EXHIBIT 4.6
THIS WARRANT IS NON-TRANSFERABLE OTHER THAN TO THE WALT DISNEY COMPANY OR ANY OF
ITS DIRECTLY OR INDIRECTLY WHOLLY-OWNED SUBSIDIARIES PRIOR TO THE COMMENCEMENT
DATE (AS DEFINED HEREIN). THIS WARRANT CONTAINS CERTAIN ADDITIONAL RESTRICTIONS
ON ITS TRANSFER AND EXERCISE ON AND SUBSEQUENT TO THE COMMENCEMENT DATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION
THEREFROM. THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF THE
HOLDER HEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER
RESTRICTIONS, AND THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
(INCLUDING ANY FUTURE HOLDER) IS BOUND BY THE TERMS OF A WARRANT PURCHASE
AGREEMENT BETWEEN THE ORIGINAL PURCHASER AND THE COMPANY (COPIES OF WHICH MAY
BE OBTAINED FROM THE COMPANY).
WARRANT TO PURCHASE 3,000,000 SHARES OF COMPANY STOCK OF
MATTEL, INC.
This certifies that the holder hereof (the "Holder"), for value received is
------
entitled to purchase from Mattel, Inc., a Delaware corporation (the "Company"),
-------
three million (3,000,000) fully paid and nonassessable shares (the "Warrant
-------
Shares") of the Company's Common Stock, par value $1.00 per share (the "Common
- ------ ------
Stock"), at a price of $27.375 per share (the "Stock Purchase Price") (such
- ----- --------------------
price determined as the closing price for the Company's Common Stock on the New
York Stock Exchange on Apri 1, 1996, the date specified by the Company and
Purchaser upon their execution of that certain letter of intent with respect to
- ---------
the transactions contemplated by the Warrant Purchase Agreement between the
Company and Purchaser dated June 27, 1996 (the "Warrant Purchase Agreement") and
--------------------------
the License Agreement referred to therein), at any time on or after the
-----------------
Commencement Date (as defined below) up to and including 5:00 p.m. (Pacific
time) on the Expiration Date (as defined below), upon surrender to the Company
at its principal offices at 333 Continental Boulevard, El Segundo, California
90245 (or at such other location as the Company may advise the Holder in
writing) of this Warrant properly endorsed with the Form of Subscription
attached hereto duly completed and signed and either (a) upon payment by wire
transfer of immediately available funds of the aggregate Stock Purchase Price
for the Warrant Shares or (b) at the election of the Holder (such election
referred to herein as "Cashless Exercise" of this Warrant), as provided for in
-------- --------
Section 1(B) below. The exercise of this Warrant is hereby expressly conditioned
upon the accuracy of all representations and warranties contained in such Form
of Subscription. The Stock Purchase Price and the number of shares purchasable
hereunder are subject to adjustment as provided in Section 3 of this Warrant.
"Commencement Date" shall mean April 2, 1999, whether or not a business day.
-----------------
"Expiration Date" shall mean April 2, 2004 (or, in the event that April 2, 2004
---------------
is not a business day, the next succeeding business day); provided, however,
that if the Company's use of the rights granted under the License Agreement is
not extended for three years from its initial term, in accordance with the
provisions of Subparagraph 1(R) of the License Agreement, then the "Expiration
Date" for this Warrant shall mean April 2, 2001 (or, in the event that April 2,
2001 is not a business day, the next succeeding business day); and provided,
further, that if the Company's use of the rights granted under the License
Agreement is extended for five years from its initial term, in accordance with
the provisions of Subparagraph
1
2(K) of the License Agreement, then the "Expiration Date" for this Warrant shall
mean April 2, 2006 (or, in the event that April 2, 2006 is not a business day,
the next succeeding business day); and provided, further, the "Expiration Date",
as so established, with respect to the exercise of this Warrant for Registrable
Securities, may be extended for up to the specified number of additional days
pursuant to the provisions of Section 5(E)(iii) of the Warrant Purchase
Agreement. Notwithstanding the above, this Warrant shall terminate immediately
in the event that the License Agreement has been terminated by the Company as a
result of a material breach by Purchaser. Termination by Purchaser as a result
of a material breach by the Company shall not result in termination of the
Warrant.
At any time prior to the Expiration Date, at the election of the Holder
hereof, this Warrant, which represents the Holder's right to purchase three
million (3,000,000) fully-paid and non-assessable shares of the Company's Common
Stock at the Stock Purchase Price (the "Original Warrant"), may be divided into
two equal Warrants (each, a "One-half Warrant"), each One-half Warrant
----------------
representing the right to purchase one and one-half million (1,500,000) fully-
paid and non-assessable shares of the Company's Common Stock at the Stock
Purchase Price. Except for such number of shares issuable upon exercise thereof,
each One-half Warrant shall have the same terms and provisions, and be subject
to the same conditions, notice provisions and restrictions on exercise and
transfer, and be identical in all other respects, to the Original Warrant. From
and after the time the Original Warrant becomes divided into two One-half
Warrants, all references herein and in the Warrant Purchase Agreement (as
defined below) to (x) the "Holder" of this Warrant shall be deemed to refer to
the rightful holder of each One-half Warrant and (y) this "Warrant" shall be
deemed to refer to each One-half Warrant.
This Warrant (or One-half Warrant, as the case may be) may only be
exercised as a whole and may not be exercised in part or from time to time.
This Warrant is issued pursuant to, and subject of the provisions of, the
Warrant Purchase Agreement and, by its acceptance of this Warrant, the Holder
expressly agrees to comply with the provisions of the Warrant Purchase Agreement
applicable to this Warrant (including, without limitation, the provisions
contained in Section 5(C) relating to subsequent transfers of this Warrant and
in Section 5 (E) relating to the exercise procedure applicable to this Warrant).
Terms used but not defined in this Warrant shall have the respective meanings
assigned to them in the Warrant Purchase Agreement, to which reference is
hereby made.
This Warrant is subject to the following further terms and conditions:
1. Exercise.
(A) Exercise Procedure; Issuance of Certificates; Payment for Shares.
This Warrant is exercisable at the option of the Holder at any time on or after
the Commencement Date and prior to or on the Expiration Date for the Warrant
Shares which may be purchased hereunder. The Company agrees that the Warrant
Shares purchased under this Warrant shall be and are deemed to be issued to the
Holder as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been surrendered and payment made for such
shares. Subject to the provisions of Section 2 hereof, certificates for the
Warrant Shares to be purchased, together with any other securities or property
to which the Holder is entitled upon such exercise, shall be delivered to the
Holder by the Company's transfer agent at the Company's expense within a
reasonable time after the rights represented by this Warrant have been
exercised. Each stock certificate so delivered shall be in such denominations of
Warrant Shares as may be requested by the Holder and shall be registered in the
name of the Holder.
2
The Holder further agrees to comply with the provisions of Section
5(E) of the Warrant Purchase Agreement respecting any proposed exercise of this
Warrant.
(B) Cashless Exercise of this Warrant. The Holder may, at its
election, exercise its right to receive shares of Common Stock on a net basis
such that, without the exchange of any funds and upon surrender of this
Warrant, the Holder receives shares of Common Stock equal to the value (as
determined below) of this Warrant by surrender of this Warrant to the Company at
its principal offices (at the above address) together with notice of such
election, in which event the Company shall issue to the Holder a number of
shares of Common Stock computed using the following formula:
X = Y x (A-B)
---------
A
where:
X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock subject to this
Warrant
A = the market price of a share of Common Stock for the date
of exercise (the market price determined, for any date, as the average of the
closing prices of the Common Stock on the New York Stock Exchange (or such other
principal securities exchange or automated quotation system upon which the
Common Stock may then be listed for public trading) for the five immediately
preceding trading days on such exchange)
B = the then current Stock Purchase Price
2. Shares to be Fully Paid; Reservation of Shares. The Company covenants
and agrees that all Warrant Shares which may be issued upon the exercise of this
Warrant will, upon issuance, be validly issued, fully paid and nonassessable and
free from all preemptive or any similar rights of any stockholder of the Company
and free of any liens or encumbrances arising through the Company. The Company
further covenants and agrees that during the period within which this Warrant
may be exercised the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of this Warrant, a sufficient
number of authorized but unissued shares of Common Stock, when and as required
to provide for the exercise of the rights represented by this Warrant. The
Company will take all such action as may be necessary to assure that such shares
of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange or automated quotation system upon which the Common Stock may be
listed.
3. Adjustment of Stock Purchase Price; Number of Shares. The Stock Purchase
Price and the number of Warrant Shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3; provided, however, that if a certain
event shall cause the Stock Purchase Price to be adjusted to a price less than
the par value of the Common Stock, the Company prior to such event shall
decrease the par value of the Common Stock so that the Stock Purchase Price
shall not be less than the par value of the Common Stock following the
occurrence of such event.
(A) Adjustment of Purchase Price. In the event that the Company at any
time or from time to time after the issuance of this Warrant shall declare or
pay, without consideration, any dividend on the Common Stock payable in Common
Stock or in any right to acquire Common Stock for no consideration, or shall
effect a subdivision of the outstanding shares of
3
Common Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Stock
Purchase Price in effect immediately prior to such event shall, concurrently
with the effectiveness of such event, be proportionately decreased or
increased, as appropriate. In the event that the Company shall declare or pay,
without consideration, any dividend on the Common Stock payable in any right to
acquire Common Stock for no consideration, then the Company shall be deemed to
have made a dividend payable in Common Stock in an amount of shares equal to the
maximum number of shares issuable upon exercise of such rights to acquire Common
Stock. Upon each adjustment of the Stock Purchase Price pursuant to this Section
3(A), the Holder of this Warrant shall thereafter be entitled to purchase, at
the Stock Purchase Price resulting from such adjustment, the number of shares of
Common Stock obtained by multiplying the Stock Purchase Price in effect
immediately prior to such adjustment by the number of shares of COmmon Stock
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Stock Purchase Price resulting from such adjustment.
(B) Adjustment for Reorganization, Reclassification, Consolidation,
Merger or Sale. If any capital reorganization or reclassification of the
capital stock of the Company, or any consolidation or merger of the Company
with another corporation, or the sale of all or substantially all of its assets
to another corporation shall be effected (other than as provided for in Section
3(A)) in such a way that holders of Common Stock shall be entitled to receive
cash, stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions shall be made
whereby the Holder shall thereafter have the right to purchase and receive upon
the basis and upon the terms and conditions specified in this Warrant upon
exercise of this Warrant and in lieu of the shares of the Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby, such cash, shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of Common Stock equal to the number of shares of such Common
Stock immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby, and in any such case appropriate provision shall
be made with respect to the rights and interest of the Holder that the
provisions thereof shall hereafter be applicable, as nearly as may be, in
relation to any shares of cash, stock, securities or assets thereafter
deliverable upon the exercise hereof.
(C) Notice of Adjustment. Upon any adjustment of the Stock Purchase
Price or any increase or decrease in the number of shares of Common Stock
purchasable upon the exercise this Warrant, the Company shall within ten
business days give written notice thereof, by first class mail, postage prepaid,
addressed to the Holder at the address of the Holder as shown on the books of
the Company. The notice shall be signed by the Company's chief financial officer
and shall state the Stock Purchase Price resulting from such adjustment and the
increase or decrease, if any, in the number of shares purchasable at such price
upon the exercise of this Warrant, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
4. Issue Tax. The issuance of certificates in the name of the Holder
for the Warrant Shares upon the exercise of this Warrant shall be made without
charge to the Holder of this Warrant for any issue tax in respect thereof.
Notwithstanding the foregoing, the Holder shall be responsible for payment of
all stock transfer taxes, if any, in respect of any transfer of this Warrant or
any Warrant Shares.
5. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder in
respect of meetings of stockholders for the election of directors
4
of the Company or any other matters or any rights whatsoever as a stockholder of
the Company. Except for the adjustment to the Stock Purchase Price pursuant to
Section 3(A) hereof in the event of a dividend on the Common Stock payable in
shares of Common Stock, no dividends or interest shall be payable or accrued in
respect of this Warrant or the interest represented hereby or the shares
purchasable hereunder until, and only to the extent that, this Warrant shall
have been exercised.
6. Restrictions on Transferability of Securities; Compliance With
Securities Act.
(A) Restrictions on Transferability of the Warrant Shares. The
Warrant Shares shall not be transferable except upon the conditions specified in
the Warrant Purchase Agreement.
(B) Restrictions on Transferability of this Warrant; Company Right of
First Refusal; Transfers Not Permitted to Significant Competitors of the
Company.
(i) This Warrant shall not be transferable prior to the Commencement
Date. On and after the Commencement Date, this Warrant shall not be
transferable, except (a) as a whole Warrant (or whole One-half Warrant) to a
single transferee (where not more than one person or entity has a beneficial
interest in this Warrant or One-half Warrant, as the case may be), and (b) only
to a person or entity that is not a Significant Competitor (as defined in the
----------------------
License Agreement), and (c) only upon the conditions specified in the Warrant
Purchase Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act and applicable "blue sky" laws and (d) only in
accordance with the other provisions of this Section 6.
(ii) By acceptance of this Warrant, the Holder agrees to provide to
the Company five (5) business days' prior written notice of the Holder's
intention, directly or indirectly, to sell, offer or contract to sell, pledge or
otherwise dispose or transfer (collectively, "transfer") this Warrant, which
--------
notice shall include (a) the identity, in reasonable and specific detail, of the
proposed direct or indirect transferee (including, if the proposed transferee is
a broker or dealer, the identity, in reasonable and specific detail, of any
subsequent transferee to whom such broker or dealer intends or expects to
transfer this Warrant following its receipt hereof), (b) a copy of a binding
agreement (subject only to the Company's right of first refusal discussed
below), executed by the Holder, as the proposed transferor, and the proposed
transferee, (c) in the event the amount of the agreed upon consideration for the
proposed sale of this Warrant is all cash (such amount, the "Warrant Transfer
Cash Price"), the Warrant Transfer Cash Price and a certification that the
Warrant Transfer Cash Price was determined on the basis of bona fide arms'
length negotiations between the parties to such agreement, (d) in the event that
some or all of the agreed upon consideration for the proposed sale of this
Warrant is property (tangible or intangible) other than cash, a reasonably
specific description of such property intended as consideration for the transfer
and (e) all other material terms of the proposed transaction (such notice shall
be referred to herein as a "Holder's Notice of Proposed Transfer of Warrant").
-----------------------------------------------
(iii) Prior to the time and date of the proposed transfer set forth
in a Holder's Notice of Proposed Transfer of Warrant, the Company may elect to
exercise a right of first refusal to purchase the Warrant at the Right of First
Refusal Price by providing the Holder with written notice of such election. If
the Company so notifies the Holder of its election to exercise such right of
first refusal, then the Company shall tender to the Holder as payment for this
Warrant a wire transfer of immediately available funds in the amount of the
Right of First Refusal Price, and the closing with respect to the purchase of
this Warrant a shall occur (a) in the event the proposed consideration is all
cash, no later than ten (10) business days after the Company receives the
Holder's Notice of Proposed Transfer of Warrant and (b) in the event the
proposed consideration is other than all cash, within the later of (w) ten (10)
business days after the Company receives the Holder's Notice of Proposed
Transfer of Warrant and (x) three (3) business days following the
5
Company's receipt from the investment banking firm referred to below of a letter
setting forth the price determined by such firm to be fair (including a
reasonable description of the basis for such determination) and evidence of the
Holder's payment of fees and disbursements of such investment banking firm as
provided below. If the Company does not so notify the Holder of its election to
exercise such right of first refusal, then the Holder may transfer the Warrant
on the terms and to the persons set forth in the Notice of Proposed Transfer of
Warrant within 45 days of the date of such Notice, subject to the limitations
set forth elsewhere in this Warrant and in the Warrant Purchase Agreement. In
the event that such transfer is not made within such 45-day period, any
subsequent transfer shall be subject to the right of first refusal contained in
this Section 5(B). The "Right of First Refusal Price" shall be calculated as (y)
----------------------------
in the event the proposed consideration is all cash, the Warrant Transfer Cash
Price or (z) in the event the proposed consideration is other than all cash, a
price determined to be fair by a nationally-recognized investment banking firm
chosen by the Company to value the aggregate consideration which is the subject
of such proposed transfer (provided, however, that the Holder shall be obligated
to pay all fees and disbursements of such investment banking firm incurred in
connection with such valuation and any matters related thereto).
(C) Restrictive Legend. Each certificate representing this Warrant or
the Warrant Shares (collectively, the "Securities") or any other securities
----------
issued in respect of Securities upon any such stock split, stock dividend,
reclassification or reorganization shall (unless otherwise permitted by the
provisions of the Warrant Purchase Agreement) be stamped or otherwise imprinted
with a legend substantially in the following form (in addition to any legend
required under applicable federal or state securities laws or the Company's
Certificate of Incorporation):
In the case of this Warrant:
---------------------------
THIS WARRANT IS NON-TRANSFERABLE OTHER THAN TO THE WALT DISNEY COMPANY OR
ANY OF ITS DIRECTLY OR INDIRECTLY WHOLLY-OWNED SUBSIDIARIES PRIOR TO THE
COMMENCEMENT DATE (AS DEFINED HEREIN). THIS WARRANT CONTAINS CERTAIN
ADDITIONAL RESTRICTIONS ON ITS TRANSFER AND EXERCISE ON AND SUBSEQUENT TO
THE COMMENCEMENT DATE.
In the case of the Warrant Shares:
---------------------------------
THE SECURITIES ARE NON-TRANSFERABLE PRIOR TO THE COMMENCEMENT DATE (AS
DEFINED HEREIN).
In the case of this Warrant and Warrant Shares:
----------------------------------------------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN
EXEMPTION THEREFROM. THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE
RIGHTS OF THE HOLDER HEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND
OTHER RESTRICTIONS, AND THE HOLDER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE (INCLUDING ANY FUTURE HOLDER) IS BOUND BY THE TERMS OF A WARRANT
PURCHASE AGREEMENT BETWEEN THE ORIGINAL PURCHASER AND THE COMPANY (COPIES OF
WHICH MAY BE OBTAINED FROM THE COMPANY).
6
7. Modification and Waiver. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
8. Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
the Holder at its address as shown on the books of the Company or to the Company
at the address indicated therefor in the first paragraph of this Warrant.
9. Descriptive Headings and Governing Law. The descriptive headings
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of Delaware without regard
to conflict of laws.
10. Lost Warrants or Stock Certificates. The Company represents and
warrants to the Holder that upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction, or mutilation of any Warrant or
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity and, if requested, bond reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company at its expense will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
11. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the Holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the market price of the Common Stock (the market price
determined, for any date, as the average of the closing prices of the Common
Stock on the New York Stock Exchange (or such other principal securities
exchange or automated quotation system upon which the Common Stock may then be
listed for public trading) for the five immediately preceding trading days on
such exchange).
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers, thereunto duly authorized this 27th day of June 1996.
Mattel, Inc.
/s/ Ned Mansour
-----------------------------
By: Ned Mansour
Title: President, Mattel USA
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>3
<DESCRIPTION>EMPLOYMENT AGREEMENT FOR HARRY PEARCE 4/14/97
<TEXT>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") between Mattel, Inc., a
Delaware corporation ("Mattel"), and HARRY J. PEARCE (the "Executive"), dated as
of the 14th day of April, 1997.
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 date
of this Agreement and ending on the third anniversary of such date (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.
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, but no less than those held by the Executive on the date
hereof with such additions and modifications consistent with responsibilities
generally assigned to executive officers of Mattel as the Chief Executive
Officer of Mattel ("CEO") may in her discretion and acting in good faith from
time to time assign to the Executive. Executive is herewith appointed Chief
Financial Officer of Mattel, Inc., reporting to the CEO, with overall
responsibility, authority and accountability for financial matters relating to
the business of the corporation and any of its subsidiaries. It is further
provided that Executive shall be the next insider appointed to serve as a member
of the Board of Directors of Mattel, Inc., immediately following Gary Baughman's
appointment, or unrealized appointment as the case may be.
(b) Full Time. The Executive agrees to devote his full business time
---------
to the business and affairs of Mattel and to use his best efforts to perform
faithfully and efficiently the responsibilities assigned to him 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; (ii) periods of
vacation and sick leave to which he 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
-2-
business services of any nature directly or indirectly to a corporation or other
business enterprise.
3. Compensation.
------------
(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
($21,154). The Base Salary shall be reviewed at least every 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 participate throughout the Employment Period in Mattel's cash or deferred
bonus incentive plans and programs ("Bonus Programs") as may be in effect from
time to time with respect to executives employed by Mattel at a participation
level reflecting the Executive's responsibilities, including, but not limited
to, the Management Incentive Plan ("MIP") and the Long-Term Incentive Plan
("LTIP") as they may be modified from time to
-3-
time and any plans or programs substituted therefor; provided that, except as
provided in Section 5(f) hereof, the determination of the amounts to be paid
pursuant to such plans or programs shall be made by the Board of Directors of
Mattel or a committee thereof authorized to take such action and shall be made
in accordance with Mattel's compensation practice and the terms and provisions
of such plans or programs; provided further 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. Notwithstanding the foregoing, it is expressly
and specifically provided that Executive's participation in the Mattel 1996-1998
Long-Term Incentive Plan shall be at a target award level of $1,500,000 and on a
full term, non-prorated basis as if Executive had been employed upon inception
of this particular Plan, with the only exception and omission being the interim
payment applicable to 1996 performance under the Plan, the latter having been
previously disbursed to participants prior to execution of this Agreement. It is
further provided that for the 1997 Plan year, Executive shall receive a
guaranteed minimum Management Incentive Plan ("MIP") award of not less than
$200,000, payable the earlier of: (i) on the date that such awards are
distributed to other eligible participants at a comparable level as Executive,
or (ii) on April 10, 1998, whichever occurs first.
-4-
(c) Incentive and Savings Plans. In addition to the Base Salary and
---------------------------
participation in the Bonus Programs, during the Employment Period the Executive
shall be entitled to participate in all incentive and savings plans and
programs, including, but not limited, to stock option plans and retirement
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. Notwithstanding the foregoing, it is expressly and
specifically provided that the Company, upon commencement of Executive's
employment, shall grant to Executive an initial grant of 200,000 stock options
under the terms of the 1996 Mattel Stock Option Plan. Over the initial 3-year
period of Executive's employment, it is agreed that Executive shall receive
stock option grants of not less than an aggregate of 500,000 stock options
issued under the terms of the 1996 Mattel Stock Option Plan or any successor
plan. In ensuing years, Executive shall receive annual grants of stock options
under one or more of Mattel's Stock Option Plans as in effect from time to time
in accordance with Mattel's policies and practices for other executives. It is
further provided that Executive shall be accorded full Mattel credit for all
prior service accrued while in the employ of Tyco Toys, Inc., and such credit
shall be applicable in the computation of all of Mattel's benefits-related plans
and programs, specifically including the Mattel 1994 Supplemental Executive
Retirement Plan ("SERP"), which provide
-5-
thereupon for a service-related component in the computation of Executive's
eligibility for benefits and/or the receipt thereof.
(d) Benefit Plans. The Executive and/or his family, as the case may
-------------
be, shall be entitled to receive all amounts which he or his family is or would
have been entitled to receive as benefits under all medical, dental, disability,
group life, accidental death and travel accident insurance plans and programs of
Mattel in which the Executive is a participant as in effect from time to time
with respect to executives employed by Mattel.
(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 with respect to executives employed by Mattel.
(f) Fringe Benefits. The Executive shall be entitled to fringe
---------------
benefits, commensurate with those available to comparable level executives,
including an automobile and related expenses as well as the use of a company-
issued gasoline credit card, club memberships and related expenses, and
financial counseling, including tax preparation and a one-time estate planning
service, in accordance with the policies of Mattel as in
-6-
effect from time to time with respect to executives employed by Mattel.
(g) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the policies of Mattel as in effect
from time to time with respect to executives employed by Mattel.
(h) Certain Amendments. Nothing herein shall be construed to prevent
------------------
Mattel from amending, altering, eliminating or reducing any plans, benefits or
programs so long as the Executive continues to have the opportunity to receive
compensation and benefits consistent with Sections 3(a) through (g).
4. Termination.
-----------
(a) Death or Disability. This Agreement shall terminate automatically
-------------------
upon the Executive's death; provided that Base Salary, all bonuses and earned
benefits will be continued and paid for a period of six (6) months thereafter,
unless a longer period is otherwise specified. Mattel may terminate this
Agreement, after having established the Executive's Disability, by giving to the
Executive written notice of its intention to terminate his employment, and his
employment with Mattel shall terminate effective on the 90th day after receipt
of such notice
-7-
(the "Disability Effective Date"). For purposes of this Agreement, the
Executive's Disability shall occur and shall be deemed to have occurred only
when the Executive 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" if a majority, consisting of at least 2/3 of the non-management members
of the Board of Directors of Mattel, determines that "Cause" exists. For
purposes of this Agreement, "Cause" means (i) an act or acts of dishonesty on
the Executive's part which are intended to result in his substantial personal
enrichment at the expense of Mattel; (ii) repeated violations by the Executive
of his 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 criminal nature 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) 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
-8-
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 his 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) without the Executive's consent, any requirement by Mattel
that Executive be based at any office or location other than an office or
location in Los Angeles, California except for travel reasonably required in the
performance of the Executive's responsibilities;
-9-
(iv) any proposed termination by Mattel of the Executive's
employment otherwise than as permitted by this Agreement; or
(v) any failure by Mattel to obtain the assumption and agreement
to perform this Agreement by a successor as contemplated by Section 11(b).
(d) Change of Control. A "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 Mattel, any trustee or other fiduciary
holding securities under an employee benefit plan of Mattel) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of Mattel representing 20% or more of the combined
voting power of Mattel'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 Mattel,
and any new director whose election by the Board of Directors, or whose
nomination for election by Mattel's stockholders, was approved by a vote of at
least one-half (1/2) of the directors then in office (other than in
-10-
connection with a contested election), cease for any reason to constitute at
least a majority of the Board of Directors;
(iii) the stockholders of Mattel approve (I) a plan of complete
liquidation of Mattel or (II) the sale or other disposition by Mattel of all or
substantially all of Mattel'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 Mattel
with any other entity other than:
(I) a merger or consolidation which results in the voting
securities of Mattel 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 Mattel (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.
-11-
In this paragraph (iv), "surviving entity" shall mean only an entity in
which all of Mattel'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 Mattel (who were directors
immediately prior thereto)" shall include only individuals who were directors of
Mattel at the beginning of the 24 consecutive month period preceding the date of
such merger or consolidation.
(e) Notice of Termination. Any termination of the Executive's
---------------------
employment by Mattel for Cause 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 13(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).
-12-
(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 his
death or as otherwise provided in Section 4(a) or this
-13-
Section 5(a). As of the Date of Termination, the Executive's family shall be
entitled to the Executive's benefits on the terms described in Section 5(d)(iv)
(other than outplacement services and leased car benefits, which are excluded),
except that healthcare insurance coverage and financial and legal counseling
services shall terminate on the third anniversary of the Date of Termination.
The Executive's country club membership must be converted or sold, as the case
may be, by the Executive's successor-in-interest within one year after the Date
of Termination on the terms described in Section 5(d)(iv)(III); provided that no
such conversion or sale shall be required and Mattel shall cause the membership
to be transferred to the Executive's spouse at no cost to the spouse if the
Executive has had the membership for at least three years.
(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 employees and/or their families and
(ii) other benefits on the terms described in Section 5(d)(iv).
(c) Cause. If the Executive's employment is terminated for Cause or
-----
if the Executive terminates his
-14-
employment without Good Reason, Mattel shall pay the Executive his 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, except that if Executive is duly vested under
the express terms of the SERP, he shall be entitled to receive SERP benefits in
accordance with the terms and conditions of the SERP.
(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 his 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 MIP bonus equal to the average of the
greatest two out of the three most recent annual MIP bonuses received by the
Executive (which two greatest MIP bonuses need not represent consecutive years)
(the "Average
-15-
Annual Bonus") and if Executive has been eligible to receive only one prior MIP
bonus, the latter shall serve as the sole basis for determining the Average
Annual Bonus. The applicable Average Annual Bonus shall then be prorated to
reflect the total number of full months the Executive was employed in the year
in which termination occurs;
(C) an LTIP payment reflective of the Executive's
participation in the three-year plan, so that at the time that final performance
under the LTIP is determinable and individual payouts calculated, the Executive
shall promptly receive an amount equivalent to what he would have received if he
had remained employed through the date of such payouts, less any interim
payments already made pursuant to the Executive's continuing eligibility for
full participation in the LTIP; and
(D) 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) if eligible, the Average Annual 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 the Mattel Personal Investment Plan
("PIP")).
(ii) Options granted to the Executive under Mattel's stock
option plans (the "Stock Option Plans") which options have been granted for more
than six months shall become
-16-
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 (ii).
In the event the Executive is age 52 or older on the Date of Termination, he
will be treated as a retiree under the Stock Option Plans, which will enable the
Executive to vest in and exercise stock options theretofore granted thereunder,
at the election of the Executive, (x) in the manner described in the immediately
preceding sentence, or (y) for a period of up to five years after the Date of
Termination (but in no event past the expiration of the term of the option
grant).
(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 his employment had not terminated.
(iv) Until the earlier of (x) the third anniversary of the Date
of Termination or (y) the date the Executive accepts other employment, Mattel
shall provide to the Executive at Mattel's expense:
(I) medical, dental, prescription drug and vision care
group insurance in accordance with the coverage in
-17-
effect immediately prior to the Date of Termination (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);
(II) 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; and
(III) continuation of country-club membership
"signatory/representative" status as in effect immediately prior to the Date of
Termination; provided that within one year after Mattel ceases to provide such
benefit, the Executive shall (a) convert the country-club membership from
"signatory/representa-tive" status under the membership provided and paid for by
Mattel to sole and personal ownership status by paying to Mattel the fair market
value of that membership as of the date Mattel ceases to provide such benefit,
less any transfer/reconveyance fees that may be required by and paid directly to
the country club by the Executive, or (b) comply with club rules in consummating
a fair, reasonable and expeditious sale of the membership and any proceeds
derived therefrom which are payable to the Executive shall belong to and must be
promptly delivered to Mattel; provided further that no such conversion or sale
shall be required and Mattel shall cause the membership to be transferred
-18-
to the Executive at no cost to the Executive (but subject to tax reporting as
imputed income applicable to the year in which the membership is transferred),
if the Executive has had the membership for at least three years.
For the three-year period after the Date of Termination, the Executive
shall remain eligible for use of personal financial and legal counseling
services through the vendor engaged and paid for by Mattel. The Executive may
continue to use the car leased by Mattel that is in the Executive's possession
on the Date of Termination until the earlier of (x) the end of the lease term or
(y) the third anniversary of the Date of Termination, at which time the
Executive may purchase the car for $1.00 (if at the end of the lease term) or
Mattel's book value (if on the third anniversary of the Date of Termination).
As of the Date of Termination, all expenses related to such leased car,
including but not limited to repairs, maintenance, gasoline, and car phone and
associated expenses, shall be the sole responsibility of the Executive.
(v) Credit shall be given 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 the plans and programs of
Mattel, including but not limited to the 1994 Supplemental
-19-
Executive Retirement Plan (the "SERP"), the Mattel Deferred Compensation Plan,
the PIP, the Mattel Retiree Medical Plan, and the Stock Option Plans. Further,
with regard to computing the Executive's benefit under the SERP, the formula
described in Section 5(d)(i)(B) shall be utilized in calculating the maximum
benefit, namely: the formula shall be 25% of the average of the final three
years of annual Base Salary (including the calendar year in which the Date of
Termination occurs), plus the average of the greatest two out of the three most
recent annual MIP bonuses received by the Executive.
(e) Change of Control. If, within 18 months following a Change of
-----------------
Control, the Executive terminates his employment for Good Reason or Mattel or
the surviving entity terminates the Executive's employment other than for Cause
or Disability:
(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) an amount equal to the MIP bonus that would have been
payable to executives of Mattel in the same bonus
-20-
category as the Executive pursuant to the Bonus Programs provided in Section
3(b) assuming, for purposes of calculating the amount of the bonus pool under
the plan, that the "maximum" amount, as that term is used in the plan, was
achieved for the current plan year (the "Maximum Annual Bonus"), with such
amount prorated to reflect the number of full months the Executive is employed
in the year in which termination occurs;
(C) an LTIP payment for the current year, assuming
achievement of the three-year maximum award, prorated to reflect the total
number of full months the Executive is employed in the year in which termination
occurs;
(D) 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 Maximum Annual Bonus 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 the PIP); and
(E) the full term payout for the three-year period of the
LTIP, assuming for purposes of calculating the amount earned under the LTIP,
achievement of the three-year maximum award (including the full amount of the
premium), less any interim payments previously received by the Executive.
(ii) If it is determined that any payment or distribution by
Mattel to the Executive pursuant to Section 5(e)
-21-
(determined without regard to any additional payments required pursuant to this
sentence) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive with respect to each Payment 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.
(iii) In addition, the Executive shall receive the amounts and
be entitled to the benefits provided in clauses (ii), (iii), (iv) and (v) of
Section 5(d).
(f) Bonus During Cancellation Period. If Mattel notifies the
--------------------------------
Executive that the Employment Period provided in Section 1 hereof will not be
automatically extended as provided therein, the compensation of the Executive
shall continue as provided in this Agreement for the period provided therein,
-22-
except that the amount of MIP compensation payable under the Bonus Programs with
respect to each fiscal year during such period (including the year in which the
notice was given) shall be the Average Annual Bonus as determined in Section
5(d)(i)(B). Amounts payable with respect to the year in which the term specified
in Section 1 expires shall be prorated based on a fraction the numerator of
which is the number of full months from the beginning of such year until the
date of the expiration of this Agreement and denominator of which is 12.
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 here-in, Mattel's
---------------------------
obligation to make the payments provided for in this
-23-
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 he
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. All amounts provided herein shall include, in each case,
interest, compounded quarterly, on the total unpaid amount determined to be
payable under this Agreement, such interest to be calculated on the basis of the
prime commercial lending rate announced by Bank of America National Trust and
Savings Association in effect from time to time during the period of such
nonpayment. 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
-24-
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 he 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 his 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, including the determination of Mattel's
Board of Directors in accordance with Section 4(b), 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 arbitration under the labor arbitration rules of
the
-25-
American Arbitration Association 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 labor
arbitration rules of the American Arbitration Association 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 provided by the office of the
American Arbitration Association nearest to the Executive's residence with the
parties striking names in order and the party striking first to be determined by
the flip of a coin. The arbitration shall be held in a location to be mutually
agreed upon by the parties. In the absence of agreement, the Chairman of the
Board of Mattel shall determine the location.
(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
-26-
arbitration provisions of this Agreement shall provide the exclusive remedy, and
each party expressly waives any right he 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 one year of the date the
claiming party knew or should have known of the facts giving rise to the claim,
except that claims arising out of or related to the termination of the
Executive's employment must be presented by him within one year after the Date
of Termination. Unless the party against whom any claim is asserted waives the
time limits set forth above, any claim not brought within the time periods
specified shall be waived and forever barred.
(d) Mattel will pay all costs and expenses of the arbitration to the
extent provided in this Section 8. In the event expenses are not paid by Mattel,
and without diminishing the Executive's right to reimbursement as provided in
this Section, costs and expenses shall be paid as follows: (x) the expenses of
the neutral arbitrator and of a transcript of any arbitration proceeding shall
be divided equally between the Executive and Mattel; and (y) each party shall
bear the expenses of the arbitrator selected by it and of the witnesses it
calls.
-27-
(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 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
-28-
during the term of employment or upon termination thereof. Accordingly,
upon Mattel's fulfilling its obligations to the Executive hereunder, the
Executive, on behalf of himself and his successors, assigns, heirs and any and
all other persons claiming through the Executive, if any, and each of them,
shall and does hereby forever relieve, release, and discharge Mattel and its
respective predecessors, successors, assigns, owners, attorneys,
representatives, affiliates, parent 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 limitation, any
statutory, civil or administrative claim, or any claim, arising out of acts or
omissions occurring before the execution of this Agreement, whether known or
unknown, suspected or unsuspected, fixed or contingent, apparent or concealed
(collectively referred to as "claims"), including, but not limited to, any
claims based on, arising out of, related to or connected with the subject matter
of this Agreement, the Executive's employment or the termination thereof, and
any and all facts in any manner arising
-29-
out of, related to or connected with the Executive's employment with, or
termination of employment from, Mattel or any of its related entities,
including, but not limited to, any claims arising from rights under federal,
state, and local laws prohibiting discrimination on the basis of race, national
origin, sex, religion, age, marital status, pregnancy, handicap, ancestry,
sexual orientation, or any other form of discrimination, and any common law
claims of any kind, including, but not limited to, contract, tort, and property
rights including, but not limited to, breach of contract, breach of the implied
covenant of good faith and fair dealing, tortious interference with contract or
current or prospective economic advantage, fraud, deceit, misrepresentation,
defamation, wrongful termination, infliction of emotional distress, breach of
fiduciary duty, and any other common law claim of any kind whatever.
Upon Mattel's fulfilling its obligations to the Executive here-under,
the Executive expressly waives any and all rights under Section 1542 of the
Civil Code of the State of California, and all other federal or state statutory
rights, rules, and principles of common law or equity, including without
limitation those of any jurisdiction, government, or political subdivision
thereof, similar to Section 1542 ("similar provision"). Thus the Executive may
not invoke the benefits of Section 1542 or any
-30-
similar provision in order to prosecute or assert in any manner any claims
released hereunder. Section 1542 provides as follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
10. Confidential Information. 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 his employment by Mattel or any of its affiliated companies
and which shall not be public knowledge and will continue to be bound by the
provisions of the Patent and Confidence Agreement previously executed by the
Executive. After termination of the Executive's employment with Mattel, he
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.
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11. Successors.
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(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
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circumstance described therein and not with respect to any other event or
circumstance, unless such waiver expressly provides to the contrary.
13. Miscellaneous.
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(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:
if to the Executive:
--------------------
Harry J. Pearce
c/o Mattel, Inc.
333 Continental Blvd.
El Segundo, CA 90245
if to Mattel:
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MATTEL, INC.
333 Continental Blvd.
El Segundo, CA 90245
ATTENTION: Ned Mansour
or to such other address as either party shall have furnished to the other in
writing in accordance herewith.
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(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.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first set forth above.
EXECUTIVE:
/s/ Harry J. Pearce
-----------------------------------
Harry J. Pearce
MATTEL: MATTEL, INC.,
a Delaware corporation
By: /s/ Ned Mansour
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Ned Mansour
President, Corporate Operations
ATTEST:
/s/ Mary L. Waller
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Assistant Secretary
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