-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, B4AYXeKpkrdUJamZg4ZUgKAI+Mwz9Pp36mnifAH3wKNDGLrkSmJoYhNS4MyEC7Ks a4sD5I4hzgNN76oXC3lqQg== 0000898430-95-000344.txt : 19950616 0000898430-95-000344.hdr.sgml : 19950616 ACCESSION NUMBER: 0000898430-95-000344 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19950321 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950321 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATTEL INC /DE/ CENTRAL INDEX KEY: 0000063276 STANDARD INDUSTRIAL CLASSIFICATION: GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES) [3944] IRS NUMBER: 951567322 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05647 FILM NUMBER: 95522037 BUSINESS ADDRESS: STREET 1: 333 CONTINENTAL BLVD CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3105244600 8-K 1 FORM 8-K FOR 03/21/95 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report: March 21, 1995 MATTEL, INC. ------------ (Exact name of registrant as specified in its charter) Delaware 001-05647 95-1567322 - ------------------------------------------------------------------------------ (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File No.) Identification No.) 333 Continental Boulevard, El Segundo, California 90245-5012 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (310) 252-2000 ---------------------------- N/A - ------------------------------------------------------------------------------ (Former name or former address, if changed since last report) Item 7. Financial Statements and Exhibits - ------- --------------------------------- (a) Financial statements of businesses acquired: None (b) Pro forma financial information: None (c) Exhibits: 99.1 First Amendment dated as of May 17, 1994 to Credit Agreement (Multi-Year Facility) dated as of March 18, 1994 among the Company, the Banks named therein and Bank of America National Trust and Savings Association, as Agent 99.2 First Amendment dated as of May 17, 1994 to Credit Agreement (364-Day Facility) dated as of March 18, 1994 among the Company, the Banks named therein and Bank of America National Trust and Savings Association, as Agent 99.3 Second Amendment dated as of September 30, 1994 to Credit Agreement (Multi-Year Facility) dated as of March 18, 1994 among the Company, the Banks named therein and Bank of America National Trust and Savings Association, as Agent 99.4 Second Amendment dated as of September 30, 1994 to Credit Agreement (364-Day Facility) dated as of March 18, 1994 among the Company, the Banks named therein and Bank of America National Trust and Savings Association, as Agent 99.5 Credit Agreement dated as of March 10, 1995 among the Company, the Banks named therein and Bank of America National Trust and Savings Association, as Agent 99.6 Second Amended and Restated Transfer and Administration Agreement dated as of March 10, 1995 among the Company, Mattel Sales Corp., Fisher-Price, Inc., the Banks named therein and NationsBank of Texas, N.A., as Agent 99.7 Mattel, Inc. Supplemental Executive Retirement Plan effective as of April 1, 1994 99.8 Fisher-Price, Inc. Matching Savings Plan, 1994 Restatement 99.9 Mattel, Inc. Personal Investment Plan, 1993 Restatement 99.10 First Amendment to the Mattel, Inc. Personal Investment Plan, 1993 Restatement SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MATTEL, INC. Registrant By: /s/ Leland P. Smith ----------------------------- Leland P. Smith Date: March 21, 1995 Assistant General Counsel -------------- EX-99.1 2 1ST AMENDMENT TO MULTI-YEAR CREDIT AGREEMENT EXHIBIT 99.1 FIRST AMENDMENT TO ------------------ CREDIT AGREEMENT (MULTI-YEAR FACILITY) -------------------------------------- THIS FIRST AMENDMENT TO CREDIT AGREEMENT (MULTI-YEAR FACILITY) (this "First Amendment") is dated as of May 17, 1994 and is entered into by and among MATTEL, INC., a Delaware corporation (the "Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (the "Banks"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the Banks (the "Agent") and amends the Credit Agreement (Multi-Year Facility) dated as of March 18, 1994 among the Company, the Banks and the Agent (the "Agreement"). RECITAL ------- The Company has requested that the Banks and the Agent amend the Agreement, and the Banks and Agent are willing to amend the Agreement on the terms and conditions set forth herein. NOW, THEREFORE, the parties hereto agree as follows: 1. Terms. All capitalized terms used herein have the same meanings as in the Agreement unless otherwise defined herein. All references to the Agreement shall mean the Agreement as hereby amended. 2. Amendments. The parties hereto agree that the Agreement is amended as follows: 2.1 The definition of "Certificate of Deposit Rate" within the definition of "CD Rate" in Section 1.1 of the Agreement is amended by deleting "Reference Banks" on the next-to- last line thereof and inserting "Agent" in lieu thereof. 2.2 Section 1.1 of the Agreement is amended by inserting the following definition in proper alphabetical order: "'Commitment' means the Aggregate Loan Commitment, the Aggregate 364-Day Commitment or the Aggregate Receivables Commitment (collectively, the "Commitments"). 2.3 Section 2.5 of the Agreement is amended and restated in its entirety as follows: "2.5 Adjustments of Aggregate Loan Commitment and Aggregate Receivables Commitment. -1- "(a) Reduction and Termination of Commitments. The Company may from time to time, in accordance with Section 2.5(c), reduce or terminate the Aggregate Loan Commitment or the Aggregate Receivables Commitment. The Company may effect changes in the Aggregate 364-Day Commitment pursuant to the 364-Day Facility. Any reduction or termination of any Commitment pursuant to this Section 2.5(a) shall be permanent. "(b) Reallocation of Commitments. In addition, the Company may from time to time, in accordance with Section 2.5(c), (i) reallocate the Aggregate Receivables Commitment to the Aggregate Loan Commitment and/or (ii) reallocate the Aggregate Loan Commitment to the Aggregate Receivables Commitment; provided, however, that (x) the Company may not deliver a Change in Commitment Notice (as hereafter defined) to the Agent to reallocate Commitments pursuant to this Section 2.5(b) more than four times in any consecutive 12-month period, (y) the Aggregate Receivables Commitment may not exceed $250,000,000 at any time, and (z) the Aggregate Loan Commitment may not be reduced to less than $125,000,000 pursuant to this Section 2.5(b) at any time. "(c) Procedures. (i) The Company may effect the termination, reduction or reallocation of the Aggregate Loan Commitment or the Aggregate Receivables Commitment by delivering a fully completed notice (a "Change in Commitment Notice") to the Agent substantially in the form of Exhibit H not less than three Business Days' prior to the date of the requested termination, reduction or reallocation. "(ii) Promptly after receipt of any Change in Commitment Notice (and in no event later than the end of the following Business Day), the Agent shall notify each Bank and the Transfer and Administration Agent thereof. In the case of any reduction, termination or reallocation of the Aggregate Receivables Commitment, the Agent shall directly contact the Transfer and Administration Agent for any relevant information. "(iii) Any partial reduction or reallocation of a Commitment shall be in an aggregate minimum amount of $10,000,000 for each such Commitment, and integral multiples of $1,000,000 in excess of that amount for each such Commitment. Any reduction or reallocation of any Commitment shall be applied to each Bank in accordance with such Bank's Pro Rata Share thereof. -2- All accrued commitment fees to, but not including the effective date of any termination of any Commitment, shall be paid on the effective date of such termination. "(iv) No reduction, termination or reallocation of any Commitments shall be permitted if, after giving effect thereto and to any prepayments made on the effective date thereof, (A) the outstanding principal amount of the Loans hereunder would exceed the Aggregate Loan Commitment; or (B) the Total Outstanding Investment would exceed the Aggregate Receivables Commitment. "(v) Concurrently with any termination, reduction or reallocation of the Aggregate Loan Commitment, the Company shall sign such amended Notes as requested by the Banks through the Agent to reflect such change." 2.4 A new Section 2.9(c) is inserted into the Agreement immediately following Section 2.9(b) as follows: "(c) The Company shall pay to the Agent such fees as may from time to time be agreed upon between the Company and the Agent." 2.5 Section 4.2(b) of the Agreement is amended and restated in its entirety as follows: "(b) The representations and warranties of the Company contained in any Loan Document (except the representation and warranty contained in Section 5.9 and, in the case of a borrowing of Loans where the aggregate principal amount of the Loans being made on that Funding Date equals or is less than the aggregate principal amount of Loans maturing on that Funding Date, the representation and warranty contained in Section 5.11), shall be true, correct and complete in all material respects on and as of that Funding Date, to the same extent as though made on and as of that Funding Date; and" 2.6 Section 7.6 of the Agreement is amended by deleting "$736,000,000" and inserting "$655,000,000" in lieu thereof. 2.7 A new Exhibit H is added to the Agreement in the form of Exhibit H hereto. -3- 3. Representations and Warranties. The Company represents and warrants to the Banks and the Agent: 3.1 Authorization. The execution, delivery and performance of this First Amendment by the Company has been duly authorized by all necessary corporate action by the Company and has been duly executed and delivered by the Company. 3.2 Binding Obligation. This First Amendment and the Agreement are legal, valid and binding agreements of the Company, enforceable in accordance with their respective terms, except to the extent enforceability thereof may be limited by applicable law relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or limiting creditors' rights generally or by the application of general principles of equity. 3.3 No Legal Obstacle to Agreements. Neither the execution of this First Amendment, the making by the Company of any borrowings under the Agreement, as amended hereby, nor the performance of the Agreement by the Company has constituted or resulted in or will constitute or result in a breach of the provisions of any material agreement, or the violation of any law, judgment, decree or governmental order, rule or regulation applicable to the Company, or result in the creation under any material agreement of any security interest, lien, charge, or encumbrance upon any of the assets of the Company. No approval or authorization of any Governmental Person is required to be obtained by the Company to permit the execution, delivery or performance by the Company of this First Amendment, the Agreement as amended hereby, or the transactions contemplated hereby or thereby, or the making of any borrowing by the Company under the Agreement, as amended hereby. 3.4 Incorporation of Certain Representations. The representations and warranties set forth in Section 5 of the Agreement are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date. 3.5 Default. No Default or Event of Default under the Agreement has occurred and is continuing. 4. Conditions, Effectiveness. The effectiveness of this First Amendment shall be subject to the compliance by the Company with its agreements herein contained, and to the delivery -4- of the following to Agent in form and substance satisfactory to Agent: 4.1 Corporate Resolution. A copy of a resolution or resolutions passed by the Board of Directors of the Company, certified by the Secretary or an Assistant Secretary of the Company as being in full force and effect on the effective date of this First Amendment, authorizing the amendments to the Agreement herein provided for and the execution, delivery and performance of this First Amendment and any note or other instrument or agreement required hereunder. 4.2 Authorized Signatories. A certificate, signed by the Secretary or an Assistant Secretary of the Company and dated the date of this First Amendment, as to the incumbency of the person or persons authorized to execute and deliver this First Amendment and any instrument or agreement required hereunder on behalf of the Company. 4.3 Other Evidence. Such other evidence with respect to the Company or any other person as the Agent or any Bank may reasonably request to establish the consummation of the transactions contemplated hereby, the taking of all corporate action in connection with this First Amendment and the Agreement and the compliance with the conditions set forth herein. 5. Miscellaneous. 5.1 Effectiveness of the Agreements. Except as hereby amended, the Agreement shall remain in full force and effect. 5.2 Waivers. This First Amendment is specific in time and in intent and does not constitute, nor should it be construed as, a waiver of any other right, power or privilege under the Agreement, or under any agreement, contract, indenture, document or instrument mentioned in the Agreement; nor does it preclude any exercise thereof or the exercise of any other right, power or privilege, nor shall any future waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned in the Agreement, constitute a waiver of any other default of the same or of any other term or provision. 5.3 Counterparts. This First Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. This First Amendment shall not become effective until the Company, the Banks, the Agent, and Mattel Sales shall have signed a copy hereof, whether the same or -5- counterparts, and the same shall have been delivered to the Agent. 5.4 Jurisdiction. This First Amendment, and any instrument or agreement required hereunder, shall be governed by and construed under the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. MATTEL, INC. By /s/ William Stavro --------------------------- Vice President and Treasurer AGENT BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By /s/ Kay Warren --------------------------- KAY WARREN Vice President BANKS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Robert W. Troutman --------------------------- ROBERT W. TROUTMAN Vice President ABN AMRO BANK N.V. By /s/ Ellen M. Coleman --------------------------- Title Assistant Vice President By /s/ J. Alexander Pruijs --------------------------- Title Vice President (Signatures continue) -6- THE BANK OF CALIFORNIA, N.A. By /s/ Thomas H. Tegart --------------------------- Title Vice President BANQUE NATIONALE DE PARIS By /s/ Clive Bettles --------------------------- Title Vice President By /s/ Rafael C. Lumanlan --------------------------- Title Vice President CHEMICAL BANK By /s/ John J. Huber III --------------------------- Title: Managing Director CONTINENTAL BANK N.A. By /s/ Donald Hartmann --------------------------- Title Vice President DRESDNER BANK AG, Los Angeles Agency By /s/ Barbara J. Readick --------------------------- Title Vice President By /s/ Dennis G. Blank --------------------------- Title Assistant Vice President (Signatures continue) -7- THE FIRST NATIONAL BANK OF BOSTON By /s/ J. Peter Mitchell --------------------------- Title Director MANUFACTURERS & TRADERS TRUST CO. By /s/ Geoffery R. Fenn --------------------------- Title Vice President MARINE MIDLAND BANK By /s/ Mary Ann Tappero --------------------------- Title Vice President NATIONSBANK OF TEXAS, N.A., as a Bank and as Transfer and Administration Agent. By /s/ J. Blake Seaton --------------------------- Title Vice President PNC BANK, NATIONAL ASSOCIATION By /s/ John R. Heskett --------------------------- Title Commercial Banking Officer (Signatures continue) -8- ISTITUTO BANCARIO SAN PAOLO di TORINO SpA By /s/ Roberto Gorlier --------------------------- Title Branch Manager By /s/ Glen Binder --------------------------- Title Assistant Vice President TORONTO-DOMINION (TEXAS), INC. By /s/ Warren Finlay --------------------------- Title Vice President -9- EXHIBIT H TO FIRST AMENDMENT ---------------------------- EXHIBIT H --------- CHANGE IN COMMITMENTS NOTICE ---------------------------- For Multi-Year Facility and Transfer and Administration Agreement TO: Bank of America National Trust and Savings Association, as Agent 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Global Agency NationsBank of Texas, N.A., as Agent 444 South Flower Street, Suite 1500 Los Angeles, Ca 90071-2901 Attn: J. Blake Seaton Gentlemen: Pursuant to (a) Section 2.5 of that certain Credit Agreement (Multi-Year Facility) dated as of March 18, 1994, as amended (the "Credit Agreement") among Mattel, Inc., a Delaware corporation (the "Company"), the Banks named therein (the "Banks") and Bank of America National Trust and Savings Association, as Agent (the "Agent") and/or (b) Section 2.11 of that certain Amended and Restated Transfer and Administration Agreement dated as of March 19, 1994, as amended, among Mattel Sales Corp., as transferor, the Company, as guarantor and servicer, the banks named therein, and NationsBank of Texas, N.A., as Transfer and Administration Agent, please effect the following changes in the Aggregate Receivables Commitment/Facility Limit and/or the Aggregate Loan Commitment: 1. Effective Date of Change: ------------------------ __________ __, 19__ 2. Requested Change: ---------------- a. Please permanently reduce the [Aggregate Receivables Commitment/Facility Limit] [Aggregate Loan Commitment] by $___________. H - 1 b. Please permanently terminate the [Aggregate Receivables Commitment] [Aggregate Loan Commitment]. c. Please reallocate $___________ from the [Aggregate Receivables Commitment/Facility Limit] [Aggregate Loan Commitment] to the [Aggregate Loan Commitment] [Aggregate Receivables Commitment/Facility Limit]. 3. Summary of Changes: ------------------ Before Change After Change in Commitment/ in Commitment/ Facility Limit: Facility Limit: -------------- -------------- Aggregate Loan Commitment/Facility Limit: - ---------------------------------------- Aggregate Loan Commitment $_____________ $_____________ Aggregate Outstandings $_____________ $_____________ Aggregate Receivables Commitment/Facility Limit: - ----------------------------------------------- Aggregate Receivables Commitment/Facility Limit $_____________ $_____________ Total Outstanding Investment $_____________ $_____________ Unless otherwise defined herein, capitalized terms used herein have the meanings assigned to them in the Agreement. "Facility Limit" is used herein as defined in the above-referenced Amended and Restated Transfer and Administration Agreement. DATED: __________________ MATTEL, INC. By _______________________ Name _____________________ Title ____________________ *Signature required only MATTEL SALES CORP.* when Aggregate Receivables Commitment changed By _______________________ Name _____________________ Title ____________________ H - 2 CONSENT OF MATTEL SALES CORP. ----------------------------- The undersigned Mattel Sales Corp. hereby consents to the foregoing First Amendment to Credit Agreement (Multi-Year Facility) dated as of May 17, 1994, and reaffirms the Continuing Guaranty (Multi-Year Facility) dated as of March 18, 1994. Dated: May 17, 1994 MATTEL SALES CORP. By: /s/ William Stavro --------------------------- Title: Vice President and Treasurer EX-99.2 3 1ST AMENDMENT TO 364-DAY CREDIT AGREEMENT EXHIBIT 99.2 FIRST AMENDMENT TO ------------------ CREDIT AGREEMENT (364-DAY FACILITY) ----------------------------------- THIS FIRST AMENDMENT TO CREDIT AGREEMENT (364-DAY FACILITY) (this "First Amendment") is dated as of May 17, 1994 and is entered into by and among MATTEL, INC., a Delaware corporation (the "Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (the "Banks"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the Banks (the "Agent") and amends the Credit Agreement (364-Day Facility) dated as of March 18, 1994 among the Company, the Banks and the Agent (the "Agreement"). RECITAL ------- The Company has requested that the Banks and the Agent amend the Agreement, and the Banks and Agent are willing to amend the Agreement on the terms and conditions set forth herein. NOW, THEREFORE, the parties hereto agree as follows: 1. Terms. All capitalized terms used herein have the same meanings as in the Agreement unless otherwise defined herein. All references to the Agreement shall mean the Agreement as hereby amended. 2. Amendments. The parties hereto agree that the Agreement is amended as follows: 2.1 The definition of "Certificate of Deposit Rate" within the definition of "CD Rate" in Section 1.1 of the Agreement is amended by deleting "Reference Banks" on the next-to- last line thereof and inserting "Agent" in lieu thereof. 2.2 The proviso to Section 2.1 of the Agreement is amended by amending and restating clause (ii) thereof in its entirety as follows: "(ii) if at any time between November 1 of each year and the Termination Date (the "Rating Period") the rating on the Company's long-term unsecured Indebtedness by any one of S&P, Moody's or Duff & Phelps is below investment grade, there shall be no Loans outstanding for 30 consecutive days during such Rating Period; provided, that if any of such ratings is first downgraded below investment grade within 30 consecutive days of the end of such Rating Period, there shall be no Loans outstanding from and after the -1- date of such downgrade through and including the Termination Date, and in each case the Company shall prepay any outstanding Loans pursuant to Section 2.6(b) to the extent required to not have any Loans outstanding during such period; and" 2.3 Section 2.5 of the Agreement is amended and restated in its entirety as follows: "2.5 Termination or Reduction of Aggregate Loan Commitment. "(a) Termination or Reduction. The Company may from time to time, in accordance with Section 2.5(b), reduce or terminate the Aggregate Loan Commitment. Any change in the Aggregate Multi-Year Commitment or the Aggregate Receivables Commitment shall be effected pursuant to the Multi-Year Facility. "(b) Procedures. (i) The Company may effect the termination or reduction of the Aggregate Loan Commitment by delivering a written notice to the Agent, specifying the date and amount of such termination or reduction, not less than three Business Days' prior to the date of the requested termination or reduction. "(ii) Promptly after receipt of such notice (and in no event later than the end of the following Business Day), the Agent shall notify each Bank thereof. "(iii) Any partial reduction of the Aggregate Loan Commitment shall be in an aggregate minimum amount of $10,000,000, and integral multiples of $1,000,000 in excess of that amount. Any reduction of the Aggregate Loan Commitment shall be applied to each Bank in accordance with such Bank's Pro Rata Share thereof. Any reduction or termination of the Aggregate Loan Commitment shall be permanent. All accrued commitment fees to, but not including the effective date of any termination of the Aggregate Loan Commitment, shall be paid on the effective date of such termination. "(iv) No reduction or termination of the Aggregate Loan Commitment shall be permitted if, after giving effect thereto and to any prepayments made on the effective date thereof, the outstanding principal amount of the Loans hereunder would exceed the Aggregate Loan Commitment. -2- "(v) Concurrently with any termination or reduction of the Aggregate Loan Commitment, the Company shall sign such amended Notes as requested by the Banks through the Agent." 2.4 Section 4.2(b) of the Agreement is amended and restated in its entirety as follows: "(b) The representations and warranties of the Company contained in any Loan Document (except the representation and warranty contained in Section 5.9 and, in the case of a borrowing of Loans where the aggregate principal amount of the Loans being made on that Funding Date equals or is less than the aggregate principal amount of Loans maturing on that Funding Date, the representation and warranty contained in Section 5.11), shall be true, correct and complete in all material respects on and as of that Funding Date, to the same extent as though made on and as of that Funding Date; and" 2.5 Section 7.6 of the Agreement is amended by deleting "$736,000,000" and inserting "$655,000,000" in lieu thereof. 3. Representations and Warranties. The Company represents and warrants to the Banks and the Agent: 3.1 Authorization. The execution, delivery and performance of this First Amendment by the Company has been duly authorized by all necessary corporate action by the Company and has been duly executed and delivered by the Company. 3.2 Binding Obligation. This First Amendment and the Agreement are legal, valid and binding agreements of the Company, enforceable in accordance with their respective terms, except to the extent enforceability thereof may be limited by applicable law relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or limiting creditors' rights generally or by the application of general principles of equity. 3.3 No Legal Obstacle to Agreements. Neither the execution of this First Amendment, the making by the Company of any borrowings under the Agreement, as amended hereby, nor the performance of the Agreement by the Company has constituted or resulted in or will constitute or result in a breach of the provisions of any material agreement, or the violation of any law, judgment, decree or governmental order, rule or regulation -3- applicable to the Company, or result in the creation under any material agreement of any security interest, lien, charge, or encumbrance upon any of the assets of the Company. No approval or authorization of any Governmental Person is required to be obtained by the Company to permit the execution, delivery or performance by the Company of this First Amendment, the Agreement as amended hereby, or the transactions contemplated hereby or thereby, or the making of any borrowing by the Company under the Agreement, as amended hereby. 3.4 Incorporation of Certain Representations. The representations and warranties set forth in Section 5 of the Agreement are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date. 3.5 Default. No Default or Event of Default under the Agreement has occurred and is continuing. 4. Conditions, Effectiveness. The effectiveness of this First Amendment shall be subject to the compliance by the Company with its agreements herein contained, and to the delivery of the following to Agent in form and substance satisfactory to Agent: 4.1 Corporate Resolution. A copy of a resolution or resolutions passed by the Board of Directors of the Company, certified by the Secretary or an Assistant Secretary of the Company as being in full force and effect on the effective date of this First Amendment, authorizing the amendments to the Agreement herein provided for and the execution, delivery and performance of this First Amendment and any note or other instrument or agreement required hereunder. 4.2 Authorized Signatories. A certificate, signed by the Secretary or an Assistant Secretary of the Company and dated the date of this First Amendment, as to the incumbency of the person or persons authorized to execute and deliver this First Amendment and any instrument or agreement required hereunder on behalf of the Company. 4.3 Other Evidence. Such other evidence with respect to the Company or any other person as the Agent or any Bank may reasonably request to establish the consummation of the transactions contemplated hereby, the taking of all corporate -4- action in connection with this First Amendment and the Agreement and the compliance with the conditions set forth herein. 5. Miscellaneous. 5.1 Effectiveness of the Agreements. Except as hereby amended, the Agreement shall remain in full force and effect. 5.2 Waivers. This First Amendment is specific in time and in intent and does not constitute, nor should it be construed as, a waiver of any other right, power or privilege under the Agreement, or under any agreement, contract, indenture, document or instrument mentioned in the Agreement; nor does it preclude any exercise thereof or the exercise of any other right, power or privilege, nor shall any future waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned in the Agreement, constitute a waiver of any other default of the same or of any other term or provision. 5.3 Counterparts. This First Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. This First Amendment shall not become effective until the Company, the Banks, the Agent, and Mattel Sales shall have signed a copy hereof, whether the same or counterparts, and the same shall have been delivered to the Agent. 5.4 Jurisdiction. This First Amendment, and any instrument or agreement required hereunder, shall be governed by and construed under the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. MATTEL, INC. By /s/ William Stavro --------------------------- WILLIAM STAVRO Vice President and Treasurer (Signatures continue) -5- AGENT BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By /s/ Kay Warren --------------------------- KAY WARREN Vice President BANKS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Robert W. Troutman --------------------------- ROBERT W. TROUTMAN Vice President ABN AMRO BANK N.V. By /s/ J. Alexander Pruijs --------------------------- Title Vice President By /s/ Ellen M. Coleman --------------------------- Title Assistant Vice President THE BANK OF CALIFORNIA, N.A. By /s/ Thomas H. Tegart --------------------------- Title Vice President BANQUE NATIONALE DE PARIS By /s/ Clive Bettles --------------------------- Title Vice President By /s/ Rafael Lumanlan --------------------------- Title Vice President (Signatures continue) -6- CHEMICAL BANK By /s/ John J. Huber III --------------------------- Title: Managing Director CONTINENTAL BANK N.A. By /s/ Donald Hartmann --------------------------- Title Vice President DRESDNER BANK AG, Los Angeles Agency By /s/ Barbara J. Readick --------------------------- Title Vice President By /s/ Dennis G. Blank --------------------------- Title Assistant Vice President THE FIRST NATIONAL BANK OF BOSTON By /s/ J. Peter Mitchell --------------------------- Title Director MANUFACTURERS & TRADERS TRUST CO. By /s/ Geoffery R. Fenn --------------------------- Title Vice President MARINE MIDLAND BANK By /s/ Mary Ann Tappero --------------------------- Title Vice President (Signatures continue) -7- NATIONSBANK OF TEXAS, N.A., as a Bank and as Transfer and Administration Agent. By /s/ J. Blake Seaton --------------------------- Title Vice President PNC BANK, NATIONAL ASSOCIATION By /s/ John R. Heskett --------------------------- Title Commercial Banking Officer ISTITUTO BANCARIO SAN PAOLO di TORINO SpA By /s/ Roberto Gorlier --------------------------- Title Branch Manager By /s/ Glen Binder --------------------------- Title Assistant Vice President TORONTO-DOMINION (TEXAS), INC. By /s/ Warren Finlay --------------------------- Title Vice President -8- CONSENT OF MATTEL SALES CORP. The undersigned Mattel Sales Corp. hereby consents to the foregoing First Amendment to Credit Agreement (364-Day Facility) dated as of May 17, 1994, and reaffirms the Continuing Guaranty (364-Day Facility) dated as of March 18, 1994. Dated: May 17, 1994 MATTEL SALES CORP. By: /s/ William Stavro --------------------------- Title: Vice President and Treasurer -9- EX-99.3 4 2ND AMENDMENT TO MULTI-YEAR CREDIT AGREEMENT EXHIBIT 99.3 SECOND AMENDMENT TO CREDIT AGREEMENT (MULTI-YEAR FACILITY) THIS SECOND AMENDMENT TO CREDIT AGREEMENT (MULTI- YEAR FACILITY (this "Second Amendment") is dated as of September 30, 1994 and is entered into by and among MATTEL, INC., a Delaware corporation (the "Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (individually referred to herein as a "Bank" and collectively as the "Banks") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as the agent for the Banks (the "Agent") and amends the Credit Agreement (Multi-Year Facility) dated as of March 18, 1994 among the Company, the Banks and the Agent, as amended by the First Amendment to Credit Agreement dated as of May 17, 1994 (the "Credit Agreement"). PRELIMINARY STATEMENT. The parties to the Credit Agreement desire to amend the Credit Agreement. In consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Terms. All capitalized terms used herein shall have the same meanings as in the Credit Agreement unless otherwise defined herein. All references to the Loan Documents shall mean the Loan Documents as hereby amended. 2. Amendments. The parties hereto agree that the Credit Agreement is amended as follows: 2.1 The definition of "Future Indebtedness" in Section 1.1 of the Agreement is amended and restated in its entirety as follows and realphabetized in Section 1.1 as appropriate: "Debt" means unsecured Indebtedness for borrowed money by the Company or its Domestic Material Subsidiaries having maturities in excess of one year, excluding (i) intercompany Indebtedness, (ii) Indebtedness permitted to be secured under Section 7.2, (iii) Indebtedness incurred under the Transfer and -1- Administration Agreement and (iv) Indebtedness hereunder and under the 364-Day Facility." 2.2 Section 7.1(b) of the Credit Agreement is amended and restated in its entirety as follows: "(b) Additional Debt incurred since January 1, 1994 not exceeding, on a cumulative basis, the following amounts for the calendar years indicated: Cumulative Additional Year Debt Permitted 1994 $150,000,000 1995 $300,000,000 1996 $450,000,000 1997 $600,000,000 provided, that any such Debt (x) will not contain any terms and conditions that in the aggregate are more restrictive than the terms and conditions contained in this Agreement (y) will not cause the Company to be in violation of Sections 7.5, 7.6, or 7.7 of this Agreement, and (z) will not exceed an additional $150,000,000 in the aggregate in any one calendar year at any time." 2.3 Section 7.6 of the Credit Agreement is amended and restated in its entirety as follows: "7.6 Consolidated Tangible Net Worth. The Company shall not permit its Consolidated Tangible Net Worth at the end of any fiscal quarter to be less than $655,000,000 plus 50% of each fiscal quarter's Consolidated Net Income subsequent to December 31, 1993 (but without reduction for any losses) plus 100% of any Net Issuance Proceeds less an amount equal to the Company's cost of any repurchases of the Company's capital stock or any goodwill due to acquisitions subsequent to December 31, 1993 in an aggregate amount not exceeding $125,000,000." 3. Representations and Warranties. The Company represents and warrants to the Banks, the Agent: 3.1 Authorization. The execution, delivery and performance of this Second Amendment by the Company has been duly authorized by all necessary corporate action by the Company and has been duly executed and delivered by the Company. 3.2 Binding Obligation. This Second Amendment and the Loan Documents are legal, valid and binding agreements of the Company, enforceable in accordance with their respective terms, except to the extent enforceability thereof may be limited by applicable law relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or limiting creditors' rights -2- generally or by the application of general principles of equity. 3.3 No Legal Obstacle to Agreements. Neither the execution of this Second Amendment, the making by the Company of any borrowings under the Credit Agreement, as amended hereby, nor the performance of the Loan Documents by the Company has constituted or resulted in or will constitute or result in a breach of the provisions of any material agreement, or the violation of any law, judgment, decree or governmental order, rule or regulation applicable to the Company, or result in the creation under any material agreement of any security interest, lien, charge, or encumbrance upon any of the assets of the Company. No approval or authorization of any governmental authority is required to be obtained by the Company to permit the execution, delivery or performance by the Company of this Second Amendment, the Loan Documents, as amended hereby, or the transactions contemplated hereby or thereby, or the making of any borrowing by the Company under the Credit Agreement, as amended hereby. 3.4 Incorporation of Certain Representations. The representations and warranties set forth in Section 5 of the Credit Agreement are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date. 3.5 Default. No Default or Event of Default under the Credit Agreement has occurred and is continuing. 4. Conditions, Effectiveness. The effectiveness of this Second Amendment shall be subject to the compliance by the Company with its agreements herein contained, and to the delivery of the following to Agent in form and substance satisfactory to Agent: 4.1 Corporate Resolution. A copy of a resolution or resolutions passed by the Board of Directors of the Company, certified by the Secretary or an Assistant Secretary of the Company as being in full force and effect on the effective date of this Second Amendment, authorizing the amendments to the Loan Documents herein provided for and the execution, delivery and performance of this Second Amendment and any other instrument or agreement required hereunder. -3- 4.2 Authorized Signatories. A certificate, signed by the Secretary or an Assistant Secretary of the Company and dated the date of this Second Amendment, as to the incumbency of the person or persons authorized to execute and deliver this Second Amendment and any instrument or agreement required hereunder on behalf of the Company. 4.3 Other Evidence. Such other evidence with respect to the Company or any other person as the Agent or any Bank may reasonably request to establish the consummation of the transactions contemplated hereby, the taking of all corporate action in connection with this Second Amendment and the Loan Documents and the compliance with the conditions set forth herein. 5. Miscellaneous. 5.1 Effectiveness of the Agreements. Except as hereby amended, the Loan Documents shall remain in full force and effect. This Second Amendment shall be effective September 30, 1994. 5.2 Waivers. This Second Amendment is specific in time and in intent and does not constitute, nor should it be construed as, a waiver of any other right, power or privilege under the Loan Documents, or under any agreement, contract, indenture, document or instrument mentioned in the Loan Documents; nor does it preclude any exercise thereof or the exercise of any other right, power or privilege, nor shall any future waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned in the Loan Documents, constitute a waiver of any other default of the same or of any other term or provision. 5.3 Consent of Transfer and Administration Agent. NationsBank of Texas, N.A. consents and agrees to the terms hereof in its capacity as Transfer and Administration Agent. 5.4 Counterparts. This Second Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. This Second Amendment shall not become effective until the Company, the Banks, the Agent and Mattel Sales shall have signed a copy hereof, whether the same or counterparts, and the same shall have been delivered to the Agent. -4- 5.5 Jurisdiction. This Second Amendment, and any instrument or agreement required hereunder, shall be governed by and construed under the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment by their duly authorized officers as of the day and year first above written. MATTEL, INC. By /s/ William Stavro --------------------------- Vice President and Treasurer AGENT BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By /s/ Kay Warren --------------------------- Vice President BANKS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Robert W. Troutman --------------------------- ROBERT W. TROUTMAN Vice President ABN AMRO BANK N.V. By /s/ J. Alexander Pruijs --------------------------- Title Vice President By /s/ John A. Miller --------------------------- Title Vice President THE BANK OF CALIFORNIA, N.A. By /s/ Thomas H. Tegart --------------------------- Title Vice President (Signatures continue) -5- BANQUE NATIONALE DE PARIS By /s/ Clive Bettles --------------------------- Title Vice President By /s/ Deborah Gohh --------------------------- Title Vice President CHEMICAL BANK By /s/ Susie Kjorlien --------------------------- Title: Vice President BANK OF AMERICA ILLINOIS (FORMERLY NAMED CONTINENTAL BANK N.A.) By /s/ Robert W. Troutman --------------------------- Title Vice President DRESDNER BANK AG, Los Angeles Agency By /s/ Jon M. Bland --------------------------- Title Senior Vice President By /s/ Dennis G. Blank --------------------------- Title Vice President THE FIRST NATIONAL BANK OF BOSTON By /s/ Debra Zurka --------------------------- Title Vice President MANUFACTURERS & TRADERS TRUST CO. By /s/ Geoffery R. Fenn --------------------------- Title Vice President (Signatures continue) -6- MARINE MIDLAND BANK By /s/ Mary Ann Tappero --------------------------- Title Vice President NATIONSBANK OF TEXAS, N.A., as a Bank and as Transfer and Administration Agent By /s/ J. Blake Seaton --------------------------- Title Vice President PNC BANK, NATIONAL ASSOCIATION By /s/ Ted A. Dunn --------------------------- Title Assistant Vice President ISTITUTO BANCARIO SAN PAOLO di TORINO SpA By /s/ Donald W. Brown --------------------------- Title Branch Manager By /s/ Glen Binder --------------------------- Title Vice President TORONTO-DOMINION (TEXAS), INC. By /s/ Diane Bailey --------------------------- Title Vice President -7- CONSENT OF MATTEL SALES CORP. The undersigned Mattel Sales Corp. hereby consents to the foregoing Second Amendment to Credit Agreement (Multi-Year Facility) dated as of September 30, 1994, and reaffirms the Continuing Guaranty (Multi-Year Facility) dated as of March 18, 1994 and the Mattel Sales Security Agreement dated as of March 18, 1994 executed and delivered by Mattel Sales Corp. Date: September 30, 1994 MATTEL SALES CORP. By: /s/ William Stavro --------------------------- Title: Vice President and Treasurer -8- EX-99.4 5 2ND AMENDMENT TO 364-DAY CREDIT AGREEMENT EXHIBIT 99.4 SECOND AMENDMENT TO CREDIT AGREEMENT (364-DAY FACILITY) THIS SECOND AMENDMENT TO CREDIT AGREEMENT (364-DAY FACILITY (this "Second Amendment") is dated as of September 30, 1994 and is entered into by and among MATTEL, INC., a Delaware corporation (the "Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (individually referred to herein as a "Bank" and collectively as the "Banks") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as the agent for the Banks (the "Agent") and amends the Credit Agreement (364-Day Facility) dated as of March 18, 1994 among the Company, the Banks and the Agent, as amended by the First Amendment to Credit Agreement dated as of May 17, 1994 (the "Credit Agreement"). PRELIMINARY STATEMENT. --------------------- The parties to the Credit Agreement desire to amend the Credit Agreement. In consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Terms. All capitalized terms used herein shall have the same meanings as in the Credit Agreement unless otherwise defined herein. All references to the Loan Documents shall mean the Loan Documents as hereby amended. 2. Amendments. The parties hereto agree that the Credit Agreement is amended as follows: 2.1 The definition of "Future Indebtedness" in Section 1.1 of the Agreement is amended and restated in its entirety as follows and realphabetized in Section 1.1 as appropriate: "Debt" means unsecured Indebtedness for borrowed money by the Company or its Domestic Material Subsidiaries having maturities in excess of one year, excluding (i) intercompany Indebtedness, (ii) Indebtedness permitted to be secured under Section 7.2, (iii) Indebtedness incurred under the Transfer and -1- Administration Agreement and (iv) Indebtedness hereunder and under the Multi-Year Facility." 2.2 Section 7.1(b) of the Credit Agreement is amended and restated in its entirety as follows: "(b) Debt in excess of $150,000,000 in the aggregate incurred in any one calendar year, net of paydowns of Debt in such year commencing January 1, 1994; provided that any such Debt so incurred (x) will not contain any terms and conditions that in the aggregate are more restrictive than the terms and conditions contained in this Agreement and (y) will not cause the Company to be in violation of Sections 7.5, 7.6, or 7.7 of this Agreement." 2.3 Section 7.6 of the Credit Agreement is amended and restated in its entirety as follows: "7.6 Consolidated Tangible Net Worth. The Company shall not permit its Consolidated Tangible Net Worth at the end of any fiscal quarter to be less than $655,000,000 plus 50% of each fiscal quarter's Consolidated Net Income subsequent to December 31, 1993 (but without reduction for any losses) plus 100% of any Net Issuance Proceeds less an amount equal to the Company's cost of any repurchases of the Company's capital stock or any goodwill due to acquisitions subsequent to December 31, 1993 in an aggregate amount not exceeding $125,000,000." 3. Representations and Warranties. The Company represents and warrants to the Banks, the Agent: 3.1 Authorization. The execution, delivery and performance of this Second Amendment by the Company has been duly authorized by all necessary corporate action by the Company and has been duly executed and delivered by the Company. 3.2 Binding Obligation. This Second Amendment and the Loan Documents are legal, valid and binding agreements of the Company, enforceable in accordance with their respective terms, except to the extent enforceability thereof may be limited by applicable law relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or limiting creditors' rights -2- generally or by the application of general principles of equity. 3.3 No Legal Obstacle to Agreements. Neither the execution of this Second Amendment, the making by the Company of any borrowings under the Credit Agreement, as amended hereby, nor the performance of the Loan Documents by the Company has constituted or resulted in or will constitute or result in a breach of the provisions of any material agreement, or the violation of any law, judgment, decree or governmental order, rule or regulation applicable to the Company, or result in the creation under any material agreement of any security interest, lien, charge, or encumbrance upon any of the assets of the Company. No approval or authorization of any governmental authority is required to be obtained by the Company to permit the execution, delivery or performance by the Company of this Second Amendment, the Loan Documents, as amended hereby, or the transactions contemplated hereby or thereby, or the making of any borrowing by the Company under the Credit Agreement, as amended hereby. 3.4 Incorporation of Certain Representations. The representations and warranties set forth in Section 5 of the Credit Agreement are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date. 3.5 Default. No Default or Event of Default under the Credit Agreement has occurred and is continuing. 4. Conditions, Effectiveness. The effectiveness of this Second Amendment shall be subject to the compliance by the Company with its agreements herein contained, and to the delivery of the following to Agent in form and substance satisfactory to Agent: 4.1 Corporate Resolution. A copy of a resolution or resolutions passed by the Board of Directors of the Company, certified by the Secretary or an Assistant Secretary of the Company as being in full force and effect on the effective date of this Second Amendment, authorizing the amendments to the Loan Documents herein provided for and the execution, delivery and performance of this Second Amendment and any other instrument or agreement required hereunder. -3- 4.2 Authorized Signatories. A certificate, signed by the Secretary or an Assistant Secretary of the Company and dated the date of this Second Amendment, as to the incumbency of the person or persons authorized to execute and deliver this Second Amendment and any instrument or agreement required hereunder on behalf of the Company. 4.3 Other Evidence. Such other evidence with respect to the Company or any other person as the Agent or any Bank may reasonably request to establish the consummation of the transactions contemplated hereby, the taking of all corporate action in connection with this Second Amendment and the Loan Documents and the compliance with the conditions set forth herein. 5. Miscellaneous. 5.1 Effectiveness of the Agreements. Except as hereby amended, the Loan Documents shall remain in full force and effect. This Second Amendment shall be effective September 30, 1994. 5.2 Waivers. This Second Amendment is specific in time and in intent and does not constitute, nor should it be construed as, a waiver of any other right, power or privilege under the Loan Documents, or under any agreement, contract, indenture, document or instrument mentioned in the Loan Documents; nor does it preclude any exercise thereof or the exercise of any other right, power or privilege, nor shall any future waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned in the Loan Documents, constitute a waiver of any other default of the same or of any other term or provision. 5.3 Consent of Transfer and Administration Agent. NationsBank of Texas, N.A. consents and agrees to the terms hereof in its capacity as Transfer and Administration Agent. 5.4 Counterparts. This Second Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. This Second Amendment shall not become effective until the Company, the Banks, the Agent and Mattel Sales shall have signed a copy hereof, whether the same or counterparts, and the same shall have been delivered to the Agent. -4- 5.5 Jurisdiction. This Second Amendment, and any instrument or agreement required hereunder, shall be governed by and construed under the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment by their duly authorized officers as of the day and year first above written. MATTEL, INC. By /s/ William Stavro ---------------------------- WILLIAM STAVRO Vice President and Treasurer AGENT BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By /s/ Kay Warren ---------------------------- Vice President BANKS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Robert W. Troutman ---------------------------- ROBERT W. TROUTMAN Vice President ABN AMRO BANK N.V. By /s/ J. Alexander Pruijs ---------------------------- Title Vice President By /s/ Ellen M. Coleman ---------------------------- Title Assistant Vice President THE BANK OF CALIFORNIA, N.A. By /s/ Thomas H. Tegart ---------------------------- Title Vice President (Signatures continue) -5- BANQUE NATIONALE DE PARIS By /s/ Clive Bettles ---------------------------- Title Vice President By /s/ Deborah Gohh ---------------------------- Title Vice President CHEMICAL BANK By /s/ Susie Kjorlien ---------------------------- Title: Vice President BANK OF AMERICA ILLINOIS (FORMERLY NAMED CONTINENTAL BANK N.A.) By /s/ Robert W. Troutman ---------------------------- Title Vice President DRESDNER BANK AG, Los Angeles Agency By /s/ Jon M. Bland ---------------------------- Title Senior Vice President By /s/ Dennis G. Blank ---------------------------- Title Vice President THE FIRST NATIONAL BANK OF BOSTON By /s/ Debra Zurka ---------------------------- Title Vice President MANUFACTURERS & TRADERS TRUST CO. By /s/ Geoffery R. Fenn ---------------------------- (Signatures continue) Title Vice President -6- MARINE MIDLAND BANK By /s/ Mary Ann Tappero ---------------------------- Title Vice President NATIONSBANK OF TEXAS, N.A., as a Bank and as Transfer and Administration Agent By /s/ J. Blake Seaton ---------------------------- Title Vice President PNC BANK, NATIONAL ASSOCIATION By /s/ Ted A. Dunn ---------------------------- Title Assistant Vice President ISTITUTO BANCARIO SAN PAOLO di TORINO SpA By /s/ Donald W. Brown ---------------------------- Title Branch Manager By /s/ Glen Binder ---------------------------- Title Vice President TORONTO-DOMINION (TEXAS), INC. By /s/ Frederic B. Hawley ---------------------------- Title Vice President -7- CONSENT OF MATTEL SALES CORP. The undersigned Mattel Sales Corp. hereby consents to the foregoing Second Amendment to Credit Agreement (364-Day Facility) dated as of September 30, 1994, and reaffirms the Continuing Guaranty (364-Day Facility) dated as of March 18, 1994 and the Mattel Sales Security Agreement dated as of March 18, 1994 executed and delivered by Mattel Sales Corp. Date: September 30, 1994 MATTEL SALES CORP. By: /s/ William Stavro ---------------------------- Title: Vice President and Treasurer EX-99.5 6 CREDIT AGREEMENT OF 03/10/95 EXHIBIT 99.5 ================================================================================ CREDIT AGREEMENT Dated as of March 10, 1995 among MATTEL, INC., THE BANKS NAMED HEREIN, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent Arranged By [LOGO OF B of A] BA SECURITIES, INC. ================================================================================ MATTEL INC. CREDIT AGREEMENT TABLE OF CONTENTS
SECTION 1. DEFINITIONS.. 1 1.1 Certain Defined Terms.............................. 1 1.2 Other Definitional Provisions...................... 15 SECTION 2. THE COMMITMENT 15 2.1 The Aggregate Facilities Commitment................ 15 2.2 Loan Accounts and Notes............................ 16 2.3 Borrowing Procedure................................ 16 2.4 Conversion and Continuation Elections.............. 17 2.5 Adjustments of Aggregate Loan Commitment and Aggregate Receivables Commitment................... 19 2.6 Prepayments........................................ 20 2.7 Repayment of Loans................................. 20 2.8 Interest on the Loans.............................. 20 2.9 Fees............................................... 21 2.10 Calculation of Interest and Fees................... 22 2.11 Payments by the Company............................ 22 2.12 Payments by the Banks to the Agent................. 23 2.13 Sharing of Payments, Etc........................... 24 SECTION 3. PAYMENTS IN GENERAL. 24 3.1 Taxes.............................................. 24 3.2 Capital Adequacy................................... 27 3.3 Illegality......................................... 28 3.4 Increased Costs and Reduction of Return............ 29 3.5 Funding Losses..................................... 29 3.6 Inability to Determine Rates....................... 30 3.7 Survival........................................... 30 SECTION 4. CONDITIONS PRECEDENT 30 4.1 Conditions to Effectiveness........................ 30 4.2 Conditions to All Loans............................ 33 SECTION 5. REPRESENTATIONS AND WARRANTIES. 34 5.1 Organization and Powers............................ 34 5.2 Good Standing...................................... 34 5.3 Subsidiaries....................................... 34 5.4 Authorization of Borrowing......................... 34 5.5 No Conflict........................................ 35 5.6 Governmental Consents.............................. 35 5.7 Binding Obligation................................. 35 5.8 Financial Condition................................ 35
-i- 5.9 Changes, Etc....................................... 36 5.10 Title to Properties................................ 36 5.11 Litigation; Adverse Facts.......................... 36 5.12 Payment of Taxes................................... 36 5.13 Agreements......................................... 37 5.14 Performance........................................ 37 5.15 Governmental Regulation............................ 37 5.16 Employee Benefit Plans............................. 37 5.17 Environmental Matters.............................. 37 5.18 Disclosure......................................... 37 5.19 Subordination Agreements........................... 38 SECTION 6. AFFIRMATIVE COVENANTS. 38 6.1 Reporting and Information Requirements............. 38 6.2 Corporate Existence, etc........................... 41 6.3 Payment of Taxes and Claims; Tax Consolidation..... 41 6.4 Maintenance of Properties; Insurance............... 42 6.5 Inspection of Property and Books and Records....... 42 6.6 Use of Proceeds of Loans........................... 43 6.7 Environmental Laws................................. 43 6.8 Subordination Agreements........................... 43 SECTION 7. NEGATIVE COVENANTS. 43 7.1 Indebtedness....................................... 44 7.2 Liens.............................................. 44 7.3 Restriction on Fundamental Changes................. 44 7.4 Sale or Discount of Receivables.................... 45 7.5 Consolidated Funded Indebtedness to Total Capitalization..................................... 45 7.6 Consolidated Tangible Net Worth.................... 45 7.7 Interest Coverage Ratio............................ 45 7.8 ERISA.............................................. 46 7.9 Amendments or Waivers Under Transfer and Administration Agreement........................... 46 7.10 Margin Regulations................................. 46 7.11 Independence of Covenants.......................... 46 SECTION 8. EVENTS OF DEFAULT. 46 8.1 Events of Default.................................. 46 8.2 Remedies........................................... 49 8.3 Rights Not Exclusive............................... 50 SECTION 9. THE AGENT 50 9.1 Appointment and Authorization...................... 50 9.2 Delegation of Duties............................... 50 9.3 Liability of Agent................................. 50 9.4 Reliance by Agent.................................. 51
-ii- 9.5 Notice of Default.................................. 52 9.6 Credit Decision.................................... 52 9.7 Indemnification.................................... 52 9.8 Agent in Individual Capacity....................... 53 9.9 Successor Agent.................................... 54 SECTION 10. MISCELLANEOUS 54 10.1 Assignments, Participations, etc................... 54 10.2 Survival of Warranties and of Certain Agreements... 57 10.3 Failure or Indulgence Not Waiver; Remedies Cumulative................................ 57 10.4 Fees and Expenses.................................. 58 10.5 Set Off............................................ 58 10.6 Notices............................................ 58 10.7 Severability....................................... 59 10.8 Amendments and Waivers............................. 59 10.9 Obligations Several................................ 60 10.10 Certain Changes.................................... 60 10.11 Headings........................................... 60 10.12 Applicable Law..................................... 60 10.13 Successors and Assigns............................. 61 10.14 Counterparts....................................... 61 10.15 Indemnity.......................................... 61 SIGNATURE PAGES.................................... S-1
EXHIBITS - -------- A Form of Note B Form of Notice of Borrowing C Form of Notice of Conversion/Continuation D Form of Officer's Certificate E Form of Opinion of Assistant General Counsel of Company F-1 Form of Fisher-Price Continuing Guaranty F-2 Form of Mattel Sales Continuing Guaranty G-1 Form of Fisher-Price Subordination Agreements G-2 Form of Mattel Sales Subordination Agreements H Form of Change in Commitments I Form of Notice of Assignment and Acceptance SCHEDULES - --------- 1.1 Loan Commitments and Pro Rata Share 5.3 Material Subsidiaries of Company 7.2 Certain Liens 10.6 Addresses for Notices and Lending Offices -iii- MATTEL, INC. ------------ CREDIT AGREEMENT ---------------- This Credit Agreement (this "Agreement") is dated as of March 10, 1995 and is entered into by and among MATTEL, INC., a Delaware corporation (the "Company"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (individually referred to herein as a "Bank" and collectively as the "Banks"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as the agent for the Banks (the "Agent"). SECTION 1. DEFINITIONS. ----------- 1.1 Certain Defined Terms. The following terms used in this Agreement --------------------- shall have the following meanings: "Affiliate", as applied to any Person, means any other Person directly --------- or indirectly controlling, controlled by or under common control with, that Person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. "Agent" has the meaning assigned to that term in the introduction to ----- this Agreement. "Agent-Related Persons" means Bank of America and any successor agent --------------------- arising under Section 9.9, together with their respective Affiliates (including, in the case of Bank of America, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Aggregate Facilities Commitment" means the maximum amount which may ------------------------------- be outstanding at any one time under this Agreement and the Transfer and Administration Agreement. "Aggregate Loan Commitment" means the aggregate commitments of the ------------------------- Banks to make Loans under this Agreement. "Aggregate Receivables Commitment" means the aggregate commitments of -------------------------------- the Banks party to the Transfer and Administration Agreement to purchase receivables under such Agreement. "Agreement" means this Credit Agreement, as it may hereafter be --------- amended, supplemented, restated or otherwise modified from time to time. "Applicable Amount" means, for each type of Loan, the commitment fee ----------------- and the utilization fee, the amount (expressed in -1- basis points per annum) set forth in the chart below opposite the Applicable Level then in effect: (Basis Points Per Annum)
Applicable Commitment Eurodollar CD Utiliza- Level Fee Rate Rate tion Fee Loans Loans ============================================================ 1 9.50 25.00 37.50 5.00 2 11.00 30.00 42.50 5.00 3 13.75 37.50 50.00 5.00 4 17.50 45.00 57.50 5.00 5 35.00 75.00 87.50 0 ============================================================
"Applicable Level" means Level 1, Level 2, Level 3, Level 4 or Level ---------------- 5, whichever is then applicable, as determined from the Company's unsecured long-term debt ratings then in effect as announced by each rating agency. Any change in the Applicable Level shall become effective upon any public announcement of any change in any rating that requires a change in the Level in accordance with the definitions of Level 1, Level 2, Level 3, Level 4 or Level 5. "Arranger" means BA Securities, Inc., a Delaware corporation. -------- "Availability Period" means the period from the Effective Date to ------------------- but excluding the Termination Date. "Bank" has the meaning assigned to that term in the introduction to ---- this Agreement. "Bank Affiliate" means a Person engaged primarily in the business of -------------- commercial banking and that is a Subsidiary of a Bank or of a Person of which a Bank is a Subsidiary. "Bank of America" means Bank of America National Trust and Savings --------------- Association. "Base Rate" means a fluctuating rate per annum which is the higher of --------- (a) the Federal Funds Rate plus one-half of one percent (1/2%) per annum and (b) the Reference Rate. "Base Rate Loans" means Loans made by the Banks bearing interest at --------------- rates determined by reference to the Base Rate. "Business Day" means any day other than a Saturday, Sunday or other ------------ day on which commercial banks in New York City, New York or San Francisco, California are authorized or required by law to close and, if the applicable Business Day relates to -2- any Eurodollar Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market. "Capital Assets" means, as at any date of determination, those assets -------------- of a Person that would, in conformity with GAAP, be classified as property, plant or equipment on the balance sheet of that Person. "Capital Lease" as applied to any Person, means any lease of any ------------- property (whether real, personal or mixed) by that Person as lessee which would, in conformity with GAAP, be required to be accounted for as a capital lease on the balance sheet of that Person other than, in the case of the Company or any of its Subsidiaries, any such lease under which the Company or any of its Subsidiaries is the lessor. "CD Rate" means, for each Interest Period in respect of CD Rate Loans ------- comprising a part of the same borrowing, the rate of interest (rounded upward to the nearest 1/100th of 1%) determined pursuant to the following formula: CD Rate = Certificate of Deposit Rate + Assessment --------------------------- 1.0 - Reserve Percentage Rate Where: "Assessment Rate" means, for any day of such Interest Period, the --------------- rate determined by the Agent as equal to the annual assessment rate in effect on such day payable to the FDIC by a member of the Bank Insurance Fund that is classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification within the meaning of 12 C.F.R. (S)327.3(d)) for insuring time deposits at offices of such member in the United States; or, in the event that the FDIC shall at any time hereafter cease to assess time deposits based upon such classifications or successor classifications, equal to the maximum annual assessment rate in effect on such day that is payable to the FDIC by commercial banks (whether or not applicable to any particular Bank) for insuring time deposits at offices of such banks in the United States. "Certificate of Deposit Rate" means for any Interest Period for CD --------------------------- Rate Loans the rate of interest per annum determined by the Agent to be the arithmetic mean (rounded upward to the nearest 1/100th of 1%) of the rates notified to the Agent by the Reference Banks as the rates of interest bid by two or more certificate of deposit dealers of recognized standing selected by the Reference Banks for the purchase at face value of dollar certificates of deposit issued by major United States banks, for a maturity comparable to such Interest Period and in the approximate amount of the CD Rate Loans to be made, at the time selected by the Agent on the first day of such Interest Period. -3- "Reserve Percentage" means for any Interest Period for CD Rate Loans ------------------ the maximum reserve percentage (expressed as a decimal, rounded upward to the nearest 1/100th of 1%), as determined by the Agent, in effect on the first day of such Interest Period (including any ordinary, marginal, emergency, supplemental, special and other reserve percentages) prescribed by the Federal Reserve Board for determining the maximum reserves to be maintained by member banks of the Federal Reserve System with deposits exceeding $1,000,000,000 for new non-personal time deposits for a period comparable to such Interest Period and in an amount of $100,000 or more. "CD Rate Loan" means a Loan that bears interest based on the CD Rate. ------------ "Change in Commitment Notice" means a notice substantially in the form --------------------------- of Exhibit H hereto with respect to a reallocation of Commitments. "Commitment" means the Aggregate Loan Commitment or the Aggregate ---------- Receivables Commitment (collectively, the "Commitments"). ----------- "Consolidated Funded Indebtedness" means, at any date of -------------------------------- determination, for the Company and its Subsidiaries on a consolidated basis, the sum of (a) all obligations and liabilities, whether current or long-term, for borrowed money, (b) that portion of obligations with respect to Capital Leases which is capitalized on the consolidated balance sheet of the Company and its Subsidiaries, and (c) all guaranties of unconsolidated funded obligations for borrowed money, all determined in conformity with GAAP. "Consolidated Net Income" for any period, means the net income (or ----------------------- loss) of the Company and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP. "Consolidated Tangible Net Worth" means, as at any date of ------------------------------- determination, the net worth of the Company and its Subsidiaries on a consolidated basis minus foreign exchange currency translation adjustments and ----- intangible assets, all determined in conformity with GAAP. "Contingent Obligation", as applied to any Person, means, without --------------------- duplication, any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any indebtedness, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will -4- be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof or (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings. Contingent Obligations shall include, without limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another and (b) any liability of such Person for the obligations of another through any agreement (contingent or otherwise) (x) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (y) to maintain the solvency or any balance sheet item, level of income or financial condition of another, if in the case of any agreement described under subclauses (x) or (y) of this sentence the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported. The amount of any Contingent Obligation denominated in a currency other than Dollars shall be equal to the Dollar Equivalent of such Contingent Obligation. "Contractual Obligation", as applied to any Person, means any ---------------------- provision of any security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "Debt" means unsecured Indebtedness for borrowed money by the Company ---- or its Material Subsidiaries that are Domestic Subsidiaries having maturities in excess of one year, excluding (i) intercompany Indebtedness, (ii) Indebtedness permitted to be secured under Section 7.2, (iii) Indebtedness incurred under the Transfer and Administration Agreement and (iv) Indebtedness hereunder. "Default" means any event or circumstance which, with the giving of ------- notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. "Dollars" means lawful money of the United States of America. ------- -5- "Domestic Subsidiary" means a Subsidiary of the Company that is ------------------- incorporated in a jurisdiction of the United States of America. "Duff & Phelps" means Duff & Phelps Credit Rating Co. ------------- "Effective Date" means the date on or after March 10, 1995 on which -------------- the Existing Credit Agreements terminate and all the conditions in Section 4.1 are satisfied or waived. "Eligible Assignee" means (i) a commercial bank organized under the ----------------- laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; and (iii) a Person that is primarily engaged in the business of commercial banking and that is (A) a Subsidiary of a Bank, (B) a Subsidiary of a Person of which a Bank is a Subsidiary, or (C) a Person of which a Bank is a Subsidiary. "Environmental Claims" means all claims, however asserted, by any -------------------- Governmental Person or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment. "Environmental Laws" means all federal, state or local laws, statutes, ------------------ common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Person, in each case relating to environmental, health, safety and land use matters. "ERISA" means, at any time, the Employee Retirement Income Security ----- Act of 1974, as amended from time to time and any successor statute, and the rules and regulations promulgated thereunder. "ERISA Affiliate", as applied to any Person, means any trade or --------------- business (whether or not incorporated) which is a member of a group of which that Person is a member and which is under common control within the meaning of Section 414(b) and 414(c) of the Internal Revenue Code. "Eurodollar Rate Loans" means Loans bearing interest at rates --------------------- determined by reference to the Eurodollar Rate as provided in Section 2.8(a). -6- "Eurodollar Rate" means, for each Interest Period for any Eurodollar --------------- Rate Loan, an interest rate per annum (rounded upward to the nearest 1/16 of one percent) determined pursuant to the following formula: Eurodollar Rate = LIBOR ----------------------------------- 1.00 - Eurodollar Reserve Percentage Where, "Eurodollar Reserve Percentage" means the maximum reserve ----------------------------- percentage (expressed as a decimal rounded upward to the next 1/100 of one percent) in effect on the date LIBOR for such Interest Period is determined (whether or not applicable to any Bank) under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency Liabilities") having a term equal to such Interest Period; and "LIBOR" means the rate of interest per annum determined by the ----- Agent to be the arithmetic mean (rounded upward to the nearest 1/16th of 1%) of the rates of interest per annum notified to the Agent by each Reference Bank as the rate of interest at which dollar deposits in the approximate amount of the amount of the Loan to be made or continued as, or converted into, a Eurodollar Rate Loan by such Reference Bank and having a maturity comparable to such Interest Period would be offered to major banks in the London interbank market at their request at or about 11:00 a.m. (London time) on the second Business Day prior to the commencement of such Interest Period. "Event of Default" means any of the events set forth in Section 8.1. ---------------- "Exchange Act" means, at any time, the Securities Exchange Act of ------------ 1934, as amended from time to time, and any successor statute, and the rules and regulations promulgated thereunder. "Existing Credit Agreements" means (i) that certain Credit Agreement -------------------------- (Multi-Year Facility) dated as of March 18, 1994 among the Company, the banks party thereto and the Agent, as amended, and (ii) that certain Credit Agreement (364-Day Facility) dated as of March 18, 1994 among the Company, the banks party thereto and the Agent, as amended. "Federal Funds Rate" means the weighted average of the rates on ------------------ overnight Federal funds transactions with members of the -7- Federal Reserve System arranged by Federal funds brokers, as published for such day of determination (or if such day of determination is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transaction received by the Agent from three Federal funds brokers of recognized standing selected by it. "Federal Reserve Board" means the Board of Governors of the Federal --------------------- Reserve System or any successor thereof. "Fisher-Price" means Fisher-Price, Inc., a Delaware corporation, ------------ formerly known as FPI, Inc. "Fisher-Price Guaranty" means the Continuing Guaranty signed by --------------------- Fisher-Price substantially in the form of Exhibit F-1 hereto, as amended, supplemented, restated or otherwise modified from time to time. "Fisher-Price Subordination Agreement" means a Fisher-Price ------------------------------------ Subordination Agreement substantially in the form of Exhibit G-1 attached hereto signed by the Company and certain Affiliates of the Company with respect to which Fisher-Price has material outstanding obligations, as it may hereafter be amended, supplemented, restated or otherwise modified from time to time. "Fitch" means Fitch Investors Service, Inc. ----- "Funding Date" means the Business Day of the funding of a Loan. ------------ "GAAP" means generally accepted accounting principles set forth in the ---- opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. "Governmental Person" means the government of the United States or the ------------------- government of any state or locality therein, any political subdivision or any governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body or entity, or other regulatory bureau, authority, body or entity of the United States or any state or locality therein, including the Federal Deposit Insurance Company, the Comptroller of the Currency or the Federal Reserve Board. -8- "Governmental Rule" means any law, statute, rule, regulation, ----------------- ordinance, order, judgment, guidelines or decision of any Governmental Person. "Indebtedness", as applied to any Person, means (i) all indebtedness ------------ for borrowed money, (ii) that portion of obligations with respect to Capital Leases which is required to be capitalized on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (iv) any obligation owed for all or any part of the deferred purchase price of property or services which purchase price is (y) due more than twelve months from the date of incurrence of the obligation in respect thereof, or (z) evidenced by a promissory note and (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non-recourse to the credit of that Person. The amount of any Indebtedness shall be the principal amount of and all interest, premium, if any, and other fees and expenses accrued on any of the foregoing. "Ineligible Securities" means securities which may not be underwritten --------------------- or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. (S) 24, Seventh), as amended. "Interest Payment Date" means, with respect to any CD Rate Loan or --------------------- Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan and, with respect to any Base Rate Loan, the last day of each calendar quarter, and with respect to all Loans, the Termination Date; provided, however, -------- ------- that if any Interest Period for a CD Rate Loan or Eurodollar Rate Loan exceeds 90 days or three months, respectively, interest shall also be paid on the date which falls 90 days or three months after the beginning of such Interest Period. "Interest Period" means, (a) with respect to any Eurodollar Rate Loan, --------------- the period commencing on the Business Day the Eurodollar Rate Loan is disbursed or continued or on the date on which a Loan is converted into a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation; and (b) with respect to any CD Rate Loan, the period commencing on the date the CD Rate Loan is disbursed or continued or on the date on which a Loan is converted into a CD Rate Loan and ending 30, 60, 90 or 180 days thereafter, as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation; provided that: -------- -9- (i) if any Interest Period pertaining to a Eurodollar Rate Loan or CD Rate Loan would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Rate Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period pertaining to a Eurodollar Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) no Interest Period shall extend beyond the Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as --------------------- amended to the date hereof and from time to time hereafter, and the rules and regulations promulgated thereunder. "Lending Office" means, with respect to any Bank, the office or -------------- offices of the Bank specified as its "Lending Office" or "Domestic Lending Office" or "Eurodollar Lending Office," as the case may be, opposite its name on Schedule 10.6 hereto, or such other office or offices of the Bank as it may from time to time specify to the Company and the Agent in writing. "Level 1" means the Company's senior unsecured long-term debt carries ------- two or more of the following ratings (provided at least one of such ratings is from S&P or Moody's): A- or higher by S&P A3 or higher by Moody's A- or higher by Duff & Phelps A- or higher by Fitch "Level 2" means that the criteria of Level 1 are not satisfied and ------- the Company's senior unsecured long-term debt carries two or more of the following ratings (provided at least one of such ratings is from S&P or Moody's): BBB+ or higher by S&P Baa1 or higher by Moody's BBB+ or higher by Duff & Phelps BBB+ or higher by Fitch "Level 3" means that neither of the criteria of Level 1 nor Level 2 ------- are satisfied and the Company's senior unsecured -10- long-term debt carries two or more of the following ratings (provided at least one of such ratings is from S&P or Moody's): BBB or higher by S&P Baa2 or higher by Moody's BBB or higher by Duff & Phelps BBB or higher by Fitch "Level 4" means that none of the criteria of Level 1, Level 2 or ------- Level 3 are satisfied and the Company's senior unsecured long-term debt carries two or more of the following ratings (provided at least one of such ratings is from S&P or Moody's): BBB- or higher by S&P Baa3 or higher by Moody's BBB- or higher by Duff & Phelps BBB- or higher by Fitch "Level 5" means that none of the criteria of Level 1, Level 2, Level ------- 3 or Level 4 are satisfied. "Lien" means any lien, mortgage, pledge, security interest, charge or ---- encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any kind of security interest). "Loan Commitment" means the amount set forth under "Loan Commitment" --------------- on Schedule 1.1, as such amount may be adjusted pursuant to Section 2.5. "Loan Documents" means this Agreement, any Notes, the Mattel Sales -------------- Guaranty, the Fisher-Price Guaranty, the Mattel Sales Subordination Agreement, the Fisher-Price Subordination Agreement and all documents and instruments delivered in connection therewith (other than the Transfer and Administration Agreement and the documents delivered pursuant thereto). "Loans" has the meaning set forth in Section 2.1. ----- "Margin Stock" has the meaning assigned to the term "Margin Stock" in ------------ Regulation U of the Federal Reserve Board as in effect from time to time. "Material Adverse Effect" means (i) a material adverse effect upon the ----------------------- business, operations, properties, assets, business prospects or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or (ii) a material impairment of the ability of the Company to perform the Obligations or of the Banks to enforce the Obligations. -11- "Material Subsidiaries" means those Subsidiaries of the Company --------------------- designated as such on Schedule 5.3 hereto and any Subsidiary of the Company formed or acquired after the Effective Date designated by the Board of Directors of the Company as a "Material Subsidiary". "Mattel Sales" means Mattel Sales Corp., a California corporation. ------------ "Mattel Sales Guaranty" means the Continuing Guaranty signed by --------------------- Mattel Sales substantially in the form of Exhibit F-2 hereto, as amended, supplemented, restated or otherwise modified from time to time. "Mattel Sales Subordination Agreement" means a Mattel Sales ------------------------------------ Subordination Agreement substantially in the form of Exhibit G-2 attached hereto signed by the Company and certain Affiliates of the Company with respect to which Mattel Sales has material outstanding obligations, as it may hereafter be amended, supplemented, restated or otherwise modified from time to time. "Moody's" means Moody's Investors Service, Inc. ------- "Multiemployer Plan" means a "multiemployer plan" as defined in ------------------ Section 4001(a)(3) of ERISA which is maintained for employees of the Company or any ERISA Affiliate of the Company. "Net Issuance Proceeds" means, in respect of any issuance of equity --------------------- (excluding shares of common stock issued in connection with conversions of the 8% Convertible Subordinated Debentures), the cash proceeds and non-cash proceeds received or receivable in connection therewith, net of reasonable costs and expenses paid or incurred in connection therewith in favor of any Person not an Affiliate of the Company, excluding the exercise of stock options under the Company's stock option plans. In the case of the issuance of debt securities after the date hereof that are convertible into equity, "Net Issuance Proceeds" shall be deemed to be received if and when such debt securities are converted into equity, and the amount of such Net Issuance Proceeds shall be an amount equal to the principal amount of the debt being converted. "Note" means a promissory note of the Company payable to the order of ---- a Bank substantially in the form of Exhibit A hereto, evidencing the Loans made by such Bank to the Company. "Notice of Borrowing" means a notice substantially in the form of ------------------- Exhibit B hereto with respect to a proposed borrowing pursuant to Section 2.3(a). -12- "Notice of Conversion/Continuation" means a notice given by the --------------------------------- Company to the Agent pursuant to Section 2.4, in substantially the form of Exhibit C hereto. "Obligations" means all obligations of every nature of the Company, ----------- Fisher-Price and Mattel Sales from time to time owed to the Agent, the Banks or any other Person required to be indemnified hereunder, or any of them, under any Loan Document. "Officers' Certificate" means a certificate substantially in the form --------------------- of Exhibit D hereto executed on behalf of the Company by two different officers of the Company, one of which shall be (a) its Chairman of the Board (if an officer), its President, one of its Executive Vice Presidents, or one of its Senior Vice Presidents, and the other one of which shall be (b) its Chief Financial Officer, its Executive Vice President-Finance, its Treasurer, one of its Assistant Treasurers, or its Controller, delivered to the Banks by the Company pursuant to Section 6.1(c). "Participant" has the meaning set forth in Section 10.1. ----------- "Pension Plan" means any employee plan which is subject to Section 412 ------------ of the Internal Revenue Code and which is maintained for employees of the Company or any ERISA Affiliate of the Company other than a Multiemployer Plan. "Person" means any individual, partnership, corporation (including a ------ business trust), joint stock company, joint venture, trust, bank, trust company, unincorporated association or other entity or a government or any agency or political subdivision thereof. "Pro Rata Share" means with respect to each Bank the percentage set -------------- forth opposite such Bank's name on Schedule 1.1 hereto. "Receivables Commitment" means the amount set forth for each Bank ---------------------- under "Receivables Commitment" on Schedule 1.1, as such amount may be adjusted under Section 2.5 and the Transfer and Administration Agreement. "Reference Banks" means Bank of America, NationsBank of Texas, N.A. --------------- and PNC Bank, National Association. Subject to Section 3.6, in the event that at any time of determination only two Banks designated as "Reference Banks" are providing rates for deposits referred to in the definition of "Eurodollar Rate" or "Certificate of Deposit Rate," those two Banks shall be the "Reference Banks" or, if only one such Bank is providing such rates, that Bank shall be the "Reference Banks" for purposes of this Agreement. -13- "Reference Rate" means the rate of interest publicly announced from -------------- time to time by Bank of America in San Francisco as its reference rate, as in effect on such date of determination. The reference rate is set by Bank of America based on various factors including Bank of America's costs and desired return, general economic conditions, and other factors, and is used as a reference point for pricing some loans. Bank of America may make loans at, above or below the rate announced by it as its reference rate. "Regulation D" means Regulation D of the Federal Reserve Board as in ------------ effect from time to time. "Requisite Banks" means, as at any date of determination, Banks having --------------- at least 66-2/3% of the then aggregate unpaid principal amount of the Loans (or if no Loans are then outstanding, Banks having at least 66-2/3% of the Aggregate Loan Commitment), and Banks having at least 66-2/3% of the then Total Outstanding Investment (or if no Investment is then outstanding, Banks having at least 66-2/3% of the Aggregate Receivables Commitment) as at such date of determination. "Securities Act" means, at any time, the Securities Act of 1933, as -------------- amended from time to time, and any successor statute, and the rules and regulations promulgated thereunder. "Section 20 Subsidiary" means the Subsidiary of the bank holding --------------------- company controlling any Bank, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities. "S&P" means Standard & Poor's Ratings Group. --- "Subsidiary" means any corporation, association or other business ---------- entity of which more than 50% of the total voting power of shares of stock entitled to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more of the other Subsidiaries of that Person or a combination thereof; provided -------- that, for purposes of this Agreement (other than financial reporting purposes), Subsidiaries of the Company shall include only the entities identified in Schedule 5.3 hereto and any Subsidiary formed or acquired after the Effective Date designated by the Board of Directors of the Company as a "Material Subsidiary". "Termination Date" means March 31, 1998. ---------------- "Total Outstanding Investment" has the meaning set forth in the ---------------------------- Transfer and Administration Agreement. -14- "Transfer and Administration Agent" means NationsBank of Texas, N.A. --------------------------------- in its capacity as agent under the Transfer and Administration Agreement. "Transfer and Administration Agreement" means the Second Amended and ------------------------------------- Restated Transfer and Administration Agreement dated as of even date herewith, among Mattel Sales and Fisher-Price, as transferors, the Company, as guarantor and servicer, the banks named therein, and NationsBank of Texas, N.A., as Transfer and Administration Agent for such banks, as it may be amended, supplemented, restated or otherwise modified from time to time. 1.2 Other Definitional Provisions. References to "Sections" shall be ----------------------------- to Sections of this Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. SECTION 2. THE COMMITMENTS. ---------------- 2.1 The Aggregate Facilities Commitment. Each Bank hereby severally ----------------------------------- agrees (a) to make advances to the Company ("Loans") on the terms and conditions set forth in this Agreement in an aggregate principal amount not exceeding such Bank's Pro Rata Share of the Aggregate Loan Commitment during the Availability Period and (b) to purchase receivables on the terms and conditions set forth in the Transfer and Administration Agreement in an amount not exceeding such Bank's Receivables Commitment during the period from the Closing Date (as defined in the Transfer and Administration Agreement) to but excluding the Termination Date (as defined in the Transfer and Administration Agreement); provided, however, -------- ------- that: (i) the outstanding principal amount of all Loans hereunder shall not exceed the Aggregate Loan Commitment; and the amount of the Total Outstanding Investment shall not exceed the Aggregate Receivables Commitment; (ii) if at any time between November 1 of each year and March 1 of the following year the rating on the Company's long-term unsecured Indebtedness by any one of S&P, Moody's, Duff & Phelps or Fitch is below investment grade, there shall be no Loans outstanding for 30 consecutive days commencing not earlier than such November 1 and ending not later than March 31, and the Company shall prepay any outstanding Loans pursuant to Section 2.6(b) to the extent required to not have any Loans outstanding during such period; and -15- (iii) the Aggregate Facilities Commitment shall not exceed $650,000,000 in the aggregate at any one time. Within the limits of each Bank's Loan Commitment, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.1, prepay pursuant to Section 2.6 and reborrow pursuant to this Section 2.1. 2.2 Loan Accounts and Notes. (a) Subject to Section 2.2(b), the ----------------------- Loans made by each Bank shall be evidenced by one or more loan accounts maintained by such Bank in the ordinary course of business. The loan accounts or records maintained by the Agent and each Bank shall be conclusive absent manifest error of the amount of the Loans made by the Banks to the Company and the interest and payments thereon. Any failure to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay any amount owing with respect to the Loans. (b) Upon the written request of any Bank made through the Agent, the Loans made by such Bank may be evidenced by one or more Notes, instead of loan accounts. Each such Bank shall endorse on the schedules annexed to its Note(s), the date, amount and maturity of each Loan made by it and the amount of each payment of principal made by the Company with respect thereto. Each such Bank is irrevocably authorized by the Company to endorse its Note(s) and each Bank's record shall be conclusive absent manifest error; provided, however, that the -------- ------- failure of a Bank to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of the Company hereunder or under any such Note to such Bank. 2.3 Borrowing Procedure. ------------------- (a) Whenever the Company desires to borrow hereunder, it shall deliver irrevocable telephonic notice to the Agent followed immediately by written notice in the form of a Notice of Borrowing, which telephonic notice must be received by the Agent no later than (i) 8:00 a.m. (San Francisco time) on the proposed Funding Date in the case of Base Rate Loans, (ii) 9:00 a.m. (San Francisco time) three Business Days in advance of the proposed Funding Date in the case of Eurodollar Rate Loans, and (iii) 12:00 Noon (San Francisco time) two Business Days prior to the proposed Funding date in the case of CD Rate Loans, specifying (A) the proposed Funding Date which shall be a Business Day, (B) the amount of the proposed borrowing, (C) whether the proposed borrowing shall consist of Base Rate Loans, Eurodollar Rate Loans or CD Rate Loans, and (D) in the case of Eurodollar Rate Loans and CD Rate Loans, the requested Interest Period. Base Rate Loans made on any Funding Date shall be in an aggregate minimum amount of $1,000,000 and integral -16- multiples of $500,000 in excess of that amount. Eurodollar Rate Loans and CD Rate Loans made on any Funding Date shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $500,000 in excess of that amount. (b) Promptly (and normally within two hours) after receipt of a Notice of Borrowing (or telephone notice in lieu thereof), the Agent shall notify each Bank of the proposed borrowing. Each Bank shall make available to the Agent its Pro Rata Share of the amount (if any) by which the principal amount of the proposed borrowing exceeds the principal amount of the Loans (if any) maturing on the Funding Date, in same day funds, by remitting such funds to: Bank of America National Trust and Savings Association, ABA No. 121-000- 358, Attn: Agency Management Services No. 5596 For credit to: BANCONTROL Account No. 12358-88449, Reference: Mattel, Inc. at the office of Bank of America located at 1850 Gateway Boulevard, Concord, California 94520, no later than 11:00 a.m. (San Francisco time) on the Funding Date. Upon satisfaction of the conditions set forth in Section 4.2, the Agent shall make available to the Company on such Funding Date the aggregate of the amounts (if any) so made available by the Banks by causing an amount of same day funds equal to such aggregate amount (if any) received by the Agent to be credited to the account of the Company at such office of Bank of America. To the extent that Eurodollar Rate Loans or CD Rate Loans made by the Banks mature on any Funding Date, the Banks shall apply the proceeds of the Loans made on such Funding Date, to the extent thereof, to the repayment of such maturing Loans, such Loans and repayments intended to be a contemporaneous exchange. 2.4 Conversion and Continuation Elections. ------------------------------------- (a) The Company may upon irrevocable written notice to the Agent: (i) elect to convert any Base Rate Loans (or any part thereof in an amount not less than $5,000,000 or an integral multiple of $500,000 in excess thereof) on any Business Day into Eurodollar Rate Loans or CD Rate Loans; (ii) elect to convert any Eurodollar Rate Loans or CD Rate Loans (or any part thereof) on the last day of any Interest Period therefor into Base Rate Loans in an amount not less than $1,000,000 or an integral multiple of $500,000 in excess thereof, or into CD Rate Loans or Eurodollar Rate Loans in an amount not less than $5,000,000 or an integral multiple of $500,000 in excess thereof; or (iii) elect to continue any Eurodollar Rate Loans or CD Rate Loans (or any part thereof in an amount not less than $5,000,000 or an integral multiple of $500,000 in excess thereof) on the last day of any Interest Period therefor; provided, that if the aggregate -------- amount of Eurodollar Rate Loans or CD Rate Loans shall have been reduced, by payment, prepayment, or conversion of part thereof to be less than $5,000,000, the Eurodollar Rate Loans and CD Rate Loans shall automatically convert into Base Rate Loans, and on -17- and after such date the right of the Company to continue such Loans as Eurodollar Rate Loans or CD Rate Loans shall terminate. (b) Each conversion or continuation shall be made upon irrevocable telephonic notice to the Agent followed immediately by written notice in the form of a Notice of Conversion/ Continuation, which telephonic notice must be received by the Agent prior to (i) 9:00 a.m. (San Francisco time) at least three Business Days in advance of the conversion or continuation date, if the Loans are to be converted into or continued as Eurodollar Rate Loans; (ii) 12:00 Noon (San Francisco time) at least two Business Days in advance of the conversion or continuation date, if the Loans are to be converted into or continued as CD Rate Loans; and (ii) 9:00 a.m. (San Francisco time) on the conversion or continuation date, if the Loans are to be converted into Base Rate Loans, specifying: (A) the proposed conversion or continuation date; (B) the aggregate amount of Loans to be converted or continued; (C) the nature of the proposed conversion or continuation; and (D) the duration of the requested Interest Period, if applicable. (c) If upon the expiration of any Interest Period applicable to Eurodollar Rate Loans or CD Rate Loans, the Company has failed to select a new Interest Period to be applicable to such Eurodollar Rate Loans or CD Rate Loans or type of Loan or if any Default or Event of Default shall then exist, the Company shall be deemed to have elected to convert such Eurodollar Rate Loans and CD Rate Loans into Base Rate Loans effective as of the expiration date of such current Interest Period. (d) Upon receipt of a Notice of Conversion/Continuation, the Agent will promptly notify each Bank thereof, or, if no timely notice is provided, the Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made pro rata according to the respective outstanding principal amounts of the Loans with respect to which the notice was given held by each Bank. (e) Unless the Requisite Banks shall otherwise agree, after the occurrence of and during the continuance of a Default or Event of Default, the Company may not elect to have a Loan be made as, or converted into or continued as, a Eurodollar Rate Loan or CD Rate Loan. (f) Notwithstanding any other provision contained in this Agreement, after giving effect to any conversion or continuation of any Loans, there shall not be more than five different Interest Periods in effect. -18- 2.5 Adjustments of Aggregate Loan Commitment and Aggregate ------------------------------------------------------ Receivables Commitment. - ---------------------- (a) Reduction and Termination of Commitments. The Company may from ---------------------------------------- time to time, in accordance with Section 2.5(c), reduce or terminate the Aggregate Loan Commitment or the Aggregate Receivables Commitment. Any reduction or termination of any Commitment pursuant to this Section 2.5(a) shall be permanent. (b) Reallocation of Commitments. In addition, the Company may from --------------------------- time to time, in accordance with Section 2.5(c), (i) reallocate the Aggregate Receivables Commitment to the Aggregate Loan Commitment and/or (ii) reallocate the Aggregate Loan Commitment to the Aggregate Receivables Commitment; provided, -------- however, that (x) the Company may not deliver a Change in Commitment Notice to - ------- the Agent to reallocate Commitments pursuant to this Section 2.5(b) more than four times in any consecutive 12-month period, and, as a result of any reallocation, (y) the Aggregate Receivables Commitment may not exceed $250,000,000 at any time, and (z) the Aggregate Loan Commitment may not be reduced to less than $400,000,000 pursuant to this Section 2.5(b) at any time. (c) Procedures. (i) The Company may effect the termination, ---------- reduction or reallocation of the Aggregate Loan Commitment or the Aggregate Receivables Commitment by delivering a fully completed Change in Commitment Notice to the Agent not less than three Business Days' prior to the date of the requested termination, reduction or reallocation. (ii) Promptly after receipt of any Change in Commitment Notice (and in no event later than the end of the following Business Day), the Agent shall notify each Bank and the Transfer and Administration Agent thereof. In the case of any reduction, termination or reallocation of the Aggregate Receivables Commitment, the Agent shall directly contact the Transfer and Administration Agent for any relevant information. (iii) Any partial reduction or reallocation of a Commitment shall be in an aggregate minimum amount of $10,000,000 for each such Commitment, and integral multiples of $1,000,000 in excess of that amount for each such Commitment. Any reduction or reallocation of any Commitment shall be applied to each Bank in accordance with such Bank's Pro Rata Share thereof. All accrued commitment fees to, but not including the effective date of any termination of any Commitment, shall be paid on the effective date of such termination. -19- (iv) No reduction, termination or reallocation of any Commitments shall be permitted if, after giving effect thereto and to any prepayments made on the effective date thereof, (A) the outstanding principal amount of the Loans hereunder would exceed the Aggregate Loan Commitment; or (B) the Total Outstanding Investment would exceed the Aggregate Receivables Commitment. (v) Concurrently with any termination, reduction or reallocation of the Aggregate Loan Commitment, the Company shall sign such amended Notes as requested by the Banks through the Agent to reflect such change. 2.6 Prepayments. (a) Voluntary. The Company may, upon not less ----------- --------- than one Business Days' prior written or telephonic notice confirmed in writing to the Agent (in the case of a prepayment of a Base Rate Loan) or three Business Days' prior written or telephonic notice confirmed in writing to the Agent (in the case of a prepayment of a Eurodollar Rate Loan or CD Rate Loan) (which notice the Agent will promptly transmit by telecopy, telex or telephone to each Bank), at any time and from time to time prepay (i) any Eurodollar Rate Loans or CD Rate Loans in whole or in part in an aggregate minimum amount of $3,000,000 and integral multiples of $500,000 in excess of that amount so long as the unpaid balance is not less than $5,000,000; or (ii) any Base Rate Loans in whole or in part in an aggregate minimum amount of $1,000,000 and integral multiples of $100,000 in excess of that amount; provided that in the event of any such -------- prepayment of any Eurodollar Rate Loans or CD Rate Loans, the Company shall be obligated to reimburse the Banks in respect thereof pursuant to Section 3.5. If such notice of prepayment does not specify how such prepayment shall be applied, it shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans or CD Rate Loans, as determined by the Agent. All prepayments of Eurodollar Rate Loans and CD Rate Loans shall be applied to the payment of any interest that has accrued to the date of such prepayment before application to principal. Prepayments of Base Rate Loans shall be applied to principal only. (b) Mandatory. Any mandatory prepayments required under Section --------- 2.1(ii) shall be accompanied by any payment required under Section 2.6(a) or 3.5, if applicable. 2.7 Repayment of Loans. Each Loan shall mature and the Company shall ------------------ repay the unpaid principal amount of each Loan on the Termination Date. 2.8 Interest on the Loans. --------------------- (a) Subject to Section 2.8(c), the Loans shall bear interest on the unpaid principal amount thereof from the Funding -20- Date through maturity (whether by acceleration or otherwise) at a rate per annum equal to the (i) Eurodollar Rate plus the Applicable Amount or (ii) CD Rate plus ---- ---- the Applicable Amount or (iii) the Base Rate; provided, however, during any period when the aggregate principal amount of Loans outstanding exceeds 50% of the Aggregate Loan Commitment, an additional .125% will be added to the Eurodollar Rate, CD Rate or Base Rate as the case may be. (b) Subject to Section 2.8(c), from and after the Effective Date, interest shall be payable in arrears on the Loans on each Interest Payment Date applicable to that Loan. Interest paid on the date of any partial prepayment of Loans hereunder shall be paid in respect of the portion of the Loans so prepaid. (c) Any principal payments on the Loans not paid when due and, to the extent permitted by applicable law, any interest payments on the Loans not paid when due, in each case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest payable upon demand at a rate which is 2% per annum in excess of the rate of interest otherwise payable under this Agreement. 2.9 Fees. (a) The Company agrees to pay a commitment fee equal to ---- the Applicable Amount on the daily average unused portion of the Loan Commitment during the Availability Period. The Company shall pay the commitment fee to the Agent for distribution to each Bank in accordance with its Pro Rata Share. The commitment fee shall be calculated on the basis of a 360-day year and the actual number of days elapsed and shall be payable quarterly in arrears on the last Business Day of each calendar quarter, for all amounts accrued to such date, and on the Termination Date; provided that, in connection with any reduction or -------- termination of the Loan Commitment pursuant to Section 2.5, the accrued fee calculated on the portion so terminated or reduced for the period ending on such date shall also be paid on the date of such reduction or termination. (b) The Company agrees to pay a utilization fee equal to the Applicable Amount on the daily average used portion of the Loan Commitment when utilization of the Loan Commitment exceeds 50% of the Loan Commitment during the Availability Period. The Company shall pay the utilization fee to the Agent for distribution to each Bank in accordance with its Pro Rata Share. The utilization fee shall be calculated on the basis of a 360-day year and the actual number of days elapsed and shall be payable quarterly in arrears on the last Business Day of each calendar quarter, for all amounts accrued to such date, and on the Termination Date; provided that, in connection with any -------- reduction or termination of the Loan Commitment pursuant to Section 2.5, the accrued fee calculated on the portion so -21- terminated or reduced for the period ending on such date shall also be paid on the date of such reduction or termination. (c) The Company shall pay to the Agent and the Arranger other fees in accordance with a term sheet dated as of February 1, 1995 from the Arranger and Bank of America to the Company. (d) The Company shall pay to the Agent such fees as may from time to time be agreed upon between the Company and the Agent. 2.10 Calculation of Interest and Fees. (a) Interest on all -------------------------------- Loans and fees payable under this Agreement shall be computed on the basis of a 360-day year and the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of the Loan or the first day of an Interest Period, as the case may be, shall be included and the date of payment shall be excluded; provided that, if a Loan is repaid on -------- the same day on which it is made, one day's interest shall be paid on that Loan. (b) Any change in the interest rate on a Loan resulting from a change in the Applicable Amount, Reserve Percentage or Eurodollar Reserve Percentage shall become effective as of the opening of business on the day on which such change in the Applicable Amount or Eurodollar Reserve Percentage becomes effective. Each determination of an interest rate by the Agent pursuant hereto shall be conclusive and binding on the Company and the Banks in the absence of manifest error. 2.11 Payments by the Company. (a) All payments of principal, ----------------------- interest and fees hereunder and under any Notes shall be in same day funds and delivered to the Agent for credit to: Bancontrol Account No. 12358-88449 Reference: Mattel, Inc. 1850 Gateway Boulevard Concord, California 94520 for the account of the Banks or the Agent not later than 11:00 a.m. (San Francisco time) on the date due. The Agent will promptly distribute to each Bank its Pro Rata Share (or other applicable share as expressly provided herein) of such principal, interest, fees or other amounts in like funds received. Any payment which is received by the Agent after that time shall be deemed to have been paid by the Company on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. (b) Subject to the provisions in the definition of "Interest Period", whenever any payment hereunder shall be stated -22- to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. (c) Unless the Agent shall have received notice from the Company prior to the date on which any payment is due to the Banks hereunder that the Company will not make such payment in full as and when required hereunder, the Agent may assume that the Company has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent the Company shall not have made such payment in full to the Agent, each Bank shall repay to the Agent on demand such amount distributed to such Bank, together with interest thereon for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate as in effect for each such day. 2.12 Payments by the Banks to the Agent. ---------------------------------- (a) Unless the Agent shall have received notice from a Bank on the Effective Date or, with respect to each borrowing after the Effective Date, by 12:00 noon (San Francisco time) one Business Day prior to the date of any proposed borrowing of Eurodollar Rate Loans or CD Rate Loans, or by 10:00 a.m. (San Francisco time) on the date of any proposed borrowing of Base Rate Loans, that such Bank will not make available to the Agent as and when required hereunder for the account of the Company the amount of that Bank's Pro Rata Share of the borrowing, the Agent may assume that each Bank has made such amount available to the Agent in immediately available funds on the Funding Date and the Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Bank shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made available to the Company such amount, that Bank shall on the next Business Day following the date of such borrowing make such amount available to the Agent, together with interest at the Federal Funds Rate for and determined as of each day during such period. A notice of the Agent submitted to any Bank with respect to amounts owing under this Section 2.12(a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Bank's Loan on the date of borrowing for all purposes of this Agreement. If such amount is not made available to the Agent on the next Business Day following the date of such borrowing, the Agent shall notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the -23- Agent's account, together with interest thereon for each day elapsed since the date of such borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such borrowing. (b) The failure of any Bank to make any Loan on any date of borrowing shall not relieve any other Bank of any obligation hereunder to make a Loan on the date of such borrowing, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on the date of any borrowing. 2.13 Sharing of Payments, Etc. If, other than as expressly ------------------------- provided elsewhere herein, any Bank shall obtain on account of the Loans made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Pro Rata Share of payments on account of the Loans obtained by all the Banks, such Bank shall forthwith (a) notify the Agent of such fact, and (b) purchase from the other Banks such participations in the Loans made by them as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of them; provided, -------- however, that if all or any portion of such excess payment is thereafter - ------- recovered from the purchasing Bank, such purchase shall to that extent be rescinded and each other Bank shall repay to the purchasing Bank the purchase price paid therefor, together with an amount equal to such paying Bank's Pro Rata Share (according to the proportion of (i) the amount of such paying Bank's required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Company agrees that any Bank so purchasing a participation from another Bank pursuant to this Section 2.13 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Bank were the direct creditor of the Company in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased pursuant to this Section 2.13 and will in each case notify the Banks following any such purchases or repayments. SECTION 3. PAYMENTS IN GENERAL. -------------------- 3.1 Taxes. ----- (a) Subject to Section 3.1(d) and Section 3.1(g), any and all payments by the Company to each Bank or the Agent under this Agreement shall be made free and clear of, and without deduction or withholding for, any and all present or future -24- taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Bank's or the Agent's net income by the jurisdiction under the laws of which such Bank or the Agent, as the case may be, is organized or maintains a Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). (b) In addition, the Company shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents (hereinafter referred to as "Other Taxes"). (c) Subject to Section 3.1(g), the Company shall indemnify and hold harmless each Bank and the Agent for the full amount of Taxes or Other Taxes (including without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.1) paid by such Bank or the Agent and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days from the date such Bank or the Agent makes written demand therefor. (d) If the Company shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank or the Agent, then, subject to Section 3.1(g): (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.1) such Bank or the Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made; (ii) the Company shall make such deductions, and (iii) the Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (e) Within 30 days after the date of any payment by the Company of Taxes or Other Taxes, the Company shall furnish to the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Agent. (f) Each Bank which is a foreign person (i.e., a person other than a United States person for United States Federal income tax purposes) agrees that: (i) it shall, no later -25- than the Effective Date (or, in the case of a Bank which becomes a party hereto after the Effective Date, the date upon which the Bank becomes a party hereto) deliver to the Company and the Agent: (A) if any Lending Office is located in the United States, two accurate and complete signed originals of Internal Revenue Service Form 4224 or any successor thereto ("Form 4224"), and (B) if any Lending Office is located outside the United States, two accurate and complete signed originals of Internal Revenue Service Form 1001 or any successor thereto ("Form 1001"), in each case indicating that the Bank is on the date of delivery thereof entitled to receive payments of principal, interest and fees for the account of such Lending Office or Offices under this Agreement free from withholding of United States Federal income tax; (ii) if at any time the Bank changes its Lending Office or Offices or selects an additional Lending Office as herein provided, it shall with reasonable promptness deliver to the Company and the Agent in replacement for, or in addition to, the forms previously delivered by it hereunder: (A) if such changed or additional Lending Office is located in the United States, two accurate and complete signed originals of Form 4224; or (B) otherwise, two accurate and complete signed originals of Form 1001, in each case indicating that the Bank is on the date of delivery thereof entitled to receive payments of principal, interest and fees for the account of such changed or additional Lending Office under this Agreement free from withholding of United States Federal income tax; (iii) it shall, before or promptly after the occurrence of any event (including the passing of time but excluding any event mentioned in (ii) above) requiring a change in the most recent Form 4224 or Form 1001 previously delivered by such Bank and if the delivery of the same be lawful, deliver to the Company and the Agent two accurate and complete original signed copies of Form 4224 or Form 1001 in replacement for the forms previously delivered by the Bank; and (iv) it shall, promptly upon the Company's reasonable request to that effect, deliver to the Company and the Agent such other forms or similar documentation as may be required from time to time by any applicable law, treaty, rule or regulation in order to establish such Bank's tax status for withholding purposes. (g) The Company will not be required to pay any additional amounts in respect of United States Federal income tax pursuant to Section 3.1(d) to any Bank for the account of any Lending Office of such Bank: (i) if the obligation to pay such additional amounts would not have arisen but for a failure by such Bank to comply with its obligations under Section 3.1(f) in respect of such Lending Office; (ii) if such Bank shall have delivered to the Company a Form 4224 in respect of such Lending Office pursuant to Section 3.1(f)(i)(A), and such Bank shall not be entitled to exemption from deduction or withholding of United States Federal income tax in respect of payments by the Company hereunder for the account of such Lending Office for any reason other than a change in United States law or regulations or in the -26- official interpretation of such law or regulations by any Governmental Person charged with the interpretation or administration thereof (whether or not having the force of law) after the date of delivery of such Form 4224; or (iii) if the Bank shall have delivered to the Company a Form 1001 in respect of such Lending Office pursuant to Section 3.1(f)(i)(B), and such Bank shall not at any time be entitled to exemption from deduction or withholding of United States Federal income tax in respect of payments by the Company hereunder for the account of such Lending Office for any reason other than a change in United States law or regulations or any applicable tax treaty or regulations or in the official interpretation of any such law, treaty or regulations by any Governmental Person charged with the interpretation or administration thereof (whether or not having the force of law) after the date of delivery of such Form 1001. (h) If, at any time, the Company requests any Bank to deliver any forms or other documentation pursuant to Section 3.1(f)(iv), then the Company shall, on demand of such Bank through the Agent, reimburse such Bank for any costs and expenses (including expenses of outside legal counsel and the allocated costs of in-house counsel) reasonably incurred by such Bank in the preparation or delivery of such forms or other documentation. (i) If the Company is required to pay additional amounts to any Bank or the Agent pursuant to Section 3.1(d), then such Bank shall use its reasonable best efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by the Company which may thereafter accrue if such change in the judgment of such Bank is not otherwise disadvantageous to such Bank. (j) The agreements and obligations of the Company contained in this Section 3.1 shall survive the payment in full of all other Obligations. 3.2 Capital Adequacy. If (a) any adoption of or any change in or in ---------------- the interpretation of any law, rule or regulation, or (b) compliance with any guideline, request or directive of any central bank or other Governmental Person or quasi-governmental authority exercising control over banks or financial institutions generally or any court (whether or not having the force of law), or (c) any change in the force or effectiveness of the regulations set forth at 12 C.F.R. Part 3 (Appendix A), 12 C.F.R. Part 225 (Appendix A), 12 C.F.R. Part 208 (Appendix A) or 12 C.F.R. Part 325 (Appendix A) requires that the commitments of any Bank hereunder (including, without limitation, commitments and obligations in respect of Loans) be treated as an asset or otherwise be included for purposes of calculating the appropriate amount of capital to be maintained by such Bank or any corporation controlling such Bank (a "Change in Law"), the -27- result of which is to reduce the rate of return on such Bank's capital as a consequence of such commitments to a level below that which such Bank could have achieved but for such Change in Law, taking into consideration such Bank's policies with respect to capital adequacy, by an amount which such Bank deems to be material, the Bank shall deliver to the Company a statement of the amount necessary to compensate such Bank for the reduction in the rate of return on its capital attributable to such commitments (the "Capital Compensation Amount"). The Bank shall determine the Capital Compensation Amount in good faith, using reasonable attribution and averaging methods. The Bank shall from time to time notify the Company of the amount so determined. Such amount shall be due and payable by the Company to such Bank ten Business Days after such notice is given. As soon as practicable after any Change in Law, each Bank shall submit to the Company estimates of the Capital Compensation Amounts that would be payable as a function of such Bank's commitments hereunder. 3.3 Illegality. ---------- (a) If any Bank shall determine that any Governmental Rule or any change therein or in the interpretation or administration thereof has made it unlawful, or that any Governmental Person has asserted that it is unlawful, for any Bank or its Lending Office to make Eurodollar Rate Loans, then, on notice thereof by the Bank to the Company through the Agent, the obligation of the Bank to make Eurodollar Rate Loans shall be suspended until the Bank shall have notified the Agent and the Company that the circumstances giving rise to such determination no longer exists. (b) If a Bank shall determine that any Governmental Rule or any change therein or in the interpretation or administration thereof has made it unlawful, or that any Governmental Person has asserted that it is unlawful, for any Bank or its Lending Office to maintain any Eurodollar Rate Loan, the Company shall prepay all Eurodollar Rate Loans of the Bank then outstanding, together with interest accrued thereon, or convert all Eurodollar Rate Loans of the Bank then outstanding to CD Rate Loans or Base Rate Loans pursuant to Section 2.4, either on the last day of the Interest Period thereof if the Bank may lawfully continue to maintain such Eurodollar Rate Loans to such day, or promptly, if the Bank may not lawfully continue to maintain such Eurodollar Rate Loans, together with any amounts required to be paid in connection therewith pursuant to Section 3.5. (c) If the obligation of any Bank to make or maintain Eurodollar Rate Loans has been terminated, the Company may elect, by giving notice to the Bank through the Agent that all Loans -28- which would otherwise be made by the Bank as Eurodollar Rate Loans shall be instead CD Rate Loans or Base Rate Loans. (d) Before giving any notice to the Agent pursuant to this Section 3.3, the affected Bank shall designate a different Lending Office with respect to its Eurodollar Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Bank, be illegal or otherwise disadvantageous to the Bank. 3.4 Increased Costs and Reduction of Return. If any Bank shall --------------------------------------- determine that, due to either (a) the introduction of or any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the CD Rate or the Eurodollar Rate) in or in the interpretation of any law or regulation or (b) the compliance with any guideline or request from any Governmental Person (whether or not having the force of law), there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining any Eurodollar Rate Loans or CD Rate Loans, then the Company shall be liable for, and shall from time to time, upon demand therefor by such Bank (with a copy of such demand to the Agent), pay to such Bank, additional amounts as are sufficient to compensate such Bank for such increased costs. Each Bank agrees to notify the Company of the occurrence of such an increased cost event promptly after obtaining knowledge thereof. 3.5 Funding Losses. The Company agrees to reimburse each Bank and to -------------- hold each Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence of: (a) the failure of the Company to make any payment or prepayment of principal of any Eurodollar Rate Loan or CD Rate Loan (including payments made after any acceleration thereof); (b) the failure of the Company to borrow, continue or convert a Loan after the Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/ Continuation; (c) the failure of the Company to make any prepayment after the Company has given a notice in accordance with Section 2.6; or (d) the prepayment of a Eurodollar Rate Loan or CD Rate Loan on a day which is not the last day of the Interest Period with respect thereto; including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Eurodollar Rate Loans or CD Rate Loans hereunder or from fees payable to terminate the deposits from which such funds were obtained. Solely for purposes of calculating amounts payable by the Company to the Banks under this Section 3.3(b) and Sections 3.4 and 3.5, (i) each Eurodollar Rate Loan made by a Bank (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the Eurodollar Rate used in determining the Eurodollar Rate for such Eurodollar Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a -29- comparable period, whether or not such Eurodollar Rate Loan is in fact so funded and (ii) each CD Rate Loan made by a Bank (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the Certificate of Deposit Rate used in determining the CD Rate for such CD Rate Loan by the issuance of its certificate of deposit in a comparable amount and for a comparable period, whether or not such CD Rate Loan is in fact so funded. This covenant shall survive the payment in full of all other Obligations. 3.6 Inability to Determine Rates. If any two Reference Banks shall ---------------------------- have determined that for any reason adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan or CD Rate Loan, or if the Requisite Banks advise the Agent in writing that the Eurodollar Rate or the CD Rate applicable for any requested Interest Period with respect to a proposed Eurodollar Rate Loan or CD Rate Loan does not adequately and fairly reflect the cost to such Banks of funding such Loan, the Agent will forthwith give notice of such determination to the Company and each Bank. Thereafter, the obligation of the Banks to make or maintain Eurodollar Rate Loans or CD Rate Loans, as the case may be, hereunder shall be suspended until the Agent upon the instruction of the Requisite Banks revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/ Continuation then submitted by it. If the Company does not revoke such notice with respect to Loans, the Banks shall make, convert or continue the Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Loans shall be made, converted or continued as Base Rate Loans instead of Eurodollar Rate Loans or CD Rate Loans, as applicable. 3.7 Survival. The agreements and obligations of the Company in this -------- Section 3 shall survive the payment of all other Obligations. SECTION 4. CONDITIONS PRECEDENT. -------------------- 4.1 Conditions to Effectiveness. This Agreement shall become --------------------------- effective only upon the Company delivering to the Agent and Banks (or to the Agent for the Banks with sufficient originally executed copies for each Bank, except for any Notes): (a) A copy of the Restated Certificate of Incorporation of the Company, together with evidence acceptable to Agent that the same has been filed with the Secretary of State of the State of Delaware and a good standing certificate from the -30- Secretaries of State of the States of Delaware and California, each to be dated a recent date prior to the Effective Date; (b) Copies of the Bylaws of the Company, certified as of the Effective Date by its corporate secretary or an assistant secretary; (c) Resolutions of the Board of Directors of the Company approving and authorizing the execution, delivery and performance of each Loan Document to which it is a party or which it is acknowledging and approving and authorizing the execution, delivery and payment of any Notes, certified as of the Effective Date by its corporate secretary or an assistant secretary; (d) A signature and incumbency certificate of the officers of the Company executing or acknowledging any Loan Document; (e) A copy of the Certificate of Incorporation of Fisher-Price, together with evidence acceptable to the Agent that the same has been filed with the Secretary of State of the State of California and a good standing certificate from the Secretary of State of the State of California to be dated a recent date prior to the Effective Date; (f) Copies of the Bylaws of Fisher-Price, certified as of the Effective Date by its corporate secretary or an assistant secretary; (g) Resolutions of the Board of Directors of Fisher-Price approving and authorizing the execution, delivery and performance of each Loan Document to which it is a party or which it is acknowledging, certified as of the Effective Date by its corporate secretary or an assistant secretary; (h) A signature and incumbency certificate of the officers of Fisher-Price executing or acknowledging any Loan Document; (i) A copy of the Articles of Incorporation of Mattel Sales, together with evidence acceptable to the Agent that the same has been filed with the Secretary of State of the State of California and a good standing certificate from the Secretary of State of the State of California to be dated a recent date prior to the Effective Date; (j) Copies of the Bylaws of Mattel Sales, certified as of the Effective Date by its corporate secretary or an assistant secretary; (k) Resolutions of the Board of Directors of Mattel Sales approving and authorizing the execution, delivery and -31- performance of each Loan Document to which it is a party or which it is acknowledging, certified as of the Effective Date by its corporate secretary or an assistant secretary; (l) A signature and incumbency certificate of the officers of Mattel Sales executing or acknowledging any Loan Document; (m) A good standing certificate with respect to any Affiliate of the Company executing a Fisher-Price Subordination Agreement or Mattel Sales Subordination Agreement from the Secretary of State of the state of its incorporation, each to be dated a recent date prior to the Effective Date; (n) Resolutions of the Board of Directors of any Affiliate of the Company executing a Fisher-Price Subordination Agreement or Mattel Sales Subordination Agreement approving and authorizing the execution, delivery and performance of such Fisher-Price Subordination Agreement and such Mattel Sales Subordination Agreement, certified as of the Effective Date by its corporate secretary or an assistant secretary; (o) A signature and incumbency certificate of the officers of any Affiliate of the Company executing a Fisher-Price Subordination Agreement or Mattel Sales Subordination Agreement; (p) Executed copies of this Agreement and, as requested by any Bank, executed Notes drawn to the order of such Bank and with appropriate insertions; (q) A certificate or other evidence from the Transfer and Administration Agent that the Transfer and Administration Agreement shall have been, or concurrently herewith is being, duly executed and delivered and all conditions precedent thereunder shall have been, or concurrently herewith are being, satisfied or waived by the Banks; (r) Executed copies of one or more favorable written opinions of Robert Normile, Esq., Assistant General Counsel of the Company dated as of the Effective Date, substantially in the form of Exhibit E hereto relating to the Company, Fisher-Price and Mattel Sales and as to such other matters as the Agent and the Banks may reasonably request; (s) A certificate signed by one of the officers authorized to deliver an Officer's Certificate, or other evidence satisfactory to the Agent, of the ratings on the Company's long-term unsecured Indebtedness by S&P, Moody's, Duff & Phelps and Fitch; (t) Evidence of termination of the Existing Credit Agreements dated the date hereof, together with payment, for -32- distribution to the agent and banks parties to the Existing Credit Agreements, of all fees payable by the Company pursuant to Sections 2.4 and 2.6 of the Existing Credit Agreements that have accrued through the Effective Date; (u) Payment of all fees payable pursuant to Section 2.9(b); (v) The Fisher-Price Guaranty duly executed by Fisher-Price; (w) The Mattel Sales Guaranty duly executed by Mattel Sales; (x) The Company shall have performed in all material respects all agreements which this Agreement provides shall be performed by it on or before the Effective Date; and (y) A Mattel Sales Subordination Agreement and a Fisher-Price Subordination Agreement duly executed by the Company. 4.2 Conditions to All Loans. The obligation of each Bank to make any ----------------------- Loan is subject to the following further conditions precedent that, as of the applicable Funding Date: (a) The Agent shall have received on or before that Funding Date a Notice of Borrowing signed by the Chief Executive Officer, the Chief Financial Officer, the Treasurer or an Assistant Treasurer of the Company or any officer of the Company designated by any of the above described officers on behalf of the Company in writing delivered to the Agent; (b) The representations and warranties of the Company contained in any Loan Document (except the representation and warranty contained in Section 5.9 and, in the case of a borrowing of Loans where the aggregate principal amount of the Loans being made on that Funding Date equals or is less than the aggregate principal amount of Loans maturing on that Funding Date, the representation and warranty contained in Section 5.11), shall be true, correct and complete in all material respects on and as of that Funding Date, to the same extent as though made on and as of that Funding Date; and (c) No Default or Event of Default shall exist or shall result from such borrowing or continuation or conversion. Each Notice of Borrowing submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the Funding Date, that the conditions in Section 4.2 are satisfied. -33- SECTION 5. REPRESENTATIONS AND WARRANTIES. ------------------------------ In order to induce the Banks and the Agent to enter into this Agreement and to make any extension of credit hereunder, the Company represents and warrants to each Bank and the Agent that the following statements are true, correct and complete: 5.1 Organization and Powers. The Company is a corporation duly ----------------------- organized, validly existing and in good standing under the laws of the State of Delaware; and, except for changes in the ordinary course of business or as permitted or contemplated by this Agreement, each of the Material Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; and each has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted and, in the case of the Company, to enter into this Agreement, a Fisher-Price Subordination Agreement and a Mattel Sales Subordination Agreement, to issue the Notes and to carry out the transactions contemplated hereby and thereby. 5.2 Good Standing. The Company and, except for changes in the ------------- ordinary course of business or as permitted or contemplated by this Agreement, each Material Subsidiary is in good standing wherever necessary to carry on its present business and operations, except in jurisdictions in which the failure to be in good standing has or will have no Material Adverse Effect. 5.3 Subsidiaries. Except as set forth in the immediately succeeding ------------ sentence and except for changes in the ordinary course of business or as permitted or contemplated by this Agreement, Schedule 5.3 hereto correctly sets forth the name, jurisdiction of incorporation and ownership interest of the Company in each of its Material Subsidiaries as of the date hereof. Except as identified on Schedule 5.3 hereto and except for changes in the ordinary course of business or as permitted or contemplated by this Agreement, the Company has no subsidiaries the book value of whose assets as at December 31, 1993, exceed $1,000,000 or, when considered in the aggregate with all other subsidiaries not listed on Schedule 5.3 hereto constitute an amount in excess of $4,000,000. 5.4 Authorization of Borrowing. The execution, delivery and -------------------------- performance of each Loan Document to which it is a party, and acknowledgement of the Fisher-Price Subordination Agreement and the Mattel Sales Subordination Agreement and the issuance, delivery and payment of the Notes have been duly authorized by all necessary corporate action by the Company. -34- 5.5 No Conflict. The execution, delivery and performance by the ----------- Company of this Agreement and the acknowledgement of the Fisher-Price Subordination Agreement, the Mattel Sales Subordination Agreement and the issuance, delivery and payment of the Notes do not and will not (a) violate the Restated Certificate of Incorporation or Bylaws of the Company, (b) violate any provision of law applicable to the Company, or any material order, judgment or decree of any court or other agency of government binding on the Company, the violation of which would result in a Material Adverse Effect, (c) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of the Company, (d) result in or require the creation or imposition of any material lien, security interest, charge or encumbrance of any nature whatsoever upon any of its material properties or assets, or (e) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of the Company. 5.6 Governmental Consents. The execution, delivery and performance --------------------- by the Company of each Loan Document to which it is a party and each agreement, document, or instrument required hereunder, the acknowledgment of the Fisher- Price Subordination Agreement, Mattel Sales Subordination Agreement, and the issuance, delivery and payment of the Notes do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Federal, state or other governmental authority or regulatory body or other such person. 5.7 Binding Obligation. This Agreement is, and each other Loan ------------------ Document to which it is a party, when executed and delivered hereunder will be, the legally valid and binding obligations of the Company, enforceable against it in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally. 5.8 Financial Condition. The Company has heretofore delivered to the ------------------- Banks a consolidated balance sheet of the Company and its Subsidiaries for the fiscal year ended December 31, 1993 and related consolidated statements of income, shareholders' equity and changes in financial position of the Company and its Subsidiaries for such fiscal year, audited by Price Waterhouse. All such statements were prepared in accordance with GAAP and fairly present the consolidated financial position of the Company and its Subsidiaries as at the date thereof and the consolidated results of operations and statement of cash flow of the Company and its Subsidiaries for the period then ended. Neither the Company nor any of its Subsidiaries has any material Contingent Obligation, liability for taxes or long-term lease which as of the date of this -35- Agreement, individually or in the aggregate, would, if it became absolute, result in a Material Adverse Effect which is not reflected in the foregoing statements or in the notes thereto. 5.9 Changes, Etc. Since December 31, 1993, there has been no event or ------------ events that have, either individually or in the aggregate, resulted in a Material Adverse Effect. 5.10 Title to Properties. The Company and its Subsidiaries ------------------- have good, sufficient and legal title to all the properties and assets reflected in the consolidated balance sheet referred to in Section 5.8 except as set forth in said balance sheet or in the notes thereto, except for assets acquired or disposed of in the ordinary course of business or as otherwise permitted by this Agreement since December 31, 1993 and except for immaterial defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. 5.11 Litigation; Adverse Facts. There is no action, suit, ------------------------- proceeding or arbitration (whether or not purportedly on behalf of the Company or any of its Subsidiaries) at law or in equity or before or by any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or any of the Company's or such Subsidiaries' properties which, in the reasonable judgment of the Company and its executive officers (assuming adverse determination of facts which the Company in good faith believes it would not successfully prove, and considering damages which in their best judgment is the maximum that would be awarded upon, and the likelihood of, an adverse determination of the claim or the amount which reflects their best judgment as to that required to be paid to settle the claims) would result in a Material Adverse Effect and there is no basis known to such executive officers for any such action, suit or proceeding. Neither the Company nor any of its Subsidiaries is (i) in violation of any applicable law which could result in a Material Adverse Effect, or (ii) subject to or in default with respect to any final judgment, writ, injunction, decree, rule or regulation of any court or Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which could result in a Material Adverse Effect. There is no action, suit, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries which provides a reasonable basis for questioning the validity or the enforceability of any Loan Document. 5.12 Payment of Taxes. All tax returns and reports of the ---------------- Company and its Material Subsidiaries required to be filed by any of them have been timely filed, and all taxes, -36- assessments, fees and other governmental charges upon the Company and its Subsidiaries and upon their respective properties, assets, income and franchises which are due and payable have been paid when due and payable or bonded against, except to the extent permitted by Section 6.3. The Company knows of no proposed tax assessment against it or any of its Subsidiaries that would result in a Material Adverse Effect. 5.13 Agreements. Neither the Company nor any of its ---------- Subsidiaries is a party to or is subject to any material agreement or instrument or charter or other internal restriction which results in a Material Adverse Effect. 5.14 Performance. Neither the Company nor any of its ----------- Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of the Company, and no condition exists which, with the giving of notice or the lapse of time or both, would constitute such a default, except, in any such case, where the consequences, direct or indirect, of such default or defaults, if any, would not result in a Material Adverse Effect. 5.15 Governmental Regulation. Neither the Company nor any of ----------------------- its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or to any Federal or state statute or regulation limiting its ability in any material way to incur Indebtedness for money borrowed. 5.16 Employee Benefit Plans. The Company and each of its ERISA ---------------------- Affiliates is in compliance in all material respects with any applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Pension Plans. Neither the Company nor any of its ERISA Affiliates has participated in or participates in any Multiemployer Plan the withdrawal from which may result in any liability to any party in an amount in excess of $1,000,000. 5.17 Environmental Matters. The Company conducts in the --------------------- ordinary course of business a review of the effect of existing Environmental Laws and existing Environmental Claims on its business, operations and properties, and as a result thereof the Company has reasonably concluded that such Environmental Laws and Environmental Claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.18 Disclosure. No representation or warranty of the Company ---------- contained in this Agreement or any other document, certificate or written statement furnished to the Banks by the -37- Company since January 1, 1994 for use in connection with the transactions contemplated by this Agreement as of the date of this Agreement contains any untrue statement of a material fact or omits to state a material fact (known to the officers of the Company in the case of any document or fact not furnished by it) necessary in order to make the statements contained herein or therein not misleading except to the extent that any such statement or omission that was untrue or misleading at the time made or that subsequently became untrue or misleading has been superseded or corrected by information provided to the Banks prior to the date of this Agreement. The projections and pro forma financial information contained in such written materials are based upon good faith estimates and assumptions believed by the Company to be reasonable at the time made, it being recognized by the Banks that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. There is no fact known to the officers of the Company as of the date of this Agreement (other than matters of a general economic nature) which materially adversely affects the business, operations, property, assets or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, which has not been disclosed herein or in the written materials referred to in Section 5.8 other than as disclosed in writing to the Banks on or before the date hereof. 5.19 Subordination Agreements. Neither Fisher-Price nor Mattel ------------------------ Sales has any material outstanding obligations to any Affiliate of the Company which has not signed a Fisher-Price Subordination Agreement or a Mattel Sales Subordination Agreement, respectively. SECTION 6. AFFIRMATIVE COVENANTS. --------------------- The Company agrees from the Effective Date until payment in full of all Obligations and termination of the Aggregate Facilities Commitment and the Transfer and Administration Agreement, unless Requisite Banks shall otherwise give prior written consent, the Company will perform all covenants in this Section 6. 6.1 Reporting and Information Requirements. The Company will -------------------------------------- maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. The Company will deliver to the Agent and to each Bank: (a) as soon as practicable and in any event not later than 55 days after the end of each of the first three fiscal -38- quarters of the Company, consolidated balance sheets of the Company and its Subsidiaries as at the end of such period and for the fiscal year to date and the related consolidated statements of income, consolidated statements of stockholders' equity and consolidated statements of cash flow all in reasonable detail and certified by the Chief Financial Officer, Executive Vice President Finance or the Treasurer of the Company that the consolidated statements (and to the best of his or her belief, the consolidating statements) and other materials required by this clause (a) fairly present the financial condition of the Company and its Subsidiaries as at the dates indicated and the results of their operations for the periods indicated, subject to changes resulting from year-end audit and normal year-end adjustments; (b) as soon as practicable and in any event not later than 100 days after the end of each fiscal year of the Company, consolidated and consolidating balance sheets of the Company and its Subsidiaries as at the end of such year and the related consolidated (and, as to statements of income only, consolidated and consolidating) statements of income, stockholders' equity and cash flow of the Company and its Subsidiaries for such fiscal year, setting forth in each case, in comparative form the consolidated figures for the previous year, all in reasonable detail and (i) in the case of such consolidated financial statements, accompanied by a report thereon of Price Waterhouse or other independent accountants of recognized national standing selected by the Company which report shall state that such consolidated financial statements present fairly the financial position of the Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flow for the periods indicated in conformity with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards and (ii) in the case of such consolidating financial statements, certified by the chief financial or accounting officer of the Company; (c) together with each delivery of financial statements of the Company and its Subsidiaries pursuant to clauses (a) and (b) above, an Officers' Certificate (i) stating that the signers have reviewed the terms of this Agreement and the Notes and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of the Company and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signers do not have knowledge of the existence as at the date of the Officers' Certificate, of any condition or event which constitutes an Event of Default or Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof, -39- and (ii) demonstrating in reasonable detail compliance during (to the extent required) and at the end of such accounting periods with the restrictions contained in Sections 7.5, 7.6 and 7.7; (d) together with each delivery of consolidated financial statements of the Company and its Subsidiaries pursuant to clause (b) above, a written statement by the independent accountants giving the report thereon (i) stating that their audit examination has included a review of the terms of this Agreement and the Notes as they relate to accounting matters, and (ii) stating whether, in connection with their audit examination, any condition or event which constitutes an Event of Default or Default has come to their attention, and if such a condition or event has come to their attention, specifying the nature and period of existence thereof; provided that such accountants shall not -------- be liable by reason of any failure to obtain knowledge of any such Event of Default or Default that would not be disclosed in the course of their audit examination. The Agent shall have the right, from time to time, to discuss the affairs of the Company directly with such independent certified public accountants; (e) promptly upon receipt thereof, copies of all reports submitted to the Company (including, without limitation, the Company's Board of Directors) by the Company's independent accountants in connection with each annual, interim or special audit of the consolidated financial statements of the Company made by such accountants, including, without limitation, any comment letter submitted by such accountants to management in connection with their annual audit; (f) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available generally by the Company to its security holders or by any Subsidiary of the Company to its security holders other than the Company or another Subsidiary, and, promptly upon their becoming effective, and in any event within 15 days of filing, all regular and periodic reports and all registration statements and prospectuses that have been filed by the Company or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any Governmental Person succeeding to any of its functions, and all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning material developments in the business of the Company and its Subsidiaries; (g) promptly upon any executive officer of the Company obtaining knowledge (i) of any condition or event which constitutes an Event of Default or Default, or becoming aware that the Agent or any Bank has given any notice or taken any other action with respect to a claimed Event of Default or Default under this Agreement, (ii) of any condition or event which would be required to be disclosed in a current report filed -40- by the Company with the Securities and Exchange Commission on Form 8-K (Items 1, 2, 4 and 6 of such Form as in effect on the date hereof) if the Company were required to file such reports under the Exchange Act, (iii) that any Person has given any notice to the Company or any Subsidiary of the Company or taken any other action with respect to a claimed default or event or condition of the type referred to in Section 8.1, (iv) of the institution of any litigation involving an alleged liability of the Company or any of its Subsidiaries equal to or greater than $20,000,000 or any adverse determination in any litigation involving a potential liability of the Company or any of its Subsidiaries equal to or greater than $20,000,000, or (v) of a Material Adverse Effect, in each case an Officers' Certificate specifying the nature and period of existence of any such condition or event, or specifying the notice given or action taken by such holder or Person and the nature of such claimed default, Event of Default, Default, event or condition, and what action the Company has taken, is taking and proposes to take with respect thereto; (h) as soon as available but no later than March 31 of each year, copies of the Company's consolidated financial plan for the then current fiscal year as customarily prepared for internal use; (i) promptly after the acquisition of any Material Subsidiary, notice of such acquisition; (j) promptly upon any executive officer of the Company obtaining knowledge, notice of any change in the ratings on the Company's long-term unsecured Indebtedness by S&P, Moody's, Duff & Phelps or Fitch; and (k) with reasonable promptness, such other information and data with respect to the Company or any of its Subsidiaries as from time to time may be reasonably requested by any Bank or the Agent, including any financial reports regularly prepared by the Company for internal use. 6.2 Corporate Existence, etc. Except as permitted or not prohibited ------------------------ in Section 7.3, the Company will at all times preserve and keep in full force and effect its corporate existence and rights and franchises material to its business and those of each of its Material Subsidiaries; provided that the -------- corporate existence and the rights and franchises of any Material Subsidiary may be terminated or permitted to lapse if such termination or lapse is in the best interest of the Company, is approved by the Board of Directors of the Company and is not materially disadvantageous to the holder of any Note. 6.3 Payment of Taxes and Claims; Tax Consolidation. The Company ---------------------------------------------- will, and will cause each of its Material -41- Subsidiaries to, pay all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its franchises, business, income or property before any penalty or interest accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided that no such charge or claim need be paid if being contested -------- in good faith by appropriate proceedings promptly instituted and diligently conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. The Company will not, nor will it permit any Material Subsidiary to, file or consent to the filing of any consolidated income tax return with any Person (other than the Company or a Subsidiary of the Company). 6.4 Maintenance of Properties; Insurance. Except as permitted or ------------------------------------ not prohibited in Section 7.3, the Company will maintain or cause to be maintained in good repair, working order and condition all material properties (other than obsolete properties) used or useful in the business of the Company and its Material Subsidiaries and from time to time will make or cause to be made all appropriate repairs, renewals, substitutions and replacements thereof. The Company will maintain or cause to be maintained, with financially sound and reputable insurers, insurance with respect to its properties and business and the properties and business of its Material Subsidiaries against loss or damage of the kinds customarily insured against by corporations of established reputation engaged in the same or similar businesses and similarly situated, of such types and in such amounts as are customarily carried under similar circumstances by such other corporations; provided that the Company may maintain a program of self insurance for the Company and its Material Subsidiaries in accordance with sound business practices. 6.5 Inspection of Property and Books and Records. The Company shall -------------------------------------------- maintain and shall cause each of its Subsidiaries to maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Company and such Subsidiaries. The Company will permit any authorized representatives designated by any Bank at the expense of that Bank, to visit and inspect any of the properties of the Company or any of its Subsidiaries, including its and their financial and accounting records, and to make copies and take extracts therefrom (but not records relating to intellectual property), and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants, all -42- upon reasonable notice and at such reasonable times during normal business hours and as often as may be reasonably requested. 6.6 Use of Proceeds of Loans. (a) The Company shall use the ------------------------ proceeds of Loans for general corporate purposes, including, without limitation, lending to its Subsidiaries and acquiring other Persons or businesses so long as the acquisition is approved by the board of directors of the Person being acquired. (b) The Company shall not, directly or indirectly, use any portion of the Loan proceeds (i) knowingly to purchase Ineligible Securities from a Section 20 Subsidiary during any period in which such Section 20 Subsidiary makes a market in such Ineligible Securities, (ii) knowingly to purchase during the underwriting or placement period Ineligible Securities being underwritten or privately placed by a Section 20 Subsidiary, or (iii) to make payments of principal or interest on Ineligible Securities underwritten or privately placed by a Section 20 Subsidiary and issued by or for the benefit of the Company or any Affiliate of the Company. 6.7 Environmental Laws. The Company shall, and shall cause each ------------------ Subsidiary to, conduct its operations and keep and maintain its property in compliance with all Environmental Laws, except where the failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.8 Subordination Agreements. If from time to time Fisher-Price or ------------------------ Mattel Sales has any material outstanding obligations owing to any Affiliate of the Company which has not signed a Fisher-Price Subordination Agreement or a Mattel Sales Subordination Agreement, respectively, the Company shall cause such Affiliate to execute deliver a Fisher-Price Subordination Agreement or a Mattel Sales Subordination Agreement, as the case may be, and deliver to the Agent a signature and incumbency certificate of the officers of each such Affiliate and cause Fisher-Price or Mattel Sales, as the case may be, to acknowledge each such agreement. SECTION 7. NEGATIVE COVENANTS. ------------------ The Company agrees from the Effective Date until payment in full of all Obligations and termination of the Aggregate Facilities Commitment and the Transfer and Administration Agreement, unless Requisite Banks shall otherwise give prior written consent, the Company will perform all covenants in this Section 7. -43- 7.1 Indebtedness. The Company will not, and will not permit any of ------------ its Material Subsidiaries to, directly or indirectly incur, assume, guaranty or otherwise become directly or indirectly liable with respect to: (a) Indebtedness for borrowed money senior or having priority of payment over the Obligations hereunder or secured by Liens on any of the Company's or any Subsidiary's assets other than as permitted under Section 7.2 other than Indebtedness existing on the Effective Date; and (b) Debt in excess of $150,000,000 in the aggregate incurred in any one calendar year, net of paydowns of Debt in such year, commencing January 1, 1995; provided that any such Debt so incurred (i) will not contain any -------- terms and conditions that in the aggregate are more restrictive than the terms and conditions contained in this Agreement and (ii) will not cause the Company to be in violation of Sections 7.5, 7.6, or 7.7 of this Agreement. 7.2 Liens. The Company will not, and will not permit any of its ----- Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of the Company or any Subsidiary to secure Indebtedness for borrowed money in excess of $100,000,000 (excluding Liens existing on the date hereof, Liens securing Indebtedness under the Transfer and Administration Agreement, Liens listed on Schedule 7.2 and Liens on newly-acquired Capital Assets); provided that such Liens on assets -------- located in the United States shall not secure Indebtedness for borrowed money in excess of $15,000,000. 7.3 Restriction on Fundamental Changes. (a) The Company shall not, ---------------------------------- and shall not permit any of its Material Subsidiaries to, engage in any material line of business substantially different from those lines of business carried on by it on the date hereof; provided, however, that the Company may engage in the -------- ------- production and sale of CD-ROM products and coin-operated arcade games related to the Company's existing lines of business. (b) The Company shall not, and shall not suffer or permit any of its Material Subsidiaries to, merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of whether in one transaction or in a series of transactions, all or substantially all, of its assets to or in favor of any Person, except: (i) any Material Subsidiary of the Company may merge with the Company, provided that the Company shall be the continuing or surviving corporation, or with any one or more Material Subsidiaries of the Company, provided that if any -44- transaction shall be between a Subsidiary and a wholly-owned subsidiary, the wholly-owned subsidiary shall be the continuing or surviving corporation; and (ii) any Subsidiary of the Company may sell all or substantially all of its assets (upon voluntary liquidation or otherwise), to the Company or another Wholly-Owned Subsidiary of the Company. 7.4 Sale or Discount of Receivables. The Company will not, and will ------------------------------- not permit any of its Domestic Subsidiaries to, directly or indirectly, sell with recourse, or discount or otherwise sell for less than the face value thereof (other than in the ordinary course of receivables financing without recourse), any of its notes or accounts receivable, except: (a) The Company and its Domestic Subsidiaries may offer discounts in the ordinary course of business for early payment of accounts receivable and may negotiate settlements of bad debts and disputed accounts receivable in the ordinary course of business; and (b) The Company, Mattel Sales and Fisher-Price may enter into and perform under the Transfer and Administration Agreement. 7.5 Consolidated Funded Indebtedness to Total Capitalization. The -------------------------------------------------------- Company shall not permit the ratio of the sum of (a) Consolidated Funded Indebtedness plus (b) Total Outstanding Investment to the sum of (x) ---- Consolidated Funded Indebtedness plus (y) Total Outstanding Investment plus (z) ---- ---- Consolidated Tangible Net Worth to exceed 65% at the end of each of the first three fiscal quarters in each fiscal year and 55% at the end of each fiscal year. 7.6 Consolidated Tangible Net Worth. The Company shall not permit ------------------------------- its Consolidated Tangible Net Worth at the end of any fiscal quarter to be less than $530,000,000 plus 50% of each fiscal quarter's Consolidated Net Income ---- subsequent to December 31, 1993 (but without reduction for any losses) plus 100% ---- of any Net Issuance Proceeds subsequent to December 31, 1993. 7.7 Interest Coverage Ratio. The Company shall not permit, as of the ----------------------- last day of each fiscal quarter, the ratio of (a) the sum of (i) its net income from continuing operations, for the four consecutive fiscal quarters ending on such date, before (A) special items, (B) minority interest, (C) gains on reacquisition of debt, plus (ii) income taxes accrued for the four consecutive ---- fiscal quarters ending on such date, plus (iii) interest accrued for the four ---- consecutive fiscal quarters ending on such date, excluding capitalized interest and without regard -45- to interest income plus (iv) depreciation and amortization for the four ---- consecutive fiscal quarters ending on such date to (b) interest incurred for the four consecutive fiscal quarters ending on such date, including capitalized interest and without regard to interest income, to be less than 3.5 to 1. 7.8 ERISA. The Company will not, and will not permit any of its ----- ERISA Affiliates to, permit the actuarial present value of all benefit liabilities under all Pension Plans to exceed the fair market value of the assets of such Pension Plans (excluding Pension Plans with assets greater than vested benefits) allocable to such benefit liabilities by more than $10,000,000. As used in this Section 7.8, the terms "actuarial present value" and "benefit liabilities" have the meanings specified in Section 4001 of ERISA. 7.9 Amendments or Waivers Under Transfer and Administration ------------------------------------------------------- Agreement. The Company shall not agree to any amendment or waiver under the Transfer and Administration Agreement without the consent of the Requisite Banks. 7.10 Margin Regulations. No portion of the proceeds of any ------------------ borrowing under this Agreement shall be used by the Company for the purpose of "purchasing" or "carrying" any Margin Stock or used in any manner which might cause such borrowing or the application of such proceeds to violate Regulation G, Regulation U, Regulation T, or Regulation X of the Federal Reserve Board or any other regulation of the Federal Reserve Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and the use of such proceeds. 7.11 Independence of Covenants. All covenants hereunder shall ------------------------- be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Default if such action is taken or condition exists. SECTION 8. EVENTS OF DEFAULT. ----------------- 8.1 Events of Default. Any of the following conditions or events ----------------- shall constitute an "Event of Default:" (a) Failure to Make Payments When Due. (i) Failure to pay any --------------------------------- required payment of principal under this Agreement or the Transfer and Administration Agreement or of any Loan or any Notes, when due, whether at stated maturity, by acceleration, by -46- notice of prepayment or otherwise, (ii) failure to pay any required payment of interest under this Agreement or the Transfer and Administration Agreement or on any Loan or any Note or any fees payable pursuant to Section 2 for a period of five days or more after the date such payment is due, or (iii) failure to pay any other amount due under this Agreement or the Transfer and Administration Agreement within 90 days after written notice thereof; or (b) Default in Other Agreements. (i) Failure of the Company, Fisher- --------------------------- Price, Mattel Sales or any of its Material Subsidiaries to pay or any default in the payment of any principal or interest on any Indebtedness in an amount exceeding $15,000,000 or any default in any other obligation for the payment of money in an amount in excess of $15,000,000 beyond any period of grace allowed; or (ii) any breach or default (unless cured or waived) with respect to any other term of any evidence of such other Indebtedness for borrowed money in an amount exceeding $15,000,000 or of any loan agreement, mortgage, indenture or other agreement relating thereto, if the effect of such failure, default or breach is to cause such Indebtedness for borrowed money to become or be declared due prior to its stated maturity; or (c) Breach of Certain Covenants. Failure of the Company to perform or --------------------------- comply with any term or condition contained in Sections 6.1(g), 6.2 or Section 7 of this Agreement; or (d) Breach of Warranty. Any of the Company's, Fisher-Price's or ------------------ Mattel Sales' representations or warranties made in any Loan Document in writing pursuant hereto or in connection herewith shall be false in any material respect on the date as of which made; or (e) Other Defaults Under Agreement. Failure of the Company, Fisher- ------------------------------ Price or Mattel Sales to perform or comply with any other term or condition contained in this Agreement or the Transfer and Administration Agreement or any Loan Document other than the conditions referred to in Subsections (a), (b), (c) and (d) above and such default shall not have been remedied or waived within 30 days after receipt of notice from the Agent or any Bank of such default; or (f) Involuntary Bankruptcy; Appointment of Receiver, etc. (i) A court ---------------------------------------------------- having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company or any of its Material Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed, or (ii) any other similar relief shall be granted under any applicable -47- federal or state or applicable foreign law; a petition for an involuntary case shall be filed against the Company or any of its Material Subsidiaries under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over the Company or any of its Material Subsidiaries, or over all or substantially all of its property, shall have been entered; or an interim receiver, trustee or other custodian of the Company or any of its Material Subsidiaries for all or substantially all of the property of the Company or any of its Material Subsidiaries shall be appointed involuntarily; and the continuance of any such events in clause (ii) for 45 days unless dismissed, bonded or discharged; or (g) Voluntary Bankruptcy; Appointment of Receiver, etc. The Company -------------------------------------------------- or any of its Material Subsidiaries shall have an order for relief entered with respect to it or commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in any involuntary case, or to the conversion from an involuntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, sequestrator, trustee or other custodian for all or substantially all of its property; the making by the Company or any of its Material Subsidiaries of any assignment for the benefit of creditors; or the inability or failure of the Company or any of its Material Subsidiaries, or the admission by the Company or any of its Material Subsidiaries in writing of its inability, to generally pay its debts as such debts become due; or the Board of Directors of the Company or any of its Material Subsidiaries adopts any resolution or otherwise takes action to approve any of the foregoing; or (h) Judgments. Any final money judgment involving in any case an --------- amount in excess of $20,000,000 or in excess of $40,000,000 in the aggregate at any one time for all final judgments shall be entered or filed against the Company or any Material Subsidiary or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 45 days or in any event later than five days prior to the date of any proposed sale thereunder; or (i) Dissolution. Any order, judgment or decree shall be entered ----------- against the Company or any Material Subsidiary decreeing the dissolution or split up of the Company and such order shall remain undischarged or unstayed for a period in excess of 30 days; or (j) ERISA. (i) any Pension Plan maintained by the Company or any of ----- its ERISA Affiliates shall be terminated within -48- the meaning of Title IV of ERISA, or (ii) a trustee shall be appointed by an appropriate United States district court to administer any Pension Plan, or (iii) the Pension Benefit Guaranty Corporation (or any successor thereto) shall institute proceedings to terminate any Pension Plan or to appoint a trustee to administer any Pension Plan, or (iv) the Company or any of its ERISA Affiliates shall withdraw (under Section 4063 of ERISA) from a Pension Plan, if, as of the date of the event listed in clauses (i)-(iv) above or any subsequent date, any of the Company or its ERISA Affiliates has any liability (such liability to include, without limitation, any liability to the Pension Benefit Guaranty Corporation, or any successor thereto, or to any other party under Sections 4062, 4063 or 4064 of ERISA or any other provision of law) resulting from or otherwise associated with the events listed in clauses (i)-(iv) above for unfunded guarantied vested benefits under the Pension Plans which exceeds the current value of assets accumulated in such Pension Plan by more than $10,000,000; or (k) Loss of Property. All, or a substantial part of, the property, ---------------- assets or business of the Company or any Material Subsidiary shall be condemned or seized and such condemnation or seizure shall have (after taking into account any insurance or condemnation award) a Material Adverse Effect; or (l) Cessation of Business. The Company or any Material Subsidiary --------------------- shall at any time voluntarily or involuntarily suspend its business or a substantial part thereof which would constitute a substantial part of, and would have a Material Adverse Effect; or (m) Servicer Default or Termination Event. A Servicer Default or a ------------------------------------- Termination Event (as each is defined in the Transfer and Administration Agreement) (other than as set forth in Section 7.3(i) of the Transfer and Administration Agreement) shall occur and be continuing; 8.2 Remedies. If any Event of Default occurs, the Agent shall, at -------- the request of, or may, with the consent of, the Requisite Banks, (a) declare the Loan Commitment of each Bank to make Loans to be terminated, whereupon such Loan Commitments shall forthwith be terminated; (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable; without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company; and (c) exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks under the Loan Documents or applicable law; provided, -------- however, that upon the occurrence of any event specified in paragraph (f) or (g) - ------- of Section 8.1 above (in the case of clause (ii) of paragraph (f) upon the expiration -49- of the 45-day period mentioned therein), the obligation of each Bank to make Loans shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Agent or any Bank. 8.3 Rights Not Exclusive. The rights provided for in this Agreement -------------------- and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. SECTION 9. THE AGENT. --------- 9.1 Appointment and Authorization. Each Bank hereby irrevocably ----------------------------- appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. 9.2 Delegation of Duties. The Agent may execute any of its duties -------------------- under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 9.3 Liability of Agent. None of the Agent-Related Persons shall (i) ------------------ be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement -50- or any other Loan Document, or for the value of any Collateral or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent- Related Person shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the Properties, books or records of the Company or any of the Company's Subsidiaries or Affiliates. 9.4 Reliance by Agent. ----------------- (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Requisite Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Requisite Banks and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks. (b) For purposes of determining compliance with the conditions specified in Sections 4.1 and 4.2, each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter either sent by the Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Bank, unless an officer of the Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from the Bank prior to any borrowing specifying its objection thereto and either such objection shall not have been withdrawn by notice to the Agent to that effect or the Bank shall not have made available to the Agent the Bank's ratable portion of such borrowing. -51- 9.5 Notice of Default. The Agent shall not be deemed to have ----------------- knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent shall have received written notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Banks and the Transfer and Administration Agent. The Agent shall take such action with respect to such Default or Event of Default as shall be requested by the Requisite Banks in accordance with Section 8; provided, however, that unless and until the Agent -------- ------- shall have received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Banks. 9.6 Credit Decision. Each Bank expressly acknowledges that none of --------------- the Agent-Related Persons has made any representation or warranty to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Company and its Subsidiaries shall be deemed to constitute any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon the Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated thereby, and made its own decision to enter into this Agreement and extend credit to the Company hereunder. Each Bank also represents that it will, independently and without reliance upon the Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of any of the Agent-Related Persons. 9.7 Indemnification. Whether or not the transactions contemplated --------------- hereby shall be consummated, the Banks shall -52- indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), ratably from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind whatsoever which may at any time (including at any time following the repayment of the Loans and the termination or resignation of the related Agent) be imposed on, incurred by or asserted against any such Person any way relating to or arising out of this Agreement or any document contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any such Person under or in connection with any of the foregoing; provided, however, that no -------- ------- Bank shall be liable for the payment to the Agent-Related Persons of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including fees and expenses of counsel and the allocated cost of in-house counsel) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. Without limiting the generality of the foregoing, if the Internal Revenue Service or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form was not delivered, was not properly executed, or because such Bank failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Bank shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses (including fees and expenses of counsel and the allocated cost of in- house counsel). The obligation of the Banks in this Section shall survive the payment of all Obligations hereunder. 9.8 Agent in Individual Capacity. Bank of America and its Affiliates ---------------------------- may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory or other business with the Company and its Subsidiaries -53- and Affiliates as though Bank of America were not the Agent hereunder and without notice to or consent of the Banks. With respect to its Loans, Bank of America shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Agent, and the terms "Bank" and "Banks" shall include Bank of America in its individual capacity. 9.9 Successor Agent. The Agent may, and at the request of the --------------- Requisite Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent shall resign as Agent under this Agreement, the Requisite Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by the Company. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Banks and the Company, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 9 and Sections 10.4 and 10.15 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Agent hereunder until such time, if any, as the Requisite Banks appoint a successor agent as provided for above. SECTION 10. MISCELLANEOUS. ------------- 10.1 Assignments, Participations, etc. (a) Any Bank may, with --------------------------------- the advance written consent of the Company at all times other than during the existence of an Event of Default and the Agent, which consent of the Company shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees (provided that no consent of the Company or the Agent shall be required in connection with any assignment and delegation by a Bank to an Eligible Assignee that is an Affiliate of such Bank) (each an "Assignee") -------- all, or any ratable part of all, of the Loans, the Commitments and the other rights and obligations of such Bank hereunder, in a minimum amount of $10,000,000 and such Bank shall concurrently therewith assign a ratable portion in the Transfer and Administration Agreement; provided, however, that the -------- ------- Company and the Agent may continue to -54- deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Company and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee shall have delivered to the Company and the Agent a Notice of Assignment and Acceptance in the form of Exhibit I ("Notice of Assignment and Acceptance") together with any Note or - --------- ----------------------------------- Notes subject to such assignment and (iii) the assignor Bank or Assignee has paid to the Agent a processing fee in the amount of $2,500. (b) From and after the date that the Agent notifies the assignor Bank that it has received (and provided its consent with respect to) an executed Notice of Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Notice of Assignment and Acceptance, shall have the rights and obligations of a Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Notice of Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents. (c) Within five Business Days after its receipt of notice by the Agent that it has received an executed Notice of Assignment and Acceptance and payment of the processing fee, (and provided that the consents to such assignment have been obtained in accordance with Section 10.01(a)), the Company shall execute and deliver to the Agent, any new Notes evidencing such Assignee's assigned Loans and Commitment and, if the assignor Bank has retained a portion of its Loans and its Commitments, any replacement Notes in the principal amount of the Loans retained by the assignor Bank (such Notes to be in exchange for, but not in payment of, the Notes held by such Bank). Immediately upon each Assignee's making its processing fee payment under the Notice of Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Bank pro tanto. --- ----- (d) Upon advance written notice to the Company, any Bank may at any time sell to one or more commercial banks or other Persons not Affiliates of the Company (a "Participant") participating interests in any Loans, the Commitment ----------- of that Bank and the other interests of that Bank (the "originating Bank") hereunder and under the other Loan Documents; provided, however, that (i) such -------- ------- Bank shall concurrently with any sale of a -55- participation herein sell a ratable participation in the Transfer and Administration Agreement and thereafter cause any such participation herein to remain ratable with such participation in the Transfer and Administration Agreement, (ii) the originating Bank's obligations under this Agreement shall remain unchanged, (iii) the originating Bank shall remain solely responsible for the performance of such obligations, (iv) the Company and the Agent shall continue to deal solely and directly with the originating Bank in connection with the originating Bank's rights and obligations under this Agreement and the other Loan Documents, and (v) no Bank shall transfer or grant any participating interest under which the Participant shall have rights to approve any amendment to, or any consent or waiver with respect to this Agreement except to the extent such amendment, consent or waiver would require unanimous consent as described in the first proviso to Section 10.8. The Company hereby acknowledges and agrees that any such disposition will give rise to a direct obligation of the Company to the Participant and the Participant shall be entitled to the benefit of Sections 3.1, 3.4 and 10.15 as if it were a "Bank." In the case of any such participation, the Participant shall not have any rights under this Agreement, or any of the other Loan Documents, and all amounts payable by the Company hereunder shall be determined as if such Bank had not sold such participation, except that if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement. (e) Notwithstanding any other provision in this Agreement, any Bank may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and the Note(s) held by it in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR (S)203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. (f) Each Bank agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information provided to it by the Company or any Subsidiary of the Company, or by the Agent on such Company's or Subsidiary's behalf, in connection with this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information for any purpose or in any manner other than pursuant to the terms contemplated by this Agreement and the Transfer and Administration Agreement; except to the extent such information (i) was or becomes generally available to the public other than as a result of a disclosure by the Bank, or -56- (ii) was or becomes available on a non-confidential basis from a source other than the Company, provided that such source is not bound by a confidentiality agreement with the Company known to the Bank; provided, however, that any Bank -------- ------- may disclose such information (A) at the request or pursuant to any requirement of any Governmental Person to which the Bank is subject or in connection with an examination of such Bank by any such authority; (B) pursuant to subpoena or other court process and when required to do so in accordance with the provisions of any applicable Governmental Rule; provided, that a Bank shall disclose only -------- the information required by such request and shall notify the Company in advance of such disclosure so that the Company may seek an appropriate protective order, and (C) to such Bank's independent auditors and other professional advisors provided such Persons are obligated to keep such information confidential. Notwithstanding the foregoing, the Company authorizes each Bank to disclose to any Assignee or Participant and to any prospective Assignee or Participant, such financial and other information in such Bank's possession concerning the Company or its Subsidiaries which has been delivered to Agent or the Banks pursuant to this Agreement or which has been delivered to the Agent or the Banks by the Company in connection with the Banks' credit evaluation of the Company prior to entering into this Agreement; provided that, unless otherwise agreed by the -------- Company, such Assignee or Participant agrees in writing to such Bank to keep such information confidential to the same extent required of the Banks hereunder. 10.2 Survival of Warranties and of Certain Agreements. (a) ------------------------------------------------ All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement, the making of the Loans hereunder and the execution and delivery of any Notes. (b) Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of the Company set forth in Sections 2.9, 3, 10.4 and 10.15 and the agreements of the Banks set forth in Sections 2.13, 9, 10.1(b) and 10.5 shall survive the payment of the Obligations by the Company and the termination of this Agreement. 10.3 Failure or Indulgence Not Waiver; Remedies Cumulative. No ----------------------------------------------------- failure or delay on the part of any Bank or any holder of any Note in the exercise of any power, right or privilege hereunder or under any Note shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Agreement or any Notes are cumulative to and not exclusive of, any rights or remedies otherwise available. -57- 10.4 Fees and Expenses. Whether or not the transactions contemplated ----------------- hereby shall be consummated, the Company agrees to pay within 30 days after submission of an invoice therefor (a) all the actual and reasonable out-of- pocket costs and expenses of preparation of the Loan Documents and all the costs of furnishing all opinions by counsel for the Company (including without limitation any opinions requested by the Banks as to any legal matters arising hereunder), and of the Company's performance of and compliance with all agreements and conditions contained therein on its part to be performed or complied with; (b) the cost of delivering to the Banks any Notes pursuant to the provisions of this Agreement; (c) the reasonable fees, expenses and disbursements of the Agent and the Agent's counsel (including the allocated cost of Agent's inhouse counsel and staff) in connection with the negotiation, preparation, execution and administration of the Loan Documents and the Loans and any amendments and waivers hereto; and (d) after the occurrence of an Event of Default, all actual and reasonable out-of-pocket costs and expenses (including reasonable fees of law firms engaged by the Banks and the reasonable estimate of the allocable costs of counsel in the staff of legal departments of the Banks and costs of settlement) incurred by the Agent and each Bank in enforcing any Obligations or in collecting any payments due from the Company hereunder or under any Notes by reason of such Event of Default or in connection with any refinancing or restructuring of any Loan Document in the nature of a "work-out" or of any insolvency or bankruptcy proceeding. 10.5 Set Off. In addition to any rights now or hereafter ------- granted under applicable law and not by way of limitation of any such rights, upon the occurrence of and during the continuance of any Event of Default (after the giving of any notice and the expiration of any grace period contained in the definition thereof), each Bank and each subsequent holder of any Note is hereby authorized by the Company at any time or from time to time, without notice to the Company, or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate any and all deposits (including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured but not including trust accounts) and any other indebtedness at any time held or owing by that Bank or that subsequent holder or any Bank Affiliate thereof to or for the credit or the account of the Company and to apply any such amounts in accordance with the provisions of Section 2.13 irrespective of whether or not that Bank or that subsequent holder shall have made any demand hereunder and each such Bank Affiliate is hereby irrevocably authorized to permit such setoff and appropriation. 10.6 Notices. Unless otherwise specifically provided herein, ------- any notice or other communication herein required or permitted to be given shall be in writing and may be -58- personally served, telecopied, telexed or sent by United States mail and shall be deemed to have been given upon delivery in person, receipt of telecopy or telex or four Business Days after deposit in the United States mail, registered or certified, with postage prepaid and properly addressed. For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this Section 10.6) shall be as set forth under each party's name on Schedule 10.6 hereto. 10.7 Severability. In case any provision in or obligation ------------ under this Agreement or any Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 10.8 Amendments and Waivers. No amendment or waiver of any ---------------------- provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company therefrom, shall be effective unless the same shall be in writing and signed by the Requisite Banks and the Company, and acknowledged by the Agent, and then such waiver shall be effective only in the specific instance and for the specific purpose for which given; provided, -------- however, that no such waiver, amendment, or consent shall, unless in writing and - ------- signed by all the Banks and the Company, and acknowledged by the Agent, do any of the following: (a) increase or extend any Bank's Pro Rata Share of the Aggregate Loan Commitment or the Receivables Commitment or subject any Bank to any additional obligations; (b) postpone or delay any date fixed for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder or under any Loan Document; (c) reduce the principal of, or the rate of interest specified herein on any Loan, or of any fees or other amounts payable hereunder or under any Loan Document; (d) change the Pro Rata Share of the Aggregate Loan Commitment or the Aggregate Receivables Commitment or of the aggregate unpaid principal amount of any extension of credit which shall be required for the Banks or any of them to take any action hereunder; (e) amend this Section 10.8 or Section 2.13; (f) amend Section 2.1, the definitions of "Pro Rata Share" or "Requisite Banks;" or -59- (g) discharge any Guarantor; provided further, that no amendment, waiver or consent shall (i) unless in - -------- ------- writing and signed by the Agent in addition to the Requisite Banks or all the Banks, as the case may be, affect the rights or duties of the Agent under any Loan Document; or (ii) have the effect of making any Bank's Loan Commitment or Receivables Commitment be nonratable with its Receivables Commitment and its Pro Rata Share of the Aggregate Unpaids (as defined in the Transfer and Administration Agreement). No notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 10.8 shall be binding upon each holder of any Notes at the time outstanding, each future holder of the Notes and, if signed by the Company, on the Company. 10.9 Obligations Several. The obligation of each Bank ------------------- hereunder is several, and no Bank shall be responsible for any obligation or commitment of any other Bank hereunder. Nothing contained in this Agreement and no action taken by Banks pursuant hereto shall be deemed to constitute Banks to be a partnership, an association, a joint venture or another entity. 10.10 Certain Changes. If (a) any changes in accounting --------------- principles from those used in the preparation of the financial statements referred to in Section 5.8 hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or requested by the Financial Accounting Standards Board or the American Institute of Certified Public Accounts (or successors thereto or agencies with similar functions) result in a change in the method of calculation of financial covenants, standards or terms found in Sections 1, 6 and 7, or (b) the Company changes the manner in which its fiscal year, fiscal quarters and fiscal months are determined, the parties hereto agree to enter into negotiations in order to amend the appropriate provisions of this Agreement so as to equitably reflect such changes with the desired result that the criteria for evaluating the Company's financial condition and operations or establishing limitations hereunder shall be the same after such changes as if such changes had not been made. 10.11 Headings. Section headings in this Agreement are -------- included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 10.12 Applicable Law. (a) This Agreement, any Notes and the -------------- other Loan Documents shall be governed by, and shall be construed and enforced in accordance with, the internal -60- laws of the State of California, without regard to conflicts of laws principles. (b) Any legal action or proceeding with respect to this Agreement and any other Loan Documents may be brought in the courts of the State of California or of the United States for the Central District of California, and by execution and delivery of this Agreement, each of the Company, the Agent and the Banks consents, for itself and in respect of its property, to the non-exclusive jurisdiction of those courts. Each of the Company, the Agent and the Banks irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of this Agreement or any document related hereto. The Company, the Agent and the Banks each waive personal service of any summons, complaint or other process, which may be made by any other means permitted by California law. 10.13 Successors and Assigns. The provisions of this Agreement ---------------------- shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Bank. No assignment or transfer of any Bank will be permitted if such assignment or transfer would result in any Bank's Pro Rata Share hereunder being a different percentage than its pro rata share of the Total Outstanding Investment. 10.14 Counterparts. This Agreement and any amendments, ------------ waivers, consents, or supplements may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. 10.15 Indemnity. Whether or not the transactions contemplated --------- hereby are consummated, the Company shall indemnify and hold the Agent-Related Persons, and each Bank and each of its respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") ------------------ harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including reasonable fees and out-of-pocket expenses of counsel and the allocated cost of internal counsel) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Bank) be imposed on, incurred by or asserted against any such Person arising out of this Agreement or any document contemplated by or referred to herein, or the -61- transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any proceeding of the type referred to in Section 8.1(f) or (g) or appellate proceeding) related to or arising out of this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided, that the Company shall ----------------------- -------- have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities resulting from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. MATTEL, INC. By /s/ William Stavro ______________________________ Vice President and Treasurer AGENT: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By /s/ Kay Warren ____________________________ Vice President BANKS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Robert W. Troutman ___________________________ Robert W. Troutman Managing Director NATIONSBANK OF TEXAS, N.A. By /s/ J. Blake Seaton ____________________________ Title Vice President _________________________ (Signatures continue) -62- CHEMICAL BANK By /s/ David J. Corcoran ____________________________ Title: Vice President _________________________ THE FIRST NATIONAL BANK OF BOSTON By /s/ J. Peter Mitchell _____________________________ Title Director _________________________ PNC BANK, NATIONAL ASSOCIATION By /s/ Ted A. Dunn ____________________________ Title Assistant Vice President _________________________ TORONTO-DOMINION (TEXAS), INC. By /s/ Diane Bailey ____________________________ Title Vice President _________________________ ABN AMRO BANK N.V. By /s/ Matthew S. Thomson ____________________________ Title Group Vice President _________________________ By /s/ Patrick A. Russo ____________________________ Title Assistant Vice President _________________________ THE BANK OF CALIFORNIA, N.A. By /s/ Thomas H. Tegart ____________________________ Title Vice President _________________________ (Signatures continue) -63- BANQUE NATIONALE DE PARIS By /s/ Clive Bettles ____________________________ Title Vice President _________________________ By /s/ Deborah Gohh ____________________________ Title Vice President _________________________ DRESDNER BANK AG, Los Angeles Agency By /s/ Barbara J. Readick ____________________________ Title Vice President _________________________ By /s/ Dennis G. Blank ____________________________ Title Vice President ------------------------- ISTITUTO BANCARIO SAN PAOLO di TORINO SpA By /s/ Donald W. Brown ____________________________ Title Branch Manager _________________________ By /s/ Glen Binder ____________________________ Title Vice President _________________________ MANUFACTURERS & TRADERS TRUST CO. By /s/ Geoffrey R. Fenn ____________________________ Title Vice President _________________________ MARINE MIDLAND BANK By /s/ William M. Holland ____________________________ Title Vice President _________________________ CITICORP USA, INC. By /s/ Barbara A. Cohen ____________________________ Title Vice President _________________________ -64- EXHIBIT A --------- FORM OF NOTE MATTEL, INC. PROMISSORY NOTE DUE MARCH 31, 1998 $___________ Los Angeles, California March 10, 1995 FOR VALUE RECEIVED, MATTEL, INC., a Delaware corporation (the "Company"), promises to pay to the order of _______________________ (the "Payee"), the principal amount of $______________ or, if different, the aggregate principal amount of Loans made by the Payee to the Company under the Credit Agreement referred to below outstanding on the Termination Date. The Company also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid at the rates and at the times which shall be determined in accordance with the provisions of the Credit Agreement dated as of March 10, 1995, among the Company, the Banks named therein and Bank of America National Trust and Savings Association, as Agent (as amended from time to time, the "Credit Agreement"). This Note (this "Note") is one of the Company's Notes issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Loans evidenced hereby are made and are to be repaid. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of Bank of America for credit to: BANCONTROL Account No. 12358-88449, reference: Mattel, Inc., at 1850 Gateway Boulevard, Concord, California 94520 or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Each of the Payee and any subsequent holder of this Note agrees that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided -------- that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Company hereunder with respect to payments of principal or interest on this Note. A-1 This Note is subject to prepayment as provided in the Credit Agreement. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The Company promises to pay all actual and reasonable costs and expenses, including reasonable attorneys' fees and the reasonably allocated cost of inhouse counsel and staff, incurred in the collection and enforcement of this Note. The Company and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. THE CREDIT AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. IN WITNESS WHEREOF, the Company has caused this Note to be executed and delivered by its duly authorized officer, as of the day and year and the place first above written. MATTEL, INC. By -------------------------------- Title ----------------------------- A-2 TRANSACTIONS ON NOTE -------------------- Type Amount Amount of Outstanding Nota- of of End of Prin. or Principal tion Loan Loan Interest Int. Paid Balance Made Date Made Made Period This Date This Date By - ---- ---- ---- -------- --------- ---------- ----- A-3 EXHIBIT B --------- NOTICE OF BORROWING ------------------- TO: Bank of America National Trust and Savings Association, as Agent 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Agency Management Services #5596 Gentlemen: Pursuant to Section 2.3 of that certain Credit Agreement dated as of March 10, 1995 (the "Credit Agreement"; capitalized terms used herein shall have the meanings assigned to them in the Credit Agreement), among Mattel, Inc., a Delaware corporation (the "Company"), the Banks named therein (the "Banks") and Bank of America National Trust and Savings Association, as Agent (the "Agent"), this represents the Company's request to borrow on __________, 19__ from the Banks on a pro rata basis the aggregate principal amount of $__________ as [Base Rate] [Eurodollar Rate] [CD Rate] Loans. [The initial Interest period for such [Eurodollar Rate] [CD Rate] Loan is requested to be a ________ month/day period]. The proceeds of such Loans are to be deposited in the Company's account at Bank of America. The undersigned officer, to the best of his knowledge, and the Company certifies that (i) the representations and warranties of the Company contained in the Credit Agreement are true, correct and complete in all material respects on and as of the date hereof to the same extent as though made on and as of the date hereof; (ii) no Default or Event of Default has occurred and is continuing under the Credit Agreement or will result from the proposed borrowing; and (iii) the Company has performed in all material respects all agreements and satisfied all conditions under the Credit Agreement required to be performed by it on or before the date hereof. DATED: ______________________ MATTEL, INC. By ___________________________ Name _________________________ Title ________________________ B-1 EXHIBIT C --------- NOTICE OF CONVERSION/CONTINUATION --------------------------------- TO: Bank of America National Trust and Savings Association, as Agent 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Agency Management Services #5596 Gentlemen: 1. Conversion Selection. Pursuant to Section 2.4 of that certain -------------------- Credit Agreement dated as of March 10, 1995 (the "Credit Agreement") among Mattel, Inc., a Delaware corporation (the "Company"), the Banks named therein (the "Banks") and Bank of America National Trust and Savings Association, as Agent (the "Agent"), please convert an aggregate of $________of existing [Base Rate, Eurodollar Rate, CD Rate] Loans, the final day of the current Interest Period (if applicable) of which is __________, 19__, to [Base Rate, Eurodollar Rate, CD Rate] Loans, as follows: Interest Period (Eurodollar Rate and Dollar Amount CD Rate Loans) ------------- ---------------------- $____________ ________months/days Maturing on ____, 19__ 2. Continuation Selection. Pursuant to Section 2.4 of the ---------------------- Agreement, please continue an aggregate of $_______of existing [Eurodollar Rate, CD Rate] Loans, the final day of the current Interest Period of which is __________, 19____, as follows: Requested Dollar Amount Interest Period ------------- --------------- $___________ ______ months/days Maturing on ______, 19___ C-1 Unless otherwise defined herein, capitalized terms used herein have the meanings assigned to them in the Agreement. DATED: ______________________ MATTEL, INC. By ___________________________ Name _________________________ Title ________________________ C-2 EXHIBIT D --------- OFFICERS' CERTIFICATE --------------------- THE UNDERSIGNED HEREBY CERTIFY THAT: (1) We are the duly elected [Chairman of the Board, President, Executive Vice President or Senior Vice President] and [Chief Financial Officer, Treasurer, Controller Assistant Treasurer or other] of Mattel, Inc., a Delaware corporation (the "Company"); (2) We have reviewed the terms of the Credit Agreement dated as of March 10, 1995, among the Company, the Banks named therein and Bank of America National Trust and Savings Association, as Agent (the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings assigned them in the Credit Agreement), and we have made, or have caused to be made under our supervision, a detailed review of the transactions and conditions of the Company and its Subsidiaries during the accounting period covered by the attached financial statements; and (3) The examinations described in paragraph (2) did not disclose, and we have no knowledge of, the existence of any condition or event which constitutes a Default or Event of Default (as defined in the Credit Agreement) during or at the end of the accounting period covered by the attached financial statements or as of the date of this Officers' Certificate, except as set forth below. Describe below (or in a separate attachment to this Officers' Certificate) the exceptions, if any, to paragraph (3) by listing, in detail, the nature of the condition or event and the period during which it has existed: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- D-1 The foregoing certifications, together with the computations set forth in Attachment No. 1 hereto and the financial statements delivered with this Officers' Certificate in support hereof, are made and delivered this _____ day of ______________, 19__ pursuant to subsection 6.1(c) of the Credit Agreement. MATTEL, INC. By: __________________________ Title: _______________________ By: _________________________ Title: ______________________ D-2 ATTACHMENT NO. I TO OFFICERS' CERTIFICATE As of (Date) ------------- ($000's Omitted Except Ratio Amounts) I. CONSOLIDATED FUNDED INDEBTEDNESS TO TOTAL CAPITALIZATION AS OF ABOVE DATE. (Section 7.5) A. Consolidated Funded Indebtedness: 1. Total liabilities for borrowed money: -- Notes Payable: $ --------------- -- Current Portion of Long-Term Debt: $ --------------- -- Term Loans: $ --------------- -- Subordinated Debt: $ --------------- -- Senior Long-Term Debt: $ --------------- -- Mortgages: $ --------------- Total liabilities for borrowed money: $ --------------- 2. Capital Leases: $ --------------- 3. Guaranties of unconsolidated funded obligations for borrowed money: $ --------------- 4. Total Consolidated Funded Indebtedness (Lines A1+A2+A3): $ =============== B. Consolidated Tangible Net Worth: 1. Net Worth: $ --------------- 2. Foreign exchange currency translation adjustments: $ --------------- 3. Intangible assets: $ --------------- 4. Consolidated Tangible Net Worth (Line B1 - (B2+B3)): $ =============== C. Total Outstanding Investment: $ --------------- D. Consolidated Funded Indebtedness plus Total Outstanding Investment (Lines A4+C): $ ---- ===============
D-3 E. Consolidated Funded Indebtedness plus Total Outstanding Investment plus Consolidated ---- ---- Tangible Net Worth (Lines D+B4): $ =============== F. Actual percentage of Consolidated Adjusted Debt plus Total Outstanding Investment ---- of Consolidated Funded Indebtedness plus Total Outstanding Investment plus ---- ---- Consolidated Tangible Net Worth (Line D/E): % --------------- G. Permitted maximum percentage of Consolidated Funded Indebtedness plus Total ---- Outstanding Investment to Consolidated Funded Indebtedness plus Total Outstanding ---- Investment plus Consolidated Tangible Net Worth: (55%) (65%) ----
II. CONSOLIDATED TANGIBLE NET WORTH AS OF ABOVE DATE. (Section 7.6) A. Minimum required Consolidated Tangible Net Worth 1. 50% of Consolidated Net Income for all fiscal quarters subsequent to December 31, 1993: $ --------------- 2. Any Net Issuance Proceeds subsequent to December 31, 1993: $ --------------- 3. Minimum Consolidated Tangible Net Worth required by covenant ($530,000,000 + Line A1+A2): $ =============== B. Actual Consolidated Tangible Net Worth (Line I.B4): $ --------------- C. Excess (Deficit) Consolidated Tangible Net Worth (Line B-A3): $ ===============
III. INTEREST COVERAGE RATIO AS OF ABOVE DATE. (Section 7.7) A. Company's net income 1. Company's net income from continuing operations, for the four consecutive fiscal quarters ending on such date: $ --------------- 2. Special items: $ --------------- 3. Minority interest: $ --------------- 4. Gains on reacquisition of debt: $ ---------------
D-4 5. Total (Line A1 - Line A1+A2+A3): $ =============== B. Income taxes accrued for the four consecutive fiscal quarters ending on such date: $ --------------- C. Interest accrued for the four consecutive fiscal quarters ending on such date, excluding capitalized interest and without regard to interest income: $ --------------- D. Depreciation and amortization for the four consecutive fiscal quarters ending on such date: $ --------------- E. Total (Lines A5+B+C+D): $ ================ F. Interest incurred for the four consecutive fiscal quarters ending on such date, including capitalized interest and without regard to interest income: $ --------------- G. Actual Ratio (Line E/Line F): ______ to 1 H. Required Minimum Ratio 3.5 to 1
D-5 EXHIBIT E --------- [FORM OF OPINION OF ASSISTANT GENERAL COUNSEL OF COMPANY] [EFFECTIVE DATE] To: The Banks Listed on Schedule A Hereto and Bank of America National Trust and Savings Association, as Agent Re: Credit Agreement dated as of March 10, 1995, among Mattel, Inc., the Banks named therein and Bank of America National Trust and Savings Association, as Agent Ladies and Gentlemen: I am the Assistant General Counsel of Mattel, Inc., a Delaware corporation (the "Company"), and in that capacity have acted as counsel to the Company, and Mattel Sales Corp., a California corporation ("Mattel Sales"), and Fisher-Price, Inc., a Delaware corporation ("Fisher-Price") in connection with the Credit Agreement dated as of March 10, 1995 (the "Credit Agreement"). This opinion is rendered to you in compliance with Section 4.1(r) of the Credit Agreement. Capitalized terms used herein without definition have the same meanings as in the Credit Agreement. In my capacity as such counsel, I have examined originals, or copies identified to my satisfaction as being true copies, of such records, documents or other instruments as in my judgment, are necessary or appropriate to enable me to render the opinions expressed below. These records, documents and instruments included the following: (a) The Restated Certificate of Incorporation of the Company, the Articles of Incorporation of Mattel Sales and the Certificate of Incorporation of Fisher-Price, each as amended to date; (b) The respective bylaws of the Company, Mattel Sales and Fisher-Price, each as amended to date; (c) All records of proceedings and actions of the respective Boards of Directors of the Company, Mattel Sales and Fisher-Price with respect to the Credit Agreement and the transactions contemplated thereby; (d) The Credit Agreement; E-1 (e) The Mattel Sales Guaranty and the Fisher-Price Guaranty; (f) The Mattel Sales Subordination Agreement and the Fisher-Price Subordination Agreement; (g) The agreements to which the Company, Mattel Sales and Fisher-Price are subject and by which any material portion of their assets are bound, identified to me by responsible officers of the Company and its Subsidiaries (the "Material Agreements"); (h) The contracts, agreements and instruments involving the borrowing of money in amounts of $15,000,000 or more currently extended or available for borrowing to which the Company, Mattel Sales and Fisher-Price are subject or by which any of their assets are bound, identified to me by responsible officers of the Company as being all such contracts, agreements and instruments (the "Other Loan Agreements"); and (i) The orders, judgments and decrees to which the Company, Mattel Sales and Fisher-Price are subject or by which any material portion of its assets is bound, identified to me by responsible officers of the Company as being all such orders, judgments and decrees (the "Judicial Orders"). I have been furnished with, and with the Banks' consent have relied upon, certificates of officers of the Company, Mattel Sales and Fisher-Price with respect to certain factual matters, copies of which have been delivered to the Banks. In addition, I have obtained and relied upon such certificates and assurances from public officials as I have deemed necessary, copies of which have been delivered to the Banks. I have investigated such questions of law for the purpose of rendering this opinion as I have deemed necessary. I am opining herein as to the effect on the subject transactions of only United States federal law, the General Corporation Law of the State of Delaware and the laws of the State of California. Certain of the opinions rendered herein are qualified by the discussion following the numbered paragraphs of my opinion. On the basis of the foregoing, and in reliance thereon, I am of the opinion that: 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and corporate authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to execute and deliver the Credit Agreement, the Mattel Sales Subordination Agreement and the Fisher-Price Subordination E-2 Agreement and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement, the Mattel Sales Subordination Agreement and the Fisher-Price Subordination Agreement. 2. Mattel Sales is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has all requisite corporate power and corporate authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to execute and deliver the Mattel Sales Guaranty and the Mattel Sales Subordination Agreement and to carry out the transactions contemplated by, and perform its obligations under, the Mattel Sales Guaranty. Mattel Sales is a wholly-owned subsidiary of the Company. 3. Fisher-Price is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and corporate authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to execute and deliver the Fisher-Price Guaranty and the Fisher-Price Subordination Agreement and to carry out the transactions contemplated by, and perform its obligations under, the Fisher-Price Guaranty. Fisher-Price is a wholly-owned subsidiary of the Company. 4. The execution and delivery of the Credit Agreement, the Mattel Sales Subordination Agreement and the Fisher-Price Subordination Agreement have been duly authorized by all necessary corporate action on the part of the Company. The Credit Agreement, the Mattel Sales Subordination Agreement and the Fisher- Price Subordination Agreement have been duly executed and delivered by the Company. The Credit Agreement, the Mattel Sales Subordination Agreement and the Fisher-Price Subordination Agreement constitute the legally valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. 5. The execution and delivery of the Mattel Sales Guaranty and the acknowledgement of the Mattel Sales Subordination Agreement have been duly authorized by all necessary corporate action on the part of Mattel Sales. The Mattel Sales Guaranty has been duly executed and delivered by Mattel Sales, and the Mattel Sales Subordination Agreement has been duly acknowledged by Mattel Sales. The Mattel Sales Guaranty constitutes the legally valid and binding obligations of Mattel Sales, enforceable against Mattel Sales in accordance with its terms. 6. The execution and delivery of the Fisher-Price Guaranty and the acknowledgement of the Fisher-Price Subordination Agreement have been duly authorized by all necessary corporate action on the part of Fisher-Price. The Fisher-Price Guaranty E-3 has been duly executed and delivered by Fisher-Price, and the Fisher-Price Subordination Agreement has been duly acknowledged by Fisher-Price. The Fisher- Price Guaranty constitutes the legally valid and binding obligations of Fisher- Price, enforceable against Fisher-Price in accordance with its terms. 7. Neither the execution and delivery of the Credit Agreement, the Mattel Sales Subordination Agreement, the Mattel Sales Guaranty, the Fisher-Price Subordination Agreement or the Fisher-Price Guaranty by the Company, Mattel Sales or Fisher-Price, as the case may be, the acknowledgement of the Mattel Sales Subordination Agreement by Mattel Sales, the acknowledgement of the Fisher-Price Subordination Agreement by Fisher-Price nor the consummation of the transactions contemplated thereby, nor compliance on or prior to the date hereof with the terms and conditions thereof applicable to the Company, Mattel Sales or Fisher-Price, as the case may be, (A) conflicts with, results in a breach of, or constitutes a default under, any of the terms, conditions or provisions of (v) the Restated Certificate of Incorporation or Bylaws of the Company, (w) the Articles of Incorporation or Bylaws of Mattel Sales, (x) the Certificate of Incorporation or Bylaws of Fisher-Price, (y) any Material Agreement, any Other Loan Agreement or any Judicial Order, or (z) any present federal, California or Delaware statute binding on the Company, Mattel Sales or Fisher-Price or (B) results in the creation of any lien upon any of the properties or assets of the Company, Mattel Sales or Fisher-Price under any Material Agreement, any Other Loan Agreement or any Judicial Order other than Liens created by or pursuant to the Transfer and Administration Agreement in favor of the Transfer and Administration Agent. 8. To the best of my knowledge and without having made any independent investigation there is no action, suit, proceeding or arbitration at law or in equity or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, pending or, to my knowledge, threatened against or affecting the Company, Mattel Sales or Fisher-Price or any of their properties which would result in any material adverse change in the business, operations, properties, assets or condition (financial or otherwise) of the Company and its subsidiaries, taken as a whole, or would materially adversely affect the Company's, Mattel Sales' or Fisher-Price's ability to perform its Obligations. 9. The making of the Loans and the application of the proceeds thereof by the Company as provided in the Credit Agreement do not violate Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. 10. No governmental consents, approvals, authorizations, registrations, declarations or filings are required by the Company, Mattel Sales or Fisher- Price under federal or California E-4 law or under the Delaware General Corporation Law in connection with the extensions of credit under the Credit Agreement. 11. The Company is not an "investment company" or a company "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. The opinions expressed in paragraphs 4, 5 and 6 hereof with respect to the validity, binding effect and enforceability of the Credit Agreement, the Mattel Sales Guaranty, the Mattel Sales Subordination Agreement, the Fisher-Price Guaranty and the Fisher-Price Subordination Agreement (the "Documents") are subject to the following limitations, qualifications and exceptions: (i) Limitations imposed by law or equitable principles upon the specific enforceability of any of the remedies, covenants and other provisions of the Documents and upon the availability of injunctive relief or other equitable remedies; (ii) The effect upon the Documents of bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting the enforceability of creditors' rights generally, including without limitation, the effect of Bankruptcy Code Section 547 on preferential transfers and Section 548 on fraudulent transfers and comparable provisions of state law; (iii) The effect of judicial decisions, invoking statutes or principles of equity, which have held that certain covenants and provisions of agreements are unenforceable where (y) the breach of such covenants or provisions imposes restrictions or burdens upon the debtor, including the acceleration of indebtedness due under debt instruments, and it cannot be demonstrated that the enforcement of such restrictions or burdens is reasonably necessary for the protection of the creditor, or (z) the creditor's enforcement of such covenants or provisions under the circumstances would violate the creditor's implied covenant of good faith and fair dealing; however, in my opinion, acceleration of the maturity date of the Loans would be available as provided in the Credit Agreement if an Event of Default occurs as a result of a material breach by the Company of a material covenant contained in the Documents; (iv) The unenforceability under certain circumstances of provisions waiving broadly or vaguely stated rights, unknown future rights, defenses to obligations or rights granted by law, where such waivers are against public policy or prohibited by law; (v) The unenforceability under certain circumstances of provisions to the effect that rights or remedies are not E-5 exclusive, that every right or remedy is cumulative and may be exercised in addition to or with any other right or remedy, that election of a particular remedy or remedies does not preclude recourse to one or more other remedies or that failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any right or remedy; (vi) The unenforceability under certain circumstances, under state or federal law or court decisions, of provisions indemnifying a party against liability for its own wrongful or negligent acts or where such indemnification is contrary to public policy or prohibited by law; (vii) The unenforceability under certain circumstances of provisions imposing penalties, forfeitures, late payment charges or any increase in interest rate upon delinquency in payment or upon occurrence of a default; (viii) The effect of California law which provides that, where a contract permits one party to the contract to recover attorneys' fees, the prevailing party in any action to enforce any provisions of the contract shall be entitled to recover its reasonable attorneys' fees; and (ix) the requirements of the California Commercial Code that party exercise its rights under the Documents in good faith and in a commercially reasonable manner. I also advise you of California statutory provisions and case law to the effect that, in certain circumstances, a surety may be exonerated if the creditor materially alters the original obligation of the principal without the consent of the guarantor, elects remedies for default that impair the subrogation rights of the guarantor against the principal, or otherwise takes any action without notifying the guarantor that materially prejudices the guarantor. However, there is also authority to the effect that a guarantor may validly waive such rights if the waivers are expressly set forth in the guaranty. While I believe that a California court should hold that the explicit language contained in the Mattel Sales Guaranty and the Fisher-Price Guaranty waiving such rights is enforceable, I express no opinion with respect to the effect of: (i) any modification to or amendment of the obligations of Mattel Sales or Fisher-price that materially increases such obligations; (ii) any election of remedies by the Banks following the occurrence of an event of default under the Documents; or (iii) any other action by the Banks that materially prejudices the grantor. The opinions set forth in paragraphs 7 and 10 are based upon consideration of only those laws and statues which, in my experience, are normally applicable to unsecured loans and guaranties. E-6 To the extent that the obligations of the Company and Mattel Sales may be dependant upon such matters, I assume for purposes of this opinion that the parties to the Documents (other than the Company, Mattel Sales and Fisher-Price) are duly incorporated, validly existing and in good standing under the laws of their respective jurisdiction of incorporation; that the Documents have been duly authorized, executed and delivered by the parties thereto (other than the Company, Mattel Sales and Fisher-Price), and constitute their legally valid and binding obligations, enforceable against them in accordance with their respective terms; that the parties to the Documents (other than the Company, Mattel Sales and Fisher-Price) have the requisite corporate or other organizational power and authority to perform their respective obligations under the Documents; and that all parties to the Documents (other than the Company, Mattel Sales and Fisher-Price) have filed any applicable returns and paid any applicable taxes under the California Franchise Tax Law. I am not expressing any opinion as to the effect of the compliance by the parties to the Documents (other than the Company, Mattel Sales and Fisher-Price) with any state or federal laws or regulations applicable to the transactions. In rendering my opinions in paragraphs 4, 5 and 6 hereof, I have assumed that each Bank is exempt from the California usury laws. This opinion is rendered only to the Agent, the Banks and their permitted Assignees and Participants and is solely for their benefit in connection with the above transactions. This opinion may not be relied upon by the Banks for an other purpose, or relied upon by any other person, firm or corporation for any purpose without my prior written consent; except that this opinion may be furnished or quoted to your legal counsel and independent auditors in connection with the above transactions, to regulatory authorities having jurisdiction over you, to your holding company and as otherwise compelled by legal process. Very truly yours, Robert Normile Vice President, Assistant General Counsel and Assistant Secretary E-7 SCHEDULE A Bank of America National Trust and Savings Association ABN AMRO Bank N.V. Banque Nationale de Paris The Bank of California, N.A. Chemical Bank Citicorp USA, Inc. Dresdner Bank AG, Los Angeles Agency The First National Bank of Boston Marine Midland Bank Istituto Bancario San Paolo di Torino SpA Manufacturers & Traders Trust Co. NationsBank of Texas, N.A. PNC Bank, National Association Toronto-Dominion (Texas), Inc. E-8 EXHIBIT F-1 ----------- FISHER-PRICE, INC. ------------------ CONTINUING GUARANTY ------------------- TO: Bank of America National Trust and Savings Association, as Agent ("Agent") PRELIMINARY STATEMENTS: A. Concurrently herewith, Mattel, Inc., a Delaware corporation (the "Company"), the Banks named therein (the "Domestic Banks") and Bank of America National Trust and Savings Association, as agent (the "Agent"), are entering into a Credit Agreement dated as of even date herewith (said agreement, as it may hereafter be amended, supplemented, restated or otherwise modified from time to time, is referred to herein as the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings assigned those terms in the Credit Agreement). B. Certain Subsidiaries of the Company that are incorporated in a jurisdiction outside of the United States of America (the "Foreign Subsidiaries") have entered into credit facilities with one or more Banks or foreign affiliates of the Banks (the "Foreign Banks"), and the Company has guarantied the obligations of such Foreign Subsidiaries under such credit facilities pursuant to one or more guaranties (the "Foreign Subsidiary Guaranties"), and it is contemplated that one or more Foreign Subsidiaries may hereafter enter into such credit facilities with one or more Foreign Banks, and that the Company may guaranty the obligations of such Foreign Subsidiaries thereunder pursuant to one or more Foreign Subsidiary Guaranties. C. It is a condition precedent to the effectiveness of the Credit Agreement that the Guarantor enter into this Continuing Guaranty guarantying all obligations of every nature of the Company and Mattel Sales from time to time owed under or in respect of (i) the Credit Agreement, the Loans, and the other Loan Documents (all such obligations are referred to herein as the "Domestic Bank Obligations"), (ii) the Foreign Subsidiary Guaranties (such obligations are referred to herein as the "Foreign Subsidiary Guaranty Obligations") and (iii) any letters of credit issued by a Bank in its individual capacity for the account of the Company outside the Credit Agreement (such obligations are referred to herein as the "Company Letter of Credit Obligations"). F-1-1 NOW, THEREFORE, the Guarantor agrees as follows: 1. For valuable consideration, the undersigned Guarantor unconditionally, absolutely and irrevocably guarantees and promises to pay to the Agent, or order, on demand, in lawful money of the United States and in immediately available funds, any and all present or future Domestic Bank Obligations, Foreign Subsidiary Guaranty Obligations and Company Letter of Credit Obligations owing to the Agent, the Domestic Banks, the Foreign Banks and the Agent (collectively, the "Guarantied Parties"). The terms Domestic Bank Obligations, Foreign Subsidiary Guaranty Obligations and Company Letter of Credit Obligations (hereinafter collectively referred to as the "Obligations") are used herein in their most comprehensive sense and include any and all advances, debts, obligations, and liabilities of the Company, now, or hereafter made, incurred, or created, whether voluntary or involuntarily, and however arising, including, without limitation, any and all attorneys' fees (including the allocated cost of inhouse counsel), costs, premiums, charges, or interest owed by the Company to the Guarantied Parties, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, whether the Company may be liable individually or jointly with others, whether recovery upon such indebtedness may be or hereafter becomes barred by any statute of limitations or whether such indebtedness may be or hereafter become otherwise unenforceable. 2. This Guaranty is a continuing guaranty which relates to any Obligations, including those which arise under successive transactions which shall either cause the Company to incur new Obligations, continue the Obligations from time to time, or renew them after they have been satisfied. The Guarantor agrees that nothing shall discharge or satisfy its obligations created hereunder except for the full payment of the Obligations. Any payment by the Guarantor shall not reduce its maximum obligation hereunder. 3. The Guarantor agrees that it is directly and primarily liable to the Agent for the benefit of the Guarantied Parties, that its obligations hereunder are independent of the Obligations of the Company, or of any other guarantor, and that a separate action or actions may be brought and prosecuted against the Guarantor, whether action is brought against the Company or whether the Company is joined in any such action or actions. The Guarantor agrees that any releases which may be given by the Agent and the Guarantied Parties to the Company or any other guarantor shall not release it from this Guaranty. 4. The obligations of the Guarantor under this Guaranty shall not be affected, modified or impaired upon the occurrence from time to time of any of the following, whether or not with notice to or the consent of the Guarantor: F-1-2 (a) the compromise, settlement, change, modification, amendment (whether material or otherwise) or partial termination of any or all of the Obligations; (b) the failure to give notice to the Guarantor of the occurrence of any Event of Default under the terms and provisions of the Agreement; (c) the waiver of the payment, performance or observance of any of the Obligations; (d) the taking or omitting to take any actions referred to in any Loan Document or of any action under this Guaranty; (e) any failure, omission or delay on the part of the Agent and/or the Guarantied Parties to enforce, assert or exercise any right, power or remedy conferred in this Guaranty, the Credit Agreement, any other Loan Document or any other indulgence or similar act on the part of the Agent and/or the Guarantied Parties in good faith and in compliance with applicable law; (f) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all of the assets, marshalling of assets, receivership, insolvency, bankruptcy, assignment for the benefit of creditors or readjustment of, or other similar proceedings which affect the Guarantor, any other guarantor of any of the Obligations of the Company or any of the assets of any of them, or any allegation of invalidity or contest of the validity of this Guaranty in any such proceeding; (g) to the extent permitted by law, the release or discharge of any other guarantors of the Obligations from the performance or observance of any obligation, covenant or agreement contained in any guaranties of the Obligations by operation of law; or (h) the default or failure of any other guarantors of the Obligations fully to perform any of their respective obligations set forth in any such guaranties of the Obligations. To the extent any of the foregoing refers to any actions which the Agent or the Guarantied Parties may take, the Guarantor hereby agrees that the Agent and/or the Guarantied Parties may take such actions in such manner, upon such terms, and at such times as the Agent or the Guarantied Parties, in their discretion, deem advisable, without, in any way or respect, impairing, affecting, reducing or releasing the Guarantor from its undertakings hereunder and the Guarantor hereby consents to each and all of the foregoing actions, events and occurrences. F-1-3 5. The Guarantor hereby waives: (a) any and all rights to require the Agent or the Guarantied Parties to prosecute or seek to enforce any remedies against the Company or any other party liable to the Agent or the Guarantied Parties on account of the Obligations; (b) any right to assert against the Agent or the Guarantied Parties any defense (legal or equitable), set-off, counterclaim, or claim which the Guarantor may now or at any time hereafter have against the Company or any other party liable to the Agent or the Guarantied Parties in any way or manner under the Credit Agreement; (c) all defenses, counterclaims and off-sets of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity or enforceability of any Loan Document and the security interest granted pursuant thereto; (d) any defense arising by reason of any claim or defense based upon an election of remedies by the Agent or the Guarantied Parties including, without limitation, any direction to proceed by judicial or nonjudicial foreclosure or by deed in lieu thereof, which, in any manner impairs, affects, reduces, releases, destroys or extinguishes the Guarantor's subrogation rights, rights to proceed against the Company for reimbursement, or any other rights of the Guarantor to proceed against the Company, against any other guarantor, or against any other security, with the Guarantor understanding that the exercise by the Agent and/or the Guarantied Parties of certain rights and remedies may offset or eliminate the Guarantor's right of subrogation against the Company, and that the Guarantor may therefore incur partially or totally non-reimbursable liability hereunder; (e) all presentments, demands for performance, notices of non-performance, protests, notices of protest, notices of dishonor, notices of default, notice of acceptance of this Guaranty, and notices of the existence, creation, or incurring of new or additional indebtedness, and all other notices or formalities to which the Guarantor may be entitled; and (f) without limiting the generality of the foregoing, the Guarantor hereby expressly waives any and all benefits of California Civil Code Sections 2809, 2810, 2819, 2825, 2839 and 2845 through 2850. 6. The Guarantor hereby agrees that unless and until all Obligations have been paid to the Agent and the Guarantied Parties in full, it shall not have any rights of subrogation, reimbursement or contribution as against the Company or any other guarantor, if any, and shall not seek to assert or enforce the F-1-4 same. Guarantor understands that the exercise by Agent of certain rights and remedies contained in the Loan Documents may affect or eliminate Guarantor's right of subrogation if any, against the Company and that Guarantor may therefore incur a partially or totally non-reimbursable liability hereunder; nevertheless, Guarantor hereby authorizes and empowers the Agent and the Guarantied Parties to exercise, in their sole discretion, any right and remedy, or any combination thereof, which may then be available, since it is the intent and purpose of Guarantor that the obligations hereunder shall be absolute, independent and unconditional under any and all circumstances. 7. The Guarantor is presently informed of the financial condition of the Company and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. The Guarantor hereby covenants that it will continue to keep itself informed of the financial condition of the Company, the status of other guarantors, if any, and of all other circumstances which bear upon the risk of nonpayment. The Guarantor hereby waives its right, if any, to require the Agent or the Guarantied Parties to disclose to it any information which the Agent or any Bank may now or hereafter acquire concerning such condition or circumstances including, but not limited to, the release of any other guarantor. 8. The Agent and each Bank's books and records evidencing the Obligations shall be admissible in any action or proceeding and shall be binding upon the Guarantor for the purpose of establishing the terms set forth therein and shall constitute prima facie proof thereof. 9. Notwithstanding anything to the contrary contained herein, the Guarantor's liability pursuant to this Guaranty shall be limited to the greater of: (a) the 'reasonably equivalent value,' received by the Guarantor or any of its subsidiaries arising out of the Loan Documents (including, without limitation, repayment of intercompany or third party debt of, investments made in, and capital contributions, advances and loans made to, the Guarantor or any of its subsidiaries, directly or indirectly, by Company or any other subsidiary with, or as a direct or indirect result of obtaining, the proceeds of any credit extended under the Loan Documents) in exchange for or in connection with the Guarantor's guaranty of the Obligations, and (b) 95% of the excess of (i) a 'fair valuation' of the amount of the assets and other property of the Guarantor and its subsidiaries taken as a whole as of the applicable date of determination of the incurrence of the Guarantor's obligations hereunder over (ii) a 'fair ---- valuation' of the Guarantor's and its subsidiaries' debts taken as a whole as of such date, but excluding liabilities arising under this Guaranty and excluding all liabilities owing by Guarantor and its subsidiaries taken as a whole to the Company or any other Subsidiary or otherwise subordinated to the Guarantor's obligations hereunder, it being understood that a F-1-5 portion of such indebtedness owing to Company shall be discharged on a dollar- for-dollar basis in an amount equal to the amount paid by Guarantor hereunder. The meaning of the terms 'reasonably equivalent value' and 'fair valuation,' and the calculations of assets and other property and debts, shall be determined in accordance with the applicable federal and California state laws in effect on the date hereof governing the determination of the insolvency of a debtor and to further the intent of all parties hereto to maximize the amount payable by the Guarantor without rendering it insolvent or leaving it with an unreasonably small amount of capital in relation to its business, in either case, at the applicable date for the determination of the incurrence of its obligations hereunder; provided, however, the Guarantor agrees, to the maximum extent -------- ------- permitted by law, that 'fair valuation' of the Guarantor's and its subsidiaries' assets and other properties means the fair market sales price as would be obtained in an arms-length transaction between competent, informed and willing parties under no compulsion to sell or buy or collections thereof obtained in the ordinary course of business and 'fair valuation' of its debts means the amount, in light of the applicable circumstances, at the time, for which the Guarantor or its subsidiaries is liable for matured known liquidated liabilities or would reasonably be expected to become liable on contingent or unliquidated liabilities as they mature and taking into consideration the nature of any such contingency and the probability that liability would be imposed. 10. The Guarantor represents and warrants for and with respect to itself that: (a) The Guarantor is a corporation duly organized and existing under the laws of the state of California, and is properly licensed and in good standing in, and where necessary to maintain its rights and privileges have complied with the fictitious name statute of, every jurisdiction in which it is doing business, except where the failure to be licensed or be in good standing or comply with any such statute will not have a material adverse effect on the ability of the Guarantor to perform its obligations hereunder or under any instrument or agreement required hereunder; (b) The execution, delivery and performance of this Guaranty and any instrument or agreement required hereunder are within the power of the Guarantor, have been duly authorized by, and are not in conflict with the terms of any charter, by-law or other organization papers of, the Guarantor; (c) No approval, consent, exemption or other action by, or notice to or filing with, any governmental authority is necessary in connection with the execution, delivery, performance or enforcement of this Guaranty or any instrument or agreement required hereunder, except as may have been obtained and F-1-6 certified copies of which have been delivered to Agent and the Guarantied Parties; (d) There is no law, rule or regulation, nor is there any judgment, decree or order of any court or governmental authority binding on the Guarantor, which would be contravened by the execution, delivery, performance or enforcement of this Guaranty or any instrument or agreement required hereunder; (e) This Guaranty is a legal, valid and binding agreement of the Guarantor, enforceable against the Guarantor in accordance with its terms, and any instrument or agreement required hereunder, when executed and delivered, will be similarly legal, valid, binding and enforceable, except where enforceability thereof may be limited by applicable law relating to bankruptcy, insolvency, moratorium or other similar laws affecting creditors' rights generally or by the application of general principles of equity; (f) There is no action, suit or proceeding pending against, or to the knowledge of the Guarantor, threatened against or affecting the Guarantor, before any court or arbitrator or any governmental body, agency or official which in any manner draws into question the validity or enforceability of this Guaranty; and (g) The execution, delivery and performance by the Guarantor of this Guaranty does not constitute, to the best knowledge of Guarantor, a "fraudulent conveyance," "fraudulent obligation" or "fraudulent transfer" within the meanings of the Uniform Fraudulent Conveyances Act or Uniform Fraudulent Transfer Act, as enacted in any jurisdiction. 11. Any one of the following events shall constitute an "Event of Bankruptcy:" (a) The Guarantor or the Company is generally not paying or admits in writing its inability to pay its debts as such debts become due, or files any petition or action for relief under any bankruptcy, reorganization, insolvency, or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors, or takes any corporate action in furtherance of any of the foregoing; (b) An involuntary petition is filed against the Guarantor or the Company under any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of the Guarantor or the Company, unless such petition or appointment is set aside or withdrawn or ceases to be in effect F-1-7 within sixty (60) days from the date of said filing or appointment. Upon the occurrence of an Event of Bankruptcy, without notice or demand, any and all of the Guarantor's obligations under this Guaranty shall become due, payable and enforceable against the Guarantor whether or not the Obligations are then due and payable. 12. All notices and other communications hereunder shall be delivered, in the manner and with the effect provided in the Credit Agreement and, in the case of the Guarantor, in care of the Company. 13. This Guaranty shall be binding upon the successors and assigns of the Guarantor and shall inure to the benefit of the Agent's and the Guarantied Parties' successors and assigns. This Guaranty cannot be assigned by the Guarantor without the prior written consent of the Agent and the Guarantied Parties which shall be in the Agent's and the Guarantied Parties' sole and absolute discretion. 14. No failure or delay by the Agent or the Guarantied Parties in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 15. The Guarantor shall pay (a) all reasonable out-of-pocket expenses of the Agent and the Guarantied Parties, including reasonable fees and disbursements of counsel (including the allocated cost of inhouse counsel and staff) for the Agent, in connection with any waiver or consent hereunder or any amendment hereof and (b) all out-of-pocket expenses incurred by the Agent and the Guarantied Parties, including fees and disbursements of counsel (including the allocated cost of inhouse counsel and staff), in connection with the enforcement of this Guaranty (whether or not suit is brought). 16. No modification of this Guaranty shall be effective for any purpose unless it is in writing and executed by an officer of the Agent authorized to do so. This Guaranty merges all negotiations, stipulations and provisions relating to the subject matter of this Guaranty which preceded or may accompany the execution of this Guaranty. 17. This Guaranty and the rights and obligations of the parties hereunder shall be construed in accordance with and be governed by the laws of the State of California without reference to the principles of conflicts of laws thereof. F-1-8 18. This Guaranty may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. 19. Terms not defined herein shall have the meanings assigned to them in the Credit Agreement. 20. Any indebtedness of the Company now or hereafter held by Guarantor is hereby subordinated to the indebtedness of the Company to the Agent and the Guarantied Parties; and such indebtedness of the Company to the Guarantor if the Agent so requests shall be collected, enforced and received by Guarantor as trustee for the Agent and the Guarantied Parties and be paid over to the Agent on account of the indebtedness of the Company to the Agent and the Guarantied Parties but without reducing or affecting in any manner the liability of the Guarantor under the other provisions of this guaranty. 21. It is not necessary for the Guarantied Parties to inquire into the powers of any Guaranteed Party or of the officers, directors or agents acting or purporting to act on its behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. Executed as of the 10th day of March 1995. FISHER-PRICE, INC. By: ____________________________ Title:__________________________ BANK OF AMERICA NATIONAL TRUST SAVINGS ASSOCIATION, as Agent By: ____________________________ Title:_________________________ F-1-9 EXHIBIT F-2 ----------- MATTEL SALES CORP. ------------------ CONTINUING GUARANTY ------------------- TO: Bank of America National Trust and Savings Association, as Agent ("Agent") PRELIMINARY STATEMENTS: A. Concurrently herewith, Mattel, Inc., a Delaware corporation (the "Company"), the Banks named therein (the "Domestic Banks") and Bank of America National Trust and Savings Association, as agent (the "Agent"), are entering into a Credit Agreement dated as of even date herewith (said agreement, as it may hereafter be amended, supplemented, restated or otherwise modified from time to time, is referred to herein as the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings assigned those terms in the Credit Agreement). B. Certain Subsidiaries of the Company that are incorporated in a jurisdiction outside of the United States of America (the "Foreign Subsidiaries") have entered into credit facilities with one or more Banks or foreign affiliates of the Banks (the "Foreign Banks"), and the Company has guarantied the obligations of such Foreign Subsidiaries under such credit facilities pursuant to one or more guaranties (the "Foreign Subsidiary Guaranties"), and it is contemplated that one or more Foreign Subsidiaries may hereafter enter into such credit facilities with one or more Foreign Banks, and that the Company may guaranty the obligations of such Foreign Subsidiaries thereunder pursuant to one or more Foreign Subsidiary Guaranties. C. It is a condition precedent to the effectiveness of the Credit Agreement that the Guarantor enter into this Continuing Guaranty guarantying all obligations of every nature of the Company and Fisher-Price from time to time owed under or in respect of (i) the Credit Agreement, the Loans, and the other Loan Documents (all such obligations are referred to herein as the "Domestic Bank Obligations"), (ii) the Foreign Subsidiary Guaranties (such obligations are referred to herein as the "Foreign Subsidiary Guaranty Obligations") and (iii) any letters of credit issued by a Bank in its individual capacity for the account of the Company outside the Credit Agreement (such obligations are referred to herein as the "Company Letter of Credit Obligations"). F-2-1 NOW, THEREFORE, the Guarantor agrees as follows: 1. For valuable consideration, the undersigned Guarantor unconditionally, absolutely and irrevocably guarantees and promises to pay to the Agent, or order, on demand, in lawful money of the United States and in immediately available funds, any and all present or future Domestic Bank Obligations, Foreign Subsidiary Guaranty Obligations and Company Letter of Credit Obligations owing to the Agent, the Domestic Banks, the Foreign Banks and the Agent (collectively, the "Guarantied Parties"). The terms Domestic Bank Obligations, Foreign Subsidiary Guaranty Obligations and Company Letter of Credit Obligations (hereinafter collectively referred to as the "Obligations") are used herein in their most comprehensive sense and include any and all advances, debts, obligations, and liabilities of the Company, now, or hereafter made, incurred, or created, whether voluntary or involuntarily, and however arising, including, without limitation, any and all attorneys' fees (including the allocated cost of inhouse counsel), costs, premiums, charges, or interest owed by the Company to the Guarantied Parties, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, whether the Company may be liable individually or jointly with others, whether recovery upon such indebtedness may be or hereafter becomes barred by any statute of limitations or whether such indebtedness may be or hereafter become otherwise unenforceable. 2. This Guaranty is a continuing guaranty which relates to any Obligations, including those which arise under successive transactions which shall either cause the Company to incur new Obligations, continue the Obligations from time to time, or renew them after they have been satisfied. The Guarantor agrees that nothing shall discharge or satisfy its obligations created hereunder except for the full payment of the Obligations. Any payment by the Guarantor shall not reduce its maximum obligation hereunder. 3. The Guarantor agrees that it is directly and primarily liable to the Agent for the benefit of the Guarantied Parties, that its obligations hereunder are independent of the Obligations of the Company, or of any other guarantor, and that a separate action or actions may be brought and prosecuted against the Guarantor, whether action is brought against the Company or whether the Company is joined in any such action or actions. The Guarantor agrees that any releases which may be given by the Agent and the Guarantied Parties to the Company or any other guarantor shall not release it from this Guaranty. 4. The obligations of the Guarantor under this Guaranty shall not be affected, modified or impaired upon the occurrence from time to time of any of the following, whether or not with notice to or the consent of the Guarantor: F-2-2 (a) the compromise, settlement, change, modification, amendment (whether material or otherwise) or partial termination of any or all of the Obligations; (b) the failure to give notice to the Guarantor of the occurrence of any Event of Default under the terms and provisions of the Agreement; (c) the waiver of the payment, performance or observance of any of the Obligations; (d) the taking or omitting to take any actions referred to in any Loan Document or of any action under this Guaranty; (e) any failure, omission or delay on the part of the Agent and/or the Guarantied Parties to enforce, assert or exercise any right, power or remedy conferred in this Guaranty, the Credit Agreement, any other Loan Document or any other indulgence or similar act on the part of the Agent and/or the Guarantied Parties in good faith and in compliance with applicable law; (f) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all of the assets, marshalling of assets, receivership, insolvency, bankruptcy, assignment for the benefit of creditors or readjustment of, or other similar proceedings which affect the Guarantor, any other guarantor of any of the Obligations of the Company or any of the assets of any of them, or any allegation of invalidity or contest of the validity of this Guaranty in any such proceeding; (g) to the extent permitted by law, the release or discharge of any other guarantors of the Obligations from the performance or observance of any obligation, covenant or agreement contained in any guaranties of the Obligations by operation of law; or (h) the default or failure of any other guarantors of the Obligations fully to perform any of their respective obligations set forth in any such guaranties of the Obligations. To the extent any of the foregoing refers to any actions which the Agent or the Guarantied Parties may take, the Guarantor hereby agrees that the Agent and/or the Guarantied Parties may take such actions in such manner, upon such terms, and at such times as the Agent or the Guarantied Parties, in their discretion, deem advisable, without, in any way or respect, impairing, affecting, reducing or releasing the Guarantor from its undertakings hereunder and the Guarantor hereby consents to each and all of the foregoing actions, events and occurrences. F-2-3 5. The Guarantor hereby waives: (a) any and all rights to require the Agent or the Guarantied Parties to prosecute or seek to enforce any remedies against the Company or any other party liable to the Agent or the Guarantied Parties on account of the Obligations; (b) any right to assert against the Agent or the Guarantied Parties any defense (legal or equitable), set-off, counterclaim, or claim which the Guarantor may now or at any time hereafter have against the Company or any other party liable to the Agent or the Guarantied Parties in any way or manner under the Credit Agreement; (c) all defenses, counterclaims and off-sets of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity or enforceability of any Loan Document and the security interest granted pursuant thereto; (d) any defense arising by reason of any claim or defense based upon an election of remedies by the Agent or the Guarantied Parties including, without limitation, any direction to proceed by judicial or nonjudicial foreclosure or by deed in lieu thereof, which, in any manner impairs, affects, reduces, releases, destroys or extinguishes the Guarantor's subrogation rights, rights to proceed against the Company for reimbursement, or any other rights of the Guarantor to proceed against the Company, against any other guarantor, or against any other security, with the Guarantor understanding that the exercise by the Agent and/or the Guarantied Parties of certain rights and remedies may offset or eliminate the Guarantor's right of subrogation against the Company, and that the Guarantor may therefore incur partially or totally non-reimbursable liability hereunder; (e) all presentments, demands for performance, notices of non-performance, protests, notices of protest, notices of dishonor, notices of default, notice of acceptance of this Guaranty, and notices of the existence, creation, or incurring of new or additional indebtedness, and all other notices or formalities to which the Guarantor may be entitled; and (f) without limiting the generality of the foregoing, the Guarantor hereby expressly waives any and all benefits of California Civil Code Sections 2809, 2810, 2819, 2825, 2839 and 2845 through 2850. 6. The Guarantor hereby agrees that unless and until all Obligations have been paid to the Agent and the Guarantied Parties in full, it shall not have any rights of subrogation, reimbursement or contribution as against the Company or any other guarantor, if any, and shall not seek to assert or enforce the F-2-4 same. Guarantor understands that the exercise by Agent of certain rights and remedies contained in the Loan Documents may affect or eliminate Guarantor's right of subrogation if any, against the Company and that Guarantor may therefore incur a partially or totally non-reimbursable liability hereunder; nevertheless, Guarantor hereby authorizes and empowers the Agent and the Guarantied Parties to exercise, in their sole discretion, any right and remedy, or any combination thereof, which may then be available, since it is the intent and purpose of Guarantor that the obligations hereunder shall be absolute, independent and unconditional under any and all circumstances. 7. The Guarantor is presently informed of the financial condition of the Company and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. The Guarantor hereby covenants that it will continue to keep itself informed of the financial condition of the Company, the status of other guarantors, if any, and of all other circumstances which bear upon the risk of nonpayment. The Guarantor hereby waives its right, if any, to require the Agent or the Guarantied Parties to disclose to it any information which the Agent or any Bank may now or hereafter acquire concerning such condition or circumstances including, but not limited to, the release of any other guarantor. 8. The Agent and each Bank's books and records evidencing the Obligations shall be admissible in any action or proceeding and shall be binding upon the Guarantor for the purpose of establishing the terms set forth therein and shall constitute prima facie proof thereof. 9. Notwithstanding anything to the contrary contained herein, the Guarantor's liability pursuant to this Guaranty shall be limited to the greater of: (a) the 'reasonably equivalent value,' received by the Guarantor or any of its subsidiaries arising out of the Loan Documents (including, without limitation, repayment of intercompany or third party debt of, investments made in, and capital contributions, advances and loans made to, the Guarantor or any of its subsidiaries, directly or indirectly, by Company or any other subsidiary with, or as a direct or indirect result of obtaining, the proceeds of any credit extended under the Loan Documents) in exchange for or in connection with the Guarantor's guaranty of the Obligations, and (b) 95% of the excess of (i) a 'fair valuation' of the amount of the assets and other property of the Guarantor and its subsidiaries taken as a whole as of the applicable date of determination of the incurrence of the Guarantor's obligations hereunder over (ii) a 'fair ---- valuation' of the Guarantor's and its subsidiaries' debts taken as a whole as of such date, but excluding liabilities arising under this Guaranty and excluding all liabilities owing by Guarantor and its subsidiaries taken as a whole to the Company or any other Subsidiary or otherwise subordinated to the Guarantor's obligations hereunder, it being understood that a F-2-5 portion of such indebtedness owing to Company shall be discharged on a dollar- for-dollar basis in an amount equal to the amount paid by Guarantor hereunder. The meaning of the terms 'reasonably equivalent value' and 'fair valuation,' and the calculations of assets and other property and debts, shall be determined in accordance with the applicable federal and California state laws in effect on the date hereof governing the determination of the insolvency of a debtor and to further the intent of all parties hereto to maximize the amount payable by the Guarantor without rendering it insolvent or leaving it with an unreasonably small amount of capital in relation to its business, in either case, at the applicable date for the determination of the incurrence of its obligations hereunder; provided, however, the Guarantor agrees, to the maximum extent -------- ------- permitted by law, that 'fair valuation' of the Guarantor's and its subsidiaries' assets and other properties means the fair market sales price as would be obtained in an arms-length transaction between competent, informed and willing parties under no compulsion to sell or buy or collections thereof obtained in the ordinary course of business and 'fair valuation' of its debts means the amount, in light of the applicable circumstances, at the time, for which the Guarantor or its subsidiaries is liable for matured known liquidated liabilities or would reasonably be expected to become liable on contingent or unliquidated liabilities as they mature and taking into consideration the nature of any such contingency and the probability that liability would be imposed. 10. The Guarantor represents and warrants for and with respect to itself that: (a) The Guarantor is a corporation duly organized and existing under the laws of the state of California, and is properly licensed and in good standing in, and where necessary to maintain its rights and privileges have complied with the fictitious name statute of, every jurisdiction in which it is doing business, except where the failure to be licensed or be in good standing or comply with any such statute will not have a material adverse effect on the ability of the Guarantor to perform its obligations hereunder or under any instrument or agreement required hereunder; (b) The execution, delivery and performance of this Guaranty and any instrument or agreement required hereunder are within the power of the Guarantor, have been duly authorized by, and are not in conflict with the terms of any charter, by-law or other organization papers of, the Guarantor; (c) No approval, consent, exemption or other action by, or notice to or filing with, any governmental authority is necessary in connection with the execution, delivery, performance or enforcement of this Guaranty or any instrument or agreement required hereunder, except as may have been obtained and F-2-6 certified copies of which have been delivered to Agent and the Guarantied Parties; (d) There is no law, rule or regulation, nor is there any judgment, decree or order of any court or governmental authority binding on the Guarantor, which would be contravened by the execution, delivery, performance or enforcement of this Guaranty or any instrument or agreement required hereunder; (e) This Guaranty is a legal, valid and binding agreement of the Guarantor, enforceable against the Guarantor in accordance with its terms, and any instrument or agreement required hereunder, when executed and delivered, will be similarly legal, valid, binding and enforceable, except where enforceability thereof may be limited by applicable law relating to bankruptcy, insolvency, moratorium or other similar laws affecting creditors' rights generally or by the application of general principles of equity; (f) There is no action, suit or proceeding pending against, or to the knowledge of the Guarantor, threatened against or affecting the Guarantor, before any court or arbitrator or any governmental body, agency or official which in any manner draws into question the validity or enforceability of this Guaranty; and (g) The execution, delivery and performance by the Guarantor of this Guaranty does not constitute, to the best knowledge of Guarantor, a "fraudulent conveyance," "fraudulent obligation" or "fraudulent transfer" within the meanings of the Uniform Fraudulent Conveyances Act or Uniform Fraudulent Transfer Act, as enacted in any jurisdiction. 11. Any one of the following events shall constitute an "Event of Bankruptcy:" (a) The Guarantor or the Company is generally not paying or admits in writing its inability to pay its debts as such debts become due, or files any petition or action for relief under any bankruptcy, reorganization, insolvency, or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors, or takes any corporate action in furtherance of any of the foregoing; (b) An involuntary petition is filed against the Guarantor or the Company under any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of the Guarantor or the Company, unless such petition or appointment is set aside or withdrawn or ceases to be in effect F-2-7 within sixty (60) days from the date of said filing or appointment. Upon the occurrence of an Event of Bankruptcy, without notice or demand, any and all of the Guarantor's obligations under this Guaranty shall become due, payable and enforceable against the Guarantor whether or not the Obligations are then due and payable. 12. All notices and other communications hereunder shall be delivered, in the manner and with the effect provided in the Credit Agreement and, in the case of the Guarantor, in care of the Company. 13. This Guaranty shall be binding upon the successors and assigns of the Guarantor and shall inure to the benefit of the Agent's and the Guarantied Parties' successors and assigns. This Guaranty cannot be assigned by the Guarantor without the prior written consent of the Agent and the Guarantied Parties which shall be in the Agent's and the Guarantied Parties' sole and absolute discretion. 14. No failure or delay by the Agent or the Guarantied Parties in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 15. The Guarantor shall pay (a) all reasonable out-of-pocket expenses of the Agent and the Guarantied Parties, including reasonable fees and disbursements of counsel (including the allocated cost of inhouse counsel and staff) for the Agent, in connection with any waiver or consent hereunder or any amendment hereof and (b) all out-of-pocket expenses incurred by the Agent and the Guarantied Parties, including fees and disbursements of counsel (including the allocated cost of inhouse counsel and staff), in connection with the enforcement of this Guaranty (whether or not suit is brought). 16. No modification of this Guaranty shall be effective for any purpose unless it is in writing and executed by an officer of the Agent authorized to do so. This Guaranty merges all negotiations, stipulations and provisions relating to the subject matter of this Guaranty which preceded or may accompany the execution of this Guaranty. 17. This Guaranty and the rights and obligations of the parties hereunder shall be construed in accordance with and be governed by the laws of the State of California without reference to the principles of conflicts of laws thereof. F-2-8 18. This Guaranty may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. 19. Terms not defined herein shall have the meanings assigned to them in the Credit Agreement. 20. Any indebtedness of the Company now or hereafter held by Guarantor is hereby subordinated to the indebtedness of the Company to the Agent and the Guarantied Parties; and such indebtedness of the Company to the Guarantor if the Agent so requests shall be collected, enforced and received by Guarantor as trustee for the Agent and the Guarantied Parties and be paid over to the Agent on account of the indebtedness of the Company to the Agent and the Guarantied Parties but without reducing or affecting in any manner the liability of the Guarantor under the other provisions of this guaranty. 21. It is not necessary for the Guarantied Parties to inquire into the powers of any Guaranteed Party or of the officers, directors or agents acting or purporting to act on its behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. Executed as of the 10th day of March 1995. MATTEL SALES CORP. By: ____________________________ Title:__________________________ BANK OF AMERICA NATIONAL TRUST SAVINGS ASSOCIATION, as Agent By: ____________________________ Title:_________________________ F-2-9 EXHIBIT G-1 ----------- SUBORDINATION AGREEMENT ----------------------- (FISHER-PRICE, INC.) -------------------- Bank of America National Trust and Savings Association, as Agent ("Agent") Gentlemen: The undersigned, ___________________________, a _________________ corporation (hereinafter referred to as "Creditor") is a creditor of Fisher- price, Inc., a Delaware corporation (hereinafter referred to as "Fisher- Price"). A. Concurrently herewith, Mattel, Inc. (the "Company"), the Banks named therein (the "Domestic Banks") and Bank of America, as agent (the "Agent"), are entering into a Credit Agreement dated as of even date herewith (said credit agreement, as it may hereafter be amended, continued, renewed, supplemented, restated or otherwise modified from time to time, is referred to herein as the "Credit Agreement"). Terms not defined herein have the meanings assigned to them in the Credit Agreement. B. Certain Subsidiaries of the Company that are incorporated in a jurisdiction outside of the United States of America (the "Foreign Subsidiaries") have entered, or may from time to time enter, into credit facilities with one or more Banks or foreign affiliates of the Banks (the "Foreign Banks"), and the Company has guarantied, or may from time to time guaranty, the obligations of such Foreign Subsidiaries thereunder pursuant to one or more guaranties (the Foreign Subsidiary Guaranties"). From time to time Banks in their individual capacity may issue letters of credit for the account of the Company outside the Credit Agreement (the "Company Letters of Credit"). The Domestic Banks and the Foreign Banks are collectively referred to herein as the "Banks." C. Concurrently herewith Fisher-Price is entering into a Continuing Guaranty dated as of even date herewith guarantying all obligations of every nature of the Company and Mattel Sales from time to time owed under or in respect of the Credit Agreement, the loans thereunder, the other Loan Documents (as defined therein) and the Foreign Subsidiary Guaranties and the Company Letters of Credit. D. It is a condition precedent to the effectiveness of the Credit Agreement that Creditor enter into this Fisher-Price G-1-1 Subordination Agreement. For the purpose of inducing the Banks to grant, continue or renew such financial accommodations to the Company, and in consideration thereof, Creditor agrees as follows: 1. Any and all claims of Creditor against Fisher-Price, now or hereafter existing, are, and shall be at all times, subject and subordinate to any and all claims, now or hereafter existing which Banks or Agent may have against Fisher- Price (including any claim by Banks or Agent for interest accruing after any assignment for the benefit of creditors by Fisher-Price or the institution by or against Fisher-Price of any proceedings under the Bankruptcy Act, or any claim by Bank for any such interest which would have accrued in the absence of such assignment or the institution of such proceedings). 2. Creditor agrees not to sue upon, or to collect, or to receive payment of the principal or interest of any claim or claims now or hereafter existing which Creditor may hold against Fisher-Price, and not to sell, assign, transfer, pledge, hypothecate, or encumber such claim or claims except subject expressly to this Agreement, and not to file or join in any petition to commence any proceeding under the Bankruptcy Act, nor to take any lien or security on any of Fisher-Price' property, real or personal, so long as any claim of Banks or Agent against Fisher-Price shall exist. 3. In case of any assignment for the benefit of creditors by Fisher-Price or in case any proceedings under the Bankruptcy Act are instituted by or against Fisher-Price, or in case of the appointment of any receiver for Fisher-Price's business or assets, or in case of any dissolution or winding up of the affairs of Fisher-Price: (a) Creditor and any assignee, trustee in bankruptcy, receiver, debtor in possession or other person or persons in charge are hereby directed to pay to Agent on behalf of itself and the Banks the full amount of Banks' and Agent's claims against Fisher-Price (including interest to the date of payment) before making any payment of principal or interest to Creditor under any indebtedness, and insofar as may be necessary for that purpose, Creditor hereby assigns and transfers to Agent on behalf of itself and the Banks all security or the proceeds thereof and all rights to any payments, dividends or other distributions, and (b) Creditor hereby irrevocably constitutes and appoints Agent its true and lawful attorney to act in its name and stead: (i) to file the appropriate claim or claims on behalf of Creditor if Creditor does not do so prior to 30 days before the expiration of the time to file claims in such proceeding and if Agent elects at its sole discretion to file such claim or claims and (ii) to accept or reject any plan of reorganization or arrangement on behalf of Creditor, and to G-1-2 otherwise vote Creditor's claim in respect of any indebtedness now or hereafter owing from Fisher-Price to Creditor in any manner Agent deems appropriate for its and the Banks' benefit and protection. 4. Agent on behalf of itself and the Banks is hereby authorized by Creditor to from time to time: (a) renew, compromise, extend, accelerate or otherwise change the time of payment, or any other terms, of any existing or future claim of Banks against Fisher-Price or the Company or any part thereof, (b) increase or decrease any rate of interest payable thereon, (c) exchange, enforce, waive, release, or fail to perfect any security therefor, (d) apply such security and direct the order or manner of sale thereof in such manner as Agent acting on its behalf and on behalf of the Banks may at its discretion determine, (e) release Fisher-Price, the Company or any other guarantor of any indebtedness of the Company from liability, and (f) make optional future advances to the Company, all without notice to Creditor and without affecting the subordination provided by this Agreement. 5. Creditor acknowledges and agrees that Creditor shall have the sole responsibility for obtaining from Fisher-Price or the Company such information concerning Fisher-Price's or the Company's financial condition or business operations as Creditor may require, and that neither the Agent nor the Banks has any duty at any time to disclose to Creditor any information relating to the business operations or financial condition of Fisher-Price or the Company. 6. On request of Agent, Creditor shall deliver to the Agent the original of any promissory note or other evidence of any existing or future indebtedness of Fisher-Price to Creditor, and mark same with a conspicuous legend which reads substantially as follows: "THIS PROMISSORY NOTE IS SUBORDINATED TO ANY PRESENT OR FUTURE INDEBTEDNESS OWING FROM THE MAKER TO BANK OF AMERICA NT&SA, AS AGENT, AND ITS ASSIGNS, AND MAY BE ENFORCED ONLY IN ACCORDANCE WITH THAT CERTAIN SUBORDINATION AGREEMENT DATED MARCH 10, 1995 BETWEEN [CREDITOR] AND BANK OF AMERICA NT&SA, AS AGENT." 7. In the event that any payment or any cash or noncash distribution is made to Creditor in violation of the terms of this Agreement, Creditor shall receive same in trust for the benefit of Banks and Agent, and shall forthwith remit it to Agent in the form in which it was received, together with G-1-3 such endorsements or documents as may be necessary to effectively negotiate or transfer same to Agent and/or Banks. 8. For violation of this Agreement, Creditor shall be liable for all loss and damage sustained by reason of such breach, and upon any such violation Agent, acting on behalf of the Banks, may accelerate the maturity of any of its existing or future claims against Fisher-Price. 9. This Agreement shall be binding upon the heirs, successors and assigns of Fisher-Price, Creditor and Bank. This Agreement and any existing or future claim of Agent or the Banks against Fisher-Price may be assigned by Agent, the Banks, in whole or in part, without notice to Fisher-Price or Creditor. 10. Notwithstanding the provisions of Section 2, so long as there has been no occurrence of any default under any agreement between Fisher-Price or the Company and the Agent and the Banks, now existing or hereafter entered into, Creditor may receive regularly scheduled principal and interest payments on any indebtedness. Mattel, Inc. ------------------------------- Creditor By: ---------------------------- William Stavro Vice President and Treasurer G-1-4 ACCEPTANCE OF SUBORDINATION AGREEMENT BY FISHER-PRICE The undersigned being the company named in the foregoing Subordination Agreement, hereby accepts and consents thereto and agrees to be bound by all the provisions thereof and to recognize all priorities and other rights granted thereby to Bank of America National Trust and Savings Association, as Agent, and the Banks (as defined therein) and their respective successors and assigns, and to perform in accordance therewith. Dated: March 10, 1995 FISHER-PRICE, INC. ----------------------- By: ---------------------------- William Stavro Treasurer G-1-5 EXHIBIT G-2 ----------- SUBORDINATION AGREEMENT ----------------------- (MATTEL SALES CORP.) -------------------- Bank of America National Trust and Savings Association, as Agent ("Agent") Gentlemen: The undersigned, ___________________________, a _________________ corporation (hereinafter referred to as "Creditor") is a creditor of Mattel Sales Corp., a California corporation (hereinafter referred to as "Mattel Sales"). A. Concurrently herewith, Mattel, Inc. (the "Company"), the Banks named therein (the "Domestic Banks") and Bank of America, as agent (the "Agent"), are entering into a Credit Agreement dated as of even date herewith (said credit agreement, as it may hereafter be amended, continued, renewed, supplemented, restated or otherwise modified from time to time, is referred to herein as the "Credit Agreement"). Terms not defined herein have the meanings assigned to them in the Credit Agreement. B. Certain Subsidiaries of the Company that are incorporated in a jurisdiction outside of the United States of America (the "Foreign Subsidiaries") have entered, or may from time to time enter, into credit facilities with one or more Banks or foreign affiliates of the Banks (the "Foreign Banks"), and the Company has guarantied, or may from time to time guaranty, the obligations of such Foreign Subsidiaries thereunder pursuant to one or more guaranties (the Foreign Subsidiary Guaranties"). From time to time Banks in their individual capacity may issue letters of credit for the account of the Company outside the Credit Agreement (the "Company Letters of Credit"). The Domestic Banks and the Foreign Banks are collectively referred to herein as the "Banks." C. Concurrently herewith Mattel Sales is entering into a Continuing Guaranty dated as of even date herewith guarantying all obligations of every nature of the Company and Fisher-Price from time to time owed under or in respect of the Credit Agreement, the loans thereunder, the other Loan Documents (as defined therein) and the Foreign Subsidiary Guaranties and the Company Letters of Credit. G-2-1 D. It is a condition precedent to the effectiveness of the Credit Agreement that Creditor enter into this Mattel Sales Subordination Agreement. For the purpose of inducing the Banks to grant, continue or renew such financial accommodations to the Company, and in consideration thereof, Creditor agrees as follows: 1. Any and all claims of Creditor against Mattel Sales, now or hereafter existing, are, and shall be at all times, subject and subordinate to any and all claims, now or hereafter existing which Banks or Agent may have against Mattel Sales (including any claim by Banks or Agent for interest accruing after any assignment for the benefit of creditors by Mattel Sales or the institution by or against Mattel Sales of any proceedings under the Bankruptcy Act, or any claim by Bank for any such interest which would have accrued in the absence of such assignment or the institution of such proceedings). 2. Creditor agrees not to sue upon, or to collect, or to receive payment of the principal or interest of any claim or claims now or hereafter existing which Creditor may hold against Mattel Sales, and not to sell, assign, transfer, pledge, hypothecate, or encumber such claim or claims except subject expressly to this Agreement, and not to file or join in any petition to commence any proceeding under the Bankruptcy Act, nor to take any lien or security on any of Mattel Sales' property, real or personal, so long as any claim of Banks or Agent against Mattel Sales shall exist. 3. In case of any assignment for the benefit of creditors by Mattel Sales or in case any proceedings under the Bankruptcy Act are instituted by or against Mattel Sales, or in case of the appointment of any receiver for Mattel Sales's business or assets, or in case of any dissolution or winding up of the affairs of Mattel Sales: (a) Creditor and any assignee, trustee in bankruptcy, receiver, debtor in possession or other person or persons in charge are hereby directed to pay to Agent on behalf of itself and the Banks the full amount of Banks' and Agent's claims against Mattel Sales (including interest to the date of payment) before making any payment of principal or interest to Creditor under any indebtedness, and insofar as may be necessary for that purpose, Creditor hereby assigns and transfers to Agent on behalf of itself and the Banks all security or the proceeds thereof and all rights to any payments, dividends or other distributions, and (b) Creditor hereby irrevocably constitutes and appoints Agent its true and lawful attorney to act in its name and stead: (i) to file the appropriate claim or claims on behalf of Creditor if Creditor does not do so prior to 30 days before the expiration of the time to file claims in such proceeding and if Agent elects at its sole discretion to file G-2-2 such claim or claims and (ii) to accept or reject any plan of reorganization or arrangement on behalf of Creditor, and to otherwise vote Creditor's claim in respect of any indebtedness now or hereafter owing from Mattel Sales to Creditor in any manner Agent deems appropriate for its and the Banks' benefit and protection. 4. Agent on behalf of itself and the Banks is hereby authorized by Creditor to from time to time: (a) renew, compromise, extend, accelerate or otherwise change the time of payment, or any other terms, of any existing or future claim of Banks against Mattel Sales or the Company or any part thereof, (b) increase or decrease any rate of interest payable thereon, (c) exchange, enforce, waive, release, or fail to perfect any security therefor, (d) apply such security and direct the order or manner of sale thereof in such manner as Agent acting on its behalf and on behalf of the Banks may at its discretion determine, (e) release Mattel Sales, the Company or any other guarantor of any indebtedness of the Company from liability, and (f) make optional future advances to the Company, all without notice to Creditor and without affecting the subordination provided by this Agreement. 5. Creditor acknowledges and agrees that Creditor shall have the sole responsibility for obtaining from Mattel Sales or the Company such information concerning Mattel Sales's or the Company's financial condition or business operations as Creditor may require, and that neither the Agent nor the Banks has any duty at any time to disclose to Creditor any information relating to the business operations or financial condition of Mattel Sales or the Company. 6. On request of Agent, Creditor shall deliver to the Agent the original of any promissory note or other evidence of any existing or future indebtedness of Mattel Sales to Creditor, and mark same with a conspicuous legend which reads substantially as follows: "THIS PROMISSORY NOTE IS SUBORDINATED TO ANY PRESENT OR FUTURE INDEBTEDNESS OWING FROM THE MAKER TO BANK OF AMERICA NT&SA, AS AGENT, AND ITS ASSIGNS, AND MAY BE ENFORCED ONLY IN ACCORDANCE WITH THAT CERTAIN SUBORDINATION AGREEMENT DATED MARCH 10, 1995 BETWEEN [CREDITOR] AND BANK OF AMERICA NT&SA, AS AGENT." 7. In the event that any payment or any cash or noncash distribution is made to Creditor in violation of the terms of this Agreement, Creditor shall receive same in trust for the benefit of Banks and Agent, and shall forthwith remit it G-2-3 to Agent in the form in which it was received, together with such endorsements or documents as may be necessary to effectively negotiate or transfer same to Agent and/or Banks. 8. For violation of this Agreement, Creditor shall be liable for all loss and damage sustained by reason of such breach, and upon any such violation Agent, acting on behalf of the Banks, may accelerate the maturity of any of its existing or future claims against Mattel Sales. 9. This Agreement shall be binding upon the heirs, successors and assigns of Mattel Sales, Creditor and Bank. This Agreement and any existing or future claim of Agent or the Banks against Mattel Sales may be assigned by Agent, the Banks, in whole or in part, without notice to Mattel Sales or Creditor. 10. Notwithstanding the provisions of Section 2, so long as there has been no occurrence of any default under any agreement between Mattel Sales or the Company and the Agent and the Banks, now existing or hereafter entered into, Creditor may receive regularly scheduled principal and interest payments on any indebtedness. Mattel, Inc. ---------------------------------- Creditor By: ------------------------------- William Stavro Vice President and Treasurer G-2-4 ACCEPTANCE OF SUBORDINATION AGREEMENT BY MATTEL SALES The undersigned being the company named in the foregoing Subordination Agreement, hereby accepts and consents thereto and agrees to be bound by all the provisions thereof and to recognize all priorities and other rights granted thereby to Bank of America National Trust and Savings Association, as Agent, and the Banks (as defined therein) and their respective successors and assigns, and to perform in accordance therewith. Dated: March 10, 1995 MATTEL SALES CORP. ----------------------- By: ------------------------------- William Stavro Vice President and Treasurer G-2-5 EXHIBIT H --------- CHANGE IN COMMITMENTS NOTICE ---------------------------- For Credit Agreement and Transfer and Administration Agreement TO: Bank of America National Trust and Savings Association, as Agent 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Agency Management Services #5596 NationsBank of Texas, N.A., as Agent 444 South Flower Street, Suite 1500 Los Angeles, Ca 90071-2901 Attn: J. Blake Seaton Gentlemen: Pursuant to (a) Section 2.5 of that certain Credit Agreement dated as of March 10, 1995, as amended (the "Credit Agreement") among Mattel, Inc., a Delaware corporation (the "Company"), the Banks named therein (the "Banks") and Bank of America National Trust and Savings Association, as Agent (the "Agent") and/or (b) Section 2.11 of that certain Second Amended and Restated Transfer and Administration Agreement dated as of March 10, 1995, as amended, among Mattel Sales Corp. and Fisher-Price, Inc., as transferors, the Company, as guarantor and servicer, the banks named therein, and NationsBank of Texas, N.A., as Transfer and Administration Agent, please effect the following changes in the Aggregate Receivables Commitment/Facility Limit and/or the Aggregate Loan Commitment: 1. Effective Date of Change: ------------------------ ______________ ___, 19__ H-1 2. Requested Change: ---------------- a. Please permanently reduce the [Aggregate Receivables ------ Commitment/Facility Limit] [Aggregate Loan Commitment] by $___________. b. Please permanently terminate the [Aggregate Receivables Commitment] --------- [Aggregate Loan Commitment]. c. Please reallocate $___________ from the [Aggregate Receivables ---------- Commitment/Facility Limit] [Aggregate Loan Commitment] to the -- [Aggregate Loan Commitment] [Aggregate Receivables Commitment/Facility Limit]. 3. Summary of Changes: ------------------ Before Change After Change in Commitment/ in Commitment/ Facility Limit: Facility Limit: -------------- -------------- Aggregate Loan Commitment/Facility Limit: ---------------------------------------- Aggregate Loan Commitment $___________ $____________ Aggregate Outstandings $___________ $____________ Aggregate Receivables Commitment/Facility Limit: ----------------------------------------------- Aggregate Receivables Commitment/Facility Limit $___________ $____________ Total Outstanding Investment $___________ $____________ Unless otherwise defined herein, capitalized terms used herein have the meanings assigned to them in the Agreement. H-2 "Facility Limit" is used herein as defined in the above-referenced Amended and Restated Transfer and Administration Agreement. DATED: ______________________ MATTEL, INC. By ___________________________ Name _________________________ Title ________________________ *Signature required only MATTEL SALES CORP.* when Aggregate Receivables Commitment changed By ___________________________ Name _________________________ Title ________________________ *Signature required only FISHER-PRICE, INC. when Aggregate Receivables Commitment changed By ___________________________ Name _________________________ Title ________________________ H-3 EXHIBIT I --------- FORM OF NOTICE OF ASSIGNMENT AND ACCEPTANCE ------------------------------------------- ____________, 19__ TO: Bank of America National Trust and Savings Association, as Agent Agency Management Services #5596 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Kay Warren Vice President Reference is made to that certain Credit Agreement dated as of March 10, 1995 (the "Credit Agreement"; capitalized terms used herein shall have the meanings assigned to them in the Credit Agreement), among Mattel, Inc., a Delaware corporation (the "Company"), the Banks named therein (the "Banks") and Bank of America National Trust and Savings Association, as Agent (the "Agent"). 1. We hereby give you notice of, and request your consent to, the assignment by _______________ (the "Assignor") to ________________ (the "Assignee") of ____% of the right, title and interest of the Assignor in and to the Loan Documents, including without limitation the right, title and interest of the Assignor in and to the Loan Commitment of the Assignor, and all outstanding Loans made by the Assignor. Before giving effect to such assignment: (a) the aggregate amount of the Assignor's Loan Commitment is $_________; and (b) as of the above date, the aggregate principal amount of its outstanding Loans is $__________. 2. The Assignor hereby represents and warrants that it has complied with the requirements of Section 10.1 of the Credit Agreement in connection with this assignment, including paying, or causing the payment of, the assignment fee thereunder to the Agent and concurrently assigning a ratable portion in the Transfer and Administration Agreement. 3. The Assignee agrees that, upon receiving your consent to such assignment and from and after ______________, the Assignee will be bound by the terms of the Loan Documents, with respect to the interest in the Loan Documents assigned to it as specified above, as fully and to the same extent as if the I-1 Assignee were the Bank originally holding such interest in the Loan Documents. 4. The following administrative details apply to the Assignee: (a) Designated Offshore Market Office: Assignee name: ____________________ Address: __________________________ Attention: ________________________ Telephone: (___) __________________ Telecopier: (___) _________________ Telex (Answerback): _______________ (b) Domestic Lending Office: Assignee name: ____________________ Address: __________________________ __________________________ __________________________ Attention: ________________________ Telephone: (___) __________________ Telecopier: (___) _________________ Telex (Answerback): _______________ (c) Notice Address: Assignee name: ____________________ Address: __________________________ __________________________ __________________________ Attention: ________________________ Telephone: (___) __________________ Telecopier: (___) _________________ Telex (Answerback): _______________ (d) Payment Instructions: Account No.: ______________________ At: ______________________ ______________________ ______________________ Ref.: ______________________ Attention: ______________________ IN WITNESS WHEREOF, the Assignor and the Assignee have I-2 caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. Very truly yours, [Name of Assignor] By:______________________ Title: [Name of Assignee] By:______________________ Title: We hereby consent to the foregoing assignment: MATTEL, INC. By: __________________________ Title: _______________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: __________________________ Title: _______________________ I-3 SCHEDULE 1.1 ------------ BANK COMMITMENTS ----------------
Aggregate Loan Receivables Facilities Bank % Commitment Commitment Commitment - ----------------------------- -------------- --------------- --------------- --------------- Bank of America 15.384615387 $ 61,538,461.56 $ 38,461,538.44 $100,000,000.00 NationsBank of Texas, N.A. 11.538461538 46,153,846.15 28,846,153.85 75,000,000.00 Chemical Bank 11.538461538 46,153,846.15 28,846,153.85 75,000,000.00 The First National Bank of 9.230769231 36,923,076.92 23,076,923.08 60,000,000.00 Boston PNC Bank, National 9.230769231 36,923,076.92 23,076,023.08 60,000,000.00 Association Toronto-Dominion (Texas), 9.230769231 36,923,076.92 23,076,023.08 60,000,000.00 Inc. ABN AMRO Bank N.V. 4.615384615 18,461,538.46 11,538,461.54 30,000,000.00 The Bank of California, 4.615384615 18,461,538.46 11,538,461.54 30,000,000.00 N.A. Banque Nationale de Paris 4.615384615 18,461,538.46 11,538,461.54 30,000,000.00 Dresdner Bank AG, Los 4.615384615 18,461,538.46 11,538,461.54 30,000,000.00 Angeles Agency Istituto Bancario San 4.615384615 18,461,538.46 11,538,461.54 30,000,000.00 Paolo di Torino SpA Manufacturers & Traders 4.615384615 18,461,538.46 11,538,461.54 30,000,000.00 Trust Co. Marine Midland Bank 3.076923077 12,307,692.31 7,692,307.69 20,000,000.00 Citicorp USA, Inc. 3.076923077 12,307,692.31 7,692,307.69 20,000,000.00 ============= =============== =============== =============== AGGREGATE COMMITMENTS 100.000000000 $400,000,000.00 $250,000,000.00 $650,000,000.00
SCHEDULE 5.3 ------------ (Page 1 of 2) SUBSIDIARIES OF MATTEL, INC. ---------------------------- Parent: Mattel, Inc. (Delaware) - ------
Percentage of Voting Securities Jurisdiction Owned Directly in Which or Indirectly Subsidiaries Organized By Parent - ------------------------------------ --------------- ----------------- ARCO Toys, Limited Hong Kong 100% Arcotoys, Inc. Delaware 100% Croner Toys Limited New Zealand 60% Far West Insurance Company, Limited Bermuda 100% Fisher-Price, Inc. Delaware 100% Fisher-Price, N.V. Belgium 100% Fisher-Price Inc. Canada 100% Fisher-Price Beteiligungs-G.m.b.H Germany 100% Mattel G.m.b.H. Germany 100% Mattel Toys K.F.T. Hungary 100% Mattel Spol. S.R.O. Czech Republic 100% Fisher-Price, S.r.l. Italy 100% Fisher-Price de Mexico, S.A. de C.V. Mexico 100% Fisher-Price, S.A. Spain 100% International Games, Inc. Delaware 100% Juegos California, S.A. de C.V. Mexico 100% Mabamex, S.A. de C.V. Mexico 100% Mattel Argentina S.A. Argentina 100% Mattel Asia Limited Hong Kong 100% Mattel B.V. The Netherlands 100% Mattel Chile S.A. Chile 100% Mattel Colombia S.A. Columbia 100% Mattel Espana, S.A. Spain 100% Mattel Europa B.V. The Netherlands 100% Mattel France S.A. France 100% Corolle S.A. France 100% Mattel Portugal Limitada Portugal 100% Mattel Gesellschaft m.b.H. Austria 100% Mattel Holding, Inc. Delaware 100% Mattel U.K. Limited U.K. 100% Mattel Group PLC U.K. 100% J.W. Spear & Sons PLC U.K. 100% J.W. Spear & Sons Pty. Limited Austria 100% J.W. Spear S.A. France 100% J.W. Spear N.V. Belgium 100% J.W. Spear B.V. The Netherlands 100% Mattel Holdings Limited Canada 100% Mattel Canada,Inc. Canada 100%
123 (Page 2 of 2) SUBSIDIARIES OF MATTEL, INC. ----------------------------
Percentage of Voting Securities Jurisdiction Owned Directly in Which or Indirectly Subsidiaries Organized By Parent - ----------------------------------- --------------- ------------------ Mattel I., Inc. Delaware 100% Mattel Toys, S.r.l. Italy 100% Mattel A.E.B.E. Greece 100% Mattel A.G. Switzerland 100% Mattel Manufacturing Europe, S.r.l. Italy 100% Mattel K.K. Japan 100% Mattel (K.L.) Sdn. Bhd. Malaysia 100% Mattel (Malaysia) Sdn. Bhd. Malaysia 100% Mattel Media, Inc. Delaware 100% Mattel Operations, Inc. Delaware 100% Mattel Overseas, Inc. California 100% Mattel Toys Vendor Operations Limited Hong Kong 100% Mattel China Vendor Operations Limited Hong Kong 100% Mattel Vendor Operations China Limited Hong Kong 100% Mattel (Proprietary) Limited South Africa 100% Mattel Pty. Limited Australia 100% Mattel Realty Corporation Delaware 100% Mattel, S.A. de C.V. Mexico 100% Aurimat, S.A. de C.V. Mexico 100% Mattel de Mexico, S.A. de C.V. Mexico 100% Mattel Serivcios, S.A. de C.V. Mexico 100% Mattel Sales Corp. California 100% Mattel Scandinavia A/S Denmark 100% Mattel South Africa South Africa 100% Mattel T Company Limited Hong Kong 100% Mattel Tools Sdn.Bhd. Malaysia 100% Mattel Toys (HK) Limited Hong Kong 100% Mattel Toys Polska Sp. Z.O.O. Poland 100% Mattel Toys (Singapore) Pte. Ltd. Singapore 100% Mattel Toys (Taiwan) Corporation Ltd. Taiwan 100% Mattel de Venezuela, C.A. Venezuela 100% Montoi S.A. de C.V. Mexico 100% P.T. Mattel Indonesia Indonesia 95% Precision Moulds Limited Hong Kong 100%
124 SCHEDULE 7.2 ------------ CERTAIN LIENS ------------- 1. Liens for taxes, assessments or governmental charges or claims the payment of which is not at the time required by Section 6.3; 2. Statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor; 3. Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); 4. Any attachment or judgment Lien, if the judgment or order it secures is less than $20,000,000, or $40,000,000 in the aggregate for all such judgments or orders in any calendar year; or any other attachment or judgment Lien, if the judgment or order it secures shall, within 45 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall have been discharged within 45 days after the expiration of any such stay; 5. Leases or subleases granted to others not interfering with the ordinary conduct of the business of the Company or any of its Subsidiaries; 6. Easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering with the ordinary conduct of the business of the Company or any of its Subsidiaries; and 7. Any interest or title of a lessor under any lease. SCHEDULE 10.6 ------------- ADDRESSES FOR NOTICES AND LENDING OFFICES ----------------------------------------- COMPANY - ------- Mattel, Inc. 333 Continental Blvd. El Segundo, California 90010 Attention: William Stavro Treasurer Telephone: (310) 252-3202 Facsimile: (310) 252-3861/2179 with a copy to the Corporate Counsel BANK OF AMERICA NATIONAL TRUST - ------------------------------- AND SAVINGS ASSOCIATION, - ----------------------- AS AGENT Bank of America National Trust and Savings Association Agency Management Services #5596 1455 Market Street, 12th Floor San Francisco, California 94103 Attention: Kay Warren Vice President Telephone: (415) 622-6918 Facsimile: (415) 622-4894 BANK OF AMERICA NATIONAL TRUST - ------------------------------- AND SAVINGS ASSOCIATION, - ----------------------- AS A BANK Domestic and Eurodollar Lending Office: 1850 Gateway Boulevard, Fourth Floor Concord, California 94520 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Bank of America National Trust and Savings Association 555 Flower Street, 11th Floor Los Angeles, California 90071 Attention: Robert W. Troutman Managing Director Credit Products #5618 Telephone: (213) 228-3866 Facsimile: (213) 228-2756 -1- NATIONSBANK OF TEXAS, N.A. - -------------------------- Domestic and Eurodollar Lending Office and Notices: NationsBank of Texas, N.A. 444 S. Flower Street, Suite 1500 Los Angeles, California 90071 Attention: J. Blake Seaton Telephone: (213) 236-4904 Facsimile: (213) 624-5815 CHEMICAL BANK - ------------- Domestic and Eurodollar Lending Office and Notices: Chemical Bank Corporate Banking Group 270 Park Avenue, 10th Floor New York, New York 10017 Attention: Sheila Hamilton Telephone: (212) 270-2322 Facsimile: (212) 270-2625 THE FIRST NATIONAL BANK OF BOSTON - --------------------------------- Domestic and Eurodollar Lending Office and Notices: The First National Bank of Boston 100 Federal Street, 6th Floor Boston, Massachusetts 02110 Attention: J. Peter Mitchell Telephone: (617) 434-8307 Facsimile: (617) 434-6685 PNC BANK, N.A. - -------------- Domestic and Eurodollar Lending Office and Notices: PNC Bank, N.A. 55 S. Lake Avenue, Suite 650 Pasadena, California 91101 Attention: Ted A. Dunn Telephone: (818) 568-0325 Facsimile: (818) 568-0653 -2- TORONTO-DOMINION (TEXAS), INC. - ------------------------------ Domestic and Eurodollar Lending Office and Notices: Toronto-Dominion (Texas), Inc. 909 Fannin Houston, Texas 77010 Attention: Lisa Allison Telephone: (713) 653-8247 Facsimile: (713) 951-9921 ABN AMRO BANK N.V. - ------------------ Domestic and Eurodollar Lending Office and Notices: ABN AMRO Bank N.V. Los Angeles International Branch 300 South Grand Avenue, Suite 1115 Los Angeles, California 90071 Attention: Matthew S. Thompson Group Vice President Telephone: (213) 687-2053 Facsimile: (213) 687-2061 THE BANK OF CALIFORNIA, N.A. - ---------------------------- Domestic and Eurodollar Lending Office and Notices: The Bank of California, N.A. 550 S. Hope Street, 5th Floor Los Angeles, California 90071 Attention: Thomas Tegart Telephone: (213) 243-3510 Facsimile: (213) 243-3552 BANQUE NATIONALE DE PARIS - ------------------------- Domestic and Eurodollar Lending Office and Notices: Banque Nationale de Paris 725 South Figueroa Street, Suite 2090 Los Angeles, CA 90017 Attention: Clive Bettles Vice President Telephone: (213) 488-9120 Facsimile: (213) 488-9602 -3- DRESDNER BANK AG - ---------------- Domestic and Eurodollar Lending Office and Notices: Dresdner Bank Los Angeles Agency 725 South Figueroa Street, Suite 3950 Los Angeles, CA 90017 Attention: Dennis Blank Vice President Telephone: (213) 489-5720 Facsimile: (213) 627-3819 ISTITUTO BANCARIO SAN PAOLO DI TORINO SPA - ----------------------------------------- Domestic and Eurodollar Lending Office and Notices: Istituto Bancario San Paolo di Torino SpA 444 S. Flower Street, Suite 4550 Los Angeles, California 90071 Attention: Glen Binder Telephone: (213) 489-3100 Facsimile: (213) 622-2514 MANUFACTURERS & TRADERS TRUST CO. - --------------------------------- Domestic and Eurodollar Lending Office and Notices: Manufacturers & Traders Trust Co. 1 Fountain Plaza Buffalo, New York Attention: Geoffrey R. Fenn Telephone: (716) 848-7335 Facsimile: (716) 848-7318 MARINE MIDLAND BANK - ------------------- Domestic and Eurodollar Lending Office: Marine Midland Bank 140 Broadway, 4th Floor New York, NY 10005-1196 Attention: William M. Holland Telephone: (212) 658-5257 Facsimile: (212) 658-5109 -4- Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Marine Midland Bank HSBC Corporate Banking 140 Broadway, 4th Floor New York, NY 10005-1196 Attention: William M. Holland Telephone: (212) 658-5257 Facsimile: (212) 658-5109 CITICORP USA, INC. - ------------------ Domestic and Eurodollar Lending Office: Citibank, N.A. One Court Square, 7th Floor Long Island City, NY 11120 Attention: Mark Wrigley Telephone: (718) 248-5732 Facsimile: (718) 248-4845 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Citicorp USA, Inc. c/o Citicorp North America, Inc. 725 South Figueroa Street, 5th Floor Los Angeles, CA 90017 Attention: Deborah Ironson Telephone: (213) 239-1424 Facsimile: (213) 623-3592 -5- EX-99.6 7 TRANSFER AND ADMINISTRATION EXHIBIT 99.6 ================================================================================ SECOND AMENDED AND RESTATED TRANSFER AND ADMINISTRATION AGREEMENT by and among MATTEL SALES CORP., as a Transferor, and FISHER-PRICE, INC., as a Transferor and MATTEL, INC., as Guarantor and Servicer, and NATIONSBANK OF TEXAS, N.A., as Agent, and THE BANKS NAMED HEREIN Dated as of March 10, 1995 Arranged By NationsBanc Capital Markets, Inc. ================================================================================ TABLE OF CONTENTS -----------------
PAGE ---- ARTICLE I DEFINITIONS 1.1 Certain Defined Terms....................................................... 2 1.2 Other Terms................................................................. 16 1.3 Computation of Time Periods................................................. 16 ARTICLE II PURCHASES AND SETTLEMENTS 2.1 Facility.................................................................... 17 2.2 Transfers................................................................... 17 2.3 Discount, Fees and Other Costs and Expenses................................. 19 2.4 Settlement Procedures....................................................... 20 2.5 Protection of Ownership Interest of the Banks............................... 20 2.6 Deemed Collections; Application of Payments................................. 22 2.7 Payments and Computations, Etc.............................................. 23 2.8 Reports..................................................................... 23 2.9 Collection Account.......................................................... 24 2.10 Deficiency Advances......................................................... 25 2.11 Adjustment of Facility Limit............................................... 25 2.12 Inability to Determine LIBOR............................................... 26 ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1 Representations and Warranties of the Transferors........................... 27 3.2 Representations and Warranties of Mattel, Inc............................... 32 3.3 Reaffirmation of Representations and Warranties............................. 36 ARTICLE IV CONDITIONS PRECEDENT 4.1 Conditions to Closing....................................................... 37 ARTICLE V COVENANTS 5.1 Affirmative Covenants of the Transferors.................................... 39 5.2 Negative Covenants of the Transferors....................................... 41 5.3 Affirmative Covenants of Mattel, Inc........................................ 42
i
PAGE ---- ARTICLE VI ADMINISTRATION AND COLLECTIONS 6.1 Appointment of Servicer..................................................... 45 6.2 Duties of Servicer and Agent................................................ 45 6.3 Rights After Designation of New Servicer.................................... 48 6.4 Responsibilities of the Transferors......................................... 48 ARTICLE VII SERVICER DEFAULT AND TERMINATION EVENTS 7.1 Servicer Default............................................................ 50 7.2 Servicer Default Remedies................................................... 50 7.3 Termination Events.......................................................... 51 7.4 Termination Event Remedies.................................................. 52 7.5 Potential Termination Event Remedies........................................ 52 ARTICLE VIII INDEMNIFICATION; EXPENSES; RELATED MATTERS 8.1 Indemnities by the Transferors.............................................. 54 8.2 Indemnity for Taxes, Reserves and Expenses.................................. 55 8.3 Other Costs, Expenses and Related Matters................................... 57 8.4 Reconveyance Under Certain Circumstances.................................... 58 ARTICLE IX THE AGENT 9.1 Appointment................................................................. 59 9.2 Attorneys-in-fact........................................................... 59 9.3 Limitation on Liability..................................................... 59 9.4 Reliance.................................................................... 60 9.5 Notice of Termination Event................................................. 60 9.6 No Representations.......................................................... 61 9.7 Indemnification............................................................. 61 9.8 Bank........................................................................ 62 9.9 Resignation................................................................. 62 9.10 Sharing of Payments, etc.................................................... 63 9.11 Independent Agreements...................................................... 64 ARTICLE X GUARANTY 10.1 Guaranty of Obligations..................................................... 65 10.2 Guaranty Continuing......................................................... 65 10.3 Guarantor Directly Liable................................................... 65 10.4 No Impairment............................................................... 66 10.5 Waiver...................................................................... 67 10.6 Subrogation................................................................. 68
ii
PAGE ---- 10.7 Information................................................................ 68 10.8 Evidence of Obligations.................................................... 69 ARTICLE XI MISCELLANEOUS 11.1 Term of Agreement.......................................................... 70 11.2 Waivers; Amendments........................................................ 70 11.3 Notices.................................................................... 71 11.4 Governing Law; Integration................................................. 72 11.5 Severability; Counterparts................................................. 72 11.6 Successors and Assigns..................................................... 73 11.7 Confidentiality............................................................ 73 11.8 Characterization of the Transactions Contemplated by the Agreement......... 74 11.9 Assignments; Participations................................................ 74
iii EXHIBITS -------- EXHIBIT A Form of Written Agreement EXHIBIT B Form of Weekly Servicer's Certificate EXHIBIT C Form of Transfer Notice EXHIBIT D [Reserved] EXHIBIT E [List of Actions, Suits and Proceedings against the Transferors] EXHIBIT F Location of Records EXHIBIT G List of Tradenames EXHIBIT H [List of Actions, Suits and Proceedings against the Guarantor] EXHIBIT I Form of Opinion of Counsel to the Transferors EXHIBIT J Form of Opinion of Counsel for the Guarantor/Servicer iv SECOND AMENDED AND RESTATED TRANSFER AND ADMINISTRATION AGREEMENT SECOND AMENDED AND RESTATED TRANSFER AND ADMINISTRATION AGREEMENT (this "Agreement"), dated as of March 10, 1995, by and among MATTEL SALES CORP., --------- a California corporation, and FISHER-PRICE, INC., a Delaware corporation, as transferors (each, a "Transferor"), MATTEL, INC., a Delaware corporation, as ---------- guarantor and servicer (the "Guarantor" and the "Servicer"), THE BANKS LISTED ON --------- -------- THE SIGNATURE PAGES HEREOF (collectively, the "Banks") and NATIONSBANK OF TEXAS, ----- N.A., a national banking association, as agent on behalf of the Banks (the "Agent"). - ------ PRELIMINARY STATEMENTS WHEREAS, the parties hereto intend to amend and restate that certain Amended and Restated Transfer and Administration Agreement, dated as of March 18, 1994, by and among Mattel Sales Corp., as transferor thereunder, the Guarantor and Servicer, the Banks and the Agent, on the terms and conditions set forth herein; WHEREAS, the Transferors may desire to convey, transfer and assign, from time to time, undivided percentage interests in certain accounts receivable with respect to which Toys "R" Us, Inc. ("Toys "R" Us") is the named obligor, ----------- and the Agent, on behalf of and for the benefit of the Banks, shall accept such conveyance, transfer and assignment of such undivided percentage interests, subject to the terms and conditions of this Agreement. NOW, THEREFORE, the parties hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. Certain Defined Terms. As used in this Agreement, the --------------------- following terms shall have the following meanings: "Adjusted Certificate of Deposit Rate" means, with respect to a ------------------------------------ Tranche and the related Tranche Period, the sum (rounded upward to the next highest 1/100 of 1%) of (i) the rate obtained by dividing (x) the Certificate of Deposit Rate by (y) a percentage equal to 100% minus the full reserve requirement percentage as specified by the Board of Governors of the Federal Reserve System that the Agent determines would be applicable on the date of determination to a certificate of deposit of the Agent in excess of $100,000 with a maturity comparable to the related Tranche Period (including, without limitation, any marginal, emergency, supplemental, special or other reserves if the Agent, in its sole discretion, determines that it is required to maintain any such reserves on such day), plus (ii) the then daily net annual assessment rate as estimated by the Agent for determining the current annual assessment payable by the Agent to the Federal Deposit Insurance Corporation for insuring certificates of deposit with a maturity comparable to the related Tranche Period. "Adverse Claim" means a lien, security interest, charge or ------------- encumbrance, or other right or claim in, of or on any Person's assets or properties in favor of any other Person. "Affiliate", as applied to any Person, means any other Person directly --------- or indirectly controlling, controlled by or under common control with, that Person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. 2 "Agent" means NationsBank of Texas, N.A., a national banking ----- association, in its capacity as agent on behalf of the Banks. "Aggregate Unpaids" means at any time, an amount equal to the sum of ----------------- (i) the aggregate accrued and unpaid Discount (including any additional Discount due pursuant to Section 7.4) with respect to all Tranche Periods at such time, (ii) the Total Outstanding Investment at such time, and (iii) all amounts owed (whether due or accrued) hereunder by the Transferors to the Agent or the Banks at such time. "Alternate Rate" means a rate per annum equal to 2% in excess of the -------------- prime rate of interest announced by the Agent from time to time, changing when and as said prime rate changes (such rate not necessarily being the lowest or best rate charged by the Agent). "Arranger" means NationsBanc Capital Markets, Inc. -------- "Bank" means each of the financial institutions listed on the ---- signature pages hereto, and any successors in accordance with Section 11.6. "Bank Commitment" for each Bank means such Bank's Percentage of the --------------- Facility Limit. "Base Rate" means a fluctuating rate per annum which is the higher of --------- (a) the Federal Funds Rate plus one-half of one percent (1/2%) per annum and (b) the Reference Rate. "Business Day" means any day excluding Saturday, Sunday and any day on ------------ which banks in Dallas, Texas, New York, New York, Pittsburgh, Pennsylvania, or San Francisco, California are authorized or required by Governmental Rule to close; provided, however, when used with respect to LIBOR, "Business Day" means -------- ------- any day on which dealings in deposits of United States dollars are transacted in the applicable offshore United States dollar interbank market. "Certificate of Deposit Rate" means, with respect to a Tranche and the --------------------------- related Tranche Period, the average of the consensus bid rates determined by the 3 Agent on the date of determination of two or more New York certificate of deposit dealers of recognized standing selected by the Agent for the purchase in New York at face value from the Reference Banks of certificates of deposit of the Reference Banks in an amount comparable to the amount of the related Transfer Price to be funded by the Agent, and with a maturity comparable to the related Tranche Period. "Close-Out Collections" means Collections received with respect to any --------------------- Close-Out Receivable. "Close-Out Receivable" means any Receivable which is due and payable -------------------- prior to the Remittance Date following the date of creation of such Receivable. "Closing Date" means March 10, 1995. ------------ "Collection Account" means the account established and maintained by ------------------ the Agent for the benefit of the Banks pursuant to Section 2.9. "Collections" means, with respect to any Receivable, all cash ----------- collections and other cash proceeds of such Receivable including, without limitation, any Deemed Collections and Close-Out Collections. "Commitment Commission Rate" means the per annum rate payable by the -------------------------- Transferors to the Banks (calculated on the basis of actual number of days elapsed divided by 360), determined in accordance with the following table, and based upon the second highest of Toys "R" Us, Inc.'s long-term senior unsecured debt ratings:
Toys "R" Us, Inc.'s long-term senior unsecured debt ratings Commitment S&P/Moody's/Duff Commission - -------------------------------------- AA-/Aa3/AA-or higher 10.0 bps A/A2/A or higher 15.0 bps A-/A3/A- 18.75 bps ======================================
4 The Commitment Commission Rate as of the Closing Date is 10.0 basis points. Upon a rating change, the Agent shall determine the applicable Commitment Commission Rate and shall promptly notify the Banks and the Transferors of the Commitment Commission Rate so determined. Such determination by the Agent shall be conclusive absent manifest error. The new applicable Commitment Commission Rate will be effective as of the date of notification to the Banks. "Commitment Fee" means a fee equal to the applicable Commitment -------------- Commission Rate payable by the Transferors on each Remittance Date on the difference between the average Facility Limit as set forth on each Weekly Report and the average Total Outstanding Investment as set forth on each Weekly Report for the one year period preceding such date. "Contingent Obligation", as applied to any Person, means, without --------------------- duplication, any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any indebtedness, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof or (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings. Contingent Obligations shall include, without limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another and (b) any liability of such Person for the obligations of another through any agreement (contingent or otherwise) (x) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (y) to maintain the solvency or any balance sheet item, level of income or financial condition of another, if in the case of any agreement 5 described under subclauses (x) or (y) of this sentence the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported. The amount of any Contingent Obligation denominated in a currency other than United States dollars shall be equal to the United States dollar equivalent of such Contingent Obligation. "Contract" means, with respect to any Receivable, both the Written -------- Agreement and the invoice related thereto, pursuant to or under which the Obligor shall be obligated to pay for merchandise sold by the related Transferor to the Obligor. "Contractual Obligation", as applied to any Person, means any ---------------------- provision of any security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "Credit Agreement" means the Credit Agreement, dated as of March 10, ---------------- 1995, by and among Mattel, Inc., the banks named therein and Bank of America National Trust and Savings Association, as Agent, as such agreement may be amended and supplemented from time to time. "Credit and Collection Policy" means each Transferor's credit and ---------------------------- collection policies and practices relating to Contracts and Receivables with respect to such Transferor existing on the date hereof, as modified from time to time in compliance with Section 5.2(c). "Deemed Collections" means any Collections on any Receivable deemed to ------------------ have been received pursuant to Section 2.6(a) or (b). "Defaulted Receivable" means a Receivable: (i) as to which any -------------------- payment, or part thereof, remains unpaid as of the close of business on the Remittance Date next succeeding the date such Receivable is created; (ii) as to which an Event of Bankruptcy has occurred with respect to the Obligor; (iii) which has been identified by the applicable Transferor or the Servicer as uncollectible; or (iv) which, consistent with the Credit and Collection 6 Policy, should be written off the related Transferor's books as uncollectible. "Deficiency Advance" has the meaning specified in Section 2.10. ------------------ "Discount" means, for each Tranche, an amount equal to the product of -------- (a) the related Transfer Price (minus any amounts released from the Collection Account by the Agent pursuant to Section 2.9(b) to fund all or a portion of such Transfer Price) and (b) the applicable Participation Rate and (c) a fraction, the numerator of which is the number of days in such Tranche Period and the denominator of which is 360; provided, however, that no provision of this -------- ------- Agreement shall require the payment or permit the collection of Discount in excess of the maximum permitted by applicable Governmental Rule; and provided, -------- further, that Discount shall not be considered paid by any distribution of - ------- Collections if at any time such distribution is rescinded or must be returned for any reason. "Discount Reserve" means, at any time, the aggregate amount of ---------------- Discount for all outstanding Tranches. "Duff" means Duff & Phelps Credit Ratings Co. ---- "Eligible Receivable" means, at any time, any Receivable: ------------------- (i) the Obligor of which is Toys "R" Us, Inc.; (ii) which is not a Defaulted Receivable at the time of the initial creation of an interest of the Agent, on behalf of the Banks, therein; (iii) which is an "account" within the meaning of Section 9-106 of the UCC of all applicable jurisdictions; (iv) which is denominated and payable only in United States dollars in the United States; 7 (v) which, together with the Contract related thereto, is in full force and effect and constitutes the legal, valid and binding obligation of the Obligor enforceable against the Obligor in accordance with its terms and subject to no offset, counterclaim or other defense; (vi) which, together with the Contract related thereto, does not contravene in any material respect any Governmental Rules applicable thereto and with respect to which no part of the Contract related thereto is in violation of any such Governmental Rule in any material respect; (vii) for which the Obligor has been directed and has agreed to remit all payments to the Collection Account; (viii) which satisfies all applicable requirements of the Credit and Collection Policy; (ix) the term of which does not extend beyond the Remittance Date next succeeding the date such Receivable is created; and (x) which was generated in the ordinary course of the related Transferor's business. "Environmental Claims" means all claims, however asserted, by any -------------------- Governmental Person or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment. "Environmental Laws" means all federal, state or local laws, statutes, ------------------ common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Person, in each case relating to environmental, health, safety and land use matters. "ERISA" means, at any time, the Employee Retirement Income Security ----- Act of 1974, as amended from time to time, and any successor statute. 8 "ERISA Affiliate", as applied to any Person, means any trade or --------------- business (whether or not incorporated) which is a member of a group of which that Person is a member and which is under common control within the meaning of Section 414(b) and 414(c) of the Internal Revenue Code of 1986, as amended. "Event of Bankruptcy", with respect to any Person, means (i) that such ------------------- Person shall generally not pay its debts as such debts become due or shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against such Person seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any Governmental Rule relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property or (ii) if such Person is a corporation, such Person shall take any corporate action to authorize any of the actions set forth in the preceding clause (i). "Facility Limit" means $250,000,000, as such amount may be adjusted as -------------- provided herein. "Federal Funds Rate" means the weighted average of the rates on ------------------ overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day of determination (or if such day of determination is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transaction received by the Agent from three Federal funds brokers of recognized standing selected by it. "GAAP" means generally accepted accounting principles set forth in the ---- opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting 9 profession, which are applicable to the circumstances as of the date of determination. "Governmental Person" means the government of the United States or the ------------------- government of any state or locality therein, any political subdivision or any governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body or entity, or other regulatory bureau, authority, body or entity of the United States or any state or locality therein, including the Federal Deposit Insurance Company, the Comptroller of the Currency or the Board of Governors of the Federal Reserve System, any central bank or any comparable authority. "Governmental Rule" means any law, statute, rule, regulation, ----------------- ordinance, order, judgment, guidelines or decision of any Governmental Person. "Guarantor" means Mattel, Inc. --------- "Indemnified Amounts" has the meaning specified in Section 8.1. ------------------- "Indemnified Parties" has the meaning specified in Section 8.1. ------------------- "LIBOR" means, with respect to a Tranche and the related Tranche ----- Period, the average of the quotations (rounded upwards to the nearest 1/100 of 1%) as of 10:00 a.m. New York time on the second Business Day prior to the commencement of such Tranche Period, if any, offered to first class banks in the offshore dollar market by the Reference Banks for U.S. Dollar deposits of amounts in same day funds comparable to the Transfer Price of such Tranche (net of amounts payable in accordance with Section 2.9(b)), with a maturity comparable to such Tranche Period to which LIBOR will apply. "Material Adverse Effect" means (i) a material adverse effect upon the ----------------------- business, operations, properties, assets, business prospects or condition (financial or otherwise) of Mattel, Inc. (together with its Subsidiaries), taken as a whole, or (ii) a material impairment of the ability of Mattel, Inc. to perform its obligations under this Agreement. 10 "Moody's" means Moody's Investors Service, Inc. ------- "Multiemployer Plan" means a "multiemployer plan" as defined in ------------------ Section 4001(a)(3) of ERISA which is maintained for employees of a Person or any ERISA Affiliate of such Person. "Notice of Termination" means a notice delivered by the Agent to the --------------------- Transferors, the Guarantor and the Banks pursuant to Section 7.4. "Obligations" has the meaning set forth in Section 10.1. ----------- "Obligor" means Toys "R" Us, Inc., a Delaware corporation, which is ------- obligated to the Transferors to make payments for the provision of goods pursuant to Contracts. "Participant" has the meaning set forth in Section 11.9. ----------- "Participation Rate" means, for any Tranche and related Tranche ------------------ Period, LIBOR (or the Adjusted Certificate of Deposit Rate pursuant to Section 2.12) plus the applicable spread. Such spread shall mean the per annum rate (calculated on the basis of the actual number of days elapsed divided by 360), determined in accordance with the following table, and based upon the second highest of Toys "R" Us, Inc.'s long-term unsecured senior debt ratings:
Toys "R" Us, Inc.'s long- term senior unsecured debt ratings S&P/Moody's/Duff Spread - --------------------------------------- AA-/Aa3/AA-or higher 20.0 bps A/A2/A or higher 22.5 bps A-/A3/A- 35.0 bps =======================================
Such spread as of the Closing Date is 20 basis points. Upon a rating change, the Agent shall determine the applicable spread and shall promptly notify the Banks 11 and the Transferors of the spread so determined. Such determination by the Agent shall be conclusive absent manifest error. The new applicable spread will be effective as of the date of notification to the Banks and will be applicable to all Tranches. "Pension Plan" means any employee plan which is subject to Section 412 ------------ of the Internal Revenue Code of 1986, as amended, and which is maintained for employees of a Person or any ERISA Affiliate of such Person other than a Multiemployer Plan. "Percentage" means, with respect to any Bank at any time, the ---------- percentage set forth next to its name on the signature page hereof, which is the equivalent of a fraction the numerator of which is equal to such Bank's Bank Commitment, and the denominator of which is equal to the Facility Limit. "Percentage Factor" means the percentage computed at any time of ----------------- determination as follows: TOI + DR ------------ ERB Where: TOI = the Total Outstanding Investment at the time of such computation. DR = the Discount Reserve at the time of such computation. ERB = the aggregate outstanding balance of the Eligible Receivables at the time of such computation. In no event shall the Percentage Factor exceed one hundred percent. The Percentage Factor shall be calculated by the Agent on the day of the initial Transfer hereunder. Thereafter, the Percentage Factor shall remain constant from the time as of which any such computation is made until the time as of which a subsequent Transfer shall be made pursuant to Section 2.2. The Percentage Factor, as calculated at the close of business on the date as of which any such Transfer is made shall remain constant at all times thereafter until such time 12 as an additional Transfer is made or until such time as the Banks shall have received the full amount of the Aggregate Unpaids, at which time the Percentage Factor shall be recomputed. "Person" means any corporation, natural person, firm, joint venture, ------ partnership, trust, unincorporated organization, enterprise, government or any department or agency of any government. "Potential Termination Event" means any condition or event which, with --------------------------- the giving of notice or the lapse of time or both, would constitute a Termination Event. "Proceeds" means "proceeds" as defined in Section 9.306(1) of the UCC. -------- "Receivable" means the indebtedness denominated in United States ---------- dollars to a Transferor by the Obligor (without giving effect to any purchase hereunder by the Agent, on behalf of the Banks, at any time) under a Contract whether constituting an account, chattel paper, instrument or general intangible, including all other obligations of the Obligor with respect thereto. Notwithstanding the foregoing, once a Receivable has been deemed collected pursuant to Section 2.6 hereof, it shall no longer constitute a Receivable hereunder. "Records" means all Contracts and other documents, books, records and ------- other information (including, without limitation, computer programs, tapes, discs, punch cards, data processing software and related property and rights) maintained with respect to Receivables and the Obligor. "Reference Banks" means Bank of America National Trust and Savings --------------- Association, NationsBank of Texas, N.A. and PNC Bank, National Association. In the event that at any time of determination only two Banks designated as "Reference Banks" are providing rates for deposits referred to in the definition of "LIBOR", those two Banks shall be the "Reference Banks" or, if only one such Bank is providing such rates, that Bank shall be the "Reference Banks" for purposes of this Agreement. 13 "Reference Rate" means the rate of interest publicly announced from -------------- time to time by NationsBank of Texas, N.A. in Dallas as its reference rate, as in effect on such date of determination. The reference rate is set by NationsBank of Texas, N.A. based on various factors including NationsBank of Texas, N.A.'s costs and desired return, general economic conditions, and other factors, and is used as a reference point for pricing some loans. NationsBank of Texas, N.A. may make loans at, above or below the rate announced as its reference rate. "Remittance Date" means December 18, 1995, December 17, 1996, and --------------- December 17, 1997, as applicable, or, if such day is not a Business Day, the next succeeding Business Day. "Requisite Banks" means, at any date of determination, Banks having at --------------- least 66-2/3% of the aggregate Bank Commitments at such time. "S&P" means Standard & Poor's Ratings Group. --- "Servicer" means Mattel, Inc. or, after a Servicer Default, a servicer -------- appointed by the Agent. "Servicer Default" has the meaning specified in Section 7.1. ---------------- "Subsidiary" means any corporation, association or other business ---------- entity of which more than 50% of the total voting power of shares of stock entitled to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more of the other Subsidiaries of that Person or a combination thereof. "Termination Date" means the earlier of (i) December 17, 1997, unless ---------------- such date is otherwise extended, or (ii) the date on which the Agent delivers a Notice of Termination to the Transferors. "Termination Event" means an event described in Section 7.3. ----------------- "Total Outstanding Investment" means the sum of the Transfer Prices ---------------------------- paid to the Transferors for all Transfers less any amounts released from the ---- Collection 14 Account by the Agent pursuant to Section 2.9(b) to fund all or a portion of any such amounts paid to the Transferors and less the aggregate ---- amount of Collections received and applied by the Agent to reduce such Total Outstanding Investment pursuant to Section 2.4 or 2.9(b); provided that the -------- Total Outstanding Investment shall be restored in the amount of any Collections so received and applied if at any time the distribution of such Collections is rescinded or must otherwise be returned for any reason; and provided further -------- ------- that the Total Outstanding Investment shall at no time exceed the Facility Limit. "Tranche" means a portion of the Total Outstanding Investment ------- allocated to a Tranche Period. "Tranche Period" means, with respect to a Tranche, the period from the -------------- date of the Transfer related thereto to the following Remittance Date. "Transaction Costs" has the meaning specified in Section 8.3. ----------------- "Transfer" means a conveyance, transfer and assignment by a Transferor -------- to the Agent, on behalf of the Banks, of an undivided percentage ownership interest in Receivables hereunder. "Transfer Date" means, with respect to each Transfer, the Business Day ------------- on which such Transfer is made. "Transfer Price" means, with respect to any Transfer, the amount paid -------------- to the related Transferor by the Banks as described in the Transfer Notice related to such Transfer. "Transfer Notice" has the meaning given to it in Section 2.2. --------------- "Transferred Interest" means, at any time of determination, an -------------------- undivided percentage ownership interest in (i) each and every then outstanding Receivable, (ii) all Collections with respect thereto, and (iii) other Proceeds of the foregoing, equal to the Percentage Factor at such time. The Transferred Interest in each Receivable and the Collections and Proceeds with respect thereto, shall at all times be in proportion to the Transferred 15 Interest in each other Receivable, and Collections and Proceeds with respect thereto. "UCC" means, with respect to any state, the Uniform Commercial Code as --- from time to time in effect in such state. "Weekly Report" means a report prepared on a Weekly basis by the ------------- Servicer in the form attached hereto as Exhibit B and delivered to the Agent in accordance with Section 2.8. "Written Agreement" means the agreement between the Obligor and the ----------------- Transferors in the form of Exhibit A. SECTION 1.2. Other Terms. All accounting terms not specifically ----------- defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of California, and not specifically defined herein, are used herein as defined in such Article 9. All other terms not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. SECTION 1.3. Computation of Time Periods. Unless otherwise stated in --------------------------- this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding." 16 ARTICLE II PURCHASES AND SETTLEMENTS SECTION 2.1. Facility. Upon the terms and subject to the conditions -------- herein set forth, each Transferor may, at its option, convey, transfer and assign to the Agent, on behalf of the Banks, and the Banks shall, subject to the terms and conditions hereof, accept such conveyance, transfer and assignment from such Transferor, without recourse except as provided herein, undivided percentage ownership interests in the Receivables, together with Collections with respect thereto, from time to time. SECTION 2.2. Transfers. Upon the terms and subject to the conditions --------- herein set forth, each Transferor may, prior to the Termination Date, convey, transfer and assign to the Agent, on behalf of the Banks, and the Banks shall, subject to the terms and conditions hereof, accept such conveyance, transfer and assignment from such Transferor, without recourse except as otherwise provided herein, undivided percentage ownership interests in Receivables, together with Collections with respect thereto (each, a "Transfer") from time to time for an -------- aggregate Transfer Price (less any amounts released from the Collection Account pursuant to Section 2.9(b) to fund all or a portion of any Transfer) not to exceed the Facility Limit; provided that in no event may there be more than one -------- Transfer per Transferor per week, and no Transfer shall be made by a Transferor between two Business Days prior to any Remittance Date and the next succeeding March 17. Each Transferor shall convey, transfer and assign to the Agent, on behalf of the Banks, undivided percentage ownership interests in its Receivables by delivering to the Agent, not later than 1:00 p.m., Dallas, Texas time, on the third Business Day prior to the proposed date of transfer, notice of each Transfer in substantially the form of Exhibit C hereto (a "Transfer Notice"). --------------- Each Transfer Notice shall specify (i) the Transfer Price based on an estimated Participation Rate, (ii) an initial estimate of the Discount relating to such Transfer based on an estimated Participation Rate, (iii) the date of such Transfer, (iv) the Tranche Period related thereto, (v) the aggregate outstanding balance of the Eligible Receivables as of the day of such notice and (vi) the estimated Percentage Factor after giving effect 17 to such Transfer. After giving effect to such Transfer, the Total Outstanding Investment plus the Discount Reserve shall not be greater than 80% of the aggregate outstanding balance of the Eligible Receivables. Promptly after 10:00 a.m., Dallas, Texas time, on the second Business Day prior to the date of a proposed Transfer, the Agent will notify the related Transferor of the LIBOR (or the Adjusted Certificate of Deposit Rate, if applicable pursuant to Section 2.12) and the Participation Rate applicable to such Transfer, and such Transferor will notify the Agent in writing of the finalized Transfer Price and the finalized Percentage Factor. The finalized Transfer Price shall be an amount not in excess of the amount which, when added to the Total Outstanding Investment immediately prior to such Transfer, would cause the Total Outstanding Investment plus the Discount Reserve to be greater than 80% of the aggregate outstanding balance of the Eligible Receivables. The Transfer Price (net of any amounts released from the Collection Account pursuant to Section 2.9(b) to fund all or a portion of any Transfer) with respect to each Transfer shall not be less than $5,000,000 and shall be in increments of $500,000 in excess thereof. Each Transfer Notice shall be executed by duly authorized officers of the Transferors. The Agent, on behalf of the Banks, shall accept such offer to convey, transfer and assign undivided percentage ownership interests in writing. The terms of each Transfer shall be as set forth herein and in the related Transfer Notice. Promptly after receipt of a Transfer Notice, the Agent shall notify each Bank of the proposed Transfer (such notice to normally be given within two hours of receipt by the Agent). Each Bank shall make available to the Agent its pro rata share of the Transfer Price by remitting such funds to the Agent for credit to NationsBank of Texas, N.A., ABA No. 111000025, Attention: Commercial Loan Operations, Account No. 0180019828, Ref. Mattel Sales Inc., no later than 2:00 p.m., Dallas, Texas time on the date of such Transfer. The Agent shall make available to the related Transferor on the date of such Transfer the aggregate of the amounts so made available by the Banks by causing an amount of same-day funds equal to such aggregate amount received by the Agent to be credited to the account of the Transferors at Bank of America National Trust and Savings Association (ABA No. 121000358, Account No. 1233112850, reference: Mattel 18 Sales Receivables); provided that, upon prior written notice to the Agent, each -------- Transferor may at any time direct the Agent to credit such amounts to another account of such Transferor. Each Transfer Notice shall be irrevocable and binding on the Transferors, and the Transferors shall indemnify the Agent and the Banks against any loss or expense incurred by the Agent or the Banks arising from or relating to any failure by the Transferor to complete such Transfer including, without limitation, any loss or expense incurred by the Agent or the Banks by reason of the liquidation or reemployment of funds acquired by the Banks in anticipation of funding such Transfer. Each Transfer shall constitute a purchase of undivided percentage ownership interests in each and every Receivable, together with all Collections and Proceeds with respect thereto. The aggregate undivided percentage ownership interest of the Agent, on behalf of the Banks, in the Receivables, together with all Collections and Proceeds with respect thereto, shall equal the Percentage Factor in effect from time to time. SECTION 2.3. Discount, Fees and Other Costs and Expenses. (a) ------------------------------------------- Notwithstanding any limitation on recourse contained herein, the Transferors shall pay to the Agent (i) on each Remittance Date and on each day thereafter until the Total Outstanding Investment has been reduced to zero, the amounts required pursuant to Section 7.4 hereof, and (ii) as and when due in accordance with this Agreement, all amounts payable pursuant to Article VIII hereof, if any. (b) Notwithstanding any limitation on recourse contained in this Agreement, Mattel, Inc. and the Transferors, as appropriate, shall pay the following non-refundable fees calculated on the basis of the actual number of days elapsed divided by 360: (i) on each Remittance Date occurring from the date of execution hereof, the Transferors shall pay the Commitment Fee; and 19 (ii) the Transferors shall pay to the Agent the fee referenced in that certain letter agreement, dated January 25, 1995, between the Transferors and the Agent. (c) Nothing in this Agreement shall limit in any way the obligations of the Transferors to pay the amounts set forth in this Section 2.3. SECTION 2.4. Settlement Procedures. On each Remittance Date and each --------------------- day thereafter until the Aggregate Unpaids have been paid in full, the Agent shall apply (i) amounts on deposit in the Collection Account pursuant to Section 2.6 or 7.3(h) and (ii) the Percentage Factor of all remaining amounts on deposit in the Collection Account in the following order of priority: first, in payment ----- of the accrued Discount for each Tranche Period, second, in payment of the ------ Commitment Fee, third, in payment of any additional Discount due pursuant to ----- Section 7.4, fourth, in payment of the aggregate of all other amounts then owed ------ (whether due or accrued) hereby by Transferors to the Banks or the Agent (other than the Total Outstanding Investment), and fifth, in reduction of the Total ----- Outstanding Investment. In the event that on any Remittance Date and any day thereafter, the Aggregate Unpaids have not been paid in full after giving effect to the preceding sentence, the Agent shall apply any other amounts on deposit in the Collection Account to the payment in full of the Aggregate Unpaids in accordance with the foregoing priority. Following the date on which the Total Outstanding Investment has been reduced to zero, all accrued Discount and applicable fees have been paid in full, all other Aggregate Unpaids have been paid in full and this Agreement shall have terminated pursuant to Section 11.1, (i) the Agent shall recompute the Percentage Factor, (ii) the Agent, on behalf of the Banks, shall be considered to have reconveyed to the applicable Transferor any interest in the Receivables (including the Transferred Interest), (iii) the Agent shall release to such Transferor any remaining Collections held in the Collection Account pursuant to this Section 2.4 and (iv) the Agent, on behalf of the Banks, shall execute and deliver to such Transferor, such documents or instruments as are necessary to terminate the Agent's interest in the Receivables. Any such documents shall be prepared by or on behalf of the related Transferor. 20 SECTION 2.5. Protection of Ownership Interest of the Banks. Each --------------------------------------------- Transferor agrees that from time to time, at its expense, it will promptly execute and deliver all instruments and documents and take all action necessary, and such other actions as may be reasonably requested by the Agent, in order to perfect or protect the Transferred Interest or to enable the Agent to exercise or enforce any of its or any Bank's rights hereunder. Without limiting the foregoing, each Transferor will, in order to accurately reflect this purchase and sale transaction, execute and file such financing or continuation statements or amendments thereto or assignments thereof as are necessary or as may be requested by the Agent in order to protect, perfect and preserve the Transferred Interest of the Agent, and agrees to mark its master data processing records and other documents with a legend describing the purchase by the Agent, on behalf of the Banks, of the Transferred Interest. Each Transferor shall, upon request of the Agent, obtain such additional search reports as the Agent shall reasonably request. To the fullest extent permitted by applicable Governmental Rule, the Agent shall be permitted to sign and file continuation statements and amendments thereto and assignments thereof without the applicable Transferor's signature. Carbon, photographic or other reproduction of this Agreement or any financing statement shall be sufficient as a financing statement. No Transferor shall change its name, identity or corporate structure (within the meaning of Section 9-402(7) of the UCC as in effect in the State of California), nor relocate its chief executive office or any office where Records are kept, unless it shall have: (i) given the Agent at least thirty (30) days' prior written notice thereof and (ii) prepared at such Transferor's expense and delivered to the Agent all financing statements, instruments and other documents necessary to preserve, perfect and protect the Transferred Interest of the Agent or reasonably requested by the Agent in connection with such change or relocation. Any filings under the UCC or otherwise that are occasioned by such change in name or location shall be made at the expense of the related Transferor. As of the date hereof, each Transferor has instructed the Obligor to cause all Collections to be deposited directly into the Collection Account, and such Transferor shall not change such arrangement unless the Agent shall have given its prior written consent thereto. If either Transferor receives any Collections or is deemed to receive any 21 Collections pursuant to Section 2.6, such Transferor shall immediately remit such Collections to the Collection Account administered by the Agent for the benefit of the Banks. SECTION 2.6. Deemed Collections; Application of Payments. (a) In ------------------------------------------- the event that on any day the outstanding balance of a Receivable is either (x) reduced as a result of any defective or returned merchandise, any cash discount or any adjustment by the related Transferor, or (y) reduced or canceled as a result of a setoff in respect of any claim by any Person (whether such claim arises out of the same or a related transaction or an unrelated transaction), then within ten (10) days, either (i) the Servicer shall deliver a Weekly Report evidencing that the aggregate outstanding balance of Eligible Receivables is at least 125% of the Total Outstanding Investment and the Discount Reserve or (ii) such Transferor shall deposit to the credit of the Collection Account the amount of such reduction or cancellation and the Agent shall be considered to have reconveyed to such Transferor any interest in such Receivables (including the Transferred Interest therein). The Agent agrees that it shall execute and return to the related Transferor such documents or instruments as are reasonably requested by such Transferor and necessary to terminate the Agent's interest on behalf of the Banks in such Receivables. Any such documents shall be prepared by or on behalf of such Transferor. (b) In the event that on any day any of the representations or warranties in Article III is no longer true with respect to a Receivable, then within ten (10) days of such occurrence, either (i) the related Transferor shall cure the breach of the applicable representation or warranty or (ii) the Servicer shall deliver a Weekly Report evidencing that the aggregate outstanding balance of Eligible Receivables (not including the aggregate outstanding balance of the Receivables subject to any such breach of a representation or warranty) is at least 125% of the Total Outstanding Investment and the Discount Reserve or (iii) such Transferor shall deposit to the credit of the Collection Account the outstanding balance of such Receivable in full and the Agent, on behalf of the Banks, shall be considered to have reconveyed to such Transferor any interest in such Receivables (including the Transferred Interest therein). The Agent 22 agrees that it shall execute and return to the related Transferor such documents or instruments as are reasonably requested by such Transferor and necessary to terminate the Agent's interest on behalf of the Banks in such Receivables. Any such documents shall be prepared by or on behalf of such Transferor. SECTION 2.7. Payments and Computations, Etc. All amounts to be paid ------------------------------ or deposited by the Transferors hereunder shall be paid or deposited in accordance with the terms hereof no later than 1:00 p.m. (New York City time) on the day when due in immediately available funds; if such amounts are payable to the Agent, on behalf of the Banks, they shall be paid or deposited in the Collection Account, until otherwise notified by the Agent. The Transferors shall, to the extent permitted by Governmental Rule, pay to the Agent, for the benefit of the Banks, upon demand, interest on all amounts not paid or deposited when due to the Banks hereunder at a rate equal to the highest Participation Rate applicable to any Tranche then outstanding plus 2% or, if no Tranche is then outstanding, the Alternate Rate. All computations of discount, interest and all per annum fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed. Any computations by the Agent of amounts payable by the Transferors hereunder to the Banks or the Agent shall be binding absent manifest error. All payments made to the Agent in respect of the Total Outstanding Investment and Discount shall be made to the Agent for the account of the Banks pro rata based on their respective Percentages. The Agent shall promptly remit - --- ---- to each Bank such Bank's pro rata share of such payments (such payments to --- ---- normally be remitted within two hours of receipt by the Agent). SECTION 2.8. Reports. At any time the Total Outstanding Investment ------- is greater than zero, commencing on the date hereof, and on each subsequent Monday (or, if such day is not a Business Day, the next succeeding Business Day) the Servicer shall prepare and forward to the Agent a Weekly Report for the preceding calendar week, and (ii) such other information as the Agent may reasonably request. On the second Business Day prior to each Remittance Date, the Transferors shall provide the Agent and each Bank with a certificate detailing the amount of Collections expected as of that Remittance 23 Date, together with the Total Outstanding Investment and the Discount Reserve. SECTION 2.9. Collection Account. (a) There shall be established on ------------------ the day of the initial Transfer hereunder and maintained, in the name of the Agent for the benefit of the Banks, a segregated account (the "Collection ---------- Account"), at NationsBank of Texas, N.A., bearing a designation clearly - ------- indicating that the funds deposited therein are held for the benefit of the Banks. (The wiring instructions for deposits to such account are: ABA No. 111000025, Account No. 1290154724.) Any interest and earnings (net of losses and investment expenses) on funds on deposit in the Collection Account shall be retained in the Collection Account and be available to make any payments required to be made hereunder (including Discount) to the Agent or the Banks. On the date on which the Total Outstanding Investment is zero and the Aggregate Unpaids have been paid in full to the Banks, any funds remaining on deposit in the Collection Account shall be released to the Transferors in same-day funds. (b) Close-Out Collections deposited to the credit of the Collection Account shall be retained in the Collection Account by the Agent until the earlier of (w) the next succeeding Remittance Date, at which time such amounts shall be applied pursuant to Section 2.4, and (x) the next succeeding Transfer Date, at which time the Agent shall release to the Transferors the amount of such Collections minus the Percentage Factor (as calculated as of the latest ----- Transfer Date) of such Collections. In the event that Collections of Close-Out Receivables are to be applied pursuant to clause (x) above, the Transferors may request that the Percentage Factor of such Collections be applied toward (i) all or a portion of the Transfer Price of the Transfer occurring on such Transfer Date (in which case such amounts shall be paid to the Transferors) or (ii) the reduction of the Total Outstanding Investment (in which case such amounts shall be paid to the Banks). In the case of any such reduction of the Total Outstanding Investment, the Agent shall, in its sole discretion, determine the Tranche(s) with respect to which such reduction shall be applied; provided -------- further, however, that in the case of any such reduction of the Total - ------- ------- Outstanding Investment, each Transferor agrees to reimburse each Bank and to hold each Bank 24 harmless from any loss or expense which such Bank may sustain or incur as a consequence of such reduction of the Total Outstanding Investment, including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its funding hereunder or from fees payable to terminate the deposits from which such funds were obtained. This covenant shall survive the payment in full of the Aggregate Unpaids. SECTION 2.10. Deficiency Advances. No Bank shall be responsible for ------------------- any default of any other Bank in respect of such other Bank's obligation to fund any portion of a Transfer hereunder, nor shall the commitment of any Bank hereunder be increased as a result of such default by any other Bank. Without limiting the generality of the foregoing, in the event any Bank shall fail to advance funds as provided herein, the Agent may, in its discretion but shall not be obligated to, advance as a Bank all or any portion of such amount (the "Deficiency Advance") and shall thereafter be entitled to payments on such - ------------------- Deficiency Advance in the same manner and at the same rate(s) to which such other Bank would have been entitled had it made such advance itself; provided -------- that, upon payment to the Agent from such other Bank of the entire outstanding amount of such Deficiency Advance, together with interest thereon, at the Participation Rate applicable to the related Tranche, then such payment shall be credited against the Agent's share of the Total Outstanding Investment in full payment of such Deficiency Advance. Acceptance by a Transferor of a Deficiency Advance from the Agent shall in no way limit the rights of such Transferor against the Bank failing to fund its pro rata portion (based on its Percentage) --- ---- of the Transfer Price of any Transfer hereunder. SECTION 2.11. Adjustment of Facility Limit. (a) The Transferors ---------------------------- shall have the right, at any time and from time to time; to terminate in whole or permanently reduce in part, without premium or penalty, the Facility Limit; provided that the Facility Limit, as reduced, shall equal or exceed the Total - -------- Outstanding Investment as of the date of such reduction. (b) The Transferors shall give not less than three Business Days' prior written notice to the Agent designating the date (which shall be a Business Day) and the amount of such termination or reduction. 25 Any partial reduction shall be in an aggregate minimum amount of $10,000,000 and integral multiples of $1,000,000 in excess of that amount. Promptly after receipt of a notice of such termination or partial reduction, the Agent shall notify each Bank and Bank of America National Trust and Savings Association as agent under the Credit Agreement of the proposed termination or reduction. Such termination or reduction shall be effective on the date specified in the Transferors' notice and shall terminate or reduce the dollar amount of each Bank's Bank Commitment. SECTION 2.12. Inability to Determine LIBOR. If for any reason the ---------------------------- Reference Banks shall have determined that for any reason adequate and reasonable means do not exist for ascertaining LIBOR for any proposed Tranche Period, or if the Requisite Banks advise the Agent in writing that LIBOR for any proposed Tranche Period does not adequately and fairly reflect the cost to such Banks of funding the Total Outstanding Investment during such Tranche Period, the Agent will forthwith give notice of such determination to the Transferors and each Bank. In such event, the Participation Rate with respect to such proposed Tranche Period and related Tranche shall be determined by reference to the Adjusted Certificate of Deposit Rate. If for any reason the Reference Banks shall have determined that for any reason adequate and reasonable means do not exist for ascertaining the Adjusted Certificate of Deposit Rate for any proposed Tranche Period, or if the Requisite Banks advise the Agent in writing that the Adjusted Certificate of Deposit Rate for any proposed Tranche Period does not adequately and fairly reflect the cost to such Banks of funding the Total Outstanding Investment during such Tranche Period, the Agent will forthwith give notice of such determination to the Transferors and each Bank. In such event, the Participation Rate with respect to such proposed Tranche Period and related Tranche shall be determined by reference to the Base Rate. 26 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1. Representations and Warranties of the Transferors. Each ------------------------------------------------- Transferor hereby represents and warrants to each of the Banks that: (a) Perfection. Immediately preceding each Transfer hereunder, the ---------- related Transferor shall be the owner of all of the Receivables which are the subject of each such Transfer, free and clear of all liens, encumbrances, security interests, preferences or other security arrangements of any kind or nature whatsoever. On or prior to each Transfer, all financing statements and other documents required to be recorded or filed in order to perfect the Transferred Interest against all creditors and purchasers from such Transferor will have been duly filed in each filing office necessary for such purpose and all filing fees and taxes, if any, payable in connection with such filings have been paid in full. (b) Accuracy of Information. All information heretofore furnished by ----------------------- a Transferor to the Banks or the Agent for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by such Transferor to the Banks or the Agent will be, true and accurate in every material respect, on the date such information is stated or certified. (c) Place of Business. The chief place of business and chief ----------------- executive office of the Transferors are located at the addresses of the Transferors indicated on Exhibit F hereto, and the offices where each Transferor keeps its Records are located at the address of such Transferor indicated on Exhibit F hereto or at such other locations notified to the Agent in accordance with Section 2.5 in jurisdictions where all action required by Section 2.5 has been taken and completed. (d) Payments. The Obligor has, with respect to each Receivable, been -------- directed by the related Transferor to remit all payments in respect of such Receivable directly to the Collection Account administered by the Agent. 27 (e) Good Title. Upon each Transfer and each recomputation of the ---------- Transferred Interest, the Agent, on behalf of the Banks, shall acquire a valid and perfected first priority undivided percentage ownership interest to the extent of the Transferred Interest or a first priority perfected security interest in each Receivable which exists on the date of such Transfer and recomputation and all Collections with respect thereto free and clear of any Adverse Claim. (f) Tradenames, etc.. As of the date hereof: (i) neither Transferor ---------------- has any subsidiaries or divisions; and (ii) neither Transferor has, within the last five (5) years, operated under any tradenames except as set forth on Exhibit G hereto and, within the last five (5) years, has not changed its name, merged with or into or consolidated with any other corporation or been the subject of any proceeding under Title 11 of the United States Code (Bankruptcy). (g) No Termination Event. No event has occurred and is continuing, -------------------- and no condition exists, which constitutes a Potential Termination Event or Termination Event. (h) Organization and Powers. Each Transferor is a corporation duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted and to enter into this Agreement and to carry out the transactions contemplated hereby. (i) Good Standing. Each Transferor is in good standing wherever ------------- necessary to carry on its present business and operations, except in jurisdictions in which the failure to be in good standing has or will have no Material Adverse Effect. (j) Authorization. The execution, delivery and performance of this ------------- Agreement have been duly authorized by all necessary corporate action by each Transferor. 28 (k) No Conflict. The execution, delivery and performance by each ----------- Transferor of this Agreement do not and will not (a) violate the Certificate of Incorporation or Bylaws of such Transferor, (b) violate any provision of law applicable to such Transferor, or any material order, judgment or decree of any court or other agency of government binding on such Transferor, the violation of which would result in a Material Adverse Effect, (c) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of such Transferor, (d) result in or require the creation or imposition of any material lien, security interest, charge or encumbrance of any nature whatsoever upon any of its material properties or assets, other than Liens created in favor of the Agent, or (e) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of such Transferor. (l) Governmental Consents. The execution, delivery and performance --------------------- by the Transferors of this Agreement, and each agreement, document, or instrument required hereunder do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Federal, state or other governmental authority or regulatory body or other such person. (m) Binding Obligation. This Agreement when executed and delivered ------------------ will be the legally valid and binding obligation of the Transferors, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally. (n) Changes, Etc. Since December 31, 1993 there has been no event or ------------ events that have, either individually or in the aggregate, resulted in a Material Adverse Effect. (o) Litigation; Adverse Facts. There is no action, suit, proceeding ------------------------- or arbitration (whether or not purportedly on behalf of either Transferor) at law or in equity or before or by any Federal, state, municipal or other governmental department, commission, board, 29 bureau, agency or instrumentality, domestic or foreign, pending or, to the knowledge of the related Transferor, threatened against or affecting such Transferor or any of its properties which, in the reasonable judgment of such Transferor and its executive officers (assuming adverse determination of facts which such Transferor in good faith believes it would not successfully prove, and considering damages which in their best judgment is the maximum that would be awarded upon, and the likelihood of, an adverse determination of the claim or the amount which reflects their best judgment as to that required to be paid to settle the claims) would result in a Material Adverse Effect and there is no basis known to such executive officers for any such action, suit or proceeding. Neither Transferor is (i) in violation of any applicable law which could result in a Material Adverse Effect, or (ii) subject to or in default with respect to any final judgment, writ, injunction, decree, rule or regulation of any court or Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which could result in a Material Adverse Effect. There is no action, suit, proceeding or investigation pending or, to the knowledge of such Transferor, threatened against or affecting such Transferor which provides a reasonable basis for questioning the validity or the enforceability of this Agreement. (p) Payment of Taxes. All tax returns and reports of either ---------------- Transferor required to be filed by any of them have been timely filed, and all taxes, assessments, fees and other governmental charges upon such Transferor and upon its respective properties, assets, income and franchises which are due and payable have been paid when due and payable or bonded against, except to the extent permitted by Section 6.3 of the Credit Agreement. Neither Transferor knows of any proposed tax assessment against it that would result in a Material Adverse Effect. (q) Agreements. Neither Transferor is a party to nor is it subject ---------- to any material agreement or instrument or charter or other internal restriction which results in a Material Adverse Effect. 30 (r) Performance. Neither Transferor is in default in the ----------- performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of such Transferor, and no condition exists which, with the giving of notice or the lapse of time or both, would constitute such a default, except, in any such case, where the consequences, direct or indirect, of such default or defaults, if any, would not result in a Material Adverse Effect. (s) Governmental Regulation. Neither Transferor is subject to ----------------------- regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 limiting its ability to transfer interests in its Receivables hereunder. (t) Employee Benefit Plans. Each Transferor and each of its ---------------------- respective ERISA Affiliates is in compliance in all material respects with any applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Pension Plans. Neither Transferor nor any of its respective ERISA Affiliates has participated in or participates in any Multiemployer Plan the withdrawal from which may result in any liability to any party in an amount in excess of $1,000,000. (u) Disclosure. No representation or warranty of a Transferor ---------- contained in this Agreement or any other document, certificate or written statement furnished to the Banks by such Transferor since January 1, 1995 for use in connection with the transactions contemplated by this Agreement as of the date of this Agreement contains any untrue statement of a material fact or omits to state a material fact (known to the Transferor in the case of any document or fact not furnished by it) necessary in order to make the statements contained herein or therein not misleading except that any such statement or omission that was untrue or misleading at the time made or that subsequently became untrue or misleading has been superseded or corrected by information provided to the Banks prior to the date of this Agreement. (v) Environmental Matters. Each Transferor conducts in the ordinary --------------------- course of business a review of the effect of existing Environmental Laws and 31 existing Environmental Claims on its business, operations and properties, and as a result thereof each Transferor has reasonably concluded that such Environmental Laws and Environmental Claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 3.2. Representations and Warranties of Mattel, Inc. Mattel, ---------------------------------------------- Inc. represents and warrants to the Banks that: (a) Servicing. Since January 1, 1995, there has been no material --------- change in the ability of Mattel, Inc. to service the Receivables. (b) Organization and Powers. Mattel, Inc. is a corporation duly ----------------------- organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted and to enter into this Agreement and to carry out the transactions contemplated hereby and thereby. (c) Good Standing. Mattel, Inc. is in good standing wherever ------------- necessary to carry on its present business and operations, except in jurisdictions in which the failure to be in good standing has or will have no Material Adverse Effect. (d) Authorization. The execution, delivery and performance of this ------------- Agreement have been duly authorized by all necessary corporate action by Mattel, Inc. (e) No Conflict. The execution, delivery and performance by Mattel, ----------- Inc. of this Agreement do not and will not (a) violate the Restated Certificate of Incorporation or Bylaws of Mattel, Inc., (b) violate any provision of law applicable to Mattel, Inc., or any material order, judgment or decree of any court or other agency of government binding on Mattel, Inc., the violation of which would result in a Material Adverse Effect, (c) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Mattel, Inc., (d) result in or require the creation or imposition of any 32 material lien, security interest, charge or encumbrance of any nature whatsoever upon any of its material properties or assets, other than Liens created in favor of the Agent, or (e) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Mattel, Inc. (f) Governmental Consents. The execution, delivery and performance --------------------- by Mattel, Inc. of this Agreement, and each agreement, document, or instrument required hereunder do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Federal, state or other governmental authority or regulatory body or other such person. (g) Binding Obligation. This Agreement when executed and delivered ------------------ will be the legally valid and binding obligation of Mattel, Inc., enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally. (h) Financial Condition. Mattel, Inc. has heretofore delivered to ------------------- the Banks a consolidated balance sheet of Mattel, Inc. and its Subsidiaries for the fiscal year ended December 31, 1993 and related consolidated statements of income, shareholders' equity and changes in financial position of Mattel, Inc. and its Subsidiaries for such fiscal year, audited by Price Waterhouse. All such statements were prepared in accordance with GAAP and fairly present the consolidated financial position of Mattel, Inc. and its Subsidiaries as at the date thereof and the consolidated results of operations and statement of cash flow of Mattel, Inc. and its Subsidiaries for the period then ended. Neither Mattel, Inc. nor any of its Subsidiaries has any material Contingent Obligation, liability for taxes or long-term lease which as of the date of this Agreement, individually or in the aggregate, would, if it became absolute, result in a Material Adverse Effect which is not reflected in the foregoing statements or in the notes thereto. 33 (i) Changes, Etc. Since December 31, 1992 there has been no event or ------------ events that have, either individually or in the aggregate, resulted in a Material Adverse Effect. (j) Title to Properties. Mattel, Inc. and its Subsidiaries have ------------------- good, sufficient and legal title to all the properties and assets reflected in the consolidated balance sheet referred to in Section 5.8 of the Credit Agreement except as set forth in said balance sheet or in the notes thereto, except for assets acquired or disposed of in the ordinary course of business or as otherwise permitted by this Agreement or the Credit Agreement since December 31, 1993 and, except for immaterial defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. (k) Litigation; Adverse Facts. There is no action, suit, proceeding ------------------------- or arbitration (whether or not purportedly on behalf of Mattel, Inc.) at law or in equity or before or by any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, pending or, to the knowledge of Mattel, Inc., threatened against or affecting Mattel, Inc. or any of its Subsidiaries or any of Mattel, Inc.'s or such Subsidiaries' properties which, in the reasonable judgment of Mattel, Inc. and its executive officers (assuming adverse determination of facts which Mattel, Inc. in good faith believes it would not successfully prove, and considering damages which in their best judgment is the maximum that would be awarded upon, and the likelihood of, an adverse determination of the claim or the amount which reflects their best judgment as to that required to be paid to settle the claims) would result in a Material Adverse Effect and there is no basis known to such executive officers for any such action, suit or proceeding. Neither Mattel, Inc. nor any of its Subsidiaries is (i) in violation of any applicable law which could result in a Material Adverse Effect, or (ii) subject to or in default with respect to any final judgment, writ, injunction, decree, rule or regulation of any court or Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which could result in a Material Adverse Effect. There is no action, suit, proceeding or investigation pending or, to the knowledge of Mattel, Inc., threatened against or affecting Mattel, 34 Inc. or any of its Subsidiaries which provides a reasonable basis for questioning the validity or the enforceability of this Agreement. (l) Payment of Taxes. All tax returns and reports of Mattel, Inc. ---------------- and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes, assessments, fees and other governmental charges upon Mattel, Inc. and its Subsidiaries and upon their respective properties, assets, income and franchises which are due and payable have been paid when due and payable or bonded against, except to the extent permitted by Section 6.3 of the Credit Agreement. Mattel, Inc. knows of no proposed tax assessment against it or any of its Subsidiaries that would result in a Material Adverse Effect. (m) Agreements. Neither Mattel, Inc. nor any of its Subsidiaries is ---------- a party to or is subject to any material agreement or instrument or charter or other internal restriction which results in a Material Adverse Effect. (n) Performance. Neither Mattel, Inc. nor any of its Subsidiaries is ----------- in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of Mattel, Inc., and no condition exists which, with the giving of notice or the lapse of time or both, would constitute such a default, except, in any such case, where the consequences, direct or indirect, of such default or defaults, if any, would not result in a Material Adverse Effect. (o) Governmental Regulation. Neither Mattel, Inc. nor any of its ----------------------- Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or to any Federal or state statute or regulation limiting its ability in any material way to transfer interests in the Receivables hereunder. (p) Employee Benefit Plans. Mattel, Inc. and each of its ERISA ---------------------- Affiliates is in compliance in all material respects with any applicable provisions of ERISA and the regulations and published interpretations there- 35 under with respect to all Pension Plans. Neither Mattel, Inc. nor any of its ERISA Affiliates has participated in or participates in any Multiemployer Plan the withdrawal from which may result in any liability to any party in an amount in excess of $1,000,000. (q) Disclosure. No representation or warranty of Mattel, Inc. ---------- contained in this Agreement or any other document, certificate or written statement furnished to the Banks by Mattel, Inc. since January 1, 1995 for use in connection with the transactions contemplated by this Agreement as of the date of this Agreement contains any untrue statement of a material fact or omits to state a material fact (known to the officers of Mattel, Inc. in the case of any document or fact not furnished by it) necessary in order to make the statements contained herein or therein not misleading except that any such statement or omission that was untrue or misleading at the time made or that subsequently became untrue or misleading has been superseded or corrected by information provided to the Banks prior to the date of this Agreement. SECTION 3.3. Reaffirmation of Representations and Warranties. On ----------------------------------------------- each day that a Transfer is made hereunder (a) the related Transferor, by accepting the proceeds of such Transfer, shall be deemed to have certified that (i) all representations and warranties described in Section 3.1 are correct on and as of such day as though made on and as of such day, and (ii) no event has occurred or is continuing or would result from any such Transfer, which constitutes a Termination Event or a Potential Termination Event and (b) Mattel, Inc. as Guarantor and as Servicer shall be deemed to have certified that (i) all representations and warranties described in Section 3.2 are correct on and as of such day as though made on and as of such day and (ii) if Mattel, Inc. is then the Servicer, that no event has occurred or is continuing or would result from any such Transfer, which constitutes, or with the passage of time or the giving of notice or both, would constitute a Servicer Default. 36 ARTICLE IV CONDITIONS PRECEDENT SECTION 4.1. Conditions to Closing. On or prior to the date of --------------------- execution hereof and prior to the effectiveness of this Agreement, the Transferors and the Guarantor shall have delivered to the Agent and the Banks originally executed copies of this Agreement, together with originals to the Agent and copies to the Banks of the following documents and instruments, all in form and substance acceptable to the Agent: (a) a Certificate of the Secretary of Mattel, Inc. (i) certifying that, since March 18, 1994, there have been no changes in the Restated Certificate of Incorporation, by-laws and incumbency signatures of Mattel, Inc. (or, if changes have been made with respect thereto, specifying the nature of such changes and attaching copies thereof to such Certificate) and (ii) attaching copies of resolutions of the Board of Directors authorizing the execution, delivery and performance of this Agreement and related documents to which it is a party; (b) good standing certificates of Mattel, Inc. from each of the Secretaries of State of Delaware and California, each to be dated a recent date prior to the Closing Date; (c) (i) a Certificate of the Secretary of Fisher-Price, Inc. attaching copies of the Certificate of Incorporation, by-laws and incumbency signatures of such Transferor, together with copies of resolutions of the Board of Directors authorizing the execution, delivery and performance of this Agreement and related documents to which it is a party and (ii) a Certificate of the Secretary of Mattel Sales Corp. (1) certifying that, since March 18, 1994, there have been no changes in the Certificate of Incorporation, by-laws and incumbency signatures of such Transferor (or, if changed have been made with respect thereto, specifying the nature of such changes and attaching copies thereof to such Certificate) and (2) attaching copies of resolutions of the Board of Directors authorizing the execution, delivery and perfor- 37 mance of this Agreement and related documents to which it is a party; (d) good standing certificate of Mattel Sales Corp. from the Secretary of State of California and a good standing certificate of Fisher- Price, Inc. from the Secretary of State of the State of Delaware to be dated a recent date prior to the Closing Date; (e) proper financing statements (Form UCC-1) naming each Transferor as the debtor/transferor and the Agent, as agent on behalf of the Banks, as purchaser or other similar instruments or documents as may be necessary or in the opinion of the Agent desirable under the UCC of all appropriate jurisdictions or any comparable Governmental Rule to perfect the ownership interest of the Agent, on behalf of the Banks, in all Receivables related to both Transferors; (f) certified copies of request for information or copies (Form UCC- 11) (or a similar search report certified by parties acceptable to the Banks) dated a date reasonably near the date of the initial Transfer listing all effective financing statements which name the Transferors (under their present names and any previous names) as Debtor and which are filed in jurisdictions in which the filings were made pursuant to item (i) above together with copies of such financing statements (none of which shall cover any Receivables or Contracts); (g) a favorable opinion of Robert J. Normile, counsel for the Transferors, in substantially the form of Exhibit I hereto and as to such other matters as the Agent may reasonably request; (h) a favorable opinion of Robert J. Normile, counsel for the Guarantor, in substantially the form of Exhibit J hereto and as to such other matters as the Agent may reasonably request; (i) a favorable opinion of Latham & Watkins, special counsel for the Transferors, as to such matters as the Agent may reasonably request; and (j) an executed copy of the Written Agreement. 38 ARTICLE V COVENANTS SECTION 5.1. Affirmative Covenants of the Transferors. At all times ---------------------------------------- for the term of this Agreement, unless the Requisite Banks shall otherwise consent in writing: (a) Conduct of Business. Each Transferor will carry on and conduct ------------------- its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted and will do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and will maintain all requisite authority to conduct its business in each jurisdiction in which its business is presently conducted. (b) Compliance with Governmental Rules. Each Transferor will comply ---------------------------------- with all Governmental Rules, writs, judgments, injunctions, decrees or awards to which it may become subject. (c) Furnishing of Information and Inspection of Records. Each --------------------------------------------------- Transferor will furnish to the Agent and the Banks from time to time such information with respect to the Receivables as the Agent or the Banks may reasonably request, including, without limitation, listings identifying the outstanding balance for each Receivable. Each Transferor will at any time and from time to time during regular business hours permit the Agent or the Banks, or their agents or representatives, (i) to examine and make copies of and abstracts from all Records and (ii) to visit the offices and properties of such Transferor for the purpose of examining such Records, and to discuss matters relating to the Receivables or such Transferor's performance hereunder with any of the officers, directors, employees, agents or independent public accountants of such Transferor having knowledge of such matters. (d) Keeping of Records and Books of Account. Each Transferor will --------------------------------------- maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evi- 39 dencing Receivables in the event of the destruction of the originals thereof), and keep and maintain, all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each Receivable). Each Transferor will give the Agent notice of any material change in the administrative and operating procedures referred to in the previous sentence. (e) Performance and Compliance with Receivables and Contracts. Each --------------------------------------------------------- Transferor will at its expense timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables. (f) Credit and Collection Policies. Each Transferor will comply in ------------------------------ all material respects with its Credit and Collection Policy in regard to each Receivable and the related Contract. (g) Accounting Treatment. Each Transferor shall report the -------------------- transactions contemplated by the Agreement on its financial statements as a sale of the Transferred Interest to the Agent on behalf of the Banks. (h) Knowledge. Promptly upon any executive officer of a Transferor --------- obtaining knowledge of any condition or event which constitutes a Termination Event or Potential Termination Event or becoming aware that the Agent or any Bank has given any notice or taken any other action with respect to a claimed Termination Event or Potential Termination Event under this Agreement, such Transferor shall provide to the Agent an officer's certificate specifying the nature and period of existence of any such condition or event, or specifying the notice given and the nature of such claimed Termination Event or Potential Termination Event, together with what action the Transferor has taken, is taking and proposes to take with respect thereto. (i) Written Agreement. For so long as this Agreement is in effect, ----------------- and prior to the delivery by the Transferors of the initial Transfer Notice of each calendar year, the Transferors shall provide the Agent 40 and the Banks with a copy of a Written Agreement in the form of Exhibit A hereto, duly executed by the Transferors and the Obligor and appropriately revised to reflect the Remittance Date of such calendar year. (j) Environmental Laws. Each Transferor shall, and shall cause each ------------------ Subsidiary to, conduct its operations and keep and maintain its property in compliance with all Environmental Laws, expect where the failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 5.2. Negative Covenants of the Transferors. At all times ------------------------------------- during the term of this Agreement, unless the Requisite Banks shall otherwise consent in writing: (a) No Sales, Liens, etc. Except as otherwise provided herein, -------------------- neither Transferor will sell, assign (by operation of Governmental Rule or otherwise) or otherwise dispose of, or create or knowingly suffer to exist any Adverse Claim upon (or the filing of any financing statement) or with respect to, any Receivable, or upon or with respect to any account to which any Collections of any Receivable are sent. (b) Extension or Amendment of Receivables. Neither Transferor will ------------------------------------- extend the term of any Receivable beyond the Remittance Date next succeeding the date such Receivable was created. Neither Transferor will amend or modify any Receivable or amend, modify or waive any term or condition of any Contract related thereto except in accordance with its normal business practices as reflected in the Credit and Collection Policy. (c) No Change in Business or Credit and Collection Policy. Neither ----------------------------------------------------- Transferor will make any change in the character of its business or in the Credit and Collection Policy without the prior written consent of the Agent at the written direction of the Requisite Banks. (d) No Modification of Written Agreement. Neither Transferor will ------------------------------------ amend, supplement, alter or otherwise modify the Written Agreement. 41 SECTION 5.3. Affirmative Covenants of Mattel, Inc. At all times ------------------------------------- during the term of this Agreement, unless the Requisite Banks shall otherwise consent in writing: (a) Financial Information. Mattel, Inc. will maintain a system of --------------------- accounting established and administered in accordance with generally accepted accounting principles, and will furnish to the Agent and the Banks: (i) as soon as practicable and in any event not later than fifty-five (55) days after the end of each of the first three (3) fiscal quarters of Mattel, Inc., consolidated balance sheets of Mattel, Inc. and its Subsidiaries as at the end of such period and for the fiscal year to date and the related consolidated and consolidating statements of income, consolidated statements of stockholders' equity and consolidated statements of cash flow all in reasonable detail and certified by the Chief Financial Officer, Executive Vice President -- Finance or the Treasurer of Mattel, Inc. that the consolidated statements (and to the best of his belief, the consolidating statements) and other materials required by this clause (a)(i) fairly present the financial condition of Mattel, Inc. and its Subsidiaries as at the dates indicated and the results of their operations for the periods indicated, subject to changes resulting from year-end audit and normal year-end adjustments; (ii) as soon as practicable and in any event not later than one hundred (100) days after the end of each fiscal year of Mattel, Inc., consolidated and consolidating balance sheets of Mattel, Inc. and its Subsidiaries as at the end of such year (such consolidating statements shall specifically detail the Transferors) and the related consolidated (and, as to statements of income only, consolidated and consolidating) statements of income, stockholders' equity and cash flow of Mattel, Inc. and its Subsidiaries for such fiscal year, setting forth in each case, in comparative form, the consolidated figures for the previous year, all in reasonable detail and (x) in the case of such consolidated financial statements, accompanied by a report there- 42 on of Price Waterhouse or other independent accountants of recognized national standing selected by Mattel, Inc., which report shall state that such consolidated financial statements present fairly the financial position of Mattel, Inc. and its Subsidiaries as at the dates indicated and the results of their operations and their cash flow for the periods indicated in conformity with generally accepted accounting principles and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards and (y) in the case of such consolidating financial statements, certified by the chief financial or accounting officer of Mattel, Inc.; and (iii) together with each delivery of financial statements of Mattel, Inc. and its Subsidiaries as provided above in clauses (i) and (ii), an officer's certificate stating that the signers thereof have reviewed the terms of this Agreement and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of Mattel, Inc. and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and the signers do not have knowledge of the existence as of the date of such officer's certificate, of any condition or event which constitutes a Termination Event or Potential Termination Event or, if any such condition or event existed or exists, specifying the nature and period of existence thereof. (b) Conduct of Business. Mattel, Inc. will carry on and conduct its ------------------- business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted (provided, however, that Mattel, Inc. may engage in the production and sale of CD-ROM products and coin-operated arcade games related to its existing lines of business) and will do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and will maintain all requisite authority to conduct its business in each 43 jurisdiction in which its business is presently conducted. (c) Compliance with Governmental Rule. Mattel, Inc. will comply with --------------------------------- all Governmental Rules, writs, judgments, injunctions, decrees or awards to which it may become subject. (d) Furnishing of Information and Inspection of Records. Mattel, --------------------------------------------------- Inc. will furnish to the Agent from time to time such information with respect to its obligations as Guarantor and Servicer hereunder as may be reasonably requested by the Agent. Mattel, Inc. will at any time and from time to time during regular business hours permit the Agent, or its agents or representatives, (i) to examine and make copies of and abstracts from all Records and (ii) to visit the offices and properties of Mattel, Inc. for the purpose of examining such Records, and to discuss matters relating to the Receivables or Mattel, Inc.'s performance hereunder as Guarantor and as Servicer, as the case may be, with any of the officers, directors, employees, agents or independent public accounts of Mattel, Inc. having knowledge of such matters. (e) Keeping of Records and Books of Account. Mattel, Inc. will --------------------------------------- maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain, all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each Receivable). Mattel, Inc. will give the Agent notice of any material change in the administrative and operating procedures referred to in the previous sentence. (f) Knowledge. Promptly upon any executive officer of Mattel, Inc. --------- obtaining knowledge of any condition or event which constitutes a Termination Event or Potential Termination Event or becoming aware that the Agent or any Bank has given any notice or taken any other action with respect to a claimed Termination Event or Potential Termination Event under this Agreement, Mattel, Inc. shall provide to the Agent an officer's certificate 44 specifying the nature and period of existence of any such condition or event, or specifying the notice given and the nature of such claimed Termination Event or Potential Termination Event, together with what action Mattel, Inc. has taken, is taking and proposes to take with respect thereto. 45 ARTICLE VI ADMINISTRATION AND COLLECTIONS SECTION 6.1. Appointment of Servicer. The servicing and ----------------------- administering of the Receivables shall be conducted by the Servicer. Until the Agent gives notice to the Transferors of the designation of a new Servicer, Mattel, Inc. is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms hereof; provided that, -------- with respect to any group of Receivables, Mattel, Inc. may, at any time, upon prior notice to the Agent, designate any Affiliate of Mattel, Inc. as subservicer hereunder, provided that such Affiliate shall not become the -------- Servicer hereunder and Mattel, Inc. shall remain liable for the performance of the duties and obligations of the Servicer in accordance with the terms hereof; provided further that Mattel, Inc. hereby designates Fisher-Price, Inc. as - -------- ------- subservicer with respect to Receivables transferred by it hereunder. On and after the occurrence of a Servicer Default, the Agent, on behalf of the Banks, may designate as Servicer any Person (including the Agent) to succeed Mattel, Inc. or any successor Servicer, on the condition in each case that any such Person so designated shall agree to perform the duties and obligations of the Servicer pursuant to the terms hereof. SECTION 6.2. Duties of Servicer and Agent. (a) The Servicer shall ---------------------------- take or cause to be taken all such action as may be necessary or advisable to facilitate the collection of each Receivable from time to time, all in accordance with applicable Governmental Rules, with reasonable care and diligence, and in accordance with the Credit and Collection Policy. Each of the Transferors, the Agent and the Banks hereby appoints as its agent the Servicer, from time to time designated pursuant to Section 6.1, to enforce its respective rights and interests in and under the Receivables and the Contracts. Neither the Transferors nor the Servicer may extend the maturity of any Receivable beyond the Remittance Date next succeeding the date of creation of such Receivable. Each Transferor shall deliver to the Servicer, and the Servicer shall hold in trust for such Transferor and the Agent in accordance with their respective interests, all Records which evidence or relate to any Receivables relating to such Transferor. Notwithstanding 46 anything to the contrary contained herein, the Agent shall have the absolute and unlimited right to direct the Servicer to commence or settle any legal action to enforce collection of any Receivable. In the event that the Obligor defaults in the performance of the Written Agreement and the Servicer fails to take action with respect to the Obligor as directed by the Agent pursuant to the preceding sentence, notwithstanding anything to the contrary contained herein, the Agent shall have the absolute and unlimited right to take any and all steps in the related Transferor's name and on behalf of such Transferor necessary or desirable, in the determination of the Requisite Banks, to collect all amounts due under any and all Receivables including, without limitation, endorsing such Transferor's name on checks and other instruments representing Collections and enforcing such Receivables and the Written Agreement. (b) The Agent shall, as soon as practicable following receipt thereof, turn over to the applicable Transferor any collections of any indebtedness of the Obligor which is not a Receivable. (c) On and after the occurrence of a Servicer Default, the Agent shall have the right to require the Servicer to cause a firm of independent public accountants (who may also render other services to the Servicer or the Transferors) to furnish a report to the Agent to the effect that they have (i) compared the information contained in the Transfer Notices and the Weekly Reports with the information contained in the Records and the Servicer's records and computer systems for such period, and that, on the basis of such examination and comparison, such firm is of the opinion that the information contained in such Transfer Notices and Weekly Reports reconciles with the information contained in the Receivables and the Servicer's records and computer system and that the servicing of the Receivables has been conducted in compliance with this Agreement, (ii) confirmed the Eligible Receivables balance as set forth on such Transfer Notices and Weekly Reports, and (iii) confirmed that the Receivables treated by the Agent as Eligible Receivables in fact satisfied the requirements of the definition thereof contained herein, except, in each case for (a) such exceptions as such firm shall believe to be immaterial (which exceptions need not be 47 enumerated) and (b) such other exceptions as shall be set forth in such statement. SECTION 6.3. Rights After Designation of New Servicer. At any time ---------------------------------------- following the designation of a Servicer pursuant to Section 6.1: (i) Each Transferor shall, at the Agent's request and at such Transferor's expense, give notice of the Banks' ownership of Receivables to the Obligor and direct that payments be made directly to the Agent or its designee or designate a new Collection Account. (ii) Each Transferor shall, at the Agent's request, (A) assemble all of the Records, and shall make the same available to the Agent at a place selected by the Agent or its designee, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections of Receivables in a manner reasonably acceptable to the Agent and shall, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Agent or its designee. (iii) Each Transferor hereby authorizes the Agent to take any and all reasonable steps in such Transferor's name and on behalf of such Transferor necessary or desirable, in the determination of the Agent, to collect all amounts due under any and all Receivables including, without limitation, endorsing such Transferor's name on checks and other instruments representing Collections and enforcing such Receivables and the Written Agreement. SECTION 6.4. Responsibilities of the Transferors. Anything herein to ----------------------------------- the contrary notwithstanding, each Transferor shall (i) perform all of its obligations under the Contracts related to its Receivables to the same extent as if interests in such Receivables had not been sold hereunder and the exercise by the Agent of its rights hereunder shall not relieve such Transferor from such obligations and (ii) pay when due any taxes, including without limitation, any sales taxes payable in connection with its Receivables and their creation and satisfaction. Neither the Agent nor the Banks shall have 48 any obligation or liability with respect to any Receivable or related Contracts, nor shall they be obligated to perform any of the obligations of the related Transferor thereunder. 49 ARTICLE VII SERVICER DEFAULT AND TERMINATION EVENTS SECTION 7.1. Servicer Default. The occurrence of any one or more of ---------------- the following events shall constitute a default by the Servicer hereunder (each, a "Servicer Default"): ---------------- (a) (i) the Servicer shall fail to perform or observe any term, covenant or agreement hereunder (other than as referred to in this Section 7.1) and such failure shall remain unremedied for ten (10) Business Days or (ii) the Servicer shall fail to make any payment or deposit to be made by it hereunder when due; or (b) any representation, warranty, certification or statement made by the Servicer in this Agreement or in any other document delivered pursuant hereto shall prove to have been incorrect in any material respect when made or deemed made; or (c) the Agent, on behalf of the Banks, shall fail to have a valid and perfected first priority ownership or security interest in and to the Receivables; or (d) any Event of Bankruptcy shall occur with respect to the Servicer; or (e) the Servicer shall merge with or into any entity whereby it is not the surviving entity; or (f) [reserved] (g) an event of acceleration with respect to any indebtedness in excess of $20,000,000 under any agreement to which the Servicer or any one of its domestic subsidiaries is a party occurs. SECTION 7.2. Servicer Default Remedies. If a Servicer Default ------------------------- occurs, the Agent shall, upon written request of the Requisite Banks, by notice to the Transferors, terminate the Servicer's rights as Servicer hereunder and appoint a successor Servicer (which successor Servicer may be itself). 50 SECTION 7.3. Termination Events. The occurrence of any one or more ------------------ of the following events shall constitute a Termination Event hereunder: (a) the occurrence of a Servicer Default; or (b) either Transferor or the Guarantor shall fail to make any payment or deposit required to be made by it hereunder when due; or (c) any Event of Bankruptcy shall occur with respect to a Transferor or the Guarantor; or (d) the material breach of any representation or warranty contained herein, or the failure to comply with any material covenant contained herein, by either Transferor or the Guarantor; or (e) the Agent, on behalf of the Banks, shall fail to have a valid and perfected first priority ownership or security interest in and to the Receivables; or (f) either Transferor or the Guarantor shall merge with or into any entity whereby it is not the surviving entity; provided that the merger of any -------- Transferor or the Guarantor with or into the other shall not constitute a Termination Event under this Section 7.3(f); or (g) any material adverse change in the operations of either Transferor or the Guarantor, or any other event which materially affects the ability of such Transferor or the Guarantor to perform its obligations hereunder; or (h) at any time the Percentage Factor exceeds 80% unless the Transferors, within ten (10) days of such occurrence, either (i) deposit into the Collection Account an amount equal to the amount by which the Total Outstanding Investment plus the Discount Reserve exceeds 80% of the aggregate ---- outstanding balance of Eligible Receivables or (ii) otherwise reduce the Percentage Factor to less than or equal to 80%; or 51 (i) the second highest short-term unsecured debt rating assigned to the Obligor by S&P, Moody's or Duff falls below "A-1", "P-1" or "D-1", respectively, or the second highest long-term senior unsecured debt rating assigned to the Obligor by S&P, Moody's or Duff falls below "A-", "A3" or "A-", respectively; or (j) the Obligor fails to remit full payment in respect of the Receivables on any Remittance Date to the Collection Account; or (k) the occurrence of an event of acceleration with respect to any indebtedness in excess of $20,000,000 under any agreement to which the Guarantor or any one of its domestic subsidiaries is a party; or (l) the occurrence of an Event of Default (as defined in the Credit Agreement) under the Credit Agreement. SECTION 7.4. Termination Event Remedies. Upon the occurrence of a -------------------------- Termination Event described in clause (c) or (e) of Section 7.3 above, all outstanding Tranches shall thereafter accrue additional Discount at a rate equal to the difference, for each respective Tranche, between (x) the highest Participation Rate applicable to any Tranche plus 2% and (y) the Participation Rate applicable to such Tranche at the time of such Termination Event, and the commitment of the Banks to purchase undivided interests in the Receivables from the Transferors shall automatically terminate. Upon the occurrence of a Termination Event other than an event described in clause (c) or (e) of Section 7.3, the Agent, upon the written request of the Requisite Banks, shall, by written notice to the Transferors, the Guarantor and the Banks, (a "Notice of --------- Termination") (i) specify that additional Discount with respect for each - ----------- outstanding Tranche shall thereafter accrue as described in this Section 7.4 and/or (ii) terminate the commitment of the Banks to purchase undivided interests in the Receivables from the Transferors. In the event that any Total Outstanding Investment remains unpaid on and after any Remittance Date, such Total Outstanding Investment will thereafter accrue Discount at the Alternate Rate until paid in full. 52 SECTION 7.5. Potential Termination Event Remedies. Upon the ------------------------------------ occurrence of a Potential Termination Event, the Agent, upon the written request of the Requisite Banks shall, by notice to the Transferors, terminate the commitment of the Banks to purchase undivided interests in the Receivables from the Transferors. 53 ARTICLE VIII INDEMNIFICATION; EXPENSES; RELATED MATTERS SECTION 8.1. Indemnities by the Transferors. Without limiting any ------------------------------ other rights which the Agent or the Banks may have hereunder or under applicable Governmental Rule, each Transferor hereby agrees to indemnify the Agent and the Banks and any permitted assigns and their respective officers, directors and employees (collectively, "Indemnified Parties") from and against any and all ------------------- damages, losses, claims, liabilities, costs and expenses, including reasonable attorneys' fees (which such attorneys may be employees of the Agent or any one of the Banks) and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of them ------------------- arising out of or as a result of this Agreement or the ownership, either directly or indirectly, by the Agent or the Banks of a Transferred Interest related to such Transferor, excluding, however, (i) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of an Indemnified Party or (ii) recourse (except as otherwise specifically provided in this Agreement) for uncollectible Receivables related to such Transferor. Without limiting the generality of the foregoing, the applicable Transferor shall indemnify each Indemnified Party for Indemnified Amounts relating to or resulting from: (i) reliance on any material representation or warranty made by such Transferor or Mattel, Inc. (or any officers of such Transferor or Mattel, Inc.) under or in connection with this Agreement, any Transfer Notice, Weekly Report or any other information or report delivered by such Transferor or Mattel, Inc. pursuant hereto, which shall have been false or incorrect in any material respect when made or deemed made; or (ii) the failure by such Transferor to comply with any applicable Governmental Rule with respect to any Receivable or the related Contract, or the nonconformity of any Receivable or the related Contract with any such applicable Governmental Rule; or 54 (iii) the failure to vest and maintain vested in the Agent, on behalf of the Banks, an undivided percentage ownership interest, to the extent of a Transferred Interest related to Receivables originated by such Transferor, in the Receivables included in such Transferred Interest, free and clear of any Adverse Claim; or (iv) the failure to file by such Transferor, or any delay in filing by such Transferor, any required financing statements, continuation statements, or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable Governmental Rules with respect to any Receivable included in a Transferred Interest related to Receivables originated by such Transferor; or (v) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable included in a Transferred Interest related to Receivables originated by such Transferor (including, without limitation, a defense based on such Receivable or the related Contract not being legal, valid and binding obligation of the Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of merchandise related to such Receivable or the furnishing or failure to furnish such merchandise; or (vi) any failure of Mattel, Inc., as Servicer or otherwise, to perform its duties or obligations in accordance with the provisions of Article VI; or (vii) any products liability claim or personal injury or property damage suit or other similar or related claim or action of whatever sort arising out of or in connection with merchandise or services which are the subject of any Receivable. SECTION 8.2. Indemnity for Taxes, Reserves and Expenses. (a) If ------------------------------------------ after the date hereof, the adoption of any Governmental Rule or bank regulatory guideline or any amendment or change in the interpretation of any existing or future Governmental Rule or bank regulatory guideline 55 by any Governmental Person charged with the administration, interpretation or application thereof, or the compliance with any directive of any Governmental Person (in the case of any bank regulatory guideline, whether or not having the force of Governmental Rule): (i) shall subject any Indemnified Party to any tax, duty or other charge with respect to this Agreement, any Transferred Interest, the Receivables or payments of amounts due hereunder, or shall change the basis of taxation of payments to any Indemnified Party of amounts payable in respect of this Agreement, any Transferred Interest, the Receivables or payments of amounts due hereunder or otherwise in respect of this Agreement, any Transferred Interest or the Receivables (except for changes in the rate of general corporate, franchise, net income or other income tax imposed on such Indemnified Party by the jurisdiction in which such Indemnified Party's principal executive office or any funding office is located); or (ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System) against assets of, deposits with or for the account of, or credit extended by, any Indemnified Party or shall impose on any Indemnified Party or on the United States market for certificates of deposit or the Eurodollar interbank market any other condition affecting this Agreement, any Transferred Interest, the Receivables or payments of amounts due hereunder or otherwise in respect of this Agreement, any Transferred Interest or the Receivables; or (iii) imposes upon any Indemnified Party any other expense (including, without limitation, reasonable attorneys' fees and expenses, and expenses of litigation or preparation therefor in contesting any of the foregoing) with respect to this Agreement, any Transferred Interest, the Receivables or payments of amounts due hereunder or otherwise in respect of this Agreement, the Transferred Interests or the Receivables, and the result of any of the foregoing is to increase the cost to such Indemni- 56 fied Party with respect to this Agreement, any Transferred Interest, the Receivables, the obligations hereunder, or the funding of any purchases hereunder, by an amount deemed by such Indemnified Party to be material, then, within ten (10) days after demand by the Agent, the applicable Transferor shall pay to such Indemnified Party such additional amount or amounts as will compensate such Indemnified Party for such increased cost. (b) If any Indemnified Party shall have determined that after the date hereof, the adoption of any applicable Governmental Rule or bank regulatory guideline regarding capital adequacy, or any change therein, or any change in the interpretation thereof by any Governmental Person, or any directive regarding capital adequacy (in the case of any bank regulatory guideline, whether or not having the force of Governmental Rule) of any such Governmental Person, has or would have the effect of reducing the rate of return on capital of such Indemnified Party (or its parent) as a consequence of such Indemnified Party's obligations hereunder or with respect hereto to a level below that which such Indemnified Party (or its parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Indemnified Party to be material, then from time to time, within ten (10) days after demand by such Indemnified Party, the applicable Transferor shall pay to such Indemnified Party such additional amount or amounts as will compensate such Indemnified Party (or its parent) for such reduction. (c) Each Bank will promptly notify the Agent, and the Agent will promptly notify the applicable Transferor of any event of which such Bank has knowledge, occurring after the date hereof, which will entitle an Indemnified Party to compensation pursuant to this Section. Any notice by the Agent, acting on behalf of a Bank, claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attributing methods. 57 SECTION 8.3. Other Costs, Expenses and Related Matters. Each ----------------------------------------- Transferor agrees, upon receipt of a written invoice, to pay or cause to be paid, and to save the Agent harmless against liability for the payment of, all reasonable out-of-pocket expenses (including, without limitation, attorneys', accountant's and other third parties' fees and expenses, any filing fees and expenses incurred by officers or employees of the Agent) incurred by or on behalf of the Agent (i) in connection with the negotiation, execution, delivery and preparation of this Agreement and any documents or instruments delivered pursuant hereto and the transactions contemplated hereby (including, without limitation, the perfection or protection of the Transferred Interest related to such Transferor) and (ii) from time to time (a) relating to any amendments, waivers or consents under this Agreement, (b) arising in connection with the Agent's or their agents' enforcement or preservation of rights (including, without limitation, the perfection and protection of the Transferred Interest related to Receivables originated by such Transferor under this Agreement), or (c) arising in connection with any audit, dispute, disagreement, litigation or preparation for litigation involving this Agreement (all of such amounts, collectively, "Transaction Costs"). ----------------- SECTION 8.4. Reconveyance Under Certain Circumstances. Each ---------------------------------------- Transferor agrees to accept the reconveyance from the Agent, on behalf of the Banks, of the Transferred Interest related to Receivables originated by such Transferor if the Agent notifies such Transferor of a material breach of any representation or warranty made or deemed made pursuant to Article III of this Agreement, and such Transferor shall fail to cure such breach within ten (10) days (or, in the case of the representations and warranties in Sections 3.1(a) and 3.1(e), five (5) days) of such notice. The reconveyance price (which shall be an amount equal to the Aggregate Unpaids) shall be paid by such Transferor directly to the Agent for the account of the Banks (and not to the Collection Account) in immediately available funds on such tenth day (or fifth day, if applicable). 58 ARTICLE IX THE AGENT SECTION 9.1. Appointment. Each Bank hereby irrevocably designates ----------- and appoints NationsBank of Texas, N.A., as the Agent of the Banks under this Agreement, and each of the Banks hereby irrevocably authorizes NationsBank of Texas, N.A., as the Agent for such Bank, to take such action on its behalf under the provisions of this Agreement and to exercise such powers as are expressly delegated to the Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. The Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any of the Banks, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Agent. SECTION 9.2. Attorneys-in-fact. The Agent may execute any of its ----------------- duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the gross negligence or willful misconduct of any agents or attorneys-in-fact selected by it with reasonable care. SECTION 9.3. Limitation on Liability. Neither the Agent nor any of ----------------------- its officers, directors, employees, agents or attorneys-in-fact shall be liable to the Banks for any action lawfully taken or omitted to be taken by it or them under or in connection with this Agreement except for its or their own gross negligence or willful misconduct. Neither the Agent nor any of its affiliates shall be responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by the Transferors, the Servicer or the Guarantor, or any officer or partner thereof contained in this Agreement, or in any certificate, report, statement or other document referred to or provided for in or received by the Agent under or in connection with this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, or for any failure of the Transferors, the Servicer or the Guarantor to perform their obligations thereunder. The Agent shall not be under any obligation to any of the Banks to 59 ascertain or to inquire as to the observance or performance of any of the terms, covenants or conditions of this Agreement on the part of the Transferors, the Servicer or the Guarantor or to inspect the properties, books or records of the Transferors, the Servicer or the Guarantor. SECTION 9.4. Reliance. The Agent shall be entitled to rely, and -------- shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy or telex message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Transferors, the Servicer or the Guarantor), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first receive advice or concurrence of the Requisite Banks as provided in this Agreement (or from all of the Banks if so specified herein) or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Requisite Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks. SECTION 9.5. Notice of Termination Event. The Agent shall not be --------------------------- deemed to have knowledge or notice of the occurrence of any Termination Event or Servicer Default hereunder unless the Agent has received written notice from a Bank, either Transferor, the Servicer or the Guarantor, describing such Termination Event or Servicer Default. In the event that the Agent receives such a notice, the Agent shall promptly give notice thereof to the Banks and Bank of America National Trust and Savings Association as agent under the Credit Agreement. Except as otherwise provided herein, the Agent shall take such action to enforce this Agreement as shall be directed by the Requisite Banks. In the event that any remedy is exercised pursuant to Section 7.4 of this 60 Agreement, each Bank and the Agent shall pursue remedies designated by the Requisite Banks to the same extent as though such demand was caused by the action of all Banks, and each Bank agrees to act as expeditiously as possible so as to maximize recovery. Each Bank agrees that no Bank shall have any right individually to take action with respect to the Transferred Interest, it being understood and agreed that such rights and remedies with respect to any portion of the Transferred Interest may be exercised by the Agent as directed by the Requisite Banks for the ratable benefit of the Banks. SECTION 9.6. No Representations. Each Bank expressly acknowledges ------------------ that neither the Agent nor any of its affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of the Transferor or the Guarantor, shall be deemed to constitute any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the financial condition, creditworthiness, affairs, status and nature of the Transferors and the Guarantor and made its own decision to enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and to make such investigation as its deems necessary to inform itself as to the status and affairs, financial or otherwise, of the Transferors and the Guarantor. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of the Transferors and the Guarantor which may come into the possession of the Agent or any of its affiliates. SECTION 9.7. Indemnification. The Banks agree to indemnify the Agent --------------- in its capacity as such (to the extent not reimbursed by the Transferors or the Guarantor and without limiting any obligations of the Transferors 61 or the Guarantor so to do, ratably according to their respective Percentages as then in effect) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time (including without limitation at any time following the payment of the Aggregate Unpaids) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement or any other document contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no -------- Bank shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the termination of this Agreement. SECTION 9.8. Bank. The Agent and its affiliates may make loans to, ---- accept deposits from and generally engage in any kind of business with the Obligor, the Transferors and the Guarantor as though it were not the Agent hereunder. With respect to its loans made or renewed by it and any note issued to it, the Agent shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Agent, and the terms "Bank" and "Banks" shall, unless the context otherwise indicates, include the Agent in its individual capacity. SECTION 9.9. Resignation. If the Agent shall resign as Agent under ----------- this Agreement, then the Requisite Banks may appoint a successor Agent for the Banks, which shall be a commercial bank organized under the Governmental Rules of the United States or any state thereof, having a combined surplus and capital of not less than $500,000,000, whereupon such successor Agent shall succeed to the rights, powers and duties of the former Agent and the obligations of the former Agent shall be terminated and cancelled, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement; provided, however, that the former Agent's resignation shall not -------- ------- become effective until such successor Agent has been appointed and has succeeded of record to all right, title and interest of 62 the former Agent in the Receivables; provided, further however, if the Requisite -------- ------- ------- Banks cannot agree as to a successor Agent within ninety (90) days after such resignation, the Agent shall appoint a successor Agent and the parties hereto agree to execute whatever documents are necessary to effect such action under this Agreement or any other document executed pursuant to this Agreement; provided, however, in such event all provisions of this Agreement shall remain - -------- ------- in full force and effect. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. SECTION 9.10. Sharing of Payments, etc. The Banks agree that (i) ------------------------- with respect to all amounts received by each of them with respect to the Aggregate Unpaids, whether in the nature of a return of any investment or discount, or amounts due to a particular Bank in respect of any commitment fees or facility fees hereunder, equitable adjustment will be made so that, in effect, all such amounts will be shared among the Banks in proportion to the portion of the Aggregate Unpaids due each Bank, whether received by voluntary payment, or by the exercise of the right of set-off or banker's lien or secured claims under the Bankruptcy Code as now or hereafter amended, altered, modified or replaced, by counterclaim or cross-action or by the enforcement of this Agreement; (ii) if any of them shall exercise any right of counterclaim, set- off, banker's lien or otherwise or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receives payment or reduction of any amounts due to such Bank hereunder, which is greater than the proportion received by any other Bank in respect of the amounts due hereunder to such other Bank, then the Bank receiving such proportionately greater payment shall (x) notify each other Bank and the Agent of such receipt and (y) purchase participations (which it shall be deemed to have done simultaneously upon the receipt of such payment) in the amounts due hereunder to the other Banks so that all such recoveries of amounts due hereunder shall be shared by the Banks in proportion to the amounts due them hereunder; provided that the foregoing -------- provisions shall not apply to any such amount received by a foreign branch, subsidiary or affiliate of any Bank which is applied by that Bank to the payment of any indebtedness of a foreign subsidiary. If all or any portion of 63 such payment is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. SECTION 9.11. Independent Agreements. The provisions contained in ---------------------- Sections 9.1 through 9.8 and 9.10 of this Article IX constitute independent obligations and agreements of the Agent and the Banks, and the Transferors and the Guarantor shall not be deemed parties thereto nor bound thereby. The Transferors and the Guarantor do acknowledge the rights of the Banks and the Agent under Section 9.8. 64 ARTICLE X GUARANTY SECTION 10.1. Guaranty of Obligations. For valuable consideration, ----------------------- the Guarantor unconditionally, absolutely and irrevocably guarantees and promises to pay to the Agent, or order, on demand, in lawful money of the United States and in immediately available funds, any and all present or future payment and performance obligations of the Transferors hereunder owing to the Agent and the Banks. The phrase "payment and performance obligations of the Transferors" (hereinafter collectively referred to as the "Obligations") is used herein in its most comprehensive sense and includes any and all advances, debts, obligations, and liabilities of the Transferors, now, or hereafter made, incurred, or created, whether voluntarily or involuntarily, and however arising, including, without limitation, any and all attorneys' fees, costs, premiums, charges, or interest owed by the Transferors to the Agent and/or the Banks, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, whether the Transferors may be liable individually or jointly with others, whether recovery upon such indebtedness may be or hereafter becomes barred by any statute of limitations or whether such indebtedness may be or hereafter become otherwise unenforceable. SECTION 10.2. Guaranty Continuing. This guaranty is a continuing ------------------- guaranty which relates to any Obligations, including those which arise under successive transactions which shall either cause the Transferors to incur new Obligations, continue the Obligations from time to time, or renew them after they have been satisfied. The Guarantor agrees that nothing shall discharge or satisfy its obligations created hereunder except for the full payment of the Obligations with interest as applicable. Any payment by the Guarantor shall not reduce its maximum obligation hereunder. SECTION 10.3. Guarantor Directly Liable. The Guarantor agrees that ------------------------- it is directly and primarily liable to the Agent for the benefit of the Banks, that its obligations hereunder are independent of the Obligations of the Transferors, or of any other guarantor, and that a separate action or actions may be brought and prosecuted against the Guarantor, whether action is brought against 65 a Transferor or whether a Transferor is joined in any such action or actions. The Guarantor agrees that any releases which may be given by the Agent and the Banks to a Transferor or any other guarantor shall not release it from this Guaranty. SECTION 10.4. No Impairment. The obligations of the Guarantor under ------------- this Guaranty shall not be affected, modified or impaired upon the occurrence from time to time of any of the following, whether or not with notice to or the consent of the Guarantor: (a) the compromise, settlement, change, modification, amendment (whether material or otherwise) or partial termination of any or all of the Obligations; (b) the failure to give notice to the Guarantor of the occurrence of any Termination Event or Servicer Default under the terms and provisions of this Agreement; (c) the waiver of the payment, performance or observance of any of the Obligations; (d) the taking or omitting to take any actions referred to in this Agreement or of any action under this guaranty; (e) any failure, omission or delay on the part of the Agent and/or the Banks to enforce, assert or exercise any right, power or remedy conferred in this Agreement or any other indulgence or similar act on the part of the Agent and/or the Banks in good faith and in compliance with applicable law; (f) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all of the assets, marshalling of assets, receivership, insolvency, bankruptcy, assignment for the benefit of creditors or readjustment of, or other similar proceedings which affect the Guarantor, any other guarantor of any of the Obligations of either Transferor or any of the assets of any of them, or any allegation of invalidity or contest of the validity of this Guaranty in any such proceeding; or 66 (g) to the extent permitted by law, the release or discharge of any other guarantors of the Obligations from the performance or observance of any obligation, covenant or agreement contained in any guaranties of the Obligations by operation of law. To the extent any of the foregoing refers to any actions which the Agent or the Banks may take, the Guarantor hereby agrees that the Agent and/or the Banks may take such actions in such manner, upon such terms, and at such times as the Agent or the Banks, in their discretion, deem advisable, without, in any way or respect, impairing, affecting, reducing or releasing the Guarantor from its undertakings hereunder and the Guarantor hereby consents to each and all of the foregoing actions, events and occurrences. SECTION 10.5. Waiver. The Guarantor hereby waives: ------ (a) any and all rights to require the Agent or the Banks to prosecute or seek to enforce any remedies against the Transferors or any other party liable to the Agent or the Banks on account of the Obligations; (b) any right to assert against the Agent or the Banks any defense (legal or equitable), set-off, counterclaim, or claim which the Guarantor may now or at any time hereafter have against the Transferors or any other party liable to the Agent or the Banks in any way or manner under this Agreement; (c) all defenses, counterclaims and off-sets of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity or enforceability of this Agreement and the security interest granted pursuant thereto; (d) any defense arising by reason of any claim or defense based upon an election of remedies by the Agent or the Banks including, without limitation, any direction to proceed by judicial or nonjudicial foreclosure or by deed in lieu thereof, which, in any manner impairs, affects, reduces, releases, destroys or extinguishes the Guarantor's subrogation rights, rights to proceed against the Transferors for reimbursement, or any 67 other rights of the Guarantor to proceed against the Transferors, against any other guarantor, or against any other security, with the Guarantor understanding that the exercise by the Agent and/or the Banks of certain rights and remedies may offset or eliminate the Guarantor's right of subrogation against the Transferors, and that the Guarantor may therefore incur partially or totally non-reimbursable liability hereunder; (e) all presentments, demands for performance, notices of non- performance, protests, notices of protest, notices of dishonor, notices of default, notice of acceptance of this Guaranty, and notices of the existence, creation, or incurring of new or additional indebtedness, and all other notices or formalities to which the Guarantor may be entitled; and (f) without limiting the generality of the foregoing, the Guarantor hereby expressly waives any and all benefits of (i) California Civil Code Sections 2809, 2810, 2819, 2825, 2839, 2845 through 2850, 2899 and 3433 and (ii) California Code of Civil Procedure Sections 580(a), 580(b), 580(d) and 726. SECTION 10.6. Subrogation. The Guarantor hereby agrees that unless ----------- and until this Agreement has terminated and all Obligations have been paid to the Agent and the Banks in full, it shall not have any rights of subrogation, reimbursement or contribution as against the Transferors or any other guarantor, if any, and shall not seek to assert or enforce the same. Guarantor understands that the exercise by Agent of certain rights and remedies contained in this Agreement may affect or eliminate Guarantor's right of subrogation if any, against the Transferors and that Guarantor may therefore incur a partially or totally non-reimbursable liability hereunder; nevertheless, Guarantor hereby authorizes and empowers the Agent and the Banks to exercise, in their sole discretion, any right and remedy, or any combination thereof, which may then be available, since it is the intent and purpose of Guarantor that the obligations hereunder shall be absolute, independent and unconditional under any and all circumstances. SECTION 10.7. Information. The Guarantor is presently informed of ----------- the financial condition of the Transferors and of all other circumstances which a dili- 68 gent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. The Guarantor hereby covenants that it will continue to keep itself informed of the financial condition of the Transferors and of all other circumstances which bear upon the risk of nonpayment. The Guarantor hereby waives its right, if any, to require the Agent or the Banks to disclose to it any information which the Agent or any Bank may now or hereafter acquire concerning such condition or circumstances including, but not limited to, the release of any other guarantor. SECTION 10.8. Evidence of Obligations. The Agent and each Bank's ----------------------- books and records evidencing the Obligations shall be admissible in any action or proceeding and shall be binding upon the Guarantor for the purpose of establishing the terms set forth therein and shall constitute prima facie proof thereof. 69 ARTICLE XI MISCELLANEOUS SECTION 11.1. Term of Agreement. This Agreement shall terminate ----------------- following the later of (i) the Termination Date or (ii) the date on which the Total Outstanding Investment has been reduced to zero, all accrued Discount has been paid in full and all other Aggregate Unpaids have been paid in full; provided, however, that (i) the rights and remedies of the Banks with respect to - -------- ------- any representation and warranty made or deemed to be made by either Transferor pursuant to this Agreement, (ii) the indemnification and payment provisions of Article VIII and (iii) the agreement set forth in Section 9.10, shall be continuing and shall survive any termination of this Agreement. SECTION 11.2. Waivers; Amendments. No failure or delay on the part ------------------- of the Agent or the Banks in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. No notice to or demand on the Transferors, the Servicer or the Guarantor in any case shall entitle the Transferors, the Servicer or the Guarantor, as the case may be, to any other or further notice or demand in similar or other circumstances. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by Governmental Rule. Any provision of this Agreement may be amended if, but only if, such amendment is in writing and is signed by the Transferors, the Servicer, the Guarantor, the Agent and the Requisite Banks; provided, however, that no such waiver, amendment or consent -------- ------- shall, unless in writing and signed by all of the Banks, the Transferors, the Servicer, the Guarantor and acknowledged by the Agent, (a) increase or extend any Bank's Bank Commitment or subject any Bank to additional obligations; (b) postpone or delay any date fixed for any payment of fees or any other amounts due to the Banks (or any of them) hereunder; (c) reduce any fees or other amounts payable to the Banks (or any Bank) hereunder; (d) change any Bank's Percentage; (e) amend this Section 11.2 or Section 9.10; or (f) release the Guarantor from any obligation undertaken by it pursuant to this Agreement. 70 SECTION 11.3. Notices. Except as provided below, all communications ------- and notices provided for hereunder shall be in writing and shall be sent by telecopy and shall be given to the other party at its telecopy number set forth on the signature page hereof or at such other telecopy number as such party may hereafter specify for the purposes of notice to such party. Each such notice or other communication shall be effective when such telecopy is transmitted to the telecopy number specified below and when confirmation of delivery is received: If to the Transferors: Mattel Sales Corp. 333 Continental Boulevard El Segundo, California 90245 Attention: William Stavro Telephone: (310) 252-3202 Telecopy: (310) 252-3215 Fisher-Price, Inc. c/o Mattel Sales Corp. 333 Continental Boulevard El Segundo, California 90245 Attention: William Stavro Telephone: (310) 252-3202 Telecopy: (310) 252-3215 If to the Guarantor or Servicer: Mattel, Inc. 333 Continental Boulevard El Segundo, California 90245 Attention: William Stavro Telephone: (310) 252-3202 Telecopy: (310) 252-3215 If to the Agent: NationsBank of Texas, N.A. 901 Main Street Dallas, Texas 75202 Attention: Ms. Tammy Grier Telephone: (214) 508-0987 Telecopy: (214) 508-2515 71 If to the Banks, to their addresses set forth on the signature pages hereto. SECTION 11.4. Governing Law; Integration. (a) This Agreement shall -------------------------- be governed by and construed in accordance with the laws of the State of California, without regard to the conflicts of Governmental Rules provisions thereof. This Agreement contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire Agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings. (b) Any legal action or proceeding with respect to this Agreement may be brought in the courts of the State of California or of the United States for the Central District of California, and by execution and delivery of this Agreement, each of the Guarantor, the Transferors and the Banks consents, for itself and in respect of its property, to the non-exclusive jurisdiction of those courts. Each of the Guarantor, the Transferors and the Banks irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of this Agreement or any document related hereto. The Guarantor, the Transferors and the Banks each waive personal service of any summons, complaint or other process, which may be made by any other means permitted by California law. SECTION 11.5. Severability; Counterparts. This Agreement may be -------------------------- executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, 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 shall not invalidate or render unenforceable such provision in any other jurisdiction. 72 SECTION 11.6. Successors and Assigns. This Agreement shall be ---------------------- binding on the parties hereto and their respective successors; provided, -------- however, that subject to Section 11.9, no party to this Agreement may assign any - ------- of its rights or delegate any of its duties hereunder. SECTION 11.7. Confidentiality. Each Bank agrees to take normal and --------------- reasonable precautions and exercise due care to maintain the confidentiality of all information provided to it by the Guarantor or any Subsidiary of the Guarantor, or by the Agent on such Guarantor's or Subsidiary's behalf, in connection with this Agreement or any documents related hereto, and neither it nor any of its Affiliates shall use any such information for any purpose or in any manner other than pursuant to the terms contemplated by this Agreement; except to the extent such information (i) was or becomes generally available to the public other than as a result of a disclosure by the Bank, or (ii) was or becomes available on a non-confidential basis from a source other than the Guarantor, provided that such source is not bound by a confidentiality agreement with the Guarantor known to the Bank; provided, however, that any Bank may -------- ------- disclose such information (A) at the request or pursuant to any requirement of any Governmental Person to which the Bank is subject or in connection with an examination of such Bank by any such authority; (B) pursuant to subpoena or other court process and when required to do so in accordance with the provisions of any applicable Governmental Rule; provided, that a Bank shall disclose only the information required by such request and shall notify the Guarantor in advance of providing such information so that the Guarantor may seek an appropriate protective order, and (C) to such Bank's independent auditors and other professional advisors provided such Persons are obligated to keep such information confidential. Notwithstanding the foregoing, the Guarantor authorizes each Bank to disclose to any Participant or Assignee and to any prospective Participant or Assignee, such financial and other information in such Bank's possession concerning the Guarantor or its Subsidiaries which has been delivered to the Agent or the Banks pursuant to this Agreement or which has been delivered to the Agent or the Banks by the Guarantor in connection with the Banks' credit evaluation of the Guarantor prior to entering into this Agreement; provided that, unless otherwise -------- agreed by 73 the Guarantor, such Participant or Assignee agrees in writing to such Bank to keep such information confidential to the same extent required of the Banks hereunder. SECTION 11.8. Characterization of the Transactions Contemplated by ---------------------------------------------------- the Agreement. It is the intention of the parties that the transactions - ------------- contemplated hereby constitute the sale of the Transferred Interest, conveying good title thereto free and clear of any Adverse Claims to the Agent, on behalf of the Banks, and that the Transferred Interest not be part of either Transferor's estate in the event of an insolvency. If, notwithstanding the foregoing, the transactions contemplated hereby should be deemed a financing, the parties intend that each Transferor shall be deemed to have granted to the Agent on behalf of the Banks, and each Transferor hereby grants to the Agent, on behalf of the Banks, a first priority perfected security interest in all of such Transferor's right, title and interest in, to and under the Receivables, and that this Agreement shall constitute a security agreement under applicable law. SECTION 11.9. Assignments; Participations. (a) Any Bank may, with --------------------------- the advance written consent of the Transferors at all times other than during the existence of a Termination Event and the Agent, which consent of the Transferors shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees (provided that no consent of the Transferors or the Agent shall be required in connection with any assignment and delegation by a Bank to an Eligible Assignee that is an Affiliate of such Bank) (each an "Assignee") all, or any ratable part of all, of the Transferred Interest and the other rights and obligations of such Bank hereunder, in a minimum amount of $10,000,000 and such Bank shall concurrently therewith assign a ratable portion in the Credit Agreement; provided, however, that the Transferors and the Agent may continue to deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Transferors and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee shall have delivered to the Transferors and the Agent an executed assignment together with any note or notes subject to such assignment and (iii) the 74 assignor Bank or Assignee has paid to the Agent a processing fee in the amount of $2,500. (b) From and after the date that the Agent notifies the assignor Bank that it has received (and provided its consent with respect to) an executed assignment and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such assignment, shall have the rights and obligations of a Bank under this Agreement, and (ii) the assignor Bank shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such assignment, relinquish its rights and be released from its obligations hereunder. (c) Upon advance written notice to the Transferors, each Bank shall have the right at any time to sell or otherwise transfer participations in all or any part of their pro rata portion of the Transferred Interest, to one or --- ---- more Affiliates of such Bank or to one or more commercial banks, merchant banks, savings and loan associations or any other institution (a "Participant"); provided that such Bank shall concurrently with any sale of a participation - -------- herein sell a ratable participation under the Credit Agreement and thereafter cause any such participation herein to remain ratable with such participation under the Credit Agreement. The Transferor hereby acknowledges and agrees that any such disposition will give rise to a direct obligation of the Transferor to the Participant and the Participant shall be entitled to the benefit of Section 9.10 as if it were a "Bank"; provided further, that in the case of a -------- ------- participation, (i) the Bank's obligations under this Agreement shall remain unchanged, (ii) the Bank shall remain solely responsible for the performance of such obligations, (iii) the Transferors and the Agent shall continue to deal solely and directly with the Bank in connection with the Bank's rights and obligations under this Agreement, and (iv) no Bank shall transfer or grant any participating interest under which the Participant shall have rights to approve any amendment to, or any consent or waiver with respect to this Agreement except to the extent such amendment, consent or waiver would require unanimous consent. In the case of any such participa-tion, the Participant shall not have any rights under this Agreement, or any 75 documents related hereto, and all amounts payable by the Transferors hereunder shall be determined as if such Bank had not sold such participation, except that if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of a Termination Event, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement. 76 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written. MATTEL SALES CORP., as Transferor By: /s/ William Stavro _______________________ Name: William Stavro Title: Vice President and Treasurer FISHER-PRICE, INC., as Transferor By: /s/ William Stavro _______________________ Name: William Stavro Title: Vice President and Treasurer MATTEL, INC., as Guarantor and Servicer By: /s/ William Stavro _______________________ Name: William Stavro Title: Vice President and Treasurer NATIONSBANK OF TEXAS, N.A., as Agent By: /s/ J. Blake Seaton _______________________ Name: J. Blake Seaton Title: Vice President 77 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 11.538461538 28,846,153.85 NATIONSBANK OF TEXAS, N.A. By: /s/ J. Blake Seaton ________________________ Name: J. Blake Seaton Title: Vice President Notice Address: 444 S. Flower Street, Suite 1500 Los Angeles, California 90071 Attn: J. Blake Seaton 78 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 15.384615387 38,461,538.44 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ Robert W. Troutman __________________________ Name: Robert W. Troutman Title: Managing Director Notice Address: 555 Flower Street, 11th Floor Los Angeles, California 90071 Attn: Robert W. Troutman 79 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 9.230769231 23,076,023.08 PNC BANK, NATIONAL ASSOCIATION By: /s/ Ted A. Dunn __________________________ Name: Ted A. Dunn Title: Assistant Vice President Notice Address: 55 South Lake Avenue, Suite 650 Pasadena, California 91101 Attn: David Corcoran 80 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 11.538461538 28,846,153.85 CHEMICAL BANK By: /s/ David J. Corcoran ___________________________ Name: David J. Corcoran Title: Vice President Notice Address: Corporate Banking Group 270 Park Avenue, 10th Floor New York, New York 10017 Attn: David Corcoran 81 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 9.230769231 23,076,923.08 THE FIRST NATIONAL BANK OF BOSTON By: /s/ Patti A. Stoil __________________________ Name: Patti A. Stoil Title: Director Notice Address: 100 Federal Street, 6th Floor Boston, Massachusetts 02110 Attn: Debra Zurka 82 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 9.230769231 23,076,023.08 TORONTO-DOMINION (TEXAS), INC. By: /s/ Diane Bailey __________________________ Name: Diane Bailey Title: Vice President Notice Address: 909 Fannin Houston, Texas 77010 Attn: Lisa Allison 83 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 3.076923077 7,692,307.69 CITICORP USA, INC. By: /s/ Barbara A. Cohen ________________________ Name: Barbara A. Cohen Title: Vice President Notice Addresses: c/o Citicorp North America, Inc. 725 South Figueroa Street 5th Floor Los Angeles, California 90017 Attn: Deborah Ironson c/o Citibank, N.A. One Court Square, 7th Floor Long Island City, New York 11120 Attn: Mark Wrigley 84 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 4.615384615 11,538,461.54 ABN AMRO BANK N.V. By: /s/ Matthew S. Thomson __________________________ Name: Matthew S. Thomson Title: Group Vice President By: /s/ Patrick A. Russo __________________________ Name: Patrick A. Russo Title: Assistant Vice President Notice Address: Los Angeles International Branch 300 South Grand Avenue, Suite 1115 Los Angeles, California 90071 Attn: Matthew S. Thomson 85 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 4.615384615 11,538,461.54 DRESDNER BANK AG Los Angeles Agency By: /s/ Jon M. Bland __________________________ Name: Jon M. Bland Title: Senior Vice President By: /s/ Dennis G. Blank __________________________ Name: Dennis G. Blank Title: Vice President Notice Address: Los Angeles Agency 725 South Figueroa Street, Suite 3950 Los Angeles, California 90017 Attn: Dennis Blank 86 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 4.615384615 11,538,461.54 MANUFACTURERS & TRADERS TRUST CO. By: /s/ Geoffrey R. Fenn __________________________ Name: Geoffrey R. Fenn Title: Vice President Notice Address: 1 Fountain Plaza Buffalo, New York 14203 Attn: Geoffrey R. Fenn 87 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 4.615384615 11,538,461.54 ISTITUTO BANCARIO SAN PAOLO DI TORINO SPA By: /s/ Donald W. Brown __________________________ Name: Donald W. Brown Title: Branch Manager By: /s/ Glen Binder __________________________ Name: Glen Binder Title: Vice President Notice Address: 444 South Flower Street Suite 4550 Los Angeles, California 90071 Attn: Glen Binder 88 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 4.615384615 11,538,461.54 THE BANK OF CALIFORNIA, N.A. By: /s/ Thomas H. Teagart __________________________ Name: Thomas H. Teagart Title: Vice President Notice Address: 550 South Hope Street Fifth Floor Los Angeles, California 90071 Attn: Thomas Tegart 89 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 4.615384615 11,538,642.54 BANQUE NATIONALE DE PARIS By: /s/ Clive Bettles __________________________ Name: Clive Bettles Title: Vice President By: /s/ Deborah Gohh __________________________ Name: Deborah Gohh Title: Vice President Notice Address: 725 South Figueroa Street Suite 2090 Los Angeles, California 90017 Attn: Clive Bettles 90 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 3.076923077 7,692,307.69 MARINE MIDLAND BANK By: /s/ William M. Holland _________________________ Name: William M. Holland Title: Vice President Notice Address: 140 Broadway, 4th Floor New York, New York 10005 Attn: William M. Holland 91 EXHIBIT A [Toys "R" Us, Inc. Letterhead] [Date] Mr. William Stavro Vice President and Treasurer Mattel, Inc. 333 Continental Boulevard El Segundo, CA 90245-5012 Dear Bill: With reference to the Second Amended and Restated Transfer and Administration Agreement, dated as of March 10, 1995, among Mattel Sales Corp., Fisher-Price, Inc., NationsBank of Texas, N.A., and a syndicate of banks, it is our understanding that Mattel and Fisher-Price would like to sell from time to time undivided interests in their domestic accounts receivable from TOYS "R" US and that to do so, it is necessary that TOYS "R" US commit for the benefit of the banks to certain payment terms which will apply regardless of any contrary language in any purchase order or other document. TOYS "R" US hereby consents to such sales of accounts receivable and agrees, unconditionally, to pay by wire transfer of immediately available funds on or before [current Remittance Date] to the account designated by you an amount equal to not less than eighty percent (80%) of the total amount of all invoices, supported by bills of lading, issued by Mattel and Fisher-Price to TOYS "R" US in the United States that are outstanding at such date. Modification or revocation of the terms of this letter shall be effective only if in writing and signed by you or the Chief Financial Officer of Mattel and by one of the following duly authorized officers of TOYS "R" US: Louis Lipschitz, Jon Friedman and Jon Kimmins. [It is our intent that the remaining twenty percent (20%) of invoiced amounts will be settled in accordance with normal settlement procedures between Mattel, Fisher-Price and TOYS "R" US.] TOYS "R" US agrees that any invoiced amounts remaining after settlement in accordance with A-1 normal settlement procedures will be paid by TOYS "R" US to the account referenced in the prior paragraph. Very truly yours, Jon Kimmins Vice President and Treasurer Agreed to and accepted by: Mattel, Inc. By: ____________________________ William Stavro Vice President and Treasurer A-2 EXHIBIT B FORM OF WEEKLY SERVICER'S CERTIFICATE For the calendar week ended __________, 19__ The undersigned, a duly authorized representative of Mattel, Inc. as Servicer, pursuant to the Second Amended and Restated Transfer and Administration Agreement, dated as of March 10, 1995 (as amended and modified from time to time, the "TAA"), among Mattel Sales Corp. and Fisher-Price, Inc., as Transferors, Mattel, Inc., as Guarantor and Servicer, NationsBank of Texas, N.A., as Agent, and the Banks, does hereby certify as follows: 1. Eligible Receivables as of the last day of the previous week......................................... $______ 2. plus Eligible Receivables generated during ---- the week..................................................... $______ 3. less Close-Out Collections received during ---- the week..................................................... $______ 4. less Deemed Collections during the week...................... $______ ---- 5. Eligible Receivables as of the last day of the week.................................................. $______ 6. Total Outstanding Investment as of the last day of the week......................................... $______ 7. Discount Reserve as of the last day of the week..................................................... $______ 8. Percentage Factor as of the last day of the week ([line 6 + line 7] / line 5)........................ ______% 9. Average Facility Limit during the week....................... $______ 10. [Eligible Receivables as of the last day of the week are equal to at least 125% of the sum of the Total Outstanding Investment and the Discount Reserve] or [The Transferor is depositing to the credit of the Collection Account the outstanding balance of certain Receivables as B-1 required by Section 2.6(b) of the TAA, and such amount is equal to $____]. 11. As of the date hereof, no Termination Event or Potential Termination Event has occurred under the TAA. 12. As of the date hereof, no default in the performance of the obligations of the Servicer under the TAA has occurred or is continuing except as follows: [if applicable, insert "none"] 13. As of the date hereof, no lien has been placed on the Receivables other than pursuant to the TAA. Capitalized terms used herein have their respective meanings as set forth in the TAA. IN WITNESS WHEREOF, the undersigned has duly executed and delivered this certificate this ___ day of _______, 19__. MATTEL, INC. as Servicer By: ----------------------- Name: Title: B-2 EXHIBIT C FORM OF TRANSFER NOTICE MATTEL SALES CORP. and FISHER-PRICE, INC. (together, the "Transferors") hereby conveys, transfers and assigns to the Agent, on behalf of the Banks, pursuant to the terms and conditions of the Second Amended and Restated Transfer and Administration Agreement, dated as of March 10, 1995 (the "TAA"), among Mattel Sales Corp., Fisher-Price, Inc., Mattel, Inc., as Guarantor and Servicer, NationsBank of Texas, N.A., as Agent, and the Banks, an undivided percentage ownership interest in the Receivables, together with Collections with respect thereto. The terms of such Transfer shall be as follows: Transfer Date: __________ Transfer Price: $_________ (line 5 + line 6) Receivables related to Mattel Sales Corp.......................... $______ Receivables related to Fisher-Price, Inc.......................... $______ THE TRANSFEROR DOES HEREBY CERTIFY AS FOLLOWS: 1. Eligible Receivables as of the last day of the prior week..... $______ 2. Total Outstanding Investment as of the last day of the prior week.................................................... $______ 3. Discount Reserve as of the last day of the prior week......... $______ 4. Funds on deposit in the Collection Account as of the date hereof........................................................ $______ 5. Close-Out Collections to be released from the Collection Account on the Transfer Date to fund a portion of the Transfer Price................................................ $______ 6. Tranche amount (Transfer Price less line 5)................... $______ 7. Tranche Period related to this Tranche........................ __ days C-1 8. Estimated LIBOR related to this Tranche....................... ______% 9. Estimated Participation Rate related to this Tranche (line 8 + applicable spread).................................. ______% 10. Discount related to this Tranche (line 6 x line 9 x line 7 / 360).............................. $_______ 11. Total Outstanding Investment after giving effect to the requested Tranche amount (line 2 + line 6).................... $_______ 12. Discount Reserve after giving effect to the requested Transfer (line 3 + line 10).................................. $_______ 13. The Percentage Factor after giving effect to the requested Tranche Amount and Discount will be (should not exceed 80%) ([line 11 + line 12] / line 1)............................... ______% This Transfer Notice is irrevocable and may be accepted by the Agent, on behalf of the Banks, at any time prior to 1:00 PM (Dallas, Texas time) on the third Business Day immediately preceding the Transfer Date specified above. Upon such acceptance of the terms of this Transfer Notice, the Transferors shall have conveyed, transferred and assigned an undivided percentage ownership interest in the Receivables, together with Collections with respect thereto to the Agent on behalf of the Banks. The Transferors and the Banks intend that this transfer of Receivables constitutes a sale of accounts under Section 9-102(1)(b) of the Uniform Commercial Code as in effect in all applicable jurisdictions ("UCC"). In the event that the conveyance hereunder is characterized as a financing, this notice shall be a security agreement under the UCC and the Transferors hereby grant a security interest (as defined in the UCC) in the Receivables related to each of them and the proceeds thereof to secure the payment to the Banks of the Aggregate Unpaids. The Banks' rights with respect to such undivided ownership interest shall be as set forth in the TAA. Capitalized terms used herein have their respective meanings as set forth in the TAA. C-2 IN WITNESS WHEREOF, the undersigned has executed this Transfer Notice on this ___ day of __________, 199_. MATTEL SALES CORP., as Transferor By: ______________________ Name: Title: FISHER-PRICE, INC., as Transferor By: ______________________ Name: Title: Agreed and accepted: NATIONSBANK OF TEXAS, N.A., as Agent By: ___________________________ Name: Title: C-3 EXHIBIT D [Reserved] D-1 EXHIBIT E [List of Actions, Suits and Proceedings against the Transferors] Mattel Sales Corp. - ----------------- NONE. Fisher-Price, Inc. - ----------------- NONE. E-1 EXHIBIT F Location of Records ------------------- Mattel Sales Corp. - ----------------- Corporate Headquarters 333 Continental Boulevard El Segundo, CA 90245 Mattel Computer Center 2424 West Desert Cove Phoenix, AZ 85029 Fisher-Price, Inc. - ----------------- 636 Girard Avenue East Aurora, New York 14052 F-1 EXHIBIT G List of Tradenames ------------------ Mattel Sales Corp. - ----------------- Mattel Sales Corp. Mattel Sales Mattel Fisher-Price, Inc. - ----------------- Fisher-Price FPI, Inc. G-1 EXHIBIT H [List of Actions, Suits and Proceedings against the Guarantor] None. H-1 EXHIBIT I [Letterhead of Counsel to the Transferors] March 10, 1995 NationsBank of Texas, N.A., as Agent [Address) [Bank] [Bank] Re: Second Amended and Restated Transfer and Administration Agreement, dated as of March 10, 1995, among Mattel Sales Corp., Fisher-Price, Inc., Mattel, Inc., NationsBank of Texas, N.A. and the banks named therein --------------------------------------------- Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.1(g) of the Second Amended and Restated Transfer and Administration Agreement dated as of March 10, 1995 (the "Agreement") among Mattel Sales Corp., a California corporation, and Fisher-Price, Inc., a Delaware corporation (together, the "Transferors"), Mattel, Inc., a Delaware corporation, as guarantor (the "Guarantor") and NationsBank of Texas, N.A., as agent (the "Agent") on behalf of the banks named therein (collectively, the "Banks"). Terms defined in this Agreement and not otherwise defined herein are used in this opinion with the meanings so defined. I am Senior Vice President -- General Counsel for Mattel, Inc. and have acted as counsel to the Transferors in connection with the preparation of the Agreement and the transactions and other documents contemplated thereby. I have examined, on the date hereof, the Agreement and all exhibits thereto (including the form of Transfer Notice I-1 attached thereto as Exhibit C), the form of initial Transfer Notice, [to be] dated ___________ 1995, relating to the initial transfers of Receivables (each, an "Initial Transfer Notice"), certificates of public officials and of officers of the Transferors and certified copies of the Transferors' certificate of incorporation, by-laws, the Boards of Directors' resolutions authorizing the Transferors' participation in the transactions contemplated by the Agreement, copies of each of the above having been delivered to you, copies of the financing statements on Form UCC-l filed in the filing offices of the Secretary of State of the State of California [and _________] [this is intended to refer to the local filing office, if applicable] (together, the "Filing Offices") executed by each Transferor, as debtor, in favor of the Agent on behalf of the Banks, substantially in the form attached hereto as Exhibit A (the "Financing Statements") [and copies of the financing statements on Form UCC-3 filed in the Filing Offices executed by ______ and ______, substantially in the form attached hereto as Exhibit B (the "Releases")]. I have also examined the closing documents delivered pursuant to the Agreement and copies of all such documents and records, and have made such investigations of law, as I have deemed necessary and relevant as a basis for our opinion. With respect to the accuracy of material factual matters which were not independently established, I have relied on certificates and statements of officers of the Transferors. Certain of the opinions rendered herein are qualified by the discussion following the numbered paragraphs of this opinion. On the basis of the foregoing, and in reliance thereon, I am of the opinion that: 1. Each Transferor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, has the power and authority to own its properties and to carry on its business as now being conducted, and had at all relevant times, and now has, all necessary power, authority, and legal right to acquire and own the Receivables, and is duly qualified, in good standing and is authorized to do business in each foreign jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization, except for qualifications and authorizations the lack of which, singly or in the aggregate, has not had and will not have a materially adverse effect upon the business properties of either Transferor or its ability to perform its obligations under the Agreement. I-2 2. Each Transferor has the corporate power and has taken all necessary corporate action to execute, deliver and perform the Agreement, the Initial Transfer Notice and each other Transfer Notice delivered pursuant to the Agreement, each in accordance with its respective terms, and to consummate the transactions contemplated thereby. The Agreement and the Initial Transfer Notice have been duly executed and delivered by the Transferors and constitute, and each Transfer Notice subsequently delivered by either Transferor pursuant to the Agreement, when executed and delivered by the related Transferor, will constitute the legal, valid and binding obligations of such Transferor, enforceable against such Transferor in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. 3. The execution, delivery and performance in accordance with their terms by the Transferors of the Agreement, the Initial Transfer Notice and each other Transfer Notice delivered pursuant to the Agreement, and the consummation of the transactions contemplated thereby, do not and will not (i) require (a) any governmental approval or (b) any consent or approval of any stockholder of the Transferors that has not been obtained, (ii) violate or conflict with, result in a breach of, or constitute a default under (a) the certificates of incorporation or the by-laws of the Transferors, (b) any other agreement to which either Transferor is a party or by which such Transferor or any of its properties may be bound, or (c) any applicable law, or any order, rule, or regulation applicable to the Transferors of any court or of any federal or state regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over the Transferors or any of their respective properties, or (iii) result or require in the creation or imposition of any lien upon any of the assets, property or revenue of the Transferors other than as contemplated by the Agreement. 4. [Except as set forth on Exhibit E to the Agreement,] [and] [T][t]o the best of my knowledge, there are not, in any court or before any arbitrator of any kind or before or by any governmental or non-governmental body, any actions, suits, proceedings or investigations, pending or threatened, (i) against the Transferors or the business or any property of the Transferors except actions, suits or proceedings that, if adversely determined, would not, singly or in the aggregate, have a materially adverse effect on the Transferors, or on the ability of either Transferor to perform its respective obligations under the I-3 Agreement, the Initial Transfer Notice and each other Transfer Notice delivered pursuant to the Agreement or (ii) relating to the Agreement, the Initial Transfer Notice or each other Transfer Notice delivered pursuant to the Agreement. 5. The Agreement and each Initial Transfer Notice create a valid "security interest" (as such term is defined in Section 1-201(37) of the Uniform Commercial Code as in effect in the State of California (the "California UCC"), under Article 9 of the California UCC in favor of the Agent, on behalf of the Banks, in the Receivables in existence and thereafter created and the proceeds thereof, subject to the provisions of Section 9-306 of the California UCC. The Financing Statements have been filed in the filing office located in the State of California and _____, which are the only offices in which filings are required under the California UCC to perfect the Agent's security interest in such Receivables and the proceeds thereof, and accordingly the Agent's security interest in the Receivables in existence and thereafter created and the proceeds thereof will, on the date[s] of the Initial Transfer Notice, be perfected under Article 9 of the California UCC. All filing fees and all taxes required to be paid as a condition to or upon the filing of the Financing Statements in the State of California and ______ have been paid in full. As of the date hereof, there were no (i) UCC financing statements naming either Transferor as debtor, seller or assignor and covering any Receivables or any interest therein or (ii) notices of the filing of any federal tax lien (filed pursuant to Section 6323 of the Internal Revenue Code) or lien of the Pension Benefit Guaranty Corporation (filed pursuant to Section 4068 of the Employment Retirement Insurance Act) covering any Receivable or any interest therein. The filing of the Financing Statements in the Filing Offices will create a first priority security interest in each Receivable and the proceeds thereof. Such perfection and priority will continue, provided that appropriate continuation statements are timely filed where and when required under the California UCC. 6. Neither Transferor is an "investment company" or a company "controlled" by an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. With respect to my opinion in paragraph 5 (i) I call your attention to the necessity of filing continuation statements from time to time under the applicable provisions of the California UCC and to the fact that additional filings under the California UCC may be required, among other things, upon the change of location of the debtor as provided in Section 9-l03(3)(e) of I-4 the California UCC or the change of the name of the debtor as provided in Section 9-402(7) thereof; and (ii) I call your attention to the fact that under certain circumstances described in Section 9-306(4) of the California UCC, the right of a secured party to enforce a perfected security interest in the cash proceeds of collateral may be limited. To the extent that the obligations of the Transferors may be dependent upon such matters, I assume for purposes of this opinion that the parties to the Agreement (other than the Transferors and the Guarantor) are duly incorporated, validly existing and in good standing under the laws of their respective jurisdictions of incorporation; that the Agreement has been duly authorized, executed and delivered by the parties to the Agreement (other than the Transferors and the Guarantor), and constitutes their legally valid and binding obligations, enforceable against them in accordance with their respective terms; and that the parties to the Agreement (other than the Transferors and the Guarantor) have the requisite corporate or other organizational power and authority to perform their respective obligations under the Agreement. I am not expressing any opinion as to the effect of compliance of the parties to the Agreement (other than the Transferor and the Guarantor) with any state or federal laws or regulations applicable to the transactions. I am admitted to the bar of the State of California, and I express no opinion herein other than with respect to the laws of the State of California and the Federal laws of the United States of America. This opinion is rendered only to you and is solely for your benefit in connection with the above transactions. This opinion may not be relied upon by you for any other purpose, or relied upon by any other person, firm or corporation for any purpose without my prior written consent; except that this opinion may be furnished or quoted to your legal counsel and independent auditors in connection with the above transactions, to regulatory authorities having jurisdiction over you, and as otherwise compelled by legal process. Very truly yours, Robert J. Normile I-5 EXHIBIT J [Letterhead of Counsel to the Guarantor/Servicer] March 10, 1995 NationsBank of Texas, N.A., as Agent [Address] [Bank] [Bank] Re: Second Amended and Restated Transfer and Administration Agreement, dated as of March 10, 1995, among Mattel Sales Corp., Fisher-Price, Inc., Mattel, Inc., NationsBank of Texas, N.A. and ------------------ the banks named therein -------------------------- Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 4.1(m) of the Second Amended and Restated Transfer and Administration Agreement dated as of March 10, 1995 (the "Agreement") among Mattel Sales Corp., a California corporation, and Fisher-Price, Inc., a Delaware corporation (together, the "Transferors"), Mattel, Inc., a Delaware corporation, as guarantor (the "Guarantor") and NationsBank of Texas, N.A., as agent (the "Agent") on behalf of the banks named therein (collectively, the "Banks"). Terms defined in this Agreement and not otherwise defined herein are used in this opinion with the meanings so defined. I am Senior Vice President -- General Counsel for the Guarantor and have acted as counsel to the Guarantor in connection with the preparation of the Agreement and the transactions and other documents contemplated thereby. J-1 I have examined, on the date hereof, the Agreement and all exhibits thereto, certificates of public officials and of officers of the Guarantor and certified copies of the Guarantor's certificate of incorporation, by-laws, the Board of Directors' resolutions authorizing the Guarantor's participation in the transactions contemplated by the Agreement, copies of each of the above having been delivered to you. I have also examined the closing documents delivered pursuant to the Agreement and copies of all such documents and records, and have made such investigations of law, as we have deemed necessary and relevant as a basis for our opinion. With respect to the accuracy of material factual matters which were not independently established, I have relied on certificates and statements of officers of the Guarantor. Certain of the opinions rendered herein are qualified by the discussion following the numbered paragraphs of this opinion. On the basis of the foregoing, and in reliance thereon, I am of the opinion that: 1. The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has the power and authority to own its properties and to carry on its business as now being conducted, and had at all relevant times, and now has, all necessary power, authority, and legal right to perform its obligations under the Agreement, and is duly qualified, in good standing and is authorized to do business in each foreign jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization, except for qualifications and authorizations the lack of which, singly or in the aggregate, has not had and will not have a materially adverse effect upon the business properties of the Guarantor or its ability to perform its obligations under the Agreement. 2. The Guarantor has the corporate power and has taken all necessary corporate action to execute, deliver and perform the Agreement in accordance with its terms, and to consummate the transactions contemplated thereby. The Agreement has been duly executed and delivered by the Guarantor and constitutes the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. J-2 3. The execution, delivery and performance in accordance with its terms by the Guarantor of the Agreement, and the consummation of the transactions contemplated thereby, do not and will not (i) require (a) any governmental approval or (b) any consent or approval of any stockholder of the Guarantor that has not been obtained, (ii) violate or conflict with, result in a breach of, or constitute a default under (a) the certificate of incorporation or the by-laws of the Guarantor, (b) any other agreement to which the Guarantor is a party or by which the Guarantor or any of its properties may be bound, or (c) any applicable law, or any order, rule, or regulation applicable to the Guarantor of any court or of any federal or state regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over the Guarantor or any of its properties, or (iii) result or require in the creation or imposition of any lien upon any of the assets, property or revenue of the Guarantor other than as contemplated by the Agreement. 4. [Except as set forth on Exhibit H to the Agreement,] [and][T][t]o the best of my knowledge, there are not, in any court or before any arbitrator of any kind or before or by any governmental or non-governmental body, any actions, suits, proceedings or investigations, pending or threatened, (i) against the Guarantor or the business or any property of the Guarantor except actions, suits or proceedings that, if adversely determined, would not, singly or in the aggregate, have a materially adverse effect on the Guarantor, or on the ability of the Guarantor to perform its obligations under the Agreement or (ii) relating to the Agreement. 5. The Guarantor is not an "investment company" or a company "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. To the extent that the obligations of the Guarantor may be dependent upon such matters, I assume for purposes of this opinion that the parties to the Agreement (other than the Guarantor and the Transferors) are duly incorporated, validly existing and in good standing under the laws of their respective jurisdictions of incorporation; that the Agreement has been duly authorized, executed and delivered by the parties to the Agreement (other than the Guarantor and the Transferors), and constitutes their legally valid and binding obligations, enforceable against them in accordance with their respective terms; and that the parties to the Agreement (other than the Guarantor and the Transferors) have the requisite corporate or other organizational power and authority to perform their respective obligations under J-3 the Agreement. I am not expressing any opinion as to the effect of compliance of the parties to the Agreement (other than the Guarantor and the Transferors) with any state or federal laws or regulations applicable to the transactions. I am admitted to the bar of the State of California, and I express no opinion herein other than with respect to the corporate laws of the State of Delaware and the Federal laws of the United States of America. This opinion is rendered only to you and is solely for your benefit in connection with the above transactions. This opinion may not be relied upon by you for any other purpose, or relied upon by any other person, firm or corporation for any purpose without my prior written consent; except that this opinion may be furnished or quoted to your legal counsel and independent auditors in connection with the above transactions, to regulatory authorities having jurisdiction over you, and as otherwise compelled by legal process. Very truly yours, Robert J. Normile J-4 EX-99.7 8 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN EXHIBIT 99.7 MATTEL, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN April 1, 1994 TABLE OF CONTENTS ----------------- Page ARTICLE I - NAME AND PLAN PURPOSES . . . . . . . . . . . . . 1 1.1 Name and Plan Purposes. . . . . . . . . . . 1 ARTICLE II - DEFINITIONS. . . . . . . . . . . . . . . . . . . 2 2.1 Actuarial Equivalent or Actuarial Equivalence . . . . . . . . . . . . . . . . 2 2.2 Administrative Committee. . . . . . . . . . 2 2.3 Beneficiary . . . . . . . . . . . . . . . . 2 2.4 Board of Directors. . . . . . . . . . . . . 2 2.5 Cause . . . . . . . . . . . . . . . . . . . 2 2.6 Change of Control . . . . . . . . . . . . . 2 2.7 Code. . . . . . . . . . . . . . . . . . . . 3 2.8 Company . . . . . . . . . . . . . . . . . . 3 2.9 Compensation. . . . . . . . . . . . . . . . 3 2.10 Disability. . . . . . . . . . . . . . . . . 4 2.11 Effective Date. . . . . . . . . . . . . . . 4 2.12 Employee. . . . . . . . . . . . . . . . . . 4 2.13 Employer. . . . . . . . . . . . . . . . . . 4 2.14 ERISA . . . . . . . . . . . . . . . . . . . 4 2.15 Final Average Compensation. . . . . . . . . 5 2.16 Month of Service. . . . . . . . . . . . . . 5 2.17 Participant . . . . . . . . . . . . . . . . 5 2.18 Plan. . . . . . . . . . . . . . . . . . . . 5 2.19 Plan Year . . . . . . . . . . . . . . . . . 5 2.20 Related Company . . . . . . . . . . . . . . 5 2.21 Service . . . . . . . . . . . . . . . . . . 5 2.22 Termination . . . . . . . . . . . . . . . . 6 ARTICLE III - ELIGIBILITY AND PARTICIPATION. . . . . . . . . . 7 3.1 Eligibility to Participate. . . . . . . . . 7 3.2 Effect of Participating in Plan . . . . . . 7 ARTICLE IV - FUNDING OF BENEFITS. . . . . . . . . . . . . . . 8 4.1 Funded Status of Benefits . . . . . . . . . 8 4.2 Rights of Participants. . . . . . . . . . . 8 4.3 No Participant Contributions. . . . . . . . 8 ARTICLE V - BENEFITS . . . . . . . . . . . . . . . . . . . . 9 5.1 Benefit Accrual . . . . . . . . . . . . . . 9 5.2 Form of Distributions . . . . . . . . . . . 9 5.3 Vesting . . . . . . . . . . . . . . . . . . 9 5.4 Change of Control . . . . . . . . . . . . 10 TABLE OF CONTENTS ----------------- Page ARTICLE VI - PAYMENT OF BENEFITS. . . . . . . . . . . . . . 12 6.1 In-Service Withdrawals Prohibited . . . . 12 6.2 Loans . . . . . . . . . . . . . . . . . . 12 6.3 Distributions Following Termination . . . 12 6.4 Death Benefits. . . . . . . . . . . . . . 12 6.5 Disability. . . . . . . . . . . . . . . . 13 6.6 Designation of Beneficiary. . . . . . . . 13 6.7 Mailing of Payments . . . . . . . . . . . 13 6.8 Payees under Legal Disability . . . . . . 14 6.9 Withholding For Taxes . . . . . . . . . . 14 ARTICLE VII - OPERATION AND ADMINISTRATION OF THE PLAN . . . 15 7.1 Administrative Committee Powers . . . . . 15 7.2 Composition of Administrative Committee . 15 7.3 Administrative Committee Procedure. . . . 16 7.4 Reporting and Disclosure. . . . . . . . . 16 7.5 Notices and Communications. . . . . . . . 16 7.6 Indemnification . . . . . . . . . . . . . 17 ARTICLE VIII - APPLICATION FOR BENEFITS . . . . . . . . . . . 18 8.1 Application for Benefits. . . . . . . . . 18 8.2 Content of Denial . . . . . . . . . . . . 18 8.3 Appeals . . . . . . . . . . . . . . . . . 19 8.4 Exhaustion of Remedies. . . . . . . . . . 19 ARTICLE IX MISCELLANEOUS MATTERS. . . . . . . . . . . . . 20 9.1 Amendment or Termination. . . . . . . . . 20 9.2 Effect of Merger of Company . . . . . . . 20 9.3 No Enlargement of Employee Rights . . . . 20 9.4 Restrictions Against Alienation . . . . . 21 9.5 Employment Agreements . . . . . . . . . . 21 9.6 Interpretation. . . . . . . . . . . . . . 21 ARTICLE I NAME AND PLAN PURPOSES ---------------------- 1.1 Name and Plan Purposes. (a) The plan established and adopted hereunder shall be known as the Mattel, Inc. Supplemental Executive Retirement Plan, dated as of April 1, 1994 (the "Plan"). This Plan does not amend or supersede the Supplemental Executive Retirement Plan dated October 31, 1991 (the "1991 SERP"). However, as set forth in Section 3.2 hereof, the participants of the 1991 SERP who retire after April 1, 1994 shall have the option of receiving benefits under this Plan or the 1991 SERP. (b) The Plan was established for the purpose of providing pension benefits to a select group of executives or highly compensated employees. The benefits under the Plan shall be funded solely out of the general assets of the Company. Accordingly, it is intended that the Plan be exempt from the requirements of Parts II, III, and IV of Title I of ERISA pursuant to Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. It is expressly intended that ERISA preempt the application of state laws to this Plan, to the maximum extent permitted by Section 514 of ERISA. 1 ARTICLE II DEFINITIONS ----------- Whenever the following terms are used in this Plan, they shall have the meaning set forth in this Article II. 2.1 Actuarial Equivalent or Actuarial Equivalence. For purposes of determining the actuarial equivalence of two different forms of benefit payments, or for purposes of calculating the amount of a lump sum, interest equal to the yield on the thirty (30) year treasury bond with a maturity date closest to the calendar date on which the calculation is made shall be used. 2.2 Administrative Committee. "Administrative Committee" shall mean the Mattel, Inc. Supplemental Executive Retirement Plan Administrative Committee described in Article VII. 2.3 Beneficiary. "Beneficiary" shall mean the person or persons designated under Section 6.6 to receive the benefit payable in the event of the death of a Participant. 2.4 Board of Directors. "Board of Directors" shall mean the Board of Directors of the Company or any committee of the Board of Directors empowered to act on behalf of the Board of Directors. 2.5 Cause. "Cause" shall mean (a) an act or acts of dishonesty on the Participant's part that are intended to result in his substantial personal enrichment at the expense of the Employer (b) repeated violations by the Participant of his duties which are demonstrably willful and deliberate on the Participant's part and which resulted in material injury to the Employer, (c) conduct of a criminal nature which may or which is likely to have an adverse impact on the Employer's reputation or standing in the community or on its relationship with its customers or those who purchase or use its products, or (d) fraudulent conduct in connection with the business or affairs of the Employer, regardless of whether said conduct is designed to defraud the Employer or others. 2.6 Change of Control. A "Change of Control" shall be deemed to have occurred on: (a) the "Distribution Date" as that term is defined in Section 1(h) of the Company's Rights Agreement dated February 7, 1992, as it may be amended from time to time. The definition of "Distribution Date" contained in the Company's Rights Agreement shall continue to apply, notwithstanding the expiration or termination of that agreement; or (b) the date (during any period of two (2) consecutive calendar years) that individuals who at the beginning of such period constituted the Company's Board of Directors, cease for any reason (other than natural causes, including death, 2 disability or retirement) to constitute a majority thereof; or (c) The date the stockholders of the Company approve: (i) a plan of complete liquidation of the Company; (ii) an agreement for the sale or disposition of all or substantially all the assets of the Company; or (iii) a merger, consolidation, or reorganization of the Company with or involving any other corporation, other than a merger, consolidation, or reorganization that would result in the voting stock of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting stock of the surviving entity) at least eighty percent (80%) of the combined voting power of the stock which is outstanding immediately after such merger, consolidation or reorganization, unless the Board of Directors of the Company determines by a majority vote prior to the merger, consolidation or reorganization that no Change in Control will occur as a result of such transaction. 2.7 Code. "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time. Where the context requires, a reference to a particular Code section shall refer to a successor Code provision. 2.8 Company. "Company" shall mean Mattel, Inc., and its successors and assigns. 2.9 Compensation. "Compensation" means a Participant's Base Salary and Short Term Bonus, as determined on the basis of the calendar year in accordance with the following rules. (a) "Base Salary" shall mean the full salary and wages (including overtime, shift differential and holiday, vacation and sick pay) paid by an Employer by reason of services performed by an Employee, subject however to the following special rules: (i) Except as specified in (ii) below, fringe benefits and contributions by the Employer to and benefits under any employee benefit shall not be taken into account in determining Compensation; (ii) Amounts deducted pursuant to authorization by an Employee or pursuant to requirements of law shall be included in "Compensation"; (iii) Amounts deferred by the Employee pursuant to non-qualified deferred compensation plans, regardless of 3 whether such amounts are includable in the Employee's gross income for his current taxable year, shall be taken into account in determining Compensation; provided, however, that amounts deferred more than three (3) years prior to Termination shall not be taken into account in determining Compensation; and (iv) Amounts included in any Employee's gross income with respect to fringe benefits, including but not limited to car allowances, life insurance and financial planning, shall not be taken into account in determining Compensation. (b) "Short Term Bonus" means the amount paid during the year under the Mattel, Inc. Management Incentive Plan. 2.10 Disability. (a) A Participant will be deemed to be "Disabled" if there is a determination to that effect under the group long- term disability plan of the Company or a Related Company and the Participant is also approved for permanent disability benefits by the Social Security Administration. (b) However, in no event will a participant be considered to be disabled for purposes of this Plan if the participant's incapacity is a result of-- (i) Intentionally self-inflicted injuries (while sane or insane), (ii) Alcohol or drug abuse, or (iii) A criminal act for which he is convicted or to which he pleads guilty or nolo contendere. 2.11 Effective Date. The effective date of the Plan is April 1, 1994. 2.12 Employee. "Employee" shall mean each person qualifying as a common law employee of the Company or of a Related Company and scheduled to work full-time (at least forty (40) hours per week). 2.13 Employer. "Employer" means the Company and any Related Company which, with the approval of the Board of Directors, elects to become a party to the Plan by adopting, by a resolution of its board of directors, the Plan for the benefit of its employees, or any one or more of them, as the context indicates. 2.14 ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. 4 2.15 Final Average Compensation. "Final Average Compensation" means the average of the Participant's Compensation during the final three (3) years of employment with the Employer, or the entire period during which he was a Participant in the Plan, if less. 2.16 Month of Service. "Month of Service" shall mean a one (1) month period of Service (stated in terms of calendar months with credit given for the actual time served during partial months and not counted as full months). 2.17 Participant. "Participant" shall mean any Employee who has been enrolled in this Plan in accordance with the provisions of Article III below. 2.18 Plan. "Plan" shall mean the Mattel, Inc. Supplemental Executive Retirement Plan. 2.19 Plan Year. The "Plan Year" shall mean the calendar year. 2.20 Related Company. An entity shall be a "Related Company" if-- (a) Fifty percent (50%) or more of the interests in the entity are owned by the Company; and (b) The entity is so designated by the Board of Directors of the Company. 2.21 Service. "Service" means the period of time (stated in terms of Months of Service) during which the employment relation between the Participant and an Employer has been maintained, and shall include periods of paid absence (not to exceed six (6) months) and unpaid leave of absence (not to exceed six (6) months) granted by the Employer (including leaves approved for military service or for birth or adoption of a child). Participants shall receive Service credit for prior Service for any period between a Termination and rehire of less than twelve (12) months and shall receive Service credit for prior Service for any period prior to a Termination so long as the rehire occurs within sixty (60) months of the date of Termination, provided such period does not exceed the original period of employment. However, periods of service as a consultant, independent contractor or part-time employee (scheduled to work less than forty (40) hours per week) shall not count as Service. An Employee shall, if approved by the Board of Directors, receive credit for service with a Related Company upon becoming a Participant hereunder, with credit measured from the date such Related Company was acquired, and may receive credit for periods of employment with prior employers, but only at the discretion of the Board of Directors and only if the Employee is made a Participant within ninety (90) days of the later of his date of hire or the date of acquisition of the Related Company. 5 2.22 Termination. (a) "Termination" shall mean the termination of an Employee's employment with the Company or a Related Company by reason of the Employee's retirement, death, Disability, resigna- tion, dismissal, or otherwise. (b) Subject to the provisions of Section 2.21, an Employee shall not be considered to have incurred a Termination by means of a leave of absence that is approved by the Company or a Related Company (whichever is applicable) and is for a period of less than two (2) years. 6 ARTICLE III ELIGIBILITY AND PARTICIPATION ----------------------------- 3.1 Eligibility to Participate. (a) The only Employees who are eligible to participate in the Plan are those executives or highly compensated employees of the Company or a Related Company that are designated by the Chief Executive Officer of the Company (or officer serving in a substantially similar capacity if there is no Chief Executive Officer). (b) An employee who becomes a Participant shall remain a Participant hereunder until all benefits under Article 5 have been paid. (c) In the event that it is determined that allowing any individual to continue participating in the Plan could cause the Plan to violate ERISA, the Committee may elect to pay the entire present value of the Participant's vested benefit to him in a lump sum distribution as soon as administratively possible. The amount of the lump sum distribution shall be the Actuarial Equivalent of the Participant's vested benefit. 3.2 Effect of Participating in Plan. A Participant may receive a benefit under this Plan only if he does not also receive a benefit under the Mattel Financial Security Plan or the 1991 SERP. Participants who have earned a benefit under either of such plans shall have the right to make an irrevocable election, at any time prior to Termination, to forfeit any benefit to which they may have become entitled under either or both such plans, and if such an election is made, shall thereupon become entitled instead to the benefit provided by this Plan. 7 ARTICLE IV FUNDING OF BENEFITS ------------------- 4.1 Funded Status of Benefits. The benefits under the Plan shall not be funded, but shall be payable out of the general assets of the Company (or a Related Company) when due. 4.2 Rights of Participants. (a) No Participant shall have a preferred claim on, or a beneficial ownership interest in, any assets of the Company (or a Related Company) prior to the time such assets are paid to him in the form of benefits. (b) All rights created under the Plan shall be unsecured contractual rights of Participants against the Company or a Related Company. However, nothing in this document shall in any way diminish any rights of a Participant to pursue his rights as a general creditor of Company or a Related Company with respect to his benefits under the Plan. 4.3 No Participant Contributions. No Participant contributions to the Plan are permitted. 8 ARTICLE V BENEFITS --------- 5.1 Benefit Accrual. Each employee who becomes a Participant under Section 3.1 and who remains in the employ of the Employer until age 60 and until he becomes vested under Section 5.3 shall be entitled to a monthly benefit beginning at age sixty (60) (or when there is a Termination, if later) and continuing for fifteen (15) years. Such monthly amount, determined as of any Determination Date (as defined below), shall equal one-twelfth (1/12th) of (a) times (b) below, rounded to the nearest dollar, where (a) is twenty-five percent (25%) of the Participant's Final Average Compensation, determined as of the Determination Date, and (b) is the fraction, not in excess of one (1), equal to the number of Months of Service credited to the Participant as of the Determination Date divided by one hundred eighty (180). "Determination Date" shall mean the date of Termination or the date the Participant is no longer a full-time employee (scheduled to work a forty (40) hour work week). 5.2 Form of Distributions. (a) Benefits will be paid in the form of monthly installments over a period of fifteen (15) years; provided, however, that the Administrative Committee may in its sole discretion elect to pay benefits other than monthly so long as they are paid at least annually. (b) A Participant may irrevocably elect, at any time prior to Termination, to receive his benefits in installments over ten (10) years. If the Participant elects that his benefits be paid over ten (10) years, the amount of the monthly installments will be adjusted so that they are the Actuarial Equivalent of monthly installments for fifteen (15) years. (c) Except as may be provided in Sections 3.1(c) and 5.4, Participants shall not be entitled to be paid their benefits in the form of lump sum distributions. Notwithstanding the preceding sentence, if the Actuarial Equivalent of the amount payable to a Participant or Beneficiary is fifty thousand dollars ($50,000) or less, it will automatically be paid in the form of a lump sum distribution. 5.3 Vesting. Each Participant shall fully vest in his benefits under Section 5.1 upon: (a) completing sixty (60) or more Months of Service with the Employer, and (b) attaining age fifty-five (55). A person whose employment with the Employer is terminated for any reason prior to fulfilling both requirements for vesting 9 hereunder shall not receive a benefit. Any Participant who has his employment terminated for Cause shall forfeit any right to a benefit notwithstanding the fact that he may have attained a vested interest in that benefit. Any Participant who, in the opinion of the Administrative Committee and within five (5) years of Termination, competes in any way with the Company or a Related Company, either as an employee of a competitor, or as a consultant or advisor to a competitor, shall not receive any unpaid benefits. A Participant who is reclassified to a management level that is not eligible for participation under this Plan shall forfeit any entitlement to a benefit under this Plan, except that a vested Participant who is so reclassified may be entitled to the benefit described under Section 5.1, based on Months of Service and Compensation to the date of such reclassification, but only upon review and approval by the Administrative Committee. 5.4 Change of Control. (a) All benefits under the Plan shall become vested upon a Change of Control of the Company. The provisions of this Section 5.4(a) shall only apply to those Participants who are employed by the Company or a Related Company on the date of the Change of Control. (b) Except as otherwise provided by resolutions adopted by the Board of Directors prior to the date of a Change of Control, all benefits payable to all Participants, (determined after the application of Section 5.4(a) above), shall become payable no later than thirty (30) days following a Change of Control, in the form of a lump sum distribution. (i) The provisions of this Section 5.4(b) shall apply to all Participants, regardless of whether they-- (A) Are currently receiving benefits under the Plan, (B) Have terminated employment, but not yet commenced receiving benefits, or (C) Are still employed by the Company or a Related Company. (ii) The amount of the lump sum distribution payable to a Participant under this Section 5.4(b) shall be the Actuarial Equivalent of the Participant's vested benefit. This amount shall be reduced by the amount (if any) of the benefit that has already been paid to the Participant. 10 (c) If the Board of Directors elects to delay or suspend payment of benefits following a Change in Control pursuant to Section 5.4(b), and a Participant whose benefits were fully vested upon such Change of Control pursuant to Section 5.4(a) is terminated without Cause within five (5) years following such Change of Control, then all benefits payable to such Participant shall become immediately payable in the form of a lump sum distribution. In calculating such benefit, the Participant shall receive credit for all Months of Service following such Change in Control. A Participant's employment will be considered to have been terminated for Cause within five (5) years following a Change of Control only if there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors. (i) This resolution must be adopted at a meeting of the Board of Directors called and held for such purpose after reasonable notice to the Participant. (ii) There must be an opportunity for the Participant, together with counsel, to be heard before the Board. (iii) The resolution must find that, in the good faith opinion of the Board of Directors, the Participant was terminated for Cause and specifying the particulars thereof in detail. (d) The provisions of Section 5.4(c) above shall not apply in determining whether a Participant has been terminated for Cause in a situation that is not subject to the provisions of this Section 5.4. 11 ARTICLE VI PAYMENT OF BENEFITS ------------------- 6.1 In-Service Withdrawals Prohibited. Participants are not entitled to receive their benefits prior to Termination. 6.2 Loans. Participants may not borrow funds from the Plan. 6.3 Distributions Following Termination. A vested Participant may terminate employment and begin to receive a benefit in the unreduced amount specified in Section 5.1 upon or after attaining age sixty (60). A vested Participant who terminates employment prior to age sixty (60) but after age fifty-five (55) shall receive a benefit commencing the first day of the month following Termination, provided that the amount specified under Section 5.1 shall be reduced by 0.4167% for each month by which the Participant's age at commencement is less than age sixty (60). (See Example A attached hereto and incorporated herein by this reference.) (a) Payments may not commence until the first day of the month following the later of the Participant's-- (i) Termination, or (ii) Attainment of age fifty-five (55). (b) With the consent of the Administrative Committee, Participants may elect to defer the commencement of their benefits for up to one (1) year; provided, however, that the benefit paid shall be fixed at the time of deferral. 6.4 Death Benefits. If a Participant dies while employed by the Company or a Related Company at a time when he is at least age forty-five (45) with sixty (60) or more Months of Service, the Participant's designated Beneficiary shall be entitled to a monthly benefit for fifteen (15) years, commencing on the date as soon as practicable after the Participant's death, in an amount equal to fifty-five percent (55%) of the amount accrued to the Participant under Section 5.1; provided, however, that for every month of age over age forty-five (45), the benefit paid shall be increased by .1667% per Month of Service. (See Example B attached hereto and incorporated herein by this reference.) If a Participant dies while employed by the Company or a Related Company at a time when he has become vested under Section 5.3 above, the Participant's Beneficiary shall be entitled to a monthly benefit for fifteen (15) years, commencing on the date of death in an amount equal to one hundred percent (100%) of the amount accrued by the Participant under Section 5.1, reduced as provided in Section 6.3 for each month by which the first payment precedes the date upon which the Participant would have reached age sixty (60). 12 If a Participant dies after Termination, then his surviving Beneficiary shall be entitled to the payments hereunder, if any, that remain to be made during that portion of the original payout period (selected by the Participant prior to Termination) following the date of death. A designated Beneficiary entitled to any retirement death benefit under this Section 6.4 may elect, prior to commencement of payment, to receive Actuarial Equivalent installments for ten (10) years. 6.5 Disability. If a Participant becomes Disabled at any time following attainment of age forty-five (45) and completion of sixty (60) Months of Service, then such Participant shall, in lieu of any other benefit described under this Plan, be entitled to a benefit commencing on the final day of the twenty-fourth month of disability without regard to the age of the Participant at the time of the disability calculated under Section 5.1 using Compensation at the time the Participant became disabled, in an amount equal to fifty- five percent (55%) of the amount accrued to the Participant under Section 5.1; provided, however, that for every month of age over age forty-five (45), the benefit paid shall be increased by .1667% per Month of Service. (See Example B attached hereto and incorporated herein by this reference.) 6.6 Designation of Beneficiary. (a) In the event benefits are payable under the Plan on behalf of a deceased Participant who has a surviving spouse, the remaining benefits will be paid to another Beneficiary only if the spouse consents in writing to such designation. (b) If there is no designated Beneficiary or surviving spouse, the benefits will be paid to the Participant's estate. 6.7 Mailing of Payments. (a) All payments under the Plan shall be delivered in person or mailed to the last address of the Participant (or, in the case of the death of the Participant, to the last address of his Beneficiary). (b) Each Participant shall be responsible for furnishing the Administrative Committee with-- (i) His current address, and (ii) The name and current address of his Beneficiary. 13 6.8 Payees under Legal Disability. Every person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally competent and of age until the Administrative Committee receives written notice, in a form and manner acceptable to it, that such person is incompetent or a minor, and that a guardian, conservator, statutory committee, or other person legally vested with the care of his estate has been appointed. In the event that the Administrative Committee finds that any person to whom a benefit is payable under the Plan is unable to properly care for his affairs, or is a minor, then any payment due (unless a prior claim therefor shall have been made by a duly appointed legal representative) may be paid to the spouse, a child, a parent, or a brother or sister, or to any person deemed by the Administrative Committee to have incurred expense for such person otherwise entitled to payment. In the event a guardian or conservator or statutory committee of the estate of any person receiving or claiming benefits under the Plan shall be appointed by a court of competent jurisdiction, payment shall be made to such guardian or conservator or statutory committee provided that proper proof of appointment is furnished in a form and manner suitable to the Administrative Committee. Any payment made under the provisions of this section shall be a complete discharge of liability therefor under the Plan. 6.9 Withholding For Taxes. Any payments out of the Plan shall be reported to the applicable taxing authorities and may be subject to withholding for taxes as may be required by any applicable federal, state or other law. 14 ARTICLE VII OPERATION AND ADMINISTRATION OF THE PLAN ---------------------------------------- 7.1 Administrative Committee Powers. The Administrative Committee shall have all powers necessary to supervise the administration of the Plan and control its operations. In addition to any powers and authority conferred on the Administrative Committee elsewhere in the Plan or by law, the Administrative Committee shall have the following powers and authority: (a) To designate agents to carry out responsibilities relating to the Plan; (b) To employ such legal, actuarial, accounting, clerical, and other assistance as it may deem appropriate in carrying out the provisions of this Plan; (c) To establish rules and procedures from time to time for the conduct of the Administrative Committee's business and the administration of this Plan; (d) To administer, interpret, and apply this Plan and to decide all questions which may arise under this Plan. All determinations by the Administrative Committee shall be binding upon all parties, to the maximum extent permitted by law; and (e) To perform or cause to be performed such further acts as it may deem to be necessary, appropriate, or convenient in the administration of the Plan. 7.2 Composition of Administrative Committee. (a) The members of the Administrative Committee (who may, but need not be Participants or even Employees) shall be appointed by the Board of Directors and shall hold office until termination of such status in accordance with the provisions of this Article VII. (b) The term of the office of each member of the Administrative Committee shall be determined in accordance with the following rules: (i) Any member of the Administrative Committee may resign at any time by giving written notice to the other members and to the Board of Directors, effective as of the date indicated therein. (ii) Any member of the Administrative Committee may be removed by the Board of Directors at any time. (iii) In the case of an Administrative Committee member who is also an Employee of the Company or a Related Company, his status as a Administrative Committee member shall terminate as of the date of his Termination, except as otherwise provided in resolutions of the Board of Directors. 15 (c) Upon the death, resignation, or removal of any member of the Administrative Committee, the Board of Directors may appoint a successor. Notice of appointment of a successor member shall be given by the Company in writing to the other members of the Administrative Committee. 7.3 Administrative Committee Procedure. (a) A majority of the members of the Administrative Committee as constituted at any time shall constitute a quorum. (b) Any action authorized by a majority of the members-- (i) Present at any meeting, or (ii) In writing without a meeting, shall constitute the actions of the Administrative Committee. (c) Any member of the Administrative Committee is authorized to execute any document or documents on behalf of the Administrative Committee. 7.4 Reporting and Disclosure. The Company (and not the Administrative Committee) shall be responsible for the reporting and disclosure of information required to be reported or disclosed pursuant to ERISA or any other applicable law. 7.5 Notices and Communications. (a) All applications, notices, designations, elections, and other communications from Participants shall be in writing, on forms prescribed by the Administrative Committee. These documents shall be mailed or delivered to the office designated by the Administrative Committee, and shall be deemed to have been given when received by such office. (b) Each notice, report, remittance, statement, or other communication directed to a Participant or Beneficiary shall be in writing and may be delivered in person or by mail. An item shall be deemed to have been delivered and received by the Participant three (3) days after the date when it is deposited in the United States Mail with postage prepaid, addressed to the Participant or Beneficiary at his last address of record with the Administrative Committee. 16 7.6 Indemnification. (a) To the maximum extent permitted by law, the Company shall indemnify each member of the Board of Directors and of the Administrative Committee, and every other Employee with duties under the Plan, against expenses (including any amount paid in settlement) reasonably incurred by him in connection with any claims against him by reason of the performance of his duties under the Plan. (b) The right of indemnification specified in Section 7.6 (a) above shall not apply with respect to matters as to which the individual acted fraudulently or in bad faith. (c) Notwithstanding the above, the Company shall have the right to select counsel and to control the prosecution or defense of the suit. (d) Furthermore, the Company shall not be obligated to indemnify any person for any amount incurred through any settlement or compromise of any action unless the Company consents in writing to the settlement or compromise. 17 ARTICLE VIII APPLICATION FOR BENEFITS ------------------------ 8.1 Application for Benefits. (a) The Administrative Committee may require any person claiming benefits under the Plan (a "Claimant") to submit an application therefor, together with such other documents and information as the Administrative Committee may require. (b) Within ninety (90) days following receipt of the application and all necessary documents and information, the Administrative Committee's authorized delegate reviewing the claim shall furnish the Claimant with written notice of the decision rendered with respect to the application. (c) Should special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the expiration of the initial ninety (90) day period. (i) The notice shall indicate the-- (A) Special circumstances requiring an extension of time, and (B) The date by which a final decision is expected to be rendered. (ii) In no event shall the period of the extension exceed ninety (90) days from the end of the initial ninety (90) day period. 8.2 Content of Denial. In the case of a denial of the Claimant's claim for benefits, the written notice shall set forth: (a) The specific reasons for the denial; (b) References to the Plan provisions upon which the denial is based; (c) A description of any additional information or material necessary for perfection of the application (together with an explanation of why the material or information is necessary); and (d) An explanation of the Plan's claims review procedure. 18 8.3 Appeals. (a) In order to appeal the decision rendered with respect to his application for benefits or with respect to the amount of his benefits, the Claimant must follow the appeal procedures set forth in this Section 8.3. (b) The appeal must be made, in writing-- (i) In the case where the claim is expressly rejected, within sixty-five (65) days after the date of notice of the decision with respect to the application, or (ii) In the case where the claim has neither been approved nor denied within the applicable period provided in Section 8.1 above, within sixty-five (65) days after the expiration of the period. (c) The Claimant may request that his application be given full and fair review by the Administrative Committee. The Claimant may review all pertinent documents and submit issues and comments in writing in connection with the appeal. (d) The decision of the Administrative Committee shall be made promptly, and not later than sixty (60) days after the Administrative Committee's receipt of a request for review, unless special circumstances require an extension of time for processing. In such a case, a decision shall be rendered as soon as possible, but not later than one hundred twenty (120) days after receipt of the request for review. (e) The decision on review shall-- (i) Be in writing, (ii) Include specific reasons for the decision, (iii) Be written in a manner designed to be understood by the Claimant, and (iv) Contain specific references to the pertinent Plan provisions upon which the decision is based. 8.4 Exhaustion of Remedies. No legal action for benefits under the Plan may be brought unless and until the Claimant has exhausted his remedies under this Article VIII. 19 ARTICLE IX MISCELLANEOUS MATTERS --------------------- 9.1 Amendment or Termination. (a) The Board of Directors may amend or terminate the Plan at any time by an instrument in writing executed in the name of the Company. However, no amendment may be adopted that would (i) reduce the dollar value of a Participant's vested benefit (ii) eliminate a form of benefit payment, or (iii) delay the date on which a Participant's vested benefit becomes payable. A reduction in a Participant's benefit resulting from a change in the interest rate used in determining Actuarial Equivalence shall not be precluded by reason of the prior sentence. (b) After the occurrence of a Change in Control, no amendment may be adopted that would affect (i) Section 2.6, (ii) Section 5.4, or (iii) this Section 9.1(b). (c) In the event of the termination of the Plan, all Participants who are employed by the Company or a Related Company on that date become fully vested. However, termination of the Plan will not accelerate the date on which benefits become payable under the Plan, except as otherwise provided in-- (i) Section 5.4, or (ii) Resolutions of the Board of Directors. 9.2 Effect of Merger of Company. (a) In the event of a consolidation, merger, sale, liquidation, or other transfer of substantially all of the operating assets of the Company to any other company, the ultimate successor or successors to the business of the Company shall automatically be deemed to have elected to continue this Plan in full force and effect, in the same manner as if the Plan had been adopted by resolution of its board of directors. (b) The presumption set forth in Section 9.2(a) above shall not apply if the successor, by resolution of its board of directors, elects not to so continue this Plan in effect. In such a case, the Plan shall terminate as of the effective date set forth in the board resolution. 9.3 No Enlargement of Employee Rights. (a) This Plan is strictly a voluntary undertaking on the part of the Company and shall not be deemed to constitute a contract between the Company (or a Related Company) and any Employee, or to be consideration for, or an inducement to, or a condition of, the employment of any Employee. (b) Nothing contained in the Plan shall be deemed to give any Employee the right to be retained in the employ of the Company (or a Related Company) or to interfere with the right of 20 the Company (or a Related Company) to discharge any Employee at any time. 9.4 Restrictions Against Alienation. A Participant's benefit under the Plan may not be assigned or alienated, either voluntarily or involuntarily. However, the preceding sentence will not preclude the Plan from reducing a Participant's benefit by the amount he owes to the Company or a Related Company. Such a reduction will apply whether the benefit is payable to the Participant or to his Beneficiary. 9.5 Employment Agreements. In the case of a Participant whose terms of employment with the Company or a Related Company are subject to the provisions of an employment agreement, to the extent that the terms of the employment contract provide the Participant with greater benefits than would otherwise be determined under the provisions of the Plan, the terms of the employment contract shall prevail. 9.6 Interpretation. (a) Article and Section headings are for reference only and shall not be deemed to be part of the substance of this instrument or to enlarge or limit the contents of any Article or Section. (b) Unless the context clearly indicates otherwise, masculine gender shall include the feminine, the singular shall include the plural, and the plural shall include the singular. (c) In the case of any ambiguity, the Plan shall be construed in such a manner so as to comply with the provisions of ERISA, including the fact that it is intended that the Plan be exempt from the requirements of Parts II, III, and IV of Title I of ERISA pursuant to Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. IN WITNESS WHEREOF, Mattel, Inc. has caused this instrument to be executed by its duly authorized officer. MATTEL, INC. By: /s/ E. Joseph McKay ------------------- E. JOSEPH MCKAY Its: Senior Vice President --------------------- Date: January 31, 1995 ---------------- 21 EX-99.8 9 FISHER-PRICE MATCHING SAVINGS PLAN EXHIBIT 99.8 1994 RESTATEMENT FISHER-PRICE, INC. MATCHING SAVINGS PLAN Effective: July 1, 1994 -i- TABLE OF CONTENTS ----------------- Page ARTICLE 1 NAME, EFFECTIVE DATE AND BASIC PLAN DEFINITIONS . . . 3 Section 1.1. Name of Plan . . . . . . . . . . . . . . . . . . 3 Section 1.2. Effective Date . . . . . . . . . . . . . . . . . 3 Section 1.3. Basic Definitions. . . . . . . . . . . . . . . . 3 (a) Affiliated Corporation . . . . . . . . . . 3 (b) Affiliated Service Organization. . . . . . 3 (c) Business Day . . . . . . . . . . . . . . . 3 (d) Code . . . . . . . . . . . . . . . . . . . 3 (e) Company. . . . . . . . . . . . . . . . . . 3 (f) Date of Hire . . . . . . . . . . . . . . . 3 (g) ERISA. . . . . . . . . . . . . . . . . . . 3 (h) Organization Under Common Control. . . . . 3 (i) Plan . . . . . . . . . . . . . . . . . . . 4 (j) Plan Administrator . . . . . . . . . . . . 4 (k) Plan Year. . . . . . . . . . . . . . . . . 4 (l) Related Business . . . . . . . . . . . . . 4 (m) Trust. . . . . . . . . . . . . . . . . . . 4 (n) Trustee. . . . . . . . . . . . . . . . . . 4 Section 1.4. Other Definitions. . . . . . . . . . . . . . . . 4 (a) Annual Addition. . . . . . . . . . . . . . 4 (b) Annuity Starting Date. . . . . . . . . . . 4 (c) Company Contribution . . . . . . . . . . . 4 (d) Company Contribution Account . . . . . . . 4 (e) Compensation . . . . . . . . . . . . . . . 4 (f) Disability Retirement Date . . . . . . . . 4 (g) Discretionary Matching Contribution. . . . 4 (h) Early Retirement Date. . . . . . . . . . . 4 (i) Eligible Employee. . . . . . . . . . . . . 4 (j) Entry Date . . . . . . . . . . . . . . . . 4 (k) Highly Compensated Employee. . . . . . . . 5 (l) Hour of Service. . . . . . . . . . . . . . 5 (m) Key Employee . . . . . . . . . . . . . . . 5 (n) Limitation Year. . . . . . . . . . . . . . 5 (o) Matching Contribution. . . . . . . . . . . 5 (p) Maximum Annual Addition. . . . . . . . . . 5 (q) Maximum Company Contribution . . . . . . . 5 (r) Normal Retirement. . . . . . . . . . . . . 5 (s) Participant. . . . . . . . . . . . . . . . 5 (t) Required Beginning Date. . . . . . . . . . 5 (u) Rollover Account . . . . . . . . . . . . . 5 (v) Salary Reduction Contribution. . . . . . . 5 (w) Savings Account. . . . . . . . . . . . . . 5 (x) Six Months of Participation Service. . . . 5 (y) Top Heavy Plan . . . . . . . . . . . . . . 5 -ii- (z) Total and Permanent Disability . . . . . . 5 (aa) Transfer Account . . . . . . . . . . . . . 5 (bb) Valuation Date . . . . . . . . . . . . . . 5 ARTICLE 2 ELIGIBILITY FOR PARTICIPATION. . . . . . . . 6 Section 2.1. Definitions. . . . . . . . . . . . . . . . . . . 6 (a) Six Months of Participation Service. . . . 6 (b) Entry Date . . . . . . . . . . . . . . . . 6 (c) Eligible Employee. . . . . . . . . . . . . 6 (i) Employees Covered by Collective Bargaining Agreement. . . . . . . . . 6 (ii) Nonresident Aliens. . . . . . . . . . 6 (iii) Irregular Employees. . . . . . . . . 6 Section 2.2. Age and Service Requirements . . . . . . . . . . 6 Section 2.3. Change in Employment Status. . . . . . . . . . . 7 (a) Employee Becomes Eligible Employee . . . . 7 (b) Participant Becomes a Non-Eligible Employee . . . . . . . . . . . . . . . . . 7 Section 2.4. Termination and Resumption of Participation. . . 7 (a) Termination of Participation . . . . . . . 7 (b) Inactive Participant . . . . . . . . . . . 7 (c) Resumption of Participation. . . . . . . . 8 Section 2.5. Service with and Transfers Involving Affiliated Corporations.. . . . . . . . . . . . 8 (a) Service with Organizations Under Common Control. . . . . . . . . . . . . . . . . . 8 (b) Transfer of Employment.. . . . . . . . . . 8 (c) Change to Eligible Status. . . . . . . . . 9 (d) Change from Eligible Status. . . . . . . . 9 (e) Subsidiary . . . . . . . . . . . . . . . . 9 ARTICLE 3 CONTRIBUTIONS. . . . . . . . . . . . 10 Section 3.1. Salary Reduction Contributions . . . . . . . . . 10 (a) In General . . . . . . . . . . . . . . . . 10 (b) Salary Reduction Contribution Elections. . 10 (c) $7,000 Limit . . . . . . . . . . . . . . . 10 Section 3.2. Matching Contributions by the Company. . . . . . 11 Section 3.3. Discretionary Matching Contributions . . . . . . 11 Section 3.4. Forfeitures. . . . . . . . . . . . . . . . . . . 11 Section 3.5. Limitations on Contributions . . . . . . . . . . 11 Section 3.6. Rollover Contributions . . . . . . . . . . . . . 12 Section 3.7. Transfers From Another Plan. . . . . . . . . . . 13 Section 3.8. Allocations of Contributions and Forfeitures . . 14 (a) Maintenance of Accounts. . . . . . . . . . 14 (b) Allocation of Salary Reduction -iii- Contributions. . . . . . . . . . . . . . . 14 (c) Allocation of Matching Contributions . . . 14 (d) Allocation of Discretionary Matching Contributions. . . . . . . . . . . . . . . 15 (e) Qualified Participant. . . . . . . . . . . 15 Section 3.9. Compensation . . . . . . . . . . . . . . . . . . 15 Section 3.10. Limitations on Allocations . . . . . . . . . . . 16 (a) Definitions . . . . . . . . . . . . . . . 16 (i) Annual Addition . . . . . . . . . . . 16 (ii) Compensation. . . . . . . . . . . . . 16 (iii) Maximum Permissible Amount . . . . . 17 (iv) Defined Benefit Fraction. . . . . . . 17 (v) Defined Contribution Fraction . . . . 17 (vi) Limitation Year . . . . . . . . . . . 17 (b) Maximum Company Contribution . . . . . . . 17 (c) Maximum Annual Addition. . . . . . . . . . 17 (d) Excess Annual Additions. . . . . . . . . . 18 Section 3.11. ADP Test . . . . . . . . . . . . . . . . . . . . 19 (a) In General . . . . . . . . . . . . . . . . 19 (i) The 125% Test . . . . . . . . . . . . 19 (ii) The Alternative Limitation Test . . . 20 (b) Definitions. . . . . . . . . . . . . . . . 20 (i) ADP . . . . . . . . . . . . . . . . . 20 (ii) Average ADP . . . . . . . . . . . . . 20 (iii) ADP Compensation . . . . . . . . . . 20 (iv) Highly Compensated Employee . . . . . 21 (v) Nonhighly Compensated Employee. . . . 23 (vi) Nonelective Contributions . . . . . . 23 (vii) Qualified Matching Contributions. . 23 (c) Special Rules. . . . . . . . . . . . . . . 23 (i) Plan Aggregation - 410(b) . . . . . . 23 (ii) Plan Aggregation - Highly Compensated Employee. . . . . . . . . 23 (iii) Family Aggregation . . . . . . . . . 24 Section 3.12. Distribution of Excess Contributions . . . . . . 24 (a) In General . . . . . . . . . . . . . . . . 24 (b) Excess Contributions . . . . . . . . . . . 25 (c) Family Aggregation . . . . . . . . . . . . 25 (d) Allocable Income/Loss. . . . . . . . . . . 25 Section 3.13. ACP Test . . . . . . . . . . . . . . . . . . . . 26 (a) In General . . . . . . . . . . . . . . . . 26 (i) The 125% Test . . . . . . . . . . . . 26 (ii) The Alternative Limitation Test . . . 26 (b) Definitions. . . . . . . . . . . . . . . . 26 (i) ACP . . . . . . . . . . . . . . . . . 26 (ii) Average ACP . . . . . . . . . . . . . 27 (iii) ACP Compensation . . . . . . . . . . 27 (c) Special Rules. . . . . . . . . . . . . . . 27 (i) Multiple Use. . . . . . . . . . . . . 27 (ii) Plan Aggregation - 410(b) . . . . . . 28 -iv- (iii) Plan Aggregation - Highly Compensated Employee . . . . . . . . 28 (iv) Family Aggregation. . . . . . . . . . 28 Section 3.14. Distribution of Excess Aggregate Contributions . . . . . . . . . . . . . . . . . 28 (a) In General . . . . . . . . . . . . . . . . 28 (b) Excess Aggregate Contributions . . . . . . 29 (c) Family Aggregation . . . . . . . . . . . . 29 (d) Allocable Income/Loss. . . . . . . . . . . 29 Section 3.15. Distributions of Excess Deferrals. . . . . . . . 30 (a) In General . . . . . . . . . . . . . . . . 30 (b) Excess Deferrals . . . . . . . . . . . . . 30 (c) Allocable Income/Loss. . . . . . . . . . . 30 Section 3.16. Coordinating Corrective Distributions. . . . . . 31 (a) Correcting Excess Deferrals After Distributing Excess Contributions. . . . . 31 (b) Correcting Excess Contributions After Distributing Excess Deferrals. . . . . . . 31 ARTICLE 4 NONFORFEITABLE RIGHT TO BENEFITS . . . . . . . 32 Section 4.1. Definitions. . . . . . . . . . . . . . . . . . . 32 (a) Normal Retirement Date . . . . . . . . . . 32 (b) Early Retirement Date. . . . . . . . . . . 32 (c) Disability Retirement Date . . . . . . . . 32 (d) Total and Permanent Disability . . . . . . 32 (e) Annuity Starting Date. . . . . . . . . . . 32 (f) Deferred Retirement. . . . . . . . . . . . 32 (g) Participant's Required Beginning Date. . . 32 (h) 70-1/2 Year. . . . . . . . . . . . . . . . 32 Section 4.2. Determination of Nonforfeitable Rights . . . . . 33 ARTICLE 5 DISTRIBUTION OF BENEFITS . . . . . . . . . 34 Section 5.1. Forms and Time of Benefit Distributions. . . . . 34 (a) In General . . . . . . . . . . . . . . . . 34 (b) Commencement of Distributions. . . . . . . 34 (c) Form of Distributions. . . . . . . . . . . 34 Section 5.2. Normal Form of Benefit . . . . . . . . . . . . . 34 Section 5.3. Alternative Form of Benefit. . . . . . . . . . . 35 Section 5.4. Designation of Death Beneficiary . . . . . . . . 35 Section 5.5. Death of Participant . . . . . . . . . . . . . . 36 Section 5.6. Early Distribution Consent . . . . . . . . . . . 36 (a) In General . . . . . . . . . . . . . . . . 36 (b) Valid Consent. . . . . . . . . . . . . . . 36 Section 5.7. Minimum Distribution Required. . . . . . . . . . 37 Section 5.8. Cash-Outs. . . . . . . . . . . . . . . . . . . . 37 (a) Definitions. . . . . . . . . . . . . . . . 37 -v- (i) Cash-Out. . . . . . . . . . . . . . . 37 (ii) Involuntary Cash-Out. . . . . . . . . 37 (iii) Voluntary Cash-Out . . . . . . . . . 37 (b) Involuntary Cash-Outs of Small Benefits. . 37 (c) Cash-Outs of Benefits in Excess of $3,500 . . . . . . . . . . . . . . . . . . 38 Section 5.9. Hardship Withdrawals . . . . . . . . . . . . . . 38 Section 5.10. Loans to Participants. . . . . . . . . . . . . . 39 (a) Trustees May Make Loans. . . . . . . . . . 39 (b) Written Applications.. . . . . . . . . . . 39 (c) Limit on Amount of Loan. . . . . . . . . . 39 (d) Term and Interest Rate . . . . . . . . . . 40 (e) Promissory Note Required . . . . . . . . . 40 (f) Security . . . . . . . . . . . . . . . . . 40 (g) Directed Investment. . . . . . . . . . . . 41 ARTICLE 6 ACCOUNT VALUATIONS AND ALLOCATION OF NET EARNINGS. . . 42 Section 6.1. Valuation Dates. . . . . . . . . . . . . . . . . 42 Section 6.2. Method of Valuation of Trust Assets. . . . . . . 42 Section 6.3. Allocation of Net Earnings . . . . . . . . . . . 42 Section 6.4. Notification to Participants . . . . . . . . . . 42 Section 6.5. Directed Investment Accounts . . . . . . . . . . 43 ARTICLE 7 THE TRUST. . . . . . . . . . . . . 45 Section 7.1. Continuation of the Trust. . . . . . . . . . . . 45 Section 7.2. Disbursements Limited to Trust Assets. . . . . . 45 Section 7.3. Expenses of Administration and Litigation. . . . 45 Section 7.4. Pooled Investment Fund or Group Trust. . . . . . 45 Section 7.5. Mattel Stock Fund. . . . . . . . . . . . . . . . 46 (a) Voting of Shares in Mattel Stock Fund. . . 46 (b) Tender Offers. . . . . . . . . . . . . . . 46 ARTICLE 8 TOP-HEAVY PROVISIONS . . . . . . . . . . 47 Section 8.1. Definitions. . . . . . . . . . . . . . . . . . . 47 (a) Top-Heavy Plan . . . . . . . . . . . . . . 47 (b) Determination Date . . . . . . . . . . . . 47 (c) Key Employee . . . . . . . . . . . . . . . 47 (d) Cumulative Account Balances. . . . . . . . 47 (e) Aggregation Group. . . . . . . . . . . . . 47 (f) Top-Heavy Valuation Date . . . . . . . . . 48 (g) Top-Heavy Compensation . . . . . . . . . . 48 (h) Qualified Top-Heavy Participant. . . . . . 48 (i) Super Top-Heavy Plan . . . . . . . . . . . 48 Section 8.2. Top-Heavy Rules. . . . . . . . . . . . . . . . . 48 -vi- (a) Application of Top-Heavy Rules . . . . . . 48 (b) Minimum Company Contribution . . . . . . . 48 (c) Limitation on Contributions and Benefit. . 49 (d) Special Rule for Non-Key Employees in Two Plans. . . . . . . . . . . . . . . . . 49 ARTICLE 9 ADMINISTRATION OF PLAN. . . . . . . . . . 50 Section 9.1. Company as Plan Administrator. . . . . . . . . . 50 Section 9.2. Responsibility for Administration of the Plan. . 50 Section 9.3. Expenses . . . . . . . . . . . . . . . . . . . . 50 Section 9.4. Liability and Indemnification. . . . . . . . . . 50 Section 9.5. Agents . . . . . . . . . . . . . . . . . . . . . 50 Section 9.6. Delegation of Authority. . . . . . . . . . . . . 51 (a) In General . . . . . . . . . . . . . . . . 51 (b) Liability. . . . . . . . . . . . . . . . . 51 Section 9.7. Defect or Omission . . . . . . . . . . . . . . . 51 Section 9.8. Funding Policy . . . . . . . . . . . . . . . . . 51 Section 9.9. Records. . . . . . . . . . . . . . . . . . . . . 51 Section 9.10. Claims Procedure . . . . . . . . . . . . . . . . 51 (a) Filing a Claim for Benefits. . . . . . . . 51 (b) Notification of Decision of Plan Administrator. . . . . . . . . . . . . . . 52 (c) Claim Review Procedure . . . . . . . . . . 52 ARTICLE 10 RIGHT TO ALTER, AMEND OR TERMINATE. . . . . . . 53 Section 10.1. Plan Amendments. . . . . . . . . . . . . . . . . 53 (a) Right to Alter or Amend. . . . . . . . . . 53 (b) Limitations on Power of Amendment. . . . . 53 (c) Form of Amendment. . . . . . . . . . . . . 53 Section 10.2. Plan Termination . . . . . . . . . . . . . . . . 54 (a) Right to Terminate . . . . . . . . . . . . 54 (b) Vesting on Termination or Partial Termination. . . . . . . . . . . . . . . . 54 (c) Disposition of Assets on Termination . . . 54 Section 10.3. Merger or Consolidation . . . . . . . . . . . . 54 ARTICLE 11 MISCELLANEOUS PROVISIONS . . . . . . . . . 55 Section 11.1. New York and Applicable Federal Law Govern. . . 55 Section 11.2. Headings for Convenience. . . . . . . . . . . . 55 Section 11.3. Rights of All Interested Parties Determined by the Terms of the Plan. . . . . . . . . . . . 55 Section 11.4. Spendthrift Clause. . . . . . . . . . . . . . . 55 Section 11.5. Qualified Domestic Relations Order. . . . . . . 55 Section 11.6. Notice to Employees . . . . . . . . . . . . . . 56 -vii- -vii- Section 11.7. No Employment Rights Created. . . . . . . . . . 56 Section 11.8. Diversion from Employees Prohibited . . . . . . 56 Section 11.9. Right to Judicial Accounting. . . . . . . . . . 57 Section 11.10. Transfer of Funds to Another Plan . . . . . . . 57 Section 11.11. Forfeiture on Account of Inability to Locate Participant or Beneficiary. . . . . . . . . . . 57 Section 11.12. Incapacity of Person Entitled to Payment. . . . 57 Section 11.13. Adoption of Plan by Organization Under Common Control. . . . . . . . . . . . . . . . . 58 ARTICLE 12 DIRECT ROLLOVERS . . . . . . . . . . . 59 Section 12.1. Direct Rollovers. . . . . . . . . . . . . . . . 59 Section 12.2. Definitions . . . . . . . . . . . . . . . . . . 59 (a) Eligible Rollover Distribution . . . . . . 59 (b) Eligible Retirement Plan . . . . . . . . . 59 (c) Distributee. . . . . . . . . . . . . . . . 59 (d) Direct Rollover. . . . . . . . . . . . . . 60 INTRODUCTION The Board of Directors of Fisher-Price, Inc. authorized the adoption of the Fisher-Price, Inc. Matching Savings Plan, having an effective date of January 1, 1992, for the benefit of eligible employees of the Company. Fisher-Price previously established the Fisher-Price Profit Sharing and Retirement Savings Plan, having an effective date of January 15, 1953, for the benefit of eligible employees of the Company. The Company wishes to merge the Fisher-Price Profit Sharing and Retirement Savings Plan into the Fisher-Price, Inc. Matching Savings Plan effective July 1, 1994. Effective July 1, 1994 the Fisher-Price Profit Sharing and Retirement Savings Plan shall be merged into the Fisher-Price, Inc. Matching Savings Plan and all assets previously held by the Fisher-Price Profit Sharing and Retirement Savings Plan shall be allocated to accounts under the Fisher-Price, Inc. Matching Savings Plan. The funds to provide benefits under this Plan shall be held, managed, invested and disbursed in accordance with the terms of this Plan and the separate Trust Agreement established as the funding vehicle under the Plan. This Plan document, together with such separate Trust Agreement, are designed to constitute a qualified plan under Section 401 of the Internal Revenue Code of 1986, as amended. Thus Fisher-Price, Inc. hereby adopts the Plan as follows: -3- ARTICLE 1 NAME, EFFECTIVE DATE AND BASIC PLAN DEFINITIONS ----------------------------------------------- Section 1.1. Name of Plan. The Plan as continued by this instrument shall be called the "Fisher-Price, Inc. Matching Savings Plan". Section 1.2. Effective Date. The effective date of this restated Plan is July 1, 1994. The original effective date of the Plan was January 1, 1992. The original effective date of the Fisher-Price Profit Sharing and Retirement Savings Plan was January 15, 1953. Section 1.3. Basic Definitions. (a) Affiliated Corporation means any corporation that is a member of a controlled group of corporations, as defined in Section 414(b) of the Code, which includes the Company. (b) Affiliated Service Organization means any service organization which is a member of an affiliated service group, as defined in Section 414(m) of the Code, which includes the Company. (c) Business Day means a day on which the New York Stock Exchange is open for trading. (d) Code means the Internal Revenue Code of 1986, as amended from time to time. (e) Company means Fisher-Price, Inc. and any Organization Under Common Control that has adopted the Plan in accordance with Section 11.13. (f) Date of Hire means the employment commencement date of the date on which an employee of the Company is first entitled to be credited with an Hour of Service with the Company as defined in Title 29, Code of Federal Regulations, Section 2530.200b-2. (g) ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. (h) Organization Under Common Control means (i) an Affiliated Corporation, (ii) a Related Business, (iii) an Affiliated Service Organization or (iv) any other entity required to be aggregated with the Company pursuant to Section 414(o) of the Code and the regulations thereunder. -4- (i) Plan means the Fisher-Price, Inc. Matching Savings Plan set forth herein and as it may hereafter be amended from time to time. (j) Plan Administrator means Fisher-Price, Inc. (k) Plan Year means the twelve-month period beginning each January 1 and ending on the following December 31. (l) Related Business means any trade or business included in a group of trades or businesses with the Company which are under common control, as defined in Section 414(c) of the Code. (m) Trust means the assets held in trust pursuant to a separate Trust Agreement between the Company and the Trustee, the purpose of which is to provide benefits to Participants under the Plan. (n) Trustee means the person or persons appointed by the Board of Directors of the Company to act as Trustee of the Trust under the Plan, and with whom the Company has entered into a separate Trust Agreement. Section 1.4. Other Definitions. (a) Annual Addition is defined in Section 3.10. (b) Annuity Starting Date is defined in Section 4.1(e). (c) Company Contribution is defined in Section 3.5. (d) Company Contribution Account is defined in Section 3.8. (e) Compensation is defined in Section 3.9. (f) Disability Retirement Date is defined in Section 4.1(c). (g) Discretionary Matching Contribution is defined in Section 3.3. (h) Early Retirement Date is defined in Section 4.1(b). (i) Eligible Employee is defined in Section 2.1. (j) Entry Date is defined in Section 2.1. -5- (k) Highly Compensated Employee is defined in Section 3.11. (l) Hour of Service is defined in Section 1.3(f). (m) Key Employee is defined in Section 8.1. (n) Limitation Year is defined in Section 3.10. (o) Matching Contribution is defined in Section 3.2. (p) Maximum Annual Addition is defined in Section 3.10. (q) Maximum Company Contribution is defined in Section 3.10. (r) Normal Retirement Date is defined in Section 4.1. (s) Participant is defined in Section 2.2. (t) Required Beginning Date is defined in Section 4.1. (u) Rollover Account is defined in Section 3.6. (v) Salary Reduction Contribution is defined in Section 3.1. (w) Savings Account is defined in Section 3.8. (x) Six Months of Participation Service is defined in Section 2.1. (y) Top Heavy Plan is defined in Section 8.1. (z) Total and Permanent Disability is defined in Section 4.1. (aa) Transfer Account is defined in Section 3.7. (bb) Valuation Date is defined in Section 6.1. -6- ARTICLE 2 ELIGIBILITY FOR PARTICIPATION ----------------------------- Section 2.1. Definitions. The following definitions apply for purposes of this Article: (a) Six Months of Participation Service. An employee shall be considered to have completed Six Months of Participation Service with the Company at the end of six full months following the employee's Date of Hire. (b) Entry Date. The term "Entry Date" means the first day of each calendar month. (c) Eligible Employee. Except as otherwise provided, the term "Eligible Employee" shall mean any common-law employee of the Company. For purposes of this Article, the term "Eligible Employee" shall not include: (i) Employees Covered by Collective Bargaining Agreement. Employees included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between the Company and employee representatives (within the meaning of Section 7701(a)(46) of the Code) if (i) there is evidence that retirement benefits were the subject of good faith bargaining and (ii) the terms of such collective bargaining agreement do not specifically provide for participation in the Plan. (ii) Nonresident Aliens. Employees who are nonresident aliens (within the meaning of Section 7701(b)(1)(B) of the Code) and who received no earned income (within the meaning of Section 911(d)(2) of the Code) from the Company which constitutes income from sources within the United States (within the meaning of Section 861(a)(3) of the Code). (iii) Irregular Employees. Employees who are hired on a seasonal basis or who otherwise have an irregular work schedule. Section 2.2. Age and Service Requirements. Each Eligible Employee of the Company shall become a Participant in the Plan on the first Entry Date coincident with or following the -7- latest of: (a) his or her completion of Six Months of Participation Service with the Company; (b) his or her attainment of age 20 1/2; or (c) the Effective Date. Each Eligible Employee who has completed the service requirement in (a) above, but who is separated from the service of the Company prior to the Entry Date shall become a Participant immediately upon his or her return to the service of the Company unless (i) Section 2.4(c) applies, or (ii) such Eligible Employee, upon the date of his or her return to the service of the Company, has not yet satisfied the age requirement in (b) above. Notwithstanding the preceding sentence, an Eligible Employee shall not in any event commence participation in the Plan prior to the Entry Date which otherwise would have applied had the Participant not separated from the service of the Company. Section 2.3. Change in Employment Status. (a) Employee Becomes Eligible Employee. If an employee's status is changed so that he or she becomes an Eligible Employee, he or she shall become a Participant in the Plan on the first Entry Date coincident with or following the satisfaction of the age and service requirements set forth in Section 2.2. (b) Participant Becomes a Non-Eligible Employee. If a Participant's employment status is changed so that he or she is no longer an Eligible Employee, such Participant shall not be entitled to share in any Matching Contributions or Discretionary Matching Contributions with respect to any Compensation earned while he or she is not an Eligible Employee. Section 2.4. Termination and Resumption of Participation. (a) Termination of Participation. Except as otherwise provided by this Section, an Eligible Employee who is a Participant shall remain a Participant until (1) the date on which his or her entire nonforfeitable interest is paid to him or her or to his or her beneficiary, or (2) the date on which his or her death occurs, if earlier. (b) Inactive Participant. If a Participant separates from the service of the Company, he or she will be an Inactive -8- Participant (1) for the remainder of the Plan Year of such separation from service, and (2) for each Plan Year beginning after such separation from service and during which he or she continues to be separated from the service of the Company. (c) Resumption of Participation. An Inactive Participant shall not be entitled to share in allocations of Matching Contributions and Discretionary Matching Contributions under Article 3.00. However, an Inactive Participant shall immediately resume active participation and be entitled to share in allocations of Matching Contributions and Discretionary Matching Contributions in accordance with the terms and conditions of Article 3.00 immediately upon reemployment by the Company. Section 2.5. Service with and Transfers Involving Affiliated Corporations. (a) Service with Organizations Under Common Control. Hours of Service completed by a Participant with an Organization Under Common Control shall be credited for eligibility and vesting purposes under this Plan under Articles 2 and 4, but not for purposes of benefit accrual under Article 3, except as specifically provided hereunder. With respect to employees who transfer to the Company after November 30, 1993 directly from Mattel, Inc. or any Subsidiary, the service credited under this subsection shall include all service with such Subsidiary or with Mattel, Inc., including service prior to the date the Subsidiary or Mattel, Inc. became an Affiliated Corporation unless at the time of the event at which a Subsidiary became an Affiliated Corporation, the Board of Directors of Fisher-Price, Inc. specifically provides otherwise. The amount of service to be credited under the preceding sentence shall be based on the terms of a qualified plan maintained by Mattel, Inc. or the Subsidiary under which the transferred employee was participating immediately prior to the transfer or under the terms of this Plan for crediting service for eligibility and vesting if the employee was not participating in such a plan. Notwithstanding the foregoing, the Board of Directors of Fisher-Price, Inc. may also specifically provide for the crediting of service under this Section with a predecessor employer or any entity other than a Subsidiary prior to the date such predecessor employer or other entity was acquired by an Affiliated Corporation or otherwise became an Affiliated Corporation. (b) Transfer of Employment. If a Participant transfers employment from the Company or any business entity that has adopted or is maintaining this Plan to any Organization Under -9- Common Control that has not adopted or is not maintaining this Plan, such transfer shall not be considered a separation from service or termination of employment under this Plan. Such Participant shall continue to be credited with Hours of Service as provided in subsection (a). If a person transfers employment from any Organization Under Common Control that has not adopted the Plan to the Company or any business entity that has adopted or is maintaining this Plan, he or she shall immediately commence active participation in the Plan if such person is employed in an eligible status, has satisfied the age and service requirements under the Plan and if the Entry Date that would otherwise apply to such person has already occurred. (c) Change to Eligible Status. If the employment status of an person changes so that he or she is eligible for participation hereunder as a result of a transfer from ineligible status, he or she shall immediately commence active participation in the Plan following the date of his or her change in employment status if such person has satisfied the age and service requirements hereunder and if the Entry Date that would otherwise apply to such person has already occurred. (d) Change from Eligible Status. If the employment status of a Participant changes so that he or she is no longer in an eligible status under the Plan but he or she is still in the service of the Company, he or she shall be credited with Hours of Service for vesting purposes for Hours of Service with the Company after the change in employment status. (e) Subsidiary. The term "Subsidiary" means any corporation included in a chain of corporations connected through stock ownership with a common parent corporation as defined under Section 1563(a)(1) of the Code where the common parent is Mattel, Inc. -10- ARTICLE 3 CONTRIBUTIONS ------------- Section 3.1. Salary Reduction Contributions. (a) In General. Each Participant, in accordance with Subsection (b), may elect to contribute to the Plan a whole percentage amount, not to exceed a percentage amount determined by the Plan Administrator pursuant to a uniform nondiscriminatory policy, of his or her Compensation ("Salary Reduction Contribution"). Salary Reduction Contributions shall be made by reducing a Participant's Compensation throughout the period during which his or her election under this Section remains in effect. The Company shall pay to the Trustees all Salary Reduction Contributions made by Participants under this Section no later than the end of a reasonable period after such Salary Reduction Contributions were withheld from the Participants' Compensation, or such longer period as may be permitted by regulations issued under Section 401(k) of the Code, but in no event later than 30 days after the close of the calendar month in which such Salary Reduction Contributions were withheld. All Salary Reduction Contributions are intended to qualify as "employer contributions" under Section 401(k) of the Code. (b) Salary Reduction Contribution Elections. The Plan Administrator shall prescribe uniform rules of general application concerning all elections under this Section. Such rules may limit the amount of Salary Reduction Contributions or the frequency of any changes in elections made by Participants. Such rules also shall prescribe the effective date of any elections, or changes in elections, made by Participants under this Section. All elections under this Section shall remain in effect until modified or discontinued by the Participant in accordance with the rules established by the Plan Administrator. Notwithstanding the foregoing, changes in Participant elections under this Section shall be permitted no less frequently than semi-annually. Furthermore, Participants, prior to any payroll period or other payment of Compensation, may elect to discontinue Salary Reduction Contributions. Such discontinuance shall remain in effect until the date a new election is made in accordance with the provisions of this Subsection. (c) $7,000 Limit. Salary Reduction Contributions of a Participant, together with the other elective deferrals (as defined in Section 402(g)(3) of the Code) of such Participant, shall not exceed $7,000, as adjusted by Section 402(g)(5) of the -11- Code, during any calendar year. In the event that the limit under this Subsection is exceeded, the Plan Administrator shall direct the Trustees to distribute such excess amount in accordance with this Article. Section 3.2. Matching Contributions by the Company. For each Plan Year, the Company shall contribute to the Plan on behalf of each Participant an amount equal to a percentage of each such Participant's Salary Reduction Contributions for such Plan Year (the "Matching Contribution") determined as follows: Participant Salary Matching Contribution Reduction Amount Percentage ------------------ --------------------- $0 to $300 100% $301 to $500 75% $501 to 6% of 40% Participant Compensation Section 3.3. Discretionary Matching Contributions. For each Plan Year, the Company shall contribute to the Plan on behalf of each Qualified Participant (as defined in Section 3.8(e)) an amount determined in the sole discretion of the Company (the "Discretionary Matching Contribution"). The amount of the Discretionary Matching Contribution on behalf of any Qualified Participant shall not exceed 3% of his or her compensation for such Plan Year. Section 3.4. Forfeitures. Forfeitures resulting from the application of Section 11.11 shall not be applied to directly increase the allocation that any Participant would otherwise receive under the Plan. Forfeitures shall in the discretion of the Plan Administrator be used to (1) pay Plan expenses or (2) reduce (but not below zero) the Matching Contribution under Section 3.2 for the Plan Year in which the forfeitures become available. Notwithstanding the foregoing, if (1) all or a portion of the forfeitures are used to reduce the Matching Contribution and (2) such forfeitures exceed the Matching Contribution for the Plan Year in which the forfeitures become available, such excess shall be held in a suspense account and shall be used to reduce Matching Contributions or pay expenses for the next Plan Year (and succeeding Plan Years, as necessary) all as determined in the discretion of the Plan Administrator. If a suspense account is in existence at any time during a Plan Year pursuant to this Section, such account will not participate in the allocation of the trust's investment gains and losses. Section 3.5. Limitations on Contributions. Salary Reduction Contributions, Matching Contributions and Discretionary Matching Contributions (collectively, the "Company -12- Contributions") under this Article shall be subject to the following limitations: (a) the sum of the Company Contributions and other amounts treated as Annual Additions for any Plan Year shall not exceed the Maximum Company Contribution, as determined under Section 3.10; and (b) the amount of the Company Contributions shall not exceed the maximum amount allowable as a deduction to the Company under Section 404 of the Code. Section 3.6. Rollover Contributions. If permitted under a uniform, nondiscriminatory policy adopted by the Plan Administrator, a rollover contribution may be made by an Eligible Employee to the Plan if: (a) the following conditions are satisfied: (i) the Eligible Employee was a participant under another plan that was qualified under Section 401(a) of the Code or an annuity plan qualified under Section 403(a) of the Code; (ii) in the case of a plan qualified under Section 401(a) of the Code, the trust under such other plan is exempt from tax under Section 501(a) of the Code; (iii) such Eligible Employee receives a distribution from such other plan which qualifies as a rollover amount, as described in Section 402(a)(5)(A) of the Code; (iv) the Eligible Employee furnishes evidence satisfactory to the Plan Administrator that such contribution meets conditions (1), (2) and (3); and (v) the rollover contribution is transferred by the Eligible Employee to the Plan within 60 days of his or her receipt of the distribution; or (b) the amounts transferred to the Plan are from a conduit individual retirement account, provided that the following conditions are satisfied: (i) such account has no assets other than assets that were previously distributed to the Eligible Employee by another qualified plan; (ii) such amounts met the applicable requirements -13- of Section 408(d)(3) of the Code for rollover treatment or transfer to the conduit individual retirement account; and (iii) such amounts are transferred by the Eligible Employee to the Plan within 60 days of his or her receipt of such amount from the conduit individual retirement account. Rollover contributions shall be held in a separate "Rollover Account" established and maintained by the Plan Administrator as a permanent accounting record under the Plan for the benefit of the Eligible Employee who made such contributions. An Eligible Employee who has made a rollover contribution shall at all times have a 100% nonforfeitable right to the value of the assets held in his or her Rollover Account. Amounts allocated to a Rollover Account shall be held in trust and invested in accordance with the terms and conditions of the Plan. Distributions of amounts allocated to a Rollover Account shall be made upon the Eligible Employee's retirement, death, disability or other separation from service in accordance with the terms and conditions of the Plan. If an Eligible Employee makes a rollover contribution to the Plan under this Section, such Eligible Employee nevertheless shall not become a Participant under the Plan and shall not participate in the allocations of Company Contributions under Section 3.8 until such Eligible Employee has satisfied the age and service requirements for participation set forth in Section 2.2. Section 3.7. Transfers From Another Plan. If permitted under a uniform policy adopted by the Plan Administrator, a Participant may elect to transfer amounts from another plan to the Plan if the following conditions are satisfied: (a) such other plan is qualified under Section 401(a) of the Code or is an annuity plan qualified under Section 403(a) of the Code; (b) in the case of a plan qualified under Section 401(a) of the Code, the trust under such other plan is exempt from tax under Section 501(a) of the Code; (c) such other plan and the trust or annuity thereunder provides that benefits may be transferred; (d) the Participant furnishes evidence satisfactory to the Plan Administrator that such transfer meets conditions -14- (a), (b) and (c); (e) the transfer will not jeopardize the tax exempt status of the Plan or create adverse tax consequences for the Company; and (f) such other plan does not have a history of providing its participants with "section 411(d)(6) protected benefits," as defined in Section 1.411(d)-4 of the Treasury Regulations, that are different from the benefits being offered under the Plan. Transfers shall be held in a separate "Transfer Account" established and maintained by the Plan Administrator as a permanent accounting record under the Plan for the benefit of the Participant whose benefits under another plan were transferred to the Plan. A Participant shall at all times have a 100% nonforfeitable right to the value of assets held in his or her Transfer Account. Amounts allocated to a Transfer Account shall be held in trust and invested in accordance with the terms and conditions of the Plan. Distributions of amounts allocated to a Transfer Account shall be made upon the retirement, death, disability or other separation from service of the Participant in accordance with the terms and conditions of the Plan. Section 3.8. Allocations of Contributions and Forfeitures. (a) Maintenance of Accounts. The Plan Administrator shall establish and maintain, as a permanent accounting record under the Plan, a "Company Contribution Account" and a "Savings Account" in the name of each Participant in the Plan. For each Participant for whom there was maintained an account or accounts under the Fisher-Price Profit Sharing and Retirement Savings Plan prior to the merger of such plan into this Plan, there shall be maintained such Profit Sharing accounts as may be appropriate as determined by the Plan Administrator. (b) Allocation of Salary Reduction Contributions. Upon the payment of Salary Reduction Contributions by the Company to the Trustees in accordance with Section 3.1(a), the Plan Administrator shall allocate the Salary Reduction Contributions of each Participant to a separate Savings Account maintained for such Participant under Subsection (a). (c) Allocation of Matching Contributions. Upon the payment of the Matching Contribution by the Company to the Trustees, the Plan Administrator shall allocate so much of the total Matching Contributions for such Plan Year and the forfeitures resulting from the application of Section 11.11, if -15- any, to the Company Contribution Account of each Participant as determined by Section 3.2. The allocation determined under this Subsection (c) shall be adjusted by an amount determined pursuant to Section 3.10, if any. (d) Allocation of Discretionary Matching Contributions. Upon the payment of the Discretionary Matching Contribution by the Company to the Trustees, the Plan Administrator shall allocate the Discretionary Matching Contribution for such Plan Year, if any, to the Company Contribution Account of each Qualified Participant in the same proportion that the Salary Reduction Contribution of such Qualified Participant for the Plan Year bears to the total Salary Reduction Contributions of all Qualified Participants for such Plan Year. Notwithstanding the foregoing, the allocation under this Subsection (d) with respect to any Qualified Participant shall not exceed 3% of his or her Compensation for such Plan Year. The allocation determined under this Subsection (d) shall be adjusted by an amount determined pursuant to Section 3.10, if any. (e) Qualified Participant. The term "Qualified Participant" for any Plan Year means a Participant who (1) is employed by the Company on the last day of the Plan Year and (2) is not a corporate vice-president or executive officer. Section 3.9. Compensation. Unless otherwise provided, the term "Compensation" for any Plan Year means the total amount paid or made available by the Company to a Participant during such Plan Year constituting wages as generally defined in Section 3401(a) of the Code determined without regard to any rules that limit the amount included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Section 3401(a)(2) of the Code). Compensation shall not include amounts representing cash or merchandise prizes awarded for suggestions or ideas, commissions, special allowances, expense reimbursements, severance pay, pay for inactive status pending retirement, any profits under stock option plans, any payments out of the short term or long term disability plans or sickness and accident plans, or any compensation the receipt of which is deferred pursuant to a plan or contract. Notwithstanding the foregoing, "Compensation" shall include any amount which is contributed by the Company pursuant to a salary reduction agreement and which is not includible in the gross income of the Participant under Sections 125, 402(a)(8), 402(h) or 403(b) of the Code. -16- Any questions as to whether any other amounts paid to a Participant constitutes Compensation shall be determined by the Company. The Compensation of each Participant taken into account under the Plan for any Plan Year shall not exceed the applicable limitation under Section 401(a)(17) of the Code for the Plan Year. Such limitation shall be adjusted at the time and in the manner permitted under Section 401(a)(17)(B) of the Code. If the Compensation of a Participant is determined on a period of time fewer than 12 months, then the limitation shall be prorated for the number of full calendar months in such period. In determining the Compensation of a Qualified Participant for purposes of this limitation, the rules of Section 414(q)(6) of the Code shall apply, except, in applying such rules, the term "family" shall include only the spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the Plan Year. If, as a result of the application of such rules, the adjusted limitation is exceeded, then the limitation shall be prorated among the affected individuals in proportion to each individual's Compensation as determined under this Section 3.9 prior to the application of this limitation. Notwithstanding any provision in this Section to the contrary, Compensation of a Participant for a Plan Year shall be limited to his or her Compensation earned while a Participant. Section 3.10. Limitations on Allocations. (a) Definitions. The following definitions apply for purposes of this Section: (i) Annual Addition shall have the same meaning as defined under Section 415(c)(2) of the Code and the regulations thereunder. (ii) Compensation shall mean wages as defined in Section 3121(a) of the Code, for purposes of calculating Social Security taxes, but determined without regard to the contribution base limitation in Section 3121(a)(1) of the Code, the special rules in Code Section 3121(v) (applicable to certain elective contributions and non-qualified deferred compensation), any rules that limit covered employment based on type or location of an employee's employer, and any rules that limit the remuneration included in wages based on familial relationship or based on the nature or location of the employment or the services performed (such as the exceptions to the definition of employment -17- in Section 3121(b)(1) through (20) of the Code). (iii) Maximum Permissible Amount, for any Limitation Year, means, with respect to a Participant, the lesser of: (1) $30,000 (or, if greater, 25% of the dollar limitation in effect under Section 415(b)(1)(A) of the Code); or (2) 25% of Compensation, as defined in (2) above. The limitation in (ii) shall not apply to any contribution for medical benefits (within the meaning of Section 401(h) of the Code or Section 419A(f)(2) of the Code) which is otherwise treated as an annual addition under Section 415(1)(1) or 419A(d)(2) of the Code. (iv) Defined Benefit Fraction shall have the same meaning as defined in Section 415(e)(2) of the Code and the regulations thereunder. (v) Defined Contribution Fraction shall have the same meaning as defined in Section 415(e)(3) of the Code and the regulations thereunder. (vi) Limitation Year means the Plan Year. (b) Maximum Company Contribution. For purposes of the Plan, the term "Maximum Company Contribution" shall mean the aggregate of the Maximum Annual Additions of all Participants for the Plan Year. (c) Maximum Annual Addition. In no event shall an amount exceeding the Maximum Annual Addition be allocated to the accounts of a Participant during any Limitation Year. For purposes of the Plan, the term "Maximum Annual Additions" shall mean the following: (i) if the Company (or an Organization Under Common Control) does not maintain any other qualified defined contribution plan and does not maintain and has never maintained a qualified defined benefit plan, the Maximum Permissible Amount; (ii) if, in addition to the Plan, the Company (or an Organization Under Common Control) maintains another qualified defined contribution plan or plans, but does -18- not maintain and has never maintained a qualified defined benefit plan, the Maximum Permissible Amount reduced (but not below zero) by the sum of any Annual Additions allocated to the Participant during the Limitation Year under such other defined contribution plan or plans; (iii) if, in addition to the Plan, the Company (or an Organization Under Common Control) maintains, or at any time maintained, a qualified defined benefit plan covering any Participant in the Plan, the amount which, when added to the Annual Additions under any other qualified defined contribution plan maintained by the Company (or an Organization Under Common Control), if any, results in a Defined Contribution Fraction which, when added to the Defined Benefit Fraction, does not exceed 1.0 in the Limitation Year. (d) Excess Annual Additions. If the Participant's Annual Additions for the Limitation Year exceeds the maximum Annual Addition for such Limitation Year (the "Excess Annual Addition"), the Excess Annual Addition shall not be deemed Annual Additions in that Limitation Year if they are treated in accordance with any one or more of the following paragraphs as determined in the Plan Administrator's discretion: (i) The Excess Annual Additions of such Participant may be allocated and reallocated to the accounts of other Qualified Participants in the Plan. However, if the allocation or reallocation of the Excess Annual Addition causes the Maximum Annual Addition of each Participant to be exceeded for the Limitation Year, then these excess amounts must be held unallocated in a suspense account. If a suspense account is in existence at any time during a particular Limitation Year, other than the Limitation Year described in the preceding sentence, all amounts in the suspense account must be allocated and reallocated to Participants' accounts (subject to the limitations of this Section) before any Company Contributions and any employee contributions which would constitute Annual Additions may be made to the Plan for that Limitation year. (ii) The Excess Annual Additions of such Participant may be used to reduce Company Contributions for the next Limitation Year (and succeeding Limitation Years, as necessary) for that Participant if that Participant is covered by the Plan as of the end of the Limitation Year. However, if that Participant is not -19- covered by the Plan as of the end of the Limitation Year, then the Excess Annual Additions must be held unallocated in a suspense account for the Limitation Year and allocated and reallocated in the next Limitation Year to all of the remaining Participants in the Plan in accordance with the rules set forth in the preceding paragraph. Furthermore, the Excess Annual Additions must be used to reduce Company Contributions for the next Limitation Year (and succeeding Limitation Year, as necessary) for all of the remaining Participants in the Plan. For purposes of this paragraph, Excess Annual Additions may not be distributed to Participants or former Participants. (iii) The Excess Annual Additions of such Participant may be held unallocated in a suspense account for the Limitation Year and allocated and reallocated in the next Limitation Year to all of the Participants in the Plan in accordance with the rules provided in paragraph (1). The Excess Annual Additions must be used to reduce Company Contributions for the next Limitation Year (and succeeding Limitation years, as necessary) for all of the Participants in the Plan. For purposes of this paragraph, Excess Annual Additions may not be distributed to Participants or former Participants. (iv) Notwithstanding the provisions of paragraphs (1), (2) or (3) above, the Plan may return employee contributions, including Salary Reduction Contributions, to the extent that the return would reduce the Excess Annual Additions of such Participant. If the Plan does not return gains attributable to the returned employee contributions, such earnings will be considered as an employee contribution for the Limitation Year in which the returned contribution was made. If a suspense account is in existence at any time during a Limitation Year pursuant to this Section, such suspense account will not participate in the allocation of the trust's investment gains and losses. Section 3.11. ADP Test. (a) In General. Annual allocations derived from Salary Reduction Contributions to the Participants' Savings Accounts must satisfy one of the following tests: (i) The 125% Test. The Average ADP for -20- Participants who are Highly Compensated Employees shall not exceed the Average ADP for Participants who are Non-Highly Compensated Employees multiplied by 1.25; or (ii) The Alternative Limitation Test. The Average ADP for Participants who are Highly Compensated Employees shall not exceed the lesser of (i) the Average ADP for Participants who are Non-Highly Compensated Employees multiplied by 2 and (ii) the Average ADP for Participants who are Non-Highly Compensated Employees plus 2 percentage points or such lesser amount determined pursuant to the provisions of Section 3.13(c)(1) to prevent the multiple use of the alternative limitation under this subsection and Section 3.13(a)(2). The Plan Administrator may calculate the ADPs of Participants and, thus, determine whether the Plan satisfies the ADP Test under this Section by treating all or part of the Qualified Matching Contributions made with respect to any or all of the Participants as Salary Reduction Contributions. The Plan Administrator may not treat Qualified Matching Contributions as Salary Reduction Contributions unless the Qualified Matching Contributions satisfy the conditions set forth in Section 1.401(k)-l(b)(5) of the Treasury Regulations. The Plan Administrator shall maintain records that demonstrate satisfaction of the ADP Test under this Section, including the extent to which the Plan treated Qualified Matching Contributions as Salary Reduction Contributions to satisfy the ADP Test. (b) Definitions. The following definitions apply for purposes of the Plan: (i) ADP, with respect to a Participant, shall mean the ratio (expressed as a percentage) of the amount of Salary Reduction Contributions and amounts treated as Salary Reduction Contributions, if any, allocated to the Participant's account for a Plan Year to the Participant's ADP Compensation for the Plan Year. (ii) Average ADP, with respect to a group of Participants, shall mean the average of the ADPs for the group of Participants. (iii) ADP Compensation, with respect to any Participant, shall be determined by the Plan Administrator in a manner that satisfies the requirement of Section 414(s) of the Code and the regulations thereunder. The period used -21- to determine a Participant's ADP Compensation for a Plan Year is either the Plan Year or the calendar year ending within the Plan Year. Whichever period is selected must be applied uniformly to determine the ADP Compensation of every Participant for the Plan Year. If the Participant participated in the Plan for less than the full Plan Year or calendar year, the Plan may take into account ADP Compensation for that portion of the Plan Year or calendar year during which the Participant actually participated, provided this limit is applied uniformly for all Participants for the Plan Year. (iv) Highly Compensated Employee. (1) In General. The term "Highly Compensated Employee" means an employee who is either a Highly Compensated Active Employee or a Highly Compensated Former Employee. (2) Highly Compensated Active Employee. A "Highly Compensated Active Employee" is any employee who, with respect to the Company, (A) performs services during the Look-Back Year and (B) is included in any one or more of the groups described for purposes of the Look-Back Year calculation in subparagraph (iii). (3) Look-Back Year Calculation. For purposes of subparagraph (ii), the following employees shall be Highly Compensated Employees with respect to the Look-Back Year: (a) employees who are 5-percent owners at any time during the Look-Back Year; (b) employees who receive Compensation in excess of $75,000 during the Look-Back Year; (c) employees who receive Compensation in excess of $50,000 during the Look-Back Year and are members of the Top-Paid Group for the Look-Back Year; and (d) employees who are Includible officers during the Look-Back Year. (4) Determination Year Calculation. The Company elects pursuant to Regulation Section 1.414(q)- lT, Q & A-14(b) to make the calendar year calculation election. Therefore, no Determination Year Calculation is required. -22- (5) Look-Back Year. The term "Look-Back Year" means the Plan Year. (6) Top-Paid Group. The term "Top-Paid Group" means, with respect to a particular year, the group consisting of the top 20 percent of the Company's employees when ranked on the basis of Compensation received from the Company during such year. The number of employees in the Top-Paid Group for a particular year is equal to 20 percent of the total number of active employees of the Company for such year, reduced by those active employees excluded under Sections 1.414(q)-lT, Q & A-9(b)(1)(i), (ii) and (iii) of the Treasury Regulations. (7) Includible Officers. The term "Includible Officer" means an employee who is (A) an officer of the Company (within the meaning of Section 416(i) of the Code and the regulations thereunder) at any time during the Look-Back Year and (B) receives compensation during such year that is greater than 50 percent of the dollar limitation in effect under Section 415(b)(1)(A) of the Code for the calendar year in which the Look-Back Year begins. If no officer of the Company satisfies the Compensation requirement of (B) above, the highest paid officer of the Company for such year is treated as a Highly Compensated Employee. Notwithstanding the foregoing, the determination of which employees are Includible Officers shall be subject to the maximum inclusion limitations of Section 1.414(q)-lT, Q & A-10(b) of the Treasury Regulations. (8) Highly Compensated Former Employee. A "Highly Compensated Former Employee" for a Look-Back Year is any former employee of the Company who, with respect to the Company, (A) performs no services for the Company in the Look-Back Year, (B) had a Separation Year prior to the Look-Back Year and was (C) a Highly Compensated Active Employee for either (I) such employee's Separation Year, or (II) any Look-Back Year ending on or after the employee's 55th birthday. (9) Separation Year. The term "Separation Year" means the Look-Back Year during which the employee separates from the service of the Company. (10) Family Aggregation. If an employee is, during a Look-Back Year, a Family Member of either a (A) 5-percent owner who is an active or former employee or (B) a Highly Compensated Employee who is one of the -23- ten most highly compensated employees ranked on the basis of Compensation paid by the Company during such year, then the Family Member and the 5-percent owner or top-ten Highly Compensated Employee shall be aggregated and shall be treated as a single employee receiving Compensation and Plan contributions equal to the sum of such Compensation and contributions of the Family Member and 5-percent owner or top-ten Highly Compensated Employee. (11) Family Member. The term "Family Member" means the spouse, lineal ascendants and descendants of the employee or former employees, and the spouses of such lineal ascendants and descendants. (v) Nonhighly Compensated Employee shall mean an Eligible Employee who is not a Highly Compensated Employee. (vi) Nonelective Contributions are contributions to the Plan made by the Company which are not made pursuant to a Participant's salary reduction contribution election under Section 3.1. (vii) Qualified Matching Contributions are Matching Contributions or Discretionary Matching Contributions that are 100% nonforfeitable at all times and satisfy the requirements set forth in Section 1.401(k)- 1(g)(13)(iii) of the Treasury Regulations. (c) Special Rules. (i) Plan Aggregation - 410(b). For purposes of this Section, if the Plan and one or more other plans which include cash or deferred arrangements actually are aggregated for purposes of Section 410(b) (other than for purposes of the average benefit percentage test) of the Code, the cash or deferred arrangements included in the Plan and such other plans shall be treated as a single cash or deferred arrangement for purposes of Section 401(k) of the Code and Section 1.401(k)-1(b) of the Treasury Regulations. Plans are aggregated under this paragraph only if they have the same plan year. (ii) Plan Aggregation - Highly Compensated Employee. For purposes of this Section, if a Highly Compensated Employee is a participant in two or more cash or deferred arrangements of the Company, all such cash or deferred arrangements shall be treated as one cash or deferred arrangement for purposes of determining the ADP of the Highly Compensated Employee unless such aggregation is -24- prohibited by Section 1.401(k)-1(g)(1)(ii)(B) of the Treasury Regulations. If the cash or deferred arrangements have different plan years, this paragraph shall be applied by treating all cash or deferred arrangements ending with or within the same calendar year as a single arrangement. (iii) Family Aggregation. If a Highly Compensated Employee is subject to the family aggregation rules of Section 414(q)(6) of the Code because such employee is either a five-percent owner or one of the ten most Highly Compensated Employees, the combined ADP for the family group (which is treated as one Highly Compensated Employee) must be determined by combining the Salary Reduction Contributions, Compensation, and amounts treated as Salary Reduction Contributions, if any, of all the eligible family members. The Salary Reduction Contributions, Compensation, and amounts treated as Salary Reduction Contributions, if any, are disregarded for purposes of determining the Average ADP for the Non-Highly Compensated Employees. If a Participant is required to be aggregated as a member of more than one family group in the Plan, all Participants who are members of those family groups that include that Participant are aggregated as one family group. Section 3.12. Distribution of Excess Contributions. (a) In General. If for any Plan Year there are any Excess Contributions, then on or before the 15th day of the third month following the end of such Plan Year, each Highly Compensated Employee having the highest ADP shall have his or her portion of the Excess Contributions distributed to him or her until one of the two tests set forth in Section 3.11(a) is satisfied, or until his or her ADP equals the ADP of the Highly Compensated Employee or Employees having the next highest ADP. This process must be repeated until one of the two tests set forth in Section 3.11(a) is satisfied. In no case may the amount of Excess Contributions be distributed for a Plan Year with respect to a Highly Compensated Employee exceed the Highly Compensated Employee's Salary Reduction Contribution for the Plan Year. Distributions of Excess Contributions shall be made first from unmatched Salary Reduction Contributions and, thereafter, simultaneously from Salary Reduction Contributions that are matched and Matching Contributions that relate to such Salary Reduction Contributions. However, any such Matching Contributions which are not vested shall be forfeited in lieu of being distributed. Notwithstanding the foregoing, if the Plan -25- Administrator treats Qualified Matching Contributions as Salary Reduction Contributions for purposes of the ADP Test, distributions of Excess Contributions shall be made first from unmatched Salary Reduction Contributions and, thereafter, simultaneously from Salary Reduction Contributions and Qualified Matching Contributions that relate to such Salary Reduction Contributions. (b) Excess Contributions. The term "Excess Contributions" means, with respect to a Plan Year, the excess of Salary Reduction Contributions, and Qualified Matching Contributions, to the extent they are treated as Salary Reduction Contributions for purposes of the ADP Test, over the maximum amount of such contributions permitted under Section 3.11(a). Excess Contributions also shall include the income allocable to the excess described in the preceding sentence. The income allocable to Excess Contributions shall be determined in accordance with subsection (d). (c) Family Aggregation. The determination and correction of Excess Contributions of a Highly Compensated Employee whose ADP is determined in accordance with the family aggregation rules of Section 3.11(c)(3) is accomplished by reducing the ADP as required by Subsection (a) and allocating the Excess Contributions for the family group among the family members in proportion to the Salary Reduction Contributions of each family member that is combined to determine the ADP. (d) Allocable Income/Loss. A Participant's Excess Contributions with respect to a Plan Year shall be adjusted for any income or loss up to the date of distribution. The income or loss allocable to Excess Contributions is the sum of (1) income or loss for the Plan Year allocable to Salary Reduction Contributions and amounts treated as Salary Reduction Contributions multiplied by a fraction, the numerator of which is such Participant's Excess Contributions for the Plan Year and the denominator of which is the sum of (i) the total account balance of the Participant attributable to Salary Reduction Contributions and amounts treated as Salary Reduction Contributions, if any, as of the beginning of the Plan Year, plus (ii) the Participant's Salary Reduction Contributions and amounts treated as Salary Reduction Contributions, if any, for the Plan Year and for the Gap Period; and (2) ten percent of the amount determined under (1) above multiplied by the number of whole calendar months that have elapsed during the Gap Period. When calculating the number of calendar months in (2) above, a distribution occurring on or before the 15th day of the month will be treated as having been made on the last day of the preceding month, and a distribution occurring after such 15th day will be treated as having been made on the first day of the next subsequent month. For purposes of -26- this subsection, the Term "Gap Period" means the period between the end of the Plan Year and the date of distribution. Section 3.13. ACP Test. (a) In General. Annual allocations derived from Matching Contributions to the Company Contribution Accounts must satisfy one of the following tests: (i) The 125% Test. The Average ACP for Participants who are Highly Compensated Employees shall not exceed the Average ACP for Participants who are Nonhighly Compensated Employees multiplied by 1.25. (ii) The Alternative Limitation Test. The Average ACP for Participants who are Highly Compensated Employees shall not exceed the lesser of (i) the Average ACP for Participants who are Nonhighly Compensated Employees multiplied by two and (ii) the Average ACP for Participants who are Nonhighly Compensated Employees plus two percentage points or such lesser amount determined pursuant to the provisions of Section 3.13(c)(1) to prevent the multiple use of the alternative limitation under this Subsection and Section 3.11(a)(2). The Plan Administrator may calculate the ACPs of Participants and, thus, determine whether the Plan satisfies the ACP Test under this Section by taking into account Salary Reduction Contributions that are treated as Matching Contributions. The Plan Administrator may not treat Salary Reduction Contributions as Matching Contributions unless the Salary Reduction Contributions satisfy the conditions set forth in Section 1.401(m)-l(b)(5) of the Treasury Regulations. The Plan Administrator may not include Salary Reduction Contributions in the ACP Test unless the Plan satisfies the ADP Test both with and without the Salary Reduction Contributions included in this ACP Test. The Plan Administrator shall maintain records that demonstrate satisfaction of the ACP Test under this Section, including the extent to which the Plan treated Salary Reduction Contributions as Matching Contributions to satisfy the ACP Test. (b) Definitions. The following definitions apply for purposes of the Plan: (i) ACP, with respect to a Participant, shall mean the ratio (expressed as a percentage) of the amount of Matching Contributions and Discretionary Matching Contributions and amounts treated as Matching Contributions -27- allocated to the Participant's account for a Plan Year to the Participant's ACP Compensation for the Plan Year. (ii) Average ACP, with respect to a group of Participants, shall mean the average of the ACPs for the group of Participants. (iii) ACP Compensation shall have the same meaning as the term ADP Compensation, as defined in Section 3.11(b)(3). (c) Special Rules. (i) Multiple Use. If (i) the sum of the Average ADP of the entire group of eligible Highly Compensated Employees under the Plan and the Average ACP of the entire group of eligible Highly Compensated Employees under the Plan exceeds the Aggregate Limit, (ii) the Average ADP of the entire group of eligible Highly Compensated Employees exceeds the amount described in the 125% Test under Section 3.11(a)(1), and (iii) the Average ACP of the entire group of eligible Highly Compensated Employees exceeds the amount described in the 125% Test under Section 3.13(a)(1), then the Average ADP or ACP of those Highly Compensated Employees will be reduced so that the Aggregate Limit is not exceeded. The amount of the reduction of the Average ADP or ACP of the entire group of Highly Compensated Employees needed to satisfy the Aggregate Limit is calculated in the manner described in Section 3.12(a) or 3.14(a) and shall be treated as Excess Contributions or Excess Aggregate Contributions. For purposes of the Multiple Use Test, the ADP and the ACP are determined after any corrections required to meet the ADP Test and the ACP Test. The "Aggregate Limit" shall mean the greater of: (a) the sum of (i) 1.25 times the greater of (I) the Average ADP of the Nonhighly Compensated Employees for the Plan Year (the "Relevant ADP") or (II) the Average ACP of the Nonhighly Compensated Employees for the Plan Year (the "Relevant ACP"), and (ii) two percentage points plus the lesser of the Relevant ADP or the Relevant ACP, provided that this amount does not exceed two times the lesser of the Relevant ADP or the Relevant ACP; or (b) sum of (i) 1.25 times the lesser of the Relevant ADP or the Relevant ACP, and (ii) two percentage points plus the greater of the Relevant ADP or the Relevant ACP, above, provided that this amount does not exceed two times the greater of the Relevant ADP or the Relevant ACP. -28- (ii) Plan Aggregation - 410(b). For purposes of this Section, if the Plan and one or more other plans actually are aggregated for purposes of Section 410(b) (other than for purposes of the average percentage test) of the Code, then the Plan and such other plans shall be treated as a single plan for purposes of Section 401(m) of the Code. Plans are aggregated under this paragraph only if they have the same plan year. (iii) Plan Aggregation - Highly Compensated Employee. For purposes of this Section, if a Highly Compensated Employee is a participant in two or more plans of the Company to which employer contributions, matching contributions or both are made, all such plans shall be treated as one plan for purposes of determining the ACP of the Highly Compensated Employee unless such aggregation is prohibited by Section 1.401(m)-1(b)(3)(ii) of the Treasury Regulation. If the plans have different plan years, this paragraph shall be applied by treating all plans ending with or within the same calendar year as a single arrangement. (iv) Family Aggregation. If a Highly Compensated Employee is subject to the family aggregation rules of Section 414(q)(6) of the Code because such employee is either a five-percent owner or one of the ten most Highly Compensated Employees, the combined ACP for the family group (which is treated as one Highly Compensated Employee) must be determined by combining the Matching Contributions, Discretionary Matching Contributions, Compensation, and amounts treated as Matching Contributions, if any, of all the eligible family members. The Matching Contributions, Discretionary Matching Contributions, amounts treated as Matching Contributions, if any, and Compensation of all family members are disregarded for purposes of determining the Average ACP for the Highly Compensated Employees and the Non-Highly Compensated Employees. If a Participant is required to be aggregated as a member of more than one family group in the Plan, all Participants who are members of those family groups that include that Participant are aggregated as one group. Section 3.14. Distribution of Excess Aggregate Contributions. (a) In General. If for any Plan Year there are Excess Aggregate Contributions, then on or before the 15th day of the third month following the end of such Plan Year, each Highly Compensated Employee having the highest ACP shall have his or her portion of the Excess Aggregate Contributions distributed to him or her, or, if forfeitable, forfeit such nonvested Excess -29- Aggregate contributions attributable to Matching Contributions until one of the two tests set forth in Section 3.13(a) is satisfied, or until his or her ACP equals the ACP of the Highly Compensated Employee or Employees having the next highest ACP. This process must be repeated until one of the two tests set forth in Section 3.13(a) is satisfied. The Plan Administrator will treat a Highly Compensated Employee's allocable share of Excess Aggregate Contributions, on a pro rata basis, as attributable to Matching Contributions, Discretionary Matching Contributions, and to Salary Reduction Contributions treated as Matching Contributions for purposes of the ACP Test. (b) Excess Aggregate Contributions. The term "Excess Aggregate Contributions" means, with respect to a Plan Year, the excess of Matching Contributions, Discretionary Matching Contributions and Salary Reduction Contributions, to the extent they are treated as Matching Contributions for purposes of the ACP Test, over the maximum amount of such contributions permitted under Section 3.13(a). Excess Aggregate Contributions shall also include the income allocable to the excess described in the preceding sentence. The income allocable to Excess Aggregate Contributions shall be determined in accordance with Subsection (d). (c) Family Aggregation. The determination and correction of Excess Aggregate Contributions of a Highly Compensated Employee whose ACP is determined in accordance with the family aggregation rules of Section 3.13(c)(4) is accomplished by reducing the ACP as required by subsection (a) and allocating the Excess Aggregate Contributions for the family group among the family members in proportion to the Matching Contributions, Discretionary Matching Contributions and amounts treated as Matching Contributions for purposes of the ACP Test, if any, of each family member that are combined to determine this ACP. (d) Allocable Income/Loss. A Participant's Excess Aggregate Contributions with respect to a Plan Year shall be adjusted for any income or loss up to the date of distribution. The income or loss allocable to Excess Aggregate Contributions is the sum of (1) income or loss for the Plan Year allocable to Matching Contributions, Discretionary Matching Contributions and amounts treated as Matching Contributions, if any, multiplied by a fraction, the numerator of which is the Participant's Excess Aggregate Contributions for the Plan Year and the denominator of which is the sum of (i) the total account balance of the Participant attributable to Matching Contributions, Discretionary Matching Contributions and amounts treated as Matching -30- Contributions, if any, as of the beginning of the Plan Year, plus (ii) the Participant's Matching Contributions, Discretionary Matching Contributions, and amounts treated as Matching Contributions, if any, for the Plan Year and for the Gap Period, and (2) ten percent of the amount determined under (1) above multiplied by the number of whole calendar months that have elapsed during the Gap Period. When calculating the number of months in (2) above, a distribution occurring on or before the 15th day of the month will be treated as having been made on the last day of the preceding month, and a distribution occurring after such 15th day will be treated as having been made on the first day of the next subsequent month. For purposes of this subsection, the term "Gap Period" means the period between the end of the Plan Year and the date of distribution. Section 3.15. Distributions of Excess Deferrals. (a) In General. Excess Deferrals by a Participant shall be distributed to such Participant no later than the first April 15 following the close of the Participant's taxable year, unless the Participant notifies the Plan that such Excess Deferrals or a portion thereof shall be distributed from a plan other than the Plan. Notice under the preceding sentence must be submitted to the Plan Administrator in writing no later than the first March 1 following the close of the Participant's taxable year. Notwithstanding the foregoing, a Participant is deemed to have notified the Plan of Excess Deferrals for the taxable year taking into account only Salary Reduction Contributions under the Plan. (b) Excess Deferrals. The term "Excess Deferrals" means, with respect to a Participant, Salary Reduction Contributions, together with other elective deferrals (as defined in Section 402(g)(3) of the Code), in excess of the dollar limitation under Section 3.1(c). Excess Deferrals also shall include the income allocable to the excess described in the preceding sentence. The income allocable to Excess Deferrals shall be determined in accordance with Subsection (c). (c) Allocable Income/Loss. A Participant's Excess Deferrals with respect to a taxable year shall be adjusted for any income or loss up to the date of distribution. The income or loss allocable to Excess Deferrals is the sum of (1) income or loss for the taxable year allocable to Salary Reduction Contributions multiplied by a fraction, the numerator of which is the Participant's Excess Deferrals for the taxable year and the denominator of which is the sum of (i) the total account balance of the Participant attributable to Salary Reduction Contributions as of the beginning of the taxable year, plus (ii) the Participant's Salary Reduction Contributions for the taxable year -31- and for the Gap Period, and (2) ten percent of the amount determined under (1) above, multiplied by the number of whole calendar months that have elapsed during the Gap Period. When calculating the number of months in (2), a distribution occurring on or before the 15th day of the month will be treated as having been made on the last day of the preceding month, and a distribution occurring after such 15th day will be treated as having been made on the first day of the next subsequent month. For purposes of this subsection, the term "Gap Period" means the period between the end of the taxable year and the date of distribution. Section 3.16. Coordinating Corrective Distributions. (a) Correcting Excess Deferrals After Distributing Excess Contributions. The amount of Excess Deferrals that may be distributed under Section 3.15 with respect to a Participant for a taxable year shall be reduced by any Excess Contributions previously distributed with respect to such Participant for the Plan Year beginning with or within such taxable year. (b) Correcting Excess Contributions After Distributing Excess Deferrals. The amount of Excess Contributions to be distributed under Section 3.12(a) with respect to a Participant for a Plan Year shall be reduced by any Excess Deferrals previously distributed to such Participant for the Participant's taxable year ending with or within such Plan Year. -32- ARTICLE 4 NONFORFEITABLE RIGHT TO BENEFITS -------------------------------- Section 4.1. Definitions. The following definitions will apply for purposes of the Plan: (a) Normal Retirement Date means the later of the Participant's 65th birthday and the fifth anniversary of the date the Participant commenced participation in the Plan. (b) Early Retirement Date means the later of the Participant's 55th birthday and the date on which the Participant completes five Years of Service. A Year of Service means a Plan Year during which an employee completes at least 1,000 Hours of Service. (c) Disability Retirement Date means the date on which a determination is made by the Plan Administrator that a Participant has a Total and Permanent Disability. (d) Total and Permanent Disability means a mental or physical condition, as determined by the Plan Administrator, or by a licensed practicing physician selected by the Plan Administrator, which is expected to be permanent or of long and indefinite duration, and which renders the Participant incapable of performing his or her customary duties for the Company. (e) Annuity Starting Date means either (i) the first day of the first period for which a benefit is paid as an annuity to the Participant, or (ii) if the Participant's benefit is not payable in the form of an annuity, the first day on which all events have occurred which entitle the Participant to such benefit. (f) Deferred Retirement means the period beginning with a Participant's Normal Retirement Date and ending with the date that he or she actually retires from the Employer. (g) Participant's Required Beginning Date means either (i) with regard to any Participant whose date of birth is after June 30, 1917, April 1 of the calendar year following the Participant's 70-1/2 Year, or (ii) with regard to any Participant whose date of birth is before July 1, 1917, April 1 of the calendar year following the later of (A) the Participant's 70-1/2 Year or (B) the calendar year in which the Participant retires. (h) 70-1/2 Year means, with respect to any Participant, the calendar year which includes the date that is -33- six months after the Participant's 70th birthday. Section 4.2. Determination of Nonforfeitable Rights. A Participant shall at all times be fully vested in, and have a 100% nonforfeitable right to his or her Savings Account and Company Contribution Account. -34- ARTICLE 5 DISTRIBUTION OF BENEFITS ------------------------ Section 5.1. Forms and Time of Benefit Distributions. (a) In General. A Participant shall be entitled to receive a distribution of his or her benefits under the Plan if such Participant has separated from the service of the Company (or Organization Under Common Control). (b) Commencement of Distributions. Unless a Participant elects otherwise, distributions of benefits to which a Participant becomes entitled under Subsection (a) shall commence as soon as practicable following the satisfaction of the conditions set forth in such Subsection (a). Notwithstanding the foregoing, distributions of a benefit to a Participant under the Plan shall commence no later than the earlier of: (i) the Participant's Required Beginning Date; or (ii) the 60th day after the close of the Plan Year in which occurs the latest of the following: (1) the date on which the Participant attains the earlier of age 65 or his or her Normal Retirement Date, (2) the 10th anniversary of the year in which the Participant commenced participation in the Plan, (3) the date the Participant terminates his service with the Company (or Organization Under Common Control), or (4) a date which is later than the dates described in (i), (ii) and (iii) above and which is specified in a written election made by the Participant. (c) Form of Distributions. At the time a Participant becomes entitled to receive a distribution of a benefit in accordance with this Section he or she shall receive such benefit in the Normal Form of Benefit unless the alternative form of benefit set forth in Section 5.3 is properly elected. Section 5.2. Normal Form of Benefit. The Normal Form of Benefit is a single lump sum payment in cash or property of -35- the Participant's entire nonforfeitable interest in the Plan. Section 5.3. Alternative Form of Benefit. A Participant who separates from service with the Company on or after his or her Normal Retirement Date, Early Retirement Date or Disability Retirement Date and who properly waives the Normal Form of Benefit may elect the following alternative form of benefit. Such alternative form of benefit shall be actuarially equivalent to the Participant's nonforfeitable interest in his or her accounts under the Plan. Under this alternative form, a Participant receives his or her benefit in installments payable at least annually for a period of years which shall not be greater than or equal to the Participant's life expectancy determined as of his or her Annuity Starting Date. The sum of the installments for each year shall be a fixed dollar amount (as elected by the Participant with the consent of the Plan Administrator) which shall not be less than the annual installment determined under the requirements of Section 401(a)(9) of the Code. All such installments shall be in cash or other property and the installment or installments for the Participant's 70-1/2 Year and all subsequent years shall be paid to the Participant on or before December 31 of such year. The frequency of the installments shall be determined by the Participant after consultation with the Plan Administrator, but shall be made no less frequently than annually. Section 5.4. Designation of Death Beneficiary. Each Participant shall designate the beneficiary for the benefits provided on his or her death under the Plan. Such designation may be changed from time to time. All designations shall be made on forms provided by and filed with the Plan Administrator. A designation made by a Participant under the Fisher- Price Profit Sharing and Retirement Savings Plan will continue to remain in effect after the merger of such plan into this Plan only for a Participant who had no account balance under this Plan immediately prior to such merger. In all other cases, a death beneficiary designation made under this Plan shall supersede a designation made under the Fisher-Price Profit Sharing and Retirement Savings Plan after the merger of the two plans on or about July 1, 1994. A married Participant may designate a beneficiary other than his or her spouse if such spouse consents in writing to such designation. Such consent shall acknowledge the effect of such designation and must be witnessed by a representative of the Plan Administrator or a notary public. No such designation shall be -36- effective if the beneficiary may be changed without the consent of the spouse, unless the spouse's consent expressly permits changes in beneficiary designations by the Participant without any requirement of further consent of the spouse. Any consent by a spouse under this Section 5.4 shall be effective only with respect to such spouse. In the absence of an otherwise effective designation under the Plan, death benefits shall be payable in the following order of priority: (a) to the Participant's spouse, or if there is none; (b) to the Participant's estate. Section 5.5. Death of Participant. If a Participant dies prior to what would otherwise have been his or her Annuity Starting Date, the Participant's entire nonforfeitable interest in the Plan shall be distributed to his or her beneficiary in a single lump sum payment in cash or property by December 31 of the calendar year in which occurs the fifth anniversary of the Participant's death. Section 5.6. Early Distribution Consent. (a) In General. If the Participant's nonforfeitable interest in the Plan exceeds $3,500, or has ever exceeded $3,500 at the time of any prior distribution, no benefit shall be paid to the Participant prior to the later of his Normal Retirement Date or age 62 unless the Participant consents in writing to the commencement of the distribution of the benefit. If the required consent is not obtained, payment of the benefit shall commence as otherwise provided under this Article. (b) Valid Consent. A Participant's consent under this Section shall not be valid unless the Participant has received a notice containing a general description of the material features of, and an explanation of, the relative values of the alternative form of benefit available under the Plan. The notice must be written in a manner that would satisfy the notice requirements of section 417(a)(3) of the Code. Such notice shall be provided no less than 30 days and no more than 90 days before the Annuity Starting Date. In addition, the Participant must be informed of his or her right to defer receipt of the distribution. A consent also will not be valid if a significant detriment is imposed under the Plan on any Participant who does not consent to the distribution. Finally, written consent of the Participant to the distribution must not be made before the Participant receives the aforementioned notice and must not be made more than 90 days -37- before the Annuity Starting Date. Notwithstanding the foregoing, if a distribution is one to which Sections 401(a)(11) and 417 of the Code do not apply, such distribution may commence less than 30 days after the aforementioned notice is given, provided that: (i) the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution and a particular distribution option, and (ii) the Participant, after receiving the notice, affirmatively elects a distribution. Section 5.7. Minimum Distribution Required. If the Deferred Retirement of any Participant extends to the Participant's Required Beginning Date, the Participant must begin to receive his or her benefit under the Plan pursuant to the Normal Form of Benefit. Notwithstanding anything in the Plan to the contrary, the sum of payments made under this Section during a calendar year must be greater than or equal to the annual installment required by Section 401(a)(9) of the Code and the regulations thereunder. Section 5.8. Cash-Outs. (a) Definitions. The following definitions will apply for purposes of this Article: (i) Cash-Out means Involuntary Cash-Outs and Voluntary Cash-Outs. (ii) Involuntary Cash-Out means a distribution made in accordance with Subsection (b). (iii) Voluntary Cash-Out means a distribution made in accordance with Subsection (c). (b) Involuntary Cash-Outs of Small Benefits. Notwithstanding any other provision of this Article, a Participant who has separated from the service of the Company and who is no longer employed by any Organization Under Common Control shall receive a distribution of his or her entire nonforfeitable interest in the Plan in a single lump sum payment of cash or property, provided that the value of such nonforfeitable interest is equal to or less than $3,500, determined as of the Valuation Date coincident with or immediately preceding his or her separation from service. A -38- distribution under this Subsection shall be made as soon as administratively feasible following the Participant's separation from service. (c) Cash-Outs of Benefits in Excess of $3,500. Notwithstanding any other provision of this Article, a Participant who has separated from the service of the Company, and who is no longer employed by any Organization Under Common Control and whose nonforfeitable interest in the Plan exceeds $3,500 may elect to receive a distribution of his or her entire nonforfeitable interest in the Plan prior to attaining his or her Normal Retirement Date or Disability Retirement Date. If a Participant elects to receive a distribution of his or her nonforfeitable interest in the Plan in accordance with this Subsection, he or she shall receive such benefit in the form of a single lump sum payment in cash or property. A distribution under this Subsection shall commence as soon as administratively feasible following the Participant's separation from service. Section 5.9. Hardship Withdrawals. Upon the application of a Participant, the Plan Administrator, in accordance with a uniform, nondiscriminatory policy, may permit such Participant to withdraw all or a portion of his or her interest in any account under the Plan needed for the purpose of alleviating extraordinary financial hardship. Only those Participants who are employed by the Company shall be permitted to apply for such withdrawals. Participants who are retired, terminated, on leave of absence or on layoff will not be permitted distributions under this Section. For purposes of this Section, a distribution is on account of extraordinary financial hardship if the distribution is made on account of immediate and heavy financial need of the Participant and is necessary to satisfy such financial need. The determination of whether a Participant has an immediate and heavy financial need is to be made on the basis of all relevant facts and circumstances. A financial need shall not fail to qualify as immediate and heavy merely because such need was reasonably foreseeable or voluntarily incurred by the Participant. A distribution will be treated as necessary to satisfy the financial need to the extent that it cannot be satisfied from other resources that are reasonably available to the Participant. Unless otherwise proscribed by applicable Treasury Regulations, a hardship may be determined to exist as a result of: (a) extraordinary expenses arising from the sickness or disability of a Participant or a member of his or her family; (b) purchasing real property which is to serve as the principal residence of the Participant; -39- (c) financing the cost of education beyond the secondary level for the Participant or a member of his or her family; or (d) the need to prevent the eviction of the Participant from his or her principal residence or foreclosure on the mortgage on the Participant's principal residence. A Participant making application under this Section shall have the burden of presenting to the Plan Administrator proof of such need and the amount required to meet the immediate financial need created by the hardship and not reasonably available from other resources of the Participant. The Plan Administrator shall not permit withdrawal under this Section 5.9 without first receiving such proof. The Plan Administrator shall adopt uniform rules of general applicability regarding maximum amounts, timing and frequency of withdrawals permitted under this Section and shall also adopt rules regarding which accounts shall be charged with any such withdrawal. Section 5.10. Loans to Participants. (a) Trustees May Make Loans. Upon written direction of the Plan Administrator, the Trustees shall make loans to Participants, who are employed by the Company, pursuant to the terms and conditions set forth in this Section and any additional rules that may be adopted. Such loans shall be made available to Participants who are on the active payroll of the Company on a reasonably equivalent basis and shall not be made available to Highly Compensated Employees, officers or shareholders in an amount greater than the amount made available to other Participants. Loans shall not be made available to Participants who are retired, terminated, on leave of absence or on layoff. (b) Written Applications. Loan applications must be in writing, signed by the applying Participant and submitted to the Plan Administrator. The application of the Participant shall be executed within 90 days prior to the making of the loan. (c) Limit on Amount of Loan. The dollar amount of a loan to any Participant, when added to any other loans granted under this Section, shall not exceed the lesser of: (i) $50,000, reduced by the excess (if any) of- (a) the highest outstanding balance of loans from the Plan during the one-year period -40- ending on the day before the date on which such loan was made, over (b) the outstanding balance of loans from the Plan on the date on which such loan was made; or (ii) one-half of the present value of the nonforfeitable accrued benefit of the employee under the Plan. The Plan Administrator, pursuant to nondiscriminatory uniform rules of general application, may impose a minimum loan amount requirement and may limit the maximum number of loans which may be outstanding under the Plan. (d) Term and Interest Rate. The term of any loan granted under this Section shall not exceed four years. Notwithstanding the previous sentence, in the case of a loan used to acquire a dwelling unit which within a reasonable time is to be used as a principal residence of the Participant the term of such loan shall not exceed fifteen years. The unpaid balance of any loan shall bear a fixed rate of interest equal to one percent plus the annual prime rate announced by the Trustee (or any other financial institution selected by the Plan Administrator) for its nonfiduciary business customers as in effect at the beginning of the month in which the loan is granted or such other reasonable rate of interest established by the Plan Administrator. The loan must be repaid in substantially level payments (with payments not less frequently than quarterly) over the term of the loan. (e) Promissory Note Required. Each such loan shall be evidenced by a promissory note or notes made, executed and delivered by the applying Participant to the Plan Administrator, and each such note or notes shall be in such form and contain such terms and conditions as the Plan Administrator shall require. (f) Security. Each loan to a Participant under this Section must be adequately secured by the Participant's nonforfeitable interest in the Plan. No more than 50% of the Participant's nonforfeitable interest in the Plan may be considered by the Plan as security for the outstanding balance of all Plan loans made to that Participant. On default, the balance of the amount owed by a Participant may be charged by the Plan Administrator or Trustee against such Participant's interest in the Plan. However, foreclosure on a note and attachment of security shall not occur until a distribution under the Plan occurs. If any balance -41- remains owing on the loan after the balance of the amount owed has been charged against such interest in the Plan, such Participant shall remain liable for such remaining balance and the Plan Administrator or Trustee may take any action it deems advisable to collect such remaining balance from such Participant. (g) Directed Investment. Any application for a loan under this Section shall constitute a direction by the Participant that his or her nonforfeitable interest in the Plan be invested in such loan. If a loan is made under this Section, the value of a Participant's account shall be adjusted as of each valuation date to reflect any principal and interest credited to such account as a result of the repayment of the loan by the Participant hereunder. -42- ARTICLE 6 ACCOUNT VALUATIONS AND ALLOCATION OF NET EARNINGS ------------------------------------------------- Section 6.1. Valuation Dates. The Plan Administrator shall direct the Trustee to determine the value of the Trust on each Valuation Date. For purposes of the Plan, "Valuation Date" means each of the following dates: (a) the last Business Day of each Plan Year; and (b) any other Business Day of the Plan Year as determined by the Plan Administrator pursuant to a nondiscriminatory policy. Section 6.2. Method of Valuation of Trust Assets. As of each Valuation Date, the Trustee shall value the assets held in the Trust at their fair market value on such date. In determining the fair market value of assets other than securities for which trading or bid prices can be obtained or cash or cash equivalents, the Trustee may appraise such assets themselves, or in its discretion employ one or more appraisers for that purpose and rely on the values established by such appraiser or appraisers. All items of income and expenses shall be taken into account either on a cash receipts and disbursements basis or on an accrual basis, as determined by the Trustee in a consistent manner. Section 6.3. Allocation of Net Earnings. As of each Valuation Date, the Plan Administrator shall (or direct the Trustee to) allocate the net earnings or losses of the Trust for the period ending with respect to such Valuation Date to each Participant's account or accounts in the ratio that each such account balance bears to all Participants' account balances as of the immediately preceding Valuation Date adjusted for charges against and credits to each such account for all payments, distributions and contributions that occurred during such period. Notwithstanding the foregoing, in making the adjustments required by this Section the amount of any net earnings or losses with respect to each Separate Fund, as hereafter defined, shall be allocated solely with respect to such Separate Fund. Section 6.4. Notification to Participants. The Plan Administrator shall, upon request, make available to each Participant a notice of the amount of his or her interest in the Trust as of the close of each Plan Year. Such interest shall consist of an amount equal to the total amounts credited to his or her accounts as a result of the adjustments under Section 6.3. -43- Section 6.5. Directed Investment Accounts. Notwithstanding any other provisions of the Plan or the Trust, a Participant or beneficiary may direct in writing that the funds allocable to his or her accounts be invested by the Trustee in one or more investment funds established by the Plan Administrator (referred to collectively as the Separate Funds and individually as a Separate Fund). By way of illustration but not limitation, such Separate Funds may include mutual funds or the following: (i) One or more Separate Funds which may be invested primarily in stocks, other securities or other property including bonds, notes and debentures, the income from which may be fixed or limited. Such Separate Funds may be established to provide a variety of investment objectives and varying degrees of risk such as (a) capital preservation and generation of income, (b) capital appreciation and (c) liquidity with a high degree of assurance of repayment. (ii) If it is permitted, in the sole discretion of the Plan Administrator, a "Mattel Stock Fund" shall be established, which shall be primarily invested by the Trustee in the common stock of Mattel, Inc., hereinafter called "Mattel Stock". The Mattel Stock Fund may be unitized for valuation purposes, and a portion of its assets may be held in cash or other short-term investments. Notwithstanding the preceding, and without the adoption of any Plan amendment, the Plan Administrator may discontinue any of the funds established under this Section and it may establish such substitute funds or additional funds as it may determine in its sole discretion. The Plan Administrator shall establish uniform rules of general applicability designating the amounts of each Participant's accounts with respect to any Plan Year which may be invested in such Separate Funds. The Plan Administrator shall make available to each Participant an election form or electronic or telephonic procedures to designate the percentage or the amount allocable to his or her accounts which shall be invested in each Separate Fund. In the discretion of the Plan Administrator, investment elections hereunder may be made at such time or times during a Plan Year as determined by the Plan Administrator. Any written election forms or other written designations shall be filed with the Plan Administrator not later than a date fixed by the Plan Administrator in order for such -44- form or designation to be effective by a specified date. An election form or other designation filed by a Participant in connection with the Plan shall be deemed to be filed when it is actually received by the Plan Administrator at the address specified on such form or any accompanying instructions. Procedures for electronic or telephonic elections under this Section may be established, changed or modified by the Plan Administrator in its discretion and shall be communicated to Participants. Electronic or telephonic elections shall be effective as provided in the procedures governing such elections. Any Participant who does not provide an election hereunder may be deemed to have elected the same investment directions as last previously specified. If no effective election has been made by a Participant, his or her accounts shall be invested by the Trustee in such fund or funds designated by the Plan Administrator. To the extent investment of assets are directed herein by the Participants, the fiduciary responsibility of the Trustee shall be limited to the extent provided in Section 404(c) of ERISA. -45- ARTICLE 7 THE TRUST --------- Section 7.1. Continuation of the Trust. The Company shall continue a Trust under the Plan. The Trust was established pursuant to a separate Trust Agreement executed by the Company and the Trustee. The Trust shall consist of such sums of money and such other property acceptable to the Trustee as shall be paid or delivered to the Trustee, together with the earnings and profits thereon. All such money and other property, all investments made therewith and the proceeds thereof, and all earnings and profits thereon, less the payments and distributions therefrom, are part of the Trust to be administered in accordance with the Trust and the terms of the Plan. Section 7.2. Disbursements Limited to Trust Assets. Nothing contained in this Plan shall be construed as obligating the Company or the Trustee to make any payment or disbursements except from funds or property held under the Trust. Section 7.3. Expenses of Administration and Litigation. The reasonable costs, expenses, taxes and liabilities incurred in connection with the administration of the Plan (including, without limitation, Trustee compensation, legal fees, and accounting and actuarial expenses) or in connection with any litigation involving the Trust shall be paid from the assets of the Trust, unless paid by the Company. No person who is a disqualified person (as defined in Section 4975 of the Code) and who receives full-time compensation from the Company, may receive compensation from the Trust, although he or she may be reimbursed for expenses properly and actually incurred in connection with the administration of the Plan. The Plan Administrator shall direct the Trustee in the payment of expenses and liabilities pursuant to this Section. Section 7.4. Pooled Investment Fund or Group Trust. Part or all of the assets of the Trust, from time to time, may be transferred to (a) any pooled investment fund of an insurance company or (b) a common or collective trust fund or pooled investment fund maintained by a bank or trust company which contemplates the commingling for investment purposes of such Trust assets with assets of other trusts. Such transfers shall be made in a manner consistent with the provisions of Section 4975(d)(8) of the Code. -46- Section 7.5. Mattel Stock Fund. (a) Voting of Shares in Mattel Stock Fund. Participants with amounts invested in the Mattel Stock Fund may direct the Trustee with respect to the voting of shares held in such Funds in accordance with this Section. The Company or the Trustee shall provide each Participant who has any portion of his or her accounts invested in the Mattel Stock Fund with the regular proxy materials or other information relating to the voting of Mattel Stock normally given to shareholders. Under rules administered by the Company and set forth under the terms of the Trust Agreement, such Participants may direct the Trustee as to the manner in which shares of Mattel Stock held by the Trustee are to be voted. Pursuant to such rules and on forms provided by the Company, each Participant may submit a direction as to the voting of the number of shares of Mattel Stock equal in value to his or her proportionate interest in the Mattel Stock Fund. The Trustee shall then vote such shares in accordance with the directions received from Participants. The Trustee shall not vote shares of Mattel Stock for which it has receive no direction from the Participants. (b) Tender Offers. If a tender offer (for which a filing has been made with the SEC which purports to comply with the requirements of Section 14(b) of the Securities Exchange Act of 1934 and the corresponding SEC Rules) is made for Mattel Stock, each Participant who has any portion of his or her accounts invested in the Mattel Stock Fund may direct the Trustee to tender the number of shares equal in value to his or her proportionate interest in the Mattel Stock Fund. Directions to the Trustee with respect to tender offers under this Section shall be made in accordance with the rules administered by the Company and set forth under the terms of the Trust Agreement. If any Participant fails to direct the Trustee to tender shares hereunder, the Trustee shall not tender such shares. Any cash or securities received by the Trustee as a result of a tender offer for shares of Mattel Stock shall be transferred to such Separate Fund as the Participant may elect. -47- ARTICLE 8 TOP-HEAVY PROVISIONS -------------------- Section 8.1. Definitions. The following definitions will apply for purposes of this Article: (a) Top-Heavy Plan. The Plan shall be considered a Top-Heavy Plan for a Plan Year if, on the Determination Date, the Cumulative Account Balances of Key Employees exceed 60% of the Cumulative Account Balances of all employees under the Plan or under all plans included in an Aggregation Group if the Plan is included in an Aggregation Group. The computation in the preceding sentence shall be made in accordance with Section 416 of the Code and the regulations thereunder. (b) Determination Date means the last day of the preceding Plan Year or, in the case of the first Plan Year, the last day of such first Plan Year. (c) Key Employee means any employee of the Company (including a beneficiary of such employee) who at any time during the Plan Year, or any of the four preceding Plan Years, is a key employee as defined in Section 416 of the Code and the regulations thereunder. Former Key Employees are not Key Employees and are excluded entirely in determining whether the Plan is a Top-Heavy Plan. (d) Cumulative Account Balances, with respect to any Participant means, the value, determined as of the Top-Heavy Valuation Date, of the Participant's accounts under the Plan, plus the sum of the present value of the cumulative accrued benefits for such Participant under all defined benefit plans included in an Aggregation Group and the aggregate of the accounts of such Participant under all defined contribution plans included in an Aggregation Group. For purposes of the preceding sentence, Cumulative Account Balances shall not include the value of the accounts or the present value of the cumulative accrued benefits of any Participant who has not performed services for the Company at any time during the 5-year period ending on the Determination Date. Except to the extent provided in the regulations, any rollover contribution (or similar transfer) initiated by the Participant, and made after December 31, 1983, to a plan shall not be taken into account with respect to the Plan for purposes of determining whether the Plan is a Top-Heavy Plan. (e) Aggregation Group shall include (1) each plan (including terminated plans) of the Company in which a Key -48- Employee is a participant during the Plan Year, or any of the four preceding Plan Years, and (2) each other plan (including terminated plans) of the Company which enables any plan in which a Key Employee participates to meet the requirements of Sections 401(a)(4) or 410 of the Code. Any other plan of the Company may be included in an Aggregation Group if such Aggregation Group would continue to meet the requirements of Sections 401(a)(4) and 410 of the Code with such plan being taken into account. In computing the value of accounts and benefits under this Subsection, any distribution made with respect to a Participant from the Plan during the 5-year period ending on the Determination Date and any distribution under a terminated plan which, if it had not been terminated, would have been required to be included in an Aggregation Group shall be added to the Participant's Cumulative Account Balances. (f) Top-Heavy Valuation Date means, with respect to each Plan Year, the last Valuation Date of such Plan Year. (g) Top-Heavy Compensation has the same meaning as defined in Section 415(c)(3) of the Code, but including amounts contributed by the Company pursuant to a salary reduction agreement which are excludable from the Participant's gross income under Sections 125, 402(a)(8), 402(h) or 403(b) of the Code. (h) Qualified Top-Heavy Participant, for any Plan Year in which the Plan is a Top-Heavy Plan, means any Participant who has not separated from service at the end of such Plan Year, regardless of the Participant's Hours of Service or Compensation for such year. (i) Super Top-Heavy Plan. The Plan shall be considered a Super Top-Heavy Plan if the Plan would meet the definition of a Top-Heavy Plan if 90% were substituted for 60% in each place it appears in Subsection (a). Section 8.2. Top-Heavy Rules. (a) Application of Top-Heavy Rules. If the Plan is a Top-Heavy Plan with respect to a Plan Year, the provisions of this Section shall become applicable for such Plan Year, notwithstanding any other provision of the Plan to the contrary. (b) Minimum Company Contribution. In any Plan Year in which the Plan is a Top-Heavy Plan, there shall be allocated to each Qualified Top-Heavy Participant, before any other allocations are made under the Plan, the lesser of 3% of the Participant's Top-Heavy Compensation or the percentage at which contributions and forfeitures are allocated under the Plan for -49- the Plan year for the Key Employee for whom such percentage is the highest for the Plan Year. The latter percentage shall be determined by dividing the contributions (including Salary Reduction Contributions) and forfeitures allocated to such Key Employee by his or her Top Heavy Compensation for the Plan Year. For purposes of this Section, Salary Reduction Contributions, matching contributions required to pass the actual deferral percentage test of Section 401(k)(3) of the Code, and matching contributions required to pass the actual contribution percentage test of Section 401(m) of the Code, of a non-Key Employee may not be considered in meeting this minimum contribution requirement. If in any Plan Year the Plan is a Top-Heavy Plan, and a non-Key Employee who is eligible to be a participant hereunder also participates in a defined benefit plan of the Company, the minimum contribution shall be provided under the defined benefit plan. If in any Plan Year this Plan is a Top-Heavy Plan, and a non-Key Employee who is eligible to be a participant hereunder also participates in a defined benefit plan of the Company, the minimum contribution shall be provided under the Plan. (c) Limitation on Contributions and Benefit. If the Plan is a Top-Heavy Plan in any Plan Year, 1.00 shall be substituted for 1.25 in calculating the Defined Benefit Fraction and the Defined Contribution Fraction under Section 3.10. Notwithstanding the preceding sentence, in any Plan Year in which the Plan is a Top-Heavy Plan but not a Super Top-Heavy Plan, 1.00 shall not be substituted for 1.25 if the Company makes an additional minimum Company contribution under Subsection (b) by substituting 4% for 3%. (d) Special Rule for Non-Key Employees in Two Plans. If (1) the Plan is a Top-Heavy Plan in any Plan Year, and (2) a non-Key Employee participates both in the Plan and in a defined benefit plan which is top-heavy and which is included in an Aggregation Group, 5% shall be substituted for 3% in Subsection (b) and 7-1/2% shall be substituted for 4% in Subsection (c). -50- ARTICLE 9 ADMINISTRATION OF PLAN ---------------------- Section 9.1. Company as Plan Administrator. The Company is the Plan Administrator and shall be a "named fiduciary" under Section 402(a)(1) of ERISA. Section 9.2. Responsibility for Administration of the Plan. The Plan Administrator shall have the authority to control and manage the operation and administration of the Plan for the exclusive benefit of the Participants and their beneficiaries as required under ERISA and the Code, subject to the specific terms of the Plan. The Plan Administrator shall have the responsibility to file and distribute reports and returns to government agencies and Participants and beneficiaries as required of Plan Administrators under ERISA and the Code. The Plan Administrator shall have the authority to determine, in accordance with the terms of the Plan, any questions as to the eligibility of an employee to become a Participant, the amount of contribution allocated to a Participant or the determination of a Participant's interest in the Trust at any time. Section 9.3. Expenses. The Company or the Trust, as determined in accordance with Section 7.3, may pay the expenses of the Plan Administrator incurred in connection with the administration of the Plan. Section 9.4. Liability and Indemnification. Except for their own negligence, willful misconduct, or breach of fiduciary duty, the Plan Administrator and any individual to whom responsibilities have been delegated under Section 9.6 shall not be liable to anyone for any act or omission in the course of the administration of the Plan or management of the Trust. In any case, to the extent permitted by law, the Company shall indemnify any employee of the Company to whom responsibilities have been delegated under Section 9.6 against any liability (not reimbursed by insurance) incurred in the course of the administration of the Plan or the management of Trust assets, except liability arising from their own negligence, willful misconduct or breach of fiduciary duty. Section 9.5. Agents. The Plan Administrator may employ such agents, including counsel, as it may deem advisable for the administration of the Plan. Such agents need not be -51- Participants under the Plan. Section 9.6. Delegation of Authority. (a) In General. The Company, by a written resolution approved by its Board of Directors, may delegate responsibilities under the Plan among employees, officers, offices or committees to carry out such responsibilities in accordance with the terms of the Plan or the Trust Agreement. (b) Liability. If the Plan Administrator delegates responsibilities to certain persons under subsection (a), such persons shall not be liable for any act or omission of other persons to whom such responsibilities are delegated except as provided in Section 405(c)(2) of ERISA. Section 9.7. Defect or Omission. The Plan Administrator shall refer any defect, omission or inconsistency in the Plan to the Board of Directors of the Company for such action as may be necessary to correct such defect, supply such omission, or reconcile such inconsistency. Section 9.8. Funding Policy. The Board of Directors of the Company or a committee authorized by the Board shall establish and review the funding policy of the Plan taking into consideration the short-term need for liquidity in Trust assets and the long-term goals for investment growth. The Board of Directors or the authorized committee shall communicate the funding policy and any changes of funding policy in writing to the Plan Administrator and the Trustee. Section 9.9. Records. The acts and decisions of the Plan Administrator shall be duly recorded. The Plan Administrator shall make available for examination by any Participant during the business hours of the Company a copy of the Plan and those records which demonstrate the determination of amounts credited to the account of and held by the Plan Administrator for the benefit of such Participant. Section 9.10. Claims Procedure. (a) Filing a Claim for Benefits. If an employee disputes a decision of the Plan Administrator with respect to such employee's eligibility to become a Participant, if a Participant disputes the amount of contribution allocated to such Participant or the determination of his or her interest in the Trust, or if an employee, a Participant or his or her beneficiary does not receive benefits to which he or she believes he or she is entitled, such person (the "Claimant") may file a claim in writing with the Plan Administrator. -52- (b) Notification of Decision of Plan Administrator. If the claim is totally or partially denied, the Plan Administrator shall notify the Claimant in writing within 90 days after the claim has been received (unless special circumstances require an extension of up to 90 additional days). The written notice shall state the specific reason for denial of the claim and a specific reference to the Plan provisions on which the denial is based. It shall describe any additional material the Claimant may need to submit to the Plan Administrator to have the claim approved, and shall give the reasons such material is necessary. in addition, the notice shall explain the claim review procedure. (c) Claim Review Procedure. If the Claimant receives a notice that the claim has been denied, the Claimant, or his or her authorized representative, may appeal to the Plan Administrator for a review of the claim. The Claimant must submit a request for review in writing to the Plan Administrator within 60 days after the date the written notice of denial of the claim is received. The Claimant, or his or her representative, may then review Plan documents which pertain to the claim and may submit issues and comments in writing to the Plan Administrator. The Plan Administrator shall then deliver to the Claimant a written determination of the claim, including specific reasons for the decision, no later than 60 days after the date the Plan Administrator received the request for review (unless special circumstances require an extension of up to 60 additional days). The decision of the Plan Administrator shall be final and conclusive. -53- ARTICLE 10 RIGHT TO ALTER, AMEND OR TERMINATE ---------------------------------- Section 10.1. Plan Amendments. (a) Right to Alter or Amend. Subject to Subsection (b), the Board of Directors of the Company reserves the right to amend, alter, modify or suspend, in whole or in part, any provision or provisions of the Plan and the Trust at any time, retroactively or otherwise. The authority under this Section may be delegated to a committee or an officer pursuant to a resolution adopted by the Board of Directors. (b) Limitations on Power of Amendment. No such amendment, alteration, modification or suspension shall be effective if it: (i) increases the duties or responsibilities of the Trustee without its written consent; (ii) vests in the Company any right, title or interest in or to any property or funds held under the Trust; (iii) diverts any part of the Trust for purposes other than for the exclusive benefit of Participants or their beneficiaries; (iv) reduces the accrued benefit of any Participant or decreases a Participant's nonforfeitable interest; or (v) eliminates or reduces a "protected benefit" (within the meaning of Section 411(d)(6) of the Code and the regulations thereunder) with respect to benefits attributable to service rendered before the later of the adoption date or effective date of such amendment, alteration, modification or suspension, except as permitted by Section 411(d)(6) of the Code and the regulations thereunder. (c) Form of Amendment. Any such amendment, alteration, modification or suspension shall be set forth in a written instrument executed by an authorized officer of the Company. -54- Section 10.2. Plan Termination. (a) Right to Terminate. The Board of Directors of the Company reserves the right to revoke or terminate the Plan and the Trust at any time with respect to its employees, in whole or in part, or to reduce, suspend or discontinue its contributions under the Plan. Such revocation, termination, reduction, suspension or discontinuance shall be effective upon the date set forth in the resolution of the Board of Directors of the Company authorizing such action. (b) Vesting on Termination or Partial Termination. In the event of termination or partial termination of the Plan, the account balance of each affected Participant shall be nonforfeitable. (c) Disposition of Assets on Termination. Upon termination (but not partial termination) of the Plan, the Trustees shall dispose of the assets of the Trust by (1) valuing such assets, (2) allocating such assets to the accounts of each Participant, and (3) distributing to such Participants their nonforfeitable interest as soon as practicable following the termination in accordance with Article 5. Section 10.3. Merger or Consolidation. This Plan shall not be merged or consolidated with, nor shall its assets or liabilities be transferred to, any other plan unless each Participant would receive a benefit immediately after the merger, consolidation or transfer (if the Plan then terminated) which is equal to or greater than the benefit he or she would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan then terminated). -55- ARTICLE 11 MISCELLANEOUS PROVISIONS ------------------------ Section 11.1. New York and Applicable Federal Law Govern. The Plan shall be construed and all Plan provisions shall be administered according to the laws of the State of New York and applicable federal law. Section 11.2. Headings for Convenience. The headings and subheadings of the Plan are inserted for convenience and reference only, and are not to be used in construing the Plan or any of its individual provisions. Section 11.3. Rights of All Interested Parties Determined by the Terms of the Plan. The Plan and Trust are purely voluntary on the part of the Company. The Trust shall be the sole source of benefits and in no event shall the Company be liable or otherwise responsible for such benefits. The Plan shall be binding upon the Company and all Participants under the Plan, and upon their respective heirs, executors, administrators, successors and assigns, and upon all persons having or claiming to have any interest of any kind or nature in or under the Plan or the Trust. Section 11.4. Spendthrift Clause. Except as provided in Sections 11.5 and 5.10, and otherwise required by law, none of the rights, benefits, payments or proceeds arising out of or by virtue of the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge. Section 11.5. Qualified Domestic Relations Order. Section 11.4 shall not apply to a Qualified Domestic Relations Order. Qualified Domestic Relations Orders shall have the same meaning as defined in Section 414(p) of the Code. The Plan Administrator shall establish a written procedure to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders. Upon receipt of a domestic relations order made pursuant to state law the Plan Administrator shall: (i) promptly notify the Participant and any other Alternate Payee, as defined by Section 414(p)(8) of the Code, of the receipt of such order and the Plan's procedures for determining its qualified status; (ii) determine within a reasonable period after -56- its receipt whether such order is a Qualified Domestic Relations Order, and notify the Participant and any other Alternate Payee of such determination; and (iii) segregate in a separate account in the Plan the amounts which would have been payable to the Alternate Payee designated in such order during such period of determination specified in paragraph (2), if the order had been determined to be a Qualified Domestic Relations Order. If the Plan Administrator determines that the order is a Qualified Domestic Relations Order, then it shall direct the Trustees to comply with the terms of the order and shall release the amounts held in the segregated account to the Alternate Payee designated in such order. To the extent provided under a Qualified Domestic Relations Order, a former spouse of a Participant shall be treated as the spouse or surviving spouse for all purposes under the Plan. Section 11.6. Notice to Employees. Notice of the existence and the provisions of the Plan and amendments thereto shall be communicated by the Plan Administrator to all individuals who are or who become Participants. Section 11.7. No Employment Rights Created. The creation and maintenance of the Plan shall not confer on any employee any right to continued employment, and all employees shall remain subject to discharge to the same extent as if the Plan had never been established. Section 11.8. Diversion from Employees Prohibited. Except as otherwise permitted by law, no part of the corpus or income of any trust fund maintained pursuant to the Plan or of any funds contributed to any such trust fund shall be used for, or diverted to purposes other than the exclusive benefit of Participants or their beneficiaries. In the event the Company shall make an excessive contribution under a mistake of fact pursuant to Section 403(c)(2)(A) of ERISA, the Company may demand repayment of such excess contribution at any time within one year following the time of payment and the Trustee shall return such amount to the Company within the one year period. Earnings of the Plan attributable to the excess contributions may not be returned to the Company but any losses attributable thereto must reduce the amount returned. All contributions made by the Company are conditioned on the deductibility of such amount under Section 404 of the Code, and shall be returned to the Company to the extent of any disallowance of a deduction within one year -57- after the disallowance. Section 11.9. Right to Judicial Accounting. Nothing contained in the Plan shall be construed as depriving the Trustee of the right to have a judicial settlement of its accounts. Upon any proceeding by the Trustee for such judicial settlement or for instructions, the only necessary party thereto in addition to the Trustee shall be the Company. None of the Participants or other beneficiaries of the Plan shall have any right to compel an accounting, judicial or otherwise, by the Trustee, and all such parties shall be bound with respect to all accounts submitted by the Trustee to the Company as provided by the Plan and Trust. Section 11.10. Transfer of Funds to Another Plan. If (1) a Participant under the Plan becomes a participant under any other plan qualified under Section 401(a) of the Code, (2) the trust under such other plan is exempt from tax under Section 501(a) of the Code, and (3) such other plan provides that amounts may be transferred to it from other qualified plans in which the employee has been eligible to participate, then such Participant may elect, subject to approval by the Plan Administrator, to transfer such amount from the Plan to such other plan to be held in trust and invested in accordance with the terms and conditions of that plan. In the case of a transfer to another plan made under this Section, the entire amount available for transfer shall be transferred as soon as administratively feasible. Section 11.11. Forfeiture on Account of Inability to Locate Participant or Beneficiary. Notwithstanding any other provision of the Plan, if a benefit becomes payable to a Participant or to his or her beneficiary and if the Company, after all reasonable efforts, is unable to locate such Participant or beneficiary within one year of the date such benefit became payable, the benefit payable to the Participant or beneficiary shall be forfeited. If a benefit has been forfeited due to the Company's inability to locate a Participant or beneficiary, and such Participant or his or her beneficiary subsequently makes a claim for such benefit, such benefit shall then be reinstated. Any reinstatement of forfeited amounts under this Section shall first be made from forfeitures, if any, occurring during the Plan Year in which such reinstatement occurs, and then, if necessary, by an additional contribution by the Company. Section 11.12. Incapacity of Person Entitled to Payment. If any person entitled to receive any benefits under the Plan ("distributee") is, in the judgment of the Plan Administrator, legally, physically, or mentally incapable of personally caring for his or her affairs, unless prior claim has -58- been made by a duly qualified guardian or other legal representative, the Plan Administrator may instruct the Trustee to make distribution to such other person, persons, or institutions as, in the judgment of the Plan Administrator, maintains, has custody of, or is otherwise responsible for such distributee. Any such payment shall be a payment for such distributee's account and shall be a complete discharge of any liability of the Plan therefor. Section 11.13. Adoption of Plan by Organization Under Common Control. With the consent of the Board of Directors of the Company the Plan may be adopted by any Organization Under Common Control with the Company for the benefit of all or a limited group of such organization's employees as specified in an agreement to adopt the Plan executed by such organization and the Board of Directors of the Company. If an Organization Under Common Control adopts the Plan, the term "Company" shall also refer to such organization. -59- ARTICLE 12 DIRECT ROLLOVERS ---------------- Section 12.1. Direct Rollovers. This Article applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. Section 12.2. Definitions. (a) Eligible Rollover Distribution. An eligible rollover distribution is an distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee on the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (b) Eligible Retirement Plan. An eligible retirement plan is an individual retirement account described in section 408(a) of the Code, and individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (c) Distributee. A distributee includes a Participant or former Participant. In addition, the Participant's or former Participant's surviving spouse and the Participant's or former Participant's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. -60- (d) Direct Rollover. A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. IN WITNESS WHEREOF, the Company has caused the Plan to be executed by its duly authorized officer this 27th day of September, 1994. FISHER PRICE, INC. By: /s/ Karen L. Kemp --------------------- EX-99.9 10 MATTEL PERSONAL INVESTMENT PLAN EXHIBIT 99.9 MATTEL, INC. PERSONAL INVESTMENT PLAN 1993 Restatement TABLE OF CONTENTS ----------------- Page ---- ARTICLE I GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Plan Name. . . . . . . . . . . . . . . . . . . . 1 1.2 Plan Purpose.. . . . . . . . . . . . . . . . . . 1 1.3 Effective Date.. . . . . . . . . . . . . . . . . 1 ARTICLE II DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 2 2.1 Accounts.. . . . . . . . . . . . . . . . . . . . 2 2.2 Affiliated Company.. . . . . . . . . . . . . . . 3 2.3 After-Tax Contributions. . . . . . . . . . . . . 3 2.4 Before-Tax Contributions.. . . . . . . . . . . . 3 2.5 Beneficiary. . . . . . . . . . . . . . . . . . . 3 2.6 Reserved for Plan Modifications. . . . . . . . . 3 2.7 Board of Directors.. . . . . . . . . . . . . . . 3 2.8 Reserved for Plan Modifications. . . . . . . . . 4 2.9 Reserved for Plan Modifications. . . . . . . . . 4 2.10 Code. . . . . . . . . . . . . . . . . . . . . . 4 2.11 Committee. . . . . . . . . . . . . . . . . . . . 4 2.12 Company. . . . . . . . . . . . . . . . . . . . . 4 2.13 Company Contributions. . . . . . . . . . . . . . 4 2.14 Company Matching Contributions.. . . . . . . . . 4 2.15 Company Stock. . . . . . . . . . . . . . . . . . 4 2.16 Compensation.. . . . . . . . . . . . . . . . . . 4 2.17 Deferral Limitation. . . . . . . . . . . . . . . 6 2.18 Reserved for Plan Modifications. . . . . . . . . 6 2.19 Distributable Benefit. . . . . . . . . . . . . . 6 2.20 Effective Date.. . . . . . . . . . . . . . . . . 7 2.21 Eligible Employee. . . . . . . . . . . . . . . . 7 2.22 Employee.. . . . . . . . . . . . . . . . . . . . 7 2.23 Employment Commencement Date.. . . . . . . . . . 8 2.24 ERISA. . . . . . . . . . . . . . . . . . . . . . 8 2.25 Hardship.. . . . . . . . . . . . . . . . . . . . 8 2.26 Highly Compensated Employee. . . . . . . . . . . 8 2.27 Hour of Service. . . . . . . . . . . . . . . . .12 2.28 Investment Manager.. . . . . . . . . . . . . . .12 2.29 Normal Retirement. . . . . . . . . . . . . . . .13 2.30 Normal Retirement Date.. . . . . . . . . . . . .13 2.31 Participant. . . . . . . . . . . . . . . . . . .13 2.32 Participation Commencement Date. . . . . . . . .13 2.33 Participating Company. . . . . . . . . . . . . .13 2.34 Period of Severance. . . . . . . . . . . . . . .13 2.35 Plan. . . . . . . . . . . . . . . . . . . . . .13 2.36 Plan Administrator.. . . . . . . . . . . . . . .13 2.37 Plan Year. . . . . . . . . . . . . . . . . . . .14 2.38 Reserved for Plan Modifications. . . . . . . . .14 2.39 Severance Date.. . . . . . . . . . . . . . . . .14 2.40 Reserved for Plan Modifications. . . . . . . . .14 i Page ---- 2.41 Reserved for Plan Modifications. . . . . . . . .14 2.42 Reserved for Plan Modifications. . . . . . . . .14 2.43 Reserved for Plan Modifications. . . . . . . . .14 2.44 Total and Permanent Disability.. . . . . . . . .14 2.45 Trust and Trust Fund.. . . . . . . . . . . . . .15 2.46 Trustee. . . . . . . . . . . . . . . . . . . . .15 2.47 Valuation Date.. . . . . . . . . . . . . . . . .15 2.48 Year of Service. . . . . . . . . . . . . . . . .15 ARTICLE III ELIGIBILITY AND PARTICIPATION. . . . . . . . . . . . . . .17 3.1 Eligibility to Participate.. . . . . . . . . . .17 3.2 Commencement of Participation. . . . . . . . . .17 ARTICLE IV TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . .18 4.1 Trust Fund.. . . . . . . . . . . . . . . . . . .18 ARTICLE V EMPLOYEE CONTRIBUTIONS . . . . . . . . . . . . . . . . . .19 5.1 Employee Contributions.. . . . . . . . . . . . .19 5.2 Amount Subject to Election.. . . . . . . . . . .19 5.3 Termination of, Change in Rate of, or Resumption of Deferrals.. . . . . . . . . . .20 5.4 Limitation on Before-Tax Contributions by Highly Compensated Employees. . . . . . . . .20 5.5 Provisions for Disposition of Excess Before- Tax Contributions by Highly Compensated Employees.. . . . . . . . . . . . . . . . . .23 5.6 Provisions for Return of Annual Before-Tax Contributions in Excess of the Deferral Limitation. . . . . . . . . . . . . . . . . .25 5.7 Character of Amounts Contributed as Before- Tax Contributions.. . . . . . . . . . . . . .27 5.8 Participant Transfer/Rollover Contributions. . .28 ARTICLE VI COMPANY CONTRIBUTIONS. . . . . . . . . . . . . . . . . . .29 6.1 General. . . . . . . . . . . . . . . . . . . . .29 6.2 Requirement for Net Profits. . . . . . . . . . .30 6.3 Special Limitations on After-Tax Contributions and Company Matching Contributions.. . . . . . . . . . . . . . . .30 6.4 Provision for Return of Excess After-Tax Contributions and Company Matching Contributions on Behalf of Highly Compensated Employees.. . . . . . . . . . . .33 6.5 Forfeiture of Company Matching Contributions Attributable to Excess Deferrals or Contributions.. . . . . . . . . . . . . . . .35 6.6 Investment and Application of Plan Contributions.. . . . . . . . . . . . . . . .35 6.7 Irrevocability.. . . . . . . . . . . . . . . . .38 ii Page ---- 6.8 Company, Committee and Trustee Not Responsible for Adequacy of Trust Fund. . . .38 ARTICLE VII PARTICIPANT ACCOUNTS AND ALLOCATIONS . . . . . . . . . . .39 7.1 General. . . . . . . . . . . . . . . . . . . . .39 7.2 Participants' Accounts.. . . . . . . . . . . . .39 7.3 Revaluation of Participants' Accounts. . . . . .39 7.4 Treatment of Accounts Following Termination of Employment.. . . . . . . . . . . . . . . .40 7.5 Accounting Procedures. . . . . . . . . . . . . .40 ARTICLE VIII VESTING; PAYMENT OF PLAN BENEFITS. . . . . . . . . . . . .41 8.1 Vesting. . . . . . . . . . . . . . . . . . . . .41 8.2 Distribution Upon Retirement.. . . . . . . . . .41 8.3 Distribution Upon Death Prior to Termination of Employment.. . . . . . . . . . . . . . . .42 8.4 Death After Termination of Employment. . . . . .42 8.5 Termination of Employment Prior to Normal Retirement Date.. . . . . . . . . . . . . . .43 8.6 Withdrawals. . . . . . . . . . . . . . . . . . .44 8.7 Form of Distribution.. . . . . . . . . . . . . .47 8.8 Election for Direct Rollover of Distributable Benefit to Eligible Retirement Plan.. . . . .48 8.9 Designation of Beneficiary.. . . . . . . . . . .49 8.10 Facility of Payment. . . . . . . . . . . . . . .50 8.11 Requirement of Spousal Consent.. . . . . . . . .51 8.12 Additional Documents.. . . . . . . . . . . . . .51 8.13 Company Stock Distribution.. . . . . . . . . . .51 8.14 Valuation of Accounts. . . . . . . . . . . . . .52 8.15 Forfeitures; Repayment.. . . . . . . . . . . . .53 8.16 Loans. . . . . . . . . . . . . . . . . . . . . .54 8.17 Special Rule for Disabled Employees. . . . . . .56 ARTICLE IX OPERATION AND ADMINISTRATION OF THE PLAN . . . . . . . . .59 9.1 Plan Administration. . . . . . . . . . . . . . .59 9.2 Committee Powers.. . . . . . . . . . . . . . . .59 9.3 Investment Manager.. . . . . . . . . . . . . . .61 9.4 Periodic Review. . . . . . . . . . . . . . . . .61 9.5 Committee Procedure. . . . . . . . . . . . . . .61 9.6 Compensation of Committee. . . . . . . . . . . .62 9.7 Resignation and Removal of Members.. . . . . . .62 9.8 Appointment of Successors. . . . . . . . . . . .62 9.9 Records. . . . . . . . . . . . . . . . . . . . .63 9.10 Reliance Upon Documents and Opinions.. . . . . .63 9.11 Requirement of Proof.. . . . . . . . . . . . . .64 9.12 Reliance on Committee Memorandum.. . . . . . . .64 9.13 Multiple Fiduciary Capacity. . . . . . . . . . .64 9.14 Limitation on Liability. . . . . . . . . . . . .64 9.15 Indemnification. . . . . . . . . . . . . . . . .64 9.16 Reserved for Plan Modifications. . . . . . . . .65 9.17 Allocation of Fiduciary Responsibility.. . . . .65 iii Page ---- 9.18 Bonding. . . . . . . . . . . . . . . . . . . . .65 9.19 Reserved for Plan Modifications. . . . . . . . .66 9.20 Reserved for Plan Modifications. . . . . . . . .66 9.21 Reserved for Plan Modifications. . . . . . . . .66 9.22 Prohibition Against Certain Actions. . . . . . .66 9.23 Plan Expenses. . . . . . . . . . . . . . . . . .66 ARTICLE X SPECIAL PROVISIONS CONCERNING COMPANY STOCK EFFECTIVE AS OF OCTOBER 1, 1992. . . . . . . . . . . . . .67 10.1 Securities Transactions. . . . . . . . . . . . .67 10.2 Valuation of Company Securities. . . . . . . . .67 10.3 Allocation of Stock Dividends and Splits.. . . .68 10.4 Reinvestment of Dividends. . . . . . . . . . . .68 10.5 Voting of Company Stock. . . . . . . . . . . . .68 10.6 Confidentiality Procedures.. . . . . . . . . . .69 10.7 Securities Law Limitation. . . . . . . . . . . .69 ARTICLE XI MERGER OF COMPANY; MERGER OF PLAN. . . . . . . . . . . . .70 11.1 Effect of Reorganization or Transfer of Assets. . . . . . . . . . . . . . . . . . . .70 11.2 Merger Restriction.. . . . . . . . . . . . . . .70 ARTICLE XII PLAN TERMINATION AND DISCONTINUANCE OF CONTRIBUTIONS . . .71 12.1 Plan Termination.. . . . . . . . . . . . . . . .71 12.2 Discontinuance of Contributions. . . . . . . . .71 12.3 Rights of Participants.. . . . . . . . . . . . .72 12.4 Trustee's Duties on Termination. . . . . . . . .72 12.5 Partial Termination. . . . . . . . . . . . . . .73 12.6 Failure to Contribute. . . . . . . . . . . . . .73 ARTICLE XIII APPLICATION FOR BENEFITS . . . . . . . . . . . . . . . . .74 13.1 Application for Benefits.. . . . . . . . . . . .74 13.2 Action on Application. . . . . . . . . . . . . .74 13.3 Appeals. . . . . . . . . . . . . . . . . . . . .74 ARTICLE XIV LIMITATIONS ON CONTRIBUTIONS . . . . . . . . . . . . . . .76 14.1 General Rule.. . . . . . . . . . . . . . . . . .76 14.2 Annual Additions.. . . . . . . . . . . . . . . .76 14.3 Other Defined Contribution Plans.. . . . . . . .76 14.4 Combined Plan Limitation (Defined Benefit Plan).. . . . . . . . . . . . . . . . . . . .77 14.5 Adjustments for Excess Annual Additions. . . . .77 14.6 Disposition of Excess Amounts. . . . . . . . . .79 14.7 Affiliated Company.. . . . . . . . . . . . . . .79 iv Page ---- ARTICLE XV RESTRICTION ON ALIENATION. . . . . . . . . . . . . . . . .80 15.1 General Restrictions Against Alienation. . . . .80 15.2 Nonconforming Distributions Under Court Order.. . . . . . . . . . . . . . . . . . . .80 ARTICLE XVI PLAN AMENDMENTS. . . . . . . . . . . . . . . . . . . . . .83 16.1 Amendments.. . . . . . . . . . . . . . . . . . .83 16.2 Retroactive Amendments.. . . . . . . . . . . . .83 16.3 Amendment of Vesting Provisions. . . . . . . . .83 ARTICLE XVII TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . .85 17.1 Minimum Company Contributions. . . . . . . . . .85 17.2 Compensation.. . . . . . . . . . . . . . . . . .85 17.3 Top-Heavy Determination. . . . . . . . . . . . .85 17.4 Maximum Annual Addition. . . . . . . . . . . . .88 17.5 Aggregation. . . . . . . . . . . . . . . . . . .88 ARTICLE XVIII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . .90 18.1 No Enlargement of Employee Rights. . . . . . . .90 18.2 Mailing of Payments; Lapsed Benefits.. . . . . .90 18.3 Addresses. . . . . . . . . . . . . . . . . . . .91 18.4 Notices and Communications.. . . . . . . . . . .92 18.5 Reporting and Disclosure.. . . . . . . . . . . .92 18.6 Governing Law. . . . . . . . . . . . . . . . . .92 18.7 Interpretation.. . . . . . . . . . . . . . . . .92 18.8 Certain Securities Laws Rules. . . . . . . . . .93 18.9 Withholding for Taxes. . . . . . . . . . . . . .93 18.10 Limitation on Company; Committee and Trustee Liability.. . . . . . . . . . . . . .93 18.11 Successors and Assigns. . . . . . . . . . . .93 18.12 Counterparts. . . . . . . . . . . . . . . . .93 MATTEL, INC. PERSONAL INVESTMENT PLAN ARTICLE I GENERAL 1.1 Plan Name. This instrument evidences the terms of a tax- qualified retirement plan for the Eligible Employees of Mattel, Inc. and its participating affiliates to be known as the "Mattel, Inc. Personal Investment Plan" ("Plan"). 1.2 Plan Purpose. This Plan is intended to qualify under Code Section 401(a) as a profit sharing plan, although contributions may be made to the Plan without regard to profits, and with respect to the portion hereof intended to qualify as a Qualified Cash or Deferred Arrangement, to satisfy the requirements of Code Section 401(k). 1.3 Effective Date. The original effective date of this Plan is November 1, 1983. This amendment and restatement of the Plan reflects the provisions of the Plan as in effect as of January 1, 1993, except as otherwise expressly provided herein. ARTICLE II DEFINITIONS 2.1 Accounts. "Accounts" or "Participant's Accounts" means the following Plan accounts maintained by the Committee for each Participant as required by Article VII: (a) "Before-Tax Contributions Account" shall mean the account established and maintained for each Participant under Article VII for purposes of holding and accounting for amounts held in the Trust Fund which are attributable to Participant Before-Tax Contributions, and any earnings thereon, in accordance with Article V. (b) "After-Tax Contributions Account" shall mean the account established and maintained for each Participant under Article VII to reflect amounts held in the Trust Fund on behalf of such Participant which are attributable to Participant After-Tax Contributions and any earnings thereon, in accordance with Article V. (c) "Company Matching Account" shall mean the account established and maintained for each Participant under Article VII for purposes of holding and accounting for amounts held in the Trust Fund which are attributable to Company Matching Contributions, and any earnings thereon, pursuant to Section 6.1(c). (d) "Company Contributions Account" shall mean the account established and maintained for each Participant under Article VII for purposes of holding and accounting for amounts held in the Trust Fund which are attributable to Company Contributions, and any earnings thereon, pursuant to Section 6.1(a). (e) "Transfer/Rollover Account" shall mean the account established and maintained for each Participant under Article VII for purposes of holding and accounting for amounts held in the Trust Fund which are attributable to amounts distributed to the Participant from any other plan qualified under Code Section 401(a), or from an Individual Retirement Account attributable to employer contributions under another plan qualified under Code Section 401(a), and any earnings on such amounts, as provided in Section 5.8. 2 2.2 Affiliated Company. "Affiliated Company" shall mean: (a) Any corporation that is included in a controlled group of corporations, within the meaning of Section 414(b) of the Code, that includes the Company, (b) Any trade or business that is under common control with the Company within the meaning of Section 414(c) of the Code, (c) Any member of an affiliated service group, within the meaning of Section 414(m) of the Code, that includes the Company, and (d) Any other entity required to be aggregated with the Company pursuant to regulations under Section 414(o) of the Code. 2.3 After-Tax Contributions. "After-Tax Contributions" shall mean those contributions by a Participant to the Trust Fund in accordance with Article V which do not qualify as Before-Tax Contributions. 2.4 Before-Tax Contributions. "Before-Tax Contributions" shall mean those amounts contributed to the Plan as a result of a salary or wage reduction election made by the Participant in accordance with Article V, to the extent such contributions qualify for treatment as contributions made under a "qualified cash or deferred arrangement" within the meaning of Section 401(k) of the Code. 2.5 Beneficiary. "Beneficiary" or "Beneficiaries" shall mean the person or persons last designated by a Participant as set forth in Section 8.9 or, if there is no designated Beneficiary or surviving Beneficiary, the person or persons designated in Section 8.9 to receive the interest of a deceased Participant in such event. 2.6 Reserved for Plan Modifications. 2.7 Board of Directors. "Board of Directors" shall mean the Board of Directors (or its delegate) of Mattel, Inc. as it may from time to time be constituted. 3 2.8 Reserved for Plan Modifications. 2.9 Reserved for Plan Modifications. 2.10 Code. "Code" shall mean the Internal Revenue Code of 1986, as in effect on the date of execution of this Plan document and as thereafter amended from time to time. 2.11 Committee. "Committee" shall mean the Committee described in Article IX hereof. 2.12 Company. "Company" shall mean Mattel, Inc., or any successor thereof, if its successor shall adopt this Plan. 2.13 Company Contributions. "Company Contributions" shall mean amounts paid by a Participating Company into the Trust Fund in accordance with Section 6.1(a). 2.14 Company Matching Contributions. "Company Matching Contributions" shall mean amounts paid by a Participating Company into the Trust Fund in accordance with Section 6.1(c). 2.15 Company Stock. "Company Stock" shall mean whichever of the following is applicable: (a) So long as the Company has only one class of stock, that class of stock. (b) In the event the Company at any time has more than one class of stock, the class (or classes) of the Company's stock constituting "employer securities" as that term is defined in Section 409A(1) of the Code. 2.16 Compensation. (a) "Compensation" shall mean the full salary and wages (including overtime, shift differential and holiday, vacation and sick pay) and other compensation paid by a Participating Company during a Plan Year by reason of services performed by an Employee, subject, however, to the following special 4 rules and to the provisions of Subsections 2.16(b) through (e): (i) Except as specified in (ii) below, fringe benefits and contributions by the Participating Company to and benefits under any employee benefit shall not be taken into account in determining compensation; (ii) Amounts deducted pursuant to authorization by an Employee or pursuant to requirements of law (including amounts of salary or wages deferred in accordance with the provisions of Section 5.1 and which qualify for treatment under Code Section 401(k) or amounts deducted pursuant to Code Section 125 or 129) shall be included in "Compensation" except as specifically provided to the contrary elsewhere in this Plan; (iii) Amounts paid or payable by reason of services performed during any period in which an Employee is not a Participant under the Plan shall not be taken into account in determining Compensation; (iv) Amounts deferred by the Employee pursuant to non-qualified deferred compensation plans, regardless of whether such amounts are includable in the Employee's gross income for his current taxable year, shall not be taken into account in determining Compensation; (v) Amounts included in any Employee's gross income with respect to life insurance as provided by Code Section 79 shall not be taken into account in determining compensation; and (vi) Amounts paid to Employees as "bonuses" shall not be taken into account in determining compensation. (b) To the extent permitted by Code Section 415(c)(3), in the case of a Participant who ceases actively to perform services for a Participating Company prior to January 1, 1989 because such person has sustained a Total and Permanent Disability, such Participant shall be deemed to have "Compensation" to the extent provided in the provisions of Section 8.17(d), for the limited purposes of determining the amount of certain contributions to this Plan. 5 (c) The term "Compensation," for purposes of Article XIV of this Plan, shall mean wages as defined in Section 3401(a) and all other payments of compensation to an Employee by the Company (in the course of the Company's trade or business) for which the Company is required to furnish the Employee a written statement under Code Sections 6041(d) and 6051(a)(3). Compensation for purposes of this Subsection (c) shall be determined without regard to any rules under Code Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401(a)(2)). (d) In the event that this Plan is deemed a Top-Heavy Plan as set forth in Article XVII, the term "Compensation" shall not include amounts excluded by reason of and to the extent provided by Sections 17.1 and 17.2. (e) Effective for Plan Years commencing on and after January 1, 1989, the "Compensation" of any Employee taken into account under the Plan for any Plan Year shall not exceed $200,000, as that amount is adjusted each year by the Secretary of the Treasury. In determining the Compensation of a Participant for purposes of this limitation, the rules of Section 414(q)(6) of the Code shall apply, except in applying such rules, the term "family" shall include only the Spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the year. If, as a result of the application of such rules the adjusted $200,000 limitation is exceeded, then, the limitation shall be prorated among the affected individuals in proportion to each such individual's Compensation as determined under this Subsection (e) prior to the application of this limitation. 2.17 Deferral Limitation. "Deferral Limitation" shall mean the dollar limitation on the exclusion of elective deferrals from a Participant's gross income under Section 402(g) of the Code, as in effect with respect to the taxable year of the Participant. 2.18 Reserved for Plan Modifications. 2.19 Distributable Benefit. "Distributable Benefit" shall mean the vested interest of a Participant in this Plan which is determined 6 and distributable in accordance with the provisions of Article VIII following the termination of the Participant's employment. 2.20 Effective Date. "Effective Date" shall mean November 1, 1983, which shall be the original effective date of this Plan. 2.21 Eligible Employee. "Eligible Employee" shall include any individual who is at least age twenty-one (21) and is employed by a Participating Company, except (a) any Employee who is covered by a collective bargaining agreement to which a Participating Company is a party if there is evidence that retirement benefits were the subject of good faith bargaining between the Participating Company and the collective bargaining representative, unless the collective bargaining agreement provides for coverage under this Plan, (b) any Employee who is a "leased employee," within the meaning of Code Section 414(n), or (c) any Employee who is classified as a temporary Employee, unless such temporary Employee has been an Employee for a twelve (12) consecutive month period. 2.22 Employee. (a) "Employee" shall mean each person currently employed in any capacity by the Company or Affiliated Company any portion of whose income is subject to withholding of income tax and/or for whom Social Security contributions are made by the Company. The term "Employee" also includes a "leased employee," to the extent required by Code Section 414(n). (b) Although Eligible Employees are the only class of Employees eligible to participate in this Plan, the term "Employee" is used to refer to persons employed in a non-Eligible Employee capacity as well as Eligible Employee category. Thus, those provisions of this Plan that are not limited to Eligible Employees, such as those relating to Hours of Service, apply to both Eligible and non-Eligible Employees. 7 2.23 Employment Commencement Date. "Employment Commencement Date" shall mean each of the following: (a) The date on which an Employee first performs an Hour of Service in any capacity for the Company or an Affiliated Company with respect to which the Employee is compensated or is entitled to compensation by the Company or the Affiliated Company. (b) In the case of an Employee who has a one-year Period of Severance and who is subsequently reemployed by the Company or an Affiliated Company, the term "Employment Commencement Date" shall also mean the first day following such one-year Period of Severance on which the Employee performs an Hour of Service for the Company or an Affiliated Company with respect to which he is compensated or entitled to compensation by the Company or Affiliated Company. 2.24 ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. 2.25 Hardship. "Hardship" shall mean a need created by immediate and heavy financial obligations of the Participant, which obligations cannot be met by other sources reasonably available to the Participant, and shall be limited to a distribution for the purpose of meeting major medical expenses of the Participant or his Spouse or dependents. A distribution shall be deemed to be necessary for the purpose of meeting major medical expenses if such expenses were previously incurred, or if such distribution is necessary to obtain major medical care. The amount required to meet a Hardship need may include amounts necessary to pay federal, state or local income taxes or penalties reasonably anticipated to result from the distribution. Any determination of Hardship shall be in accordance with regulations promulgated under Code Section 401(k). The existence of a Participant's financial Hardship and the amount required to meet the need created by the Hardship shall be determined by the Committee in accordance with rules of uniform application which the Committee may from time to time prescribe. 2.26 Highly Compensated Employee. (a) "Highly Compensated Employee" shall mean any Employee who 8 (i) was a 5% owner during the Determination Year or the Look Back Year; (ii) received Compensation from the Company in excess of $75,000 during the Look Back Year; (iii) received Compensation from the Company in excess of $50,000 during the Look Back Year and was in the "top-paid group" of Employees for such Look Back Year; (iv) was at any time an officer during the Look Back Year and received Compensation greater than fifty percent (50%) of the amount in effect under Section 415(b)(1)(A) of the Code in such Look Back Year; or (v) was an Employee described in Paragraph (ii), (iii), or (iv) above for the Determination Year and was a member of the group consisting of the 100 Employees paid the greatest Compensation during the Determination Year. (b) Determination of a Highly Compensated Employee shall be in accordance with the following definitions and special rules: (i) "Determination Year" means the Plan Year for which the determination of Highly Compensated Employee is being made. (ii) "Look Back Year" is the twelve (12) month period preceding the Determination Year. (iii) An Employee shall be treated as a 5% owner for any Determination Year or Look Back Year if at any time during such Year such Employee was a 5% owner (as defined in Section 17.3). (iv) An Employee is in the "top-paid group" of Employees for any Determination Year or Look Back Year if such Employee is in the group consisting of the top twenty percent (20%) of the Employees when ranked on the basis of Compensation paid during such Year. (v) For purposes of this Section, no more than fifty (50) Employees (or, if lesser, the greater of three (3) Employees or ten percent (10%) of the Employees) shall be treated as officers. To the extent required by Code Section 414(q), if for any Determination Year or 9 Look Back Year no officer of the Company is described in this Section, the highest paid officer of the Company for such year shall be treated as described in this Section. (vi) If any individual is a "family member" with respect to a 5% owner or of a Highly Compensated Employee in the group consisting of the ten (10) Highly Compensated Employees paid the greatest Compensation during the Determination Year or Look Back Year, then (A) such individual shall not be considered a separate Employee, and (B) any Compensation paid to such individual (and any applicable contribution or benefit on behalf of such individual) shall be treated as if it were paid to (or on behalf of) the 5% owner or Highly Compensated Employee. For purposes of this Paragraph (vi), the term "family member" means, with respect to any Employee, such Employee's spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants. (vii) For purposes of this Section the term "Compensation" means Compensation as defined in Code Section 415(c)(3), as set forth in Section 2.16(c), without regard to the limitations of Section 2.16(e); provided, however, the determination under this Paragraph (vi) shall be made without regard to Code Sections 125, 402(a)(8), and 401(h)(1)(B), and in the case of Participant contributions made pursuant to a salary reduction agreement, without regard to Code Section 403(b). (viii) For purposes of determining the number of Employees in the "top-paid" group under this Section, the following Employees shall be excluded: (A) Employees who have not completed six (6) months of service, (B) Employees who normally work less than 17-1/2 hours per week, (C) Employees who normally work not more than six (6) months during any Plan Year, and 10 (D) Employees who have not attained age 21, (E) Except to the extent provided in Treasury Regulations, Employees who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between Employee representatives and the Company, and (F) Employees who are nonresident aliens and who receive no earned income (within the meaning of Code Section 911(d)(2) from the Company which constitutes income from sources within the United States (within the meaning of Code Section 861(a)(3)). The Company may elect to apply Subparagraphs (A) through (D) above by substituting a shorter period of service, smaller number of hours or months, or lower age for the period of service, number of hours or months, or (as the case may be) than as specified in such Subparagraphs. (ix) A former Employee shall be treated as a Highly Compensated Employee if (A) such Employee was a Highly Compensated Employee when such Employee incurred a severance, or (B) such Employee was a Highly Compensated Employee at any time after attaining age fifty-five (55). (x) Code Sections 414(b), (c), (m), and (o) shall be applied before the application of this Section. Also, the term "Employee" shall include "leased employees," within the meaning of Code Section 414(n), unless such leased Employee is covered under a "safe harbor" plan of the leasing organization and not covered under a qualified plan of the Affiliated Company. (c) To the extent permissible under Code Section 414(q), the Committee may determine which Employees shall be categorized as Highly Compensated Employees by applying a simplified method and calendar year election prescribed by the Internal Revenue Service. 11 2.27 Hour of Service. (a) "Hour of Service" of an Employee shall mean the following: (i) Each hour for which the Employee is paid by the Company or an Affiliated Company or entitled to payment for the performance of services as an Employee. (ii) Each hour in or attributable to a period of time during which the Employee performs no duties (irrespective of whether he has terminated his Employment) due to a vacation, holiday, illness, incapacity (including pregnancy or disability), layoff, jury duty, military duty or a Leave of Absence, for which he is so paid or so entitled to payment, whether direct or indirect. However, no such hours shall be credited to an Employee if such Employee is directly or indirectly paid or entitled to payment for such hours and if such payment or entitlement is made or due under a plan maintained solely for the purpose of complying with applicable workmen's compensation, unemployment compensation or disability insurance laws or is a payment which solely reimburses the Employee for medical or medically related expenses incurred by him. (iii) Each hour for which he is entitled to back pay, irrespective of mitigation of damages, whether awarded or agreed to by the Company or an Affiliated Company, provided that such Employee has not previously been credited with an Hour of Service with respect to such hour under paragraphs (i) or (ii) above. (b) Hours of Service under Subsections (a)(ii) and (a)(iii) shall be calculated in accordance with Department of Labor Regulation 29 C.F.R. [section] 2530.200b-2(b). Hours of Service shall be credited to the appropriate computation period according to the Department of Labor Regulation [section] 2530.200b-2(c). However, an Employee will not be considered as being entitled to payment until the date when the Company or the Affiliated Company would normally make payment to the Employee for such Hour of Service. 2.28 Investment Manager. "Investment Manager" means the one or more Investment Managers, if any, that are appointed pursuant to Section 9.3. 12 2.29 Normal Retirement. "Normal Retirement" shall mean a Participant's termination of employment on or after attaining the Plan's Normal Retirement Date. 2.30 Normal Retirement Date. "Normal Retirement Date" shall be the Participant's sixty-fifth birthday. 2.31 Participant. "Participant" shall mean any Eligible Employee who has satisfied the participation eligibility requirements set forth in Section 3.1 and has begun participation in this Plan in accordance with the provisions of Section 3.2. 2.32 Participation Commencement Date. "Participation Commencement Date" shall mean the day on which an Employee's participation in this Plan may commence in accordance with the provisions of Article III. 2.33 Participating Company. "Participating Company" shall mean Mattel, Inc. and each Affiliated Company (or similar entity) that has been granted permission by the Board of Directors to participate in this Plan, provided that contributions are being made hereunder for the Employees of such Participating Company. Permission to become a Participating Company shall be granted under such conditions and upon such conditions as the Board of Directors deems appropriate. 2.34 Period of Severance. "Period of Severance" shall mean the period of time commencing on the Participant's Severance Date and continuing until the first day, if any, on which the Participant completes one or more Hours of Service following such Severance Date. 2.35 Plan. "Plan" shall mean the Mattel, Inc. Personal Investment Plan herein set forth, and as it may be amended from time to time. 2.36 Plan Administrator. "Plan Administrator" shall mean the administrator of the Plan, within the meaning of Section 3(16)(A) of ERISA. The Plan Administrator shall be Mattel, Inc. 13 2.37 Plan Year. "Plan Year" shall mean the fiscal year of the Company. Effective as of January 1, 1992, the fiscal year of the Company is the twelve consecutive month period ending each December 31. 2.38 Reserved for Plan Modifications. 2.39 Severance Date. "Severance Date" shall mean the earlier of (a) the date on which an Employee quits, retires, is discharged, or dies; or (b) the first anniversary of the first date of a period in which an Employee remains absent from service (with or without pay) with the Company or an Affiliated Company for any reason other than quit, retirement, discharge or death (such as vacation, holiday, sickness, disability, leave of absence or layoff). In the case of an Employee who has a maternity or paternity absence described in Code Sections 410(a)(5)(E) and 411(a)(6)(E), the Employee's Period of Severance will begin on the second anniversary of the date the Employee is first absent for a maternity or paternity leave, provided the Employee does not perform an Hour of Service during such period. The first one-year period of the absence will be included in the Employee's period of service and the second one-year period is neither part of the period of service nor part of the Period of Severance. The Committee may require that the Employee furnish such timely information as the Committee may reasonably require to establish that the absence from work is for such a maternity or paternity absence, and the number of days for which there was such an absence. 2.40 Reserved for Plan Modifications. 2.41 Reserved for Plan Modifications. 2.42 Reserved for Plan Modifications. 2.43 Reserved for Plan Modifications. 2.44 Total and Permanent Disability. An individual shall be considered to be suffering from a Total and Permanent Disability if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 12 months. An individual's disabled status shall be determined by the Committee, based on such evidence as the Committee determines to be sufficient. The rules of this 14 Section 2.44 shall be applied by the Committee in accordance with Treasury Regulations, if any, promulgated under Code Section 415 or Code Section 37(e)(3). 2.45 Trust and Trust Fund. "Trust" or "Trust Fund" shall mean the one or more trusts created for funding purposes under the Plan. 2.46 Trustee. "Trustee" shall mean the corporation appointed by the Company to act as Trustee of the Trust Fund, or any successor or other corporation acting as a trustee of the Trust Fund. 2.47 Valuation Date. "Valuation Date" shall mean the date as of which the Trustee shall determine the value of the assets in the Trust Fund for purposes of determining the value of each Account, which shall be the last business day of each calendar month or such other dates as may be determined in rules prescribed by the Committee. 2.48 Year of Service. "Year of Service" means three hundred sixty five (365) days included in a period of service recognized under this Section 2.48. (a) Subject to the succeeding provisions of this Section 2.48, a Participant shall be credited with a period of service equal to the elapsed time between his Employment Commencement Date and his subsequent Severance Date. (b) A Participant additionally shall receive credit for a Period of Severance in computing his service hereunder if such Participant completes an Hour of Service prior to the first anniversary of his Severance Date. Except as provided in this Section 2.48(b), a Period of Severance shall not be included in a Participant's period of service hereunder. (c) If a Participant who does not have any vested interest in his accounts under the Plan has five (5) consecutive one-year Periods of Severance, any prior period of service shall be disregarded for all purposes of the Plan. Periods of service credited under this Section 2.48 before such five (5) consecutive one-year Periods of Severance shall not include any period or periods of service that are not 15 required to be taken into account under this Section 2.48(c) by reason of any prior Periods of Severance. (d) The number of a Participant's Years of Service for vesting shall be determined by reference to each three hundred sixty five day period of service recognized under this Section 2.48, whether or not consecutive. (e) Notwithstanding any other provision of this Plan, service performed by Employees for employers other than the Company or Affiliated Companies may be taken into account in computing service for any purpose of this Plan to the extent and in the manner determined by resolution of the Administrative Committee in its sole discretion. (f) Notwithstanding any other provision of this Plan, service performed for an Affiliated Company prior to such entity becoming an Affiliated Company shall be taken into account for purposes of computing service under this Plan unless determined otherwise by resolution of the Board of Directors of the Company. 16 ARTICLE III ELIGIBILITY AND PARTICIPATION 3.1 Eligibility to Participate. (a) Every Eligible Employee shall become eligible to participate in the Plan on the date he becomes an Eligible Employee. (b) If an Eligible Employee ceases to be an Eligible Employee he shall again become eligible to participate in the Plan on the date he again becomes an Eligible Employee. (c) Notwithstanding the preceding rules of this Section 3.1, the actual date upon which an Employee will commence participation will be determined pursuant to the rules of Section 3.2. 3.2 Commencement of Participation. (a) Each Eligible Employee shall be entitled automatically to commence participation in this Plan with respect to the Company Contributions described in Section 6.1(a). (b) From January 1, 1987 to June 30, 1988, each Eligible Employee shall be entitled to commence Employee contributions as set forth in Article V and Company Matching Contributions as set forth in Section 6.1(c) on the January 1 after their Employment Commencement Date. (c) Effective July 1, 1988, each Eligible Employee shall be entitled to commence After-Tax Contributions and Company Matching Contributions as set forth in Section 6.1(c) as of the date he becomes an Eligible Employee. (d) Effective January 1, 1989, each Eligible Employee shall be entitled to commence Before-Tax Contributions and Company Matching Contributions as set forth in Section 6.1(c) as of the date he becomes an Eligible Employee. (e) The Committee may prescribe such rules as it deems necessary or appropriate regarding times and procedures for Participants to make elections to contribute a portion of Compensation as provided in Section 5.1. 17 ARTICLE IV TRUST FUND 4.1 Trust Fund. (a) The Company has entered into a Trust Agreement for the establishment of a Trust to hold the assets of the Plan. Simultaneously with the establishment of this Plan the Company shall pay to the Trustee a specified sum of money as its initial contribution to the Trust Fund. The Trustee shall acknowledge receipt of this contribution and shall agree to hold and administer this contribution together with such additional funds and assets that may be subsequently deposited with the Trustee pursuant to the terms of this Plan. (b) The Trust Fund is authorized to invest in either Company Stock or such other assets as the Committee or the Investment Manager (if applicable) may direct. Participants may direct the investment of the assets in their Accounts in the Trust Fund from among the acceptable investment alternatives which the Committee may from time to time make available. (c) The Committee shall not be required to engage in any transaction, including without limitation, directing the purchase or sale of Company Stock, which it determines in its sole discretion, might tend to subject itself, its members, the Plan, the Company, or any Participant to liability under federal or state securities law. 18 ARTICLE V EMPLOYEE CONTRIBUTIONS 5.1 Employee Contributions. In accordance with rules which the Committee shall prescribe from time to time, each Participant shall be given an opportunity to elect to have a percentage of his or her Compensation contributed to the Plan. A contribution election by a Participant shall remain in effect from year to year (notwithstanding salary or wage rate changes) until changed by the Participant. Effective January 1, 1987, at the election of the Participant, contributions shall be made as Before-Tax Contributions, After-Tax Contributions or a combination thereof. 5.2 Amount Subject to Election. (a) Effective for Plan Years commencing on and after January 1, 1989, subject to the limitations of this Article V, the amount of an individual's Compensation that may be contributed subject to the election provided in Section 5.1 shall be a whole percentage of the individual's Compensation, which percentage is not less than one percent (1%) nor more than the difference between (i) the Participant's Company Contributions percentage determined under Section 6.1(a) and (ii) seventeen percent (17%). (b) No Participant shall be permitted to make Before-Tax Contributions in excess of the Deferral Limitation. Any election by a Participant to make Before-Tax Contributions shall be deemed to include an election to automatically substitute After-Tax Contributions for such Before-Tax Contributions, effective for the period starting on the date immediately following the date the Participant's Before-Tax Contributions for a calendar year equal the Deferral Limitation and ending on the immediately following December 31. In the event a Participant's Before-Tax Contributions exceed the Deferral Limitation, excess contributions shall be subject to the provisions of Section 5.6. (c) For purposes of satisfying one of the tests described under Section 5.4 and Section 6.3, the Committee may prescribe such rules as it deems necessary or appropriate regarding the maximum amount that a Participant may elect to contribute and the timing of such an election. These rules may prescribe a maximum percentage of Compensation that may be contributed, or may provide that the maximum percentage of Compensation that a Participant may contribute will 19 be a lower percentage of his Compensation above a certain dollar amount of Compensation than the maximum deferral percentage below that dollar amount of Compensation. These rules shall apply to all individuals eligible to make the election described in Section 5.1, except to the extent that the Committee prescribes special or more stringent rules applicable only to Highly Compensated Employees. 5.3 Termination of, Change in Rate of, or Resumption of Deferrals. (a) A Participant may at any time submit a request to the Committee to terminate his contributions made pursuant to this Article V. (b) A Participant may at any time (but not more frequently than once per calendar quarter) submit a request to the Committee to alter the rate of, or resume his contributions made pursuant to this Article V. (c) A request for termination, alteration, or resumption or alteration of the rate of contributions shall be in form satisfactory to the Committee. The Committee may require at least thirty (30) days notice prior to commencement of the payroll period for which such change is to be effective. 5.4 Limitation on Before-Tax Contributions by Highly Compensated Employees. With respect to each Plan Year, Participant Before-Tax Contributions under the Plan for the Plan Year shall not exceed the limitations on contributions on behalf of Highly Compensated Employees under Section 401(k) of the Code, as provided in this Section. In the event that Before-Tax Contributions under this Plan on behalf of Highly Compensated Employees for any Plan Year exceed the limitations of this Section for any reason, such excess contributions and any income allocable thereto shall be returned to the Participant or recharacterized as Participant After-Tax Contributions, as provided in Section 5.5. (a) The Before-Tax Contributions by a Participant for a Plan Year shall satisfy the Average Deferral Percentage test set forth in (i)(A) below, or the alternative Average Deferral Percentage test set forth in (i)(B) below, and to the extent required by regulations under Code Section 401(m), also shall satisfy the test identified in (ii) below: 20 (i)(A) The "Actual Deferral Percentage" for Eligible Employees who are Highly Compensated Employees shall not be more than the "Actual Deferral Percentage" of all other Eligible Employees multiplied by 1.25, or (i) (B) The excess of the "Actual Deferral Percentage" for Eligible Employees who are Highly Compensated Employees over the "Actual Deferral Percentage" for all other Eligible Employees shall not be more than two percentage points, and the "Actual Deferral Percentage" for Highly Compensated Employees shall not be more than the "Actual Deferral Percentage" of all other Eligible Employees multiplied by 2.00. (ii) Average Contribution Percentage for Highly Compensated Employees eligible to participate in this Plan and a plan of the Company or an Affiliated Company that is subject to the limitations of Section 401(m) of the Code including, if applicable, this Plan, shall be reduced in accordance with Section 6.4, to the extent necessary to satisfy the requirements of Treasury Regulations Section 1.401(m)-2. (b) For the purposes of the limitations of this Section 5.4, the following definitions shall apply: (i) "Actual Deferral Percentage" means, with respect to Eligible Employees who are Highly Compensated Employees and all other Eligible Employees for a Plan Year, the average of the ratios, calculated separately for each Eligible Employee in such group, of the amount of Before- Tax Contributions under the Plan allocated to each Eligible Employee for such Plan Year to such Employee's "Compensation" for such Plan Year. An Eligible Employee's Before-Tax Contributions may be taken into account for purposes of determining his Actual Deferral Percentage for a particular Plan Year only if such Before-Tax Contributions are allocated to the Eligible Employee as of a date within that Plan Year. For purposes of this rule, an Eligible Employee's Before-Tax Contributions shall be considered allocated as of a date within a Plan Year only if (A) the allocation is not contingent upon the Eligible Employee's participation in the Plan or performance of services on any date subsequent to that date, and (B) the Before-Tax Contribution is 21 actually paid to the Trust no later than the end of the twelve month period immediately following the Plan Year to which the contribution relates. To the extent determined by the Committee and in accordance with regulations issued by the Secretary of the Treasury, contributions on behalf of an Eligible Employee that satisfy the requirements of Code Section 401(k)(3)(C)(ii) may also be taken into account for the purpose of determining the Actual Deferral Percentage of such Eligible Employee. (ii) "Compensation" means Compensation determined by the Committee in accordance with the requirements of Section 414(s) of the Code, including, to the extent elected by the Committee, amounts deducted from an Employee's wages or salary that are excludable from income under Sections 125, 129, or 402(a)(8) of the Code. (c) In the event that as of the last day of a Plan Year this Plan satisfies the requirements of Section 401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans which include arrangements under Code Section 401(k), then this Section 5.4 shall be applied by determining the Actual Deferral Percentages of Eligible Employees as if all such plans were a single plan, in accordance with regulations prescribed by the Secretary of the Treasury under Section 401(k) of the Code. (d) For the purposes of this Section, the Actual Deferral Percentage for any Highly Compensated Employee who is a participant under two or more Code Section 401(k) arrangements of the Company or an Affiliated Company shall be determined by taking into account the Highly Compensated Employee's Compensation under each such arrangement and contributions under each such arrangement which qualify for treatment under Code Section 401(k), in accordance with regulations prescribed by the Secretary of the Treasury under Section 401(k) of the Code. (e) If an Eligible Employee (who is also a Highly Compensated Employee) is subject to the family aggregation rules in Section 2.26(b)(vi), the combined Actual Deferral Percentage for the family group (which is treated as one Highly Compensated Employee) shall be the Actual Deferral Percentage determined by combining the Before-Tax Contributions, amounts treated as Before-Tax Contributions under Code Section 401(k)(3)(D)(ii), and Compensation of all eligible family members. 22 (f) For purposes of this Section, the amount of Before-Tax Contributions by a Participant who is not a Highly Compensated Employee for a Plan Year shall be reduced by any Before-Tax Contributions in excess of the Deferral Limitation which have been distributed to the Participant under Section 5.6, in accordance with regulations prescribed by the Secretary of the Treasury under Section 401(k) of the Code. (g) The determination of the Actual Deferral Percentage of any Participant shall be made after applying the provisions of Section 14.5 relating to certain limits on Annual Additions under Section 415 of the Code. (h) The determination and treatment of Before-Tax Contributions and the Actual Deferral Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. (i) The Committee shall keep or cause to have kept such records as are necessary to demonstrate that the Plan satisfies the requirements of Code Section 401(k) and the regulations thereunder, in accordance with regulations prescribed by the Secretary of the Treasury. 5.5 Provisions for Disposition of Excess Before-Tax Contributions by Highly Compensated Employees. (a) The Committee shall determine, as soon as is reasonably possible following the close of each Plan Year, the extent, if any, to which deferral treatment under Code Section 401(k) may not be available for Before-Tax Contributions by Highly Compensated Employees. If, pursuant to the determination by the Committee, any or all of a Participant's Before-Tax Contributions are not eligible for tax-deferral treatment, then any excess Before-Tax Contributions and any income allocable thereto shall be disposed of in accordance with (i) or (ii) below. (i) To the extent permissible under Section 6.3, excess Before-Tax Contributions by the Highly Compensated Employee in a Plan Year may be recharacterized as After-Tax Contributions for the Plan Year not later than two and one-half (2-1/2) months following the close of the Plan Year. Any recharacterization shall be effective retroactive to the date of the Highly Compensated Employee's earliest Before-Tax Contributions during the Plan Year in which the excess Before- Tax Contributions were made. To the extent 23 required by Treas. Reg. Section 1-401(k)-1(f)(3), Before-Tax Contributions recharacterized as After- Tax Contributions shall continue to be treated as Before-Tax Contributions for purposes of Article VIII. (ii) To the extent a Participant's Before-Tax Contributions cannot be recharacterized in accordance with (i) above, any excess Before- Tax Contributions in a Plan Year shall, if administratively feasible, be distributed to the Participant not later than two and one-half (2-1/2) months following the close of the Plan Year in which such excess Before-Tax Contributions were made, but in any event no later than the close of the first Plan Year following the Plan Year in which such excess Before-Tax Contributions were made (after withholding any applicable income taxes due on such amounts). (b) For purposes of this Section, the amount of excess Before-Tax Contributions to be distributed to a Participant for a Plan Year or recharacterized shall be reduced by the amount of any Before-Tax Contributions in excess of the Deferral Limitation (for the Participant's taxable year that ends with or within the Plan Year) which have been distributed to the Participant under Section 5.6, in accordance with regulations prescribed by the Secretary of the Treasury under Section 401(k) of the Code. (c) The Committee shall determine the amount of any excess Before-Tax Contributions by Highly Compensated Employees for a Plan Year by application of the leveling method set forth in Treasury Regulation Section 1.401(k)-1(f)(2) under which the Deferral Percentage of the Highly Compensated Employee who has the highest such percentage for such Plan Year is reduced to the extent required (i) to enable the Plan to satisfy the Actual Deferral Percentage test, or (ii) to cause such Highly Compensated Employee's Deferral Percentage to equal the Deferral Percentage of the Highly Compensated Employee with the next highest Deferral Percentage. This process shall be repeated until the Plan satisfies the Actual Deferral Percentage test. For each Highly Compensated Employee, the amount of excess Before-Tax Contributions shall be equal to the total Before-Tax Contributions (plus any amounts treated as Before-Tax Contributions) made or deemed to be made by such Highly Compensated Employee (determined prior to the application of the foregoing provisions of this Subsection (c)) minus the amount determined by multiplying the Highly Compensated Employee's Deferral Percentage (determined after application of the 24 foregoing provisions of this Subsection (c)) by his Compensation. (d) The determination and correction of excess Before-Tax Contributions of a Highly Compensated Employee whose Actual Deferral Percentage is determined under the family aggregation rules in Section 5.4(e) shall be accomplished by reducing the Actual Deferral Percentage as required under Subsections (a) and (b) above and allocating the excess Before-Tax Contributions for the family unit among family members in proportion to the Before-Tax Contributions of each family member that are combined to determine the Actual Deferral Percentage. (e) For purposes of satisfying the Actual Deferral Percentage test, income allocable to a Participant's excess Before-Tax Contributions, as determined under (b) above, shall be determined in accordance with any reasonable method used by the Plan for allocating income to Participant Accounts, provided such method does not discriminate in favor of Highly Compensated Employees and is consistently applied to all Participants for all corrective distributions or recharacterizations under the Plan for a Plan Year. The Committee shall not be liable to any Participant (or his Beneficiary, if applicable) for any losses caused by misestimating the amount of any Before-Tax Contributions in excess of the limitations of this Article V and any income allocable to such excess. (f) To the extent required by regulations under Section 401(k) or 415 of the Code, any excess Before-Tax Contributions with respect to a Highly Compensated Employee shall be treated as Annual Additions under Article XIV for the Plan Year for which the excess Before-Tax Contributions were made, notwithstanding the distribution or recharacterization of such excess in accordance with the provisions of this Section. 5.6 Provisions for Return of Annual Before-Tax Contributions in Excess of the Deferral Limitation. (a) In the event that due to error or otherwise, a Participant's Before-Tax Contributions under this Plan exceed the Deferral Limitation for any calendar year (but without regard to amounts of compensation deferred under any other plan), the excess Before-Tax Contributions for the Plan Year, if any, together with income allocable to such amount shall be distributed to the Participant on or before the first April 15 following the close of the calendar year in 25 which such excess contribution is made. The amount of excess Before-Tax Contributions that may be distributed to a Participant under this Section for any taxable year shall be reduced by any excess Before-Tax Contributions previously distributed or recharacterized in accordance with Section 5.5 for the Plan Year beginning with or within such taxable year. (i) Income on Before-Tax Contributions in excess of the Deferral Limitation shall be calculated in accordance with Section 5.5(e), except calculations of allocable income shall be made with reference to the calendar year (if the Plan Year is not the calendar year). (ii) For the 1987 calendar year only, income shall be calculated on a reasonable and consistent basis; provided, however, if there is a loss allocable to the excess Before-Tax Contributions, the amount distributed shall be the excess amount adjusted to reflect such loss. (iii) The Committee shall not be liable to any Participant (or his Beneficiary, if applicable) for any losses caused by misestimating the amount of any Before-Tax Contributions in excess of the limitations of this Article V and any income allocable to such excess. (b) If in any calendar year a Participant makes Before-Tax Contributions under this Plan and additional elective deferrals, within the meaning of Code Section 402(g)(3), under any other plan maintained by the Company or an Affiliated Company, and the total amount of the Participant's elective deferrals under this Plan and all such other plans exceed the Deferral Limitation, the Company and each Affiliated Company maintaining a plan under which the Participant made any elective deferrals shall notify the affected plans in writing, and corrective distributions of the excess elective deferrals, and any income allocable thereto, shall be made from one or more such plans, to the extent determined by the Company and each Affiliated Company. The determination of the amount of a Participant's elective deferrals for any calendar year shall be made after applying the provisions of Section 14.5 relating to certain limits on Annual Additions under Section 415 of the Code. All corrective distributions of excess elective deferrals shall be made on or before the first April 15 following the close of the calendar year in which the excess elective deferrals were made. 26 (c) In accordance with rules and procedures as may be established by the Committee, a Participant may submit a claim to the Committee in which he certifies in writing the specific amount of his Before- Tax Contributions for the preceding calendar year which, when added to amounts deferred for such calendar year under any other plans or arrangements described in Section 401(k), 408(k) or 403(b) of the Code (other than a plan maintained by the Company or an Affiliated Company), will cause the Participant to exceed the Deferral Limitation for the calendar year in which the deferral occurred. Any such claim must be submitted to the Committee no later than the March 1 of the calendar year following the calendar year of deferral. To the extent the amount specified by the Participant does not exceed the amount of the Participant's Before-Tax Contributions under the Plan for the applicable calendar year, the Committee shall treat the amount specified by the Participant in his claim as a Before- Tax Contribution in excess of the Deferral Limitation for such calendar year and return such excess and any income allocable thereto to the Participant, as provided in (a) above. In the event that for any reason such Participant's Before-Tax Contributions in excess of the Deferral Limitation for any calendar year are not distributed to the Participant by the time prescribed in (a) above, such excess shall be held in the Participant's Before-Tax Contribution Account until distribution can be made in accordance with the provisions of this Plan. (d) To the extent required by regulations under Section 402(g) or 415 of the Code, Before-Tax Contributions with respect to a Participant in excess of the Deferral Limitation shall be treated as Annual Additions under Article XIV for the Plan Year for which the excess contributions were made, notwithstanding the distribution of such excess in accordance with the provisions of this Section. 5.7 Character of Amounts Contributed as Before-Tax Contributions. Unless otherwise specifically provided to the contrary in this Plan, amounts deferred pursuant to a Participant's election to make Before-Tax Contributions in accordance with Section 5.1 (and which qualify for treatment under Code Section 401(k) and are contributed to the Trust Fund pursuant to Article VI) shall be treated, for federal and state income tax purposes, as Participating Employer contributions. 27 5.8 Participant Transfer/Rollover Contributions. Effective as of an Eligible Employee's Employment Commencement Date, or such later date as may be determined by the Administrator, amounts, if any, distributed to such Eligible Employee from another plan that satisfies the requirements of Code Section 401(a), or held in an individual retirement account which is attributable solely to a rollover contribution within the meaning of Code Section 408(d)(3), may be transferred to this Plan and credited to the Participant's Transfer/Rollover Account in accordance with Code Section 402(a) and rules which the Committee shall prescribe from time to time; provided, however, the Committee determines that the continued qualification of this Plan under Code Section 401(a) or 401(k) would not be adversely affected by such transfer, or would cause this Plan to become a "transferee plan," within the meaning of Code Section 401(a)(ll). Any amounts transferred in accordance with this Section 5.8, which shall be in cash, shall not be subject to distribution to the Participant except as expressly provided under the terms of this Plan. 28 ARTICLE VI COMPANY CONTRIBUTIONS 6.1 General. Subject to the requirements and restrictions of this Article VI and Article XIV, and subject also to the amendment or termination of the Plan or the suspension or discontinuance of contributions as provided herein, a Participating Company shall contribute for each Participant who is an Employee of such Participating Company, as follows: (a) For each month of each Plan Year commencing on and after January 1, 1989, an amount to the Participant's Company Contributions Account equal to a percentage of the Participant's Compensation during such month according to the Participant's attained age as of the last day of the preceding month, as follows: Age as of Last Day Percentage of of Preceding Month Compensation ------------------ ------------- Under 40 2% 40 - 44 4% 45 - 49 5% 50 - 54 6% 55+ 7% (b) An amount to the Participant's Before- Tax Contributions Account which is equal to the amount of the Participant's Before-Tax Contributions pursuant to Section 5.1 and which qualify for tax treatment under Code Section 401(k). (c) An amount to the Participant's Company Matching Account which is the sum of the amounts in (i) and (ii) below: (i) A dollar amount equal to the dollar amount of the first two percent (2%) of the sum of a Participant's Before-Tax and After-Tax Contributions pursuant to Section 5.1. (ii) A dollar amount equal to 50% of the dollar amount of the next four percent (4%) of the sum of a Participant's Before-Tax and After-Tax Contributions pursuant to Section 5.1. The maximum Company Matching Contribution pursuant to this Section 6.1(c) shall be four percent (4%) of the Participant's Compensation (such Compensation to be 29 determined prior to reduction for Before-Tax Contributions pursuant to Section 5.1). 6.2 Requirement for Net Profits. Contributions by a Participating Employer shall be made without regard to current or accumulated profits for the year; provided, however, that the Plan is intended to be designed to qualify as a profit sharing plan for purposes of Sections 401(a) et seq. of the Code. 6.3 Special Limitations on After-Tax Contributions and Company Matching Contributions. With respect to each Plan Year, After-Tax Contributions and Company Matching Contributions under the Plan for the Plan Year shall not exceed the limitations on contributions on behalf of Highly Compensated Employees under Section 401(m) of the Code, as provided in this Section. For purposes of this Section, excess Before-Tax Contributions recharacterized as After-Tax Contributions after the close of a Plan Year shall be treated as After-Tax Contributions in a Plan Year as provided in Section 5.5(a)(i). In the event that After-Tax Contributions and Company Matching Contributions under this Plan on behalf of Highly Compensated Employees for any Plan Year exceed the limitations of this Section for any reason, such excess contributions and any income allocable thereto shall be disposed of in accordance with Section 6.4. For purposes of this Section 6.3, the meaning of the term "Compensation" shall be as defined in Section 5.4(b). (a) After-Tax Contributions and Company Matching Contributions on behalf of Participants under Section 6.1(c) for a Plan Year shall satisfy the Average Contribution Percentage test set forth in (i)(A) below, or the Average Contribution Percentage test set forth in (i)(B) below: (i) (A) The "Average Contribution Percentage" for Eligible Employees who are Highly Compensated Employees shall not be more than the "Average Contribution Percentage" of all other Eligible Employees multiplied by 1.25, or (i) (B) The excess of the "Average Contribution Percentage" for Eligible Employees who are Highly Compensated Employees over the "Average Contribution Percentage" for the other Eligible Employees shall not be more than two (2) percentage points, and the "Average Contribution Percentage" for Eligible Employees who are 30 Highly Compensated Employees shall not be more than the "Average Contribution Percentage" of all other Eligible Employees multiplied by 2.00. (ii) The Average Contribution Percentage for Highly Compensated Employees eligible to participate in this Plan and a plan of the Company or an Affiliated Company that satisfies the requirements of Section 401(k) of the Code, including, if applicable, this Plan, shall be reduced to the extent necessary to satisfy the requirements of Treasury Regulations Section 1.401(m)-2 or similar such rule. (b) For purposes of this Section, "Average Contribution Percentage" means, with respect to a group of Eligible Employees for a Plan Year, the average of the "Contribution Percentage," calculated separately for each Eligible Employee in such group. The "Contribution Percentage" for any Eligible Employee is determined by dividing the sum of After-Tax Contributions during the Plan Year and Company Matching Contributions under the Plan on behalf of each Eligible Employee for such Plan Year, by such Eligible Employee's Compensation for such Plan Year. "Company Matching Contributions" for purposes of the Average Contribution Percentage test shall include a Company Matching Contribution only if it is allocated to the Participant's Company Matching Contributions Account during the Plan Year and is paid to the Trust Fund by the end of the twelfth month following the close of the Plan Year. To the extent determined by the Committee and in accordance with regulations issued by the Secretary of the Treasury under Code Section 401(m)(3), the Before-Tax Contributions on behalf of an Eligible Employee and any "qualified nonelective contributions," within the meaning of Code Section 401(m)(4)(c), on behalf of an Eligible Employee may also be taken into account for purposes of calculating the Contribution Percentage of such Eligible Employee, but shall not otherwise be taken into account. However, any Company Matching Contributions taken into account for purposes of determining the Actual Deferral Percentage of an Eligible Employee under Section 5.4(a) shall not be taken into account under this Section 6.3. (c) In the event that as of the last day of a Plan Year this Plan satisfies the requirements of Section 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of Section 410(b) of the Code only if aggregated with this Plan, then this Section 6.3 shall be applied by determining the 31 Contribution Percentages of Eligible Employees as if all such plans were a single plan, in accordance with regulations prescribed by the Secretary of the Treasury under Section 401(m) of the Code. (d) For the purposes of this Section, the Contribution Percentage for any Eligible Employee who is a Highly Compensated Employee under two or more Code Section 401(a) plans of the Company or an Affiliated Company to the extent required by Code Section 401(m), shall be determined in a manner taking into account the participant contributions and matching contributions for such Eligible Employee under each of such plans. (e) If an Eligible Employee (who is also a Highly Compensated Employee) is subject to the family aggregation rules in Section 2.26(b)(vi), the combined Average Contribution Percentage for the family group (which is treated as one Highly Compensated Employee) shall be the Average Contribution Percentage determined by combining the After-Tax Contributions, Company Matching Contributions, amounts treated as Company Matching Contributions under Code Section 401(m)(3), and Compensation of all the eligible family members. (f) The determination of the Contribution Percentage of any Participant shall be made after first applying the provisions of Section 14.5 relating to certain limits on Annual Additions under Section 415 of the Code, then applying the provisions of Section 5.6 relating to the return of Before-Tax Contributions in excess of the Deferral Limitation, then applying the provisions of Section 5.5 relating to certain limits under Section 401(k) of the Code imposed on Pre-Tax Contributions of Highly Compensated Employees, and last, applying the provisions of Section 6.5 relating to the forfeiture of Company Matching Contributions attributable to excess Before-Tax or After-Tax Contributions. (g) The determination and treatment of the Contribution Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. (h) The Committee shall keep or cause to have kept such records as are necessary to demonstrate that the Plan satisfies the requirements of Code Section 401(m) and the regulations thereunder, in accordance with regulations prescribed by the Secretary of the Treasury. 32 6.4 Provision for Return of Excess After-Tax Contributions and Company Matching Contributions on Behalf of Highly Compensated Employees. (a) The Committee shall determine, as soon as is reasonably possible following the close of the Plan Year, the extent (if any) to which After-Tax and Company Matching Contributions on behalf of Highly Compensated Employees may cause the Plan to exceed the limitations of Section 6.3 for such Plan Year. If, pursuant to the determination by the Committee, After- Tax and Company Matching Contributions on behalf of a Highly Compensated Employee may cause the Plan to exceed such limitations, then the Committee shall take the following steps: (i) First, any excess After-Tax Contributions that were not matched by Company Matching Contributions, and any income allocable thereto, shall be distributed to the Highly Compensated Employee (after withholding any applicable income taxes on such amounts). (ii) Second, if any excess remains after the provisions of (i) above are applied, to the extent necessary to eliminate the excess, Company Matching Contributions on behalf of the Highly Compensated Employee, and any income allocable thereto, shall be forfeited, to the extent forfeitable under the Plan, or distributed to the Highly Compensated Employee, to the extent non-forfeitable under the Plan (after withholding any applicable income taxes on such amounts). Any corresponding After-Tax Contributions, and any income allocable thereto, shall be distributed to the Highly Compensated Employee (after withholding any applicable income taxes on such amounts). (iii) If administratively feasible, excess After-Tax Contributions and Company Matching Contributions which are nonforfeitable under the Plan, including any income allocable thereto, shall be distributed to Highly Compensated Employees, or, to the extent forfeitable, forfeited, within two and one-half (2-1/2) months following the close of the Plan Year for which the excess Contributions were made, but in any event no later than the end of the first Plan Year following the Plan Year for which the excess Contributions were made, notwithstanding any other provision in this Plan. Amounts of excess Company Matching Contributions forfeited by Highly Compensated Employees under this Section, including any income allocable 33 thereto, shall be applied, to the maximum extent practicable, to reduce Company Matching Contributions for the Plan Year for which such excess Contributions were made and thereafter shall be applied as soon as possible to reduce Company Matching Contributions for succeeding Plan Years. (b) The Committee shall determine the amount of any excess After-Tax Contributions and Company Matching Contributions made by or on behalf of Highly Compensated Employees for a Plan Year by application of the leveling method set forth in Proposed Treasury Regulation Section 1.401(m)-1(e)(2) under which the Contribution Percentage of the Highly Compensated Employee who has the highest such percentage for such Plan Year is reduced, to the extent required (i) to enable the Plan to satisfy the Average Contribution Percentage test, or (ii) to cause such Highly Compensated Employee's Contribution Percentage to equal the Contribution Percentage of the Highly Compensated Employee with the next highest Contribution Percentage. This process shall be repeated until the Plan satisfies the Average Contribution Percentage test. For each Highly Compensated Employee, the amount of excess After-Tax and Company Matching Contributions shall be equal to the total After-Tax and Company Matching Contributions (plus any amounts treated as Company Matching Contributions) made on behalf of such Highly Compensated Employee (determined prior to the application of the foregoing provisions of this Subsection (b)) minus the amount determined by multiplying the Highly Compensated Employee's Contribution Percentage (determined after the application of the foregoing provisions of this Subsection (b)) by his Compensation. (c) The determination and correction of excess After-Tax and Company Matching Contributions made by and on behalf of a Highly Compensated Employee whose Average Contribution Percentage is determined under the family aggregation rules in Section 6.3(e) shall be accomplished by reducing the Average Contribution Percentage of the Highly Compensated Employee as required under Subsections (a) and (b) above and allocating the excess After-Tax and Company Matching Contributions for the family unit among the family members in proportion to the After-Tax and Company Matching Contributions of each family member that are combined to determine the Average Contribution Percentage. 34 (d) For purposes of satisfying the Average Contribution Percentage test, income allocable to a Participant's excess After-Tax Contributions or Company Matching Contributions, as determined under (b) above, shall be determined by applying procedures comparable to those provided under Section 5.5. (e) To the extent required by regulations under Section 414(m) or 415 of the Code, any excess After-Tax Contributions or matching Company Contribution forfeited by or distributed to a Highly Compensated Employee in accordance with this Section shall be treated as an Annual Addition under Article XIV for the Plan Year for which the excess contribution was made, notwithstanding such forfeiture or distribution. 6.5 Forfeiture of Company Matching Contributions Attributable to Excess Deferrals or Contributions. To the extent any Company Matching Contributions allocated to a Participant's Company Matching Contributions Account are attributable to excess Before-Tax Contributions required to be distributed to the Participant in accordance with Section 5.5 or 5.6, or excess After-Tax Contributions required to be distributed to the Participant in accordance with Section 6.10, such Company Matching Contributions, including any income allocable thereto, shall be forfeited, notwithstanding that such Company Matching Contributions may otherwise be nonforfeitable under the terms of the Plan. Any Company Matching Contributions forfeited by a Participant in accordance with this Section 6.5 shall be applied to reduce Company Matching Contributions. 6.6 Investment and Application of Plan Contributions. (a) Subject to the provisions of Section 4.1(b), all contributions to the Trust Fund under Section 6.1 (including Before-Tax Contributions) and Participant After-Tax Contributions under Section 5.1 shall be invested as provided in this Section 6.6, subject to such rules as the Committee may adopt, in its sole discretion, to implement the provisions of this Section 6.6. The Committee may establish a choice of investment alternatives for Accounts from which each Participant may select in determining the manner in which his Account will be invested. In its sole discretion, the Committee may establish an investment alternative consisting of Company Stock. If investment alternatives are established in accordance with this Section 6.6, the following provisions of this Section 6.6 shall apply, 35 including, in the event the Committee establishes a Company Stock alternative, the limitations of (iv) below and the provisions of Article X relating to investments in Company Stock. (i) A Participant may elect to change an investment election with respect to the allocation of future contributions made by him or on his behalf (such election to apply to all such contributions without regard to any distinction between Company contributions or Participant contributions) among the investment alternatives. Subject to such rules as the Committee may prescribe, any such election to change shall be effective as of the next succeeding January 1, April 1, July 1, or October 1. Any such election shall be made in any whole percentage, subject to the provisions of Subsection (iv) below. (ii) Separate Trust Fund Subaccounts shall be established for each investment alternative selected by a Participant, and each such Subaccount shall be valued separately. (iii) A Participant may elect to change the investment of his Accounts and reallocate such Accounts among the investment alternatives in any whole percentage, subject to the limitations of (iv) below. Subject to such rules as the Committee may prescribe, any such election to change shall be effective as of the next succeeding January 1, April 1, July 1, or October 1. Any such change shall be implemented by the Committee in accordance with practices and procedures established by the Committee to provide for the orderly liquidation and/or purchase of investments. (iv) If a Company Stock alternative is established by the Committee, each Participant may elect to invest up to a maximum of twenty-five percent (25%) of contributions made by him or on his behalf (such limitation to apply to all contributions without regard to any distinction between Company contributions and Participant contributions) in the Company Stock alternative in accordance with this Section 6.6. Such a Participant may also elect to transfer amounts from his Accounts held in other investment alternatives to the Company Stock alternative in accordance with this Section 6.6, provided, however, that no such transfer shall be implemented to the extent that such transfer would result in the value of the Participant's interest 36 in the Company Stock Fund exceeding twenty-five percent (25%) of the value of his interest in all investment alternatives held under the Plan. Notwithstanding the preceding sentence, neither the Company nor the Committee, nor any representative of the Company, the Committee or of the Plan shall have any obligation to monitor the value of a Participant's interest in the Company Stock Fund, or to manage said fund, and no person shall or shall have any authority to dispose of any Participant's interest in the Company Stock Fund except in accordance with a Participant's valid election or otherwise in accordance with express provisions of this Plan. (v) In the case of a Participant who fails to make an effective election, for any reason whatsoever, as to how all or any portion of his interest therein shall be invested, the Committee shall prescribe rules which shall require that the Accounts of such Participant be invested in the current guaranteed investment contract. (b) If a fund consisting of one or more guaranteed investment contracts is made available as an investment alternative, from time to time the Company may advise Participants of the projected rate of return to be credited on contributions held or deposited in a Participant's guaranteed investment fund subaccount during a future period, not to exceed twelve (12) months (the "Guarantee Period"). To the extent the actual rate of return on contributions deposited or held in the guaranteed investment fund during a Guarantee Period is less than the projected rate communicated to Participants, the Company may, in its sole discretion make one or more contributions on behalf of each Participant for such Guarantee Period, which shall not exceed the amount required, if any, to increase the rate of return on such Participant's guaranteed investment fund subaccount for such Guarantee Period to the projected rate of return for the Guarantee Period. Notwithstanding the foregoing, no contribution and allocation shall be made under this Subsection with respect to a Highly Compensated Employee to the extent such contribution would result in prohibited discrimination, within the meaning of Section 401(a)(4) of the Code. Further, notwithstanding the foregoing, neither this Section 6.6 nor any other provision of this Plan shall be construed or applied to cause the Company to be an insurer or guarantor of any investment, either as to income or principal. 37 6.7 Irrevocability. A Participating Company shall have no right or title to, nor interest in, the contributions made to the Trust Fund, and no part of the Trust Fund shall revert to the Participating Company except that on and after the Effective Date funds may be returned to a Participating Company as follows: (a) In the case of a Participating Company contribution which is made by a mistake of fact, that contribution may be returned to the Participating Company within one (1) year after it is made. (b) All contributions to the Trust Fund are conditioned on deductibility under Code Section 404. In the event deduction is disallowed for any such contribution, such contribution may be returned to the Participating Company. 6.8 Company, Committee and Trustee Not Responsible for Adequacy of Trust Fund. The Company, Committee and Trustee shall not be liable or responsible for the adequacy of the Trust Fund to meet and discharge any or all payments and liabilities hereunder. All Plan benefits will be paid only from the Trust assets, and neither the Company, the Committee nor the Trustee shall have any duty or liability to furnish the Trust with any funds, securities or other assets except as expressly provided in the Plan. Except as required under the Plan or Trust or under Part 4 of Title I of ERISA, the Company shall not be responsible for any decision, act or omission of the Trustee, the Committee, or the Investment Manager (if applicable), and shall not be responsible for the application of any moneys, securities, investments or other property paid or delivered to the Trustee. 38 ARTICLE VII PARTICIPANT ACCOUNTS AND ALLOCATIONS 7.1 General. (a) All contributions under this Plan shall be held in the Trust Fund. (b) All gains, losses, dividends and other property acquisitions and/or transfers that occur with respect to the Trust Fund shall be held, charged, credited, debited or otherwise accounted for under said fund on an unallocated basis until allocated to Participants' Accounts as of a Valuation Date as provided under this Plan or otherwise used or applied in accordance with the provisions of this Plan. 7.2 Participants' Accounts. In order to account for the allocated interest of each Participant in the Trust Fund, there shall be established and maintained the Accounts described in Section 2.1. 7.3 Revaluation of Participants' Accounts. (a) As of each Valuation Date, and within sixty days after the removal or resignation of the Trustee, the Trustee shall value the assets of the Trust on the basis of fair market values. (b) As soon as is reasonably possible after receipt of these valuations from the Trustee, the Committee shall revalue the Accounts of each Participant as of the applicable Valuation Date so as to reflect a proportionate share in any increase or decrease in the fair market value of the assets in the Trust Fund, determined by the Trustee as of that date as compared with the value of the assets in the Trust Fund as of the immediately preceding Valuation Date. The valuation and allocation provisions of this Section 7.3 shall be applied and implemented in accordance with the following rules: (i) As of each Valuation Date the Committee shall revalue the Accounts holding such assets so as to reflect to each such Account a proportionate share in the net income or loss of the assets since the immediately preceding Valuation Date. 39 (ii) The Company, Committee and Trustee do not in any manner or to any extent whatsoever warrant, guarantee or represent that the value of a Participant's Accounts shall at any time equal or exceed the amount previously contributed thereto. 7.4 Treatment of Accounts Following Termination of Employment. Following a Participant's termination of employment, pending distribution of the Participant's Distributable Benefit pursuant to the provisions of Article VIII below, the Participant's Plan Accounts shall continue to be maintained and accounted for in accordance with all applicable provisions of this Plan. 7.5 Accounting Procedures. The Committee and the Trustee shall establish accounting procedures for the purpose of making the allocations, valuations and adjustments to Participants' Accounts provided for in this Article VII. From time to time the Committee and Trustee may modify such accounting procedures for the purpose of achieving equitable, nondiscriminatory, and administratively feasible allocations among the Accounts of Participants in accordance with the general concepts of the Plan and the provisions of this Article VII. 40 ARTICLE VIII VESTING; PAYMENT OF PLAN BENEFITS 8.1 Vesting. Each Participant's vested interest in his Accounts shall be determined as follows: (a) Each Participant shall at all times be one hundred percent (100%) vested in his Before-Tax Contributions Account, his After-Tax Contributions Account and his Transfer/Rollover Account under the Plan. (b) Except as provided in (c) below, each Participant shall become vested in his Company Matching Account and his Company Contributions Account according to the table set forth below: Number of Vesting Years of Service Percentage ---------------- ---------- Less than 1 0 At least 1 but less than 2 0 At least 2 but less than 3 25 At least 3 but less than 4 50 At least 4 but less than 5 75 5 or more 100 (c) Notwithstanding the foregoing, each Participant who completed an Hour of Service prior to July 1, 1989 shall at all times be one hundred percent (100%) vested in his Company Contributions Account. (d) Additionally a Participant shall become one hundred percent (100%) vested in his Company Matching Account and his Company Contributions Account upon attainment of Normal Retirement Date while an Employee, or in the event of death or Total and Permanent Disability while an Employee. 8.2 Distribution Upon Retirement. (a) A Participant may retire from the employment of the Company on his Normal Retirement Date. Subject to the required distribution rules under (b) below, if the Participant continues in the service of the Company beyond his Normal Retirement Date, he shall continue to participate in the Plan in the same manner as Participants who have not reached their Normal Retirement Dates. At the subsequent termination of the Participant's employment on his late retirement date, his Distributable Benefit shall be based upon the 41 value of his Accounts as of the applicable Valuation Date determined with reference to the date of distribution. After a Participant has reached his Normal Retirement Date, any termination of the Participant's employment (other than by reason of death or disability) shall be deemed a Normal Retirement. (b) Upon Normal Retirement a Participant shall be entitled to a distribution of his Distributable Benefit in the Trust Fund. Such distribution shall be made or commence to be made as soon as practicable but no later than the sixtieth day after the close of the Plan Year in which occurs the Participant's termination of employment with the Company and all Affiliated Companies; provided, however, in the case of a Participant who is a "5-percent owner" (within the meaning of Section 401(a)(9) of the Code) and, in the case of any Participant who attains age 70-1/2 after December 31, 1987, distribution shall be made not later than April 1 following the calendar year in which such Participant attains age 70-1/2, whether or not the Participant's employment has terminated. 8.3 Distribution Upon Death Prior to Termination of Employment. (a) Upon the death of a Participant during his employment the Committee shall direct the Trustee to make a distribution of the Participant's Distributable Benefit in the Trust Fund to the Beneficiary designated by the deceased Participant, or as otherwise determined under Section 8.9. (b) Distribution as provided in Section 8.3(a) shall be made or commence to be made not later than sixty (60) days after the close of the Plan Year in which all facts required by the Committee to be established as a condition of payment shall have been established to the satisfaction of the Committee (provided that, to the extent required by Section 401(a)(9) of the Code, his entire Distributable Benefit shall be distributed within five (5) years of such Participant's death). 8.4 Death After Termination of Employment. Upon the death of a former Participant after his retirement or other termination of employment, but prior to the distribution of his Distributable Benefit in the Trust Fund to which he is entitled, the Committee shall direct the Trustee to make a distribution of the balance to which the deceased Participant was entitled, to the Beneficiary 42 designated by the deceased Participant or as otherwise determined under Section 8.9. 8.5 Termination of Employment Prior to Normal Retirement Date. (a) Subject to the provisions of Section 8.5(b) below, if a Participant's employment for the Company and all Affiliated Companies terminates prior to his Normal Retirement Date, his Distributable Benefit in the Trust Fund shall be paid in a lump sum distribution as soon as administratively feasible following his Normal Retirement Date, or prior to his Normal Retirement Date in accordance with Subsection 8.5(b). Unless the Participant's Distributable Benefit is payable prior to his Normal Retirement in accordance with (b), the Participant shall be deemed to have elected to defer distribution until his Normal Retirement Date. In no event shall such distribution be later than sixty (60) days after the close of the Plan Year in which occurs the Participant's Normal Retirement Date. (b) If the Participant makes a valid written election in accordance with (c) below (and without regard to any such election if the distribution is not more than $3,500), payment of his Distributable Benefit pursuant to this Section 8.5 may be made on an earlier date which is not later than sixty (60) days after the close of the Plan Year in which occurs the Participant's termination of employment with the Company and all Affiliated Companies, to the extent administratively feasible. For purposes of Section 72(t) of the Code, any distribution to a Participant in accordance with this Section 8.5 during or following the year in which he attains age fifty- five (55) shall be deemed to be on account of an event enumerated in Code Section 72(t)(2). (c) Effective as of January 1, 1989, any written election by a Participant to receive payment of his Distributable Benefit prior to Normal Retirement Date shall not be valid unless such election is made both (A) after the Participant receives a written notice advising him of his right to defer payment to Normal Retirement Date and (B) within the ninety (90) day period ending on the Participant's "Benefit Starting Date." The notice to the Participant advising him of his right to defer payment shall be given no less than thirty (30) nor more than ninety (90) days prior to the Participant's Benefit Starting Date. For purposes of this Subsection(c), "Benefit Starting Date" shall mean the first day of the first period for which the Participant's Distributable Benefit is paid. 43 (d) In the event a Participant is not fully vested in all of his Company Contributions Account or Company Matching Account under the Plan, the portion of such Accounts which is not vested shall be forfeited as of the earlier of the date such Accounts are distributed to him or the date he incurs five (5) consecutive one-year Periods of Severance. (e) Notwithstanding the foregoing, if a Participant ceases to be an Employee by reason of the disposition by the Company or an Affiliated Company of either (i) substantially all of the assets used by the Company or an Affiliated Company, as the case may be, in a trade or business, or (ii) the interest of the Company or an Affiliated Company, as the case may be, in a subsidiary, such Participant shall be entitled to distribution of his Distributable Benefit as if, for purposes of this Plan only, such event constitutes a termination of employment. 8.6 Withdrawals. (a) Subject to the succeeding provisions of this Section 8.6, while he is still an Eligible Employee, a Participant may withdraw amounts from his Accounts under the Plan; provided, however, that not more than one withdrawal may be made by a Participant from his Accounts within any single quarter of a Plan Year. Payment of a withdrawal shall be made only in cash and shall be allocated pro rata among the Participant's investment fund subaccounts, including any Company Stock subaccount. In no event may any amount be withdrawn by a Participant after he ceases to be an Eligible Employee. (b) A withdrawal from a Participant's Transfer/Rollover Account may be made in accordance with rules of uniform application which the Committee may from time to time prescribe; provided, however, that, except in the case of a Participant who is determined to have a Total and Permanent Disability and who is ineligible to make further contributions under Section 5.1, no amount representing Employee contributions made within the preceding six months to the Mattel Investment Plan which were matched by Company matching contributions under said Plan may be withdrawn from such Account; and provided further, that unless the Participant has completed an aggregate of at least sixty (60) months of participation in this Plan and the Mattel Investment Plan as of the date of withdrawal or has attained age 59-1/2 or is determined by the Committee to have a Total and Permanent Disability, the withdrawal shall not include amounts attributable to Company contributions made under the 44 Mattel Investment Plan within the two (2) year period preceding withdrawal. (c) A withdrawal from a Participant's After- Tax Contribution Account may be made in accordance with rules of uniform application which the Committee may from time to time prescribe; provided, however, that except in the case of a Participant who is determined to have a Total and Permanent Disability and who is ineligible to make further contributions under Section 5.1, no amount representing After-Tax Contributions made within the preceding six months to the Plan which were matched by Company Matching Contributions may be withdrawn from such Account. (d) A withdrawal from a Participant's Before-Tax Contributions Account may be made in accordance with rules of uniform application which the Committee may from time to time prescribe; provided, however, no Participant may withdraw from his Before- Tax Contributions Account prior to attaining age 59-1/2 or a determination by the Committee that such Participant has a Total and Permanent Disability or that the withdrawal is necessary to relieve a Hardship of the Participant or his family. For purposes of this Section 8.6(d), a withdrawal may be considered to be necessary on account of a Hardship of the Participant if the Committee determines that the amount required to meet such Hardship is not readily available to the Participant from other resources, in accordance with regulations prescribed by the Secretary of the Treasury under Section 401(k) of the Code. The Committee may determine that a withdrawal is necessary on account of a Hardship on the basis of facts and circumstances, as provided in (i) below, or on the basis of the criteria specified in (ii) below: (i) A distribution generally may be treated as necessary on account of a Hardship of a Participant if the Committee reasonably relies on the Participant's representations to the Committee, unless the Committee has actual knowledge to the contrary, that the Hardship cannot be relieved (A) through reimbursement or compensation by insurance or otherwise, (B) by reasonable liquidation of assets, if such liquidation would not itself cause an immediate and heavy financial need, (C) by the cessation of Participant Before-Tax Contributions to the Plan, or (D) by other distributions or non-taxable loans from plans of the Company or any other employer, or by borrowing from commercial sources on reasonable commercial terms, unless the obligation to repay the loan would be inconsistent with the 45 purpose of the withdrawal. For purposes of this Section, a Participant's resources shall be deemed to include those assets of his spouse and minor children that are reasonably available to the Participant. (ii) A distribution shall be deemed by the Committee to be necessary on account of a Hardship of a Participant if all of the following requirements are satisfied: (A) the distribution is not in excess of the amount of the Hardship, (B) the Participant has obtained all distributions (other than Hardship distributions) and all non- taxable loans (at the time of the loan) currently available under all plans maintained by the Company, (C) the Participant's Before-Tax Contributions and After-Tax Contributions and employee contributions under all qualified and nonqualified plans of deferred compensation maintained by the Company, including a stock option, stock purchase, or similar plan, or a cash or deferred arrangement that is part of a cafeteria plan within the meaning of Code Section 125, will be suspended under the terms of each such plan, or in accordance with the terms of an otherwise legally enforceable agreement, for twelve (12) months following the receipt of the distribution, and (D) the Deferral Limitation for the Participant for the Participant's taxable year following the taxable year of distribution is reduced by the amount of the Participant's Before- Tax Contributions for the taxable year of distribution. No earnings credited to a Participant's Before-Tax Contributions Account after December 31, 1988 shall be available for a Hardship withdrawal. (e) A withdrawal from a Participant's vested interest in his Company Contributions Account may be made in accordance with rules of uniform application which the Committee may from time to time prescribe; provided, however, that no Participant may withdraw from his Company Contributions Account prior to attaining age 59-1/2 or a determination by the Committee that such Participant has a Total and Permanent Disability or that the withdrawal is necessary to relieve a Hardship of the Participant or his family. (f) A withdrawal from the vested portion of a Participant's Company Matching Account may be made in accordance with rules of uniform application which the Committee may from time to time prescribe; provided, 46 however, that unless the Participant has completed an aggregate of at least sixty (60) months of participation in this Plan and the Mattel Investment Plan as of the date of withdrawal or has attained age 59-1/2 or is determined by the Committee to have Total and Permanent Disability, any withdrawal from such Company Matching Account shall not include amounts attributable to Company contributions made within the two (2) year period preceding withdrawal. (g) If a Participant makes an in-service withdrawal from his Company Contributions Account or Company Matching Account at a time when the Participant does not have a one hundred percent (100%) vested interest in the value of such Account, and the Participant may increase his vested interest in the Account: (i) such Account shall be established as a separate Account as of the date of distribution, and (ii) at any relevant time the Participant's vested interest in the value of such separate Account shall be equal to an amount ("X") determined by the formula: X = P(AB + D) - D For purposes of applying the formula above: P is the nonforfeitable percentage at the relevant time, AB is the Account balance at the relevant time, and D is the amount of the withdrawal. (h) Disbursement of withdrawals shall be as soon as administratively practicable after the Valuation Date which occurs at the end of the month in which the Participant completes the filing of a request for withdrawal in form satisfactory to the Committee. 8.7 Form of Distribution. (a) Unless a Participant makes a written election in accordance with Section 8.8 below, a Participant's Distributable Benefit shall be payable in the form of a single sum distribution. Except for any portion of such Distributable Benefit that is payable in the form of Company Stock in accordance with Section 8.13, such distribution shall be in cash. (b) In the case of any disbursement from a Participant's Accounts, such disbursement shall be made ratably from such investment funds or investment 47 vehicles in which such Participant's Accounts affected by such disbursement are invested. 8.8 Election for Direct Rollover of Distributable Benefit to Eligible Retirement Plan. (a) Effective as of January 1, 1993, to the extent required by Section 401(a)(31) of the Code, a Participant who is eligible to receive payment of his Distributable Benefit shall be entitled to elect a direct rollover of all or part of the taxable portion of his Distributable Benefit to an "eligible retirement plan." For purposes of this Section, an "eligible retirement plan" shall mean any plan described in Code Section 402(c)(8)(B), except that such plan must be a defined contribution plan, the terms of which permit the acceptance of a direct rollover from a qualified plan. Any non-taxable portion of the Participant's Distributable Benefit shall be payable to the Participant in accordance with Section 8.7 above. (b) A Participant's direct rollover election under this Section shall be in writing and shall be made in accordance with rules and procedures established by the Committee. Such election shall specify the dollar or percentage amount of the Distributable Benefit to be rolled over, the name and address of the eligible retirement plan selected by the Participant, and such additional information as the Committee deems necessary or appropriate in order to implement the election. It shall be the Participant's responsibility to confirm that the eligible retirement plan designated in his direct rollover election will accept the direct rollover of his Distributable Benefit. The Committee shall be entitled to direct the rollover based on its reasonable reliance on information provided by the Participant, and shall be not required to independently verify such information, unless it is clearly unreasonable not to do so. (c) At least thirty (30) days, but not more than ninety (90) days, prior to the date a Participant's Distributable Benefit becomes payable, the Participant shall be given written notice of any right he may have to elect a direct rollover of the taxable portion of his Distributable Benefit to an eligible retirement plan; provided, however, a Participant who attained his Normal Retirement Date or whose Distributable Benefit does not exceed $3,500 may waive the thirty (30) day notice requirement by making an affirmative election to make or not to make a direct rollover of all or a portion of his Distributable Benefit. 48 (d) If a Participant who attained his Normal Retirement Date or whose Distributable Benefit does not exceed $3,500 fails to file a written election with the Committee within ninety (90) days after notice is given, or if the Committee cannot effect the direct rollover within a reasonable time after the election is filed due to the failure of the Participant to take such actions as may be required by the eligible retirement plan before it will accept the direct rollover, the Participant's Distributable Benefit shall be paid to him after withholding applicable income taxes. (e) If a Participant has made a direct rollover election with respect to any portion of his Distributable Benefit that is payable in Company Stock, as provided in Section 8.13, unless the eligible retirement plan specified by the Participant will accept a direct rollover of such Stock, the Stock will be distributed to the Participant, notwithstanding the Participant's direct rollover election. (f) To the extent required by Section 401(a)(31) of the Code, if all or a portion of a Participant's Distributable Benefit is payable to the Participant's surviving Spouse, or to a former Spouse in accordance with a "qualified domestic relations order," such surviving Spouse or former Spouse shall be entitled to elect a direct rollover of all or a portion of such distribution in accordance with the provisions of this Section. 8.9 Designation of Beneficiary. (a) Subject to the provisions of Section 8.11, each Participant shall have the right to designate a Beneficiary or Beneficiaries to receive his interest in the Trust Fund in the event of his death before receipt of his entire interest in the Trust Fund. This designation is to be made on the form prescribed by and delivered to the Committee. (b) Subject to the provisions of Section 8.11, a Participant shall have the right to change or revoke any such designation by filing a new designation or notice of revocation with the Committee. Subject to the provisions of Section 8.11, no notice to any Beneficiary nor consent by any Beneficiary shall be required to effect any such change or revocation. (c) If a deceased Participant shall have failed to designate a Beneficiary, or if the Company shall be unable to locate a designated Beneficiary after reasonable efforts have been made, or if for any 49 reason the designation shall be legally ineffective, or if the Beneficiary shall have predeceased the Participant without effectively designating a successor Beneficiary, any distribution required to be made under the provisions of this Plan shall commence within three (3) years after the Participant's death to the person or persons included in the highest priority category among the following, in order of priority: (i) The Participant's surviving spouse; (ii) The Participant's surviving children, including adopted children; (iii) The Participant's surviving parents; or (iv) The Participant's estate. The determination by the Committee as to which persons, if any, qualify within the foregoing categories shall be final and conclusive upon all persons. (d) In the event that the deceased Participant was not a resident of California at the date of his death, the Committee, in its discretion, may require the establishment of ancillary administration in California. In the event that a Participant shall predecease his Beneficiary and on the subsequent death of the Beneficiary a remaining distribution is payable under the applicable provisions of this Plan, the distribution shall be payable in the same order of priority categories as set forth above but determined with respect to the Beneficiary, subject to the same provisions concerning non-California residency, the unavailability of an estate representative and/or the absence of administration of the Beneficiary's estate as are applicable on the death of the Participant. 8.10 Facility of Payment. If any payee under the Plan is a minor or if the Committee reasonably believes that any payee is legally incapable of giving a valid receipt and discharge for any payment due him, the Committee may have the payment, or any part thereof, made to the person (or persons or institution) whom it reasonably believes is caring for or supporting the payee, unless it has received due notice of claim therefor from a duly appointed guardian or committee of the payee. Any payment shall be a payment from the Accounts of the payee and shall, to the extent thereof, be a complete discharge of any liability under the Plan to the payee. 50 8.11 Requirement of Spousal Consent. Notwithstanding any Beneficiary designation submitted by a Participant, any distribution required to be made under the terms of the Plan by reason of the death of the Participant shall be paid in full to the Participant's surviving spouse, unless there is no surviving spouse or the spouse consents in writing to the beneficiary designation, acknowledging the effect of the election. Any such spousal consent, to be valid, must be witnessed by a plan representative or a notary public. The spousal consent requirement of this Section 8.11 shall be waived and the Participant's Beneficiary designation shall be made effective if the Participant establishes to the satisfaction of the Committee that the required consent cannot be obtained because there is no spouse or the spouse cannot be located. 8.12 Additional Documents. (a) The Committee or Trustee, or both, may require the execution and delivery of such documents, papers and receipts as the Committee or Trustee may determine necessary or appropriate in order to establish the fact of death of the deceased Participant and of the right and identity of any Beneficiary or other person or persons claiming any benefits under this Article VIII. (b) The Committee or the Trustee, or both, may, as a condition precedent to the payment of death benefits hereunder, require an inheritance tax release and/or such security as the Committee or Trustee, or both, may deem appropriate as protection against possible liability for state or federal death taxes attributable to any death benefits. 8.13 Company Stock Distribution. Except in the case of a withdrawal in accordance with Section 8.6, payment of any portion of a Participant's Distributable Benefit held in his Company Stock subaccount shall be paid in Company Stock, unless the Participant elects in writing in accordance with procedures established by the Committee that payment shall be made in cash in lieu of Company Stock (which election may apply to a payment to the trustee of an "eligible retirement plan" in accordance with Section 8.8). Within a reasonable period of time prior to the date such Participant's Distributable Benefit is to be paid, the Committee shall notify the Participant of his right to elect to have payment of the value of his Company Stock subaccount made in the form of a cash distribution in lieu of a Company Stock distribution. Upon being so notified, the Participant shall have a reasonable time (at 51 least thirty (30) days) in which to file a written election to have such payment made in cash. Any such election shall be irrevocable and shall operate to require the Trustee to value such Company Stock as of the immediately following Valuation Date at the then prevailing purchase price. Neither the Company, the Committee, nor the Trustee shall be required to time the distribution or sale of Company Stock to anticipate fluctuations in the purchase price. If a Participant fails to file a written election to receive a cash payment of the value of the portion of his Distributable Benefit attributable to his Company Stock subaccount within thirty (30) days of receiving notification, payment shall be made in Company Stock. 8.14 Valuation of Accounts. (a) For purposes of determining a Participant's Distributable Benefit under this Plan, the value of a Participant's Accounts shall be determined in accordance with rules prescribed by the Committee, subject, however, to the following provisions: (i) Unless the provisions of (ii) below apply, if a Participant's employment terminates for any reason other than death, the value of a Participant's Accounts shall be determined as of the Valuation Date coinciding with or next following the date on which a properly completed application for payment or transfer of the Participant's Distributable Benefit, and such other forms as may be required by the Committee in order to process the distribution or transfer, are received by the Committee. (ii) If a Participant's employment terminates for any reason other than death and the Committee does not receive the Participant's properly completed application for the payment or transfer of the Participant's Distributable Benefit, and such other forms as may be required by the Committee to process the payment or transfer, and the value of such Participant's Accounts at the applicable Valuation Date does not exceed $3500, the applicable Valuation Date shall be the Valuation Date coinciding with or next following the expiration of a reasonable period of time after the Participant is furnished with such application and forms, including any tax notice required under Code Section 402(f). (iii) In the case of a Participant's death, the value of a Participant's Accounts for purposes of determining the Participant's 52 Distributable Benefit shall be determined as of the Valuation Date coinciding with or next following the date on which the Committee has been furnished with all documents and information (including but not limited to proof of death, facts demonstrating the identity and entitlement of any Beneficiary or other payee, and any and all releases) necessary to distribute such Participant's Accounts. (iv) In the case of any withdrawal or loan, the value of a Participant's Accounts under the Plan shall be determined as of the Valuation Date coinciding with or next following the date on which the Participant submits a request for such withdrawal or loan in a form satisfactory to the Committee and the withdrawal or loan is approved. (v) The value of a Participant's Accounts shall be increased or decreased (as appropriate) by any contributions, forfeitures, or distributions properly allocable under the terms of this Plan to his Accounts that occurred on or after the most recent Valuation Date or for any other reason were not otherwise reflected in the valuation of his Accounts on such Valuation Date. (b) Neither the Committee, the Company, nor the Trustee shall have any responsibility for any increase or decrease in the value of a Participant's Accounts as a result of any valuation made under the terms of this Plan after the date of his termination of employment and before the date of the distribution of his Accounts to him. Also, neither the Committee, the Company, nor the Trustee shall have any responsibility for failing to make any interim valuation of a Participant's Accounts between the date of distribution to the Participant of his Accounts and the applicable Valuation Date, even though the Plan assets may have been revalued in that interim for a purpose other than to revalue the Accounts under this Plan. 8.15 Forfeitures; Repayment. (a) Amounts forfeited in accordance with Section 8.5(d) shall be applied as soon as practicable to reduce future Company contributions. (b) A Participant who elects to receive a distribution pursuant to Subsection 8.5(b) may, in the case of his reemployment as an Eligible Employee, repay the total amount distributed and shall in such case be fully restored in amounts forfeited in accordance with Section 8.5(d); provided, however, that no such 53 repayment shall be permitted unless such repayment is made prior to the date the Participant incurs five (5) consecutive one-year Periods of Severance and prior to the fifth anniversary of his Employment Commencement Date following the Period of Severance. 8.16 Loans. (a) From time to time, the Committee may adopt procedures whereby a Participant may borrow from his Accounts under the Plan. In no event may any amount be borrowed by a Participant after he ceases to be an Eligible Employee. In addition to such other requirements as may be imposed by applicable law, any such loan shall bear a reasonable rate of interest, shall be adequately secured by proper collateral, and shall be repaid within a specified period of time according to a written repayment schedule that calls for substantially level amortization over the term of the loan. (b) In connection with the requirements set forth in Subsection (a) above, the Committee shall establish the applicable interest rate, which shall be reasonably equivalent to interest rates available commercially with respect to similar loans. Without prejudice to the right of any Participant and the Trustee to enter into other appropriate arrangements to secure repayment of a loan pursuant to this Section 8.16, a loan to a Participant hereunder may be secured by an interest in the Participant's vested interest in his Accounts under this Plan. Any loan shall by its terms require repayment within five (5) years in substantially level payments made no less frequently than quarterly, except that the repayment period may in the discretion of the Committee be up to a maximum of fifteen (15) years in the case of a loan certified by the Participant to be used to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as a principal residence of the Participant. (c) In no event shall the principal amount of a loan hereunder, at the time the loan is made, together with the outstanding balance of all other loans to the Participant under this Plan, exceed the lesser of: (i) fifty percent (50%) of the value of the Participant's vested interest in his Accounts under this Plan, determined as of the Valuation Date occurring at the end of the month in which the Participant's loan application is completed in form satisfactory to the Committee (provided, 54 however, for loans granted or renewed prior to October 19, 1989, the amount determined under this Subsection 8.16(c)(i) shall not be less than the lesser of ten thousand dollars ($10,000) or the full value of all such Accounts of the Participant where such value is less than twenty thousand dollars ($20,000)), or (ii) fifty thousand dollars ($50,000), reduced by the highest outstanding loan balance of the Participant from the Plan during the 1-year period ending on the day before the date on which such loan was made. No loan less than two thousand dollars ($2,000) will be made. Unless otherwise determined by the Committee, no Participant may have more than one loan outstanding under this Plan on any date. (d) Each Participant desiring to enter into a loan arrangement pursuant to this Section 8.16 shall apply for a loan by filing a properly completed application with the Committee. The Committee shall notify the Participant within a reasonable time whether the application is approved or denied. Upon approval of the application by the Committee, the Participant shall enter into a loan agreement with the Trustee. Such a Participant shall execute such further written agreements as may be necessary or appropriate to establish a bona fide debtor-creditor relationship between such Participant and the Trustee and to protect against the impairment of any security for said loan. (e) Any loan made to a Participant shall be secured by a pro rata portion of his vested investment fund subaccounts, including any Company Stock subaccount. Repayments of a loan by a Participant shall be invested among the Participant's investment fund subaccounts in accordance with the Participant's investment election then in effect under Section 6.6(a)(i). (f) Loans shall be repaid in accordance with the repayment schedule provided under the terms of the loan agreement. Notwithstanding the repayment schedule provided in a loan agreement, however, the amount of any outstanding loan shall be due and payable on the earlier to occur of (a) the date on which distribution is made or commences to be made of the participant's vested interest under the Plan or (b) the expiration of one hundred eighty (180) days following the date the Participant ceases to be an Employee. Following a Participant's Severance Date, any outstanding loan amount which has become due and payable under the 55 foregoing rule or otherwise, and which is secured by the Participant's vested interest in his Accounts, shall be treated as distributed from the Plan to the Participant. (g) In the event a Participant fails to repay a loan in accordance with the terms of a loan agreement, such loan shall be treated as in default. The date of the enforcement of the security interest due to a loan in default shall be determined by the Committee, provided no loss of principal or income shall result due to any delay in the enforcement of the security interest due to the default. As of the Participant's Severance Date, the Participant's Distributable Benefit shall be reduced by the outstanding amount of a loan which is then in default, including any accrued interest thereon, that is secured by the Participant's vested interest in his Accounts. Any reasonable costs related to collection of a loan made hereunder shall be borne by the Participant. (h) To the extent required to comply with the requirements of Section 401(a)(4) of the Internal Revenue Code, loans hereunder shall be made in a uniform and non-discriminatory manner. 8.17 Special Rule for Disabled Employees. (a) Subsection 8.17(b) shall apply to any Participant whose active performance of services for a Participating Company has ceased by reason of disability, and who has not subsequently resumed the active performance of such services. Subsections 8.17(c) and (d) shall apply only to a Participant whose active performance of services for a Participating Company ceases prior to January 1, 1989 by reason of disability, and who has not subsequently resumed the active performance of such services. (b) In the case of a Participant to whom this Section 8.17(b) applies, so long as such Participant continues to receive Compensation from a Participating Company, but in no event for longer than a period of six (6) months commencing with the date of such Participant's cessation of active service, such Participant may continue to participate in this Plan in the same manner as any other Participant. (c) In the case of a Participant to whom this Section 8.17 applied by reason of a disability prior to January 1, 1989 and who, on or after expiration of the period described in Section 8.17(b) above, commences to receive payments under the long term disability benefit coverage provided by a 56 Participating Company and who also is determined to be suffering from a Total and Permanent Disability, contributions shall be made by the Participating Company pursuant to Section 6.1(a) (relating to contributions to Participants' Company Contributions Accounts) with respect to the Participant's "Compensation" as defined in Subsection 8.17(d) below, but the Participant shall not be eligible to make any contributions with respect to his own Compensation, and shall not be entitled to share in any other Participating Company contributions to the Plan (including but not limited to contributions to the Company Matching Account). Contributions by a Participating Company pursuant to this Section 8.17(c) shall be subject to amendment or termination of the Plan or other suspension or discontinuance of contributions, and in any event shall cease to be made with respect to any Participant after the earlier to occur of such Participant's death or termination of employment for any other reason, cessation of Total and Permanent Disability, or attainment of age sixty-five (65). (d) In the case of a Participant to whom Section 8.17 applied by reason of a disability prior to January 1, 1989 and who is eligible to share in contributions of a Participating Company as provided in Subsection 8.17(c) above, the Compensation of such Participant for a Plan Year shall be deemed to equal the amount of Compensation which the Participant was paid (and which was taken into account for purposes of Sections 5.1 and 6.1 hereof) immediately before sustaining such Total and Permanent Disability, provided, however, that such amounts shall be included in Compensation only upon the following conditions: (i) the Participant is not an officer, owner, or highly compensated individual (within the meaning of such terms under Code Section 415(c)(3)); (ii) the payments to such Participant under such long term disability benefit coverage shall be treated as "Compensation" only to the extent that such payments do not exceed the Participant's wage or salary rate paid immediately before becoming disabled to an extent constituting a Total and Permanent Disability; and (iii) the Participant's accounts under the Plan, to the extent attributable to contributions made during a period of Total and Permanent Disability shall be nonforfeitable. 57 (e) For purposes of this Plan, a Participant shall not be deemed to have terminated employment prior to his ceasing to be eligible for contributions under this Section 8.17, and upon such cessation of eligibility shall be deemed to have terminated employment only if he did not then begin or recommence employment for the Company or an Affiliated Company. 58 ARTICLE IX OPERATION AND ADMINISTRATION OF THE PLAN 9.1 Plan Administration. (a) Authority to control and manage the operation and administration of the Plan shall be vested in a committee ("Committee") as provided in this Article IX. (b) The members of the Committee shall be appointed by the Board of Directors and shall hold office until resignation, death or removal by the Board of Directors. Members of the Committee may, but need not be, appointed by appropriate designation of a Committee heretofore constituted pursuant to the provisions of another employee benefit plan maintained by the Company. (c) For purposes of ERISA Section 402(a), the members of the Committee shall be the Named Fiduciaries of this Plan. (d) The Secretary of the Committee shall cause to be attached to the copy of the Plan maintained in the office of the Committee for the purpose of inspection an accurate schedule listing the names of all persons from time to time serving as the Named Fiduciaries of the Plan. (e) Notwithstanding the foregoing, a Trustee with whom Plan assets have been placed in trust or an Investment Manager appointed pursuant to Section 9.3 may be granted exclusive authority and discretion to manage and control all or any portion of the assets of the Plan. 9.2 Committee Powers. The Committee shall have all powers and discretion necessary to supervise the administration of the Plan and control its operations. In addition to any powers and authority conferred on the Committee elsewhere in the Plan or by law, the Committee shall have, by way of illustration but not by way of limitation, the following powers and authority: (a) To allocate fiduciary responsibilities (other than trustee responsibilities) among the Named Fiduciaries and to designate one or more other persons to carry out fiduciary responsibilities (other than trustee responsibilities). However, no allocation or delegation under this Section 9.2(a) shall be effective 59 until the person or persons to whom the responsibilities have been allocated or delegated agree to assume the responsibilities. The term "trustee responsibilities" as used herein shall have the meaning set forth in Section 405(c) of ERISA. The preceding provisions of this Section 9.2(a) shall not limit the authority of the Committee to appoint one or more Investment Managers in accordance with Section 9.3. (b) To designate agents to carry out responsibilities relating to the Plan, other than fiduciary responsibilities. (c) To employ such legal, actuarial, medical, accounting, clerical and other assistance as it may deem appropriate in carrying out the provisions of this Plan, including one or more persons to render advice with regard to any responsibility any Named Fiduciary or any other fiduciary may have under the Plan. (d) To establish rules and regulations from time to time for the conduct of the Committee's business and the administration and effectuation of this Plan. (e) To administer, interpret, construe and apply this Plan and to decide all questions which may arise or which may be raised under this Plan by any Employee, Participant, former Participant, Beneficiary or other person whatsoever, including but not limited to all questions relating to eligibility to participate in the Plan, the amount of service of any Participant, and the amount of benefits to which any Participant or his Beneficiary may be entitled by reason of his service prior to or after the Effective Date hereof. (f) To determine the manner in which the assets of this Plan, or any part thereof, shall be disbursed. (g) To direct the Trustee, in writing, from time to time, to invest and reinvest the Trust Fund, or any part thereof, or to purchase, exchange, or lease any property, real or personal, which the Committee may designate. This shall include the right to direct the investment of all or any part of the Trust in any one security or any one type of securities permitted hereunder. Among the securities which the Committee may direct the Trustee to purchase are "employer securities" as defined in Code Section 409A(1) or any successor statute thereto. 60 (h) To perform or cause to be performed such further acts as it may deem to be necessary, appropriate or convenient in the efficient administration of the Plan. Any action taken in good faith by the Committee in the exercise of authority conferred upon it by this Plan shall be conclusive and binding upon the Participants and their Beneficiaries. All discretionary powers conferred upon the Committee shall be absolute. 9.3 Investment Manager. (a) The Committee, by action reflected in the minutes thereof, may appoint one or more Investment Managers, as defined in Section 3(38) of ERISA, to manage all or a portion of the assets of the Plan. (b) An Investment Manager shall discharge its duties in accordance with applicable law and in particular in accordance with Section 404(a) (1) of ERISA. (c) An Investment Manager, when appointed, shall have full power to manage the assets of the Plan for which it has responsibility, and neither the Company nor the Committee shall thereafter have any responsibility for the management of those assets. 9.4 Periodic Review. (a) At periodic intervals, not less frequently than annually, the Committee shall review the long-run and short-run financial needs of the Plan and shall determine a funding policy for the Plan consistent with the objectives of the Plan and the minimum funding standards of ERISA, if applicable. In determining the funding policy the Committee shall take into account, at a minimum, not only the long-term investment objectives of the Trust Fund consistent with the prudent management of the assets thereof, but also the short-run needs of the Plan to pay benefits. (b) All actions taken by the Committee with respect to the funding policy of the Plan, including the reasons therefor, shall be fully reflected in the minutes of the Committee. 9.5 Committee Procedure. (a) A majority of the members of the Committee as constituted at any time shall constitute a quorum, and any action by a majority of the members present at any meeting, or authorized by a majority of 61 the members in writing without a meeting, shall constitute the action of the Committee. (b) The Committee may designate certain of its members as authorized to execute any document or documents on behalf of the Committee, in which event the Committee shall notify the Trustee of this action and the name or names of the designated members. The Trustee, Company, Participants, Beneficiaries, and any other party dealing with the Committee may accept and rely upon any document executed by the designated members as representing action by the Committee until the Committee shall file with the Trustee a written revocation of the authorization of the designated members. 9.6 Compensation of Committee. (a) Members of the Committee shall serve without compensation unless the Board of Directors shall otherwise determine. However, in no event shall any member of the Committee who is an Employee receive compensation from the Plan for his services as a member of the Committee. (b) All members shall be reimbursed for any necessary or appropriate expenditures incurred in the discharge of duties as members of the Committee. (c) The compensation or fees, as the case may be, of all officers, agents, counsel, the Trustee, or other persons retained or employed by the Committee shall be fixed by the Committee. 9.7 Resignation and Removal of Members. Any member of the Committee may resign at any time by giving written notice to the other members and to the Board of Directors effective as therein stated. Any member of the Committee may, at any time, be removed by the Board of Directors. 9.8 Appointment of Successors. (a) Upon the death, resignation, or removal of any Committee member, the Board of Directors may appoint a successor. (b) Notice of appointment of a successor member shall be given by the Secretary of the Company in writing to the Trustee and to the members of the Committee. 62 (c) Upon termination, for any reason, of a Committee member's status as a member of the Committee, the member's status as a Named Fiduciary shall concurrently be terminated, and upon the appointment of a successor Committee member the successor shall assume the status of a Named Fiduciary as provided in Section 9.1. 9.9 Records. (a) The Committee shall keep a record of all its proceedings and shall keep, or cause to be kept, all such books, accounts, records or other data as may be necessary or advisable in its judgment for the administration of the Plan and to properly reflect the affairs thereof. (b) However, nothing in this Section 9.9 shall require the Committee or any member thereof to perform any act which, pursuant to law or the provisions of this Plan, is the responsibility of the Plan Administrator, nor shall this Section relieve the Plan Administrator from such responsibility. 9.10 Reliance Upon Documents and Opinions. (a) The members of the Committee, the Board of Directors, the Company and any person delegated under the provisions hereof to carry out any fiduciary responsibilities under the Plan ("delegated fiduciary"), shall be entitled to rely upon any tables, valuations, computations, estimates, certificates and reports furnished by any consultant, or firm or corporation which employs one or more consultants, upon any opinions furnished by legal counsel, and upon any reports furnished by the Trustee. The members of the Committee, the Board of Directors, the Company and any delegated fiduciary shall be fully protected and shall not be liable in any manner whatsoever for anything done or action taken or suffered in reliance upon any such consultant or firm or corporation which employs one or more consultants, Trustee, or counsel. (b) Any and all such things done or actions taken or suffered by the Committee, the Board of Directors, the Company and any delegated fiduciary shall be conclusive and binding on all Employees, Participants, Beneficiaries, and any other persons whomsoever, except as otherwise provided by law. (c) The Committee and any delegated fiduciary may, but are not required to, rely upon all records of the Company with respect to any matter or thing whatsoever, and may likewise treat those records 63 as conclusive with respect to all Employees, Participants, Beneficiaries, and any other persons whomsoever, except as otherwise provided by law. 9.11 Requirement of Proof. The Committee or the Company may require satisfactory proof of any matter under this Plan from or with respect to any Employee, Participant, or Beneficiary, and no person shall acquire any rights or be entitled to receive any benefits under this Plan until the required proof shall be furnished. 9.12 Reliance on Committee Memorandum. Any person dealing with the Committee may rely on and shall be fully protected in relying on a certificate or memorandum in writing signed by any Committee member or other person so authorized, or by the majority of the members of the Committee, as constituted as of the date of the certificate or memorandum, as evidence of any action taken or resolution adopted by the Committee. 9.13 Multiple Fiduciary Capacity. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan. 9.14 Limitation on Liability. (a) Except as provided in Part 4 of Title I of ERISA, no person shall be subject to any liability with respect to his duties under the Plan unless he acts fraudulently or in bad faith. (b) No person shall be liable for any breach of fiduciary responsibility resulting from the act or omission of any other fiduciary or any person to whom fiduciary responsibilities have been allocated or delegated, except as provided in Part 4 of Title I of ERISA. (c) No action or responsibility shall be deemed to be a fiduciary action or responsibility except to the extent required by ERISA. 9.15 Indemnification. (a) To the extent permitted by law, the Company shall indemnify each member of the Board of Directors and the Committee, and any other Employee of the Company with duties under the Plan, against expenses (including any amount paid in settlement) reasonably incurred by him in connection with any 64 claims against him by reason of his conduct in the performance of his duties under the Plan, except in relation to matters as to which he acted fraudulently or in bad faith in the performance of such duties. The preceding right of indemnification shall pass to the estate of such a person. (b) The preceding right of indemnification shall be in addition to any other right to which the Board member or Committee member or other person may be entitled as a matter of law or otherwise. 9.16 Reserved for Plan Modifications. 9.17 Allocation of Fiduciary Responsibility. (a) Part 4 of Title I of ERISA permits the division, allocation and delegation between Plan fiduciaries of the fiduciary responsibilities owed to the Plan Participants. Under this concept, each fiduciary, including a Named Fiduciary, is accountable only for his own functions, except to the extent of his co-fiduciary liability under Section 405 of ERISA. (b) Under the preceding provisions of this Article IX, the day-to-day operational, administrative and investment aspects of the Plan have been delegated to the Committee. Except to the extent expressly provided to the contrary in the Plan document, the responsibilities delegated to the Committee include, by way of illustration but not by way of limitation, such matters as: (i) Satisfying accounting and auditing requirements; (ii) Satisfying insurance and bonding requirements; (iii) Administering the Plan's claims procedure; and (iv) Appointing Investment Managers. 9.18 Bonding. (a) Except as is prescribed by the Board of Directors, as provided in Section 412 of ERISA, or as may be required under any other applicable law, no bond or other security shall be required by any member of the Committee, or any other fiduciary under this Plan. 65 (b) Notwithstanding the foregoing, for purposes of satisfying its indemnity obligations under Section 9.15, the Company may (but need not) purchase and pay premiums for one or more policies of insurance. However, this insurance shall not release the Company of its liability under the indemnification provisions. 9.19 Reserved for Plan Modifications. 9.20 Reserved for Plan Modifications. 9.21 Reserved for Plan Modifications. 9.22 Prohibition Against Certain Actions. (a) To the extent prohibited by law, in administering this Plan the Committee shall not discriminate in favor of any class of Employees and particularly it shall not discriminate in favor of highly compensated Employees, or Employees who are officers or shareholders of the Company. (b) The Committee shall not cause the Plan to engage in any transaction that constitutes a nonexempt prohibited transaction under Section 4975(c) of the Code or Section 406(a) of ERISA. (c) All individuals who are fiduciaries with respect to the Plan (as defined in Section 3(21) of ERISA) shall discharge their fiduciary duties in accordance with applicable law, and in particular, in accordance with the standards of conduct contained in Section 404 of ERISA. 9.23 Plan Expenses. (a) All expenses incurred in the establishment, administration and operation of the Plan, including but not limited to the expenses incurred by the members of the Committee in exercising their duties, shall be charged to the Trust Fund and allocated to Participants Accounts as determined by the Committee, but shall be paid by the Company if not paid by the Trust Fund. (b) Notwithstanding the foregoing, the cost of interest and normal brokerage charges which are included in the cost of securities purchased by the Trust Fund (or charged to proceeds in the case of sales) or other charges relating to specific assets of the Plan shall be charged and allocated in a fair and equitable manner to the Accounts to which the securities (or other assets) are allocated. 66 ARTICLE X SPECIAL PROVISIONS CONCERNING COMPANY STOCK EFFECTIVE AS OF OCTOBER 1, 1992 10.1 Securities Transactions. Subject to the limitations of Section 6.6(a)iv, the Trustee shall acquire Company Stock in the open market or from the Company or any other person, including a party in interest, pursuant to a Participant's election to invest any Company contributions on his behalf (including Before- Tax Contributions), or Participant After-Tax Contributions, in the Company Stock alternative established by the Committee in accordance with Section 6.6, or to transfer amounts held in other investment alternatives to such Company Stock alternative. No commission will be paid in connection with the Trustee's acquisition of Company Stock from a party in interest. Pending acquisition of Company Stock and pursuant to a Participant's investment election, elected amounts shall be allocated to the Participant's Company Stock subaccount in cash and may be invested in any short-term interest fund of the Trustee. Neither the Company, nor the Committee, nor any Trustee have any responsibility or duty to time any transaction involving Company Stock in order to anticipate market conditions or changes in Company Stock value. Neither the Company, nor the Committee nor any Trustee have any responsibility or duty to sell Company Stock held in the Trust Fund in order to maximize return or minimize loss. 10.2 Valuation of Company Securities. When it is necessary to value Company Stock held by the Plan, the value will be the current fair market value of the Company Stock, determined in accordance with applicable legal requirements. If the Company Stock is publicly traded, fair market value will be based on the most recent closing price in public trading, as reported in The Wall Street Journal or any other publication of general circulation designated by the Committee, unless another method of valuation is required by the standards applicable to prudent fiduciaries. If the Company Stock cannot be valued on the basis of its closing price in recent public trading, fair market value will be determined by the Company in good faith based on all relevant factors for determining the fair market value of securities. Relevant factors include an independent appraisal by a person who customarily makes such appraisals, if an appraisal of the fair market value of the Company Stock as of the relevant date was obtained. 67 In the case of a transaction between the Plan and a party in interest, the fair market value of the Company Stock must be determined as of the date of the transaction rather than as of some other Valuation Date occurring before or after the transaction. In other cases, the fair market value of the Company Stock will be determined as of the most recent Valuation Date. 10.3 Allocation of Stock Dividends and Splits. Company Stock received by the Trust as a result of a Company Stock split or Company Stock dividend on Company Stock held in Participants' Accounts will be allocated as of the Valuation Date coincident with or following the date of such split or dividend, to each Participant who has such an Account. The amount allocated will bear substantially the same proportion to the total number of shares received as the number of shares in the Participant's Account bears to the total number of shares allocated to such Accounts of all Participants immediately before the allocation. The shares will be allocated to the nearest thousandth of a share. 10.4 Reinvestment of Dividends. Upon direction of the Committee, cash dividends may be reinvested as soon as practicable by the Trustee in shares of Company Stock for Participants' Accounts. Cash dividends may be reinvested in Company Stock purchased as provided in Section 10.1 or purchased from the Accounts of Participants who receive cash distributions of a fractional share or a fractional interest therein. 10.5 Voting of Company Stock. The Trustee shall have no discretion or authority to vote Company Stock held in the Trust on any matter presented for a vote by the stockholders of the Company except in accordance with timely directions received by the Trustee from Participants, unless otherwise required by applicable law. (a) Each Participant shall be entitled to direct the Trustee as to the voting of all Company Stock allocated and credited to his Account. (b) All Participants entitled to direct such voting shall be notified by the Company, pursuant to its normal communications with shareholders, of each occasion for the exercise of such voting rights within a reasonable time before such rights are to be exercised. Such notification shall include all information distributed to shareholders either by the Company or any other party regarding the exercise of such rights. If a Participant shall fail to direct the 68 Trustee as to the exercise of voting rights arising under any Company Stock credited to his Accounts, or if any Company Stock held in the Plan has not been allocated to Participants' Accounts, the Trustee shall not be required to vote such Company Stock except as otherwise required by applicable law. The Trustee shall maintain confidentiality with respect to the voting directions of all Participants. (c) Each Participant shall be a Named Fiduciary (as that term is defined in ERISA Section 402(a)(2)) with respect to Company Stock for which he has the right to direct the voting under the Plan but solely for the purpose of exercising voting rights pursuant to this Section 10.5. 10.6 Confidentiality Procedures. The Administration Committee shall establish procedures intended to ensure the confidentiality of information relating to Participant transactions involving Company Stock, including the exercise of voting, tender and similar rights. The Administration Committee shall also be responsible for ensuring the adequacy of the confidentiality procedures and monitoring compliance with such procedures. The Administration Committee may, in its sole discretion, appoint an independent fiduciary to carry out any activities that it determines involve a potential for undue Company influence on Participants with respect to the exercise of their rights as shareholders. 10.7 Securities Law Limitation. Neither the Committee nor the Trustee shall be required to engage in any transaction, including, without limitation, directing the purchase or sale of Company Stock, which it determines in its sole discretion might tend to subject itself, its members, the Plan, the Company, or any Participant or Beneficiary to a liability under federal or state securities laws. 69 ARTICLE XI MERGER OF COMPANY; MERGER OF PLAN 11.1 Effect of Reorganization or Transfer of Assets. In the event of a consolidation, merger, sale, liquidation, or other transfer of the operating assets of the Company to any other company, the ultimate successor or successors to the business of the Company shall automatically be deemed to have elected to continue this Plan in full force and effect, in the same manner as if the Plan had been adopted by resolution of its Board of Directors, unless the successor(s), by resolution of its Board of Directors, shall elect not to so continue this Plan in effect, in which case the Plan shall automatically be deemed terminated as of the applicable effective date set forth in the board resolution. 11.2 Merger Restriction. Notwithstanding any other provision in this Article, this Plan shall not in whole or in part merge or consolidate with, or transfer its assets or liabilities to any other plan unless each affected Participant in this Plan would receive a benefit immediately after the merger, consolidation, or transfer (if the Plan then terminated) which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had then terminated). 70 ARTICLE XII PLAN TERMINATION AND DISCONTINUANCE OF CONTRIBUTIONS 12.1 Plan Termination. (a) (i) Subject to the following provisions of this Section 12.1, the Company may terminate the Plan and the Trust Agreements at any time by an instrument in writing executed in the name of the Company by an officer or officers duly authorized to execute such an instrument, and delivered to the Trustee. (ii) The Plan and Trust Agreements may terminate if the Company merges into any other corporation, if as the result of the merger the entity of the Company ceases, and the Plan is terminated pursuant to the rules of Section 11.1. (b) Upon and after the effective date of the termination, the Company shall not make any further contributions under the Plan and no contributions need be made by the Company applicable to the Plan year in which the termination occurs, except as may otherwise be required by law. (c) The rights of all affected Participants to benefits accrued to the date of termination of the Plan, to the extent funded as of the date of termination, shall automatically become fully vested as of that date. 12.2 Discontinuance of Contributions. (a) In the event the Company decides it is impossible or inadvisable for business reasons to continue to make contributions under the Plan, the Company by resolution of its Board of Directors may discontinue contributions to the Plan. Upon and after the effective date of this discontinuance, no Participating Company or Participant shall make any further contributions under the Plan and no contributions need be made by a Participating Company with respect to the Plan Year in which the discontinuance occurs, except as may otherwise be required by law. A Participant shall be released from any salary reduction agreement under the Plan as of the effective date of a discontinuance of contributions. (b) The discontinuance of contributions on the part of the Company shall not terminate the Plan as to the funds and assets then held by the Trustee, or 71 operate to accelerate any payments of distributions to or for the benefit of Participants or Beneficiaries, and the Trustee shall continue to administer the Trust Fund in accordance with the provisions of the Plan until all of the obligations under the Plan shall have been discharged and satisfied. (c) However, if this discontinuance of contributions shall cause the Plan to lose its status as a qualified plan under Code Section 401(a), the Plan shall be terminated in accordance with the provisions of this Article XII. (d) On and after the effective date of a discontinuance of contributions, the rights of all affected Participants to benefits accrued to that date, to the extent funded as of that date, shall automatically become fully vested as of that date. 12.3 Rights of Participants. In the event of the termination of the Plan, for any cause whatsoever, all assets of the Plan, after payment of expenses, shall be used for the exclusive benefit of Participants and their Beneficiaries and no part thereof shall be returned to the Company, except as provided in Section 6.7 of this Plan. 12.4 Trustee's Duties on Termination. (a) On or before the effective date of termination of this Plan, the Trustee shall proceed as soon as possible, but in any event within six months from the effective date, to reduce all of the assets of the Trust Fund to cash and other securities in such proportions as the Committee shall determine (after approval by the Internal Revenue Service, if necessary or desirable, with respect to any portion of the assets of the Trust Fund held in common stock or securities of the Company). (b) After first deducting the estimated expenses for liquidation and distribution chargeable to the Trust Fund, and after setting aside a reasonable reserve for expenses and liabilities (absolute or contingent) of the Trust, the Committee shall make required allocations of items of income and expense to the Accounts. (c) Following these allocations, the Trustee shall promptly, after receipt of appropriate instructions from the Committee, distribute in accordance with Section 8.7 to each former Participant in Company stock or cash an amount equal to the amount 72 credited to his Accounts as of the date of completion of the liquidation. (d) The Trustee and the Committee shall continue to function as such for such period of time as may be necessary for the winding up of this Plan and for the making of distributions in accordance with the provisions of this Plan. (e) Notwithstanding the foregoing, distributions to Participants upon Plan termination in accordance with this Section 12.4 shall only be made if a "successor plan," within the meaning of regulations under Code Section 401(k)(10), is not established. In the event a "successor plan" is established prior to or subsequent to the termination of the Plan, the Committee shall direct the Trustee to continue to hold any assets of the Trust Fund not payable upon the termination until such assets may, at the direction of the Committee, be transferred to and held in the successor plan until distributable under the terms of that successor plan. 12.5 Partial Termination. (a) In the event of a partial termination of the Plan within the meaning of Code Section 411(d)(3), the interests of affected Participants in the Trust Fund, as of the date of the partial termination, shall become nonforfeitable as of that date. (b) That portion of the assets of the Plan affected by the partial termination shall be used exclusively for the benefit of the affected Participants and their Beneficiaries, and no part thereof shall otherwise be applied. (c) With respect to Plan assets and Participants affected by a partial termination, the Committee and the Trustee shall follow the same procedures and take the same actions prescribed in this Article XII in the case of a total termination of the Plan. 12.6 Failure to Contribute. The failure of a Participating Company to contribute to the Trust in any year, if contributions are not required under the Plan for that year, shall not constitute a complete discontinuance of contributions to the Plan. 73 ARTICLE XIII APPLICATION FOR BENEFITS 13.1 Application for Benefits. The Committee may require any person claiming benefits under the Plan to submit an application therefor, together with such documents and information as the Committee may require. In the case of any person suffering from a disability which prevents the claimant from making personal application for benefits, the Committee may, in its discretion, permit another person acting on his behalf to submit the application. 13.2 Action on Application. (a) Within ninety days following receipt of an application and all necessary documents and information, the Committee's authorized delegate reviewing the claim shall furnish the claimant with written notice of the decision rendered with respect to the application. (b) In the case of a denial of the claimant's application, the written notice shall set forth: (i) The specific reasons for the denial, with reference to the Plan provisions upon which the denial is based; (ii) A description of any additional information or material necessary for perfection of the application (together with an explanation why the material or information is necessary); and (iii) An explanation of the Plan's claim review procedure. (c) A claimant who wishes to contest the denial of his application for benefits or to contest the amount of benefits payable to him shall follow the procedures for an appeal of benefits as set forth in Section 13.3 below, and shall exhaust such administrative procedures prior to seeking any other form of relief. 13.3 Appeals. (a) (i) A claimant who does not agree with the decision rendered with respect to his application may appeal the decision to the Committee. 74 (ii) The appeal shall be made, in writing, within sixty-five days after the date of notice of the decision with respect to the application. (iii) If the application has neither been approved nor denied within the ninety day period provided in Section 13.2 above, then the appeal shall be made within sixty-five days after the expiration of the ninety day period. (b) The claimant may request that his application be given full and fair review by the Committee. The claimant may review all pertinent documents and submit issues and comments in writing in connection with the appeal. (c) The decision of the Committee shall be made promptly, and not later than sixty days after the Committee's receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than one hundred twenty days after receipt of a request for review. (d) The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant with specific reference to the pertinent Plan provisions upon which the decision is based. 75 ARTICLE XIV LIMITATIONS ON CONTRIBUTIONS 14.1 General Rule. (a) Notwithstanding anything to the contrary contained in this Plan, the total Annual Additions under this Plan to a Participant's Plan Accounts for any Limitation Year shall not exceed the lesser of: (i) Thirty Thousand Dollars ($30,000) (or if greater, one-fourth (1/4) of the defined benefit dollar limitation set forth in Section 415(b) of the Code as in effect for the Limitation Year); or (ii) Twenty-five percent of the Participant's total Compensation from the Company and any Affiliated Companies for the year, excluding amounts otherwise treated as Annual Additions under Section 14.2. (b) For purposes of this Article XIV, the Company has elected a "Limitation Year" corresponding to the Plan Year. 14.2 Annual Additions. For purposes of Section 14.1, the term "Annual Additions" shall mean, for any Limitation Year, the sum of: (a) the amount credited to the Participant's Accounts from Company contributions for such Limitation Year; (b) any Employee contributions for the Limitation Year; and (c) any amounts described in Section 415(l)(1) or 419(A)(d)(2) of the Code. Annual Additions for Limitation Years commencing prior to 1987 shall not be recalculated to take into account all Employee contributions. 14.3 Other Defined Contribution Plans. If the Company or an Affiliated Company is contributing to any other defined contribution plan (as defined in Section 415(i) of the Code) for its Employees, some or all of whom may be Participants in this Plan, then contributions to the other plan shall be aggregated with 76 contributions under this Plan for the purposes of applying the limitations of Section 14.1. 14.4 Combined Plan Limitation (Defined Benefit Plan). In the event a Participant hereunder also is a participant in any qualified defined benefit plan (within the meaning of Section 415(k) of the Code) of the Company or an Affiliated Company, then the benefit payable under such other defined benefit plan, or any of them, shall be reduced for so long and to the extent necessary to provide that the sum of the "defined benefit fraction" and the "defined contribution fraction," for any Limitation Year, as defined in Section 415(e) of the Code, shall not exceed one (1). 14.5 Adjustments for Excess Annual Additions. In general, the amount of excess for any Limitation Year under this Plan and any other defined contribution plan (as defined in Code Section 414(i)) or defined benefit plan (as defined in Code Section 414(j)) maintained by the Company or an Affiliated Company will be determined so as to avoid Annual Additions in excess of the limitations set forth in Sections 14.1 through 14.4. However, if as a result of an administrative error, the Annual Additions to a Participant's Accounts under this Plan (after giving effect to the maximum permissible adjustments under the other plans) would exceed the applicable limitations described in Sections 14.1 through 14.4, the excess amount shall be subject to this Section 14.5. (a) For Plan Years commencing prior to January 1, 1993, the following rules shall apply: (i) If the Participant made any after- tax contributions to any defined contribution plan that is maintained by the Company or an Affiliated Company, which after-tax contributions were not matched by matching contributions, these contributions shall be returned to the Participant to the extent of any excess Annual Additions arising under Section 14.1(a)(ii). (ii) If excess Annual Additions remain after the application of the above rule, such excess amounts (if any) allocated to the Participant's Company Contributions Account shall be reduced to the extent necessary to eliminate (if possible) any remaining excess Annual Additions. (iii) If excess Annual Additions remain after the application of (i) and (ii) above, such excess amounts (if any) allocated to the 77 Participant's Company Matching Contribution Account shall be reduced to the extent necessary to eliminate (if possible) any remaining excess Annual additions. (iv) If any excess Annual Additions remain after the application of (i), (ii) and (iii) above, such excess amounts (if any) allocated to the Participant's Before-Tax Contributions Account shall be reduced to the extent necessary to eliminate (if possible) any remaining excess Annual Additions. (b) For Plan Years commencing on or after January 1, 1993, the following rules shall apply: (i) If the Participant made any after- tax contributions to this or any other defined contribution plan that is maintained by the Company or an Affiliated Company, which after-tax contributions were not matched by matching contributions, within the meaning of Code Section 401(m), such after-tax contributions and any earnings thereon shall be returned to the Participant to the extent of any excess Annual Additions. (ii) If excess Annual Additions remain after the application of the above rule, if the Participant made any Before-Tax Contributions for the Plan Year to this or any other defined contribution plan that is maintained by the Company or an Affiliated Company, which Before-Tax Contributions were not matched by matching contributions, within the meaning of Code Section 401(m), Before-Tax Contributions and any earnings thereon shall be returned to the Participant to the extent of any excess Annual Additions. (iii) If excess Annual Additions remain after the application of the above rule, if the Participant made any after-tax contributions for the Plan Year to this or any other defined contribution plan that is maintained by the Company or an Affiliated Company, which after-tax contributions were matched by matching contributions, within the meaning of Code Section 401(m), any such after-tax contributions and any earnings thereon shall be returned to the Participant and any matching contributions attributable thereto shall be reduced to the extent necessary to eliminate any remaining excess Annual Additions. 78 (iv) If excess Annual Additions remain after the application of the above rule, if the Participant made any Before-Tax Contributions for the Plan Year to this or any other defined contribution plan that is maintained by the Company or an Affiliated Company, which Before-Tax Contributions were matched by matching contributions, within the meaning of Code Section 401(m), any such Before-Tax Contributions and any earnings thereon shall be returned to the Participant and any matching contributions attributable thereto shall be reduced to the extent necessary to eliminate any remaining excess Annual Additions. (v) If excess Annual Additions remain after the application of the above rule, any other Company contributions for the Plan Year shall be reduced to the extent necessary to eliminate any remaining excess Annual Additions. 14.6 Disposition of Excess Amounts. Any excess amounts contributed by a Participating Company on behalf of a Participant for any Plan Year (other than Before-Tax Contributions) shall be held unallocated in a suspense account for the Plan Year and applied, to the extent possible, first to reduce the Participating Company contributions for the Plan Year, and next, to reduce the Participating Company contributions for the succeeding Plan Year, or Years, if necessary. No investment gains or losses shall be allocated to a suspense account. 14.7 Affiliated Company. For purposes of this Article XIV, the status of an entity as an Affiliated Company shall be determined by reference to the percentage tests set forth in Code Section 415(h). 79 ARTICLE XV RESTRICTION ON ALIENATION 15.1 General Restrictions Against Alienation. (a) The interest of any Participant or Beneficiary in the income, benefits, payments, claims or rights hereunder, or in the Trust Fund shall not in any event be subject to sale, assignment, hypothecation, or transfer. Each Participant and Beneficiary is prohibited from anticipating, encumbering, assigning, or in any manner alienating his or her interest under the Trust Fund, and is without power to do so, except as may otherwise be provided for in the Trust Agreement. The interest of any Participant or Beneficiary shall not be liable or subject to his debts, liabilities, or obligations, now contracted, or which may be subsequently contracted. The interest of any Participant or Beneficiary shall be free from all claims, liabilities, bankruptcy proceedings, or other legal process now or hereafter incurred or arising; and the interest or any part thereof, shall not be subject to any judgment rendered against the Participant or Beneficiary. (b) In the event any person attempts to take any action contrary to this Article XV, that action shall not be effective, and all Participants and their Beneficiaries, may disregard that action and shall not suffer any liability for any disregard of that action, and shall be reimbursed on demand out of the Trust Fund for the amount of any loss, cost or expense incurred as a result of disregarding or of acting in disregard of that action. (c) The preceding provisions of this Section 15.1 shall be interpreted and applied by the Committee in accordance with the requirements of Code Section 401(a)(13) as construed and interpreted by authoritative judicial and administrative rulings and regulations. (d) The provisions of Subsections 15.1(a) and 15.1(b) are expressly subject to qualified domestic relations orders, as provided in Code Section 401(a)(13)(B). 15.2 Nonconforming Distributions Under Court Order. (a) In the event that a court with jurisdiction over the Plan and the Trust Fund shall issue an order or render a judgment requiring that all or part of a Participant's interest under the Plan and 80 in the Trust Fund be paid to a spouse, former spouse and/or children of the Participant by reason of or in connection with the marital dissolution and/or marital separation of the Participant and the spouse, and/or some other similar proceeding involving marital rights and property interests, then notwithstanding the provisions of Section 15.1 the Committee may, in its absolute discretion, direct the applicable Trustee to comply with that court order or judgment and distribute assets of the Trust Fund in accordance therewith. Pending distribution to an alternate payee of any portion of a Participant's vested interest in the Trust Fund, pursuant to a court order or judgment, such portion shall be segregated and invested in accordance with rules prescribed by the Committee, and neither the Participant nor the alternate payee shall be entitled to make an election with respect to the investment of such segregated portion. (b) The Committee's decision with respect to compliance with any such court order or judgment shall be made in its absolute discretion and shall be binding upon the Trustee and all Participants and their Beneficiaries; provided, however, that the Committee in the exercise of its discretion shall not make payments in accordance with the terms of an order which is not a qualified domestic relations order or which the Committee determines would jeopardize the continued qualification of the Plan and Trust under Section 401 of the Code. Notwithstanding the foregoing, the Committee may make a distribution to an alternate payee prior to the date the Participant attains age fifty (50), if such distribution is required by a qualified domestic relations order. (c) Neither the Plan, the Company, the Committee nor the Trustee shall be liable in any manner to any person, including any Participant or Beneficiary, for complying with any such court order or judgment. (d) Nothing in this Section 15.2 shall be interpreted as placing upon the Company, the Committee or any Trustee any duty or obligation to comply with any such court order or judgment. The Committee may, if in its absolute discretion it deems it to be in the best interests of the Plan and the Participants, determine that any such court order or judgment shall be resisted by means of judicial appeal or other available judicial remedy, and in that event the Trustee shall act in accordance with the Committee's directions. 81 (e) The Committee shall adopt procedures and provide notifications to a Participant and alternate payees in connection with a qualified domestic relations order, to the extent required under Code Section 414(p). 82 ARTICLE XVI PLAN AMENDMENTS 16.1 Amendments. The Board of Directors may at any time, and from time to time, amend the Plan by an instrument in writing executed in the name of the Company by an officer or officers duly authorized to execute such instrument, and delivered to the applicable Trustee. However, to the extent required by law, no amendment shall be made at any time, the effect of which would be: (a) To cause any assets of the Trust Fund to be used for or diverted to purposes other than providing benefits to the Participants and their Beneficiaries, and defraying reasonable expenses of administering the Plan, except as provided in Section 6.7; (b) To have any retroactive effect so as to deprive any Participant or Beneficiary of any accrued benefit to which he would be entitled under this Plan, in contravention of Code Section 411(d)(6), if his employment were terminated immediately before the amendment; (c) To eliminate or reduce an optional form of benefit to the extent so doing would contravene Code Section 411(d)(6); or (d) To increase the responsibilities or liabilities of a Trustee or an Investment Manager without his written consent. 16.2 Retroactive Amendments. Notwithstanding any provisions of this Article XVI to the contrary, the Plan may be amended prospectively or retroactively (as provided in Section 401(b) of the Code) to make the Plan conform to any provision of ERISA, any Code provisions dealing with tax-qualified employees' trusts, or any regulation under either. 16.3 Amendment of Vesting Provisions. Effective January 1, 1989, if the Plan is amended in any way that directly or indirectly affects the computation of a Participant's vested interest in his Accounts, each Participant who has completed at least three (3) Years of Service may elect, within a reasonable time after the adoption of the amendment, to continue to have his vested interest computed under the Plan without regard to 83 such amendment. The period during which the election may be made shall commence when the date of the amendment is adopted and shall end on the latest of: (i) 60 days after the amendment is adopted; (ii) 60 days after the amendment is effective; or (iii) 60 days after the Participant is issued written notice of the amendment. 84 ARTICLE XVII TOP-HEAVY PROVISIONS 17.1 Minimum Company Contributions. In the event that this Plan is deemed a Top-Heavy plan with respect to any Plan Year, each Non-Key Employee who is a Participant shall receive Company contributions that in the aggregate are at least equal to the lesser of three percent (3%) of Compensation or the percentage at which Company contributions are made for the Key Employee (under any plan required to be included in an Aggregation Group) for whom such percentage is the highest for the Plan Year, regardless of whether the Non-Key Employee elected to make Before-Tax Contributions to the Plan for the Plan Year, completed less than 1,000 Hours of Service during such Plan Year, or the Non-Key Employee's level of Compensation. For purposes of this Section 17.1, Company contributions shall include amounts considered contributed by Key Employees and which qualify for treatment under Code Section 401(k), and any Company contributions for Key Employees taken into account under Section 401(k)(3) or 401(m) of the Code, but shall not include such amounts considered as contributed by or for Non-Key Employees. Further, in determining the percentage at which Company contributions are made for the Plan Year for the Key Employee for whom such percentage is the highest, the contributions for a Key Employee shall be divided by so much of a Key Employee's compensation for the Plan Year as does not exceed $200,000, as that amount is adjusted each year by the Secretary of the Treasury. In the event a Participant is covered by both a defined contribution and a defined benefit plan maintained by the Company, both of which are determined to be Top-Heavy Plans, the defined benefit minimum, offset by the benefits provided under the defined contribution plan, shall be provided under the defined benefit plan. 17.2 Compensation. For the purpose of calculating Company contributions to be made to a Participant for Plan Years commencing prior to January 1, 1989, the annual Compensation taken into account for any Employee shall not exceed $200,000 (increased by any adjustments made pursuant to Section 416(d)(2) of the Code or regulations thereunder) if the Plan is deemed a Top-Heavy Plan with respect to any Plan Year. 17.3 Top-Heavy Determination. This Plan shall be deemed a Top-Heavy Plan with respect to any Plan Year in which, as of the Determination 85 Date: (a) the aggregate of the Accounts of Key Employees under the Plan exceeds 60% of the aggregate of the Accounts of all Employees; or (b) the aggregate of the Accounts of Key Employees under all defined contribution plans and the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans includable in an Aggregation Group exceed 60% of a similar sum for all employees in such group. As used above, the term "Aggregation Group" includes all plans of Participating Companies having one or more Key Employees as Participants and any other defined contribution plan of a Participating Company that permits a plan of a Participating Company having one or more Key Employees to meet the qualification requirements of Sections 401(a)(4) or 410 of the Code. The present value of account balances under a defined contribution plan shall be determined as of the most recent valuation date that falls within or ends on the Determination Date. The present value of accrued benefits under a defined benefit plan shall be determined as of the same valuation date used for computing plan costs for minimum funding. The present value of the cumulative accrued benefits of a Non-Key Employee shall be determined under either: (i) the method, if any, that uniformly applies for accrual purposes under all plans maintained by affiliated companies, within the meaning of Code Sections 414(b), (c), (m) or (o); or (ii) if there is no such method, as if such benefit accrued not more rapidly than the lowest accrual rate permitted under the fractional accrual rate of Section 411(b)(1)(C) of the Code. For purposes of this Article XVII, "Determination Date" shall mean, with respect to any Plan Year, the last day of the preceding Plan Year, or, in the case of the first Plan Year, the last day of such Plan Year. The term, "Key Employee" shall mean, for purposes of this Article XVII, any Employee or former Employee who, at any time during such Plan Year (or any of the 4 preceding Plan Years) is: (1) an officer of a Participating Company having an annual compensation in excess of 50 percent of the amount in effect under Section 415(b)(1)(A) of the Code for such Plan Year; (2) one of the 10 Employees having an annual compensation in excess of 150 percent of the amount in effect under Section 415(c)(1)(A) of the Code owning (or considered as owning within the meaning of 86 Section 318 of the Code) the largest interests in a Participating Company; (3) a 5% owner of a Participating Company; or (4) 1% owner of a Participating Company having an annual compensation from a Participating Company of more than $150,000. For purposes of (1) above, no more than 50 Employees (or, if lesser, the greater of 3 or 10% of the Employees) shall be treated as officers. A 5% (or 1%, if applicable) owner means any person who owns (or is considered as owning within the meaning of Section 318 of the Code) more than 5% (1%) of the outstanding stock of the Participating Company or stock possessing more than 5% (1%) of the total combined voting power of all stock of the Participating Company. For purposes of applying the constructive ownership rules under Section 318(a)(2) of the Code, subparagraph (C) of such Section shall be applied by substituting "5 percent" for "50 percent." For purposes of determining "5% owners" and/or "1% owners," the aggregating rules of Sections 414(b), (c) and (m) of the Code shall not apply. For purposes of determining whether an Employee has compensation of more than $150,000, however, compensation from each entity required to be aggregated under Sections 414(b), (c) and/or (m) of the Code shall be taken into account. For purposes of determining the amount of a Participant's Account for purposes of this Section 17.3, the amount shall include the aggregate distributions under the Plan made to the Participant during the five year period ending on the Determination Date. The following shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy Plan: (1) any rollover to the Plan that is initiated by a Participant; (2) the account value of any Participant who is not a Key Employee with respect to any Plan Year but was a Key Employee with respect to any prior Plan Year; and (3) the account value of a Participant who has not received any compensation from any Participating Company under the Plan (other than benefits under the Plan) during the five year period ending on the Determination Date. 87 17.4 Maximum Annual Addition. (a) Except as set forth below, in the case of any Top-Heavy Plan the rules of Section 14.4 shall be applied by substituting "1.0" for "1.25" in the defined benefit plan fraction and the defined contribution fraction. (b) The rule set forth in Subsection (a) above shall not apply if the requirements of both Paragraphs (i) and (ii), below, are satisfied. (i) The requirements of this Paragraph (i) are satisfied if the rules of Section 17.4(a) above would be satisfied after substituting "four percent (4%)" for "three percent (3%)" where it appears therein with respect to Participants covered only under a defined contribution plan. (ii) The requirements of this Paragraph (ii) are satisfied if the Plan would not be a Top-Heavy Plan if "ninety percent (90%)" were substituted for "sixty percent (60%)" each place it appears in Section 17.3(a)(ii). (c) The rules of Subsection (a) shall not apply with respect to any Employee as long as there are no -- (i) Company contributions, forfeitures, or voluntary nondeductible contributions allocated to the Employee under a defined contribution plan maintained by the Company, or (ii) Accruals by the Employee under a defined benefit plan maintained by the Company. 17.5 Aggregation. Each Plan of a Participating Company required to be included in an "Aggregation Group" shall be treated as a Top-Heavy Plan if such group is a "Top-Heavy Group." For purposes of this Article XVII, an "Aggregation Group" shall mean: (i) each plan of a Participating Company in which a Key Employee is a Participant, and (ii) each other plan of a Participating Company which enables any plan described in (i) above to meet the requirements of Section 401(a)(4) or 410 of the Code. Any plan of a Participating Company that is not required to be included in an Aggregation Group may be treated as part of such group if such group would continue 88 to meet the requirements of Section 401(a)(4) and 410 of the Code with such plan taken into account. For purposes of this Section 17.5, a "Top-Heavy Group" means any Aggregation Group if the sum (as of the Determination Date) of the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans included in such group and the aggregate of the accounts of Key Employees under all defined contribution plans included in such group exceed 60% of a similar sum determined for all Employees. 89 ARTICLE XVIII MISCELLANEOUS 18.1 No Enlargement of Employee Rights. (a) This Plan is strictly a voluntary undertaking on the part of the Company and shall not be deemed to constitute a contract between the Company and any Employee, or to be consideration for, or an inducement to, or a condition of, the employment of any Employee. (b) Nothing contained in this Plan or the Trust shall be deemed to give any Employee the right to be retained in the employ of the Company or to interfere with the right of the Company to discharge or retire any Employee at any time. (c) No Employee, nor any other person, shall have any right to or interest in any portion of the Trust Fund other than as specifically provided in this Plan. 18.2 Mailing of Payments; Lapsed Benefits. (a) All payments under the Plan shall be delivered in person or mailed to the last address of the Participant (or, in the case of the death of the Participant, to the last address of any other person entitled to such payments under the terms of the Plan) furnished pursuant to Section 18.3 below. (b) In the event that a benefit is payable under this Plan to a Participant or any other person and after reasonable efforts such person cannot be located for the purpose of paying the benefit for a period of three (3) consecutive years, the Committee, in its sole discretion, may determine that such person conclusively shall be presumed dead and upon the termination of such three (3) year period the benefit shall be forfeited and as soon thereafter as practicable shall be applied to reduce future Company Contributions; provided, however, should any person entitled to such benefit thereafter claim such benefit, such benefit shall be restored. Alternatively, benefits that cannot be paid may escheat to the state in accordance with applicable state law. (c) For purposes of this Section 18.2, the term "Beneficiary" shall include any person entitled under Section 8.9 to receive the interest of a deceased Participant or deceased designated Beneficiary. It is the intention of this provision that the benefit will 90 be distributed to an eligible Beneficiary in a lower priority category under Section 8.9 if no eligible Beneficiary in a higher priority category can be located by the Committee after reasonable efforts have been made. (d) The Accounts of a Participant shall continue to be maintained until the amounts in the Accounts are paid to the Participant or his Beneficiary. Notwithstanding the foregoing, in the event that the Plan is terminated, the following rules shall apply: (i) All Participants (including Participants who have not previously claimed their benefits under the Plan) shall be notified of their right to receive a distribution of their interests in the Plan; (ii) All Participants shall be given a reasonable length of time, which shall be specified in the notice, in which to claim their benefits; (iii) All Participants (and their Beneficiaries) who do not claim their benefits within the designated time period shall be presumed to be dead. The Accounts of such Participants shall be forfeited at such time. These forfeitures shall be disposed of according to rules prescribed by the Committee, which rules shall be consistent with applicable law. (iv) The Committee shall prescribe such rules as it may deem necessary or appropriate with respect to the notice and forfeiture rules stated above. (e) Should it be determined that the preceding rules relating to forfeiture of benefits upon Plan termination are inconsistent with any of the provisions of the Code and/or ERISA, these provisions shall become inoperative without the need for a Plan amendment and the Committee shall prescribe rules that are consistent with the applicable provisions of the Code and/or ERISA. 18.3 Addresses. Each Participant shall be responsible for furnishing the Committee with his correct current address and the correct current name and address of his Beneficiary or Beneficiaries. 91 18.4 Notices and Communications. (a) All applications, notices, designations, elections, and other communications from Participants shall be in writing, on forms prescribed by the Committee and shall be mailed or delivered to the office designated by the Committee, and shall be deemed to have been given when received by that office. (b) Each notice, report, remittance, statement and other communication directed to a Participant or Beneficiary shall be in writing and may be delivered in person or by mail. An item shall be deemed to have been delivered and received by the Participant when it is deposited in the United States Mail with postage prepaid, addressed to the Participant or Beneficiary at his last address of record with the Committee. 18.5 Reporting and Disclosure. The Plan Administrator shall be responsible for the reporting and disclosure of information required to be reported or disclosed by the Plan Administrator pursuant to ERISA or any other applicable law. 18.6 Governing Law. All legal questions pertaining to the Plan shall be determined in accordance with the provisions of ERISA and the laws of the State of California. All contributions made hereunder shall be deemed to have been made in California. 18.7 Interpretation. (a) Article and Section headings are for convenient reference only and shall not be deemed to be part of the substance of this instrument or in any way to enlarge or limit the contents of any Article or Section. Unless the context clearly indicates otherwise, masculine gender shall include the feminine, and the singular shall include the plural and the plural the singular. (b) The provisions of this Plan shall in all cases be interpreted in a manner that is consistent with this Plan satisfying: (i) The requirements (of Code Section 401(a) and related statutes) for qualification as a Profit Sharing Plan; and 92 (ii) The requirements (of Code Section 401(k) and related statutes) for qualification as a Qualified Cash or Deferred Arrangement. 18.8 Certain Securities Laws Rules. Any election or direction made under this Plan by an individual who is or may become subject to liability under Section 16 of the Securities Exchange Act of l934, as amended (the "Exchange Act"), may be conditioned upon such restrictions as are necessary or appropriate to qualify for an applicable exemption under Section 16(b) of the Exchange Act, or any rule promulgated thereunder. To the extent required by Section 401(a)(4) of the Code, the rules under this Section 18.8 shall be administered in a non- discriminatory manner. 18.9 Withholding for Taxes. Any payments out of the Trust Fund may be subject to withholding for taxes as may be required by any applicable federal or state law. 18.10 Limitation on Company; Committee and Trustee Liability. Any benefits payable under this Plan shall be paid or provided for solely from the Trust Fund and neither the Company, the Committee nor the Trustee assume any responsibility for the sufficiency of the assets of the Trust to provide the benefits payable hereunder. 18.11 Successors and Assigns. This Plan and the Trust established hereunder shall inure to the benefit or, and be binding upon, the parties hereto and their successors and assigns. 18.12 Counterparts. This Plan document may be executed in any number of identical counterparts, each of which shall be deemed a complete original in itself and may be introduced in evidence or used for any other purpose without the production of any other counterparts. IN WITNESS WHEREOF, in order to record the adoption of this Plan, Mattel, Inc. has caused this instrument to be executed by its duly authorized officers 93 this 4th day of May, 1993, effective, however, as of January 1, 1993, except as otherwise expressly provided herein. MATTEL, INC. By: /s/ Francesca Luzuriaga --------------------------- By: --------------------------- 94 EX-99.10 11 1ST AMENDMENT TO MATTEL PERSONAL INVESTMENT EXHIBIT 99.10 MATTEL INC. PERSONAL INVESTMENT PLAN FIRST AMENDMENT TO THE 1993 RESTATEMENT The Mattel, Inc. Personal Investment Plan (the "Plan") is hereby amended as follows: (1) Effective January 1, 1994, Section 2.16(e) of the Plan is hereby amended to read in its entirety as follows: "(e) Effective for Plan Years commencing on and after January 1, 1994, the `Compensation' of any Employee taken into account under the Plan for any Plan Year shall not exceed $150,000 (or such adjusted amount as may be prescribed for such Plan Year pursuant to Section 401(a)(17) of the Code). In determining the Compensation of a Participant for purposes of this limitation, the rules of Section 414(q)(6) of the Code shall apply, except in applying such rules, the term `family' shall include only the Spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the year. If, as a result of the application of such rules the adjusted $150,000 limitation is exceeded, then, the limitation shall be prorated among the affected individuals in proportion to each such individual's Compensation as determined under this Subsection (e) prior to the application of this limitation." (2) Effective January 1, 1993, Section 5.8 of the Plan is hereby amended to read in its entirety as follows: "5.8 Participant Transfer/Rollover Contributions. -------------------------------------------- Effective as of an Eligible Employee's Employment Commencement Date, or such later date as may be determined by the Administrator, amounts, if any, distributed to such Eligible Employee or payable to such Eligible Employee from another plan that satisfies the requirements of Code Section 401(a), or held in an individual retirement account which is attributable solely to a rollover contribution within the meaning of Code Section 408(d)(3), may be transferred to this Plan, including by direct rollover from another plan that satisfies the requirements of Code Section 401(a), and credited to the Participant's Transfer/Rollover Account in accordance with Code Section 402 and rules which the Committee shall prescribe from time to time; provided, however, the Committee determines that the continued qualification of this Plan under Code Section 401(a) or 401(k) would not be adversely affected by such transfer, or would cause this Plan to become a `transferee plan,' within the meaning of Code Section 401(a)(11). Any amounts transferred in accordance with this Section 5.8, which shall be in cash, shall not be subject to distribution to the Participant except as expressly provided under the terms of this Plan." IN WITNESS WHEREOF, Mattel, Inc. has caused this instrument to be executed by its duly authorized officer this 21st day of December, 1994, effective as of the dates set forth above. MATTEL, INC. By: /s/ E. Joseph McKay ------------------- -2- -----END PRIVACY-ENHANCED MESSAGE-----