-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UDN7Ff9gZPjAZ4O4C/gdAXOeoYkSEgSYOEHq9Y/gRENooDbQMLwZJGo9a/TxeiBi ZRklx5RQcst7XMKKfHKjfQ== 0000898430-97-001581.txt : 19970418 0000898430-97-001581.hdr.sgml : 19970418 ACCESSION NUMBER: 0000898430-97-001581 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970417 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970417 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATTEL INC /DE/ CENTRAL INDEX KEY: 0000063276 STANDARD INDUSTRIAL CLASSIFICATION: DOLLS & STUFFED TOYS [3942] IRS NUMBER: 951567322 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 002-28436 FILM NUMBER: 97582807 BUSINESS ADDRESS: STREET 1: 333 CONTINENTAL BLVD CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3102522000 8-K 1 FORM 8-K 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: April 17, 1997 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: UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996
HISTORICAL PRO FORMA ---------------------- ---------------------------- MATTEL TYCO ADJUSTMENTS COMBINED ------ ---- ----------- -------- (IN MILLIONS, EXCEPT PER SHARE DATA) Net Sales............................................... $3,785.9 $721.0 $28.4 (g) $4,535.3 Cost of sales................................... 1,877.3 404.1 34.1 (g) 2,315.5 ---------- -------- ----------- ----------- Gross Profit............................................ 1,908.6 316.9 (5.7) 2,219.8 Advertising and promotion expenses.............. 614.5 174.2 (9.7) (g) 779.0 Other selling and administrative expenses....... 647.1 121.3 4.0 (g) 772.4 Interest expense................................ 75.5 23.8 99.3 Restructuring and integration charges........... - - - Other expense, net.............................. 25.8 6.6 32.4 ---------- -------- ----------- ----------- Income (Loss) from Continuing Operations Before Income Taxes........................................ 545.7 (9.0) - 536.7 Provision (benefit) for income taxes........... 168.1 (0.2) (3.4) (h) 164.5 ---------- -------- ----------- ----------- Income (Loss) from Continuing Operations................ 377.6 (8.8) 3.4 372.2 Preferred stock dividend requirements.......... - 7.4 7.4 ---------- -------- ----------- ----------- Income (Loss) from Continuing Operations Applicable to Common Shares........................................ $ 377.6 $(16.2) $ 3.4 $ 364.8 ========== ======== =========== =========== Income (Loss) Per Share from Continuing Operations (i)....................................... $ 1.36 $(0.46) $ 1.24 ========== ======== =========== Average number of common and common equivalent shares outstanding (i)............................... 278.4 34.8 295.4 ========== ======== ===========
See accompanying notes to pro forma condensed combined financial statements. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF DECEMBER 31, 1996
HISTORICAL PRO FORMA --------------------- -------------------------------- MATTEL TYCO ADJUSTMENTS COMBINED ------ ---- ----------- -------- (IN MILLIONS) ASSETS Current Assets: Cash, cash equivalents and marketable securities............. $ 500.6 $ 49.6 $ 69.7 (a) $ 619.9 Accounts receivable, net..................................... 732.3 189.0 27.6 (b) 948.9 Inventories.................................................. 372.7 71.5 - 444.2 Prepaid expenses and other current assets.................... 165.2 30.5 (1.9) (c) 193.8 ----------- --------- ------------ ------------ Total current assets.................................. 1,770.8 340.6 95.4 2,206.8 ----------- --------- ------------ ------------ Property, plant and equipment, net.................................. 579.6 36.6 - 616.2 Other noncurrent assets............................................. 543.1 268.2 27.2 (d) 838.5 ----------- --------- ------------ ------------ TOTAL ASSETS......................................... $2,893.5 $645.4 $ 122.6 $3,661.5 =========== ========= ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term borrowings and current portion of long- term liabilities.......................................... $ 126.6 $ 9.4 $ - $ 136.0 Accounts payable, accrued liabilities and income taxes payable................................................... 833.8 144.4 234.2 (e) 1,212.4 ----------- --------- ------------ ------------ Total current liabilities............................. 960.4 153.8 234.2 1,348.4 ----------- --------- ------------ ------------ Medium-Term notes................................................... 220.0 - - 220.0 Senior subordinated notes........................................... - 126.5 - 126.5 6-3/4% senior notes due 2000........................................ 100.0 - - 100.0 Other long-term debt................................................ 54.9 20.1 - 75.0 Other long-term liabilities......................................... 110.4 1.4 - 111.8 Shareholders' equity................................................ 1,447.8 343.6 (111.6) (f) 1,679.8 ----------- --------- ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,893.5 $645.4 $ 122.6 $3,661.5 =========== ========= ============ ============
See accompanying notes to pro forma condensed combined financial statements. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only, giving effect to the Merger of Mattel and Tyco as accounted for by the "pooling of interests" method. In accordance with Commission reporting rules, the pro forma condensed combined statement of income, and the historical statements from which it is derived, presents only income from continuing operations and, therefore, does not include discontinued operations, extraordinary items, and the cumulative effects of accounting changes. The pro forma condensed combined statement of income for the twelve months ended December 31, 1996 excludes: (i) the positive effects of potential cost savings which may be achieved upon combining the resources of the companies; and (ii) transaction and restructuring costs of approximately $275 million. The pro forma condensed combined balance sheet as of December 31, 1996 includes, in accordance with Commission reporting rules, the impact of all transactions, whether of a recurring or nonrecurring nature, that can be reasonably estimated and should be reflected as of that date. 2. PRO FORMA ADJUSTMENTS Intercompany Transactions - There were no intercompany transactions which required elimination from the pro forma combined operating results or balance sheet. (a) Cash - Cash has been adjusted to reflect the issuance of 3.0 million shares of Mattel Common Stock to an independent third party prior to the merger consummation date, and the payment of a termination fee on certain Tyco short-term borrowings. (b) Accounts Receivable, Net - A reclassification was made to conform Tyco's reporting of the allowance for defective returns to that of Mattel. (c) Prepaid Expenses and Other Current Assets - Current assets have been adjusted to reflect the write-off of the current portion of Tyco's capitalized debt issuance costs related to certain short-term borrowing arrangements that will be terminated. (d) Other Noncurrent Assets - The combined pro forma financial information has been adjusted to reflect the write-off of the noncurrent portion of Tyco's capitalized debt issuance costs related to certain short-term borrowing arrangements that will be terminated, and recognition of tax benefits relating to certain foreign net operating losses of Tyco. (e) Accounts Payable, Accrued Liabilities, and Income Taxes Payable - The pro forma adjustment reflects approximately $200 million, net of related taxes, for transaction and restructuring costs related to the Merger, and the reclassification of the allowance for defective returns to conform Tyco's reporting to that of Mattel. (f) Shareholders' Equity - Shareholders' equity has been adjusted to reflect the following: -Common stock accounts are adjusted for the assumed issuance of 17.0 million shares of Mattel Common Stock in exchange for 34.8 million shares of Tyco Common Stock outstanding as of December 31, 1996, utilizing the Exchange Ratio of 0.48876. Additionally, adjustments reflect conversion of Tyco stock options and Restricted Stock Units into Mattel Common Stock. The number of shares of Mattel Common Stock to be issued at consummation of the Merger will be based upon the actual number of shares of Tyco Common Stock outstanding at that time. -Additional paid-in capital is adjusted for the effects of: (i) issuance of shares of Mattel Common Stock having a par value of $1 per share in exchange for Tyco Common Stock having a par value of $0.01 per share; (ii) cancellation of 0.2 million shares of Tyco Common Stock held in treasury as of December 31, 1996; (iii) the issuance of 0.6 million shares of Mattel Common Stock for Tyco stock options and Restricted Stock Units; (iv) the issuance of 3.0 million shares of Mattel Common Stock from its treasury to an independent third party prior to the merger consummation date; and (v) conversion of Tyco Series B and Series C Preferred Stock into equivalent shares of Mattel Series B and C Preferred Stock. -Retained earnings is adjusted for the effects of: (i) accrual for transaction and restructuring costs related to the Merger; (ii) compensation expense related to the Tyco Restricted Stock Units; (iii) write-off of Tyco's capitalized debt issuance costs and a termination fee related to certain short-term borrowings; and (iv) recognition of tax benefits relating to certain foreign net operating losses of Tyco. (g) Pro Forma Combined Statement of Income - Certain reclassifications have been made to conform Tyco's reporting of net sales, cost of sales, advertising and promotion, and selling and administrative expenses to that of Mattel. (h) Provision (Benefit) for Income Taxes - The pro forma financial adjustment reflects the reduction of valuation allowances established in the historical financial statements of Tyco, resulting in the recognition of benefits of losses incurred by certain foreign affiliates in the pro forma combined financial statements. (i) Income per Common Share - Pro forma weighted-average common shares outstanding for all periods presented are based upon Mattel's and Tyco's combined historical weighted-average shares, after adjustment of Tyco's historical number of shares by the Exchange Ratio of 0.48876. (c) Exhibits: 99.0 First Amended and Restated Credit Agreement dated as of March 13, 1997 among the Company, the Banks named therein and Bank of America National Trust and Savings Association, as Agent 99.1 Transfer and Administration Agreement dated as of March 11, 1997 among the Company, Mattel Factoring, Inc., the Banks named therein and NationsBank of Texas, N.A., as Agent 99.2 Receivables Purchase Agreement dated as of March 11, 1997 by and among Mattel Sales Corp., Fisher- Price, Inc., the Company and Mattel Factoring, Inc. 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: April 17, 1997 Assistant Secretary and -------------- Assistant General Counsel EX-99.0 2 1ST AMENDED AND RESTATED CREDIT AGREEMENT EXHIBIT 99.0 ================================================================================ - -------------------------------------------------------------------------------- FIRST AMENDED AND RESTATED CREDIT AGREEMENT Dated as of March 13, 1997 among MATTEL, INC., THE BANKS NAMED HEREIN, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent Arranged By [LOGO APPEARS HERE] BANCAMERICA SECURITIES, INC. - -------------------------------------------------------------------------------- ================================================================================ MATTEL INC. FIRST AMENDED AND RESTATED CREDIT AGREEMENT TABLE OF CONTENTS SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . 1 1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . 17 SECTION 2. THE COMMITMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.1 The Aggregate Facilities Commitment. . . . . . . . . . . . . . 17 2.2 Loan Accounts and Notes. . . . . . . . . . . . . . . . . . . . 17 2.3 Borrowing Procedure. . . . . . . . . . . . . . . . . . . . . . 18 2.4 Conversion and Continuation Elections. . . . . . . . . . . . . 19 2.5 Adjustments of Aggregate Loan Commitment and Aggregate Receivables Commitment . . . . . . . . . . . . . . . 20 2.6 Voluntary Prepayments. . . . . . . . . . . . . . . . . . . . . 21 2.7 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . 22 2.8 Interest on the Loans. . . . . . . . . . . . . . . . . . . . . 22 2.9 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.10 Calculation of Interest and Fees . . . . . . . . . . . . . . . 23 2.11 Payments by the Company. . . . . . . . . . . . . . . . . . . . 23 2.12 Payments by the Banks to the Agent . . . . . . . . . . . . . . 24 2.13 Sharing of Payments, Etc.. . . . . . . . . . . . . . . . . . . 25 SECTION 3. PAYMENTS IN GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 26 3.1 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 3.2 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . 29 3.3 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . 29 3.4 Increased Costs and Reduction of Return. . . . . . . . . . . . 30 3.5 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . 30 3.6 Inability to Determine Rates . . . . . . . . . . . . . . . . . 31 3.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . 32 4.1 Conditions to Effectiveness. . . . . . . . . . . . . . . . . . 32 4.2 Conditions to All Loans. . . . . . . . . . . . . . . . . . . . 34 SECTION 5. REPRESENTATIONS AND WARRANTIES.. . . . . . . . . . . . . . . . . . . . . 35 5.1 Organization and Powers. . . . . . . . . . . . . . . . . . . . 35 5.2 Good Standing. . . . . . . . . . . . . . . . . . . . . . . . . 35 5.3 Material Subsidiaries. . . . . . . . . . . . . . . . . . . . . 35 5.4 Authorization of Borrowing . . . . . . . . . . . . . . . . . . 36 5.5 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . 36 5.6 Governmental Consents. . . . . . . . . . . . . . . . . . . . . 36 5.7 Binding Obligation . . . . . . . . . . . . . . . . . . . . . . 36
- i - 5.8 Financial Condition. . . . . . . . . . . . . . . . . . . . . . 36 5.9 Changes, Etc . . . . . . . . . . . . . . . . . . . . . . . . . 37 5.10 Title to Properties. . . . . . . . . . . . . . . . . . . . . . 37 5.11 Litigation; Adverse Facts. . . . . . . . . . . . . . . . . . . 37 5.12 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . 38 5.13 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 38 5.14 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . 38 5.15 Governmental Regulation. . . . . . . . . . . . . . . . . . . . 38 5.16 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 38 5.17 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 39 5.18 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 39 5.19 Subordination Agreements . . . . . . . . . . . . . . . . . . . 39 SECTION 6. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.1 Reporting and Information Requirements . . . . . . . . . . . . 40 6.2 Corporate Existence, etc . . . . . . . . . . . . . . . . . . . 43 6.3 Payment of Taxes and Claims; Tax Consolidation . . . . . . . . 43 6.4 Maintenance of Properties; Insurance . . . . . . . . . . . . . 43 6.5 Inspection of Property and Books and Records . . . . . . . . . 44 6.6 Use of Proceeds of Loans . . . . . . . . . . . . . . . . . . . 44 6.7 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . 44 6.8 Subordination Agreements . . . . . . . . . . . . . . . . . . . 45 SECTION 7. NEGATIVE COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . 45 7.1 Secured Indebtedness . . . . . . . . . . . . . . . . . . . . . 45 7.2 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 7.3 Restriction on Fundamental Changes . . . . . . . . . . . . . . 46 7.4 Sale or Discount of Receivables. . . . . . . . . . . . . . . . 46 7.5 Consolidated Funded Indebtedness to Total Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 47 7.6 Interest Coverage Ratio. . . . . . . . . . . . . . . . . . . . 47 7.7 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 7.8 Margin Regulations . . . . . . . . . . . . . . . . . . . . . . 47 7.9 Independence of Covenants. . . . . . . . . . . . . . . . . . . 48 SECTION 8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 8.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . 48 8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 8.3 Rights Not Exclusive . . . . . . . . . . . . . . . . . . . . . 51 SECTION 9. THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 9.1 Appointment and Authorization. . . . . . . . . . . . . . . . . 52 9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . 52 9.3 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . 52 9.4 Reliance by Agent. . . . . . . . . . . . . . . . . . . . . . . 53 9.5 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . 53 9.6 Credit Decision. . . . . . . . . . . . . . . . . . . . . . . . 54
- ii - 9.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 54 9.8 Agent in Individual Capacity . . . . . . . . . . . . . . . . . 55 9.9 Successor Agent. . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 10. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 10.1 Assignments, Participations, etc.. . . . . . . . . . . . . . . 56 10.2 Survival of Warranties and of Certain Agreements . . . . . . . 59 10.3 Failure or Indulgence Not Waiver; Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . 59 10.4 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . 59 10.5 Set Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 10.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 10.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 61 10.8 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 61 10.9 Obligations Several. . . . . . . . . . . . . . . . . . . . . . 62 10.10 Certain Changes . . . . . . . . . . . . . . . . . . . . . . . 62 10.11 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 62 10.12 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . 62 10.13 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 63 10.14 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 63 10.15 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 63 10.16 Amendment and Restatement . . . . . . . . . . . . . . . . . . 64 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 Officers' 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 Commitments and Pro Rata Shares 5.3 Material Subsidiaries of Company 5.11 Material Litigation 7.2 Certain Liens
- iii - MATTEL, INC. ------------ FIRST AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------------- This FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is dated as of March 13, 1997 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"). PRELIMINARY STATEMENTS ---------------------- A. The Company, certain of the Banks and the Agent are parties to that certain Credit Agreement dated as of March 10, 1995, as amended, (as so amended, the "Existing Credit Agreement") pursuant to which the Banks agreed to make certain credit facilities available to the Company in accordance with the terms of the Existing Credit Agreement. B. The Company, the Banks and the Agent desire to amend and restate the Existing Credit Agreement in its entirety on the terms and conditions set forth herein. In consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company, the Banks and the Agent agree to amend and restate the Existing Credit Agreement in its entirety as follows: 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. -1- "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 amount set forth opposite ------------------------------- "Total" under "Facilities Commitments" on Schedule 1.1, as such amount may be adjusted pursuant to Section 2.5. "Aggregate Loan Commitment" means the amount set forth opposite ------------------------- "Total" under "Loan Commitment" on Schedule 1.1, as such amount may be adjusted pursuant to Section 2.5. "Aggregate Receivables Commitment" means the amount set forth opposite -------------------------------- "Total" under "Receivables Commitment" on Schedule 1.1, as such amount may be adjusted pursuant to Section 2.5. "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 and the commitment ----------------- fee, the amount (expressed in 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 Rate Level Fee Rate Loans + Loans + ============================================================ 1 6.50 20.00 32.50 - ------------------------------------------------------------ 2 7.50 22.50 35.00 - ------------------------------------------------------------ 3 9.00 27.50 40.00 - ------------------------------------------------------------ 4 11.00 32.50 45.00 - ------------------------------------------------------------ 5 15.00 37.50 50.00 - ------------------------------------------------------------ 6 25.00 62.50 75.00 ============================================================
"Applicable Level" means Level 1, Level 2, Level 3, Level 4, Level 5 ---------------- or Level 6, 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 -2- 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, Level 5 or Level 6. "Arranger" means BancAmerica 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 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: -3- 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. "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. -4- "Change in Commitment Notice" means a notice substantially in the form --------------------------- of Exhibit H hereto with respect to a reallocation of Commitments. "Combined Total Outstanding Investment" means an amount equal to the ------------------------------------- sum of (a) the Total Outstanding Investment under the Transfer and Administration Agreement plus (b) the analogous amount under Other Permitted Accounts Receivable Financing Facilities relating to the sales of accounts receivable of Domestic Subsidiaries (without duplication for accounts receivable sold to a Subsidiary of the Company and then sold to a third party purchaser). "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 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 -5- 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. "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. ------- "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 13, 1997 on which -------------- 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 -6- 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). "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 -7- 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 Agreement" has the meaning set forth in Recital A ------------------------- hereto. "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. "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. ------------ "Fisher-Price Guaranty" means the First Amended and Restated --------------------- Continuing Guaranty signed by Fisher-Price substantially -8- in the form of Exhibit F-1 hereto, as amended, supplemented, restated or otherwise modified from time to time. "Fisher-Price Subordination Agreement" means the First Amended and ------------------------------------ Restated 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. "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 -9- 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: -------- (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 -10- (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 A2 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): A- or higher by S&P A3 or higher by Moody's A- or higher by Duff & Phelps A- or higher by Fitch "Level 3" means that neither of the criteria of Level 1 or Level 2 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 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): -11- BBB or higher by S&P Baa2 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 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 6" means that none of the criteria of Level 1, Level 2, Level ------- 3, Level 4 or Level 5 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, for each Bank, 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. -12- "Material Subsidiary" means a Subsidiary of the Company, including its ------------------- Subsidiaries, which meets any of the following conditions: (a) the Company's and its Subsidiaries' investments in, and advances to, the Subsidiary exceed 10 percent of the total assets of the Company and its Subsidiaries consolidated as of the end of the most recently completed fiscal year (for a proposed business combination to be accounted for as a pooling of interest, this condition is also met when the number of common shares exchanged or to be exchanged by the Company exceeds 10 percent of its total common shares outstanding at the date the combination is initiated); or (b) the Company and its other Subsidiaries' proportionate share of the total assets (after intercompany eliminations) of the Subsidiary exceeds 10 percent of the total assets of the Company and its Subsidiaries consolidated as of the end of the most recently completed fiscal year; or (c) the Company and its other Subsidiaries' equity in the income from continuing operations before income taxes, extraordinary items and cumulative effect of a change in accounting principles of the Subsidiary exceeds 10 percent of such income of the Company and its Subsidiaries consolidated for the most recently completed fiscal year. For purpose of meeting the prescribed income test the following guidance should be applied: (i) When a loss has been incurred by either the Company and its Subsidiaries consolidated or the tested Subsidiary, but not both, the equity in the income or loss of the tested Subsidiary should be excluded from the income of the Company and its Subsidiaries consolidated for purposes of the computation. (ii) If income of the Company and its Subsidiaries consolidated for the most recent fiscal year is at least 10 percent lower than the average of the income for the last five years, such average income should be substituted for purposes of the computation. Any loss years should be omitted for purposes of computing average income. (iii) Where the test involves combined entities, as in the case of determining whether summarized financial data should be presented, entities reporting losses shall not be aggregated with entities reporting income. "Mattel Sales" means Mattel Sales Corp., a California corporation. ------------ -13- "Mattel Sales Guaranty" means the First Amended and Restated --------------------- 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 the First Amended and ------------------------------------ Restated 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. "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). "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), one of its Presidents, 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 Treasurer, one of its Assistant Treasurers, or its Controller, delivered to the Banks by the Company pursuant to Section 6.1(c). "Other Permitted Accounts Receivable Financing Facility" means a ------------------------------------------------------ financing arrangement (other than the Transfer and Administration Agreement) entered into in the ordinary course of business under which accounts receivable of the Company, Mattel Sales, Fisher-Price or any other Subsidiary are -14- periodically sold directly to third party purchasers, or sold to a Subsidiary of the Company formed for such purpose which in turn sells such accounts receivable to third party purchasers; provided, however, that in connection with any such -------- ------- financing arrangement: (a) there is no recourse to any seller of such accounts receivable on account of the creditworthiness of the obligor on such accounts receivable; and (b) no negative pledge or Lien is created on any accounts receivables not actually sold or discounted. "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, for each Bank, 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. "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 -15- 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. "Termination Date" means March 31, 2002. ---------------- "Total Outstanding Investment" has the meaning set forth in the ---------------------------- Transfer and Administration Agreement. "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 Transfer and ------------------------------------- Administration Agreement dated as of March 11, 1997, among Mattel Factoring, Inc., as transferor, the Company, as guarantor and servicer, the banks named therein, and NationsBank -16- 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; (ii) the amount of the Total Outstanding Investment shall not exceed the Aggregate Receivables Commitment; (iii) the Aggregate Loan Commitment and the Aggregate Receivables Commitment shall not exceed the Aggregate Facilities Commitment; and (iv) each Bank's Pro Rata Share hereunder shall at all times be equal to such Bank's Percentage under, and as defined in, the Transfer and Administration Agreement. 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 -17- 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 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 -18- 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 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. -19- (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. 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 the amount set forth opposite "Total" under "Receivables Commitment" on Schedule 1.1 at any time, and (z) the Aggregate -20- Loan Commitment may not be reduced to less than the amount set forth opposite "Total" under "Loan Commitment" on Schedule 1.1 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. (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 Voluntary Prepayments. 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 -21- 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. 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 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. (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. -22- 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 shall pay to the Agent and the Arranger other fees in accordance with a term sheet dated as of January 28, 1997 from the Arranger and Bank of America to the Company. (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. 2.10 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 -23- 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 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 -24- 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 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 -25- 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 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 -26- 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 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 -27- 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 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. -28- (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 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. -29- (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 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 -30- 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 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 -31- 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 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 Delaware and good standing certificates from the Secretaries of State of the State of Delaware and 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 -32- 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 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; -33- (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 Leland P. Smith, 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 Officers' 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) Payment of all fees payable pursuant to Section 2.9(b); (u) The Fisher-Price Guaranty duly executed by Fisher-Price; (v) The Mattel Sales Guaranty duly executed by Mattel Sales; (w) 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 (x) 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 -34- 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. 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 Material Subsidiaries. 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 -35- name, jurisdiction of incorporation and ownership interest of the Company in each of its Material Subsidiaries as of the date hereof. 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. 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 -36- Company and its Subsidiaries for the fiscal year ended December 31, 1995 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 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, 1995, 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, 1995 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. Except as set forth on Schedule 5.11 ------------------------- hereto, 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 -37- 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, 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 -38- 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 Company since January 1, 1996 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. -39- 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 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 -40- 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, 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 and 7.6. (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; -41- (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 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; -42- (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 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, -43- 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 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 -44- 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. 7.1 Secured Indebtedness. Other than as permitted under Section 7.2, -------------------- 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 any Indebtedness which (a) is senior to the Obligations, (b) has any priority of payment over the Obligations or (c) is secured by Liens on any of the Company's or any Subsidiary's assets. 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 except: (a) Liens securing Indebtedness for borrowed money not exceeding $100,000,000 in the aggregate at any time; (b) Liens existing on the date hereof; (c) Liens securing Indebtedness under the Transfer and Administration Agreement; (d) Liens securing Indebtedness under Other Permitted Accounts Receivable Financing Facilities; -45- (e) Liens listed on Schedule 7.2; and (f) Liens on newly-acquired Capital Assets; provided that such Liens on Capital Assets located in the United States shall not secure Indebtedness for borrowed money in excess of $25,000,000. 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 transaction shall be between a Subsidiary and a wholly-owned subsidiary, the wholly-owned subsidiary shall be the continuing or surviving corporation; (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; and (iii) Tyco Toys, Inc., a Delaware corporation, may merge with the Company, provided that the Company shall be the continuing or surviving corporation and provided that no Default or Event of Default shall exist immediately prior to, or result from, such merger. 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 or without recourse, or discount or otherwise sell for less than the face value thereof any of its notes or accounts receivable, except: (a) discounts offered in the ordinary course of business for early payment of accounts receivable and negotiated -46- settlements of bad debts and disputed accounts receivable in the ordinary course of business; (b) sales of accounts receivable under the Transfer and Administration Agreement and agreements entered into in connection therewith; (c) sales of accounts receivable under Other Permitted Accounts Receivable Financing Facilities; and (d) sales of accounts receivable where the Company believes in good faith that the collectability of such accounts receivable is or may be jeopardized by the distressed financial condition of the obligor under such accounts receivable. 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) Combined Total Outstanding Investment to the sum of (x) ---- Consolidated Funded Indebtedness plus (y) Combined 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 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 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. 7.7 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. 7.8 Margin Regulations. No portion of the proceeds of any borrowing ------------------ under this Agreement shall be used by the Company -47- 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. 7.9 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 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 -48- 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 Loan Documents or Transfer and --------------------------------------------------- Administration Agreement. Failure of the Company, Fisher-Price, Mattel Sales or - ------------------------ Mattel Factoring, Inc., to perform or comply with any other term or condition contained in any Loan Document or the Transfer and Administration Agreement, in each case to the extent it is a party thereto, 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 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 -49- 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 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 -50- (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 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. -51- 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 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. -52- 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. 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 -53- 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 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 -54- 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 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 -55- 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 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 -56- (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 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 -57- 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 (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 -58- 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. 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 -59- 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 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 -60- 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 (g) discharge any Guarantor; -61- 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 laws of the State of California, without regard to conflicts of laws principles. -62- (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 transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the -63- 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. 10.16 Amendment and Restatement. This Agreement amends and restates ------------------------- the Existing Agreement, and any loans and the revolving commitments outstanding under the Existing Agreement shall be deemed Loans and the Loan Commitment outstanding under this Agreement. -64- 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 ------------------------------- William Stavro Senior Vice President and Treasurer AGENT: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By _______________________________ Janice Hammond Vice President BANKS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By _______________________________ Robert W. Troutman Managing Director S-1 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 _______________________________ William Stavro Senior Vice President and Treasurer AGENT: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By /s/ Janice Hammond ------------------------------- Janice Hammond Vice President BANKS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Robert W. Troutman ------------------------------- Robert W. Troutman Managing Director S-1 NATIONSBANK OF TEXAS, N.A. By /s/ Charles F. Lilygren ---------------------------------- Title Vice President ------------------------------- S-2 THE CHASE MANHATTAN BANK, N.A. By /s/ Mary E. Cameron ---------------------------------- Title: Vice President ------------------------------ S-3 THE FIRST NATIONAL BANK OF BOSTON By /s/ Debra Zurka ---------------------------------- Title Vice President ------------------------------ S-4 PNC BANK, NATIONAL ASSOCIATION By /s/ Beth Filipponi ---------------------------------- Title Corporate Banking Officer ------------------------------- S-5 TORONTO DOMINION (TEXAS), INC. By /s/ Darlene Riedel ---------------------------------- Title VP ------------------------------- S-6 ABN AMRO BANK N.V. By /s/ Matthew S. Thomson ---------------------------------- Title Group Vice President/Director ------------------------------- By /s/ John A. Miller ---------------------------------- Title Group Vice President ------------------------------- S-7 UNION BANK OF CALIFORNIA, N.A. By /s/ Scott M. Lane ---------------------------------- Title Vice President ------------------------------- S-8 BANQUE NATIONALE DE PARIS By /s/ Clive Bettles ---------------------------------- Title Senior Vice President & Manager ------------------------------- By /s/ Mitchell M. Ozawa ---------------------------------- Title Vice President ------------------------------- S-9 DRESDNER BANK AG, New York Branch and Grand Cayman Branch By /s/ Thomas J. Nadramia --------------------------------- Title Vice President ------------------------------- By /s/ Brigitte Sacin --------------------------------- Title Assistant Treasurer ------------------------------- S-10 ISTITUTO BANCARIO SAN PAOLO di TORINO SpA By /s/ Robert S. Wurster --------------------------------- Title First Vice President ------------------------------- By /s/ William J. De Angelo --------------------------------- Title First Vice President ------------------------------- S-11 MANUFACTURERS & TRADERS TRUST CO. By /s/ Geoffrey R. Fenn ---------------------------------- Title Vice President ------------------------------- S-12 CITICORP USA, INC. By /s/ William M. Royer ---------------------------------- Title Attorney In Fact ------------------------------- S-13 SOCIETE GENERALE By /s/ J. Staley Stewart --------------------------------- Title Vice President ------------------------------- S-14 THE INDUSTRIAL BANK OF JAPAN, LIMITED LOS ANGELES AGENCY By /s/ Wataru Ogawa --------------------------------------- Title Joint General Manager ----------------------------------- S-15 EXHIBIT A --------- PROMISSORY NOTE --------------- $______________________ Los Angeles, California March 13, 1997 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 First Amended and Restated Credit Agreement dated as of March 13, 1997, 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. If the Payee was a party to the Existing Credit Agreement, this Note amends and restates any promissory note executed and delivered by the Company in favor of Payee in connection with such Existing 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 PROMISSORY NOTE A-1 hereunder with respect to payments of principal or interest on this Note. 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 __________________________________________ Name ________________________________________ Title _______________________________________ PROMISSORY NOTE 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 - ---- ---- ---- -------- --------- --------- ----- PROMISSORY NOTE A-3 EXHIBIT B --------- NOTICE OF BORROWING ------------------ TO: Bank of America National Trust and Savings Association, as Agent 1455 Market Street, 13th Floor San Francisco, CA 94103 Attention: Agency Management Services #5596 Gentlemen: Pursuant to Section 2.3 of that certain First Amended and Restated Credit Agreement dated as of March 13, 1997 (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 ____________________________________ NOTICE OF BORROWING B-1 EXHIBIT C --------- NOTICE OF CONVERSION/CONTINUATION --------------------------------- TO: Bank of America National Trust and Savings Association, as Agent 1455 Market Street, 13th Floor San Francisco, CA 94103 Attention: Agency Management Services #5596 Gentlemen: 1. Conversion Selection. Pursuant to Section 2.4 of that certain -------------------- First Amended and Restated Credit Agreement dated as of March 13, 1997 (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___ NOTICE OF CONVERSION/CONTINUATION 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 ___________________________________ NOTICE OF CONVERSION/CONTINUATION C-2 EXHIBIT D --------- OFFICERS' CERTIFICATE -------------------- THE UNDERSIGNED HEREBY CERTIFY THAT: (1) We are the duly elected [Chairman of the Board (if an officer), President, Executive Vice President, Senior Vice Presidents] and [Chief Financial Officer, Treasurer, Assistant Treasurer, Controller] of Mattel, Inc., a Delaware corporation (the "Company"); (2) We have reviewed the terms of the First Amended and Restated Credit Agreement dated as of March 13, 1997, 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: _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ OFFICERS' CERTIFICATE 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: __________________________________ Name: ________________________________ Title: _______________________________ By: __________________________________ Name: ________________________________ Title: _______________________________ OFFICERS' CERTIFICATE 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 Indebtedness: $___________ - Term Loans: $___________ - Subordinated Indebtedness: $___________ - Senior Long-Term Indebtedness: $___________ - 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. Combined Total Outstanding Investment: 1. Total Outstanding Investment under Transfer and Administration Agreement: $____________ 2. Amount analogous to "Total Outstanding Investment" under Other Permitted Accounts Receivable Financing Facilities relating to Domestic Subsidiaries (describe): $____________ 3. Combined Total Outstanding Investment (Lines B1+B2): $____________ OFFICERS' CERTIFICATE D-3 C. Consolidated Funded Indebtedness plus Combined Total Outstanding Investment (Lines A4+B3): $____________ D. Consolidated Tangible Net Worth: 1. Net Worth: $____________ 2. Foreign exchange currency translation adjustments: $____________ 3. Intangible assets: $____________ 4. Consolidated Tangible Net Worth (Line D1 - (D2+D3)): $____________ E. Consolidated Funded Indebtedness plus ---- Combined Total Outstanding Investment plus ---- Consolidated Tangible Net Worth (Lines C+D4): $____________ F. Actual percentage of Consolidated Funded Indebtedness plus Combined Total Outstanding ---- Investment to Consolidated Funded Indebtedness plus Combined Total Outstanding Investment plus ---- ---- Consolidated Tangible Net Worth (Line C+E): ___________% G. Permitted maximum percentage of Consolidated Funded Indebtedness plus Combined Total ---- Outstanding Investment to Consolidated Funded Indebtedness plus Combined Total Outstanding ---- Investment plus Consolidated Tangible ---- Net Worth: (55%) (65%) II. INTEREST COVERAGE RATIO AS OF ABOVE DATE. (Section 7.6) 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: $____________ 5. Total (Line A1 - Line A1+A2+A3): $____________ OFFICERS' CERTIFICATE D-4 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 OFFICERS' CERTIFICATE D-5 EXHIBIT E --------- [LETTERHEAD OF MATTEL, INC. APPEARS HERE] March 13, 1997 To: The Banks Listed on Schedule A Hereto and Bank of America National Trust ---------- and Savings Association, as Agent Re: First Amended and Restated Credit Agreement, dated as of March 13, 1997, among Mattel, Inc., the Banks named therein and Bank of America National Trust and Savings Association, as Agent Ladies and Gentlemen: I am an Assistant General Counsel and Assistant Secretary of Mattel, Inc., a Delaware corporation (the "Company"), and in that capacity have acted as counsel to the Company, Mattel Sales Corp., a California corporation ("Mattel Sales"), and Fisher-Price, Inc., a Delaware corporation ("Fisher-Price"), in connection with the preparation of the First Amended and Restated Credit Agreement, dated as of March 13, 1997 (the "Credit Agreement"), among the Company, the banks named therein (the "Banks") and Bank of America National Trust and Savings Association, as Agent (the "Agent"). 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 or other attorneys in the Company's Legal Department have examined originals, or copies identified to our satisfaction as being true copies, of such records, documents or other instruments as in our 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; The Banks and Bank of America National Trust and Savings Association, as Agent March 13, 1997 Page 2 (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) 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 as material to the Company and its subsidiaries as a whole by responsible officers of the Company and its subsidiaries (the "Material Agreement"); (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 their assets are bound, identified to me by responsible officers of the Company as being all such orders, judgments and decrees (the "Judicial Orders"). The documents described in subsections (d) - (f) above are referred to herein collectively as the "Documents." 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. 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. The Banks and Bank of America National Trust and Savings Association, as Agent March 13, 1997 Page 3 In my examination, I have assumed the legal capacity of all natural persons executing documents, the authenticity of all documents (other than the Loan Documents) submitted to me as originals, and the conformity to authentic original documents (other than the Loan Documents) of all documents submitted to me as copies. I am opining herein as to the effect on the subject transactions only of the federal laws of the United States, the internal laws of the State of California and the General Corporation Law of the State of Delaware, and I express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or, in the case of Delaware, any other laws or as to any matters of municipal law or the laws of any other local agencies within any state. The opinions set forth in paragraphs 7 and 10 below are based upon my consideration of only those statutes, rules and regulations which, in my experience, are normally applicable to unsecured loans and guaranties. Whenever a statement herein is qualified by "to the best of my knowledge" or a similar phrase, it is intended to indicate that those attorneys in the Company's Legal Department who have rendered legal services in connection with the Credit Agreement do not have current actual knowledge of the inaccuracy of such statement. However, except as otherwise expressly indicated, I have not undertaken any independent investigation to determine the accuracy of any such statement, and no inference that I have any knowledge of any matters pertaining to such statement should be drawn from my representation of the Company, Mattel Sales and Fisher-Price. 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 as of the date hereof: 1. The Company is a corporation duly incorporated, 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, to execute and deliver the Credit Agreement, the Mattel Sales Subordination Agreement and the Fisher-Price Subordination 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. The Banks and Bank of America National Trust and Savings Association, as Agent March 13, 1997 Page 4 2. Mattel Sales is a corporation duly incorporated, 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, to execute and deliver the Mattel Sales Guaranty, to acknowledge 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 incorporated, 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, to execute and deliver the Fisher-Price Guaranty, to acknowledge 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 terms. 5. The execution and delivery of the Mattel Sales Guaranty and the acknowledgment 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 obligation of Mattel Sales, enforceable against Mattel Sales in accordance with its terms. 6. The execution and delivery of the Fisher-Price Guaranty and the acknowledgment 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 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 The Banks and Bank of America National Trust and Savings Association, as Agent March 13, 1997 Page 5 obligation of Fisher-Price, enforceable against Fisher-Price in accordance with its terms. 7. Neither the execution and delivery of the Documents 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 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) to the best of my knowledge, any present federal or California statute binding on the Company, Mattel Sales or Fisher-Price or the Delaware General Corporation Law, 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. No opinion is expressed in clause (z) of this paragraph 7 as to the application of Section 548 of the federal Bankruptcy Code and comparable provisions of state law, or of any antifraud laws, antitrust or trade regulation laws. 8. Except as set forth on Schedule B hereto, 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. The Banks and Bank of America National Trust and Savings Association, as Agent March 13, 1997 Page 6 10. To the best of my knowledge, no governmental consents, approvals, authorizations, registrations, declarations or filings are required by the Company, Mattel Sales or Fisher-Price under any federal or California law or under the Delaware General Corporation Law in connection with the extensions of credit under the Credit Agreement. No opinion is expressed in this paragraph 10 as to the application of Section 548 of the federal Bankruptcy Code and comparable provisions of state law, or of any antifraud laws, antitrust or trade regulation laws. 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 above are subject to the following limitations, qualifications and exceptions: (a) such opinions are subject to the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors, including, without limitation, the effect on the transaction of Section 548 of the federal Bankruptcy Code and comparable provisions of state law, and the effect on the transaction of Section 547 of the federal Bankruptcy Code; (b) enforceability of the Documents is subject to the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law; (c) certain rights, remedies and waivers contained in the Documents may be limited or rendered ineffective by applicable California laws or judicial decisions governing such provisions, but such laws or judicial decisions do not render the Documents invalid or unenforceable as a whole; and (d) I express no opinion as to the validity or enforceability of any provision of the Documents that permits a party to increase the rate of interest or impose any penalty, forfeiture, late charge or prepayment premium in the event of a delinquency, default or prepayment. In rendering the opinions expressed in paragraph 7 insofar as they require interpretation of the Material Agreements, Other Loan Agreements or Judicial Orders, (i) I have assumed with your permission that all courts of competent jurisdiction would enforce The Banks and Bank of America National Trust and Savings Association, as Agent March 13, 1997 Page 7 such agreements as written, but would apply the internal laws of the State of California, without giving effect to any choice of law provisions contained therein or any choice of law principles which would result in application of the internal laws of any other state, (ii) to the extent that any questions of legality or legal construction have arisen in connection with my review, I have applied the laws of the State of California in resolving such questions, and (iii) I express no opinion with respect to the effect of any action or inaction by the Company, Mattel Sales or Fisher-Price under the Documents, the Material Agreements, the Other Loan Agreements or the Judicial Orders, which may result in a breach or default under any Material Agreement, Other Loan Agreement or Judicial Order, respectively. I advise you that certain of the Material Agreements, Other Loan Agreements and Judicial Orders may be governed by other laws, that such laws may vary substantially from the law assumed to govern for purposes of this opinion, and that if such other laws govern then this opinion may not be relied upon as to whether or not a breach or default would occur under the law actually governing such Material Agreements, Other Loan Agreements or Judicial Orders. Without limiting the generality of the foregoing, the opinions expressed above are also subject to the following limitations, exceptions and assumptions: (a) the unenforceability under certain circumstances, under California or federal law or court decisions, of provisions expressly or by implication 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; (b) the unenforceability under certain circumstances of provisions to the effect that rights or remedies are not 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, that any right or remedy may be exercised without notice, or that failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such right or remedy; (c) the unenforceability under certain circumstances 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; The Banks and Bank of America National Trust and Savings Association, as Agent March 13, 1997 Page 8 (d) the requirements of the California Commercial Code that a party exercise its rights under the Documents in good faith and in a commercially reasonable manner; (e) the effect of Section 1717 of the California Civil Code, 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 provision of the contract shall be entitled to recover its reasonable attorneys' fees; (f) the effect of California law, which provides that a court may refuse to enforce, or may limit the application of, a contract or any clause thereof which the court finds as a matter of law to have been unconscionable at the time it was made or contrary to public policy; (g) I express no opinion as to (i) the enforceability of the choice of law provisions in the Documents or (ii) the effect upon the transactions under the Documents of California laws relating to permissible rates of interest; and (h) 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 the Company, 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 guarantor. To the extent that the obligations of the Company, Mattel Sales or Fisher-Price may be dependent upon such matters, I assume for purposes of this opinion that: all parties to the Documents other than the Company, Mattel Sales or Fisher-Price have complied with any applicable requirement to file returns and pay taxes under the Franchise Tax Law of the State of California; all parties to the Documents other than the Company, Mattel Sales or Fisher-Price are The Banks and Bank of America National Trust and Savings Association, as Agent March 13, 1997 Page 9 duly incorporated, validly existing and in good standing under the laws of their respective jurisdictions of incorporation; all parties to the Documents other than the Company, Mattel Sales or Fisher-Price have the requisite corporate power and authority to execute and deliver the Documents and to perform their respective obligations under the Documents; and the Documents have been duly authorized, executed and delivered by all the parties thereto other than the Company, Mattel Sales or Fisher-Price and constitute their legally valid and binding obligations, enforceable against them in accordance with their terms. In rendering my opinions in paragraphs 4, 5 and 6 hereof, I have assumed that each Bank is a bank chartered under the laws of the United States or a State of the United States or is otherwise 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 Agent, the Banks and their permitted Assignees and Participants 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, to your holding company and as otherwise compelled by legal process. Very truly yours, /s/ Leland P. Smith Leland P. Smith Assistant General Counsel and Assistant Secretary SCHEDULE A Bank of America National Trust and Savings Association ABN AMRO Bank, N.A. Banque Nationale de Paris Union Bank of California, N.A. The Chase Manhattan Bank Citicorp USA, Inc. Dresdner Bank AG. Los Angeles Agency The First National Bank of Boston Instituto Bancario San Paolo Torino SpA Manufacturers & Traders Trust Co. NationsBank of Texas, N.A. PNC Bank, N.A. Societe Generale Toronto-Dominion (Texas), Inc. The Industrial Bank of Japan, Ltd. SCHEDULE B Greenwald v. Mattel, Inc. (Case No. YC 025 008) filed October 13, 1995 ------------------------- in Superior Court of the State of California, County of Los Angeles. Lewis v. Vogelstein et al. (Case No. 14954) filed April 23, 1996 in the -------------------------- Delaware Court of Chancery, New Castle County. EXHIBIT F-1 ----------- FISHER-PRICE, INC. ------------------ FIRST AMENDED AND RESTATED 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 First Amended and Restated 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 FISHER-PRICE GUARANTY F-1-1 obligations are referred to herein as the "Company Letter of Credit Obligations"). D. This Guaranty amends and restates the Continuing Guaranty dated as of March 10, 1995 delivered by the Guarantor. 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 FISHER-PRICE GUARANTY F-1-2 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: (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 FISHER-PRICE GUARANTY F-1-3 (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. 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; FISHER-PRICE GUARANTY F-1-4 (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 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 FISHER-PRICE GUARANTY F-1-5 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 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: FISHER-PRICE GUARANTY F-1-6 (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 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 FISHER-PRICE GUARANTY F-1-7 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 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 FISHER-PRICE GUARANTY F-1-8 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. 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 FISHER-PRICE GUARANTY F-1-9 behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. Executed as of the 13th day of March 1997. FISHER-PRICE, INC. By:______________________ Title:___________________ BANK OF AMERICA NATIONAL TRUST SAVINGS ASSOCIATION, as Agent By:______________________ Vice President FISHER-PRICE GUARANTY F-1-10 EXHIBIT F-2 ----------- MATTEL SALES CORP. ------------------ FIRST AMENDED AND RESTATED 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 First Amended and Restated 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 MATTEL SALES GUARANTY F-2-1 obligations are referred to herein as the "Company Letter of Credit Obligations"). D. This Guaranty amends and restates the Continuing Guaranty dated as of March 10, 1995 delivered by the Guarantor. 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 MATTEL SALES GUARANTY F-2-2 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: (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 MATTEL SALES GUARANTY F-2-3 (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. 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; MATTEL SALES GUARANTY F-2-4 (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 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 MATTEL SALES GUARANTY F-2-5 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 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: MATTEL SALES GUARANTY F-2-6 (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 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 MATTEL SALES GUARANTY F-2-7 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 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 MATTEL SALES GUARANTY F-2-8 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. 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 MATTEL SALES GUARANTY F-2-9 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 13th day of March 1997. MATTEL SALES CORP. By:______________________________ Title:___________________________ BANK OF AMERICA NATIONAL TRUST SAVINGS ASSOCIATION, as Agent By: _____________________________ Vice President MATTEL SALES GUARANTY F-2-10 EXHIBIT G-1 ----------- FISHER-PRICE, INC. ------------------ FIRST AMENDED AND RESTATED SUBORDINATION AGREEMENT -------------------------------------------------- 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 First Amended and Restated 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 FISHER-PRICE SUBORDINATION AGREEMENT G-1-1 defined therein) and the Foreign Subsidiary Guaranties and the Company Letters of Credit. D. This Agreement amends and restates the Subordination Agreement dated as of March 10, 1995 delivered by the Creditor. E. It is a condition precedent to the effectiveness of the Credit Agreement that Creditor enter into this Fisher-Price 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 FISHER-PRICE SUBORDINATION AGREEMENT G-1-2 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 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 FISHER-PRICE SUBORDINATION AGREEMENT G-1-3 AGREEMENT DATED MARCH 13, 1997 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 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. __________________________ Creditor By: ______________________________ FISHER-PRICE SUBORDINATION AGREEMENT 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:__________________________ FISHER-PRICE, INC. By: ________________________ FISHER-PRICE SUBORDINATION AGREEMENT G-1-5 EXHIBIT G-2 MATTEL SALES CORP. ------------------ FIRST AMENDED AND RESTATED SUBORDINATION AGREEMENT -------------------------------------------------- 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 First Amended and Restated 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 MATTEL SALES SUBORDINATION AGREEMENT G-2-1 defined therein) and the Foreign Subsidiary Guaranties and the Company Letters of Credit. D. This Agreement amends and restates the Subordination Agreement dated as of March 10, 1995 delivered by the Creditor. E. 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 MATTEL SALES SUBORDINATION AGREEMENT G-2-2 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 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 MATTEL SALES SUBORDINATION AGREEMENT G-2-3 AGREEMENT DATED MARCH 13, 1997 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 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. _________________________ Creditor By: ______________________________ MATTEL SALES SUBORDINATION AGREEMENT 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:_____________________ MATTEL SALES CORP. By: _____________________ MATTEL SALES SUBORDINATION AGREEMENT 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 555 South Flower Street, 11th Floor Los Angeles, CA 90071 Attention: Janice Hammond Agency Management - Los Angeles #20529 NationsBank of Texas, N.A., as Agent 444 South Flower Street, Suite 1500 Los Angeles, Ca 90071-2901 Attention: Tom Scharfenberg Gentlemen: Pursuant to (a) Section 2.5 of that certain First Amended and Restated Credit Agreement dated as of March 13, 1997, 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 13, 1997, 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__ CHANGE IN COMMITMENTS NOTICE 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. CHANGE IN COMMITMENTS NOTICE 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 ________________________________ CHANGE IN COMMITMENTS NOTICE H-3 EXHIBIT I --------- NOTICE OF ASSIGNMENT AND ACCEPTANCE ----------------------------------- _______________, 19___ TO: Bank of America National Trust and Savings Association, as Agent 555 South Flower Street, 11th Floor Los Angeles, CA 90071 Attention: Janice Hammond Agency Management - Los Angeles #20529 Reference is made to that certain First Amended and Restated Credit Agreement dated as of March 13, 1997 (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 NOTICE OF ASSIGNMENT AND ACCEPTANCE 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 NOTICES OF ASSIGNMENT AND ACCEPTANCE 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: ___________________________ Vice President NOTICE OF ASSIGNMENT AND ACCEPTANCE I-3 SCHEDULE 1.1 ------------
BANK COMMITMENTS ---------------- Bank Pro Rata Loan Receivables Facilities - ---- Share Commitment Commitment Commitment ----- ---------- ---------- ---------- Bank of America 12.000% $72,000,000.00 $48,000,000.00 $120,000,000.00 NationsBank of Texas, N.A. 9.000 54,000,000.00 36,000,000.00 90,000,000.00 The Chase Manhattan Bank 9.000 54,000,000.00 36,000,000.00 90,000,000.00 The First National Bank of 7.500 45,000,000.00 30,000,000.00 75,000,000.00 Boston PNC Bank, National 7.500 45,000,000.00 30,000,000.00 75,000,000.00 Association Toronto Dominion (Texas), 7.500 45,000,000.00 30,000,000.00 75,000,000.00 Inc. ABN AMRO Bank N.V. 7.500 45,000,000.00 30,000,000.00 75,000,000.00 Union Bank of California, 5.000 30,000,000.00 20,000,000.00 50,000,000.00 N.A. Banque Nationale de Paris, 5.000 30,000,000.00 20,000,000.00 50,000,000.00 Los Angeles Agency Dresdner Bank AG, New York 5.000 30,000,000.00 20,000,000.00 50,000,000.00 Branch and Grand Cayman Branch Istituto Bancario San 5.000 30,000,000.00 20,000,000.00 50,000,000.00 Paolo di Torino SpA Manufacturers & Traders 5.000 30,000,000.00 20,000,000.00 50,000,000.00 Trust Co. Citicorp USA, Inc. 5.000 30,000,000.00 20,000,000.00 50,000,000.00 Societe Generale 5.000 30,000,000.00 20,000,000.00 50,000,000.00 The Industrial Bank of Japan, Limited, Los 5.000 30,000,000.00 20,000,000.00 50,000,000.00 Angeles Agency =========== ============== ============== ============= TOTAL 100.000% $600,000,000.00 $400,000,000.00 $1,000,000,000.
SCHEDULE 5.3 ------------ MATERIAL SUBSIDIARIES OF THE COMPANY ------------------------------------
Percentage of Voting Securities Owned Jurisdiction Directly or Subsidiaries/1/ in Which Parent Indirectly Organized By Parent ================================================================================ Arco Toys, Limited Honk Kong Mattel, Inc. 100% Fisher-Price, Inc. Delaware Mattel, Inc. 100% Mattel Europa B.V. The Mattel, Inc. 100% Netherlands Mattel Holding, Inc. Delaware Mattel, Inc. 100% Mattel Operations, Inc. Delaware Mattel, Inc. 100% Mattel Sales Corp. California Mattel, Inc. 100%
______________________ /1/All of the subsidiaries listed above are included in the Consolidated Financial Statements. These subsidiaries meet the criteria defined in Rule 1-02 (w) of Regulation S-X. SCHEDULE 5.11 ------------- MATERIAL LITIGATION ------------------- 1. Greenwald v. Mattel, Inc. (Case No. YC 025 008) filed October 13, ------------------------- 1995 in the Superior Court of the State of California, County of Los Angeles. 2. Lewis v. Vogelstein et al. (Case No. 14954) filed April 23, 1996 in -------------------------- the Delaware Court of Chancery, New Castle County. Further information relating to these matters is set forth in the Company's periodic filings under the Exchange Act. 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 Senior Vice President and Treasurer Telephone: (310) 252-3202 Facsimile: (310) 252-3215 with a copy to the Corporate Counsel BANK OF AMERICA NATIONAL TRUST - ------------------------------ AND SAVINGS ASSOCIATION, - ----------------------- AS AGENT Notices of Borrowing and Notices of Conversion/Continuation): Bank of America National Trust and Savings Association Agency Management Services #5596 1455 Market Street, 13th Floor San Francisco, California 94103 Attention: Nancy Li Telephone: (415) 436-4017 Facsimile: (415) 436-2700 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Bank of America National Trust and Savings Association 555 South Flower Street, 11th Floor Los Angeles, CA 90071 Attention: Janice Hammond Vice President Agency Management - Los Angeles #20529 Telephone: (213) 228-9861 Facsimile: (213) 228-2299 -1- BANK OF AMERICA NATIONAL TRUST - ------------------------------ AND SAVINGS ASSOCIATION, - ----------------------- AS A BANK Domestic and Eurodollar Lending Office: Payment Services Operations #5693 1850 Gateway Boulevard, Fourth Floor Concord, California 94520 Attention: Cheryl Davidson Telephone: (510) 675-7154 Facsimile: (510) 675-7531 or (510) 675-7519 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) 623-7923 NATIONSBANK OF TEXAS, N.A. - -------------------------- Domestic and Eurodollar Lending Office and Notices: NationsBank of Texas, N.A. 901 Main Street Dallas, Texas 75202-3714 Attention: Marie Lancaster Telephone: (214) 508-2158 Facsimile: (214) 508-2515 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): NationsBank of Texas, N.A. 444 S. Flower Street, Suite 1500 Los Angeles, California 90071 Attention: Tom Scharfenberg Senior Vice President Telephone: (213) 236-4923 Facsimile: (213) 624-5815 -2- THE CHASE MANHATTAN BANK - ------------------------ Domestic and Eurodollar Lending Office and Notices: The Chase Manhattan Bank 270 Park Avenue, 10th Floor New York, New York 10017 Attention: Miranda Chin Telephone: (212) 622-0836 Facsimile: (212) 622-0130 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): The Chase Manhattan Bank 101 California Street, Suite 2725 San Francisco, California 94111 Attention: Ted Swimmer Vice President-Finance Telephone: (415) 954-9552 Facsimile: (415) 954-9583 THE FIRST NATIONAL BANK OF BOSTON - --------------------------------- Domestic and Eurodollar Lending Office and Notices: The First National Bank of Boston U.S. Corporate Division, Mail Stop 01-09-06 100 Federal Street, 6th Floor Boston, Massachusetts 02110 Attention: Carol Rousseau Telephone: (617) 434-5777 Facsimile: (617) 434-0630 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): The First National Bank of Boston U.S. Corporate Division, Mail Stop 01-09-06 100 Federal Street, 6th Floor Boston, Massachusetts 02110 Attention: Debra L. Zurka Vice President Telephone: (617) 434-2683 Facsimile: (617) 434-0630 -3- PNC BANK, NATIONAL ASSOCIATION - ------------------------------ Domestic and Eurodollar Lending Office and Notices: PNC Bank, National Association Corporate Banking Loan Services 249 Fifth Avenue, 2nd Floor Mail Stop P-1-POPP-02-4 Pittsburgh, PA 15222-2707 Attention: Sally Hunter Telephone: (412) 768-3807 Facsimile: (412) 768-4586 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): PNC Bank, National Association Corporate Banking Loan Services 249 Fifth Avenue, 2nd Floor Mail Stop P-1-POPP-02-4 Pittsburgh, PA 15222-2707 Attention: David J. Egan Senior Vice President Telephone: (412) 762-5932 Facsimile: (412) 768-4586 TORONTO DOMINION (TEXAS), INC. - ------------------------------ Domestic and Eurodollar Lending Office and Notices: Toronto Dominion (Texas), Inc. 909 Fannin Street, Suite 1700 Houston, Texas 77010 Attention: Dave Parker Telephone: (713) 653-8245 Facsimile: (713) 951-9921 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Toronto Dominion (Texas), Inc. 909 Fannin Street, Suite 1700 Houston, Texas 77010 Attention: John Geresi Director - Corporate Accounting Telephone: (713) 653-8207 Facsimile: (713) 652-2647 -4- 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: Hela Schmidt Loan Department Telephone: (213) 687-2026 Facsimile: (213) 687-2085 Kamel Ghurani Operations Manager Telephone: (213) 687-2065 Facsimile: (213) 687-2085 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): 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/Director Telephone: (213) 687-2053 Facsimile: (213) 687-2061 UNION BANK OF CALIFORNIA, N.A. - ------------------------------ Domestic and Eurodollar Lending Office and Notices: Union Bank of California, N.A. 550 S. Hope Street, 3rd Floor Los Angeles, California 90071 Attention: Hisako Sakamoto/Amelita Akin Telephone: (213) 243-3522 Facsimile: (213) 629-0147 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Union Bank of California, N.A. 550 S. Hope Street, 3rd Floor Los Angeles, California 90071 Attention: Scott M. Lane Vice President Telephone: (213) 243-3512 Facsimile: (213) 243-3552 -5- 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: Mitchell Ozawa Vice President Telephone: (213) 688-6416 Facsimile: (213) 488-9602 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Banque Nationale de Paris 725 South Figueroa Street, Suite 2090 Los Angeles, CA 90017 Attention: Mitchell Ozawa Vice President Telephone: (213) 688-6416 Facsimile: (213) 488-9602 DRESDNER BANK AG, New York Branch and - ------------------------------------- Grand Cayman Branch - --------------------- Domestic and Eurodollar Lending Office and Notices: Dresdner Bank Aktiengesellschaft New York Branch 75 Wall Street New York, New York 10005-2889 Attention: Feixiao Dai Credit Services Telephone: (212) 574-0269 Facsimile: (212) 574-0130 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Dresdner Bank Los Angeles Agency 333 S. Grand Avenue, Suite 1700 Los Angeles, CA 90017 Attention: Jon M. Bland Senior Vice President Telephone: (213) 473-5410 Facsimile: (213) 473-5450 -6- ISTITUTO BANCARIO SAN PAOLO DI TORINO SPA - ----------------------------------------- Domestic and Eurodollar Lending Office and Notices: Istituto Bancario San Paolo di Torino SpA New York Branch, 35th Floor 245 Park Avenue New York, New York 10167 Attention: Alessandro Garelli Telephone: (212) 692-3170 Facsimile: (212) 599-5303 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Istituto Bancario San Paolo di Torino SpA 444 S. Flower Street, Suite 4550 Los Angeles, California 90071 Attention: Don Brown CFA/FVP/General Manager Telephone: (213) 489-3105 Facsimile: (213) 622-2514 MANUFACTURERS & TRADERS TRUST CO. - --------------------------------- Domestic and Eurodollar Lending Office and Notices: Manufacturers & Traders Trust Co. One Fountain Plaza, 12th Floor Buffalo, New York 14203-1495 Attention: Patricia J. Gustina Telephone: (716) 848-7357 Facsimile: (716) 848-7318 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Manufacturers & Traders Trust Co. One Fountain Plaza, 12th Floor Buffalo, New York 14203-1495 Attention: Geoffrey R. Fenn Vice President Telephone: (716) 848-7335 Facsimile: (716) 848-7318 -7- THE INDUSTRIAL BANK OF JAPAN, LIMITED - ------------------------------------- Los Angeles Agency - ------------------ Domestic and Eurodollar Lending Office: The Industrial Bank of Japan, Limited Los Angeles Agency 350 South Grand, Suite 1500 Los Angeles, CA 90071 Attention: Lynn Santos/Sue Tam Officer Telephone: (213) 893-6345/6498 Facsimile: (213) 688-7486 Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): The Industrial Bank of Japan, Limited Los Angeles Agency 350 South Grand Avenue, Suite 1500 Los Angeles, CA 90071 Attention: Blake Seaton Vice President Telephone: (213) 893-6448 Facsimile: (213) 488-9840 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 Securities Markets, Inc. 725 South Figueroa Street, 5th Floor Los Angeles, CA 90017 Attention: Deborah Ironson Telephone: (213) 239-1424 Facsimile: (213) 623-3592 -8- EX-99.1 3 TRANSFER AND ADMINISTRATION AGREEMENT EXHIBIT 99.1 ________________________________________________________________________________ TRANSFER AND ADMINISTRATION AGREEMENT by and among MATTEL FACTORING, INC., as 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 11, 1997 Arranged By NationsBanc Capital Markets, Inc. ________________________________________________________________________________ TABLE OF CONTENTS -----------------
PAGE ---- ARTICLE I DEFINITIONS.............................................................................. 1 1.1. Certain Defined Terms............................................................ 1 1.2. Other Terms...................................................................... 16 1.3. Computation of Time Periods...................................................... 16 ARTICLE II PURCHASES AND SETTLEMENTS................................................................ 18 2.1. Facility......................................................................... 17 2.2. Transfers........................................................................ 18 2.3. Discount, Fees and Other Costs and Expenses...................................... 20 2.4. Settlement Procedures............................................................ 21 2.5. Protection of Ownership Interest of the Banks.................................... 22 2.6. Deemed Collections; Application of Payments...................................... 23 2.7. Payments and Computations, Etc................................................... 24 2.8. Reports.......................................................................... 24 2.9. Collection Account............................................................... 25 2.10. Deficiency Advances.............................................................. 26 2.11. Adjustment of Facility Limit..................................................... 27 2.12. Inability to Determine LIBOR..................................................... 27 2.13. Transfer of Existing Receivables; Termination of Prior Agreement................. 28 ARTICLE III REPRESENTATIONS AND WARRANTIES........................................................... 29 3.1. Representations and Warranties of the Transferor................................. 29 3.2. Representations and Warranties of Mattel, Inc.................................... 34 3.3. Reaffirmation of Representations and Warranties.................................. 38 ARTICLE IV CONDITIONS PRECEDENT..................................................................... 39 4.1. Conditions to Closing............................................................ 39 ARTICLE V COVENANTS................................................................................ 42 5.1. Affirmative Covenants of the Transferor.......................................... 42 5.2. Negative Covenants of the Transferor............................................. 44 5.3. Affirmative Covenants of Mattel, Inc............................................. 45
i
PAGE ---- ARTICLE VI ADMINISTRATION AND COLLECTIONS........................................................... 50 6.1. Appointment of Servicer.......................................................... 50 6.2. Duties of Servicer and Agent..................................................... 50 6.3. Rights After Designation of New Servicer......................................... 52 6.4. Responsibilities of the Transferor............................................... 52 ARTICLE VII SERVICER DEFAULT AND TERMINATION EVENTS.................................................. 54 7.1. Servicer Default................................................................. 54 7.2. Servicer Default Remedies........................................................ 54 7.3. Termination Events............................................................... 55 7.4. Termination Event Remedies....................................................... 56 7.5. Potential Termination Event Remedies............................................. 57 ARTICLE VIII INDEMNIFICATION; EXPENSES; RELATED MATTERS............................................... 58 8.1. Indemnities by the Transferor.................................................... 58 8.2. Indemnity for Taxes, Reserves and Expenses....................................... 59 8.3. Other Costs, Expenses and Related Matters........................................ 61 8.4. Reconveyance Under Certain Circumstances......................................... 62 ARTICLE IX THE AGENT................................................................................ 63 9.1. Appointment...................................................................... 63 9.2. Attorneys-in-fact................................................................ 63 9.3. Limitation on Liability.......................................................... 63 9.4. Reliance......................................................................... 64 9.5. Notice of Termination Event...................................................... 64 9.6. No Representations............................................................... 65 9.7. Indemnification.................................................................. 65 9.8. Bank............................................................................. 66 9.9. Resignation...................................................................... 66 9.10. Sharing of Payments, etc......................................................... 67 9.11. Independent Agreements........................................................... 68 ARTICLE X GUARANTY................................................................................. 69 10.1. Guaranty of Obligations......................................................... 69 10.2. Guaranty Continuing............................................................. 69 10.3. Guarantor Directly Liable....................................................... 69 10.4. No Impairment................................................................... 70 10.5. Waiver.......................................................................... 71 10.6. Subrogation..................................................................... 72 10.7. Information..................................................................... 72 10.8. Evidence of Obligations......................................................... 73
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PAGE ---- ARTICLE XI MISCELLANEOUS............................................................................ 74 11.1. Term of Agreement............................................................... 74 11.2. Waivers; Amendments............................................................. 74 11.3. Notices......................................................................... 75 11.4. Governing Law; Integration...................................................... 76 11.5. Severability; Counterparts...................................................... 76 11.6. Successors and Assigns.......................................................... 76 11.7. Confidentiality................................................................. 77 11.8. Characterization of the Transactions Contemplated by the Agreement.............. 78 11.9. Assignments; Participations..................................................... 78
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 Transferor EXHIBIT F Location of Chief Executive Office and 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 Transferor EXHIBIT J Form of Opinion of Counsel for the Guarantor/Servicer iv TRANSFER AND ADMINISTRATION AGREEMENT TRANSFER AND ADMINISTRATION AGREEMENT (this "Agreement"), dated as of --------- March 11, 1997, by and among MATTEL FACTORING, INC., a Delaware corporation, as transferor (the "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 Transferor 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. "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 Transferor 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 2 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 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. 3 "Closing Date" means March 13, 1997. ------------ "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 -------------------------- Transferor 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 7.0 bps - -------------------------------------------------------------------------------- A/A2/A or higher 8.0 bps - -------------------------------------------------------------------------------- A-/A3/A- 10.0 bps ================================================================================
The Commitment Commission Rate as of the Closing Date is 8.0 basis points. Upon a rating change, the Agent shall determine the applicable Commitment Commission Rate and shall promptly notify the Banks and the Transferor 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 Transferor on each Remittance Date on the difference between the average Facility Limit and the average Total Outstanding Investment on each day for the one-year period preceding such date. 4 "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 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 Seller 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 5 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 First Amended and Restated Credit ---------------- Agreement, dated as of March 11, 1997, 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 the Transferor's credit and ---------------------------- collection policies and practices relating to Contracts and Receivables with respect to the 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 Transferor or the Servicer as uncollectible; or (iv) which, consistent with the Credit and Collection Policy, should be written off the 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 6 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; (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; 7 (viii) which satisfies all applicable requirements of the Credit and Collection Policy; (ix) the remaining term of which at the time of transfer hereunder does not extend beyond the next succeeding Remittance Date; and (x) which was generated in the ordinary course of the related Seller's business and purchased by the Transferor from such Seller in accordance with the Purchase Agreement. "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. "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 8 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 $400,000,000, 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 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. 9 "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. "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 --------------------- Transferor, the Guarantor and the Banks pursuant to Section 7.4. "Obligations" has the meaning set forth in Section 10.1. ----------- 10 "Obligor" means Toys "R" Us, Inc., a Delaware corporation. ------- "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 Spread S&P/Moody's/Duff - -------------------------------------------------------------------------------- AA-/Aa3/AA-or higher 18.0 bps - -------------------------------------------------------------------------------- A/A2/A or higher 22.0 bps - -------------------------------------------------------------------------------- A-/A3/A- 25.0 bps ================================================================================
Such spread as of the Closing Date is 22 basis points. Upon a rating change, the Agent shall determine the applicable spread and shall promptly notify the Banks and the Transferor 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 11 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 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. 12 "Prior Agreement" has the meaning set forth in Section 2.13. --------------- "Prior Banks" means each of the "Banks" other than The Industrial Bank ----------- of Japan, Limited. "Proceeds" means "proceeds" as defined in Section 9.306(1) of the UCC. -------- "Purchase Agreement" means the Receivable Purchase Agreement, dated as ------------------ of March 11, 1997 among each Seller, as seller, and the Transferor, as buyer, as such agreement may be amended and supplemented from time to time. "Receivable" means the indebtedness denominated in United States ---------- dollars to a Seller by the Obligor (without giving effect to any purchase by the Transferor under the Purchase Agreement or 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; "Receivable" shall include the indebtedness of the Obligor denominated in United States dollars to Mattel Sales Corp. and Fisher-Price, Inc. sold to NationsBank of Texas, N.A., as agent, on behalf of certain financial institutions, pursuant to the Second Amended and Restated Transfer and Administration Agreement dated as of March 10, 1995, as amended from time to time, and assigned by NationsBank of Texas, N.A., as agent on behalf of such financial institutions, to the Agent, on behalf of the Banks, pursuant to Section 2.13 hereof. 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 13 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. "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 17, 1997, December 17, 1998, December --------------- 17, 1999, December 17, 2000 and December 17, 2001, 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. --- "Seller" means each of Mattel Sales Corp., a California corporation, ------ and Fisher-Price, Inc., a Delaware corporation, and their successors and assigns under the Purchase Agreement. "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. ---------------- "Servicer's Certificate" means a report prepared on a monthly basis ---------------------- and prior to a Transfer by the Servicer in the form attached hereto as Exhibit B and delivered to the Agent in accordance with Section 2.8. "Subsidiary" means any corporation, association or other business ---------- entity of which more than 50% of the 14 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, 2001, unless ---------------- such date is otherwise extended, or (ii) the date on which the Agent delivers a Notice of Termination to the Transferor. "Termination Event" means an event described in Section 7.3. ----------------- "Total Outstanding Investment" means the sum of the Transfer Prices ---------------------------- paid to the Transferor for all Transfers plus the amount paid to the Prior ---- Banks on the Closing Date as described in Section 2.13 less any amounts released ---- from the Collection Account by the Agent pursuant to Section 2.9(b) to fund all or a portion of any such amounts paid to the Transferor 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 the -------- Transferor to the Agent, on behalf of the Banks, of an undivided percentage ownership interest in Receivables hereunder or the conveyance, transfer and assignment by the "Agent", under and as defined in the Prior Agreement, to the Agent, on behalf of the Banks, of 15 its interest in certain indebtedness of the Obligor as described in Section 2.13. "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 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 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. "Written Agreement" means the agreement between the Obligor and the ----------------- Transferor 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 16 including" and the words "to" and "until" each means "to but excluding." 17 ARTICLE II PURCHASES AND SETTLEMENTS SECTION 2.1. Facility. Upon the terms and subject to the conditions -------- herein set forth, the 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 the 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, the 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 the 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 week, and no Transfer shall be made by the Transferor between two Business Days prior to any Remittance Date and the next succeeding December 27. The 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"), and the --------------- Transferor shall, at the time of delivery of the Transfer Notice, cause the Servicer to prepare and deliver to the Agent a Servicer's Certificate covering the period from the last day specified in the most recent Servicer's Certificate delivered to the Agent to and including the day prior to the date of delivery of the related Transfer Notice. Each Transfer Notice shall specify (i) the Transfer Price based on an estimated Participation Rate, 18 (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 to such Transfer. After giving effect to such Transfer, the Total Outstanding Investment plus the Discount Reserve shall not be greater than 90% 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 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 the 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 90% 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 a duly authorized officer of the Transferor. 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: Corporate Credit Services, Account No. 1292000883, Ref. Mattel Factoring, no later than 2:00 p.m., Dallas, Texas time on the date of such Transfer. The Agent shall make available to the Transferor on the date of such Transfer 19 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 Transferor at Bank of America National Trust and Savings Association (ABA No. 121000358, Account No. 1235906117, reference: Mattel Factoring Receivables); provided that, upon prior written notice to the -------- Agent, the Transferor may at any time direct the Agent to credit such amounts to another account of the Transferor; provided further that the Transfer Price payable on the Closing Date shall be remitted to the "Agent" (under and as defined in the Prior Agreement) in consideration for the assignment by the Prior Banks to the Agent, on behalf of the Banks, of the "Transferred Interest" and the "Total Outstanding Investment" existing under the Prior Agreement as of the Closing Date. Each Transfer Notice shall be irrevocable and binding on the Transferor, and the Transferor 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 Transferor 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. 20 (b) Notwithstanding any limitation on recourse contained in this Agreement, Mattel, Inc. and the Transferor, 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 Transferor shall pay the Commitment Fee; and (ii) the Transferor shall pay to the Agent the fee referenced in that certain letter agreement, dated February 4, 1997, between Mattel, Inc. and the Agent. (c) Nothing in this Agreement shall limit in any way the obligations of the Transferor 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 the Transferor 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 21 applicable Transferor any interest in the Receivables (including the Transferred Interest), (iii) the Agent shall release to the 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 the 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 Transferor. SECTION 2.5. Protection of Ownership Interest of the Banks. The --------------------------------------------- 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, the 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. The 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 Transferor's signature. Carbon, photographic or other reproduction of this Agreement or any financing statement shall be sufficient as a financing statement. The Transferor shall not 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 the 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 22 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 Transferor. As of the date hereof, the Transferor has instructed the Obligor to cause all Collections to be deposited directly into the Collection Account, and the Transferor shall not change such arrangement unless the Agent shall have given its prior written consent thereto. If the Transferor receives any Collections or is deemed to receive any Collections pursuant to Section 2.6, the 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 either Seller or the 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 Servicer's Certificate evidencing that the aggregate outstanding balance of Eligible Receivables is at least 111% of the Total Outstanding Investment and the Discount Reserve or (ii) the 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 the Transferor any interest in such Receivables (including the Transferred Interest therein). The Agent agrees that it shall execute and return to the Transferor such documents or instruments as are reasonably requested by the 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 the 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 Transferor shall cure the breach of the applicable representation or warranty or (ii) the Servicer shall deliver a Servicer's Certificate evidencing that the aggregate outstanding balance of Eligible Receivables (not including the aggre- 23 gate outstanding balance of the Receivables subject to any such breach of a representation or warranty) is at least 111% of the Total Outstanding Investment and the Discount Reserve or (iii) the 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 recon veyed to such Transferor any interest in such Receivables (including the Transferred Interest therein). The Agent agrees that it shall execute and return to the Transferor such documents or instruments as are reasonably requested by the 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 the Transferor. SECTION 2.7. Payments and Computations, Etc. All amounts to be paid ------------------------------ or deposited by the Transferor 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 Transferor 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 Transferor 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 24 on the date hereof, and on the first Monday of each calendar month (or, if such day is not a Business Day, the next succeeding Business Day) the Servicer shall prepare and forward to the Agent a Servicer's Certificate covering a period from the later to occur of (A) the first day of the preceding calendar month and (B) the date on which the last such Servicer's Certificate was delivered in connection with a Transfer pursuant to Section 2.2, through and including the last day of the preceding calendar month, and (ii) such other information as the Agent may reasonably request. On the second Business Day prior to each Remittance Date, the Transferor shall provide the Agent and each Bank with a certificate detailing the amount of Collections expected as of that Remittance 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 Transferor 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 Transferor 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 Re- 25 ceivables are to be applied pursuant to clause (x) above, the Transferor 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 Transferor) 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, the Transferor agrees to reimburse each Bank and to hold each Bank 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 the Transferor of a Deficiency Advance from the Agent shall in no way limit the rights of the Transferor against the Bank failing to fund its 26 pro rata portion (based on its Percentage) of the Transfer Price of any - --- ---- Transfer hereunder. SECTION 2.11. Adjustment of Facility Limit. (a) The Transferor ---------------------------- 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 Transferor 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. 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 Transferor's 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 Transferor 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 27 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 Transferor 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. SECTION 2.13. Transfer of Existing Receiv ables; Termination of Prior ------------------------------------------------------- Agreement. Prior to the date hereof, Mattel Sales Corp. and Fisher-Price, Inc. - --------- transferred to NationsBank of Texas, N.A., as agent for certain financial institutions, an undivided interest in certain indebtedness of the Obligor denominated in United States dollars to Mattel Sales Corp. and Fisher-Price, Inc. Such transfer occurred pursuant to the terms of that certain Second Amended and Restated Transfer and Administration Agreement dated as of March 10, 1995, as amended from time to time (the "Prior Agreement"). NationsBank of --------------- Texas, N.A. as agent under the Prior Agreement, and each of the Prior Banks hereby, effective as of the Closing Date, convey, transfer and assign to the Agent, for the benefit of the Banks, all of its right, title and interest in the "Transferred Interest" and the "Total Outstanding Investment" each as defined and existing under the Prior Agreement as of the Closing Date. The Transferor hereby assumes all Mattel Sales Corp.'s and Fisher-Price, Inc.'s obligations with respect to such "Total Outstanding Investment" and agrees that the amount paid by the Banks on the Closing Date to the Agent under and as defined in the Prior Agreement shall constitute part of the Total Outstanding Investment hereunder. Each of the Prior Banks hereby consent to the termination of the Prior Agreement and authorize and direct NationsBank of Texas, N.A., as agent under the Prior Agreement, to (i) take any action necessary or reasonably requested by Mattel Sales Corp. and Fisher-Price, Inc. to terminate the Prior Agreement (except those provisions thereof which expressly survive any termination thereof) and (ii) assign to the Agent any and all Uniform Commercial Code financing statements which may have been filed in its favor in connection with the Prior Agreement. 28 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1. Representations and Warranties of the Transferor. The ------------------------------------------------ Transferor hereby represents and warrants to each of the Banks that: (a) Perfection. Immediately preceding each Transfer hereunder, ---------- the 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 the Transferor or a Seller 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 the 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 the 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 Transferor is located at the address of the Transferor indicated on Exhibit F hereto, and the offices where the Transferor keeps its Records are located at the addresses of the 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 Transferor to remit all payments in respect of such Receivable directly to the Collection Account administered by the Agent. 29 (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) the ---------------- Transferor has no subsidiaries or divisions; and (ii) the Transferor has not, 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. The 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 the Purchase Agreement and to carry out the transactions contemplated hereby and thereby. (i) Good Standing. The 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 and the Purchase Agreement have been duly authorized by all necessary corporate action by the Transferor. 30 (k) No Conflict. The execution, delivery and performance by the ----------- Transferor of this Agreement and the Purchase Agreement do not and will not (a) violate the Certificate of Incorporation or Bylaws of the Transferor, (b) violate any provision of law applicable to the Transferor, or any material order, judgment or decree of any court or other agency of government binding on the 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 the 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 the Transferor. (l) Governmental Consents. The execution, delivery and --------------------- performance by the Transferor of this Agreement and the Purchase Agreement, and each agreement, document, or instrument required hereunder and thereunder 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 Transferor, 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, 1995 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 the Transferor) at law or in equity or before or by any Federal, state, municipal or other governmental department, commission, board, bureau, 31 agency or instrumentality, domestic or foreign, pending or, to the knowledge of the Transferor, threatened against or affecting the Transferor or any of its properties which, in the reasonable judgment of the Transferor and its executive officers (assuming adverse determination of facts which the 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. The Transferor is not (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 Transferor, threatened against or affecting the Transferor which provides a reasonable basis for questioning the validity or the enforceability of this Agreement or the Purchase Agreement. (p) Payment of Taxes. All tax returns and reports of the ---------------- Transferor required to be filed by any of them have been timely filed, and all taxes, assessments, fees and other governmental charges upon the Transferor and upon its 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. The Transferor does not know of any proposed tax assessment against it that would result in a Material Adverse Effect. (q) Agreements. The Transferor is not 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. (r) Performance. The Transferor is not in default in the ----------- performance, observance or fulfillment 32 of any of the obligations, covenants or conditions contained in any Contractual Obligation of the 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. The Transferor is not 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. The 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 the Transferor 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. (u) Disclosure. No representation or warranty of the Transferor ---------- contained in this Agreement or any other document, certificate or written statement furnished to the Banks by the Transferor since January 1, 1997 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. The Transferor 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 Transferor 33 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, 1997, 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 material lien, security interest, charge or encumbrance of any nature whatsoever upon any of its material proper- 34 ties 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, 1995 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. (i) Changes, Etc. Since December 31, 1995 there has been no ------------ event or events that have, either individually or in the aggregate, resulted in a Material Adverse Effect. 35 (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, 1995 and, except for immaterial defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. (k) Litigation; Adverse Facts. Other than with respect to the ------------------------- matters set forth on Exhibit H hereto, 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, Inc. or any of its Subsidiaries which provides a reasonable basis for questioning the validity or the enforceability of this Agreement. 36 (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 thereunder 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 37 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, 1997 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 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. 38 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 Transferor 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. attaching copies of the Restated Certificate of Incorporation, by-laws and incumbency signatures of Mattel, Inc., 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; (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) a Certificate of the Secretary of the Transferor attaching copies of the Certificate of Incorporation, by-laws and incumbency signatures of the 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; (d) good standing certificate of the Transferor from the Secretary of State of Delaware 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 39 interest of the Agent, on behalf of the Banks, in all Receivables related to the Transferor; (f) proper financing statements (Form UCC-1) naming each Seller as the debtor/transferor and the Transferor, as purchaser and the Agent, as agent on behalf of the Banks, as assignee 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 Transferor, in all Receivables related to each Seller; (g) 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 Transferor and each Seller (under their present names and any previous names) as Debtor and which are filed in jurisdictions in which the filings were made pursuant to items (e) and (f) above together with copies of such financing statements (none of which shall cover any Receivables or Contracts); (h) a favorable opinion of Leland P. Smith, counsel for the Sellers and the Transferor, in substantially the form of Exhibit I hereto and as to such other matters as the Agent may reasonably request; (i) a favorable opinion of Leland P. Smith, counsel for the Guarantor, in substantially the form of Exhibit J hereto and as to such other matters as the Agent may reasonably request; (j) a favorable opinion of Latham & Watkins, special counsel for the Transferor, as to such matters as the Agent may reasonably request; (k) an executed copy of the Written Agreement; (l) an executed copy of the Purchase Agreement; and (m) original copies of each document or instrument required to be delivered by each Seller as a 40 condition precedent to the effectiveness of the Purchase Agreement. 41 ARTICLE V COVENANTS SECTION 5.1. Affirmative Covenants of the Transferor. At all times --------------------------------------- for the term of this Agreement, unless the Requisite Banks shall otherwise consent in writing: (a) Conduct of Business. The 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. The 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. The --------------------------------------------------- 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. The 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 the Transferor for the purpose of examining such Records, and to discuss matters relating to the Receivables or the Transferor's performance hereunder with any of the officers, directors, employees, agents or independent public accountants of the Transferor having knowledge of such matters. (d) Keeping of Records and Books of Account. The Transferor --------------------------------------- will maintain and implement administrative and operating procedures (including, 42 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). The 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. --------------------------------------------------------- The 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. The 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. The 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 the --------- 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, the 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 Transferor of the initial Transfer Notice of each 43 calendar year, the Transferor shall provide the Agent and the Banks with a copy of a Written Agreement in the form of Exhibit A hereto, duly executed by the Transferor and the Obligor and appropriately revised to reflect the Remittance Date of such calendar year. (j) Environmental Laws. The 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. (k) UCC Matters. The Transferor shall deliver to the Agent not ----------- later than the tenth Business Day following the Closing Date (i) certified copies of request for information or copies (Form UCC-11) (or a similar search report certified by parties acceptable to the Agent) dated a date reasonably near the Closing Date listing all effective financing statements which name Fisher-Price, Inc. (under its present name and any previous names) and FPI, Inc. as Debtor and which are on file with the Secretary of State of the State of New York (in the case of Fisher-Price, Inc. such search may cover only calendar year 1995) together with copies of such financing statements (none of which shall cover any Receivables or Contracts) and (ii) an opinion letter of Latham & Watkins, special counsel for the Transferor, in form and substance acceptable to the Agent substantially to the effect that such searches do not evidence a security interest in the Receivables which is prior to the security interest granted by Fisher-Price, Inc. in favor of the Transferor under the Purchase Agreement) (which letter may take the form of a letter deleting or otherwise modifying the opinion letter delivered by such firm on the Closing Date). SECTION 5.2. Negative Covenants of the Transferor. 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, -------------------- the Transferor will not 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 fi- 44 nancing 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. The Transferor ------------------------------------- will not itself extend the term of any Receivable beyond the Remittance Date next succeeding the date such Receivable was created, nor will the Transferor agree to any such extension by a Seller pursuant to the Purchase Agreement. The Transferor will not 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, nor will the Transferor permit any such amendment, modification or waiver by a Seller pursuant to the Purchase Agreement. (c) No Change in Business or Credit and Collection Policy. The ----------------------------------------------------- Transferor will not 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, nor will the Transferor permit a Seller to make any such change pursuant to the Purchase Agreement without the prior written consent of the Agent at the written direction of the Requisite Banks. (d) No Modification of Written Agreement. The Transferor will ------------------------------------ not amend, supplement, alter or otherwise modify the Written Agreement, nor will the Transferor permit a Seller to amend, supplement, alter or otherwise modify the Written Agreement pursuant to the Purchase Agreement. (e) No Modification of Purchase Agreement. The Transferor will ------------------------------------- not agree to any amendment, supplement, waiver, alteration or other modification of the Purchase Agreement which may have a material adverse effect on the Agent's right, title and interest in the Receivables or which may have a material adverse effect on the collectability of the Receivables. 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: 45 (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 Transferor) 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 thereon 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 Subsid- 46 iaries 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 jurisdiction in which its business is presently conducted. (c) Compliance with Governmental Rule. Mattel, Inc. will --------------------------------- comply with all Governmental Rules, 47 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 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. 48 has taken, is taking and proposes to take with respect thereto. 49 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 Transferor 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 sold by it to the Transferor under the Purchase Agreement. 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 Transferor, 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 Transferor nor the Servicer may extend the maturity of any Receivable beyond the Remittance Date next succeeding the date of creation of such Receivable. The Transferor shall deliver to the Servicer, and the Servicer shall hold in trust for the Transferor and the Agent in accordance with their respective interests, all Records which evidence or relate to 50 any Receivables. Notwithstanding 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 Transferor's name and on behalf of the 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 the 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 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 Transferor) to furnish a report to the Agent to the effect that they have (i) compared the information contained in the Transfer Notices and the Servicer's Certificates 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 Servicer's Certificates 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 Servicer's Certificates, 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 51 (which exceptions need not be 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) The Transferor shall, at the Agent's request and at the 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) The 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) The Transferor hereby authorizes the Agent to take any and all reasonable steps in such Transferor's name and on behalf of the Transferor necessary or desirable, in the determination of the Agent, to collect all amounts due under any and all Receivables including, without limitation, endorsing the Transferor's name on checks and other instruments representing Collections and enforcing such Receivables and the Written Agreement. SECTION 6.4. Responsibilities of the Transferor. Anything herein to ---------------------------------- the contrary notwithstanding, the 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 52 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 Transferor thereunder. 53 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 Transferor, terminate the Servicer's rights as Servicer hereunder and appoint a successor Servicer (which successor Servicer may be itself). 54 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 the 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 the Transferor, either Seller 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 the Transferor or the Guarantor; or (e) the Transferor shall fail to have a valid and perfected first priority ownership interest in and to the Receivables or 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) the Transferor or the Guarantor shall merge with or into any entity whereby it is not the surviving entity; provided that the merger of the -------- 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 the Transferor or the Guarantor, or any other event which materially affects the ability of the Transferor or the Guarantor to perform its obligations hereunder; or (h) at any time the Percentage Factor exceeds 90% unless the Transferor, within ten (10) days of such occurrence, either (i) deposits into the Collection Account an amount equal to the amount by which the Total Outstanding Investment plus the Discount Reserve exceeds 90% of the aggregate ---- outstanding balance of 55 Eligible Receivables or (ii) otherwise reduces the Percentage Factor to less than or equal to 90%; or (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 Transferor 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 Transferor, 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 Transferor. 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. 56 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 Transferor, terminate the commitment of the Banks to purchase undivided interests in the Receivables from the Transferor. 57 ARTICLE VIII INDEMNIFICATION; EXPENSES; RELATED MATTERS SECTION 8.1. Indemnities by the Transferor. Without limiting any ----------------------------- other rights which the Agent or the Banks may have hereunder or under applicable Governmental Rule, the 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, 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. Without limiting the generality of the foregoing, the Transferor shall indemnify each Indemnified Party for Indemnified Amounts relating to or resulting from: (i) reliance on any material representation or warranty made by the Transferor or Mattel, Inc. (or any officers of the Transferor or Mattel, Inc.) under or in connection with this Agreement, any Transfer Notice, Servicer's Certificate or any other information or report delivered by the 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 the 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 (iii) the failure to vest and maintain vested in the Agent, on behalf of the Banks, an 58 undivided percentage ownership interest, to the extent of the Transferred Interest, in the Receivables included in such Transferred Interest, free and clear of any Adverse Claim; or (iv) the failure to file by the Transferor, or any delay in filing by the 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; 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 (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 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): 59 (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 Indemnified 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 60 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 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. SECTION 8.3. Other Costs, Expenses and Related Matters. The ----------------------------------------- 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 61 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) 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 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. The ---------------------------------------- Transferor agrees to accept the reconveyance from the Agent, on behalf of the Banks, of the Transferred Interest if the Agent notifies the Transferor of a material breach of any representation or warranty made or deemed made pursuant to Article III of this Agreement, and the 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 the 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). 62 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 Transferor, 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 Transferor, the Servicer or the Guarantor to perform their obligations thereunder. The Agent 63 shall not be under any obligation to any of the Banks to 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 Transferor, the Servicer or the Guarantor or to inspect the properties, books or records of the Transferor, 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 Transferor, 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, the 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 64 exercised pursuant to Section 7.4 of this 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 Transferor 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 Transferor 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 Transferor 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 Transferor or the Guarantor 65 and without limiting any obligations of the Transferor 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 Transferor 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 66 succeeded of record to all right, title and interest of 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 indebted- 67 ness of a foreign subsidiary. If all or any portion of 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 Transferor and the Guarantor shall not be deemed parties thereto nor bound thereby. The Transferor and the Guarantor do acknowledge the rights of the Banks and the Agent under Section 9.8. 68 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 Transferor hereunder owing to the Agent and the Banks. The phrase "payment and performance obligations of the Transferor" (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 Transferor, 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 Transferor to the Agent and/or the Banks, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, whether the Transferor 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 Transferor 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 Transferor, 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 69 the Transferor or whether the 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 the 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 the 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 70 (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 Transferor 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 Transferor 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 Transferor for reimbursement, or any other rights of the Guarantor to proceed against the 71 Transferor, 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 Transferor, 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 Transferor 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 Transferor 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 Transferor and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of 72 nonpayment of the Obligations. The Guarantor hereby covenants that it will continue to keep itself informed of the financial condition of the Transferor 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. 73 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 the 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 Transferor, the Servicer or the Guarantor in any case shall entitle the Transferor, 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 Transferor, 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 Transferor, 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. 74 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 Transferor: Mattel Factoring, Inc. 2043 East Mariposa M.S. 24-199 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. Marie Lancaster Telephone: (214) 508-2158 Telecopy: (214) 508-2515 If to either Seller, to its address set forth in the Purchase Agreement. If to the Banks, to their addresses set forth on the signature pages hereto. 75 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 Transferor 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 Transferor 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 Transferor 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. SECTION 11.6. Successors and Assigns. This Agreement shall be ---------------------- binding on the parties hereto and their respective successors; provided, -------- however, that - ------- 76 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 the Guarantor, such Participant or Assignee agrees in 77 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 the 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 the Transferor shall be deemed to have granted to the Agent on behalf of the Banks, and the Transferor hereby grants to the Agent, on behalf of the Banks, a first priority perfected security interest in all of the 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 Transferor at all times other than during the existence of a Termination Event and the Agent, which consent of the Transferor shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees (provided that no consent of the Transferor 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 Transferor 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 Transferor and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee shall have delivered to the Transferor and the Agent an executed assignment together with any note or notes subject to such assignment and (iii) the assignor 78 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 Transferor, 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 Transferor 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 participation, the Participant shall not have any rights under this Agreement, or any docu- 79 ments related hereto, and all amounts payable by the Transferor 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. 80 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written. MATTEL FACTORING, INC., as Transferor By: /s/ William Stavro ------------------------ Name: William Stavro Title: Senior Vice President and Treasurer MATTEL, INC., as Guarantor and Servicer By: /s/ William Stavro ------------------------ Name: William Stavro Title: Senior Vice President and Treasurer NATIONSBANK OF TEXAS, N.A., as Agent By: _______________________ Name: Title: IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written. MATTEL FACTORING, INC., as Transferor By: ________________________ Name: William Stavro Title: Senior Vice President and Treasurer MATTEL, INC., as Guarantor and Servicer By: ________________________ Name: William Stavro Title: Senior Vice President and Treasurer NATIONSBANK OF TEXAS, N.A., as Agent By: /s/ Charles F. Lilygren ------------------------ Name: Charles F. Lilygren Title: Vice President
Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - --------------- -------------- 9.000000000 36,000,000 NATIONSBANK OF TEXAS N.A. By: /s/ Charles F. Lilygren ------------------------- Name: Charles F. Lilygren Title: Vice President
Notice Address: 444 S. Flower Street, Suite 4100 Los Angeles, California 90071 Attn: Charles F. Lilygren
Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - --------------- ------------- 12.000000000 48,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ Robert W. Troutman ----------------------- Name: Robert W. Troutman Title: Managing Director
Notice Address: 555 South Flower Street, 11th Floor Credit Products #5618 Los Angeles, California 90071 Attn: Robert W. Troutman
Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - --------------- ------------- 9.000000000 36,000,000 THE CHASE MANHATTAN BANK By: /s/ Mary E. Cameron --------------------- Name: Mary E. Cameron Title: Vice President
Notice Address: Corporate Banking Group 270 Park Avenue, 9th Floor New York, New York 10017 Attn: Mary E. Cameron
Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - --------------- ------------- 7.500000000 30,000,000 ABN AMRO BANK N.V. Los Angeles International Branch By: /s/ Matthew S. Thomson ------------------------ Name: Matthew S. Thomson Title: Vice President By: /s/ Paul K. Stimfle ----------------------- Name: Paul K. Stimfle Title: Vice President
Notice Address: Los Angeles International Branch 300 South Grand Avenue, Suite 1115 Los Angeles, California 90071 Attn: Matthew S. Thomson
Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - --------------- -------------- 7.500000000 30,000,000 THE FIRST NATIONAL BANK OF BOSTON By: /s/ Debra Zurka ----------------------- Name: Debra Zurka Title: Vice President
Notice Address: 100 Federal Street MAIL STOP 01-09-05 Boston, Massachusetts 02110 Attn: Debra Zurka
Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - --------------- ------------- 7.500000000 30,000,000 PNC BANK, NATIONAL ASSOCIATION By: /s/ Beth Filipponi ---------------------- Name: Beth Filipponi Title: Corporate Banking Officer
Notice Address: 249 Fifth Avenue 1 PNC Plaza Second Floor Pittsburgh, Pennsylvania 15222 Attn: David J. Egan Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- ------------- 7.500000000 30,000,000 TORONTO DOMINION (TEXAS), INC. By: /s/ Darlene Riedel ------------------- Name: DARLENE RIEDEL Title: VICE PRESIDENT Notice Address: 909 Fannin Houston, Texas 77010 Attn: Manager, Credit Administration Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- ------------- 5.000000000 20,000,000 BANQUE NATIONALE DE PARIS By: /s/ Clive Bettles ------------------ Name: Clive Bettles Title: Senior Vice President and Manager By: /s/ Mitchell M. Ozawa ---------------------- Name: Mitchell M. Ozawa Title: Vice President Notice Addresses: 725 South Figueroa Street Suite 2090 Los Angeles, California 90017 Attn: Mitchell M. Ozawa Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 5.000000000 20,000,000 DRESDNER BANK AG New York Branch and Grand Cayman Branch By: /s/ Thomas J. Nadramia ------------------------ Name: Thomas J. Nadramia Title: Vice President By: /s/ Denise M. Rohd ------------------------ Name: Denise M. Rohd Title: Assistant Treasurer Notice Address: 333 South Grand Avenue Suite 1700 Los Angeles, California 90071 Attn: Jon M. Bland Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- -------------- 5.000000000 20,000,000 CITICORP USA, INC. By: /s/ William M. Royer -------------------------- Name: William M. Royer Title: Attorney In Fact Notice Address: c/o Citicorp North America, Inc. 725 South Figueroa Street 5th Floor Los Angeles, California 90017 Attn: Deborah Ironson c/o Citicorp N.A. One Court Square, 7th Floor Long Island City, New York 11120 Attn: Mark Wrigley Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- ------------- 5.000000000 20,000,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ Wataru Ogawa --------------------- Name: Wataru Ogawa Title: Joint General Manager Notice Address: Los Angeles Agency 350 South Grand Avenue Suite 1500 Los Angeles, California 90071 Attn: J. Blake Seaton Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- ------------- 5.000000000 20,000,000 ISTITUTO BANCARIO SAN PAOLO DI TORINO SPA By: /s/ Robert Wurster ---------------------- Name: Robert Wurster Title: First Vice President By: /s/ William De Angelo ----------------------- Name: William De Angelo Title: First Vice President Notice Address: 444 South Flower Street Suite 4550 Los Angeles, California 90071 Attn: Donald W. Brown Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- ------------- 5.000000000 20,000,000 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 Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- ------------- 5.000000000 20,000,000 SOCIETE GENERALE By: /s/ J. Staley Stewart ------------------------- Name: J. Staley Stewart Title: Vice President Notice Address: 2029 Century Park East Suite 2900 Los Angeles, California 90067 Attn: J. Staley Stewart Vice President Dollar Amount of Percentage of Original Facility Percentage (%) Limit ($) - -------------- ------------- 5.000000000 20,000,000 UNION BANK OF CALIFORNIA, N.A. By: /s/ Scott Lane --------------------- Name: Scott Lane Title: Vice President Notice Address: 550 South Hope Street Third Floor Los Angeles, California 90071 Attn: Scott Lane EXHIBIT A [Toys "R" Us, Inc. Letterhead] [Date] Mr. William Stavro Senior Vice President and Treasurer Mattel, Inc. 333 Continental Boulevard El Segundo, CA 90245-5012 Dear Bill: With reference to the Accounts Receivable Purchase Agreement, dated as of March 11, 1997 among Mattel Sales Corp., Fisher-Price, Inc. and Mattel Factoring, Inc., it is our understanding that Mattel and Fisher-Price would like to sell from time to time their domestic accounts receivable from TOYS "R" US to Mattel Factoring, Inc. and that under the Transfer and Administration Agreement, dated as of March 11, 1997, among Mattel Factoring, Inc. NationsBank of Texas, N.A., and a syndicate of banks, it is our understanding that Mattel Factoring, Inc. would like to sell from time to time undivided interests in the 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 ninety percent (90%) 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. 1 It is our intent that the remaining ten percent (10%) 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 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 Senior Vice President and Treasurer A-2 EXHIBIT B FORM OF SERVICER'S CERTIFICATE For the Period beginning ___________, 199_ and ending ___________, 200_ The undersigned, a duly authorized representative of Mattel, Inc. as Servicer, pursuant to the Transfer and Administration Agreement, dated as of March 11, 1997 (as amended and modified from time to time, the "TAA"), among Mattel Factoring, Inc., as Transferor, 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 period.......................... $______ 2. plus Eligible Receivables generated during ---- the period...................................... $______ 3. less Close-Out Collections received during ---- the period...................................... $______ 4. less Deemed Collections during the period....... $______ ---- 5. Eligible Receivables as of the last day of the period................................... $______ 6. Total Outstanding Investment as of the last day of the period.......................... $______ 7. Discount Reserve as of the last day of the period...................................... $______ 8. Percentage Factor as of the last day of the period ([line 6 + line 7] / line 5)......... _____% 9. Average Facility Limit during the period........ $______ 10. [Eligible Receivables as of the last day of the period are equal to at least 111% of the sum of the Total Outstanding Investment and the Discount Reserve] or [The Transferor is depositing to the credit of the Collection B - 1 Account the outstanding balance of certain Receivables as 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 FACTORING, INC. (the "Transferor") hereby conveys, transfers and assigns to the Agent, on behalf of the Banks, pursuant to the terms and conditions of the Transfer and Administration Agreement, dated as of March 11, 1997 (the "TAA"), among Mattel Factoring, 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 period.............................. $______ 2. Total Outstanding Investment as of the last day of the prior period..................... $______ 3. Discount Reserve as of the last day of the prior period..................................... $______ 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 8. Estimated LIBOR related to this Tranche.......... ______% C - 1 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 90%) ([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 Transferor 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 Transferor 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 Transferor hereby grants 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 FACTORING, 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 Transferor Mattel Factoring, Inc. - ---------------------- NONE. E - 1 EXHIBIT F Location of Chief Executive Office and Records ---------------------------------------------- Chief Executive Office: Mattel Factoring, Inc. 2043 East Mariposa M.S. 24-199 El Segundo, California 90245 333 Continental Boulevard El Segundo, CA 90245 Mattel Computer Center 2424 West Desert Cove Phoenix, AZ 85029 636 Girard Avenue East Aurora, New York 14052 F - 1 EXHIBIT G List of Tradenames ------------------ Mattel Factoring, Inc. G - 1 EXHIBIT H List of Actions, Suits and Proceedings -------------------------------------- against the Guarantor --------------------- Greenwald v. Mattel, Inc. (Case No. YC 025 008) filed October 13, 1995 in - ------------------------- Superior Court of the State of California, County of Los Angeles. Lewis v. Vogelstein et. al. (Case No. 14954) filed April 23, 1996 in the - --------------------------- Delaware Court of Chancery, New Castle County. H - 1 EXHIBIT I [Letterhead of Counsel to the Transferor] March 11, 1997 NationsBank of Texas, N.A., as Agent [Address] [Bank] [Bank] Re: Transfer and Administration Agreement, dated as of March 11, 1997, among Mattel Factoring, 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 Transfer and Administration Agreement dated as of March 11, 1997 (the "Agreement") among Mattel Factoring, Inc., a Delaware corporation (the "Transferor"), Mattel, Inc., a Delaware corporation, as servicer and 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 Transferor and the Sellers in connection with the preparation of the Agreement and the Purchase Agreement and the transactions and other documents contemplated thereby. I-1 I have examined, on the date hereof, the Purchase Agreement and all exhibits thereto, the Agreement and all exhibits thereto (including the form of Transfer Notice attached thereto as Exhibit C), the form of initial Transfer Notice, [to be] dated ___________ 1997, relating to the initial transfers of Receivables (each, an "Initial Transfer Notice"), certificates of public officials and of officers of the Transferor and the Sellers and certified copies of the Transferor's and the Sellers' certificate of incorporation, by-laws, the Boards of Directors' resolutions authorizing the Transferor's and the Sellers' participation in the transactions contemplated by the Agreement and the Purchase 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[s] of California [and _______] [and _________] [refer to the local filing office(s), if applicable] (together, the "Seller Filing Offices") executed by the Sellers, as debtor, in favor of the Transferor and assigned to the Agent on behalf of the Banks, substantially in the form attached hereto as Exhibit A (the "Seller Financing Statements"), 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 "Transferor Filing Offices") executed by the Transferor, as debtor, in favor of the Agent on behalf of the Banks, substantially in the form attached hereto as Exhibit A (the "Transferor 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 Sellers and the Transferor. 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 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 I-2 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 the Transferor or its ability to perform its obligations under the Purchase Agreement and the Agreement. 2. Each Seller 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 such Seller or its ability to perform its obligations under the Purchase Agreement. 3. The Transferor has the corporate power and has taken all necessary corporate action to execute, deliver and perform the Purchase Agreement, 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 Purchase Agreement, the Agreement and the Initial Transfer Notice have been duly executed and delivered by the Transferor and constitute, and each Transfer Notice subsequently delivered by the Transferor pursuant to the Agreement, when executed and delivered by the Transferor, will constitute the legal, valid and binding obligations of the Transferor, enforceable against the 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. 4. Each Seller has the corporate power and has taken all necessary corporate action to execute, deliver and perform the Purchase Agreement in accordance with its terms, and to I-3 consummate the transactions contemplated thereby. The Purchase Agreement has been duly executed and delivered by each Seller and constitutes the legal, valid and binding obligations of each Seller, enforceable against each Seller 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. 5. The execution, delivery and performance in accordance with their terms by the Transferor of the Purchase Agreement, 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 Transferor 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 Transferor, (b) any other agreement to which the Transferor is a party or by which the Transferor or any of its properties may be bound, or (c) any applicable law, or any order, rule, or regulation applicable to the Transferor of any court or of any federal or state regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over the Transferor 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 Transferor other than as contemplated by the Agreement. 6. The execution, delivery and performance in accordance with their terms by each Seller of the Purchase 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 either Seller 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 either Seller, (b) any other agreement to which either Seller is a party or by which either Seller or any of their respective properties may be bound, or (c) any applicable law, or any order, rule, or regulation applicable to either Seller of any court or of any federal or state regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over either Seller 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 either Seller other than as contemplated by the Purchase Agreement. I-4 7. [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 Transferor or the business or any property of the Transferor except actions, suits or proceedings that, if adversely determined, would not, singly or in the aggregate, have a materially adverse effect on the Transferor, or on the ability of the Transferor to perform its obligations under the Purchase Agreement or the Agreement, the Initial Transfer Notice and each other Transfer Notice delivered pursuant to the Agreement or (ii) relating to the Purchase Agreement, the Agreement, the Initial Transfer Notice or each other Transfer Notice delivered pursuant to the Agreement. 8. [Except as set forth on Exhibit [E] to the Purchase 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 either Seller or the business or any property of either Seller except actions, suits or proceedings that, if adversely determined, would not, singly or in the aggregate, have a materially adverse effect on either Seller, or on the ability of either Seller to perform its obligations under the Purchase Agreement or (ii) relating to the Purchase Agreement. 9. 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 Transferor 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 Transferor Financing Statements in the State of California and ______ have been paid in full. As of the date hereof, there were I-5 no (i) UCC financing statements naming the 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 Transferor 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. 10. The Purchase Agreement creates 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 Transferor, 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 Seller 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 [and the _________ UCC] to perfect the Transferor's security interest in such Receivables and the proceeds thereof, and accordingly the Transferor'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 [and the ________ UCC]. All filing fees and all taxes required to be paid as a condition to or upon the filing of the Seller 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 Seller 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 Seller 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 [and the _______ UCC]. I-6 11. Neither the Transferor nor either Seller 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 paragraphs 9 and 10 (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 the _________ UCC] and to the fact that additional filings under the California UCC [and the ___________ UCC] may be required, among other things, upon the change of location of the debtor as provided in Section 9-l03(3)(e) of the California UCC [and the ________ 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 and the [________ 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 Transferor may be dependent upon such matters, I assume for purposes of this opinion that the parties to the Agreement (other than the Transferor 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 Transferor 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 Transferor 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 I-7 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, Leland P. Smith I-8 EXHIBIT J [Letterhead of Counsel to the Guarantor/Servicer] March 11, 1997 NationsBank of Texas, N.A., as Agent [Address] [Bank] [Bank] Re: Transfer and Administration Agreement, dated as of March 11, 1997, among Mattel Factoring, 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 Transfer and Administration Agreement dated as of March 11, 1997 (the "Agreement") among Mattel Factoring, Inc., a Delaware corporation (the "Transferor"), Mattel, Inc., a Delaware corporation, as servicer and 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. 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 J-1 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. 3. The execution, delivery and performance in accordance with its terms by the Guarantor of the Agreement, and the J-2 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 Transferor) 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 Transferor), 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 Transferor) 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 J-3 Guarantor and the Transferor) 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, Leland P. Smith J-4 EX-99.2 4 RECEIVABLES PURCHASE AGREEMENT EXHIBIT 99.2 ________________________________________________________________________________ RECEIVABLES PURCHASE AGREEMENT by and among MATTEL SALES CORP., as an Originator and FISHER-PRICE, INC., as an Originator and MATTEL, INC., as Servicer, and MATTEL FACTORING, INC., as Buyer Dated as of March 11, 1997 ________________________________________________________________________________ RECEIVABLE PURCHASE AGREEMENT THIS RECEIVABLES PURCHASE AGREEMENT (this "Agreement"), dated as of --------- March 11, 1997, is entered into by and among MATTEL SALES CORP., a California corporation ("Mattel Sales Corp." or an "Originator"), and FISHER-PRICE, INC., a ----------------- ---------- Delaware corporation ("Fisher-Price, Inc." or an "Originator," and, together ------------------ ---------- with Mattel Sales Corp., the "Originators"), MATTEL, INC., a Delaware ----------- corporation ("Mattel, Inc."), as servicer (the "Servicer"), and MATTEL ------------ -------- FACTORING, INC., a Delaware corporation (the "Buyer"). ----- PRELIMINARY STATEMENTS WHEREAS, each of the Originators now owns, and from time to time hereafter will create, Receivables (as defined below). Each Originator wishes to sell and assign to the Buyer, and the Buyer wishes to purchase from each Originator, all right, title and interest of such Originator in and to such Originator's Receivables now and hereafter arising until the Termination Date (as defined below); WHEREAS, the Originators and the Buyer believe that it is in their mutual best interests for each of the Originators to sell its Receivables to the Buyer and for the Buyer to purchase such Receivables; WHEREAS, the Originators and the Buyer intend this transaction to be a true sale of Receivables from each Originator to the Buyer, providing the Buyer with the full benefits of ownership of such Receivables, and none of the Originators nor the Buyer intends this transaction to be, or for any purpose to be characterized as, a loan from the Buyer to any of the Originators; and WHEREAS, upon purchasing Receivables from the Originators, the Buyer intends to sell undivided interests therein and in certain related rights pursuant to that certain Transfer and Administration Agreement, dated as of March 11, 1997 (as the same may from time to time hereafter be amended, supplemented, restated or otherwise modified, the "Purchase Agreement"), among ------------------ the Buyer as seller thereunder (the "Seller"), Mattel, Inc., as the servicer and ------ guarantor thereunder, the financial institutions party thereto from time to time (the "Banks"), and NationsBank of Texas, N.A., a national banking association, ----- as agent for the Banks (together with any successors permitted thereunder, the "Agent") or pursuant to any other Permitted Accounts Receivable Financing ----- Facility (as defined below). NOW, THEREFORE, the parties hereby agree as follows: 1 ARTICLE I DEFINITIONS SECTION 1.1. Certain Defined Terms. As used in this Agreement, the --------------------- following terms shall have the following meanings: "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. "Agent" has the meaning set forth in the Recitals hereto. ----- "Agreement" has the meaning set forth in the Preamble hereto. --------- "Assignee" has the meaning specified in Section 9.9. -------- ----------- "Authorized Officer" of a Person means the President, any Vice ------------------ President, the Chief Financial Officer, the Treasurer, any Assistant Treasurer or the Controller of such Person. "Banks" has the meaning set forth in the Recitals hereto. ----- "Base Rate" means a rate per annum which is equal to the one (1) month --------- LIBOR quoted by Bloomberg at 11:00 a.m., New York time on the date the first obligation is incurred, plus 10%, which rate shall be adjusted on the first day ---- of each calendar quarter based on the then one (1) month LIBOR as so quoted by Bloomberg; provided that the new rate has deviated from the previous rate by -------- more than 25 basis points. "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. "Buyer" has the meaning set forth in the Preamble hereto. ----- 2 "Collection Account" means the account established and maintained by ------------------ the Buyer pursuant to Section 2.11. ------------ "Collections" means, with respect to any Receivable, all cash ----------- collections and other cash proceeds of such Receivable. "Collection Date" means that date following the Termination Date which --------------- is one year and one day after the date on which (i) the Outstanding Balance of all Receivables sold hereunder has been reduced to zero, and (ii) the Originators have paid to the Buyer all indemnities, adjustments and other amounts which may be owed hereunder in connection with the Purchases. "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 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. "Contracts" mean, 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 Originator to the Obligor. 3 "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 and Collection Policy" means each Originator's credit and ---------------------------- collection policies and practices relating to Contracts and Receivables with respect to such Originator existing on the date hereof, as modified from time to time in compliance with Section 5.2(c). -------------- "Credit Agreement" means the First Amended and Restated Credit ---------------- Agreement, dated as of March 11, 1997, 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. "Defaulted Receivable" means a Receivable: (i) as to which any -------------------- payment, or part thereof, remains unpaid by the close of business on the Remittance Date of any year after 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 Originator or the Servicer as uncollectible; or (iv) which, consistent with the Credit and Collection Policy, should be written off the related Originator's books as uncollectible. "Dilutions" means, at any time, the aggregate amount of reductions in --------- the Outstanding Balances of the Receivables as a result of any setoff, discount, adjustment or otherwise, other than cash Collections on account of the Receivables. "Discount Factor" means a percentage calculated to provide the Buyer --------------- with a reasonable return on its investment in the Receivables after taking account of (i) the time value of money based upon the anticipated dates of collection of the Receivables and the cost to the Buyer of financing its investment in the Receivables during such period, (ii) the risk of nonpayment by the Obligor, and (iii) the cost of Servicing or sub-servicing performed by Mattel, Inc., and the Originators. The Originators and the Buyer may agree from time to time to change the Discount Factor based on changes in one or more of the items affecting the calculation thereof; provided that any change to the -------- Discount Factor shall take effect as of the commencement of a Payment Period, shall apply only prospectively and shall not affect the Purchase Price payment in respect of Purchases which occurred during any Payment Period ending prior to the Payment Period during which the Originators and the Buyer agree to make such change. "Eligible Originator" means Mattel Sales Corp. and Fisher-Price, Inc., ------------------- and each of the Other Originators designated by and of which Mattel, Inc., owns, 4 directly or indirectly, more than 50% of the outstanding shares of voting stock on a fully diluted basis. "Eligible Receivables" (or any comparable term) shall have the meaning -------------------- set forth in any outstanding Permitted Accounts Receivable Financing Facility. "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. "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). "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 5 such transaction received by the Agent from three Federal funds brokers of recognized standing selected by it. "Fisher-Price, Inc." has the meaning set forth in the Preamble hereto. ------------------ "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 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. "Indemnified Amounts" has the meaning specified in Section 8.1. ------------------- ----------- "Indemnified Parties" has the meaning specified in Section 8.1. ------------------- ----------- "Initial Closing Date" means the date specified by agreement of all of -------------------- the parties hereto as the date on which the initial Purchases shall be consummated. "Initial Originator" has the meaning specified in Section 2.8. ------------------ ----------- "Material Adverse Effect" means a material adverse effect on (i) the ----------------------- ability of any Originator to perform its obligations under any Transaction Document, (ii) the legality, validity or enforceability of this Agreement or any other Transaction Document, (iii) any Originator's or the Buyer's interest in the Receivables purchased hereunder generally or in any material portion of the Receivables purchased hereunder, or the Collections with respect thereto, (iv) the collectibility of all or any material portion of the Receivables purchased hereunder, (v) the business, operations, properties, assets, business prospects or condition (financial or otherwise) of Mattel, Inc. (together with its Subsidiaries), taken as a whole, or (vi) the ability of the Servicer or any sub- servicer to service the Receivables purchased hereunder. 6 "Mattel, Inc." has the meaning set forth in the Preamble hereto. ------------ "Mattel Sales Corp." has the meaning set forth in the Preamble hereto. ------------------ "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 Buyer to the --------------------- Originators pursuant to Section 7.4. ----------- "Obligor" means Toys "R" Us, Inc., a Delaware corporation. ------- "Originator" has the meaning set forth in the Preamble hereto. ---------- "Other Originator" means an Originator other than Mattel Sales Corp. ---------------- and Fisher-Price, Inc. "Outstanding Balance" of any Receivable at any time means the then ------------------- outstanding principal balance thereof, and shall exclude any interest or finance charges thereon, without regard to whether any of the same shall have been capitalized. "Payment Period" means each period which ends on March 31, June 30, -------------- September 30, or December 31 or any portion thereof which elapses during the term of this Agreement. The first Payment Period shall commence on the date of the Initial Closing Date and the final Payment Period shall terminate on the Termination Date. "Payment Report" means a report furnished by the Servicer to the Buyer -------------- pursuant to Section 6.2(b). -------------- "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. "Permitted Accounts Receivable Financing Facilities" means the -------------------------------------------------- Purchase Agreement and any other Permitted Accounts Receivable Financing Facilities (as such term is defined in the Credit Agreement as of the date hereof), together with any amendments, supplements, restatements, extensions or any other modifications from time to time. 7 "Permitted Claim" means the interest of the Agent, on behalf of the --------------- Banks, in certain receivables assigned pursuant to Section 2.13 of the Purchase Agreement, by NationsBank of Texas, N.A., as agent, on behalf of certain financial institutions, pursuant to the Second Amended and Restated Transfer and Administration Agreement dated as of March 10, 1995, as amended from time to time, to the Agent, on behalf of the Banks. "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. "Purchase" means a conveyance, transfer and assignment by an -------- Originator to the Buyer, of its interest in Receivables and related Collections pursuant to the terms hereunder. "Purchase Agreement" has the meaning set forth in the Recitals hereto. ------------------ "Purchase Price" means, with respect to any Purchase on any date, the -------------- aggregate price to be paid to the Originators for such Purchase in accordance with Section 2.2 of this Agreement of the Receivables being sold to the Buyer on ----------- such date, which price shall equal (i) the product of (x) the Original Balance of such Receivables, times (y) one minus the Discount Factor then in effect, ----- minus (ii) any Purchase Price Credits to be credited against the purchase price - ----- otherwise payable in accordance with Section 2.3 hereof. ----------- "Purchase Price Credit" has the meaning specified in Section 2.3. --------------------- ----------- "Receivable" means the indebtedness denominated in United States ---------- dollars to an Originator by the Obligor (without giving effect to any purchase hereunder by the Buyer, 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 2.4 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. 8 "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 17, 1997, December 17, 1998, December --------------- 17, 1999, December 17, 2000, and December 17, 2001, as applicable, or, if such day is not a Business Day, the next succeeding Business Day. "Seller" has the meaning set forth in the Recitals hereto. ------ "Servicer" means Mattel, Inc., or, after a Servicer Default, a -------- servicer appointed by the Buyer. "Servicer Default" has the meaning specified in Section 7.1. ---------------- ----------- "Subordinated Loan" has the meaning specified in Section 2.2(b). ----------------- -------------- "Subordinated Note" means a promissory note in substantially the form ----------------- of Exhibit A hereto as more fully described in Section 2.2(b), as the same may --------- -------------- be amended, restated, supplemented or otherwise modified from time to time. "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. "Surviving Corporation" has the meaning specified in Section 2.10. --------------------- ------------ "Target" has the meaning specified in Section 2.10. ------ ------------ "Terminating Originator" has the meaning specified in Section 2.9. ---------------------- ----------- "Termination Date" means the earlier of (i) December 17, 2001, unless ---------------- such date is otherwise extended, or (ii) the date on which the Buyer delivers a Notice of Termination to the Originators. "Termination Event" means an event described in Section 3.1(g). ----------------- -------------- "Transaction Costs" has the meaning specified in Section 8.3. ----------------- ----------- 9 "Transaction Documents" means, collectively, this Agreement, the --------------------- Permitted Accounts Receivable Financing Facilities, the Subordinated Notes, and all other instruments, documents and agreements executed and delivered by the Originators pursuant to or in connection with this Agreement, together with al amendments, supplements, restatements, extensions or other modifications thereto. "UCC" means, with respect to any state, the Uniform Commercial Code as --- from time to time in effect in such state. "Written Agreement" means the agreement between the Obligor and the ----------------- Originators in the form of Exhibit B. --------- 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." 10 ARTICLE II PURCHASES AND SETTLEMENTS SECTION 2.1. Purchases of Receivables. (a) Effective on the Initial ------------------------ Closing Date, in consideration for the Buyer's agreement to make Purchase Price payments hereunder and otherwise upon the terms and subject to the conditions set forth herein, each Originator does hereby severally and not jointly agree to sell, assign, transfer, set-over and otherwise convey to the Buyer, without recourse (except to the extent expressly provided herein), and the Buyer does hereby agree to purchase from each such Originator, on the terms and subject to the conditions set forth herein, all of such Originator's right, title and interest in and to each Receivable of such Originator that existed as of the close of such Originator's business on the Initial Closing Date, and each Receivable created by such Originator thereafter, together, in each case, with all Collections relating thereto; provided, however, that in no event shall the -------- ------- Buyer purchase (A) any Receivable created on or after the Termination Date, or (B) any Receivable from an Originator other than an Eligible Originator. On the Initial Closing Date, the Buyer shall acquire all right, title and interest of each Originator in and to all such Originator's Receivables existing as of the close of business on such date (together with all Collections relating thereto). On each Business Day thereafter through and including the Termination Date, the Buyer shall acquire from each Eligible Originator all of such Eligible Originator's right, title and interest in and to all of such Eligible Originator's Receivables (together with all Collections relating thereto) which were not previously purchased by the Buyer hereunder immediately (and without further action) upon the creation of such Receivables; provided that the -------- acquisition by the Buyer of such right, title and interest of any Originator in connection with each Buyer hereunder is conditioned upon and subject to such Originator's receipt of the Purchase Price payments relating thereto in accordance with this Article II. ---------- (b) It is the intention of the parties hereto that each Purchase of Receivables made hereunder shall constitute a "sale of accounts," as such term is used in Article 9 of the UCC, which sales are absolute and irrevocable and provide the Buyer with the full benefits of ownership of the applicable Receivables. Except as described in Section 2.3, each sale of Receivables ----------- hereunder is made without recourse to the selling Originator; provided, however, -------- ------- that (i) such Originator shall be liable to the Buyer for all representations, warranties and covenants made by such Originator pursuant to the terms of the Transaction Documents, and (ii) such sales do not constitute and is not intended to result in an assumption by the Buyer or any assignee thereof of any obligation of such Originator or any other Person arising in connection with the Receivables, the related Contracts or any other obligations of such Originator. In view of the intention of the parties hereto that the Purchases of Receivables made hereunder shall constitute sales of such Receivables rather than loans secured by such Receivables, each of the Originators agrees on or prior to 11 the date hereof to mark its master data processing records relating to its Receivables with a legend, in substantially the form set forth in Schedule A ---------- attached hereto, and Mattel, Inc. agrees to note in its consolidated annual report that Receivables have been sold to the Buyer. Upon the request of the Buyer, each of the Originators will execute and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or reasonably appropriate to perfect and maintain the perfection of the Buyer's ownership interest in the Receivables and the Collections acquired from such Originator. SECTION 2.2. Payment for the Purchases. (a) On the Initial Closing ------------------------- Date, the first Purchase Price payment shall be tendered to each Originator in the following manner: (i) in immediately available funds to the extent of funds made available to the Buyer in connection with its subsequent sale of an interest in such Receivables to the Banks under the Purchase Agreement; and (ii) with respect to any remaining balance owed to such Originator, by borrowing a Subordinated Loan from such Originator as described in Section 2.2(b) below. -------------- The Purchase Price for each Purchase after the initial Purchase shall become due and owing in full by the Buyer to the Originator or their designee on the date of such Purchase (except that the Buyer may, with respect to any such Purchase, ------ ---- offset against such Purchase Price owed to an Originator any amounts owed by such Originator to the Buyer hereunder and which have become due but remain unpaid) and shall be paid to the Originators in the manner provided in Sections -------- 2.2(b) and (c) below. - -------------- (b) With respect to any Purchase hereunder, at the time of settlement of the Purchase Price therefor pursuant to Section 2.2(c), the Buyer may elect -------------- to pay all or any part of each applicable Purchase Price by borrowing from the applicable Originator a subordinated revolving loan (each, a "Subordinated ------------ Loan"), and each applicable Originator, subject to the remaining provisions of - ---- this Section 2.2(b), irrevocably agrees to advance upon each such request such -------------- Subordinated Loan in the amount so specified by the Buyer (which amount, unless otherwise specified by the Buyer, shall be deemed to be the lesser of (i) the aggregate Purchase Price which remains owing to such Originator in connection with such settlement after giving effect to funds received by such Originator which have been applied thereto, and (ii) the maximum Subordinated Loan which may then be borrowed by such Originator under the restrictions set forth in the following sentence). Notwithstanding the foregoing, no Originator shall be committed to make 12 any Subordinated Loan (and the Buyer's right to make the election described hereinabove shall not be effective with respect to any Originator) if and to the extent that, as of the end of the last Business Day of the Payment Period to which such settlement relates and as a result of making such loan, Buyer's total assets (including any indebtedness from any Affiliates) does not exceed the Buyer's total liability (including any indebtedness owed to any Affiliate) by three percent (3%) or more. The Subordinated Loans made by each Originator shall be evidenced by, and shall be payable in accordance with the terms and provisions of, a promissory note issued by such Originator in substantially the form of Exhibit A hereto (each, as it may be amended, supplemented or otherwise --------- modified from time to time, together with all replacements thereof or substitutions therefor, a "Subordinated Note") and shall be payable solely from ----------------- funds which the Buyer is not required under Permitted Accounts Receivable Financing Facilities to set aside for the benefit of, or otherwise pay over to, any agents or purchasers thereunder, including the Agent and/or the Banks. (c) On each Business Day during a Payment Period after the Initial Closing Date, all Collections available to the Buyer (after setting aside amounts required to be set aside for the benefit of, or otherwise paid over to, any agents or purchasers, including the Agent and/or the Banks, in accordance with Permitted Accounts Receivable Financing Facilities) shall be paid directly to the Originators (as determined by the Servicer) and shall be applied as payments toward the Purchase Price of Receivables conveyed by such Originators to the Buyer during such Payment Period. Although amounts shall be paid directly to the Originators on a daily basis in accordance with the first sentence of this Section 2.2(c), settlement of the Purchase Price between the -------------- Buyer and the Originators shall be effected on March 31, June 30, September 30 and December 31 (or earlier at the option of the Buyer) with respect to all Purchases within the same Payment Period concurrently with the delivery of the Payment Report relating to such Payment Period pursuant to Section 6.2(b) hereof -------------- and based on the information contained therein. In addition to such other information as may be included therein, each Payment Report shall set forth the following with respect to the related Payment Period: (i) the aggregate Outstanding Balance of Receivables created and conveyed in Purchases during such Payment Period, (ii) the aggregate Purchase Price payable to each Originator in respect of such Purchases, specifying the Discount Factor in effect for such Payment Period and the aggregate Purchase Price Credits deducted in calculating such aggregate Purchase Price, (iii) the aggregate amount of funds received by each Originator during such Payment Period which are to be applied toward the aggregate Purchase Price owing for such Payment Period pursuant to the first sentence of Section 2.2(c), (iv) the increase or decrease in the amount of -------------- outstandings under each Subordinated Note as of the end of such Payment Period after giving effect to the application of funds toward the aggregate Purchase Price and the restrictions on Subordinated Loans set forth in Section 2.2(b), -------------- and (v) which Receivables would satisfy the definition of Eligible Receivables, and the Eligible 13 Receivable balance at the end of the Payment Period. Although settlement shall be effected concurrently with the delivery of each Payment Report, increases or decreases in the amount owing under the Subordinated Notes made pursuant to Section 2.2(b) shall be deemed to have occurred and shall be effective as of the - -------------- last Business Day of the Payment Period to which such settlement relates. SECTION 2.3. Purchase Price Credit Adjustments. If on any day the --------------------------------- Outstanding Balance of a Receivable is either (a) reduced as a result of any defective goods or services or damage to shipped goods, any cash discount or any adjustment by the applicable Originator (whether individually, in such Originator's performance of duties as sub-servicer, or by the Servicer), (b) 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 and whether such claim relates to such Originator or any Affiliates thereof), or (c) otherwise reduced as a result of any of the factors set forth in the definition of Dilutions, then, in such event, the Buyer shall be entitled to a credit (each, a "Purchase Price Credit") against the Purchase --------------------- Price otherwise payable hereunder to such Originator equal to the full amount of such reduction or cancellation. If such Purchase Price Credit exceeds the aggregate Original Balance of the Receivables to be paid for by the Buyer hereunder on any date, then the applicable Originator shall pay the remaining amount of such Purchase Price Credit in cash within one Business Day after such date; provided that, if the Termination Date has not occurred, such Originator -------- shall be allowed to deduct the remaining amount of such Purchase Price Credit from any indebtedness owed to it under its Subordinated Note. Upon the payment (through offset or otherwise) of any Purchase Price Credit relating to returned or repossessed goods, all right, title and interest in and to such goods shall be re-vested in the applicable Originator and the Buyer shall have no further interest therein. SECTION 2.4. Settlement as to Specific Receivables. If (a) on the ------------------------------------- day of purchase of any Receivable from any Originator hereunder any of the representations or warranties set forth in Article III are not true with respect ----------- to any Receivable, or (b) as a result of any action or inaction of such Originator, on any day any of the representations or warranties set forth in Article III are no longer true with respect to a Receivable, then such - ----------- Originator forthwith shall deliver to the Servicer for deposit into an account same day funds in an amount equal to the unpaid balance of such Receivable for application by the Servicer to the same extent as if Collections of such unpaid balance had actually been received on such date; provided that, if the Buyer -------- thereafter receives payment on account of Collections due with respect to such Receivable, the Buyer promptly shall deliver such funds to such Originator. SECTION 2.5. Payments and Computations, Etc. All amounts to be paid ------------------------------- or deposited by the Buyer hereunder shall be paid or deposited in accordance 14 with the terms hereof on the day when due in immediately available funds to the account of the applicable Originator designated from time to time by such Originator or as otherwise directed by such Originator. In the event that any payment owed by any Person hereunder becomes due on a day which is not a Business Day, then such payment shall be made on the next succeeding Business Day. Any amount due hereunder which is not paid when due hereunder shall bear interest at the Base Rate as in effect from time to time until paid in full; provided, however, that such interest rate shall not at any time exceed the - -------- ------- maximum rate permitted by applicable law. All computations of interest payable 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. SECTION 2.6. Software License. Each of the Originators hereby grants ---------------- to each of the Buyer, the Servicer and the sub-servicers an irrevocable, non- exclusive license to use, without royalty or payment of any kind, all software used by such Originator to account for its Receivables, to the extent necessary to administer such Receivables, whether such software is owned by such Originator or is owned by others and used by such Originator under license agreements with respect thereto; provided that should the consent of any -------- licensor of any Originator to such grant of the license described herein be required, each Originator hereby agrees that upon the request of the Buyer, it will use its reasonable efforts to obtain the consent of such third-party licensor and, in the absence of obtaining such consent, shall, upon request of the Buyer, download all Records contained in such licensed software in a format which is accessible by the Buyer and/or otherwise print out such Records. The license granted hereby shall be irrevocable, and shall terminate on the date this Agreement terminates in accordance with its terms (it being understood that this Agreement shall not terminate unless and until none of the Originators is acting as Servicer or a sub-servicer and either (i) all Records have been made available in accordance with this Section to the successor Servicer, or (ii) all "Aggregate Unpaids" under and as defined in the Purchase Agreement have been paid and similar amounts under any other Permitted Accounts Receivable Financing Facilities have been paid. SECTION 2.7. Characterization. If, notwithstanding the intention of ---------------- the parties expressed in Section 2.1(b), the conveyance by any of the -------------- Originators to the Buyer of Receivables hereunder shall be characterized as a secured loan and not a sale, this Agreement shall constitute a security agreement under the UCC and other applicable law. For this purpose, each of the Originators hereby grants to the Buyer a duly perfected security interest in all of such Originator's right, title and interest in, to and under the Receivables, the Collections, each Collection Account, and all proceeds of any thereof which security interest shall be prior to all other Adverse Claims therein (other than the Permitted Claim). After a Termination Event, the Buyer and its assignees shall have, in addition to the rights and remedies which they may have under this Agreement, all other rights and remedies provided to a 15 secured creditor after default under the UCC and other applicable law which are not inconsistent with any express provision of this Agreement or any other Transaction Document, which rights and remedies shall be cumulative. SECTION 2.8. Addition of Originators. Any Subsidiary of Mattel, Inc. ----------------------- (other than one of the Originators party to this Agreement as of the Initial Closing Date (the "Initial Originators")) may become an Originator hereunder and ------------------- sell its accounts receivable to the Buyer if the Buyer gives its prior written consent to the addition of such Subsidiary as an Originator hereunder in their sole discretion (which consent may be conditioned upon, inter alia, receipt and ----- ---- satisfactory review of historical information about such Subsidiary's accounts receivable). Mattel, Inc. and its Subsidiary that is proposed to be added as an Originator shall give to the Buyer not less than 30 days' prior written notice of the proposed effective date of the addition of such Subsidiary as an Originator. Once such notice has been given, any addition of a Subsidiary of Mattel, Inc. as an Originator pursuant to this Section shall become effective on the Business Day immediately following the Business Day on which (i) the requirements described above shall have been satisfied, and (ii) such Subsidiary and the parties hereto shall have executed and delivered such agreements, instruments and other documents, each in form and substance reasonably satisfactory to the Buyer, that the Buyer determines are necessary or appropriate to effect such addition. SECTION 2.9. Termination of Status as an Originator. An Originator -------------------------------------- may terminate its obligation to sell its Receivables to the Buyer at any time if such Originator (a "Terminating Originator") shall have given the Buyer not less ---------------------- than 30 days' prior written notice of such Originator's intention to terminate such obligations. Any termination by an Originator pursuant to this Section shall terminate such Originator's right and obligation to sell Receivables hereunder to the Buyer and the Buyer's agreement, with respect to such Originator, to purchaser such Receivables; provided, however, that such -------- ------- termination shall not relieve such Originator of any of its other obligations hereunder to the extent such obligations relate to Receivables originated by such Originator prior to the effective date of such termination. SECTION 2.10. Effect of Merger or Consolidation of an Originator. -------------------------------------------------- (a) Each Originator which intends to be a party to any merger or consolidation with another Originator shall give not less than 10 Business Days' prior written notice of such intended merger or consolidation to the Buyer. If an Originator is merged with and into or is consolidated with another Originator, then the surviving Originator shall continue to be an Originator, but shall promptly deliver such financing statements and other instruments as the Buyer may reasonably request to continue the perfection of their respective interests in the Receivables originated by such parties. 16 (b) Each Originator which intends to be a party to any merger or consolidation with another corporation which is not an Originator (such other corporation, a "Target") shall give not less than 30 days' prior written notice ------ of such intended merger or consolidation to the Buyer. If an Originator is merged with and into or is consolidated with a Target and the surviving corporation of such merger or consolidation (the "Surviving Corporation") is --------------------- Mattel, Inc., or a Subsidiary of Mattel, Inc., then the Surviving Corporation may request that it be permitted to be an Originator hereunder by delivering a written request to the Buyer, together with such historical information about the Target and its accounts receivable and the Surviving Corporation's accounting and systems capabilities as the Buyer may reasonably request. Upon receipt of the information described in the preceding sentence, the Buyer will determine whether it, in its sole discretion, is willing to permit the Surviving Corporation to be an Originator hereunder. If such consent is granted, the Surviving Corporation and the parties hereto shall have executed and delivered such agreements, instruments, other documents and/or amendments, each in form and substance reasonably satisfactory to the Buyer that the Buyer determines are necessary or appropriate to effect such addition. SECTION 2.11. Collection Account. There shall be established on the ------------------ Initial Closing Date and maintained, in the name of the Buyer, a segregated account (the "Collection Account"), bearing a designation clearly indicating ------------------ that the funds deposited therein are held for the benefit of the Buyer. 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 to the Buyer. On the date on which all obligations under the Permitted Accounts Receivable Financing Facilities have been paid in full and such facilities have been terminated, any funds remaining on deposit in the Collection Account shall be released to the Originators in same-day funds. 17 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1. Representations and Warranties of the Originators. Each ------------------------------------------------- Originator hereby represents and warrants to the Buyer that: (a) Perfection. Immediately preceding each Purchase hereunder, the ---------- related Originator shall be the owner of all of the Receivables which are the subject of each such Purchase, free and clear of all Adverse Claims (other than the Permitted Claim). On or prior to each Purchase, all financing statements and other documents required to be recorded or filed in order to perfect the Purchase 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 ----------------------- an Originator to the Buyer, the Banks, the Agent or any other party to a Permitted Accounts Receivable Financing Facility for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by such Originator to the Buyer, the Banks, the Agent or any other party to a Permitted Accounts Receivable Financing Facility 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 Originators are located at the addresses of the Originators indicated on Exhibit C hereto, and the offices where each Originator --------- keeps its Records are located at the address of such Originator indicated on Exhibit C hereto. - --------- (d) Payments. The Obligor has, with respect to each Receivable, been -------- directed by the related Originator to remit all payments in respect of such Receivable directly to the Collection Account. (e) Good Title. Upon each Purchase, the Buyer shall acquire a valid ---------- and perfected first priority ownership interest in each Receivable which exists on the date of such Purchase, and all Collections with respect thereto, free and clear of any Adverse Claim, other than the Permitted Claim. (f) Tradenames, etc.. As of the date hereof: (i) neither Originator ---------------- has any subsidiaries or divisions; and (ii) neither Originator has, within the last five (5) years, operated under any tradenames except as set forth on Exhibit D hereto and, within the last five (5) years, has not changed its name, - --------- merged with or 18 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 Originator 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 Originator 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 Originator. (k) No Conflict. The execution, delivery and performance by each ----------- Originator of this Agreement do not and will not (a) violate the Certificate of Incorporation or Articles of Incorporation or Bylaws of such Originator, (b) violate any provision of law applicable to such Originator, or any material order, judgment or decree of any court or other agency of government binding on such Originator, 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 Originator, (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 Buyer, or (e) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of such Originator. (l) Governmental Consents. The execution, delivery and performance --------------------- by the Originators 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. 19 (m) Binding Obligation. This Agreement when executed and delivered ------------------ will be the legally valid and binding obligation of the Originators, 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, 1996, 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 Originator) 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 related Originator, threatened against or affecting such Originator or any of its properties which, in the reasonable judgment of such Originator and its executive officers (assuming adverse determination of facts which such Originator 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 Originator 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 Originator, threatened against or affecting such Originator 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 ---------------- Originator required to be filed by any of them have been timely filed, and all taxes, assessments, fees and other governmental charges upon such Originator 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 Originator knows of any proposed tax assessment against it that would result in a Material Adverse Effect. (q) Agreements. Neither Originator 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. 20 (r) Performance. Neither Originator is in default in the ----------- performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of such Originator, and no conditions 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 Originator 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 Originator 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 Originator 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 an Originator ---------- contained in this Agreement or any other document, certificate or written statement furnished to the Buyer by such Originator since January 1, 1997, 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 Originator 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. (v) Environmental Matters. Each Originator 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 each Originator 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. (w) Fisher Price, Inc. has a place of business in more than one county in the State of New York. SECTION 3.2. Representations and Warranties of Mattel, Inc. Mattel, ---------------------------------------------- Inc. represents and warrants to the Buyer that: 21 (a) Servicing. Since January 1, 1997, 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 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 Buyer, 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. 22 (h) Financial Condition. Mattel, Inc. has heretofore delivered ------------------- to the Buyer a consolidated balance sheet of Mattel, Inc. and its Subsidiaries for the fiscal year ended December 31, 1995, 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. (i) Changes, Etc. Since December 31, 1995, 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, (1) except as set forth in said balance sheet or in the notes thereto, (2) 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 (3) except for immaterial defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. (k) Litigation; Adverse Facts. Except as set forth on Exhibit E ------------------------- --------- hereto, 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 23 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, 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 thereunder 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 Buyer by Mattel, Inc. since January 1, 1997, for use in connection 24 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. SECTION 3.3. Reaffirmation of Representations and Warranties. On ----------------------------------------------- each day that a Purchase is made hereunder, (a) the related Originator, by accepting the proceeds of such Purchase, 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 Purchase, which constitutes a Termination Event or a Potential Termination Event, and (b) Mattel, Inc. 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 Purchase, which constitutes, or with the passage of time or the giving of notice or both, would constitute a Servicer Default. 25 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 Originators shall have delivered to the Buyer originally executed copies of this Agreement, together with originals to the Buyer of the following documents and instruments, all in form and substance acceptable to the Buyer: (a) a Certificate of the Secretary of Mattel, Inc., attaching copies of the Restated Certificate of Incorporation, by-laws and incumbency signatures of Mattel, Inc., and 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 Initial 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 Originator, 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 Originator (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 performance 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 Initial Closing Date; (e) proper financing statements (Form UCC-1) naming each Originator as the debtor/transferor and the Buyer, as purchaser or other similar instruments or documents as may be necessary or in the opinion of the Buyer desirable under the UCC of all appropriate jurisdictions or any comparable Governmental Rule to perfect the ownership interest of the Buyer in all Receivables related to both Originators; 26 (f) certified copies of request for information or copies (Form UCC-11) (or a similar search report certified by parties acceptable to the Buyer) dated a date reasonably near the date of the initial Purchase listing all effective financing statements which name the Originators (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 Leland P. Smith, counsel for the Originators, in substantially the form of Exhibit F hereto and as to such other --------- matters as the Buyer may reasonably request; (h) a favorable opinion of Leland P. Smith, counsel for the Guarantor, in substantially the form of Exhibit G hereto and as to such other --------- matters as the Buyer may reasonably request; (i) a favorable opinion of Latham & Watkins, special counsel for the Originators, as to such matters as the Buyer may reasonably request; and (j) an executed copy of the Written Agreement. 27 ARTICLE V COVENANTS SECTION 5.1. Affirmative Covenants of the Originators. At all times ---------------------------------------- for the term of this Agreement, unless the Buyer shall otherwise consent in writing: (a) Conduct of Business. Each Originator 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. Fisher-Price, Inc. will continue to have a place of business in more than one county in the State of New York, unless it has provided 30 days' advance written notice to the Buyer. (b) Compliance with Governmental Rules. Each Originator 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 --------------------------------------------------- Originator will furnish to the Buyer from time to time such information with respect to the Receivables as the Buyer may reasonably request, including, without limitation, listings identifying the outstanding balance for each Receivable. Each Originator will at any time and from time to time during regular business hours permit the Buyer, or its agents, representatives, (i) to examine and make copies of and abstracts from all Records and (ii) to visit the offices and properties of such Originator for the purpose of examining such Records, and to discuss matters relating to the Receivables or such Originator's performance hereunder with any of the officers, directors, employees, agents or independent public accountants of such Originator having knowledge of such matters. (d) Keeping of Records and Books of Account. Each Originator --------------------------------------- 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). Each Originator will give the Buyer notice of any material change in the administrative and operating procedures referred to in the previous sentence. 28 (e) Performance and Compliance with Receivables and Contracts. --------------------------------------------------------- Each Originator 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 Originator 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 Originator shall report the -------------------- transactions contemplated by the Agreement on its financial statements as a sale of the Receivables to the Buyer. (h) Knowledge. Promptly upon any executive officer of an --------- Originator obtaining knowledge of any condition or event which constitutes a Termination Event or Potential Termination Event or becoming aware that the Buyer has given any notice or taken any other action with respect to a claimed Termination Event or Potential Termination Event under this Agreement, such Originator shall provide to the Buyer 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 Originator has taken, is taking and proposes to take with respect thereto. (i) Written Agreement. For so long as this Agreement is in ----------------- effect, and promptly after the beginning of each calendar year, the Originators shall provide the Buyer with a copy of a Written Agreement in the form of Exhibit B hereto, duly executed by the Originators and the Obligor and - --------- appropriately revised to reflect the Remittance Date of such calendar year. (j) Environmental Laws. Each Originator 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 Originators. At all times ------------------------------------- during the term of this Agreement, unless the Buyer shall otherwise consent in writing: (a) No Sales, Liens, etc. Except as otherwise provided herein, -------------------- neither Originator will sell, assign (by operation of Governmental Rule or otherwise) or otherwise dispose of, or create or knowingly suffer to exist any Adverse Claim (other than the Permitted Claim) upon (or the filing of any financing statement) or 29 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 Originator ------------------------------------- will extend the term of any Receivable beyond the Remittance Date next succeeding the date such Receivable was created. Neither Originator 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 Originator will make any change in the character of its business or in the Credit and Collection Policy without the prior written consent of the Buyer. (d) No Modification of Written Agreement. Neither Originator ------------------------------------ will amend, supplement, alter or otherwise modify the Written Agreement. SECTION 5.3. Affirmative Covenants of Mattel, Inc. At all times ------------------------------------- during the term of this Agreement, unless the Buyer 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 Buyer: (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 Originators) and the related consolidated (and, as to statements of income only, consolidated and consolidating) statements of income, stockholders' 30 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 thereon 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 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 Buyer from time to time such information with respect to its 31 obligations as Servicer hereunder as may be reasonably requested by the Buyer. Mattel, Inc. will at any time and from time to time during regular business hours permit the Buyer, or its agents, representatives or appointees, (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 Servicer 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 Buyer 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 Buyer 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 Buyer 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 Mattel, Inc. has taken, is taking and proposes to take with respect thereto. 32 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 Buyer gives notice to the Originators 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 Buyer, 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 sub- - -------- ------- servicer with respect to Receivables transferred by it hereunder. On and after the occurrence of a Servicer Default, the Buyer, may designate as Servicer any Person (including the Buyer) 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 Buyer. (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 Originators and the Buyer 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 Originators nor the Servicer may extend the maturity of any Receivable beyond the Remittance Date next succeeding the date of creation of such Receivable. Each Originator shall deliver to the Servicer, and the Servicer shall hold in trust for such Originator and the Buyer in accordance with their respective interests, all Records which evidence or relate to any Receivables relating to such Originator. Notwithstanding anything to the contrary contained herein, the Buyer 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 Buyer pursuant to the preceding sentence, notwithstanding anything to the contrary contained herein, the Buyer shall have the absolute and unlimited right to take any and all steps in the related Originator's name and on behalf of such Originator necessary or desirable, in the determination of the Buyer, to collect all amounts due under any and all Receivables including, without limitation, endorsing such Originator's name on checks and other instruments representing Collections and 33 enforcing such Receivables and the Written Agreement. (b) On the 15th day after the end of each fiscal quarter (or, if such date is not a Business Day, the next succeeding Business Day), and at such times as the Buyer shall request, the Servicer shall prepare and forward to the Buyer a Payment Report for the related Payment Period (or other comparable report for such period as may be applicable). Promptly following any request therefor by the Buyer, the Originator shall prepare and provide to the Buyer a listing by Obligor of all Receivables together with an aging of such Receivables. (c) The Buyer shall, as soon as practicable following receipt thereof, turn over to the applicable Originator any collections of any indebtedness of the Obligor which is not a Receivable. (d) On and after the occurrence of a Servicer Default, the Buyer 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 Originators) to furnish a report to the Buyer to the effect that they have compared the information contained in the Payment 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 Payment 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. 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 Originator shall, at the Buyer's request and at such Originator's expense, give notice of the Buyer' ownership of Receivables to the Obligor and direct that payments be made directly to the Buyer or its designee or designate a new Collection Account. (ii) Each Originator shall, at the Buyer's request, (A) assemble all of the Records, and shall make the same available to the Buyer at a place selected by the Buyer 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 Buyer and shall, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Buyer or its designee. (iii) Each Originator hereby authorizes the Buyer to take any and all reasonable steps in such Originator's name and on behalf of such 34 Originator necessary or desirable, in the determination of the Buyer, to collect all amounts due under any and all Receivables including, without limitation, endorsing such Originator's name on checks and other instruments representing Collections and enforcing such Receivables and the Written Agreement. SECTION 6.4. Responsibilities of the Originators. Anything herein to ----------------------------------- the contrary notwithstanding, each Originator 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 Buyer of its rights hereunder shall not relieve such Originator 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. The Buyer shall not have any obligation or liability with respect to any Receivable or related Contracts, nor shall it be obligated to perform any of the obligations of the related Originator thereunder. 35 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) 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 Buyer 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) 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 Buyer shall, by notice to the Originators, terminate the Servicer's rights as Servicer hereunder and appoint a successor Servicer (which successor Servicer may be itself). 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 Originator shall fail to make any payment or deposit required to be made by it hereunder when due; or 36 (c) any Event of Bankruptcy shall occur with respect to an Originator or Mattel, Inc.; 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 Originator or Mattel, Inc.; or (e) the Buyer shall fail to have a valid and perfected first priority ownership or security interest in and to the Receivables; or (f) either Originator shall merge with or into any entity whereby it is not the surviving entity (unless approved, pursuant to Section ------- 2.10; provided that the merger of any Originator with or into the other or - ---- -------- Mattel, Inc. shall not constitute a Termination Event under this Section 7.3(f); ------------- (g) any material adverse change in the operations of either Originator, or any other event which materially affects the ability of such Originator to perform its obligations hereunder; or (h) 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 (i) the Obligor fails to remit full payment in respect of the Receivables on any Remittance Date to the Collection Account; or (j) the occurrence of an event of acceleration with respect to any indebtedness in excess of $20,000,000 under any agreement to which Mattel, Inc. or any one of its domestic subsidiaries is a party; or (k) 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 and -------------------------- during the continuation of a Termination Event, the Buyer may either (i) remove Mattel, Inc. as Servicer, without limiting any other right to remove Mattel, Inc. as Servicer set forth herein or in any other Transaction Document, and/or remove any one or more of the sub-servicer(s) as sub-servicer(s), or (ii) declare the Termination Date to have occurred, whereupon the Termination Date shall forthwith occur, without demand, protest or further notice of any kind, all of which are hereby expressly waived by each of the Originators, individually and as Servicer or sub-servicer, as applicable; provided, however, -------- ------- that upon the occurrence of a Termination Event described in Section 7.3(c) -------------- above or of an actual or deemed 37 entry of an order for relief with respect to any of the Originators under the Federal Bankruptcy Code, the Termination Date shall automatically occur, without demand, protest or any notice of any kind, all of which are hereby expressly waived by each of the Originators, individually and as Servicer or sub-servicer, as applicable. Upon the occurrence of the Termination Date for any reason whatsoever, the Buyer and its assigns shall have, in addition to all other rights and remedies under this Agreement or otherwise, all other rights and remedies provided under the UCC, which rights shall be cumulative. SECTION 7.5. Potential Termination Event Remedies. Upon the ------------------------------------ occurrence of a Potential Termination Event, the Buyer may, by notice to the Originators, terminate the commitment of the Buyer to purchase the Receivables from the Originators. 38 ARTICLE VIII INDEMNIFICATION; EXPENSES; RELATED MATTERS SECTION 8.1. Indemnities by the Originators. Without limiting any ------------------------------ other rights which the Buyer may have hereunder or under applicable Governmental Rule, each Originator hereby agrees to indemnify the Buyer 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 Buyer) 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 Buyer of the Receivables related to such Originator, 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 Originator. Without limiting the generality of the foregoing, the applicable Originator shall indemnify each Indemnified Party for Indemnified Amounts relating to or resulting from: (i) reliance on any material representation or warranty made by such Originator or Mattel, Inc. (or any officers of such Originator or Mattel, Inc.) under or in connection with this Agreement, any Payment Report or any other information or report delivered by such Originator 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 Originator 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 (iii) the failure to vest and maintain vested in the Buyer, ownership of the Receivables originated by such Originator, free and clear of any Adverse Claim (other than the Permitted Claim); or (iv) the failure to file by such Originator, or any delay in filing by such Originator, 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 Receivables originated by such Originator; or 39 (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 Originator (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 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, 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, the Receivables or payments of amounts due hereunder or otherwise in respect of this Agreement, 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 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, the Receivables or payments of amounts due hereunder or otherwise in respect of this Agreement, or the Receivables; or 40 (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, the Receivables or payments of amounts due hereunder or otherwise in respect of this Agreement or the Receivables, and the result of any of the foregoing is to increase the cost to such Indemnified Party with respect to this Agreement, 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 Buyer, the applicable Originator shall pay to such Indemnified Party such additional amount or amounts as will compensate such Indemnified Party for such increased cost. (b) The Buyer will promptly notify the applicable Originator of any event of which the Buyer has knowledge, occurring after the date hereof, which will entitle an Indemnified Party to compensation pursuant to this Section. Any notice by the Buyer, 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, the Buyer may use any reasonable averaging and attributing methods. SECTION 8.3. Other Costs, Expenses and Related Matters. Each ----------------------------------------- Originator agrees, upon receipt of a written invoice, to pay or cause to be paid, and to save the Buyer 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 Buyer) incurred by or on behalf of the Buyer (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 Receivables originated by such Originator) and (ii) from time to time (a) relating to any amendments, waivers or consents under this Agreement, (b) arising in connection with the Buyer's or its agents' enforcement or preservation of rights (including, without limitation, the perfection and protection of the Receivables originated by such Originator 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 ---------------------------------------- Originator agrees to accept the reconveyance from the Buyer, of the Receivables originated by such Originator if the Buyer notifies such Originator of a material breach of any representation or warranty made or deemed made pursuant to Article III of this Agreement, and such Originator shall fail to cure such ----------- breach within ten (10) days (or, in the case of the representations and warranties in Sections 3.1(a) --------------- 41 and 3.1(e), five (5) days) of such notice. The reconveyance price shall be paid - ---------- by such Originator directly to the Buyer in immediately available funds on such tenth day (or fifth day, if applicable). 42 ARTICLE IX MISCELLANEOUS SECTION 9.1. Term of Agreement. This Agreement shall terminate ----------------- following the Termination Date; provided, however, that (i) the rights and -------- ------- remedies of the Buyer with respect to any representation and warranty made or deemed to be made by either Originator pursuant to this Agreement, and (ii) the indemnification and payment provisions of Article VIII, shall be continuing and ------------ shall survive any termination of this Agreement. SECTION 9.2. Waivers; Amendments. No failure or delay on the part of ------------------- the Buyer 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 Originators, or the Servicer in any case shall entitle the Originators, or the Servicer, 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 Originators, the Servicer, and the Buyer. SECTION 9.3. 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 Originators: Mattel Sales Corp. 333 Continental Boulevard El Segundo, California 90245 Attention: William Stavro Telephone: (310) 252-3202 Telecopy: (310) 252-3215 43 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 Servicer: Mattel, Inc. 333 Continental Boulevard El Segundo, California 90245 Attention: William Stavro Telephone: (310) 252-3202 Telecopy: (310) 252-3215 If to the Buyer: Mattel Factoring, Inc. M.S. 24-199 2043 East Mariposa El Segundo, CA 90245 Attention: William Stavro Telecopy: (310) 252-3215 SECTION 9.4. 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 Originators and the Buyer consents, for itself and in respect of its property, to the non-exclusive jurisdiction of those courts. Each of the Originators and the Buyer 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 44 Agreement or any document related hereto. The Originators and the Buyer each waive personal service of any summons, complaint or other process, which may be made by any other means permitted by California law. SECTION 9.5. 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. SECTION 9.6. Successors and Assigns. This Agreement shall be binding ---------------------- on the parties hereto and their respective successors; provided, however, that -------- ------- subject to Section 9.9, no party to this Agreement may assign any of its rights ----------- or delegate any of its duties hereunder. The Agent, on behalf of the Banks, is intended by the parties hereto to be a third-party beneficiary of this Agreement during a "Termination Event" (as defined in the Purchase Agreement). SECTION 9.7. Confidentiality. The Buyer agrees to take normal and --------------- reasonable precautions and exercise due care to maintain the confidentiality of all information provided to it by Servicer or any Subsidiary of the Servicer in connection with this Agreement or any documents related hereto, and it shall not 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 Buyer, or (ii) was or becomes available on a non-confidential basis from a source other than the Servicer; provided that such source is not -------- bound by a confidentiality agreement with the Servicer known to the Buyer; provided, however, that the Buyer may disclose such information (A) at the - -------- ------- request or pursuant to any requirement of any Governmental Person to which the Buyer is subject or in connection with an examination of the Buyer 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 the Buyer shall disclose only the information required by such - -------- request and shall notify the Servicer in advance of providing such information so that the Servicer may seek an appropriate protective order, and (C) to the Buyer's independent auditors and other professional advisors provided such Persons are obligated to keep such information confidential and (D) any parties to a Permitted Accounts Receivable Financing Facility; provided, that such -------- parties agree to keep such information confidential to the same extent required by the Buyer hereunder. Notwithstanding the foregoing, the Servicer authorizes the Buyer to disclose to any Assignee and to any prospec- 45 tive Assignee, such financial and other information in the Buyer's possession concerning the Servicer or its Subsidiaries which has been delivered to the Buyer pursuant to this Agreement or which has been delivered to the Buyer by the Servicer prior to entering into this Agreement; provided that, unless otherwise -------- agreed by the Servicer, such Assignee agrees in writing to the Buyer to keep such information confidential to the same extent required of the Buyer hereunder. SECTION 9.8. 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 Receivables, conveying good title thereto free and clear of any Adverse Claims (other than the Permitted Claim) to the Buyer, and that the Receivables not be part of either Originator'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 Originator shall be deemed to have granted to the Buyer and each Originator hereby grants to the Buyer, a first priority perfected security interest in all of such Originator's right, title and interest in, to and under the Receivables, and that this Agreement shall constitute a security agreement under applicable law. SECTION 9.9. Assignments. The Buyer may, with the advance written ----------- consent of the Originators, which consent (other than during the existence of a Termination Event) shall not be unreasonably withheld, at any time assign and delegate to one or more Persons (each an "Assignee") all, or any part of all, of the Receivables and the other rights and obligations of the Buyer hereunder; provided, however, that the Originators may continue to deal solely and directly - -------- ------- with the Buyer 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 Originators by the Buyer; and (ii) the Buyer and its Assignee shall have delivered to the Originators an executed assignment. (b) After such time, (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 purchaser under this Agreement, and (ii) the Buyer 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. 46 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Receivables Purchase Agreement as of the date first above written. MATTEL SALES CORP., as an Originator By: /s/ William Stavro ------------------------------------- Name: William Stavro Title: Senior Vice President and Treasurer FISHER-PRICE, INC., as an Originator By: /s/ William Stavro ------------------------------------- Name: William Stavro Title: Senior Vice President and Treasurer MATTEL, INC., as Servicer By: /s/ William Stavro ------------------------------------- Name: William Stavro Title: Senior Vice President and Treasurer MATTEL FACTORING, INC., as Buyer By: /s/ William Stavro ------------------------------------- Name: William Stavro Title: Senior Vice President and Treasurer 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 Receivable Purchase Agreement, dated as of March 11, 1997, among Mattel Sales Corp., Fisher-Price, Inc., and Mattel Factoring, Inc., it is our understanding that Mattel and Fisher-Price would like to sell from time to time their domestic accounts receivable from TOYS "R" US to Mattel Factoring, Inc. and that under the Transfer and Administration Agreement, dated as of March 11, 1997, among Mattel Factoring, Inc., NationsBank of Texas, N.A., and a syndicate of banks, it is our understanding that Mattel Factoring, Inc. would like to sell from time to time undivided interests in the 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 ninety percent (90%) 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 ten percent (10%) 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 A-1 remaining after settlement in accordance with 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 Senior Vice President and Treasurer A-2 EXHIBIT B Actions, Suits and Proceedings ------------------------------ against the Originators ----------------------- Mattel Sales Corp. - ----------------- NONE. Fisher-Price, Inc. - ----------------- NONE. B-1 EXHIBIT C Location of Records ------------------- Mattel Factoring, Inc. 2043 East Mariposa M.S. 24-199 El Segundo, CA 90245 333 Continental Boulevard El Segundo, CA 90245 Mattel Computer Center 2424 West Desert Cove Phoenix, AZ 85029 636 Girard Avenue East Aurora, New York 14052 C-1 EXHIBIT D List of Tradenames ------------------ Mattel Sales Corp. - ----------------- Mattel Sales Corp. Mattel Sales Mattel Fisher-Price, Inc. - ----------------- Fisher-Price FPI, Inc. D-1 EXHIBIT E List of Actions, Suits and Proceedings -------------------------------------- against the Servicer -------------------- 1. Greenwald v. Mattel, Inc., (Case No. YC 025 008) filed October 13, 1995 in ------------------------- Superior Court of the State of California, County of Los Angeles. 2. Lewis v. Vogelstein, et al., (Case No. 14954) filed April 23, 1996 in the --------------------------- Delaware Court of Chancery, New Castle County. E-1 EXHIBIT F Opinion Letter from Counsel to the Originator SEE ATTACHED F-1 EXHIBIT G Opinion Letter for Counsel to the Servicer SEE ATTACHED G-1 EXHIBIT H FORM OF SUBORDINATED NOTE --- SUBORDINATED NOTE March 11, 1997 1. Note. FOR VALUE RECEIVED, the undersigned, MATTEL FACTORING, ---- INC., a Delaware corporation (the "Buyer"), hereby unconditionally promises to pay to the order of [Insert name of Originator], a _________ corporation ("Originator"), in lawful money of the United States of America and in immediately available funds, on the "Collection Date" (as defined in the "Sale Agreement" referred to below) the aggregate unpaid principal sum outstanding of all "Subordinated Loans" made from time to time by Originator to Buyer pursuant to and in accordance with the terms of that certain Receivables Purchase Agreement dated as of March 13, 1997, among the Originator, various of its affiliates and the Buyer (as amended, restated, supplemented or otherwise modified from time to time, the "Sale Agreement"). Reference to Article II of ---------- the Sale Agreement is hereby made for a statement of the terms and conditions under which the loans evidenced hereby have been and will be made. All terms which are capitalized and used herein and which are not otherwise specifically defined herein shall have the meanings ascribed to such terms in the Sale Agreement. 2. Interest. The Buyer further promises to pay interest on the -------- outstanding unpaid principal amount hereof from the date hereof until payment in full hereof at a rate equal to the Base Rate; provided, however, that if the -------- ------- Buyer shall default in the payment of any principal hereof, the Buyer promises to, on demand, pay interest at the rate of the Base Rate plus 2.00% on any such unpaid amounts, from the date such payment is due to the date of actual payment. Interest shall be payable on the first Business Day of each month in arrears; provided, however, that the Buyer may elect on the date any interest payment is - -------- ------- due hereunder to defer such payment and upon such election the amount of interest due but unpaid on such date shall constitute principal under this Subordinated Note. The outstanding principal of any loan made under this Subordinated Note shall be due and payable on the Collection Date and may be repaid or prepaid at any time without premium or penalty. 3. Principal Payments. Originator is authorized and directed by the ------------------ Buyer to enter on the grid attached hereto, or, at its option, in its books and records, the date and amount of each loan made by it which is evidenced by this Subordinated Note and the amount of each payment of principal made by the Buyer, H-1 and absent manifest error, such entries shall constitute prima facie evidence of ----- ----- the accuracy of the information so entered; provided that neither the failure of -------- Originator to make any such entry or any error therein shall expand, limit or affect the obligations of the Buyer hereunder. 4. Subordination. The indebtedness evidenced by this Subordinated ------------- Note is subordinated to the prior payment in full of all of the Buyer's recourse obligations under that certain Transfer and Administration Agreement dated as of March 13, 1997, by and among the Buyer, Mattel, Inc., as initial servicer, certain financial institutions party thereto, as "the Banks," and NationsBank of Texas, N.A. as the "Agent" (as amended, restated, supplemented or otherwise modified from time to time, the "Purchase Agreement"), together with any other Permitted Accounts Receivable Financing Facilities (as defined in the Sale Agreement). The subordination provisions contained herein are for the direct benefit of, and may be enforced by, the Agent, the Banks, any other agents and purchasers under other Permitted Accounts Receivable Financing Facilities and/or any of their respective assignees (collectively, the "Senior Claimants"). Until the date on which all and all obligations of the Buyer and/or the Servicer under Permitted Accounts Receivable Financing Facilities and any "fee letters" referenced therein (all such obligations, collectively, the "Senior Claim") have ------------ been indefeasibly paid and satisfied in full, Originator shall not demand, accelerate, sue for, take, receive or accept from the Buyer, directly or indirectly, in cash or other property or by set-off or any other manner (including, without limitation, from or by way of collateral) any payment or security of all or any of the indebtedness under this Subordinated Note or exercise any remedies or take any action or proceeding to enforce the same; provided, however, that (i) Originator hereby agrees that it will not institute - -------- ------- against the Buyer any proceeding of the type described in Section 6.1(e) of the -------------- Sale Agreement unless and until the Collection Date has occurred, and (ii) nothing in this paragraph shall restrict Buyer from paying, or Originator from requesting, any payments under this Subordinated Note so long as the Buyer is not required under any of the Permitted Accounts Receivable Financing Facilities to set aside for the benefit of, or otherwise pay over to, the funds used for such payments to any of the Senior Claimants and further provided that the making of such payment would not otherwise violate the terms and provisions of the Permitted Accounts Receivable Financing Facilities. Should any payment, distribution or security or proceeds thereof be received by Originator in violation of the immediately preceding sentence, Originator agrees that such payment shall be segregated, received and held in trust for the benefit of, and deemed to be the property of, and shall be immediately paid over and delivered to the Senior Claimants. 5. Bankruptcy; Insolvency. Upon the occurrence of any Event of ---------------------- Bankruptcy involving Buyer as debtor, then and in any such event the Senior Claimants shall receive payment in full of all amounts due or to become due on or in respect of the Senior Claim before Originator is entitled to receive payment on H-2 account of this Subordinated Note, and to that end, any payment or distribution of assets of Buyer of any kind or character, whether in cash, securities or other property, in any applicable insolvency proceeding, which would otherwise be payable to or deliverable upon or with respect to any or all indebtedness under this Subordinated Note, is hereby assigned to and shall be paid or delivered by the Person making such payment or delivery (whether a trustee in bankruptcy, a receiver, custodian or liquidating trustee or otherwise) directly to the Senior Claimants for application to, or as collateral for the payment of, the Senior Claim until such Senior Claim shall have been paid in full and satisfied. 6. Amendments. This Subordinated Note shall not be amended or ---------- modified except in accordance with Section 8.1 of the Sale Agreement. ----------- 7. Governing Law. This Subordinated Note has been made and ------------- delivered at Los Angeles, California, and shall be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws and decisions of the State of California. Wherever possible each provision of this Subordinated Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Subordinated Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Subordinated Note. 8. Waivers. All parties hereto, whether as makers, endorsers, or ------- otherwise, severally waive presentment for payment, demand, protest and notice of dishonor. Originator additionally expressly waives all notice of the acceptance by any Senior Claimant of the subordination and other provisions of this Subordinated Note and expressly waives reliance by any Senior Claimant upon the subordination and other provisions herein provided. MATTEL FACTORING, INC. By:_____________________________________ Name: William Stavro Title: Senior Vice President and Treasurer H-3 SCHEDULE TO SUBORDINATED NOTE SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL --------------------------------------------
Amount of Amount Unpaid Subordinated of Principal Notation Date Loan Principal Paid Balance Made by - ---- ---- -------------- ------- ------- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ---- - ------- ------------ -------------- ---------- ----
H-4 SCHEDULE A FORM OF RECORDS LEGEND "THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO MATTEL FACTORING, INC. PURSUANT TO A RECEIVABLES PURCHASE AGREEMENT, DATED AS OF MARCH 11, 1997, AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME; AND UNDIVIDED, FRACTIONAL OWNERSHIP INTERESTS IN THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD BY MATTEL FACTORING, INC. TO CERTAIN OTHER INVESTORS PURSUANT TO A TRANSFER AND ADMINISTRATION AGREEMENT DATED AS OF MARCH 11, 1997, AS THE SAME MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME." A-1 TABLE OF CONTENTS -----------------
PAGE ---- ARTICLE I DEFINITIONS............................................................... 2 SECTION 1.1. Certain Defined Terms............................................ 2 SECTION 1.2. Other Terms...................................................... 10 SECTION 1.3. Computation of Time Periods...................................... 10 ARTICLE II PURCHASES AND SETTLEMENTS................................................ 11 SECTION 2.1. Purchases of Receivables......................................... 11 SECTION 2.2. Payment for the Purchases........................................ 12 SECTION 2.3. Purchase Price Credit Adjustments................................ 14 SECTION 2.4. Settlement as to Specific Receivables............................ 14 SECTION 2.5. Payments and Computations, Etc................................... 14 SECTION 2.6. Software License................................................. 15 SECTION 2.7. Characterization................................................. 15 SECTION 2.8. Addition of Originators.......................................... 16 SECTION 2.9. Termination of Status as an Originator........................... 16 SECTION 2.10. Effect of Merger or Consolidation of an Originator.............. 16 SECTION 2.11. Collection Account.............................................. 17 ARTICLE III REPRESENTATIONS AND WARRANTIES.......................................... 18 SECTION 3.1. Representations and Warranties of the Originators................ 18 SECTION 3.2. Representations and Warranties of Mattel, Inc.................... 21 SECTION 3.3. Reaffirmation of Representations and Warranties.................. 25 ARTICLE IV CONDITIONS PRECEDENT..................................................... 26 SECTION 4.1. Conditions to Closing............................................ 26 ARTICLE V COVENANTS................................................................. 28 SECTION 5.1. Affirmative Covenants of the Originators......................... 28 SECTION 5.2. Negative Covenants of the Originators............................ 29 SECTION 5.3. Affirmative Covenants of Mattel, Inc............................. 30 ARTICLE VI ADMINISTRATION AND COLLECTIONS........................................... 33 SECTION 6.1. Appointment of Servicer.......................................... 33 SECTION 6.2. Duties of Servicer and Buyer..................................... 33 SECTION 6.3. Rights After Designation of New Servicer......................... 34 SECTION 6.4. Responsibilities of the Originators.............................. 35 ARTICLE VII SERVICER DEFAULT AND TERMINATION EVENTS................................. 36 SECTION 7.1. Servicer Default................................................. 36
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PAGE ---- SECTION 7.2. Servicer Default Remedies........................................ 36 SECTION 7.3. Termination Events............................................... 36 SECTION 7.4. Termination Event Remedies....................................... 37 SECTION 7.5. Potential Termination Event Remedies............................. 38 ARTICLE VIII INDEMNIFICATION; EXPENSES; RELATED MATTERS............................. 39 SECTION 8.1. Indemnities by the Originator.................................... 39 SECTION 8.2. Indemnity for Taxes, Reserves and Expenses....................... 40 SECTION 8.3. Other Costs, Expenses and Related Matters........................ 41 SECTION 8.4. Reconveyance Under Certain Circumstances......................... 41 ARTICLE IX MISCELLANEOUS............................................................ 43 SECTION 9.1. Term of Agreement................................................ 43 SECTION 9.2. Waivers; Amendments.............................................. 43 SECTION 9.3. Notices.......................................................... 43 SECTION 9.4. Governing Law; Integration....................................... 44 SECTION 9.5. Severability; Counterparts....................................... 45 SECTION 9.6. Successors and Assigns........................................... 45 SECTION 9.7. Confidentiality.................................................. 45 SECTION 9.8. Characterization of the Transactions Contemplated by the Agreement..................................................... 46 SECTION 9.9. Assignments...................................................... 46
ii EXHIBITS -------- EXHIBIT A Form of Written Agreement EXHIBIT B List of Actions, Suits and Proceedings against the Originators EXHIBIT C Location of Records EXHIBIT D List of Tradenames EXHIBIT E List of Actions, Suits and Proceedings against the Servicer EXHIBIT F Form of Opinion of Counsel to the Originators EXHIBIT G Form of Opinion of Counsel for the Servicer EXHIBIT H Form of Subordinated Note SCHEDULES --------- SCHEDULE A Form of Records Legend iii -----END PRIVACY-ENHANCED MESSAGE-----