WARRANT PURCHASE AGREEMENT
Mattel, Inc.
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Ladies & Gentlemen:
This Warrant Purchase Agreement (the "Agreement") is made as
of July 26, 2000 (the "Closing Date") by and between Mattel,
Inc., a Delaware corporation (the "Company"), and Warner Bros., a
division of Time Warner Entertainment Company, L.P., a Delaware
limited partnership ("Purchaser").
The Company and Purchaser hereby confirm their respective
agreements as follows:
1. Authorization and Purchase of the Warrant.
(A) Authorization of the Warrant. As of the Closing Date, the
Company's Board of Directors has authorized the issuance by the
Company and the sale to the Purchaser of a warrant (the
"Warrant") to purchase 3,000,000 fully paid and nonassessable
shares of Common Stock, par value $1.00 per share (the "Common
Stock"), of the Company, all as more fully described, and subject
to the conditions set forth below and in the form of Warrant
annexed hereto as Exhibit 1. The shares of Common Stock issuable
upon exercise of the Warrant are herein referred to as the
"Warrant Shares;" and the Warrant and the Warrant Shares are
sometimes herein together referred to as the "Securities."
(B) Purchase of Warrant. Subject to the terms and conditions
set forth below and in the Warrant, the Company shall issue to
Purchaser the Warrant in consideration for the rights granted to
the Company under that certain license agreement, dated as of
January 28, 2000 (the "License Agreement"), by and between the
Company and Purchaser. A conformed copy of the License
Agreement, in the form executed and delivered by each of Warner
Bros. and the Company, is annexed hereto as Exhibit 2.
2. The Closing.
(A) Closing Date. The closing of the purchase and sale of the
Warrant to Purchaser hereunder (the "Closing") shall be held at
the offices of Mattel, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇
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mutually agreed upon by the parties hereto, at 6:00 p.m.,
California time, on July 26 (or such other date as may be
mutually agreed upon in writing by the parties hereto). On the
Closing Date the Company shall deliver to Purchaser the Warrant
registered in the name of Purchaser.
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3. Representations and Warranties of the Company. The Company
represents and warrants to Purchaser as of the Closing Date as
follows:
(A) Corporate Power; Authorization. The Company has all
requisite corporate power and has taken all requisite corporate
action to execute and deliver each of this Agreement and the
License Agreement, to sell and issue the Securities and to carry
out and perform all of its obligations hereunder and thereunder.
Each of this Agreement and the License Agreement has been duly
authorized, executed and delivered on behalf of the Company and
constitutes the valid and binding agreement of the Company,
enforceable in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization or similar
laws relating to or affecting the enforcement of creditors'
rights generally and (ii) as limited by equitable principles
generally. The consummation of the transactions contemplated
herein and the fulfillment of the terms herein will not result in
a breach of any of the terms or provisions of the Company's
Certificate of Incorporation or by-laws.
(B) Validity of Securities. The Warrant, when sold against the
consideration therefor as provided herein, will be validly
authorized and issued, fully paid and nonassessable. The
issuance and delivery of the Warrant is not subject to preemptive
or any similar rights of the stockholders of the Company or any
liens or encumbrances arising through the Company; and when the
Warrant Shares are issued upon exercise and in accordance with
the terms of the Warrant, they will be validly issued and
outstanding, fully paid and nonassessable and free of any liens
or encumbrances arising through the Company.
(C) SEC Documents; Financial Statements. The Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999,
the Company's Quarterly Report on Form 10-Q for the three months
ended March 31, 2000, the Company's Quarterly Report on Form 10-Q
for the three months ended June 30, 2000, the Company's Current
Report on Form 8-K filed on April 6, 2000, the Company's Current
Report on Form 8-K filed on May 18, 2000, the Company's Current
Report on Form 8-K filed on July 6, 2000, the Company's Current
Report on Form 8-K filed on July 26, 2000, and the Company's
Notice of Annual Meeting of Stockholders and Proxy Statement,
dated April 28, 2000, as supplemented by the Supplement to Proxy
Statement, dated May 25, 2000 (collectively, the "SEC
Documents"), as filed by the Company with the Securities and
Exchange Commission (the "SEC") are attached hereto as Exhibit 3.
Each of the SEC Documents conforms in all material respects to
the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as applicable, and the rules,
regulations and instructions of the Commission thereunder. Each
of the SEC Documents did not as of its respective date contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances in
which they were made, not misleading. The financial statements
of the Company included in the SEC Documents (the "Financial
Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto. Except
as may be indicated in the notes to the Financial Statements, the
Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied and
fairly present the consolidated financial position of the Company
and its subsidiaries at the dates thereof. From June 30, 2000
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through the date hereof, except for any events described in the
SEC Documents, there have been no events giving rise to a
material averse effect on the business of the Company.
(D) Authorized and Unissued Shares of Common Stock.
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.
4. Representations and Warranties of Purchaser. Purchaser
hereby represents and warrants to the Company as of the Closing
Date as follows:
(A) Investment Experience. Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities Act
of 1933, as amended (the "Securities Act"), and was not organized
for the specific purpose of acquiring the Securities. Purchaser
is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to
acquire the Securities. Purchaser has such business and
financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of the
Securities. Purchaser has had the opportunity to ask questions
and receive answers concerning the terms and conditions of its
purchase of the Securities and to obtain any additional
information from the Company that is necessary to verify the
information furnished in the SEC Documents.
(B) Investment Intent. Purchaser is purchasing the Warrant for
investment for its own account only and not with a view to, or
for resale in connection with, any "distribution" thereof within
the meaning of the Securities Act. Purchaser understands that
the Warrant has not been registered under the Securities Act or
registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may
depend upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(C) Authorization. Purchaser has all requisite power and has
taken all requisite action to execute and deliver each of this
Agreement and the License Agreement, to license the rights
granted to the Company under the License Agreement and to carry
out and perform all of its obligations hereunder and thereunder.
Each of this Agreement and the License Agreement has been duly
authorized, executed and delivered on behalf of Purchaser and
constitutes the valid and binding agreement of Purchaser,
enforceable in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization or similar
laws relating to or affecting the enforcement of creditors'
rights generally and (ii) as limited by equitable principles
generally. The consummation of the transactions contemplated
herein and the fulfillment of the terms herein will not result in
a breach of any of the terms or provisions of Purchaser's
partnership agreement or other similar organizational documents.
(D) No Legal, Tax or Investment Advice. Purchaser understands
that nothing in this Agreement or any other materials presented
to Purchaser in connection with the purchase and sale of the
Securities constitutes legal, tax or investment advice.
Purchaser has consulted
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such legal, tax and investment advisors
as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Warrant.
5. Restrictions on Transfer of Securities; Registrable
Securities.
(A) Restrictions on Transferability. The Securities shall not
be offered, resold, pledged or otherwise transferred from
Purchaser to a transferee other than (i) in accordance with the
provisions of Sections 5(C) and 5(E) hereof (only with respect to
the Warrants), (ii) in accordance with the provisions of
Section 6 of the Warrant, and (iii) in a transaction meeting the
requirements of Rule 144 under the Securities Act ("Rule 144") or
otherwise in accordance with the Securities Act and the
applicable securities laws of any state of the United States or
any other applicable jurisdiction. Purchaser will be required to
notify any subsequent purchaser of any then existing resale
restrictions as set forth above and to comply with the provisions
of Section 5(C) below. The Company shall be entitled to give
stop transfer instructions to the transfer agent with respect to
the Securities in order to enforce the foregoing restrictions.
(B) Restrictive Legends. Each certificate representing any of
the Securities (or any other securities issued in respect of the
Securities upon any stock split or stock dividend) shall (unless
otherwise permitted by the provisions hereof or the Warrant) 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):
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 SUCH 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).
(C) Any Subsequent Holder of the Warrant to Expressly Assume
Obligations Hereunder; Purchaser's Ability to Transfer.
Purchaser hereby covenants and agrees that from and after the
date hereof, Purchaser may transfer (as defined in the Warrant)
the Warrant only in accordance with the provisions of Section
6(B) of the Warrant and the other provisions of this Section 5
and only to a transferee (referred to herein as a "Holder" of the
Warrant) who expressly and in writing agrees with Purchaser and
the Company, at the time of such transfer, to assume all of the
obligations of, and comply with all of the provisions applicable
to, Purchaser under this Agreement and Holder under the Warrant.
References in this Section 5(C) to the Warrant shall mean the
Warrant or either of the two One-half Warrants (as defined in the
Warrant), as the case may be.
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(D) Registration on Form S-3.
(i) Filing of Registration Statement relating to the Warrant
Shares. Subject to the provisions of Section 5(D)(iv) below, the
Company agrees that it shall file (or have on file) with the SEC
a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Registration Statement") relating to the
resale by Purchaser of all Warrant Shares (such Warrant Shares
covered by the Registration Statement constituting the
"Registrable Securities"). Until the Registration Statement is
effective, the Company shall use commercially reasonable efforts
to cause the Registration Statement to become effective. The
Company shall commence the registration process no later than
five (5) days after the date hereof. The Company is not
presently aware of any reason that would cause the SEC to fail to
declare the Registration Statement effective following the
satisfactory completion of its customary review process.
(ii) Registration Expenses. The Company shall pay all
Registration Expenses in connection with any registration,
qualification or compliance hereunder, and Purchaser shall pay
all Selling Expenses and other expenses that are not Registration
Expenses relating to the Registrable Securities resold by
Purchaser. "Registration Expenses" shall mean all expenses,
except for Selling Expenses, incurred by the Company in complying
with the registration provisions herein described, including,
without limitation, all registration, qualification and filing
fees, printing expenses, fees and disbursements of counsel for
the Company, blue sky fees and expenses, transfer taxes that may
be payable in respect of the issuance or delivery of the Warrant
Shares (except any such issuance or transfer in a name other than
that in which the Warrant is registered) and the expense of any
special audits incident to or required by any such registration.
"Selling Expenses" shall mean all stock transfer taxes applicable
to the Registrable Securities by reason of issuance or transfer
in a name other than that in which the Warrant is registered, all
fees and disbursements of counsel for Purchaser, and all other
expenses incurred by Purchaser relating to the Registrable
Securities.
(iii) Additional Company Obligations. In the case of any
registration effected by the Company pursuant to these
registration provisions, the Company will use its commercially
reasonable efforts to: (a) keep such Registration Statement
effective for a period beginning on the date the Registration
Statement is declared effective by the SEC (the "Effective Date")
and ending on the earliest of the following dates (such earliest
date referred to herein as the "Expiration Date"): (i) the date
upon which the Purchaser or any subsequent Holder fails to hold
at least 10% of the Warrant Shares; (ii) the date upon which the
Registrable Securities could be sold by the Purchaser (or
subsequent Holder) in a single transaction pursuant to Rule 144
under the Securities Act and the Company has agreed to remove the
legend referred to in Section 5(B); (iii) the date which is the
fifth anniversary of the Closing Date; and (iv) the date as of
which all of the Registrable Securities have been sold pursuant
to the Registration Statement; (b) prepare and file with the SEC
such amendments and supplements to the Registration Statement and
the prospectus used in connection with the Registration Statement
as may be necessary to comply with the provisions of the
Securities Act with respect to sales of the Registrable
Securities pursuant to the Registration Statement; (c) furnish to
the Purchaser (or subsequent Holder) as many copies of the
prospectus and other documents incident thereto, including any
amendment or supplement thereto, as such Holder may reasonably
request (and the
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Company hereby consents to the use (in
accordance with law) of the prospectus, and any amendment or
supplement thereto, by the Purchaser (or subsequent Holder) in
connection with the offer and sale of the Registrable Securities;
(d) cause all Warrant Shares to be listed on each securities
exchange and quoted on each quotation service on which similar
securities issued by the Company are then listed or quoted;
(e) provide a transfer agent and registrar for all Warrant Shares
and a CUSIP number for all Warrant Shares; and (f) use its
commercially reasonable efforts to comply with all applicable
rules and regulations of the SEC.
(iv) Rule 144; Information Concerning Purchaser (or any
Subsequent Holder). Purchaser (and any subsequent Holder) shall
furnish to the Company such information regarding Purchaser (and
such subsequent Holder) as the Company may reasonably request in
writing in connection with any registration, qualification or
compliance described herein. Purchaser (and each subsequent
Holder) shall represent that such information is true, complete
and accurate in all material respects as of the respective dates
thereof.
(v) Suspension of Registration Statement. The
Purchaser (and any subsequent Holder) agrees, by exercise of the
Warrant, upon receipt of notice (a "Suspension Notice") by the
Company (i) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement under
the Securities Act or of the suspension by any state securities
commission of the qualification of the Registrable Securities
for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, or (i) of the
existence of any fact or the happening of any event that makes
any statement of a material fact made in the Registration
Statement, the prospectus contained therein, any amendment or
supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to
or changes in the Registration Statement in order to make the
statements therein not misleading, or that requires the making
of any additions to or changes in the prospectus in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading, the Purchaser (or
any such Holder) will forthwith discontinue disposition of
Warrant Shares pursuant to the Registration Statement until (i)
the Purchaser (or such Holder) has received copies of a
supplemented or amended prospectus, or (ii) the Purchaser (or
such Holder) is advised in writing by the Company that the use
of the prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by
reference in the prospectus (in each case, the "Recommencement
Date"). The Purchaser (and any subsequent Holder) receiving a
Suspension Notice hereby agrees that it will either (i) destroy
any prospectuses, other than permanent file copies, then in the
Purchaser's (or such Holder's) possession which have been
replaced by the Company with more recently dated prospectuses or
(ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in the
Purchaser's (or such Holder's) possession of the prospectus
covering Registrable Securities that was current at the time of
receipt of the Suspension Notice.
(E) Exercise of Warrant.
(i) Notice of Proposed Exercise of the Warrant.
Purchaser (and each subsequent Holder) hereby agrees to provide
to the Company ten (10) business days' prior
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written notice (a "Notice of
Proposed Exercise") of Purchaser's (or such Holder's) intention
to exercise the Warrant, which notice shall specify whether such
exercise is a Cashless Exercise (as defined in the Warrant) or an
exercise of the Warrant for cash as provided in the Warrant.
(ii) Potential Extension of Expiration Date. If the Notice of
Proposed Exercise is given within the ten (10) business days
immediately preceding the Expiration Date of the Warrant, the
Expiration Date of the Warrant shall be extended such number of
days (and only such number of days) necessary to permit timely
exercise of the Warrant in accordance with the provisions of
Section 5(E)(i).
6. Company Reports Filed Under the Exchange Act. With a view
to making available to the Holder the benefits of Rule 144 and
other rules or regulations of the SEC that may permit the Holder
to sell Warrant Shares to the public without registration, the
Company covenants and agrees to: (a) make and keep public
information available, as those terms are understood and defined
in Rule 144, at all times after the Closing; (b) file with the
SEC in a timely manner all reports and other documents required
of the Company under the Securities Act and the Exchange Act; and
(c) furnish to the Holder, so long as the Holder owns any
Securities forthwith upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (ii) a copy of
the most recent annual report of the Company, and a copy of each
quarterly and interim report of the Company filed since the
filing of the most recent annual report of the Company, and
(iii) such other information as may be reasonably requested in
order to avail the Holder of any rule or regulation of the SEC
that permits the selling of any such Securities without
registration.
7. Miscellaneous.
(A) Waivers and Amendments. The terms of this Agreement
may be waived or amended only with the written consent of the Company
and Purchaser.
(B) Governing Law. This Agreement and the Warrant shall each 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.
(C) Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by
the Company or Purchaser and the Closing.
(D) Successors and Assigns. The provisions hereof shall inure
to the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto
(specifically including any person that becomes a Holder of the
Warrant through transfer thereof from the Purchaser, and any
other successors in interest to the Securities). In the event of
any merger, consolidation or acquisition involving the Company in
which the Company is not the surviving entity, the Company's
obligations hereunder and under the Warrant shall be expressly or
by operation of law assumed by the surviving entity.
(E) Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with
regard to the subject hereof.
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(F) Notices, etc. All notices and other communications required
or permitted hereunder shall be effective upon receipt and shall
be in writing and may be delivered in person, by facsimile,
overnight delivery service or U.S. mail, in which event it may be
mailed by first-class, certified or registered, postage prepaid,
addressed:
if to Purchaser, at
Warner Bros.
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Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or
if to the Company, at
Mattel Inc.
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▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
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Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or in any case at such other address as Purchaser or the Company
shall have furnished to the other in writing.
(G) Severability of this Agreement. If any provision of this
Agreement shall be judicially determined to be invalid, illegal
or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or
impaired thereby.
(H) Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference
and shall not, by themselves, determine the construction of this
Agreement.
(I) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.
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(J) Tax Treatment. The Company and Purchaser hereby agree that,
for Federal income tax purposes, (i) Purchaser will recognize
income attributable to the Warrant in the taxable year within
which Purchaser either exercises or transfers the Warrant and
(ii) the Company will claim a deduction in an amount equal to
Purchaser's recognized income in the taxable year within which
Purchaser either exercises or transfers the Warrant.
(Signature page follows)
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Please confirm that the foregoing correctly sets forth the
agreement between us by signing in the space provided below for
that purpose.
WARNER BROS.,
a division of Time Warner Entertainment
Company, L.P.
/s/ ▇▇▇▇ ▇▇▇▇▇▇
_______________
By: ▇▇▇▇ ▇▇▇▇▇▇
Title: Senior Vice President Corporate
Business Affairs
AGREED AND ACCEPTED,
as of the date first above written:
Mattel, Inc.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
__________________
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President, General Counsel
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