkey" Softkey Software Products Inc., an Ontario corporation.
(n) "Softkey Exchangeable Shares" the Exchangeable Shares (as such term is defined in the Rights Agreement) in the capital stock of Softkey.
2. Section 2 of the Plan is hereby amended, effective as of November 4, 1999, by renumbering the current subsections (e) through (j) as (f) through (k).
3. The first sentence of Section 12 of the Plan is hereby amended,
effective as of February 10, 2000, to read in its entirety as follows:
"If the employment of a Participant terminates, other than pursuant to
paragraphs (a) through (e) of this Section 12, all unexercised,
deferred and unpaid Awards shall be cancelled 90 days after the date of
such termination of employment, unless the Award Agreement provides
otherwise."
4. Paragraph (c)(ii) of Section 12 of the Plan is hereby amended,
effective as of February 10, 2000, by adding the following additional
sentence to the end thereof, reading in its entirety as follows:
"Without limiting the generality of the foregoing, in such event, the
5. Section 12 of the Plan is hereby amended, effective as of November 4, 1999, by adding new subsections (d) and (e) to the end thereof, reading in its entirety as follows:
(d) If the employment of a Participant terminates for Cause, all unexercised, deferred and unpaid Awards shall be immediately cancelled.
(e) Additionally, except to the extent the terms of a stock option permit its later termination, notwithstanding the provisions of this Section 12 and Section 13 to the contrary, in the case of a Participant who incurs a termination of employment other than for Cause during the 18-month period following a Change in Control, any stock option held by such Participant may thereafter be exercised by the Participant, to the extent it was exercisable at the time of termination, or on such accelerated basis as the Committee may determine, for (l) the longer of (A) two years from the date of such termination of employment or (B) such other period as may be provided in the Plan for such termination of employment, or as the Committee may provide in the Award Agreement, or (2) until expiration of the stated term of such stock option, whichever period is shorter.
6. Section 19 of the Plan is hereby amended, effective as of November 4, 1999, to read in its entirety as follows:
(a) In the event of a Change in Control (as defined below) of the Company, all Awards then outstanding shall become fully exercisable as of the date of the Change in Control, and all restrictions and conditions of all Awards then outstanding shall be deemed satisfied as of the date of the Change in Control.
(b) "Change in Control"
(1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then outstanding shares of common stock of the Company, including the shares of common stock of the Company issuable upon an exchange of Softkey Exchangeable Shares that are not owned by the Company or any corporation controlled by the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company or any corporation controlled by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (D) any acquisition by a
(2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(3) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as
(4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
7. The foregoing amendments to the Plan shall apply (i) with respect to awards granted under the Plan on or after the effective date specified above for such amendment, as of the date of grant, and (ii) with respect to awards previously granted under the Plan, effective as of February 10, 2000.
* * *
IN WITNESS WHEREOF, the Company has caused this Amendment to the Plan to be executed, effective as set forth above.
By: /s/ Alan Kaye
-------------------------------------
Name: Alan Kaye
Title: Senior Vice President Human
Resources
|
The Amended and Restated Mattel 1996 Stock Option Plan (the "Plan") is hereby amended as set forth below.
1. Section 2 of the Plan is hereby amended, effective as of November 4, 1999, by adding new Paragraphs (b), (t), (v), and (w), reading in their entirety as follows:
(b) "Cause" shall mean (1) "Cause" as defined in any individual
employment agreement between the Company or an affiliate and the
Participant, or (2) if there is no such individual employment agreement
or if it does not define Cause: (A) an act or acts of dishonesty on the
Participant's part which are intended to result in the Participant's
substantial personal enrichment at the expense of the Company; (B)
repeated violations by the Participant of the Participant's obligations
to the Company that are demonstrably willful and deliberate on the
Participant's part and that resulted in material injury to the Company;
(C) conduct of a criminal nature that has or that is more likely than
not to have a material adverse effect on the Company's reputation or
standing in the community, or on its continuing relationships with its
customers or those who purchase or use its products; or (D) fraudulent
conduct in connection with the business or affairs of the Company,
regardless of whether said conduct is designed to defraud the Company or
others.
(t) "Rights Agreement" shall mean the Rights Agreement, dated as of February 7, 1992, as amended by an amendment dated as of May 13, 1999 and an amendment dated as of November 4, 1999 by and between the Company and BankBoston N.A., a national banking association, formerly, The First National Bank of Boston, and not giving effect to any amendments subsequent to November 4, 1999.
(v) "Softkey" shall mean Softkey Software Products Inc., an Ontario corporation.
(y) "Softkey Exchangeable Shares" shall mean the Exchangeable Shares (as such term is defined in the Rights Agreement) in the capital stock of Softkey.
2. Section 2 of the Plan is hereby amended, effective as of November 4, 1999, by renumbering the current Paragraphs (b) through (r) as (c) through (s), (s) as (u) and (t) through (w) as (x) through (aa).
3. Section 9 of the Plan is hereby amended, effective as of November 4, 1999, to read in its entirety as follows:
(a) Except to the extent the terms of an Option require its prior termination, each Option shall terminate on the earliest of the following dates:
(ii) Except to the extent the terms of an Option permit its later termination, the date that is ninety (90) days from the date of the Severance of the Participant to whom the Option was granted; provided, however, that if the Participant's Severance is as a result of death or the Participant's becoming Disabled, then the date shall be extended to one (1) year from the date of the Severance of the Participant to whom the Option was granted; or
(iii) The date of the Participant's Severance for Cause.
(b) Except to the extent the terms of an Option permit its later termination, notwithstanding the provisions of Paragraph (a) above, in the case of a Participant who incurs a Severance after the attainment of age fifty-five (55) and the completion of five (5) years of service (as determined for a Participant who is also an employee of the Company in accordance with the terms of the Mattel, Inc. Personal Investment Plan), the Participant's Non-Qualified Stock Options will continue to vest for five (5) years following Severance, and the Participant will be able to exercise his or her Non-Qualified Stock Options until the earlier of (i) five (5) years following Severance or (ii) the date on which the Options would otherwise expire.
(c) Additionally, except to the extent the terms of an Option permit
its later termination, notwithstanding Paragraphs (a) and (b) of this
Section 9 and Section 20, in the case of a Participant who incurs a
Severance other than for Cause during the 18-month period following a
Change in Control, any Option held by such Participant may thereafter be
exercised by the Participant, to the extent it was exercisable at the
time of termination, or on such accelerated basis as the Committee may
determine, for (1) the longer of (a) two years from such date of
Severance or (b) such other period as may be provided in the Plan for
such Severance or as the Committee may provide in the option agreement,
or (2) until expiration of the stated term of such Option, whichever
period is shorter.
4. Section 19 of the Plan is hereby amended, effective as of November 4, 1999, to read in its entirety as follows:
(a) In the event of a Change in Control (as defined below), all Options and Stock Appreciation Rights then outstanding shall become fully exercisable as of the date of the Change in Control and all restrictions and conditions of all Grants of Restricted Stock then outstanding shall be deemed satisfied as of the date of the Change in Control.
(1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then outstanding shares of common stock of the Company, including the shares of common stock of the Company issuable upon an exchange of Softkey Exchangeable Shares that are not owned by the Company or any corporation controlled by the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company or any corporation controlled by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (D) any acquisition by a Person of 20% of either the Outstanding Company Common Stock or the Outstanding Company Voting Securities as a result of an acquisition of common stock of the Company by the Company or of Softkey Exchangeable Shares by Softkey which, by reducing the number of shares of common stock of the Company or Softkey Exchangeable Shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 20% or more of either the Outstanding Company Common Stock or the Outstanding Company Voting Securities; provided, however, that if a Person shall become the beneficial owner of 20% or more of either the Outstanding Company Common Stock or the Outstanding Company Voting Securities by reason of a share acquisitions by the Company or by Softkey as described above and shall, after such share acquisitions by the Company or Softkey, become the beneficial owner of any additional shares of common stock of the Company, then such acquisition shall constitute a Change in Control or (E) any acquisition pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (3) of this Section; provided, further, however, that for purposes of this subsection (l), any Investing Person (as such term is defined in the Rights Agreement) shall be deemed not to be a beneficial owner of any Investment Shares (as such term is defined in the Rights Agreement) and the holder of the Mattel Special Voting Preferred Share (as such term is defined in the Rights Agreement) shall be deemed not to be a beneficial owner of such Mattel Special Voting Preferred Share; or
(2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual
(3) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding share of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(4) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
5. The foregoing amendments to the Plan shall apply (i) with respect to awards granted under the Plan on or after November 4, 1999, as of the date of grant, and (ii) with respect to awards previously granted under the Plan, effective as of February 10, 2000.
* * *
By: /s/ Alan Kaye ------------------------------- Name: Alan Kaye Title: Senior Vice President Human Resources |
This is an Option Agreement between Mattel, Inc. (the "Company") and the individual (the "Option Holder") named in the Notice of Grant of Stock Option (the "Notice) attached hereto as the cover page of this agreement.
Recitals
The Company has adopted the Mattel 1996 Stock Option Plan (the "Plan") for the granting to selected employees of options to purchase shares of Common Stock of the Company. In accordance with the terms of the Plan, the Compensation/Options Committee of the Board of Directors (the "Committee"), has approved the execution of this Grant Agreement (the "Option") between the Company and the Option Holder. Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Plan.
Option
1. Terms. The Company grants to the Option Holder the right and option to purchase on the terms and conditions hereinafter set forth, all or any part of the aggregate number of shares set forth in the Notice of Common Stock exercisable in accordance with the provisions of this Option during a period expiring ten years from the date of the Notice (the "Expiration Date"), unless terminated prior to that date pursuant to Section 5 or 6 below. This Option is a Non-Qualified Stock Option.
2. Exercisability (Vesting). The Option Holder may purchase the following percentages of the shares of Common Stock set forth in the Notice on or after the dates set forth below; provided that the Option Holder is employed by the Company or one of its Subsidiaries on the applicable vesting date:
=========================================================================
Percent of Shares
Commencing on the Date of this Option Subject to this Option
that may be Purchased
-------------------------------------------------------------------------
After the First 6 months 10%
-------------------------------------------------------------------------
After the First year 10%
-------------------------------------------------------------------------
After each 6 months thereafter 20%
-------------------------------------------------------------------------
Fully vested after 3 years
=========================================================================
|
The number of shares that may be purchased upon exercise of this Option shall in each case be calculated to the nearest full share.
4. Withholding. Upon exercise, the Option Holder shall pay, or make provisions satisfactory to the Company or its Subsidiary for payment of any federal, state and local taxes required to be withheld.
5. Cancellation of Grants. Option Holder specifically acknowledges that this Option is subject to the provisions of Section 20 of the plan, entitled "Cancellation of Grants," which can cause the forfeiture of this Option, or the rescission of Common Stock acquired upon the exercise of this Option. As a condition of the exercise of this Option, the Option Holder shall certify on a form acceptable to the Committee that he or she is in compliance with the terms and conditions of the plan, including Section 20 thereof, entitled "Cancellation of Grants."
6. Term. This Option shall terminate ninety (90) days after the Option
7. Compliance with Law. No shares issuable upon the exercise of this Option shall be issued and delivered unless and until all applicable registration requirements of the Securities Act of 1933, all applicable listing requirements of any national securities exchange on which the Common Stock is then listed, and all other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery, shall have been complied with. In particular, the Committee may require certain investment (or other) representations and undertakings in connection with the issuance of securities in connection with the Plan in order to comply with applicable law.
8. Assignability. Except as may be effected by will or by the laws of descent and distribution, any attempt to assign this Option shall be of no effect.
9. Certain Corporate Transactions. In the event of any change in the Common Stock by reason of a stock split, stock dividend, combination or reclassification of shares, recapitalization, merger, or similar event the Committee may adjust proportionately the number of shares and the stock price of the Common Stock subject to this Option. In the event of any other change affecting the Common Stock or
10. No Additional Rights. Neither the granting of this Option nor its exercise shall (a) confer upon the Option Holder any right to continue in the employ of the Company (b) interfere in any way with the rights of the Company or a Subsidiary to terminate such employment at any time for any reason, with or without cause, or (c) interfere with the right of the Company or a Subsidiary to undertake any lawful corporate action. Option Holder acknowledges that he or she is an "employee at will." The provisions of this Section 10 are subject to the terms of any employment agreement between the Option Holder and the Company (or a Subsidiary).
11. Rights as a Stockholder. Neither the Option Holder nor any other person legally entitled to exercise this Option shall be entitled to any of the rights or privileges of a stockholder of the Company in respect of any shares issuable upon any exercises of this Option unless and until a certificate or certificates representing such shares shall have been actually issued and delivered to the Option Holder.
12. Compliance with Plan. This Option is subject to, and the Company and Option Holder agree to be bound by, all of the terms and conditions of the Plan as it shall be amended from time-to-time. No amendment to the plan shall adversely affect this Option without the consent of the Option Holder. In the case of a conflict between the terms of the Plan and this Option, the terms of the Plan shall govern.
13. Governing Law. This Option has been granted, executed and delivered with effect from the date of Notice, at El Segundo, California, and interpretation, performance and enforcement of this Option shall be governed by the laws of the State of Delaware.
This is an Option Agreement between Mattel, Inc. (the "Company") and the individual (the "Option Holder") named in the Notice of Grant of Stock Option (the "Notice) attached hereto as the cover page of this agreement.
Recitals
The Company has adopted the Mattel 1996 Stock Option Plan (the "Plan") for the granting to selected employees of options to purchase shares of Common Stock of the Company. In accordance with the terms of the Plan, the Compensation/Options Committee of the Board of Directors (the "Committee"), has approved the execution of this Grant Agreement (the "Option") between the Company and the Option Holder. Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Plan.
Option
1. Terms. The Company grants to the Option Holder the right and option to purchase on the terms and conditions hereinafter set forth, all or any part of the aggregate number of shares set forth in the Notice of Common Stock exercisable in accordance with the provisions of this Option during a period expiring ten years from the date of the Notice (the "Expiration Date"), unless terminated prior to that date pursuant to Section 5 or 6 below. This Option is a Non-Qualified Stock Option.
2. Exercisability (Vesting). The Option Holder may purchase the following percentages of the shares of Common Stock set forth in the Notice on or after the dates set forth below; provided that the Option Holder is employed by the Company or one of its Subsidiaries on the applicable vesting date:
============================================================================
Percent of Shares
Commencing on the Date of this Option Subject to this Option
that may be Purchased
----------------------------------------------------------------------------
After the First 6 months 10%
----------------------------------------------------------------------------
After the First year 10%
----------------------------------------------------------------------------
After each 6 months thereafter 20%
----------------------------------------------------------------------------
Fully vested after 3 years
============================================================================
|
The number of shares that may be purchased upon exercise of this Option shall in each case be calculated to the nearest full share.
4. Withholding. Upon exercise, the Option Holder shall pay, or make provisions satisfactory to the Company or its Subsidiary for payment of any federal, state and local taxes required to be withheld.
5. Cancellation of Grants. Option Holder specifically acknowledges that this Option is subject to the provisions of Section 20 of the plan, entitled "Cancellation of Grants," which can cause the forfeiture of this Option, or the rescission of Common Stock acquired upon the exercise of this Option. As a condition of the exercise of this Option, the Option Holder shall certify on a form acceptable to the Committee that he or she is in compliance with the terms and conditions of the plan, including Section 20 thereof, entitled "Cancellation of Grants."
6. Term. Any portion of this Option that is not exercisable
i. If the Option Holder's employment is terminated by reason of death, the heirs of the Option Holder will be able to exercise this Option until the earlier of (a) one (1) year following the death of the Optionee or (b) the date on which this Option would otherwise expire.
ii. If the Option Holder's employment is terminated after the attainment of age fifty-five (55) and the completion of five (5) years of service (as determined in accordance with the terms of the Mattel, Inc. Personal Investment Plan), the Option Holder will be able to exercise this Option until the earlier of (a) five (5) years following termination of employment or (b) the date on which this Option would otherwise expire.
8. Assignability. Except as may be effected by will or by the laws of descent and distribution, any attempt to assign this Option shall be of no effect.
9. Certain Corporate Transactions. In the event of any change in the Common Stock by reason of a stock split, stock dividend, combination or reclassification of shares, recapitalization, merger, or similar event the Committee may adjust proportionately the number of shares and the stock price of the Common Stock subject to this Option. In the event of any other change affecting the Common Stock or any distribution (other than normal cash dividends) to holders of Common Stock, the Committee may make such adjustments as it may deem equitable (including adjustments to avoid fractional shares) in order to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property or stock, spin-off, reorganization or liquidation, the Committee may substitute a new option for this Option or provide for the assumption of this Option by the other corporation that is a party to the transaction.
10. No Additional Rights. Neither the granting of this Option nor its exercise shall (a) confer upon the Option Holder any right to continue in the employ of the Company (b) interfere in any way with the rights of the Company or a Subsidiary to terminate such employment at any time for any reason, with or without cause, or (c) interfere with the right of the Company or a Subsidiary to undertake any lawful corporate action. Option Holder acknowledges that he or she is an "employee at will." The provisions of this Section 10 are subject to the terms of any employment agreement between the Option Holder and the Company (or a Subsidiary).
11. Rights as a Stockholder. Neither the Option Holder nor any other person legally entitled to exercise this Option shall be entitled to any of the rights or privileges of a stockholder of the Company in respect of any shares issuable upon any exercises of this Option unless and until a certificate or certificates representing such shares shall have been actually issued and delivered to the Option Holder.
12. Compliance with Plan. This Option is subject to, and the Company and Option Holder agree to be bound by, all of the terms and conditions of the Plan as it shall be amended from time-to-time. No amendment to the plan shall adversely affect this Option without the consent of the Option Holder. In the case of a conflict between the terms of the Plan and this Option, the terms of the Plan shall govern.
The Mattel, Inc. 1997 Premium Price Stock Option Plan (the "Plan") is hereby amended as set forth below.
1. Section 2.2 of the Plan is hereby amended, effective as of November 4, 1999, to read in its entirety as follows:
2.2 "Change in Control" means the occurrence of any of the following:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (1) the then outstanding shares
of common stock of the Company, including the shares of common stock
of the Company issuable upon an exchange of Softkey Exchangeable
Shares that are not owned by the Company or any corporation controlled
by the Company (the "Outstanding Company Common Stock") or (2) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (a), the following shall not constitute a
Change in Control: (1) any acquisition directly from the Company, (2)
any acquisition by the Company or any corporation controlled by the
Company, (3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company, (4) any acquisition by a Person of 20% of
either the Outstanding Company Common Stock or the Outstanding Company
Voting Securities as a result of an acquisition of common stock of the
Company by the Company or of Softkey Exchangeable Shares by Softkey
which, by reducing the number of shares of common stock of the Company
or Softkey Exchangeable Shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to
20% or more of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities; provided, however, that if a
Person shall become the beneficial owner of 20% or more of either the
Outstanding Company Common Stock or the Outstanding Company Voting
Securities by reason of a share acquisitions by the Company or by
Softkey as described above and shall, after such share acquisitions by
the Company or Softkey, become the beneficial owner of any additional
shares of common stock of the Company, then such acquisition shall
constitute a Change in Control or (5) any acquisition pursuant to a
transaction which complies with clauses (1), (2) and (3) of subsection
(c) of this Section; provided, further, however, that for purposes of
this subsection (a), any Investing Person (as such term is defined in
the Rights Agreement) shall be deemed not to be a beneficial owner of
any Investment Shares (as such term is defined in the Rights
Agreement) and the holder of the Mattel Special Voting Preferred Share
(as such term is defined in the Rights
(b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(c) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of respectively, the then outstanding share of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (3) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
2.9 "Rights Agreement" means the Rights Agreement, dated as of February 7, 1992, as amended by an amendment dated as of May 13, 1999 and an amendment dated as of November 4, 1999 by and between the Company and BankBoston N.A., a national banking association, formerly, The First National Bank of Boston, and not giving effect to any amendments subsequent to November 4, 1999.
3. New Sections 2.32 and 2.33 are hereby added to the Plan, effective as of November 4, 1999, reading in their entirety as follows:
2.32 "Softkey" means Softkey Software Products Inc., an Ontario corporation.
2.33 "Softkey Exchangeable Shares" means the Exchangeable Shares (as defined in the Rights Agreement) the capital stock of Softkey.
4. Current Sections 2.29, 2.30, 2.31, 2.32, 2.33, 2.34 and 2.35 are hereby
renumbered, effective as of November 4, 1999, as 2.30, 2.31, 2.34, 2.35,
2.36, 2.37 and 2.38, respectively.
5. Section 9.5.5 of the Plan is hereby amended, effective as of February 10, 2000, to read in its entirety as follows:
In the event of a Change in Control, an Option which has not previously been forfeited may be exercised for all of the shares that were part of the original grant as to which the Option has not previously been exercised, without regard to the Participant's duration of employment and without regard to the applicable performance criteria.
6. Clause (c) of Section 11.4.4 of the Plan is hereby amended, effective as of February 10, 2000, to read in its entirety as follows: "The second anniversary of the date of the Change in Control."
7. Section 10.1.1 of the Plan is hereby amended, as of November 4, 1999, by adding a new paragraph to the end thereof, reading in its entirety as follows:
Notwithstanding the provisions of this Section 10.1.1 and Section 12.4 to the contrary, in the case of a Participant who incurs a Termination without Cause during the 18-month period following a Change in Control, any Option held by such Participant may thereafter be exercised by the Participant, to the extent it was exercisable at the time of termination, or on such accelerated basis as the Committee may determine, for (a) the longer of (1) two years from such date of Severance or (2) such other period as may be provided in the Plan for such Severance or as the Grant Agreement provides, or (b) until expiration of the stated term of such Option, whichever period is shorter.
* * *
IN WITNESS WHEREOF, the Company has caused this Amendment to the Plan to be executed, effective as set forth above.
By: /s/ Alan Kaye
------------------------------------
Name: Alan Kaye
Title: Senior Vice President Human
Resources
|
1. Purpose. The purpose of the Mattel, Inc. 1999 Stock Option Plan ("Plan") is to promote the interests of Mattel, Inc. ("Company") and its stockholders by enabling the Company to offer an opportunity to acquire an equity interest in the Company so as to better attract, retain, and reward Employees (as defined below) who are not Officers (as defined below) or Directors (as defined below) of the Company and Consultants (as defined below) to the Company and, accordingly, to strengthen the mutuality of interests between those persons and the Company's stockholders by providing those persons with a proprietary interest in pursuing the Company's long-term growth and financial success.
2. Definitions. For purposes of this Plan, the following terms shall have the meanings set forth below.
(a) "Board" means the Board of Directors of Mattel, Inc.
(b) "Cause" shall mean (1) "Cause" as defined in any individual employment
agreement between the Company or an affiliate and the Participant, or (2) if
there is no such individual employment agreement or if it does not define Cause:
(A) an act or acts of dishonesty on the Participant's part which are intended to
result in the Participant's substantial personal enrichment at the expense of
the Company; (B) repeated violations by the Participant of the Participant's
obligations to the Company that are demonstrably willful and deliberate on the
Participant's part and that resulted in material injury to the Company; (C)
conduct of a criminal nature that has or that is more likely than not to have a
material adverse effect on the Company's reputation or standing in the
community, or on its continuing relationships with its customers or those who
purchase or use its products; or (D) fraudulent conduct in connection with the
business or affairs of the Company, regardless of whether said conduct is
designed to defraud the Company or others.
(c) "Code" means the Internal Revenue Code of 1986, as amended. Reference to any specific section of the Code shall be deemed to be a reference to any successor provision.
(d) "Committee" means the Compensation/Options Committee of the Board, or such other committee of the Board that is designated by the Board to administer the Plan, as provided in Section 3(a). In the event that one or more members of the Committee do not comply with the eligibility requirements of Rule 16b-3, then the entire Board may serve as the Committee for purposes of this Plan.
(e) "Common Stock" means the common stock of Mattel, Inc., $1.00 par value per share, or any security issued in substitution, exchange, or in lieu thereof.
(f) "Company" means Mattel, Inc., a Delaware corporation, or any successor corporation. Except where the context indicates otherwise, the term "Company" shall include its Parent and Subsidiaries.
(h) "Director" means a member of the Board.
(i) "Disabled" means that there is a determination to that effect under the group long-term disability plan of the Company and the Participant is also approved for permanent disability benefits by the Social Security Administration or that a Participant is treated as "disabled" under an employment agreement which is in effect between the Company and the Participant at the time of such termination. However, in no event will a Participant be considered to be disabled for purposes of this Plan if the Participant's incapacity is a result of intentionally self-inflicted injuries (while sane or insane), alcohol or drug abuse, or a criminal act for which the Participant is convicted or to which the Participant pleads guilty or nolo contendere.
(j) "Employee" means any Officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended and in effect from time to time, or any successor statute.
(l) "Fair Market Value" shall mean, unless a different method or value is determined by the Committee, the closing price of the Common Stock as reported on the New York Stock Exchange Composite Tape for that day, or, if the New York Stock Exchange is closed on that day, the next preceding day on which the New York Stock Exchange was open.
(m) "Grant" means an award of an Option or Restricted Stock.
(n) "Independent Director" means a member of the Board who is not an Employee of the Company.
(o) "Insider" means a person or entity that is subject to the provisions of
Section 16 of the Exchange Act.
(p) "Officer" means the Company's president, principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice-president of the Company in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the Company.
(q) "Option" means a non-qualified stock option that is intended not to be
and is specifically designated as not being an incentive stock option under
Section 422 of the Code.
(s) "Participant" means a person who has received a Grant.
(t) "Plan" means this Mattel, Inc. 1999 Stock Option Plan, as it may be amended from time to time.
(u) "Restricted Stock" means shares of Common Stock issued pursuant to
Section 11 below that are subject to restrictions on ownership.
(v) "Retirement" means a Severance where the Participant (i) had previously attained the age of fifty-five (55) and completed five (5) years of service (as determined in accordance with the terms of the Mattel, Inc. Personal Investment Plan) or (ii) is otherwise eligible to be treated as retired for purposes of Mattel stock option plans under an employment agreement which is in effect between the Company and the Participant at the time of Severance.
(w) "Rights Agreement" shall mean the Rights Agreement, dated as of February 7, 1992, as amended by an amendment dated as of May 13, 1999 and an amendment dated as of November 4, 1999 by and between the Company and BankBoston N.A., a national banking association, formerly, The First National Bank of Boston, and not giving effect to any amendments subsequent to November 4, 1999.
(x) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act and as amended from time to time.
(y) "Severance" means, with respect to a Participant, the termination of his or her provision of services to the Company as an Employee, Director, or Consultant, whether by reason of death, becoming Disabled, Retirement, resignation, dismissal, or any other reason. The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to a Severance. However, a Participant will not be considered to have incurred a Severance because of a transfer of employment between the Company and a Subsidiary or a Parent (or vice versa).
(z) "Softkey" shall mean Softkey Software Products Inc., an Ontario corporation.
(aa) "Softkey Exchangeable Shares" shall mean the Exchangeable Shares (as such term is defined in the Rights Agreement) in the capital stock of Softkey.
(bb) "Stock Appreciation Right" means a right granted pursuant to Section 12 below to receive a payment in cash, shares of Common Stock or any combination thereof with respect to a specified number of shares of Common Stock equal to the excess of the Fair Market Value of the
(cc) "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain, as determined in accordance with the rules of Code Section 424(f).
3. Administration.
(a) Except as set forth in Section 15(b) below, this Plan shall be administered by the Committee. The Board may remove members from, or add members to, the Committee at any time. The Committee shall be composed of individuals selected in a manner that complies with Rule 16b-3 and with Code Section 162(m).
(b) The Committee may conduct its meetings in person or by telephone. One- third (1/3rd) of the members of the Committee shall constitute a quorum, and any action shall constitute the action of the Committee if it is authorized by a majority of the members present at any meeting or by all of the members in writing without a meeting.
(c) The Committee is authorized to interpret this Plan and to adopt rules and procedures relating to the administration of this Plan. All actions of the Committee in connection with the interpretation and administration of this Plan shall be binding upon all parties.
(d) Subject to the limitations of Sections 16 and 22 below, the Committee is expressly authorized to make such modifications to this Plan as well as to the Options, Restricted Stock and Stock Appreciation Rights granted hereunder as are necessary to effectuate the intent of this Plan as a result of any changes in the tax, accounting, or securities laws treatment of Participants and the Plan.
(e) The Committee may delegate its responsibilities to others under such conditions and limitations as it may prescribe, except that the Committee may not delegate its authority with regard to the granting of Options to Insiders, except to the extent permitted by Rule 16b-3.
4. Duration of Plan.
(a) This Plan shall be effective as of November 4, 1999.
(b) Unless terminated earlier pursuant to Section 19, this Plan shall terminate on December 31, 2009, except with respect to Options, Restricted Stock and Stock Appreciation Rights then outstanding.
5. Number of Shares.
(b) In the event that a Participant pays part or all of the exercise price of an Option or the purchase price of Restricted Stock in the form of Common Stock, only the net additional shares issued (i.e., the number of shares issued in excess of the number of shares surrendered) will be taken into account for purposes of the limitations of Paragraph (a) above.
(c) Upon the forfeiture of shares of Restricted Stock, the forfeited shares of Common Stock shall again become available for use under the Plan. Upon the expiration or termination of an outstanding Option which shall not have been exercised in full, the shares of Common Stock remaining unissued under the Option shall again become available for use under the Plan.
6. Eligibility.
(a) Persons eligible to receive Grants under this Plan shall consist of key Employees who are not Officers or Directors and Consultants.
(b) The Committee shall from time to time, in its absolute discretion, and subject to applicable limitations of this Plan:
(i) Determine which eligible Employees who are not Officers or Directors are key Employees and select from among the key Employees as well as Consultants such of them as in its opinion should be awarded Grants.
(ii) Subject to Section 5(a), determine the number of shares to be subject to such Grants awarded to the selected individuals.
(iii) Determine the terms and conditions of such Grants, consistent subject this Plan.
(c) In the event that the Company acquires another entity by merger or otherwise, the Committee may authorize the issuance of Options ("Substitute Options") to the individuals performing services for the acquired entity in substitution of stock options previously granted to those individuals in connection with their performance of services for the acquired entity upon such terms and conditions as the Committee shall determine.
7. Form of Options. Options shall be granted under this Plan on such terms and in such form as the Committee may approve, which shall not be inconsistent with the provisions of this Plan, but which need not be identical from Option to Option.
(a) The exercise price per share of Common Stock purchasable under an Option shall be set forth in the Option. Except in the case of Options subject to the provisions of Section 6(b)
(b) The Committee may include dividend equivalent rights on shares of Common Stock that are subject to Options. The Committee shall specify in the Option such terms as it deems appropriate regarding the dividend equivalent rights, including whether the dividend rights are payable currently or only when the Option is exercised, and whether any interest accrues on any unpaid dividend equivalent rights.
8. Exercise of Options.
(a) An Option shall be exercisable at such time or times and be subject to such terms and conditions as may be set forth in the Option. Options shall only be exercisable for whole numbers of shares.
(b) Options are exercised by payment of the full amount of the purchase price to the Company. The payment shall be in the form of cash or such other forms of consideration as the Committee shall deem acceptable, such as the surrender of outstanding shares of Common Stock owned by the person exercising the Option or by withholding shares that would otherwise be issued upon the exercise of the Option. If the payment is made by means of the surrender of Restricted Stock, a number of shares issued upon the exercise of the Option equal to the number of shares of Restricted Stock surrendered shall be subject to the same restrictions as the Restricted Stock that was surrendered. The Committee may also authorize the exercise of Options by the delivery to the Company or its designated agent of an irrevocable written notice of exercise form together with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the shares of Common Stock and to deliver the sale or margin loan proceeds directly to the Company to pay the exercise price of the Option.
(c) In the event of the Disability of the Participant, an Option held by the Participant may be exercised (to the extent that the Option is then exercisable) by his or her conservator, agent under durable power of attorney, or trustee of any trust holding the Option.
(d) In the event of the death of the Participant, an Option held by the Participant may be exercised (to the extent that the Option is then exercisable) by his or her administrator, executor, personal representative, or trustee of a trust holding the Option, or other person to whom the Option has been transferred by means of the laws of descent and distribution.
(e) In the event of the Participant's Retirement, all Options which were granted to such Participant at least six (6) months prior to Retirement, whether or not previously exercisable, shall become exercisable immediately.
9. Termination of Options.
(a) Except to the extent the terms of an Option require its prior termination, each Option shall terminate on the earliest of the following dates:
(ii) Except to the extent the terms of an Option permit its later termination, the date that is ninety (90) days from the date of the Severance of the Participant to whom the Option was granted; provided, however, that if the Participant's Severance is as a result of death or the Participant's becoming Disabled, then the date shall be extended to one (1) year from the date of the Severance of the Participant to whom the Option was granted; or
(iii) The date of the Participant's Severance for Cause.
(b) Except to the extent the terms of an Option permit its later termination, notwithstanding the provisions of Paragraph (a) above, in the case of a Participant's Retirement, the Participant's Options will continue to vest for five (5) years following Retirement, and the Participant will be able to exercise his or her Options until the earlier of (i) five (5) years following Retirement or (ii) the date on which the Options would otherwise expire.
(c) Additionally, except to the extent the terms of an Option permit its
later termination, nothwithstanding Paragraphs (a) and (b) of this Section 9 and
Section 20, in the case of a Participant who incurs a Severance other than for
Cause during the 18-month period following a Change in Control, any Option held
by such Participant may thereafter be exercised by the Participant, to the
extent it was exercisable at the time of termination, or on such accelerated
basis as the Committee may determine, for (1) the longer of (a) two years from
such date of Severance or (b) such other period as may be provided in the Plan
for such Severance or as the Committee may provide in the option agreement, or
(2) until expiration of the stated term of such Option, whichever period is
shorter.
10. Reload Options.
(a) In the case of a Participant who pays the exercise price of an Option prior to the date on which it expires by means of surrendering shares of Common Stock previously acquired by the Participant, the Committee may at its discretion grant the Participant another Option ("Reload Option") of the same type (i.e., a non-qualified stock option) as the Option being exercised ("Underlying Option") for the same number of shares that were so surrendered.
(b) The duration of the Reload Option will be for the remaining term of the Underlying Option, and the Exercise Price shall be the Fair Market Value of the Common Stock on the day on which the Underlying Option was exercised.
(c) Reload Options may only be granted to individuals performing services for the Company at the time the Underlying Option is exercised. A Reload Option may not be granted upon the exercise of another Reload Option.
11. Restricted Stock.
(a) The Committee may issue Grants of Restricted Stock upon such terms and conditions as it may deem appropriate, which terms need not be identical for all such Grants.
(b) Restricted Stock may be sold to Participants, or it may be issued to Participants without the receipt of any consideration. If the Participant is required to give any consideration, the payment shall be in the form of cash or such other forms of consideration as the Committee shall deem acceptable, such as the surrender of outstanding shares of Common Stock owned by the Participant.
(c) A Participant shall not have a vested right to the Restricted Stock until the satisfaction of the vesting requirements specified in the Grant.
(d) A Participant may not assign or alienate his or her interest in the shares of Restricted Stock prior to vesting. Otherwise, the Participant shall have all of the rights of a
(e) The following rules apply with respect to events that occur prior to the date on which the Participant obtains a vested right to the Restricted Stock.
(i) Stock dividends issued with respect to the shares covered by a Grant of Restricted Stock shall be treated as additional shares received under the Grant of Restricted Stock.
(ii) Cash dividends are taxable compensation to the Participant that is deductible by the Company.
12. Stock Appreciation Rights.
(a) Stock Appreciation Rights may be granted separately or in conjunction with all or part of an Option granted under the Plan. In the case of an Option, such rights may be granted either at or after the time of the Grant of the Option.
(b) A Stock Appreciation Right that is granted in conjunction with an Option may provide that it may only be exercised when the Option may be exercised.
13. Participant Elections. Pursuant to such rules and procedures as may be prescribed by the Committee, Participants may elect to exchange one type of Grant under the Plan for another type of Grant, and/or enter into other arrangements to defer the receipt of income or items of tax preference that would otherwise be recognized by the Participant under the Plan.
14. [Intentionally Omitted].
15. Bonus Grants and Grants In Lieu Of Compensation. The Committee is authorized to grant shares of Common Stock as a bonus, or to grant shares of Common Stock, Restricted Stock or Options in lieu of Company obligations to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements. Such grants shall be upon such terms and conditions as the Committee may deem appropriate.
16. Modification of Options. The Committee may modify an existing Option, including the right to:
(a) Accelerate the right to exercise it;
(b) Extend or renew it; or
(c) Cancel it and issue a new Option.
However, no modification may be made to an Option that would impair the rights of the Participant holding the Option without his or her consent.
(a) Except to the extent specified in the Grant and as provided in Sections
8(c) and (d), Options are exercisable only by the Participant. Options are not
assignable or transferable except by will or the laws of descent and
distribution. The Committee shall prescribe such rules and procedures as it
deems appropriate regarding the transfer of Options, taking into account the
impact of Section 16 of the Exchange Act, the need to register those shares
under the Securities Act of 1933, and applicable State Blue Sky Laws.
(b) Grants of Restricted Stock and Stock Appreciation Rights shall be subject to such restrictions on transferability as may be imposed in such Grants.
18. Adjustments.
(a) In the event of a stock split, stock dividend, recapitalization, merger, consolidation, split-up, combination, exchange of shares, or similar change affecting Common Stock, the Committee shall authorize such adjustments as it may deem appropriate with respect to:
(i) The number and/or kind of shares covered by each outstanding Option;
(ii) The aggregate number and/or kind of shares for which Options may be granted under this Plan; and
(iii) The exercise price per share in respect of each outstanding Option.
Except as set forth above in this Section 18(a), no issuance by the Company of shares of stock of any class, or securities convertible into, or options or warrants to purchase shares of any class of stock, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to any Grant.
(b) The Committee may also make such adjustments in the event of a spinoff (or other distribution) of Company assets to stockholders, other than normal cash dividends.
19. Effect of Change in Control.
(a) In the event of a Change in Control (as defined in Paragraph (b) below), all Options and Stock Appreciation Rights then outstanding shall become fully exercisable as of the date of the Change in Control and all restrictions and conditions of all Grants of Restricted Stock then outstanding shall be deemed satisfied as of the date of the Change in Control.
(b) A "Change in Control" shall mean:
(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then outstanding shares of common
(ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as through such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(iii) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities
(iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
20. Cancellation of Grants. Except as otherwise provided in the Grant, the Committee may cancel any unexpired, unpaid, or deferred Grant at any time if the Participant does not comply with all of the terms of the Grant and the following conditions.
(a) A Participant shall not render services for any organization or engage directly or indirectly in any business that, in the judgment of the Chief Executive Officer of the Company or other senior officer designated by the Committee, is or becomes competitive with the Company, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company. For Participants whose employment has terminated, the judgment of the Chief Executive Officer shall be based on the Participant's position and responsibilities while employed by the Company, the Participant's post-employment responsibilities and position with the other organization or business, the extent of past, current and potential competition or conflict between the Company and the other organization or business, the effect on the Company's customers, suppliers and competitors of the Participant assuming the post-employment position and such other considerations as are deemed relevant given the applicable facts and circumstances. A Participant who has retired shall be free, however, to purchase as an investment or otherwise, stock or other securities of such organization or business so long as they are listed upon a recognized securities exchange or traded over-the-counter, and such investment does not represent a substantial investment to the Participant or a greater than five percent (5%) equity interest in the organization or business.
(b) A Participant shall not, without prior written authorization from the Company, disclose to anyone outside the Company, or use in other than the Company's business, any confidential information or material, as those terms are used in the Company's Employee Patent and Confidence Agreement, relating to the business of the Company, acquired by the Participant either during or after employment with the Company.
(d) Upon exercise, payment, or delivery pursuant to an Award, the Participant shall certify on a form acceptable to the Committee that he or she is in compliance with the terms and conditions of the Plan. Failure to comply with the provisions of paragraph (a), (b) or (c) of this Section 20 prior to, or during the six (6) months after, any exercise, payment or delivery pursuant to an Award may, at the Committee's discretion, cause such exercise, payment or delivery to be rescinded. The Company shall notify the Participant in writing of any such rescission within two (2) years after such exercise, payment or delivery. Within ten (10) days after receiving such a notice from the Company, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded exercise, payment, or delivery pursuant to an Award. Such payment shall be made either in cash or by returning to the Company the number of shares of Common Stock that the Participant received in connection with the rescinded exercise, payment, or delivery.
21. [Intentionally Omitted.]
22. Amendments and Termination. The Board may at any time amend or terminate this Plan. However, no amendment or termination of the Plan may impair the rights of a Participant holding a Grant without his or her consent.
23. Tax Withholding.
(a) The Company shall have the right to take such actions as may be necessary to satisfy its tax withholding obligations relating to the operation of this Plan.
(b) If Common Stock is used to satisfy the Company's tax withholding obligations, the stock shall be valued at its Fair Market Value when the tax withholding is required to be made.
(c) Notwithstanding any other provision of this Plan, the number of shares of Common Stock otherwise issuable upon the exercise of an Option which may be withheld in order to satisfy the Participant's federal and state income and payroll tax liabilities with respect to the exercise or vesting of the Option shall be limited to the number of shares which have a Fair Market Value equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal and state income tax and payroll tax purposes that are applicable to such supplemental taxable income.
24. No Additional Rights.
(a) Neither the adoption of this Plan nor the granting of any Option or Restricted Stock shall:
(ii) Confer upon any Participant the right to continue performing services for the Company, nor shall it interfere in any way with the right of the Company to terminate the services of any Participant at any time, with or without cause.
(b) No Participant shall have any rights as a stockholder with respect to any shares covered by a Grant until the date a certificate for such shares has been issued to the Participant following the exercise of an Option or the receipt of Restricted Stock.
25. Securities Law Restrictions.
(a) No securities shall be issued under this Plan unless the Committee shall be satisfied that the issuance will be in compliance with applicable federal and state securities laws.
(b) The Committee may require certain investment (or other) representations and undertakings in connection with the issuance of securities in connection with the Plan in order to comply with applicable law.
(c) Certificates for shares of Common Stock delivered under this Plan may be subject to such restrictions as the Committee may deem advisable. The Committee may cause a legend to be placed on the certificates to refer to those restrictions.
26. Indemnification. To the maximum extent permitted by law, the Company shall indemnify each member of the Committee and of the Board, as well as any other Employee of the Company with duties under this Plan, against expenses (including any amount paid in settlement) reasonably incurred by the individual in connection with any claims against the individual by reason of the performance of the individual's duties under this Plan, unless the losses are due to the individual's gross negligence or lack of good faith. The Company will have the right to select counsel and to control the prosecution or defense of the suit. The Company will not be required to indemnify any person for any amount incurred through any settlement unless the Company consents in writing to the settlement.
27. Governing Law. This Plan and all actions taken hereunder shall be governed by and construed in accordance with the laws of the State of Delaware.
************************************
To signify its adoption of this Plan, the Company has caused its execution.
Mattel, Inc., a Delaware Corporation
/s/ Alan Kaye -------------------------------------- Senior Vice President, Human Resources |
Date: November 4, 1999
This is an Option Agreement between Mattel, Inc. (the "Company") and the individual (the "Option Holder") named in the Notice of Grant of Stock Option (the "Notice) attached hereto as the cover page of this agreement.
Recitals
The Company has adopted the Mattel 1999 Stock Option Plan (the "Plan") for the granting to selected employees of options to purchase shares of Common Stock of the Company. In accordance with the terms of the Plan, the Compensation/Options Committee of the Board of Directors (the "Committee"), has approved the execution of this Grant Agreement (the "Option") between the Company and the Option Holder. Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Plan.
Option
1. Terms. The Company grants to the Option Holder the right and option to purchase on the terms and conditions hereinafter set forth, all or any part of the aggregate number of shares set forth in the Notice of Common Stock exercisable in accordance with the provisions of this Option during a period expiring ten years from the date of the Notice (the "Expiration Date"), unless terminated prior to that date pursuant to Section 5 or 6 below. This Option is a Non-Qualified Stock Option.
2. Exercisability (Vesting). The Option Holder may purchase the following percentages of the shares of Common Stock set forth in the Notice on or after the dates set forth below; provided that the Option Holder is employed by the Company or one of its Subsidiaries on the applicable vesting date:
Percent of Shares
Commencing on the Date of this Option Subject to this Option
that may be Purchased
==============================================================================================
On and Before First Anniversary 0%
----------------------------------------------------------------------------------------------
After the First Anniversary 50%
----------------------------------------------------------------------------------------------
After the Second Anniversary and Until the Expiration Date 100%
==============================================================================================
|
3. Method of Exercising. Each exercise of this Option shall be by means of a written notice of exercise delivered to the office of the Secretary of the Company, specifying the number of whole shares to be purchased, accompanied by payment of the full purchase price of the shares to be purchased. The payment shall be in the form of cash or such other forms of consideration as the Committee shall deem acceptable, such as the surrender of outstanding shares of Common Stock owned by the Option Holder or by withholding shares that would otherwise be issued upon the exercise of the Option. The Option Holder may exercise this Option by the delivery to the Company or its designated agent of an irrevocable written notice of exercise form together with irrevocable instructions to the broker-dealer to sell or margin a sufficient portion of the shares of Common Stock and to deliver the sale or margin loan proceeds directly to the Company to pay the exercise price of this Option.
4. Withholding. Upon exercise, the Option Holder shall pay, or make provisions satisfactory to the Company or its Subsidiary for payment of any federal, state and local taxes required to be withheld.
5. Cancellation of Grants. Option Holder specifically acknowledges that this Option is subject to the provisions of Section 20 of the plan, entitled "Cancellation of Grants," which can cause the forfeiture of this Option, or the rescission of Common Stock acquired upon the exercise of this Option. As a condition of the exercise of this Option, the Option Holder shall certify on a form acceptable to the Committee that he or she is in compliance with the terms and conditions of the plan, including Section 20 thereof, entitled "Cancellation of Grants."
6. Term. Any portion of this Option that is not exercisable pursuant to
i. If the Option Holder's employment is terminated by reason of death, the heirs of the Option Holder will be able to exercise this Option until the earlier of (a) one (1) year following the death of the Optionee or (b) the date on which this Option would otherwise expire.
7. Compliance with Law. No shares issuable upon the exercise of this Option shall be issued and delivered unless and until all applicable registration requirements of the Securities Act of 1933, all applicable listing requirements of any national securities exchange on which the Common Stock is then listed, and all other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery, shall have been complied with. In particular, the Committee may require certain investment (or other) representations and undertakings in connection with the issuance of securities in connection with the Plan in order to comply with applicable law.
8. Assignability. Except as may be effected by will or by the laws of descent and distribution, any attempt to assign this Option shall be of no effect.
9. Certain Corporate Transactions. In the event of any change in the Common Stock by reason of a stock split, stock dividend, combination or reclassification of shares, recapitalization, merger, or similar event the Committee may adjust proportionately the number of shares and the stock price of the Common Stock subject to this Option. In the event of any other change affecting the Common Stock or any distribution (other than normal cash dividends) to holders of Common Stock, the Committee may make such adjustments as it may deem equitable (including adjustments to avoid fractional shares) in order to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property or stock, spin-off, reorganization or liquidation, the Committee may substitute a new option for this Option or provide for the assumption of this Option by the other corporation that is a party to the transaction.
10. No Additional Rights. Neither the granting of this Option nor its exercise shall (a) confer upon the Option Holder any right to continue in the employ of the Company (b) interfere in any way with the rights of the Company or a Subsidiary to terminate such employment at any time for any reason, with or without cause, or (c) interfere with the right of the Company or a Subsidiary to undertake any lawful corporate action. Option Holder acknowledges that he or she is an "employee at will." The provisions of this Section 10 are subject to the terms of any employment agreement between the Option Holder and the Company (or a Subsidiary).
11. Rights as a Stockholder. Neither the Option Holder nor any other person legally entitled to exercise this Option shall be entitled to any of the rights or privileges of a stockholder of the Company in respect of any shares issuable upon any
12. Compliance with Plan. This Option is subject to, and the Company and Option Holder agree to be bound by, all of the terms and conditions of the Plan as it shall be amended from time-to-time. No amendment to the plan shall adversely affect this Option without the consent of the Option Holder. In the case of a conflict between the terms of the Plan and this Option, the terms of the Plan shall govern.
13. Governing Law. This Option has been granted, executed and delivered with effect from the date of Notice, at El Segundo, California, and interpretation, performance and enforcement of this Option shall be governed by the laws of the State of Delaware.
This is an Option Agreement between Mattel, Inc. (the "Company") and the individual (the "Option Holder") named in the Notice of Grant of Stock Option (the "Notice) attached hereto as the cover page of this agreement.
Recitals
The Company has adopted the Mattel 1999 Stock Option Plan (the "Plan") for the granting to selected employees of options to purchase shares of Common Stock of the Company. In accordance with the terms of the Plan, the Compensation/Options Committee of the Board of Directors (the "Committee"), has approved the execution of this Grant Agreement (the "Option") between the Company and the Option Holder. Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Plan.
Option
1. Terms. The Company grants to the Option Holder the right and option to purchase on the terms and conditions hereinafter set forth, all or any part of the aggregate number of shares set forth in the Notice of Common Stock exercisable in accordance with the provisions of this Option during a period expiring ten years from the date of the Notice (the "Expiration Date"), unless terminated prior to that date pursuant to Section 5 or 6 below. This Option is a Non-Qualified Stock Option.
2. Exercisability (Vesting). The Option Holder may purchase the following percentages of the shares of Common Stock set forth in the Notice on or after the dates set forth below; provided that the Option Holder is employed by the Company or one of its Subsidiaries on the applicable vesting date:
Percent of Shares
Commencing on the Date of this Option Subject to this Option
that may be Purchased
=================================================================================================================
After the First 6 months 10%
-----------------------------------------------------------------------------------------------------------------
After the First year 10%
-----------------------------------------------------------------------------------------------------------------
After each 6 months thereafter 20%
-----------------------------------------------------------------------------------------------------------------
Fully vested after 3 years
=================================================================================================================
|
3. Method of Exercising. Each exercise of this Option shall be by means of a written notice of exercise delivered to the office of the Secretary of the Company, specifying the number of whole shares to be purchased, accompanied by payment of the full purchase price of the shares to be purchased. The payment shall be in the form of cash or such other forms of consideration as the Committee shall deem acceptable, such as the surrender of outstanding shares of Common Stock owned by the Option Holder or by withholding shares that would otherwise be issued upon the exercise of the Option. The Option Holder may exercise this Option by the delivery to the Company or its designated agent of an irrevocable written notice of exercise form together with irrevocable instructions to the broker-dealer to sell or margin a sufficient portion of the shares of Common Stock and to deliver the sale or margin loan proceeds directly to the Company to pay the exercise price of this Option.
4. Withholding. Upon exercise, the Option Holder shall pay, or make provisions satisfactory to the Company or its Subsidiary for payment of any federal, state and local taxes required to be withheld.
5. Cancellation of Grants. Option Holder specifically acknowledges that this Option is subject to the provisions of Section 20 of the plan, entitled "Cancellation of Grants," which can cause the forfeiture of this Option, or the rescission of Common Stock acquired upon the exercise of this Option. As a condition of the exercise of this Option, the Option Holder shall certify on a form acceptable to the Committee that he or she is in compliance with the terms and conditions of the plan, including Section 20 thereof, entitled "Cancellation of Grants."
6. Term. Any portion of this Option that is not exercisable pursuant to
i. If the Option Holder's employment is terminated by reason of death, the heirs of the Option Holder will be able to exercise this Option until the earlier of (a) one (1) year following the death of the Optionee or (b) the date on which this Option would otherwise expire.
7. Compliance with Law. No shares issuable upon the exercise of this Option shall be issued and delivered unless and until all applicable registration requirements of the Securities Act of 1933, all applicable listing requirements of any national securities exchange on which the Common Stock is then listed, and all other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery, shall have been complied with. In particular, the Committee may require certain investment (or other) representations and undertakings in connection with the issuance of securities in connection with the Plan in order to comply with applicable law.
8. Assignability. Except as may be effected by will or by the laws of descent and distribution, any attempt to assign this Option shall be of no effect.
9. Certain Corporate Transactions. In the event of any change in the Common Stock by reason of a stock split, stock dividend, combination or reclassification of shares, recapitalization, merger, or similar event the Committee may adjust proportionately the number of shares and the stock price of the Common Stock subject to this Option. In the event of any other change affecting the Common Stock or any distribution (other than normal cash dividends) to holders of Common Stock, the Committee may make such adjustments as it may deem equitable (including adjustments to avoid fractional shares) in order to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property or stock, spin-off, reorganization or liquidation, the Committee may substitute a new option for this Option or provide for the assumption of this Option by the other corporation that is a party to the transaction.
10. No Additional Rights. Neither the granting of this Option nor its exercise shall (a) confer upon the Option Holder any right to continue in the employ of the Company (b) interfere in any way with the rights of the Company or a Subsidiary to terminate such employment at any time for any reason, with or without cause, or (c) interfere with the right of the Company or a Subsidiary to undertake any lawful corporate action. Option Holder acknowledges that he or she is an "employee at will." The provisions of this Section 10 are subject to the terms of any employment agreement between the Option Holder and the Company (or a Subsidiary).
11. Rights as a Stockholder. Neither the Option Holder nor any other person legally entitled to exercise this Option shall be entitled to any of the rights or privileges of a stockholder of the Company in respect of any shares issuable upon any exercises of this Option unless and until a certificate or certificates representing such shares shall have been actually issued and delivered to the Option Holder.
13. Governing Law. This Option has been granted, executed and delivered with effect from the date of Notice, at El Segundo, California, and interpretation, performance and enforcement of this Option shall be governed by the laws of the State of Delaware.
For The Year Ended(a)(b)
-------------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1997 1996 1995
-------- -------- --------- -------- --------
BASIC
Income (loss) before
extraordinary item......... $(82,373) $206,053 $(178,111) $ 21,962 $308,997
Deduct: Dividends on
convertible preferred
stock..................... (3,980) (7,960) (10,505) (7,391) (3,200)
Dividends on convertible
preference stock........ -- -- -- -- (3,342)
-------- -------- --------- -------- --------
Income (loss) before
extraordinary item for
computation of income per
share...................... (86,353) 198,093 (188,616) 14,571 302,455
Extraordinary item.......... -- -- (4,610) -- --
-------- -------- --------- -------- --------
Net income (loss) applicable
to common shares........... $(86,353) $198,093 $(193,226) $ 14,571 $302,455
======== ======== ========= ======== ========
Applicable Shares for
Computation of Income
(Loss) per Share:
Weighted average common
shares outstanding........ 414,186 390,210 369,870 359,209 342,363
======== ======== ========= ======== ========
Basic Income (Loss) Per
Common Share:
Net income (loss) per
common share before
extraordinary item........ $ (0.21) $ 0.51 $ (0.51) $ 0.04 $ 0.88
Extraordinary item......... -- -- (0.01) -- --
-------- -------- --------- -------- --------
Net income (loss) per
common share.............. $ (0.21) $ 0.51 $ (0.52) $ 0.04 $ 0.88
======== ======== ========= ======== ========
|
For The Year Ended(a)(b)
-------------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1997 1996 1995
-------- -------- --------- -------- --------
DILUTED
Income (loss) before
extraordinary item......... $(82,373) $206,053 $(178,111) $ 21,962 $308,997
Deduct:
Dividends on convertible
preferred stock........... (3,980) (7,960) (10,505) (7,391) (3,200)
Impact of required ESOP
dividends or contributions
upon conversion........... -- -- -- -- (3,342)
-------- -------- --------- -------- --------
Income (loss) before
extraordinary item for
computation of income per
share...................... (86,353) 198,093 (188,616) 14,571 302,455
Extraordinary item.......... -- -- (4,610) -- --
-------- -------- --------- -------- --------
Net income (loss) applicable
to common shares........... $(86,353) $198,093 $(193,226) $ 14,571 $302,455
======== ======== ========= ======== ========
Applicable Shares for
Computation of Income
(Loss) Per Share:
Weighted average common
shares outstanding........ 414,186 390,210 369,870 359,209 342,363
Weighted average common
equivalent shares arising
from:
Dilutive stock options..... -- 8,501 -- 7,292 5,924
Assumed conversion of
convertible preferred
stock..................... -- 18,000 -- -- --
Assumed conversion of
notes..................... -- -- -- 64 --
Stock subscription and
other warrants............ -- 4,812 -- 1,029 1,046
Nonvested stock............ -- 184 -- 603 507
-------- -------- --------- -------- --------
Weighted average number of
common and common
equivalent shares......... 414,186 421,707 369,870 368,197 349,840
======== ======== ========= ======== ========
Diluted Income (Loss) Per
Common Share:
Net income (loss) per
common share before
extraordinary item........ $ (0.21) $ 0.47 $ (0.51) $ 0.04 $ 0.86
Extraordinary item......... -- -- (0.01) -- --
-------- -------- --------- -------- --------
Net income (loss) per
common share.............. $ (0.21) $ 0.47 $ (0.52) $ 0.04 $ 0.86
======== ======== ========= ======== ========
|
For The Years Ended December 31, (a)(b)
-----------------------------------------------------
1999 1998 1997 1996 1995
--------- -------- -------- -------- --------
EARNINGS AVAILABLE FOR
FIXED CHARGES:
Income (loss) before
income taxes,
cumulative effect of
changes in accounting
principles and
extraordinary items.... $(110,743) $391,632 $ 1,216 $188,898 $506,243
Less (plus) minority
interest and
undistributed income
(loss) of less-than-
majority-owned
affiliates, net........ 145 (165) (144) 303 (36)
Add:
Interest expense....... 151,609 128,468 112,612 126,929 108,298
Appropriate portion of
rents (c)............. 17,070 18,994 21,007 21,814 21,155
--------- -------- -------- -------- --------
Earnings available for
fixed charges.......... $ 58,081 $538,929 $134,691 $337,944 $635,660
========= ======== ======== ======== ========
FIXED CHARGES:
Interest expense........ $ 151,609 $128,468 $112,612 $126,929 $108,298
Capitalized interest.... 527 993 991 1,789 693
Appropriate portion of
rents (c).............. 17,070 18,994 21,007 21,814 21,155
--------- -------- -------- -------- --------
Fixed charges........... $ 169,206 $148,455 $134,610 $150,532 $130,146
========= ======== ======== ======== ========
Ratio of earnings to
fixed charges.......... 0.34 X 3.63 X 1.00 X 2.24 X 4.88 X
========= ======== ======== ======== ========
|
For The Years Ended December 31, (a)(b)
----------------------------------------------------
1999 1998 1997 1996 1995
--------- -------- -------- -------- --------
EARNINGS AVAILABLE FOR
FIXED CHARGES:
Income (loss) before
income taxes,
cumulative effect of
changes in accounting
principles and
extraordinary items.... $(110,743) $391,632 $ 1,216 $188,898 $506,243
Less (plus) minority
interest and
undistributed income
(loss) of less-than-
majority-owned
affiliates, net........ 145 (165) (144) 303 (36)
Add:
Interest expense....... 151,609 128,468 112,612 126,929 108,298
Appropriate portion of
rents (c)............. 17,070 18,994 21,007 21,814 21,155
--------- -------- -------- -------- --------
Earnings available for
fixed charges.......... $ 58,081 $538,929 $134,691 $337,944 $635,660
========= ======== ======== ======== ========
FIXED CHARGES:
Interest expense........ $ 151,609 $128,468 $112,612 $126,929 $108,298
Capitalized interest.... 527 993 991 1,789 693
Dividends--Series B
preferred stock........ -- -- 2,537 3,406 3,200
Dividends--Series C
preferred stock........ 3,980 7,960 7,968 3,985 --
Dividends--Series F
preference stock....... -- -- -- -- 3,342
Appropriate portion of
rents (c).............. 17,070 18,994 21,007 21,814 21,155
--------- -------- -------- -------- --------
Fixed charges........... $ 173,186 $156,415 $145,115 $157,923 $136,688
========= ======== ======== ======== ========
Ratio of earnings to
fixed charges.......... 0.34 X 3.45 X 0.93 X 2.14 X 4.65 X
========= ======== ======== ======== ========
|
Percentage of
Voting Securities
Owned Directly or
Jurisdiction in Indirectly
Subsidiaries/1/ Which Organized By Parent/2/
--------------- --------------- -----------------
American Girl Music Incorporated.............. Wisconsin 100%
American Girl Place Incorporated.............. Wisconsin 100%
American Girls Productions Incorporated....... Wisconsin 100%
ARCOTOYS, Inc................................. Delaware 100%
Broderbund Software, Inc...................... Delaware 100%
Parsons Technology, Inc...................... California 100%
Far West Insurance Company, Limited........... Bermuda 100%
Fisher-Price, Inc............................. Delaware 100%
Mabamex, S.A. de C.V.......................... Mexico 100%
Mattel Argentina S.A.......................... Argentina 100%
Mattel Bangkok Limited........................ Thailand 80%
Mattel Belgium N.V............................ Belgium 100%
Mattel do Brasil Ltda......................... Brazil 100%
Mattel Chile S.A.............................. Chile 100%
Mattel Colombia S.A........................... Colombia 100%
Mattel Design Services, Inc................... Delaware 100%
Mattel Direct, Inc............................ Delaware 100%
Mattel Distribution, Inc...................... Delaware 100%
Mattel East Asia Limited...................... Hong Kong 100%
Mattel Toys (India) Private Limited.......... India 100%
Mattel Espana, S.A............................ Spain 100%
Mattel Factoring, Inc......................... Delaware 100%
Mattel (HK) Limited........................... Hong Kong 100%
Mattel Holding, Inc........................... Delaware 100%
Mattel U.K. Limited.......................... U.K. 100%
Mattel Tyco (UK) Ltd........................ U.K. 100%
Mattel Acquisitions plc..................... U.K. 100%
Bluebird Toys plc.......................... U.K. 100%
Bluebird Toys (UK) Limited................ U.K. 100%
Matchbox Collectibles (Europe) Ltd.......... U.K. 100%
Mattel Group PLC............................ U.K. 100%
J.W. Spear & Sons PLC...................... U.K. 100%
Mattel Holdings Limited....................... Canada 100%
Mattel Canada Inc............................ Canada 100%
Mattel I., Inc................................ Delaware 100%
Mattel S.r.l................................. Italy 100%
Mattel A.E.B.E.............................. Greece 100%
Mattel A.G.................................. Switzerland 100%
Mattel Manufacturing Europe, S.r.l.......... Italy 100%
Mattel International Holdings B.V............. The Netherlands 100%
Mattel Europe Holdings B.V................... The Netherlands 100%
Mattel G.m.b.H.............................. Germany 100%
Mattel Manufacturing East Europe S.R.O...... Czech Republic 100%
Mattel Europa B.V........................... The Netherlands 100%
|
Percentage of
Voting Securities
Owned Directly or
Jurisdiction in Indirectly
Subsidiaries/1/ Which Organized By Parent/2/
--------------- --------------- -----------------
Nanhai City Mattel Diecast Ltd........... China 100%
Mattel B.V............................... The Netherlands 100%
P.T. Mattel Indonesia.................... Indonesia 100%
Mattel France S.A......................... France 100%
Corolle S.A.............................. France 100%
Mattel Portugal Limitada................ Portugal 100%
Mattel Gesellschaft m.b.H................. Austria 100%
Mattel Northern Europe.................... Denmark 100%
Mattel Japan Limited........................ Japan 100%
Mattel (K.L.) Sdn.Bhd....................... Malaysia 100%
Mattel (Malaysia) Sdn.Bhd................... Malaysia 100%
Mattel Manufacturas de Monterrey, S.A. de
C.V........................................ Mexico 100%
Mattel Media, Inc........................... Delaware 100%
Mattel de Mexico, S.A. de C.V............... Mexico 100%
Mattel Servicios, S.A. de C.V.............. Mexico 100%
Mattel (NZ) Limited......................... New Zealand 100%
Mattel Operations, Inc...................... Delaware 100%
Mattel Overseas, Inc........................ California 100%
Mattel Asia Pacific Sourcing Limited....... Hong Kong 100%
Mattel Vendor Operations Asia Limited...... Hong Kong 100%
Tyco Hong Kong Ltd......................... Hong Kong 100%
Mattel Peru, S.A............................ Peru 100%
Mattel Pty. Limited......................... Australia 100%
Mattel Realty Corporation................... Delaware 100%
Mattel Sales Corp........................... California 100%
Mattel Southeast Asia Pte. Ltd.............. Singapore 100%
Mattel Specialty, Inc....................... Delaware 100%
Mattel Tools Sdn.Bhd........................ Malaysia 100%
Mattel Taiwan Corporation................... Taiwan 100%
Mattel de Venezuela, C.A.................... Venezuela 100%
Mattel.com, Inc............................. Delaware 100%
Mindscape Holdings, Inc..................... Delaware 100%
Mindscape, Inc............................. Delaware 100%
Mindscape International Pty. Ltd........... Australia 100%
Montoi S.A. de C.V.......................... Mexico 100%
Pleasant Company............................ Wisconsin 100%
Pleasant Company Publications............... Wisconsin 100%
Pleasant Company Productions................ Wisconsin 100%
Precision Moulds Limited.................... Hong Kong 100%
Softkey Holding GmbH........................ Germany 100%
TLC The Learning Company Deutschland GmbH.. Germany 100%
Softkey Holdings Corporation................ Canada 100%
Softkey Software Products Inc.............. Canada 100%
Softkey Holdings SARL....................... France 100%
TLC Edusoft SA............................. France 100%
The Learning Company Asia Pacific Pty.
Limited.................................... Australia 100%
|
Percentage of
Voting Securities
Owned Directly or
Jurisdiction in Indirectly
Subsidiaries/1/ Which Organized By Parent/2/
--------------- --------------- -----------------
The Learning Company Holland B.V............. The Netherlands 100%
The Learning Company (Ireland) Limited....... Ireland 100%
The Learning Company, K.K.................... Japan 100%
The Learning Company (UK) Limited............ U.K. 100%
TLC Multimedia Inc........................... Minnesota 100%
Tyco Toys (Europe) N.V....................... Belgium 100%
|
We hereby consent to the incorporation by reference in each of the twelve Registration Statements on Form S-8 (No. 33-14717, No. 33-51454, No. 33-34920, No. 33-57082, No. 33-62185, No. 333-01061, No. 333-03385, No. 333-47459, No. 333-47461, No. 333-67493, No. 333-75145 and No. 333-79099), and in the Prospectuses constituting part of the Registration Statements on Form S-3 (No. 333-68017 and No. 333-73177), and in the Prospectus constituting part of the Registration Statement on Form S-4 (No. 333-71587) of Mattel, Inc. and its subsidiaries of our report dated February 2, 2000 relating to the financial statements and financial statement schedule which appears in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
-------------------------------------
PricewaterhouseCoopers LLP
|
Los Angeles, California
March 10, 2000
ARTICLE 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM MATTEL, INC.'S
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
MULTIPLIER: 1,000
PERIOD TYPE: YEAR
FISCAL YEAR END
DEC 31 1999
PERIOD START
JAN 1 1999
PERIOD END
DEC 31 1999
CASH
275,024
SECURITIES
0
RECEIVABLES
1,499,240
ALLOWANCES
229,235
INVENTORY
544,296
CURRENT ASSETS
2,420,027
PP&E
1,223,520
DEPRECIATION
474,026
TOTAL ASSETS
5,127,022
CURRENT LIABILITIES
1,817,524
BONDS
1,183,835
PREFERRED MANDATORY
0
PREFERRED
0
COMMON
433,563
OTHER SE
1,529,124
TOTAL LIABILITY AND EQUITY
5,127,022
SALES
5,514,950
TOTAL REVENUES
5,514,950
CGS
2,913,910
TOTAL COSTS
2,913,910
OTHER EXPENSES
2,560,174
LOSS PROVISION
0
INTEREST EXPENSE
151,609
INCOME PRETAX
(110,743)
INCOME TAX
(28,370)
INCOME CONTINUING
(82,373)
DISCONTINUED
0
EXTRAORDINARY
0
CHANGES
0
NET INCOME
(82,373)
EPS BASIC
(0.21)
EPS DILUTED
(0.21)