<PAGE>
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: August 21, 1998
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)
<PAGE>
Information to be included in the Report
----------------------------------------
Item 7. Financial Statements and Exhibits
- ------- ---------------------------------
(a) Financial statements of businesses acquired: None
(b) Pro forma financial information: None
(c) Exhibits:
99.0 Second Amended and Restated Credit Agreement
dated as of March 11, 1998 among the Company,
the Banks named therein and Bank of America
National Trust and Savings Association, as
Agent
99.1 Receivables Purchase Agreement dated as of
March 11, 1998 among the Company, Mattel
Factoring, Inc., the Banks named therein and
NationsBank of Texas, N.A., as Agent
99.2 Employment Agreement dated May 5, 1997 between
the Company and Gary S. Baughman
99.3 Mattel, Inc. Personal Investment Plan,
April 1, 1997 Restatement
<PAGE>
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/ Robert Normile
-------------------------
Robert Normile
Date: August 21, 1998 Vice President,
--------------- Associate General Counsel
and Secretary
<PAGE>
EXHIBIT 99.0
================================================================================
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of March 11, 1998
among
MATTEL, INC.,
THE BANKS NAMED HEREIN,
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
[LOGO OF BANK OF AMERICA]
Arranged by
BancAmerica ROBERTSON STEPHENS
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
MATTEL INC.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS.............................................................. 1
1.1 CERTAIN DEFINED TERMS....................................................... 1
1.2 OTHER DEFINITIONAL PROVISIONS............................................... 12
SECTION 2. THE COMMITMENTS.......................................................... 12
2.1 THE AGGREGATE FACILITIES COMMITMENT......................................... 12
2.2 LOAN ACCOUNTS AND NOTES..................................................... 12
2.3 BORROWING PROCEDURE......................................................... 13
2.4 CONVERSION AND CONTINUATION ELECTIONS....................................... 13
2.5 ADJUSTMENTS OF AGGREGATE LOAN COMMITMENT AND PURCHASERS' INVESTMENT LIMIT... 15
2.6 VOLUNTARY PREPAYMENTS....................................................... 16
2.7 REPAYMENT OF LOANS.......................................................... 16
2.8 INTEREST ON THE LOANS....................................................... 16
2.9 FEES........................................................................ 16
2.10 CALCULATION OF INTEREST AND FEES............................................ 17
2.11 PAYMENTS BY THE COMPANY..................................................... 17
2.12 PAYMENTS BY THE BANKS TO THE AGENT.......................................... 18
2.13 SHARING OF PAYMENTS, ETC.................................................... 19
SECTION 3. PAYMENTS IN GENERAL...................................................... 20
3.1 TAXES....................................................................... 21
3.2 CAPITAL ADEQUACY............................................................ 21
3.3 ILLEGALITY.................................................................. 22
3.4 INCREASED COSTS AND REDUCTION OF RETURN..................................... 22
3.5 FUNDING LOSSES.............................................................. 23
3.6 INABILITY TO DETERMINE RATES................................................ 23
3.7 SURVIVAL.................................................................... 23
SECTION 4. CONDITIONS PRECEDENT..................................................... 24
4.1 CONDITIONS TO EFFECTIVENESS................................................. 24
4.2 CONDITIONS TO ALL LOANS..................................................... 25
SECTION 5. REPRESENTATIONS AND WARRANTIES........................................... 26
5.1 ORGANIZATION AND POWERS..................................................... 26
5.2 GOOD STANDING............................................................... 26
5.3 MATERIAL SUBSIDIARIES....................................................... 26
5.4 AUTHORIZATION OF BORROWING.................................................. 26
5.5 NO CONFLICT................................................................. 26
5.6 GOVERNMENTAL CONSENTS....................................................... 27
5.7 BINDING OBLIGATION.......................................................... 27
5.8 FINANCIAL CONDITION......................................................... 27
5.9 CHANGES, ETC................................................................ 27
5.10 TITLE TO PROPERTIES......................................................... 27
5.11 LITIGATION; ADVERSE FACTS................................................... 27
5.12 PAYMENT OF TAXES............................................................ 28
5.13 AGREEMENTS.................................................................. 28
5.14 PERFORMANCE................................................................. 28
5.15 GOVERNMENTAL REGULATION..................................................... 28
5.16 EMPLOYEE BENEFIT PLANS...................................................... 28
5.17 ENVIRONMENTAL MATTERS....................................................... 28
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
5.18 DISCLOSURE.................................................................. 29
5.19 SUBORDINATION AGREEMENTS.................................................... 29
SECTION 6. AFFIRMATIVE COVENANTS.................................................... 29
6.1 REPORTING AND INFORMATION REQUIREMENTS...................................... 29
6.2 CORPORATE EXISTENCE, ETC.................................................... 32
6.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.............................. 32
6.4 MAINTENANCE OF PROPERTIES; INSURANCE........................................ 32
6.5 INSPECTION OF PROPERTY AND BOOKS AND RECORDS................................ 32
6.6 USE OF PROCEEDS OF LOANS.................................................... 33
6.7 ENVIRONMENTAL LAWS.......................................................... 33
6.8 SUBORDINATION AGREEMENTS.................................................... 33
SECTION 7. NEGATIVE COVENANTS....................................................... 33
7.1 SECURED INDEBTEDNESS........................................................ 33
7.2 LIENS....................................................................... 33
7.3 RESTRICTION ON FUNDAMENTAL CHANGES.......................................... 34
7.4 SALE OR DISCOUNT OF RECEIVABLES............................................. 34
7.5 CONSOLIDATED FUNDED INDEBTEDNESS TO TOTAL CAPITALIZATION.................... 35
7.6 INTEREST COVERAGE RATIO..................................................... 35
7.7 ERISA....................................................................... 35
7.8 MARGIN REGULATIONS.......................................................... 35
7.9 INDEPENDENCE OF COVENANTS................................................... 35
SECTION 8........................................................................... 36
8.1 EVENTS OF DEFAULT........................................................... 36
8.2 REMEDIES.................................................................... 38
8.3 RIGHTS NOT EXCLUSIVE........................................................ 38
SECTION 9. THE AGENT................................................................ 39
9.1 APPOINTMENT AND AUTHORIZATION............................................... 39
9.2 DELEGATION OF DUTIES........................................................ 39
9.3 LIABILITY OF AGENT.......................................................... 39
9.4 RELIANCE BY AGENT........................................................... 39
9.5 NOTICE OF DEFAULT........................................................... 40
9.6 CREDIT DECISION............................................................. 40
9.7 INDEMNIFICATION............................................................. 41
9.8 AGENT IN INDIVIDUAL CAPACITY................................................ 41
9.9 SUCCESSOR AGENT............................................................. 42
SECTION 10. MISCELLANEOUS........................................................... 42
10.1 ASSIGNMENTS, PARTICIPATIONS, ETC............................................ 42
10.2 SURVIVAL OF WARRANTIES AND OF CERTAIN AGREEMENTS............................ 44
10.3 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE....................... 44
10.4 FEES AND EXPENSES........................................................... 45
10.5 SET OFF..................................................................... 45
10.6 NOTICES..................................................................... 45
10.7 SEVERABILITY................................................................ 45
10.8 AMENDMENTS AND WAIVERS...................................................... 46
10.9 OBLIGATIONS SEVERAL......................................................... 46
10.10 CERTAIN CHANGES............................................................. 46
10.11 HEADINGS.................................................................... 47
10.12 APPLICABLE LAW.............................................................. 47
10.13 SUCCESSORS AND ASSIGNS...................................................... 47
10.14 COUNTERPARTS................................................................ 47
10.15 INDEMNITY................................................................... 47
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
10.16 AMENDMENT AND RESTATEMENT................................................... 48
SIGNATURE PAGES S-1
</TABLE>
-iii-
<PAGE>
EXHIBITS
Form of:
A Note
B Notice of Borrowing
C Notice of Conversion/Continuation
D Officers' Certificate
E Opinion of Assistant General Counsel of Company
F-1 Fisher-Price Continuing Guaranty
F-2 Mattel Sales Continuing Guaranty
G-1 Fisher-Price Subordination Agreements
G-2 Mattel Sales Subordination Agreements
H Change in Commitments
I 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
-iv-
<PAGE>
MATTEL, INC.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is
dated as of March 11, 1998 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 and restated by
a First Amended and Restated Credit Agreement dated as of March 13, 1997 (as so
amended and restated, 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 further 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 further 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.
"Agent" has the meaning assigned to that term in the introduction to this
-----
Agreement.
"Agent-Related Persons" means Agent 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.
-1-
<PAGE>
"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.
"Agreement" means this Credit Agreement, as it may hereafter be amended,
---------
supplemented, restated or otherwise modified from time to time.
"Applicable Amount" means the commitment fee or the margin applicable to
-----------------
Eurodollar Rate Loans (expressed in basis points per annum) set forth in the
chart below opposite the second highest rating issued by S&P, Moody's or Duff &
Phelps on Borrower's senior unsecured long-term debt:
<TABLE>
<CAPTION>
SENIOR UNSECURED LONG-TERM COMMITMENT EURODOLLAR RATE
DEBT RATINGS FEE LOANS +
--------------------------------------------------------------------------------
<S> <C> <C>
A or higher by S&P 6.50 20.00
A2 or higher by Moody's
A or higher by Duff & Phelps
--------------------------------------------------------------------------------
A- or higher by S&P 7.50 22.50
A3 or higher by Moody's
A- or higher by Duff & Phelps
--------------------------------------------------------------------------------
BBB+ or higher by S&P 9.00 27.50
Baa1 or higher by Moody's
BBB+ or higher by Duff & Phelps
--------------------------------------------------------------------------------
BBB or higher by S&P 11.00 32.50
Baa2 or higher by Moody's
BBB or higher by Duff & Phelps
--------------------------------------------------------------------------------
BBB- or higher by S&P 15.00 37.50
Baa3 or higher by Moody's
BBB- or higher by Duff & Phelps
--------------------------------------------------------------------------------
None of above criteria satisfied 25.00 62.50
--------------------------------------------------------------------------------
</TABLE>
Any change in the commitment fee or the margin applicable to Eurodollar
Rate Loans shall become effective upon any public announcement of any change in
the above ratings that requires such a change according to the above chart.
-2-
<PAGE>
"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, San Francisco, California or
Dallas, Texas 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.
"Change in Commitment Notice" means a notice substantially in the form of
---------------------------
Exhibit H hereto with respect to a reallocation of Commitments.
"Combined Purchasers' Investments" means an amount equal to the sum of (a)
--------------------------------
the Purchasers' Investments under the Receivables Purchase 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 Purchasers'
----------
Investment Limit (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
-3-
<PAGE>
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 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.
-------
-4-
<PAGE>
"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 11, 1998 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 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,
-5-
<PAGE>
"Eurodollar Reserve Percentage" means the maximum reserve percentage
-----------------------------
(expressed as a decimal rounded upward to the next 1/100 of one percent) in
effect on the date LIBOR for such Interest Period is determined (whether or
not applicable to any Bank) under regulations issued from time to time by
the Federal Reserve Board for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred to as
"Eurocurrency Liabilities") having a term equal to such Interest Period;
and
"LIBOR" means the rate of interest per annum determined by the Agent
-----
to be the arithmetic mean (rounded upward to the nearest 1/16th of 1%) of
the rates of interest per annum notified to the Agent by each Reference
Bank as the rate of interest at which dollar deposits in the approximate
amount of the amount of the Loan to be made or continued as, or converted
into, a Eurodollar Rate Loan by such Reference Bank and having a maturity
comparable to such Interest Period would be offered to major banks in the
London interbank market at their request at or about 11:00 a.m. (London
time) on the second Business Day prior to the commencement of such Interest
Period.
"Event of Default" means any of the events set forth in Section 8.1.
----------------
"Exchange Act" means, at any time, the Securities Exchange Act of 1934, as
------------
amended from time to time, and any successor statute, and the rules and
regulations promulgated thereunder.
"Existing Credit 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 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.
-6-
<PAGE>
"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 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 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 Eurodollar Rate Loan exceeds three months, respectively, interest
shall also be paid on the date which falls three months after the beginning of
such Interest Period.
"Interest Period" means, 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; provided that:
--------
-7-
<PAGE>
(i) if any Interest Period pertaining to a Eurodollar 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 the
result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on
the immediately preceding Business Day;
(ii) any Interest Period pertaining to a Eurodollar Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period; and
(iii) no Interest Period shall extend beyond the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
---------------------
to the date hereof and from time to time hereafter, and the rules and
regulations promulgated thereunder.
"Lending Office" means, with respect to any Bank, the office or offices of
--------------
the Bank specified as its "Lending Office" or "Domestic Lending Office" or
"Eurodollar Lending Office," as the case may be, opposite its name on Schedule
10.6 hereto, or such other office or offices of the Bank as it may from time to
time specify to the Company and the Agent in writing.
"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 Receivables Purchase 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.
"Material Subsidiary" means a Subsidiary of the Company, including its
-------------------
Subsidiaries, which meets any of the following conditions:
-8-
<PAGE>
(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.
------------
"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.
-------
-9-
<PAGE>
"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 Receivables Purchase 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 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.
"Percentage" has the meaning set forth in the Receivables Purchase
----------
Agreement.
-10-
<PAGE>
"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.
"Purchasers" has the meaning set forth in the Receivables Purchase
----------
Agreement.
"Purchaser Commitment" means, for each Bank, the amount set forth for each
--------------------
Bank under "Purchaser Commitment" on Schedule 1.1, as such amount may be
adjusted under Section 2.5 and the Receivables Purchase Agreement.
"Purchasers' Investment" has the meaning set forth in the Receivables
----------------------
Purchase Agreement.
"Purchasers' Investment Limit" means the amount set forth opposite "Total"
----------------------------
under "Purchaser Commitment" on Schedule 1.1, as such amount may be adjusted
pursuant to Section 2.5.
"Receivables Purchase Agent" means NationsBank of Texas, N.A. in its
--------------------------
capacity as agent under the Receivables Purchase Agreement.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
------------------------------
dated as of March 11, 1998, among Mattel Factoring, Inc., as transferor, the
Company, as guarantor and servicer, the Purchasers and the Receivables Purchase
Agent, as it may be amended, supplemented, restated or otherwise modified from
time to time.
"Reference Banks" means Bank of America and NationsBank of Texas, N.A.
---------------
Subject to Section 3.6, in the event that at any time of determination only one
Bank designated as a Reference Bank is providing rates for deposits referred to
in the definition of "Eurodollar Rate," such 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 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 the Requisite Purchasers (as defined in the Receivables
Purchase Agreement).
-11-
<PAGE>
"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 Service, a division of McGraw-Hill,
---
Inc., a corporation.
"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, 2003.
----------------
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 Receivables Purchase Agreement in an amount not exceeding such Bank's
Purchaser Commitment during the period from the Closing Date (as defined in the
Receivables Purchase Agreement) to but excluding the Facility Termination Date
(as defined in the Receivables Purchase Agreement); provided, however, that:
-------- -------
(i) the outstanding principal amount of all Loans hereunder shall not exceed the
Aggregate Loan Commitment; (ii) the aggregate amount of the Purchasers'
Investments shall not exceed the Purchasers' Investment Limit; (iii) the
Aggregate Loan Commitment and the Purchasers' Investment Limit 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 Receivables Purchase 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
-12-
<PAGE>
so shall not, however, limit or otherwise affect the obligation of the Company
hereunder to pay any amount owing with respect to the Loans.
(b) Upon the written request of any Bank made through the Agent, the
Loans made by such Bank may be evidenced by one or more Notes, instead of loan
accounts. Each such Bank shall endorse on the schedules annexed to its Note(s),
the date, amount and maturity of each Loan made by it and the amount of each
payment of principal made by the Company with respect thereto. Each such Bank is
irrevocably authorized by the Company to endorse its Note(s) and each Bank's
record shall be conclusive absent manifest error; provided, however, that the
-------- -------
failure of a Bank to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the obligations of the
Company hereunder or under any such Note to such Bank.
2.3 BORROWING PROCEDURE.
(a) Whenever the Company desires to borrow hereunder, it shall deliver
irrevocable telephonic notice to the Agent followed immediately by written
notice in the form of a Notice of Borrowing, which telephonic notice must be
received by the Agent no later than (i) 8:00 a.m. (San Francisco time) on the
proposed Funding Date in the case of Base Rate Loans and (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, 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 or Eurodollar
Rate Loans, and (D) in the case of Eurodollar 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 made on any Funding Date shall be in an
aggregate minimum amount of $5,000,000 and integral multiples of $500,000 in
excess of that amount.
(b) Promptly (and normally within two hours) after receipt of a Notice
of Borrowing (or telephone notice in lieu thereof), the Agent shall notify each
Bank of the proposed borrowing. Each Bank shall make available to the Agent its
Pro Rata Share of the amount (if any) by which the principal amount of the
proposed borrowing exceeds the principal amount of the Loans (if any) maturing
on the Funding Date, in same day funds, by remitting such funds to: Bank of
America National Trust and Savings Association, ABA No. 121-000-358, Attn:
Agency Management Services No. 5596 For credit to: BANCONTROL Account No.
12358-88449, Reference: Mattel, Inc. at the office of Bank of America located
at 1850 Gateway Boulevard, Concord, California 94520, no later than 11:00 a.m.
(San Francisco time) on the Funding Date. Upon satisfaction of the conditions
set forth in Section 4.2, the Agent shall make available to the Company on such
Funding Date the aggregate of the amounts (if any) so made available by the
Banks by causing an amount of same day funds equal to such aggregate amount (if
any) received by the Agent to be credited to the account of the Company at such
office of Bank of America. To the extent that Eurodollar Rate Loans 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.
-13-
<PAGE>
(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; (ii) elect to convert any Eurodollar
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 (iii) elect to continue any
Eurodollar 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 shall have been reduced, by payment, prepayment, or conversion of
part thereof to be less than $5,000,000, the Eurodollar 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 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 and (ii) 9:00
a.m. (San Francisco time) on the conversion or continuation date, if the Loans
are to be converted into Base Rate Loans, specifying: (A) the proposed
conversion or continuation date; (B) the aggregate amount of Loans to be
converted or continued; (C) the nature of the proposed conversion or
continuation; and (D) the duration of the requested Interest Period, if
applicable.
(c) If upon the expiration of any Interest Period applicable to
Eurodollar Rate Loans, the Company has failed to select a new Interest Period to
be applicable to such Eurodollar 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 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.
(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.
-14-
<PAGE>
2.5 ADJUSTMENTS OF AGGREGATE LOAN COMMITMENT AND PURCHASERS' INVESTMENT
LIMIT.
(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 Purchasers' Investment Limit. 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 Purchasers'
Investment Limit to the Aggregate Loan Commitment and/or (ii) reallocate the
Aggregate Loan Commitment to the Purchasers' Investment Limit; 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 Purchasers' Investment Limit may not exceed the amount set
forth opposite "Total" under "Purchaser Commitment" on Schedule 1.1 at any time,
and (z) the Aggregate 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
Purchasers' Investment Limit 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 Receivables Purchase Agent
thereof. In the case of any reduction, termination or reallocation of
the Purchasers' Investment Limit, the Agent shall directly contact the
Receivables Purchase 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 Purchasers' Investment would
exceed the Purchasers' Investment Limit.
-15-
<PAGE>
(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) (which notice the Agent will
promptly transmit by telecopy, telex or telephone to each Bank), at any time and
from time to time prepay (i) any Eurodollar Rate Loans 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,
- --------
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, as determined
by the Agent. All prepayments of Eurodollar 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) 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. 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
-16-
<PAGE>
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 February 3, 1998 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 made without setoff, counterclaim,
recoupment or any other deduction, in same day funds and delivered to the Agent
for credit to:
Bancontrol Account No. 12358-88449
Reference: Mattel, Inc.
1850 Gateway Boulevard
Concord, California 94520
for the account of the Banks or the Agent not later than 11:00 a.m. (San
Francisco time) on the date due. The Agent will promptly distribute to each
Bank its Pro Rata Share (or other applicable share as expressly provided herein)
of such principal, interest, fees or other amounts in like funds received. Any
payment which is received by the Agent after that time shall be deemed to have
been paid by the Company on the next succeeding Business Day and any applicable
interest or fee shall continue to accrue.
(b) Subject to the provisions in the definition of "Interest Period",
whenever any payment hereunder shall be stated 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.
-17-
<PAGE>
(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 by 10:00 a.m. (San Francisco
time) on the date of any proposed borrowing of Base Rate Loans, that such Bank
will not make available to the Agent as and when required hereunder for the
account of the Company the amount of that Bank's Pro Rata Share of the
borrowing, the Agent may assume that each Bank has made such amount available to
the Agent in immediately available funds on the Funding Date and the Agent may
(but shall not be so required), in reliance upon such assumption, make available
to the Company on such date a corresponding amount. If and to the extent any
Bank shall not have made its full amount available to the Agent in immediately
available funds and the Agent in such circumstances has made available to the
Company such amount, that Bank shall on the next Business Day following the date
of such borrowing make such amount available to the Agent, together with
interest at the Federal Funds Rate for and determined as of each day during such
period. A notice of the Agent submitted to any Bank with respect to amounts
owing under this Section 2.12(a) shall be conclusive, absent manifest error. If
such amount is so made available, such payment to the Agent shall constitute
such Bank's Loan on the date of borrowing for all purposes of this Agreement.
If such amount is not made available to the Agent on the next Business Day
following the date of such borrowing, the Agent shall notify the Company of such
failure to fund and, upon demand by the Agent, the Company shall pay such amount
to the Agent for the 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
-18-
<PAGE>
(a) notify the Agent of such fact, and (b) purchase from the other Banks such
participations in the Loans made by them as shall be necessary to cause such
purchasing Bank to share the excess payment ratably with each of them; provided,
--------
however, that if all or any portion of such excess payment is thereafter
- -------
recovered from the purchasing Bank, such purchase shall to that extent be
rescinded and each other Bank shall repay to the purchasing Bank the purchase
price paid therefor, together with an amount equal to such paying Bank's Pro
Rata Share (according to the proportion of (i) the amount of such paying Bank's
required repayment to (ii) the total amount so recovered from the purchasing
Bank) of any interest or other amount paid or payable by the purchasing Bank in
respect of the total amount so recovered. The Company agrees that any Bank so
purchasing a participation from another Bank pursuant to this Section 2.13 may,
to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Bank were the direct creditor of the Company in the amount of such
participation. The Agent will keep records (which shall be conclusive and
binding in the absence of manifest error) of participations purchased pursuant
to this Section 2.13 and will in each case notify the Banks following any such
purchases or repayments.
SECTION 3
PAYMENTS IN GENERAL.
3.1 TAXES.
(a) Subject to Section 3.1(d) and Section 3.1(g), any and all payments
by the Company to each Bank or the Agent under this Agreement shall be made free
and clear of, and without deduction or withholding for, any and all present or
future 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.
-19-
<PAGE>
(d) If the Company shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank
or the Agent, then, subject to Section 3.1(g): (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 3.1) such
Bank or the Agent, as the case may be, receives an amount equal to the sum it
would have received had no such deductions been made; (ii) the Company shall
make such deductions, and (iii) the Company shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.
(e) Within 30 days after the date of any payment by the Company of
Taxes or Other Taxes, the Company shall furnish to the Agent the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to the Agent.
(f) Each Bank which is a foreign person (i.e., a person other than a
United States person for United States Federal income tax purposes) agrees that:
(i) it shall, no later than the Effective Date (or, in the case of a Bank which
becomes a party hereto after the Effective Date, the date upon which the Bank
becomes a party hereto) deliver to the Company and the Agent: (A) if any
Lending Office is located in the United States, two accurate and complete signed
originals of Internal Revenue Service Form 4224 or any successor thereto ("Form
4224"), and (B) if any Lending Office is located outside the United States, two
accurate and complete signed originals of Internal Revenue Service Form 1001 or
any successor thereto ("Form 1001"), in each case indicating that the Bank is on
the date of delivery thereof entitled to receive payments of principal, interest
and fees for the account of such Lending Office or Offices under this Agreement
free from withholding of United States Federal income tax; (ii) if at any time
the Bank changes its Lending Office or Offices or selects an additional Lending
Office as herein provided, it shall with reasonable promptness deliver to the
Company and the Agent in replacement for, or in addition to, the forms
previously delivered by it hereunder: (A) if such changed or additional Lending
Office is located in the United States, two accurate and complete signed
originals of Form 4224; or (B) otherwise, two accurate and complete signed
originals of Form 1001, in each case indicating that the Bank is on the date of
delivery thereof entitled to receive payments of principal, interest and fees
for the account of such changed or additional Lending Office under this
Agreement free from withholding of United States Federal income tax; (iii) it
shall, before or promptly after the occurrence of any event (including the
passing of time but excluding any event mentioned in (ii) above) requiring a
change in the most recent Form 4224 or Form 1001 previously delivered by such
Bank and if the delivery of the same be lawful, deliver to the Company and the
Agent two accurate and complete original signed copies of Form 4224 or Form 1001
in replacement for the forms previously delivered by the Bank; and (iv) it
shall, promptly upon the Company's reasonable request to that effect, deliver to
the Company and the Agent such other forms or similar documentation as may be
required from time to time by any applicable law, treaty, rule or regulation in
order to establish such Bank's tax status for withholding purposes.
(g) The Company will not be required to pay any additional amounts in
respect of United States Federal income tax pursuant to Section 3.1(d) to any
Bank for the account of any Lending Office of such Bank: (i) if the obligation
to pay such additional amounts would not have arisen but for a failure by such
Bank to comply with its obligations under Section 3.1(f) in respect of such
Lending Office; (ii) if such Bank shall have delivered to the Company a
-20-
<PAGE>
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.
(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
-21-
<PAGE>
attribution and averaging methods. The Bank shall from time to time notify the
Company of the amount so determined. Such amount shall be due and payable by the
Company to such Bank ten Business Days after such notice is given. As soon as
practicable after any Change in Law, each Bank shall submit to the Company
estimates of the Capital Compensation Amounts that would be payable as a
function of such Bank's commitments hereunder.
3.3 ILLEGALITY.
(a) If any Bank shall determine that any Governmental Rule or any
change therein or in the interpretation or administration thereof has made it
unlawful, or that any Governmental Person has asserted that it is unlawful, for
any Bank or its Lending Office to make Eurodollar Rate Loans, then, on notice
thereof by the Bank to the Company through the Agent, the obligation of the Bank
to make Eurodollar Rate Loans shall be suspended until the Bank shall have
notified the Agent and the Company that the circumstances giving rise to such
determination no longer exists.
(b) If a Bank shall determine that any Governmental Rule or any change
therein or in the interpretation or administration thereof has made it unlawful,
or that any Governmental Person has asserted that it is unlawful, for any Bank
or its Lending Office to maintain any Eurodollar Rate Loan, the Company shall
prepay all Eurodollar Rate Loans of the Bank then outstanding, together with
interest accrued thereon, or convert all Eurodollar Rate Loans of the Bank then
outstanding to 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 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 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, 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
-22-
<PAGE>
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 (including payments made
after any acceleration thereof); (b) the failure of the Company to borrow,
continue or convert a Loan after the Company has given (or is deemed to have
given) a Notice of Borrowing or a Notice of Conversion/ Continuation; (c) the
failure of the Company to make any prepayment after the Company has given a
notice in accordance with Section 2.6; or (d) the prepayment of a Eurodollar
Rate Loan 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
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, 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. 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 if the Requisite Banks advise the Agent
in writing that the Eurodollar Rate applicable for any requested Interest Period
with respect to a proposed Eurodollar 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 hereunder
shall be suspended until the Agent upon the instruction of the Requisite Banks
revokes such notice in writing. Upon receipt of such notice, the Company may
revoke any Notice of Borrowing or Notice of Conversion/ Continuation then
submitted by it. If the Company does not revoke such notice with respect to
Loans, the Banks shall make, convert or continue the Loans, as proposed by the
Company, in the amount specified in the applicable notice submitted by the
Company, but such Loans shall be made, converted or continued as Base Rate Loans
instead of Eurodollar Rate Loans.
3.7 SURVIVAL. The agreements and obligations of the Company in this
Section 3 shall survive the payment of all other Obligations.
-23-
<PAGE>
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) To the extent different from that delivered in connection with the
Existing Credit Agreement, 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;
(b) To the extent different from that delivered in connection with the
Existing Credit Agreement, 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) To the extent different from that delivered in connection with the
Existing Credit Agreement, 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;
(f) To the extent different from that delivered in connection with the
Existing Credit Agreement, copies of the Bylaws of Fisher-Price, certified as of
the Effective Date by its corporate secretary or an assistant secretary;
(g) To the extent different from that delivered in connection with the
Existing Credit Agreement, 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;
(h) To the extent different from that delivered in connection with the
Existing Credit Agreement, copies of the Bylaws of Mattel Sales, certified as of
the Effective Date by its corporate secretary or an assistant secretary;
(i) Executed copies of this Agreement and, as requested by any Bank,
executed Notes drawn to the order of such Bank and with appropriate insertions;
-24-
<PAGE>
(j) A certificate or other evidence from the Receivables Purchase
Agent that the Receivables Purchase Agreement shall have been, or concurrently
herewith is being, duly executed and delivered and all conditions precedent to
the initial purchase thereunder shall have been, or concurrently herewith are
being, satisfied or waived by the Banks;
(k) 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;
(l) 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 and
Duff & Phelps;
(m) Payment of all fees payable pursuant to Section 2.9(b);
(n) An acknowledgement signed by Fisher-Price and Mattel Sales
consenting to the amendment and restatement of the Existing Credit Agreement on
the terms of this Agreement; and
(o) 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
4.2 CONDITIONS TO ALL LOANS. The obligation of each Bank to make any
Loan is subject to the following further conditions precedent that, as of the
applicable Funding Date:
(a) The Agent shall have received on or before that Funding Date a
Notice of Borrowing signed by the Chief Executive Officer, the Chief Financial
Officer, the Treasurer or an Assistant Treasurer of the Company or any officer
of the Company designated by any of the above described officers on behalf of
the Company in writing delivered to the Agent;
(b) The representations and warranties of the Company contained in any
Loan Document (except the representation and warranty contained in Section 5.9
and, in the case of a borrowing of Loans where the aggregate principal amount of
the Loans being made on that Funding Date equals or is less than the aggregate
principal amount of Loans maturing on that Funding Date, the representation and
warranty contained in Section 5.11), shall be true, correct and complete in all
material respects on and as of that Funding Date, to the same extent as though
made on and as of that Funding Date; and
(c) No Default or Event of Default shall exist or shall result from
such borrowing or continuation or conversion.
Each Notice of Borrowing submitted by the Company hereunder shall
constitute a representation and warranty by the Company hereunder, as of the
Funding Date, that the conditions in Section 4.2 are satisfied.
-25-
<PAGE>
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 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.
-26-
<PAGE>
5.6 GOVERNMENTAL CONSENTS. The execution, delivery and performance by
the Company of each Loan Document to which it is a party and each agreement,
document, or instrument required hereunder, the acknowledgment of the Fisher-
Price Subordination Agreement, Mattel Sales Subordination Agreement, and the
issuance, delivery and payment of the Notes do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any Federal, state or other governmental authority or regulatory
body or other such person.
5.7 BINDING OBLIGATION. This Agreement is, and each other Loan Document
to which it is a party, when executed and delivered hereunder will be, the
legally valid and binding obligations of the Company, enforceable against it in
accordance with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable
principles relating to or limiting creditors' rights generally.
5.8 FINANCIAL CONDITION. The Company has heretofore delivered to the
Banks a consolidated balance sheet of the Company and its Subsidiaries for the
fiscal year ended December 31, 1996 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, 1996, 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, 1996 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
-27-
<PAGE>
Adverse Effect and there is no basis known to such executive officers for any
such action, suit or proceeding. Neither the Company nor any of its Subsidiaries
is (i) in violation of any applicable law which could result in a Material
Adverse Effect, or (ii) subject to or in default with respect to any final
judgment, writ, injunction, decree, rule or regulation of any court or Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, which could result in a Material
Adverse Effect. There is no action, suit, proceeding or investigation pending
or, to the knowledge of the Company, threatened against or affecting the Company
or any of its Subsidiaries which provides a reasonable basis for questioning the
validity or the enforceability of any Loan Document.
5.12 PAYMENT OF TAXES. All tax returns and reports of the Company and its
Material Subsidiaries required to be filed by any of them have been timely
filed, and all taxes, assessments, fees and other governmental charges upon the
Company and its Subsidiaries and upon their respective properties, assets,
income and franchises which are due and payable have been paid when due and
payable or bonded against, except to the extent permitted by Section 6.3. The
Company knows of no proposed tax assessment against it or any of its
Subsidiaries that would result in a Material Adverse Effect.
5.13 AGREEMENTS. Neither the Company nor any of its Subsidiaries is a
party to or is subject to any material agreement or instrument or charter or
other internal restriction which results in a Material Adverse Effect.
5.14 PERFORMANCE. Neither the Company nor any of its Subsidiaries is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Contractual Obligation of the Company,
and no condition exists which, with the giving of notice or the lapse of time or
both, would constitute such a default, except, in any such case, where the
consequences, direct or indirect, of such default or defaults, if any, would not
result in a Material Adverse Effect.
5.15 GOVERNMENTAL REGULATION. Neither the Company nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940 or to any Federal or state statute or regulation
limiting its ability in any material way to incur Indebtedness for money
borrowed.
5.16 EMPLOYEE BENEFIT PLANS. The Company and each of its ERISA Affiliates
is in compliance in all material respects with any applicable provisions of
ERISA and the regulations and published interpretations thereunder with respect
to all Pension Plans. Neither the Company nor any of its ERISA Affiliates has
participated in or participates in any Multiemployer Plan the withdrawal from
which may result in any liability to any party in an amount in excess of
$1,000,000.
5.17 ENVIRONMENTAL MATTERS. The Company conducts in the ordinary course
of business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that such Environmental Laws and
Environmental Claims could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
-28-
<PAGE>
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, 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 the Company in the case of any
document or fact not furnished by it) necessary in order to make the statements
contained herein or therein not misleading except to the extent that any such
statement or omission that was untrue or misleading at the time made or that
subsequently became untrue or misleading has been superseded or corrected by
information provided to the Banks prior to the date of this Agreement. The
projections and pro forma financial information contained in such written
materials are based upon good faith estimates and assumptions believed by the
Company to be reasonable at the time made, it being recognized by the Banks that
such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There is no fact known to the officers of
the Company as of the date of this Agreement (other than matters of a general
economic nature) which materially adversely affects the business, operations,
property, assets or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, which has not been disclosed herein or in the
written materials referred to in Section 5.8 other than as disclosed in writing
to the Banks on or before the date hereof.
5.19 SUBORDINATION AGREEMENTS. Neither Fisher-Price nor Mattel Sales has
any material outstanding obligations to any Affiliate of the Company which has
not signed a Fisher-Price Subordination Agreement or a Mattel Sales
Subordination Agreement, respectively.
SECTION 6
AFFIRMATIVE COVENANTS.
The Company agrees from the Effective Date until payment in full of all
Obligations and termination of the Aggregate Facilities Commitment and the
Receivables Purchase 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
-29-
<PAGE>
Subsidiaries as at the dates indicated and the results of their operations for
the periods indicated, subject to changes resulting from year-end audit and
normal year-end adjustments;
(b) as soon as practicable and in any event not later than 100 days
after the end of each fiscal year of the Company, consolidated and consolidating
balance sheets of the Company and its Subsidiaries as at the end of such year
and the related consolidated (and, as to statements of income only, consolidated
and consolidating) statements of income, stockholders' equity and cash flow of
the Company and its Subsidiaries for such fiscal year, setting forth in each
case, in comparative form the consolidated figures for the previous year, all in
reasonable detail and (i) in the case of such consolidated financial statements,
accompanied by a report thereon of Price Waterhouse or other independent
accountants of recognized national standing selected by the Company which report
shall state that such consolidated financial statements present fairly the
financial position of the Company and its Subsidiaries as at the dates indicated
and the results of their operations and their cash flow for the periods
indicated in conformity with GAAP and that the examination by such accountants
in connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards and (ii) in the case of
such consolidating financial statements, certified by the chief financial or
accounting officer of the Company;
(c) together with each delivery of financial statements of the Company
and its Subsidiaries pursuant to clauses (a) and (b) above, an Officers'
Certificate (i) stating that the signers have reviewed the terms of this
Agreement and the Notes and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and condition of
the Company and its Subsidiaries during the accounting period covered by such
financial statements and that such review has not disclosed the existence during
or at the end of such accounting period, and that the signers do not have
knowledge of the existence as at the date of the Officers' Certificate, of any
condition or event which constitutes an Event of Default or Default, or, if any
such condition or event existed or exists, specifying the nature and period of
existence thereof, 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
-30-
<PAGE>
consolidated financial statements of the Company made by such accountants,
including, without limitation, any comment letter submitted by such accountants
to management in connection with their annual audit;
(f) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its security holders or by any Subsidiary of the
Company to its security holders other than the Company or another Subsidiary,
and, promptly upon their becoming effective, and in any event within 15 days of
filing, all regular and periodic reports and all registration statements and
prospectuses that have been filed by the Company or any of its Subsidiaries with
any securities exchange or with the Securities and Exchange Commission or any
Governmental Person succeeding to any of its functions, and all press releases
and other statements made available generally by the Company or any Subsidiary
to the public concerning material developments in the business of the Company
and its Subsidiaries;
(g) promptly upon any executive officer of the Company obtaining
knowledge (i) of any condition or event which constitutes an Event of Default or
Default, or becoming aware that the Agent or any Bank has given any notice or
taken any other action with respect to a claimed Event of Default or Default
under this Agreement, (ii) of any condition or event which would be required to
be disclosed in a current report filed by the Company with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4 and 6 of such Form as in effect
on the date hereof) if the Company were required to file such reports under the
Exchange Act, (iii) that any Person has given any notice to the Company or any
Subsidiary of the Company or taken any other action with respect to a claimed
default or event or condition of the type referred to in Section 8.1, (iv) of
the institution of any litigation involving an alleged liability of the Company
or any of its Subsidiaries equal to or greater than $20,000,000 or any adverse
determination in any litigation involving a potential liability of the Company
or any of its Subsidiaries equal to or greater than $20,000,000, or (v) of a
Material Adverse Effect, in each case an Officers' Certificate specifying the
nature and period of existence of any such condition or event, or specifying the
notice given or action taken by such holder or Person and the nature of such
claimed default, Event of Default, Default, event or condition, and what action
the Company has taken, is taking and proposes to take with respect thereto;
(h) as soon as available but no later than March 31 of each year,
copies of the Company's consolidated financial plan for the then current fiscal
year as customarily prepared for internal use;
(i) promptly after the acquisition of any Material Subsidiary, notice
of such acquisition;
(j) promptly upon any executive officer of the Company obtaining
knowledge, notice of any change in the ratings on the Company's long-term
unsecured Indebtedness by S&P, Moody's and, Duff & Phelps; 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
-31-
<PAGE>
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, 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
-32-
<PAGE>
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 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
Receivables Purchase 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:
-33-
<PAGE>
(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 Receivables Purchase
Agreement;
(d) Liens securing Indebtedness under Other Permitted Accounts
Receivable Financing Facilities;
(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 consumer software products 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; and
(ii) any Subsidiary of the Company may sell all or substantially all
of its assets (upon voluntary liquidation or otherwise), to the Company or
another Wholly-Owned Subsidiary of the Company.
7.4 SALE OR DISCOUNT OF RECEIVABLES. The Company will not, and will not
permit any of its Domestic Subsidiaries to, directly or indirectly, sell with 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 settlements of bad debts and
disputed accounts receivable in the ordinary course of business;
(b) sales of accounts receivable under the Receivables Purchase
Agreement and agreements entered into in connection therewith;
-34-
<PAGE>
(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 Purchasers' Investments to the sum of (x)
----
Consolidated Funded Indebtedness plus (y) Combined Purchasers' Investments 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 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.
-35-
<PAGE>
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 Receivables Purchase
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 Receivables Purchase
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 Receivables
Purchase Agreement within 90 days after written notice thereof; or
(b) DEFAULT IN OTHER AGREEMENTS. (i) Failure of the Company, Fisher-
Price, Mattel Sales or any of its Material Subsidiaries to pay or any default in
the payment of any principal or interest on any Indebtedness in an amount
exceeding $15,000,000 or any default in any other obligation for the payment of
money in an amount in excess of $15,000,000 beyond any period of grace allowed;
or
(ii) any breach or default (unless cured or waived) with respect
to any other term of any evidence of such other Indebtedness for borrowed
money in an amount exceeding $15,000,000 or of any loan agreement,
mortgage, indenture or other agreement relating thereto, if the effect of
such failure, default or breach is to cause such Indebtedness for borrowed
money to become or be declared due prior to its stated maturity; or
(c) BREACH OF CERTAIN COVENANTS. Failure of the Company to perform or
comply with any term or condition contained in Sections 6.1(g), 6.2 or Section 7
of this Agreement; or
(d) BREACH OF WARRANTY. Any of the Company's, Fisher-Price's or
Mattel Sales' representations or warranties made in any Loan Document in writing
pursuant hereto or in connection herewith shall be false in any material respect
on the date as of which made; or
(e) OTHER DEFAULTS UNDER LOAN DOCUMENTS OR RECEIVABLES PURCHASE
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 Receivables Purchase 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
-36-
<PAGE>
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 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
-37-
<PAGE>
other provision of law) resulting from or otherwise associated with the events
listed in clauses (i)-(iv) above for unfunded guarantied vested benefits under
the Pension Plans which exceeds the current value of assets accumulated in such
Pension Plan by more than $10,000,000; or
(k) LOSS OF PROPERTY. All, or a substantial part of, the property,
assets or business of the Company or any Material Subsidiary shall be condemned
or seized and such condemnation or seizure shall have (after taking into account
any insurance or condemnation award) a Material Adverse Effect; or
(l) CESSATION OF BUSINESS. The Company or any Material Subsidiary
shall at any time voluntarily or involuntarily suspend its business or a
substantial part thereof which would constitute a substantial part of, and would
have a Material Adverse Effect; or
(m) SERVICER DEFAULT OR TERMINATION EVENT. A Servicer Default or a
Termination Event (as each is defined in the Receivables Purchase Agreement)
(other than as set forth in Section 10.1(h) of the Receivables Purchase
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.
-38-
<PAGE>
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.
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
-39-
<PAGE>
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 Receivables Purchase
Agent. The Agent shall take such action with respect to such Default or Event of
Default as shall be requested by the Requisite Banks in accordance with Section
8; provided, however, that unless and until the Agent shall have received any
-------- -------
such request, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Banks.
9.6 CREDIT DECISION. Each Bank expressly acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries shall be deemed to constitute any representation or
warranty by the Agent to any Bank. Each Bank represents to the Agent that it
has, independently and without reliance upon the Agent and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, prospects, operations, property,
financial and other condition and creditworthiness of the Company and its
Subsidiaries, and all applicable bank regulatory laws relating to the
transactions contemplated thereby, and made its own decision to enter into this
Agreement and extend credit to the Company hereunder. Each Bank also represents
that it will, independently and without reliance upon the Agent and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other
documents expressly herein required to be furnished to the Banks by the Agent,
the Agent shall not have any duty or
-40-
<PAGE>
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 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 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.
-41-
<PAGE>
9.9 SUCCESSOR AGENT. The Agent may, and at the request of the Requisite
Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent
shall resign as Agent under this Agreement, the Requisite Banks shall appoint
from among the Banks a successor agent for the Banks which successor agent shall
be approved by the Company. If no successor agent is appointed prior to the
effective date of the resignation of the Agent, the Agent may appoint, after
consulting with the Banks and the Company, a successor agent from among the
Banks. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 9 and Sections 10.4 and 10.15 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Requisite Banks appoint a successor agent as provided for
above.
SECTION 10.
MISCELLANEOUS.
10.1 ASSIGNMENTS, PARTICIPATIONS, ETC. (a) Any Bank may, with the
advance written consent of the Company at all times other than during the
existence of an Event of Default and the Agent, which consent of the Company
shall not be unreasonably withheld, at any time assign and delegate to one or
more Eligible Assignees (provided that no consent of the Company or the Agent
shall be required in connection with any assignment and delegation by a Bank to
an Eligible Assignee that is an Affiliate of such Bank) (each an "Assignee")
--------
all, or any ratable part of all, of the Loans, the Commitments and the other
rights and obligations of such Bank hereunder, in a minimum amount of
$10,000,000 and such Bank shall concurrently therewith assign a ratable portion
in the Receivables Purchase 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 (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
-42-
<PAGE>
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 Receivables Purchase Agreement and thereafter cause any
such participation herein to remain ratable with such participation in the
Receivables Purchase Agreement, (ii) the originating Bank's obligations under
this Agreement shall remain unchanged, (iii) the originating Bank shall remain
solely responsible for the performance of such obligations, (iv) the Company and
the Agent shall continue to deal solely and directly with the originating Bank
in connection with the originating Bank's rights and obligations under this
Agreement and the other Loan Documents, and (v) no Bank shall transfer or grant
any participating interest under which the Participant shall have rights to
approve any amendment to, or any consent or waiver with respect to this
Agreement except to the extent such amendment, consent or waiver would require
unanimous consent as described in the first proviso to Section 10.8. The
Company hereby acknowledges and agrees that any such disposition will give rise
to a direct obligation of the Company to the Participant and the Participant
shall be entitled to the benefit of Sections 3.1, 3.4 and 10.15 as if it were a
"Bank." In the case of any such participation, the Participant shall not have
any rights under this Agreement, or any of the other Loan Documents, and all
amounts payable by the Company hereunder shall be determined as if such Bank had
not sold such participation, except that if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Bank under
this Agreement.
(e) Notwithstanding any other provision in this Agreement, any Bank
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement and the Note(s) held by it in
favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or
U.S. Treasury Regulation 31 CFR (S)203.14, and such Federal
-43-
<PAGE>
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 Receivables Purchase 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 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.
-44-
<PAGE>
10.4 FEES AND EXPENSES. Whether or not the transactions contemplated
hereby shall be consummated, the Company agrees to pay within 30 days after
submission of an invoice therefor (a) all the actual and reasonable out-of-
pocket costs and expenses of preparation of the Loan Documents and all the costs
of furnishing all opinions by counsel for the Company (including without
limitation any opinions requested by the Banks as to any legal matters arising
hereunder), and of the Company's performance of and compliance with all
agreements and conditions contained therein on its part to be performed or
complied with; (b) the cost of delivering to the Banks any Notes pursuant to the
provisions of this Agreement; (c) the reasonable fees, expenses and
disbursements of the Agent and the Agent's counsel (including the allocated cost
of Agent's inhouse counsel and staff) in connection with the negotiation,
preparation, execution and administration of the Loan Documents and the Loans
and any amendments and waivers hereto; and (d) after the occurrence of an Event
of Default, all actual and reasonable out-of-pocket costs and expenses
(including reasonable fees of law firms engaged by the Banks and the reasonable
estimate of the allocable costs of counsel in the staff of legal departments of
the Banks and costs of settlement) incurred by the Agent and each Bank in
enforcing any Obligations or in collecting any payments due from the Company
hereunder or under any Notes by reason of such Event of Default or in connection
with any refinancing or restructuring of any Loan Document in the nature of a
"work-out" or of any insolvency or bankruptcy proceeding.
10.5 SET OFF. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of and during the continuance of any Event of Default (after the
giving of any notice and the expiration of any grace period contained in the
definition thereof), each Bank and each subsequent holder of any Note is hereby
authorized by the Company at any time or from time to time, without notice to
the Company, or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate any and all deposits (including, but not
limited to, indebtedness evidenced by certificates of deposit, whether matured
or unmatured but not including trust accounts) and any other indebtedness at any
time held or owing by that Bank or that subsequent holder or any Bank Affiliate
thereof to or for the credit or the account of the Company and to apply any such
amounts in accordance with the provisions of Section 2.13 irrespective of
whether or not that Bank or that subsequent holder shall have made any demand
hereunder and each such Bank Affiliate is hereby irrevocably authorized to
permit such setoff and appropriation.
10.6 NOTICES. Unless otherwise specifically provided herein, any notice
or other communication herein required or permitted to be given shall be in
writing and may be personally served, telecopied, telexed or sent by United
States mail and shall be deemed to have been given upon delivery in person,
receipt of telecopy or telex or four Business Days after deposit in the United
States mail, registered or certified, with postage prepaid and properly
addressed. For the purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this Section 10.6) shall
be as set forth under each party's name on Schedule 10.6 hereto.
10.7 SEVERABILITY. In case any provision in or obligation under this
Agreement or any Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
-45-
<PAGE>
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 Loan Commitment or any Purchaser's
Purchaser 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 any Bank's Pro Rata Share of the Aggregate Loan Commitment
or any Purchaser's Percentage of the Purchasers' Investment Limit 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;
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 Pro Rata Share
hereunder a different percentage than its Percentage under the Receivables
Purchase 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
-46-
<PAGE>
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.
(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 Percentage under the
Receivables Purchase Agreement.
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
-47-
<PAGE>
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 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. Banks which are party to the Existing Credit
Agreement consent to The Northern Trust Company becoming a party hereto. The
Company represents and warrants that (a) there is no defense, counterclaim or
offset of any type or nature under the Mattel Sales Subordination Agreement or
the Fisher Price Subordination Agreement, (b) the same remain in full, force and
effect after giving effect hereto, and (c) all references to "Credit Agreement"
and "Loan Documents" therein shall be deemed references to this Agreement and
"Loan Documents" as defined herein.
-48-
<PAGE>
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
S-1
<PAGE>
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-2
<PAGE>
NATIONSBANK OF TEXAS, N.A.
By: /s/ Charles F. Lilygren
------------------------------
Charles F. Lilygren
Title: Senior Vice President
---------------------------
S-3
<PAGE>
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Lenard Weiner
------------------------------
Title: Managing Director
---------------------------
S-4
<PAGE>
BANKBOSTON, N.A.
By: /s/ Debra Zurka
------------------------------
Title: Director
---------------------------
S-5
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Timothy J. Marchando
------------------------------
Timothy J. Marchando
Title: Vice President
---------------------------
S-6
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By: /s/ Debbie A. Greene
------------------------------
Debbie A. Greene
Title: Vice President
---------------------------
S-7
<PAGE>
ABN AMRO BANK N.V.
By: /s/ Ellen M. Coleman
------------------------------
Ellen M. Coleman
Title: Vice President/Director
---------------------------
By: /s/ Heather F. Brandt
------------------------------
Heather F. Brandt
Title: Vice President
---------------------------
S-8
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Scott Lane
------------------------------
Title: Vice President
---------------------------
S-9
<PAGE>
BANQUE NATIONALE DE PARIS
By: /s/ Clive Bettles
-----------------------------------
Title: Senior Vice President & Manager
--------------------------------
By: /s/ Mitchell M. Ozawa
-----------------------------------
Title: Vice President
--------------------------------
S-10
<PAGE>
DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH
By: /s/ John W. Sweeney
------------------------------
Title: Assistant Vice President
---------------------------
By: /s/ Christopher E. Sarisky
------------------------------
Title: Assistant Treasurer
---------------------------
S-11
<PAGE>
ISTITUTO BANCARIO SAN PAOLO di
TORINO SpA
By: /s/ Carlo Persico
------------------------------
Title: Deputy General Manager
---------------------------
By: /s/ Ettore Viazzo
------------------------------
Title: Vice President
---------------------------
S-12
<PAGE>
MANUFACTURERS & TRADERS TRUST CO.
By: /s/ Geoffrey R. Fenn
------------------------------
Title: Vice President
---------------------------
S-13
<PAGE>
CITICORP USA, INC.
By: /s/ Deborah Ironson
------------------------------
Title: Attorney-In-Fact
---------------------------
S-14
<PAGE>
SOCIETE GENERALE
By: /s/ Maureen E. Kelly
------------------------------
Title: Vice President
---------------------------
S-15
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED
LOS ANGELES AGENCY
By: /s/ Vicente L. Timiraos
------------------------------
Title: SVP & SDGM
---------------------------
S-16
<PAGE>
THE NORTHERN TRUST COMPANY
By: /s/ John E. Burda
------------------------------
Title: Second Vice President
---------------------------
S-17
<PAGE>
EXHIBIT A
SECOND AMENDED AND RESTATED
PROMISSORY NOTE
$__________________ Los Angeles, California
March 11, 1998
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 Second Amended and
Restated Credit Agreement dated as of March 11, 1998, 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 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
A-1
<PAGE>
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:
------------------------
A-2
<PAGE>
TRANSACTIONS ON NOTE
<TABLE>
<CAPTION> Amount of
End of interest or Balance
Type of Amount of Interest principal principal Notation
Date Loan Made Loan Made Period paid this date made by
---- --------- --------- ------ ---- --------- -------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
A-1
<PAGE>
EXHIBIT B
NOTICE OF BORROWING
TO: Bank of America National Trust
and Savings Association, as Agent
Gentlemen:
Pursuant to Section 2.3 of that certain Second Amended and Restated Credit
Agreement dated as of March 11,1998 (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].
[The initial Interest period for such Eurodollar Rate Loan is requested to
_________ month/day period].
The proceeds of such Loans are to be deposited in the Company's account at
Bank of America.
The undersigned officer, to the best of his knowledge, and the Company
certifies that (i) the representations and warranties of the Company contained
in the Credit Agreement are true, correct and complete in all material respects
on and as of the date hereof to the same extent as though made on and as of the
date hereof; (ii) no Default or Event of Default has occurred and is continuing
under the Credit Agreement or will result from the proposed borrowing; and (iii)
the Company has performed in all material respects all agreements and satisfied
all conditions under the Credit Agreement required to be performed by it on or
before the date hereof.
DATED:
--------------------
MATTEL, INC.
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
B-1
<PAGE>
EXHIBIT C
NOTICE OF CONVERSION/CONTINUATION
TO: Bank of America National Trust
and Savings Association, as Agent
Gentlemen:
1. CONVERSION SELECTION. Pursuant to Section 2.4 of that certain Second
Amended and Restated Credit Agreement dated as of March 11, 1998 (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] Loans, the final day of the current
Interest Period (if applicable) of which is __________, 19__, to [Base Rate,
Eurodollar Rate] Loans, as follows:
Requested Interest Period
Dollar Amount (Eurodollar Rate Loans)
------------- -----------------------
$________________ __________ months
Maturing on _________, 19___
2. CONTINUATION SELECTION. Pursuant to Section 2.4 of the Agreement,
please continue an aggregate of $_______of existing Eurodollar Rate Loans, the
final day of the current Interest Period of which is __________, 19____, as
follows:
Dollar Amount Requested Interest Period
------------- -------------------------
$________________ __________ months
Maturing on _________, 19___
Unless otherwise defined herein, capitalized terms used herein have the
meanings assigned to them in the Agreement.
DATED:
---------------------
MATTEL, INC.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
C-1
<PAGE>
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 Second Amended and Restated Credit
Agreement dated as of March 11, 1998, among the Company, the Banks named therein
and Bank of America National Trust and Savings Association, as Agent (the
"Credit Agreement"; capitalized terms used herein without definition shall have
the meanings assigned them in the Credit Agreement), and we have made, or have
caused to be made under our supervision, a detailed review of the transactions
and conditions of the Company and its Subsidiaries during the accounting period
covered by the attached financial statements; and
(3) The examinations described in paragraph (2) did not disclose, and we
have no knowledge of, the existence of any condition or event which constitutes
a Default or Event of Default (as defined in the Credit Agreement) during or at
the end of the accounting period covered by the attached financial statements or
as of the date of this Officers' Certificate, except as set forth below.
Describe below (or in a separate attachment to this Officers' Certificate)
the exceptions, if any, to paragraph (3) by listing, in detail, the nature of
the condition or event and the period during which it has existed:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
D-1
<PAGE>
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:
-----------------------
D-2
<PAGE>
<TABLE>
<CAPTION>
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)
<S> <C>
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 Investments:
1. Purchasers' Investments under Receivables $_____________
Purchase Agreement:
2. Amount analogous to " Purchasers' Investments" under Other $_____________
Permitted Accounts Receivable Financing Facilities
relating to Domestic Subsidiaries (describe):
3. Combined Purchasers' Investments (Lines B1+B2): $_____________
C. Consolidated Funded Indebtedness plus Combined Purchasers' Investments (Lines A4+B3): $_____________
D. Consolidated Tangible Net Worth:
1. Net Worth: $_____________
2 Foreign exchange currency translation adjustments: $_____________
</TABLE>
-1-
<PAGE>
<TABLE>
<S> <C>
3. Intangible assets: $______________
4. Consolidated Tangible Net Worth (Line D1 - (D2+D3)): $
==============
E. Consolidated Funded Indebtedness plus Combined Purchasers' Investments plus $______________
Consolidated Tangible Net Worth (Lines C+D4):
F. Actual percentage of Consolidated Funded Indebtedness plus
Combined Purchasers' Investments to Consolidated Funded
Indebtedness plus Combined Purchasers' Investments
plus Consolidated Tangible Net Worth (Line CE): ________%
G. Permitted maximum percentage of Consolidated Funded Indebtedness
plus Combined Purchasers' Investments to Consolidated Funded
Indebtedness plus Combined Purchasers'
Investments 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): $______________
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 ELine F): __ to 1
H. Required Minimum Ratio 3.5 to 1
</TABLE>
-2-
<PAGE>
EXHIBIT E
OPINION OF ASSISTANT
GENERAL COUNSEL OF COMPANY
UPDATED FORM TO COME
E-1
<PAGE>
SCHEDULE A OPINION OF ASSISTANT
[ALL BANKS PARTY TO CREDIT AGREEMENT]
E-2
<PAGE>
EXHIBIT F-1
FISHER-PRICE, INC.
FIRST AMENDED AND RESTATED CONTINUING GUARANTY
TO: Bank of America National Trust
and Savings Association, as 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 obligations are
referred to herein as the "Company Letter of Credit Obligations"). This Guaranty
amends and restates the Continuing Guaranty dated as of March 10, 1995 delivered
by the Guarantor.
D. 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
F-1-1
<PAGE>
and include any and all advances, debts, obligations, and liabilities of the
Company, now, or hereafter made, incurred, or created, whether voluntary or
involuntarily, and however arising, including, without limitation, any and all
attorneys' fees (including the allocated cost of inhouse counsel), costs,
premiums, charges, or interest owed by the Company to the Guarantied Parties,
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, whether the Company may be liable individually or
jointly with others, whether recovery upon such indebtedness may be or hereafter
becomes barred by any statute of limitations or whether such indebtedness may be
or hereafter become otherwise unenforceable.
2. This Guaranty is a continuing guaranty which relates to any
Obligations, including those which arise under successive transactions which
shall either cause the Company to incur new Obligations, continue the
Obligations from time to time, or renew them after they have been satisfied.
The Guarantor agrees that nothing shall discharge or satisfy its obligations
created hereunder except for the full payment of the Obligations. Any payment
by the Guarantor shall not reduce its maximum obligation hereunder.
3. The Guarantor agrees that it is directly and primarily liable to the
Agent for the benefit of the Guarantied Parties, that its obligations hereunder
are independent of the Obligations of the Company, or of any other guarantor,
and that a separate action or actions may be brought and prosecuted against the
Guarantor, whether action is brought against the Company or whether the Company
is joined in any such action or actions. The Guarantor agrees that any releases
which may be given by the Agent and the Guarantied Parties to the Company or any
other guarantor shall not release it from this Guaranty.
4. The obligations of the Guarantor under this Guaranty shall not be
affected, modified or impaired upon the occurrence from time to time of any of
the following, whether or not with notice to or the consent of the Guarantor:
(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
F-1-2
<PAGE>
assets of any of them, or any allegation of invalidity or contest of the
validity of this Guaranty in any such proceeding;
(g) to the extent permitted by law, the release or discharge of any other
guarantors of the Obligations from the performance or observance of any
obligation, covenant or agreement contained in any guaranties of the Obligations
by operation of law; or
(h) the default or failure of any other guarantors of the Obligations fully
to perform any of their respective obligations set forth in any such guaranties
of the Obligations.
To the extent any of the foregoing refers to any actions which the Agent or
the Guarantied Parties may take, the Guarantor hereby agrees that the Agent
and/or the Guarantied Parties may take such actions in such manner, upon such
terms, and at such times as the Agent or the Guarantied Parties, in their
discretion, deem advisable, without, in any way or respect, impairing,
affecting, reducing or releasing the Guarantor from its undertakings hereunder
and the Guarantor hereby consents to each and all of the foregoing actions,
events and occurrences.
5. The Guarantor hereby waives:
(a) any and all rights to require the Agent or the Guarantied Parties to
prosecute or seek to enforce any remedies against the Company or any other party
liable to the Agent or the Guarantied Parties on account of the Obligations;
(b) any right to assert against the Agent or the Guarantied Parties any
defense (legal or equitable), set-off, counterclaim, or claim which the
Guarantor may now or at any time hereafter have against the Company or any other
party liable to the Agent or the Guarantied Parties in any way or manner under
the Credit Agreement;
(c) all defenses, counterclaims and off-sets of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity or enforceability of any Loan Document and the security
interest granted pursuant thereto;
(d) any defense arising by reason of any claim or defense based upon an
election of remedies by the Agent or the Guarantied Parties including, without
limitation, any direction to proceed by judicial or nonjudicial foreclosure or
by deed in lieu thereof, which, in any manner impairs, affects, reduces,
releases, destroys or extinguishes the Guarantor's subrogation rights, rights to
proceed against the Company for reimbursement, or any other rights of the
Guarantor to proceed against the Company, against any other guarantor, or
against any other security, with the Guarantor understanding that the exercise
by the Agent and/or the Guarantied Parties of certain rights and remedies may
offset or eliminate the Guarantor's right of subrogation against the Company,
and that the Guarantor may therefore incur partially or totally non-reimbursable
liability hereunder;
(e) all presentments, demands for performance, notices of non-performance,
protests, notices of protest, notices of dishonor, notices of default, notice of
acceptance of this Guaranty, and notices of the existence, creation, or
incurring of new or additional indebtedness, and all other notices or
formalities to which the Guarantor may be entitled; and
F-1-3
<PAGE>
(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 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
F-1-4
<PAGE>
accordance with the applicable federal and California state laws in effect on
the date hereof governing the determination of the insolvency of a debtor and to
further the intent of all parties hereto to maximize the amount payable by the
Guarantor without rendering it insolvent or leaving it with an unreasonably
small amount of capital in relation to its business, in either case, at the
applicable date for the determination of the incurrence of its obligations
hereunder; provided, however, the Guarantor agrees, to the maximum extent
-------- -------
permitted by law, that 'fair valuation' of the Guarantor's and its subsidiaries'
assets and other properties means the fair market sales price as would be
obtained in an arms-length transaction between competent, informed and willing
parties under no compulsion to sell or buy or collections thereof obtained in
the ordinary course of business and 'fair valuation' of its debts means the
amount, in light of the applicable circumstances, at the time, for which the
Guarantor or its subsidiaries is liable for matured known liquidated liabilities
or would reasonably be expected to become liable on contingent or unliquidated
liabilities as they mature and taking into consideration the nature of any such
contingency and the probability that liability would be imposed.
10. The Guarantor represents and warrants for and with respect to itself
that:
(a) The Guarantor is a corporation duly organized and existing under the
laws of the state of California, and is properly licensed and in good standing
in, and where necessary to maintain its rights and privileges have complied with
the fictitious name statute of, every jurisdiction in which it is doing
business, except where the failure to be licensed or be in good standing or
comply with any such statute will not have a material adverse effect on the
ability of the Guarantor to perform its obligations hereunder or under any
instrument or agreement required hereunder;
(b) The execution, delivery and performance of this Guaranty and any
instrument or agreement required hereunder are within the power of the
Guarantor, have been duly authorized by, and are not in conflict with the terms
of any charter, by-law or other organization papers of, the Guarantor;
(c) No approval, consent, exemption or other action by, or notice to or
filing with, any governmental authority is necessary in connection with the
execution, delivery, performance or enforcement of this Guaranty or any
instrument or agreement required hereunder, except as may have been obtained and
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-1-5
<PAGE>
(f) There is no action, suit or proceeding pending against, or to the
knowledge of the Guarantor, threatened against or affecting the Guarantor,
before any court or arbitrator or any governmental body, agency or official
which in any manner draws into question the validity or enforceability of this
Guaranty; and
(g) The execution, delivery and performance by the Guarantor of this
Guaranty does not constitute, to the best knowledge of Guarantor, a "fraudulent
conveyance," "fraudulent obligation" or "fraudulent transfer" within the
meanings of the Uniform Fraudulent Conveyances Act or Uniform Fraudulent
Transfer Act, as enacted in any jurisdiction.
11. Any one of the following events shall constitute an "Event of
Bankruptcy:"
(a) The Guarantor or the Company is generally not paying or admits in
writing its inability to pay its debts as such debts become due, or files any
petition or action for relief under any bankruptcy, reorganization, insolvency,
or moratorium law or any other law for the relief of, or relating to, debtors,
now or hereafter in effect, or makes any assignment for the benefit of
creditors, or takes any corporate action in furtherance of any of the foregoing;
(b) An involuntary petition is filed against the Guarantor or the Company
under any bankruptcy statute now or hereafter in effect, or a custodian,
receiver, trustee, assignee for the benefit of creditors (or other similar
official) is appointed to take possession, custody or control of any property of
the Guarantor or the Company, unless such petition or appointment is set aside
or withdrawn or ceases to be in effect within sixty (60) days from the date of
said filing or appointment.
Upon the occurrence of an Event of Bankruptcy, without notice or demand,
any and all of the Guarantor's obligations under this Guaranty shall become due,
payable and enforceable against the Guarantor whether or not the Obligations are
then due and payable.
12. All notices and other communications hereunder shall be delivered, in
the manner and with the effect provided in the Credit Agreement and, in the case
of the Guarantor, in care of the Company.
13. This Guaranty shall be binding upon the successors and assigns of the
Guarantor and shall inure to the benefit of the Agent's and the Guarantied
Parties' successors and assigns. This Guaranty cannot be assigned by the
Guarantor without the prior written consent of the Agent and the Guarantied
Parties which shall be in the Agent's and the Guarantied Parties' sole and
absolute discretion.
14. No failure or delay by the Agent or the Guarantied Parties in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
15. The Guarantor shall pay (a) all reasonable out-of-pocket expenses of
the Agent and the Guarantied Parties, including reasonable fees and
disbursements of counsel (including the allocated cost of inhouse counsel and
staff) for the Agent, in connection with any waiver or
F-1-6
<PAGE>
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 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:
---------------------
Name:
---------------------
Title:
---------------------
BANK OF AMERICA NATIONAL TRUST
SAVINGS ASSOCIATION, as Agent
By:
-------------------------
Vice President
F-1-7
<PAGE>
EXHIBIT F-2
MATTEL SALES CORP.
FIRST AMENDED AND RESTATED CONTINUING GUARANTY
TO: Bank of America National Trust
and Savings Association, as 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 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
F-2-1
<PAGE>
Subsidiary Guaranty Obligations and Company Letter of Credit Obligations
(hereinafter collectively referred to as the "Obligations") are used herein in
their most comprehensive sense and include any and all advances, debts,
obligations, and liabilities of the Company, now, or hereafter made, incurred,
or created, whether voluntary or involuntarily, and however arising, including,
without limitation, any and all attorneys' fees (including the allocated cost of
inhouse counsel), costs, premiums, charges, or interest owed by the Company to
the Guarantied Parties, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, whether the Company may
be liable individually or jointly with others, whether recovery upon such
indebtedness may be or hereafter becomes barred by any statute of limitations or
whether such indebtedness may be or hereafter become otherwise unenforceable.
2. This Guaranty is a continuing guaranty which relates to any
Obligations, including those which arise under successive transactions which
shall either cause the Company to incur new Obligations, continue the
Obligations from time to time, or renew them after they have been satisfied.
The Guarantor agrees that nothing shall discharge or satisfy its obligations
created hereunder except for the full payment of the Obligations. Any payment
by the Guarantor shall not reduce its maximum obligation hereunder.
3. The Guarantor agrees that it is directly and primarily liable to the
Agent for the benefit of the Guarantied Parties, that its obligations hereunder
are independent of the Obligations of the Company, or of any other guarantor,
and that a separate action or actions may be brought and prosecuted against the
Guarantor, whether action is brought against the Company or whether the Company
is joined in any such action or actions. The Guarantor agrees that any releases
which may be given by the Agent and the Guarantied Parties to the Company or any
other guarantor shall not release it from this Guaranty.
4. The obligations of the Guarantor under this Guaranty shall not be
affected, modified or impaired upon the occurrence from time to time of any of
the following, whether or not with notice to or the consent of the Guarantor:
(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,
F-2-2
<PAGE>
assignment for the benefit of creditors or readjustment of, or other similar
proceedings which affect the Guarantor, any other guarantor of any of the
Obligations of the Company or any of the assets of any of them, or any
allegation of invalidity or contest of the validity of this Guaranty in any such
proceeding;
(g) to the extent permitted by law, the release or discharge of any other
guarantors of the Obligations from the performance or observance of any
obligation, covenant or agreement contained in any guaranties of the Obligations
by operation of law; or
(h) the default or failure of any other guarantors of the Obligations fully
to perform any of their respective obligations set forth in any such guaranties
of the Obligations.
To the extent any of the foregoing refers to any actions which the Agent or
the Guarantied Parties may take, the Guarantor hereby agrees that the Agent
and/or the Guarantied Parties may take such actions in such manner, upon such
terms, and at such times as the Agent or the Guarantied Parties, in their
discretion, deem advisable, without, in any way or respect, impairing,
affecting, reducing or releasing the Guarantor from its undertakings hereunder
and the Guarantor hereby consents to each and all of the foregoing actions,
events and occurrences.
5. The Guarantor hereby waives:
(a) any and all rights to require the Agent or the Guarantied Parties to
prosecute or seek to enforce any remedies against the Company or any other party
liable to the Agent or the Guarantied Parties on account of the Obligations;
(b) any right to assert against the Agent or the Guarantied Parties any
defense (legal or equitable), set-off, counterclaim, or claim which the
Guarantor may now or at any time hereafter have against the Company or any other
party liable to the Agent or the Guarantied Parties in any way or manner under
the Credit Agreement;
(c) all defenses, counterclaims and off-sets of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity or enforceability of any Loan Document and the security
interest granted pursuant thereto;
(d) any defense arising by reason of any claim or defense based upon an
election of remedies by the Agent or the Guarantied Parties including, without
limitation, any direction to proceed by judicial or nonjudicial foreclosure or
by deed in lieu thereof, which, in any manner impairs, affects, reduces,
releases, destroys or extinguishes the Guarantor's subrogation rights, rights to
proceed against the Company for reimbursement, or any other rights of the
Guarantor to proceed against the Company, against any other guarantor, or
against any other security, with the Guarantor understanding that the exercise
by the Agent and/or the Guarantied Parties of certain rights and remedies may
offset or eliminate the Guarantor's right of subrogation against the Company,
and that the Guarantor may therefore incur partially or totally non-reimbursable
liability hereunder;
(e) all presentments, demands for performance, notices of non-performance,
protests, notices of protest, notices of dishonor, notices of default, notice of
acceptance of this Guaranty,
F-2-3
<PAGE>
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 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
F-2-4
<PAGE>
to Company shall be discharged on a dollar-for-dollar basis in an amount
equal to the amount paid by Guarantor hereunder. The meaning of the terms
'reasonably equivalent value' and 'fair valuation,' and the calculations of
assets and other property and debts, shall be determined in accordance with the
applicable federal and California state laws in effect on the date hereof
governing the determination of the insolvency of a debtor and to further the
intent of all parties hereto to maximize the amount payable by the Guarantor
without rendering it insolvent or leaving it with an unreasonably small amount
of capital in relation to its business, in either case, at the applicable date
for the determination of the incurrence of its obligations hereunder; provided,
--------
however, the Guarantor agrees, to the maximum extent permitted by law, that
- -------
'fair valuation' of the Guarantor's and its subsidiaries' assets and other
properties means the fair market sales price as would be obtained in an arms-
length transaction between competent, informed and willing parties under no
compulsion to sell or buy or collections thereof obtained in the ordinary course
of business and 'fair valuation' of its debts means the amount, in light of the
applicable circumstances, at the time, for which the Guarantor or its
subsidiaries is liable for matured known liquidated liabilities or would
reasonably be expected to become liable on contingent or unliquidated
liabilities as they mature and taking into consideration the nature of any such
contingency and the probability that liability would be imposed.
10. The Guarantor represents and warrants for and with respect to itself
that:
(a) The Guarantor is a corporation duly organized and existing under the
laws of the state of California, and is properly licensed and in good standing
in, and where necessary to maintain its rights and privileges have complied with
the fictitious name statute of, every jurisdiction in which it is doing
business, except where the failure to be licensed or be in good standing or
comply with any such statute will not have a material adverse effect on the
ability of the Guarantor to perform its obligations hereunder or under any
instrument or agreement required hereunder;
(b) The execution, delivery and performance of this Guaranty and any
instrument or agreement required hereunder are within the power of the
Guarantor, have been duly authorized by, and are not in conflict with the terms
of any charter, by-law or other organization papers of, the Guarantor;
(c) No approval, consent, exemption or other action by, or notice to or
filing with, any governmental authority is necessary in connection with the
execution, delivery, performance or enforcement of this Guaranty or any
instrument or agreement required hereunder, except as may have been obtained and
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
F-2-5
<PAGE>
enforceable, except where enforceability thereof may be limited by applicable
law relating to bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally or by the application of general
principles of equity;
(f) There is no action, suit or proceeding pending against, or to the
knowledge of the Guarantor, threatened against or affecting the Guarantor,
before any court or arbitrator or any governmental body, agency or official
which in any manner draws into question the validity or enforceability of this
Guaranty; and
(g) The execution, delivery and performance by the Guarantor of this
Guaranty does not constitute, to the best knowledge of Guarantor, a "fraudulent
conveyance," "fraudulent obligation" or "fraudulent transfer" within the
meanings of the Uniform Fraudulent Conveyances Act or Uniform Fraudulent
Transfer Act, as enacted in any jurisdiction.
11. Any one of the following events shall constitute an "Event of
Bankruptcy:"
(a) The Guarantor or the Company is generally not paying or admits in
writing its inability to pay its debts as such debts become due, or files any
petition or action for relief under any bankruptcy, reorganization, insolvency,
or moratorium law or any other law for the relief of, or relating to, debtors,
now or hereafter in effect, or makes any assignment for the benefit of
creditors, or takes any corporate action in furtherance of any of the foregoing;
(b) An involuntary petition is filed against the Guarantor or the Company
under any bankruptcy statute now or hereafter in effect, or a custodian,
receiver, trustee, assignee for the benefit of creditors (or other similar
official) is appointed to take possession, custody or control of any property of
the Guarantor or the Company, unless such petition or appointment is set aside
or withdrawn or ceases to be in effect within sixty (60) days from the date of
said filing or appointment.
Upon the occurrence of an Event of Bankruptcy, without notice or demand,
any and all of the Guarantor's obligations under this Guaranty shall become due,
payable and enforceable against the Guarantor whether or not the Obligations are
then due and payable.
12. All notices and other communications hereunder shall be delivered, in
the manner and with the effect provided in the Credit Agreement and, in the case
of the Guarantor, in care of the Company.
13. This Guaranty shall be binding upon the successors and assigns of the
Guarantor and shall inure to the benefit of the Agent's and the Guarantied
Parties' successors and assigns. This Guaranty cannot be assigned by the
Guarantor without the prior written consent of the Agent and the Guarantied
Parties which shall be in the Agent's and the Guarantied Parties' sole and
absolute discretion.
14. No failure or delay by the Agent or the Guarantied Parties in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
F-2-6
<PAGE>
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.
F-2-7
<PAGE>
21. It is not necessary for the Guarantied Parties to inquire into the
powers of any Guaranteed Party or of the officers, directors or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
Executed as of the 13th day of March 1997.
MATTEL SALES CORP.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
BANK OF AMERICA NATIONAL TRUST
SAVINGS ASSOCIATION, AS AGENT
By:
----------------------------
Vice President
F-2-8
<PAGE>
EXHIBIT G-1
FISHER-PRICE, INC.
FIRST AMENDED AND RESTATED SUBORDINATION AGREEMENT
TO: Bank of America National Trust
and Savings Association, as 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 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
G-1-1
<PAGE>
which Banks or Agent may have against Fisher-Price (including any claim by Banks
or Agent for interest accruing after any assignment for the benefit of creditors
by Fisher-Price or the institution by or against Fisher-Price of any proceedings
under the Bankruptcy Act, or any claim by Bank for any such interest which would
have accrued in the absence of such assignment or the institution of such
proceedings).
2. Creditor agrees not to sue upon, or to collect, or to receive payment
of the principal or interest of any claim or claims now or hereafter existing
which Creditor may hold against Fisher-Price, and not to sell, assign, transfer,
pledge, hypothecate, or encumber such claim or claims except subject expressly
to this Agreement, and not to file or join in any petition to commence any
proceeding under the Bankruptcy Act, nor to take any lien or security on any of
Fisher-Price' property, real or personal, so long as any claim of Banks or Agent
against Fisher-Price shall exist.
3. In case of any assignment for the benefit of creditors by Fisher-Price
or in case any proceedings under the Bankruptcy Act are instituted by or against
Fisher-Price, or in case of the appointment of any receiver for Fisher-Price's
business or assets, or in case of any dissolution or winding up of the affairs
of Fisher-Price: (a) Creditor and any assignee, trustee in bankruptcy,
receiver, debtor in possession or other person or persons in charge are hereby
directed to pay to Agent on behalf of itself and the Banks the full amount of
Banks' and Agent's claims against Fisher-Price (including interest to the date
of payment) before making any payment of principal or interest to Creditor under
any indebtedness, and insofar as may be necessary for that purpose, Creditor
hereby assigns and transfers to Agent on behalf of itself and the Banks all
security or the proceeds thereof and all rights to any payments, dividends or
other distributions, and (b) Creditor hereby irrevocably constitutes and
appoints Agent its true and lawful attorney to act in its name and stead: (i)
to file the appropriate claim or claims on behalf of Creditor if Creditor does
not do so prior to 30 days before the expiration of the time to file claims in
such proceeding and if Agent elects at its sole discretion to file such claim or
claims and (ii) to accept or reject any plan of reorganization or arrangement on
behalf of Creditor, and to 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
G-1-2
<PAGE>
neither the Agent nor the Banks has any duty at any time to disclose to Creditor
any information relating to the business operations or financial condition of
Fisher-Price or the Company.
6. On request of Agent, Creditor shall deliver to the Agent the original
of any promissory note or other evidence of any existing or future indebtedness
of Fisher-Price to Creditor, and mark same with a conspicuous legend which reads
substantially as follows:
"THIS PROMISSORY NOTE IS SUBORDINATED TO ANY PRESENT OR FUTURE
INDEBTEDNESS OWING FROM THE MAKER TO BANK OF AMERICA NT&SA, AS AGENT,
AND ITS ASSIGNS, AND MAY BE ENFORCED ONLY IN ACCORDANCE WITH THAT
CERTAIN SUBORDINATION AGREEMENT DATED MARCH 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:
-----------------------------
G-1-3
<PAGE>
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:
-----------------------------
G-1-4
<PAGE>
EXHIBIT G-2
MATTEL SALES CORP.
FIRST AMENDED AND RESTATED SUBORDINATION AGREEMENT
TO: Bank of America National Trust
and Savings Association, as 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 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
G-2-1
<PAGE>
which Banks or Agent may have against Mattel Sales (including any claim by Banks
or Agent for interest accruing after any assignment for the benefit of creditors
by Mattel Sales or the institution by or against Mattel Sales of any proceedings
under the Bankruptcy Act, or any claim by Bank for any such interest which would
have accrued in the absence of such assignment or the institution of such
proceedings).
2. Creditor agrees not to sue upon, or to collect, or to receive payment
of the principal or interest of any claim or claims now or hereafter existing
which Creditor may hold against Mattel Sales, and not to sell, assign, transfer,
pledge, hypothecate, or encumber such claim or claims except subject expressly
to this Agreement, and not to file or join in any petition to commence any
proceeding under the Bankruptcy Act, nor to take any lien or security on any of
Mattel Sales' property, real or personal, so long as any claim of Banks or Agent
against Mattel Sales shall exist.
3. In case of any assignment for the benefit of creditors by Mattel Sales
or in case any proceedings under the Bankruptcy Act are instituted by or against
Mattel Sales, or in case of the appointment of any receiver for Mattel Sales's
business or assets, or in case of any dissolution or winding up of the affairs
of Mattel Sales: (a) Creditor and any assignee, trustee in bankruptcy,
receiver, debtor in possession or other person or persons in charge are hereby
directed to pay to Agent on behalf of itself and the Banks the full amount of
Banks' and Agent's claims against Mattel Sales (including interest to the date
of payment) before making any payment of principal or interest to Creditor under
any indebtedness, and insofar as may be necessary for that purpose, Creditor
hereby assigns and transfers to Agent on behalf of itself and the Banks all
security or the proceeds thereof and all rights to any payments, dividends or
other distributions, and (b) Creditor hereby irrevocably constitutes and
appoints Agent its true and lawful attorney to act in its name and stead: (i)
to file the appropriate claim or claims on behalf of Creditor if Creditor does
not do so prior to 30 days before the expiration of the time to file claims in
such proceeding and if Agent elects at its sole discretion to file 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
G-2-2
<PAGE>
neither the Agent nor the Banks has any duty at any time to disclose to Creditor
any information relating to the business operations or financial condition of
Mattel Sales or the Company.
6. On request of Agent, Creditor shall deliver to the Agent the original
of any promissory note or other evidence of any existing or future indebtedness
of Mattel Sales to Creditor, and mark same with a conspicuous legend which reads
substantially as follows:
"THIS PROMISSORY NOTE IS SUBORDINATED TO ANY PRESENT OR FUTURE
INDEBTEDNESS OWING FROM THE MAKER TO BANK OF AMERICA NT&SA, AS AGENT,
AND ITS ASSIGNS, AND MAY BE ENFORCED ONLY IN ACCORDANCE WITH THAT
CERTAIN SUBORDINATION AGREEMENT DATED MARCH 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:
------------------------
G-2-3
<PAGE>
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:
---------------------------
G-2-1
<PAGE>
EXHIBIT H
CHANGE IN COMMITMENTS NOTICE
For Credit Agreement and
Receivables Purchase Agreement]
TO: Bank of America National Trust
and Savings Association, as Agent
NationsBank of Texas, N.A., as Receivables Purchase Agent
Gentlemen:
Pursuant to (a) Section 2.5 of that certain Second Amended and Restated
Credit Agreement dated as of March 11, 1998, 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)that certain Receivables
Purchase Agreement dated as of March 11, 1998, as amended, among Mattel Sales
Corp. and Fisher-Price, Inc., as transferors, the Company, as guarantor and
servicer, the purchasers named therein, and NationsBank of Texas, N.A., as the
Receivables Purchase Agent,] please effect the following changes in the
Purchasers' Investment Limit and/or the Aggregate Loan Commitment:
1. EFFECTIVE DATE OF CHANGE:
____________________, 19__
2. REQUESTED CHANGE:
a. Please permanently reduce the [Purchasers' Investment Limit]
------
[Aggregate Loan Commitment] by $ __________ .
---------------------
b. Please permanently terminate the [Purchasers' Investment
---------
Limit] [Aggregate Loan Commitment].
c. Please reallocate $ _____ from the [Purchasers'
---------- ----------------
Investment Limit] [Aggregate Loan Commitment] to the [Aggregate Loan
--
Commitment] [Purchasers' Investment Limit].
H-1
<PAGE>
3. SUMMARY OF CHANGES:
<TABLE>
<CAPTION>
BEFORE ABOVE CHANGES AFTER ABOVE CHANGES
<S> <C> <C>
Aggregate Loan Commitment $________________ $________________
Aggregate Outstandings under $________________ $________________
Credit Agreement
Purchasers' Investment Limit $________________ $________________
Purchasers' Investments $________________ $________________
</TABLE>
Unless otherwise defined herein, capitalized terms used herein have the
meanings assigned to them in the Agreement.
DATED:
MATTEL, INC.
By:
_________________________
Name:
_________________________
Title:
_____________________
*Signature required only MATTEL SALES CORP.*
when Purchasers' Investment
Limit changed By:
_________________________
Name:
_________________________
Title:
______________________
*Signature required only FISHER-PRICE, INC.*
when Purchasers' Investment
Limit changed By:
_________________________
Name:
______________________
Title:
______________________
H-2
<PAGE>
EXHIBIT I
NOTICE OF ASSIGNMENT AND ACCEPTANCE
_________, 19
TO: Bank of America National Trust
and Savings Association, as Agent
Reference is made to that certain Second Amended and Restated Credit
Agreement dated as of March 11, 1998 (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
[Receivables Purchase 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
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:_____________________
I-1
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have 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:___________________
Name:_________________
Title:________________
[NAME OF ASSIGNEE]
By:___________________
Name:_________________
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
I-2
<PAGE>
SCHEDULE 1.1
------------
<TABLE>
<CAPTION>
BANK COMMITMENTS
BANK Pro Rata Loan Purchaser Facilities
Share Commitment Commitment Commitment
<S> <C> <C> <C> <C>
Bank of America National Trust and Savings Association 12.00% $ 84,000,000 $ 36,000,000 $ 120,000,000
- -------------------------------------------------------------------------------------------------------------------
NationsBank of Texas, N.A. 9.00 63,000,000 27,000,000 90,000,000
The Chase Manhattan Bank 9.00 63,000,000 27,000,000 90,000,000
- -------------------------------------------------------------------------------------------------------------------
ABN AMRO Bank N.V. 7.50 52,500,000 22,500,000 75,000,000
BankBoston, N.A. 7.50 52,500,000 22,500,000 75,000,000
Citicorp USA, Inc. 7.50 52,500,000 22,500,000 75,000,000
Toronto Dominion (Texas), Inc. 7.50 52,500,000 22,500,000 75,000,000
- -------------------------------------------------------------------------------------------------------------------
Banque Nationale de Paris, Los Angeles Agency 5.00 35,000,000 15,000,000 50,000,000
Dresdner Bank AG, New York Branch and Grand Cayman Branch 5.00 35,000,000 15,000,000 50,000,000
Istituto Bancario San Paolo di Torino SpA 5.00 35,000,000 15,000,000 50,000,000
Manufacturers & Traders Trust Co. 5.00 35,000,000 15,000,000 50,000,000
PNC Bank, National Association 5.00 35,000,000 15,000,000 50,000,000
Societe Generale 5.00 35,000,000 15,000,000 50,000,000
Union Bank of California, N.A. 5.00 35,000,000 15,000,000 50,000,000
- -------------------------------------------------------------------------------------------------------------------
Northern Trust Company 2.50 17,500,000 7,500,000 25,000,000
The Industrial Bank of Japan, Limited, Los Angeles Agency 2.50 17,500,000 7,500,000 25,000,000
===== ============ ============ =============
TOTAL 100% $700,000,000 $300,000,000 $1,000,000,00
</TABLE>
1
<PAGE>
SCHEDULE 5.3
MATERIAL SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
Percentage of
Voting Securities
Subsidiaries/1/ Jurisdiction in Which Parent Owned Directly or
Organized Indirectly By Parent
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arco Toys, Limited Hong Kong Mattel, Inc. 100%
Fisher-Price, Inc. Delaware Mattel, Inc. 100%
Mattel Europa B.V. The Netherlands Mattel, Inc. 100%
Mattel Holding, Inc. Delaware Mattel, Inc. 100%
Mattel Sales Corp. California Mattel, Inc. 100%
Tyco Preschool Toys, Inc. Delaware Mattel, Inc. 100%
</TABLE>
/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.
1
<PAGE>
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. Federal and state litigation related to In re Toys "R" Us, Inc. (FTC
----------------------
Docket No. 9278).
1
<PAGE>
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.
-1-
<PAGE>
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
1850 Gateway Blvd., 5th Floor
Concord, California 94520
Attention: Nancy Li
Telephone: (510) 675-8445
Facsimile: (510) 675-8500
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: Gina Meador
Vice President
Agency Management - Los Angeles #20529
Telephone: (213) 228-5245
Facsimile: (213) 228-2299
-1-
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS A BANK
Domestic and Eurodollar Lending Office:
Payment Services Operations #5693
1850 Gateway Boulevard, Third Floor
Concord, California 94520
Attention: Adria Carter
Telephone:(510) 675-7154
Facsimile: (510) 675-7236 or (510) 675-7531
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
-2-
<PAGE>
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
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 Franscisco, CA 94111
Attention: Ted Swimmer
Vice President-Finance
Telephone: (415) 954-9552
Facsimile: (415) 954-9583
-3-
<PAGE>
BANKBOSTON, N.A.
Domestic and Eurodollar Lending Office and Notices:
BankBoston, N.A.
U.S. Corporate Division, Mail Stop 01-09-06
100 Federal Street, 9th Floor
Boston, Massachusetts 02110
Attention: Carol Flynn
Telephone: (617) 434-5777
Facsimile: (617) 434-0630
Notices (other than Notices of Borrowing and
Notices of Conversion/Continuation):
BankBoston,. N.A.
U.S. Corporate Division, Mail Stop 01-09-06
100 Federal Street, 9th Floor
Boston, Massachusetts 02110
Attention: Debra L. Zurka
Director
Telephone: (617) 434-2683
Facsimile: (617) 434-0630
PNC BANK, NATIONAL ASSOCIATION
Domestic and Eurodollar Lending Office and Notices:
PNC Bank, National Association
Corporate Banking Loan Services
249 Fifth Avenue, 6th Floor
Mail Stop P-1-POPP-06-1
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 Department
249 Fifth Avenue, 2nd Floor
Mail Stop P-1-POPP-02-2
Pittsburgh, PA 15222-2707
Attention: Timothy J. Marchando
Vice President
Telephone: (412) 762-7333
Facsimile: (412) 762-6484
-4-
<PAGE>
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
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
-5-
<PAGE>
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.
445 South Figueroa Street, 16th Floor
Los Angeles, California 90071
Attention: Scott Jessup
Telephone: (213) 236-4023
Facsimile: (213) 236-7814
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) 243-3503
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
-6-
<PAGE>
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 AG
New York Branch
75 Wall Street
New York, New York 10005-2889
Attention: Robert Reddington
Credit Services
Telephone: (212) 429-2269
Facsimile: (212) 429-2130
Notices (other than Notices of Borrowing and
Notices of Conversion/Continuation):
Dresdner Bank AG
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
-7-
<PAGE>
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: Carmela Romanello-Schaden
Telephone: (212) 692-3126
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: Donald Brown
FVP and Representative
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
-8-
<PAGE>
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
-9-
<PAGE>
THE NORTHERN TRUST COMPANY
Domestic and Eurodollar Lending Office and Notices:
The Northern Trust Company
50 South LaSalle Street, Station B-11
Chicago, IL 60675
Attention: Martin G. Alston
Vice President
Telephone: (312) 444-5058
Facsimile: (312) 444-5055
SOCIETE GENERALE
Domestic and Eurodollar Lending Office:
2029 Century Park East, Suite 2029
Los Angeles, CA 90067
Attention: Hillary Adkins
Telephone: (310) 788-7113
Facsimile: (310) 203-0539
Notices (other than Notices of Borrowing and
Notices of Conversion/Continuation):
Societe Generale
2029 Century Park East, Suite 2900
Los Angeles, CA 90067
Attention: Staley Stewart
Vice President
Telephone: (310) 788-7103
Facsimile: (310) 551-1537
-10-
<PAGE>
CONSENT OF MATTEL SALES CORP. AND FISHER PRICE, INC.
TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
The undersigned Mattel Sales Corp. and Fisher-Price, Inc. hereby consent to
the amendment and restatement of the 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 on the terms and
conditions set forth in the Second Amended and Restated Credit Agreement dated
as of March 11, 1998, among Mattel, Inc., the Banks named therein and Bank of
America National Trust and Savings Association, as Agent (the "Amended Credit
Agreement") and reaffirm their respective First Amended and Restated Continuing
Guaranties, dated as of March 13, 1997 to which it is a party and their consents
to the Mattel Sales Subordination Agreement and Fisher Price Subordination
Agreement, respectively, (the "Subordination Agreements"), and represent and
warrant that (a) there is no defense, counterclaim or offset of any type or
nature under such Continuing Guaranties or the Subordination Agreements, (b) the
same remain in full, force and effect after giving effect hereto, and (c) all
references to "Credit Agreement" and "Loan Documents" in such Continuing
Guaranties and the Subordination Agreements shall be deemed references to the
Amended Credit Agreement and "Loan Documents" as defined in the Amended Credit
Agreement.
Dated: March 11, 1998
FISHER-PRICE, INC.
By:
----------------------
Name:
--------------------
Title:
-------------------
MATTEL SALES CORP.
By:
----------------------
Name:
--------------------
Title:
-------------------
-11-
<PAGE>
EXHIBIT 99.1
RECEIVABLES PURCHASE AGREEMENT
among
MATTEL FACTORING, INC.,
as Transferor
MATTEL, INC.,
as Servicer and Guarantor
THE FINANCIAL INSTITUTIONS PARTY HERETO
as Purchasers
and
NATIONSBANK OF TEXAS, N.A.,
as Agent
Dated as of March 11, 1998
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS............................................ 1
Section 1.1. Certain Defined Terms........................... 1
--------------------
Section 1.2. Other Terms..................................... 9
-----------
ARTICLE II. AMOUNTS AND TERMS OF THE PURCHASES.................... 9
Section 2.1. Purchase Facility............................... 9
-----------------
Section 2.2. Making Purchases................................ 9
----------------
Section 2.3. Payments and Computations, Etc.................. 10
------------------------------
Section 2.4. Collection Account.............................. 11
------------------
Section 2.5. Facility Termination Date....................... 11
-------------------------
Section 2.6. Adjustment of Facility Limit.................... 12
----------------------------
Section 2.7. Deficiency Advances............................. 12
-------------------
Section 2.8. Commitment and Other Fees. (a)................. 12
-------------------------
ARTICLE III. CONDITIONS OF PURCHASES.............................. 13
Section 3.1. Conditions Precedent to Initial Purchase......... 13
----------------------------------------
Section 3.2. Conditions Precedent to All Purchases............ 13
-------------------------------------
ARTICLE IV. SERVICING AND SETTLEMENT PROCEDURES................... 14
Section 4.1. Appointment of Servicer.......................... 14
-----------------------
Section 4.2. Duties of Servicer............................... 14
------------------
Section 4.3. Servicer Default................................. 15
----------------
Section 4.4. Servicer Default Remedies........................ 15
-------------------------
Section 4.5. Responsibilities of the Transferor............... 15
----------------------------------
ARTICLE V. REPRESENTATIONS AND WARRANTIES......................... 16
Section 5.1. Representations and Warranties................... 16
------------------------------
ARTICLE VI. COVENANTS............................................. 18
Section 6.1. Covenants........................................ 18
---------
a. Compliance with Laws, Etc............................. 18
-------------------------
b. Offices, Records and Books of Account; Etc............ 18
------------------------------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
c. Performance and Compliance with Contracts and Credit
----------------------------------------------------
and Collection Policy.............................. 19
---------------------
d. Ownership Interest, Etc............................... 19
-----------------------
e. Sales, Liens, Etc..................................... 19
-----------------
f. Extension or Amendment of Receivables................. 19
-------------------------------------
g. Change in Business or Credit and Collection Policy.... 19
--------------------------------------------------
h. Audits................................................ 19
------
i. Status of Listed Receivables.......................... 20
----------------------------
j. Reporting Requirements................................ 20
----------------------
k. General Restrictions.................................. 20
--------------------
l. Mergers, Acquisitions, Sales, Investments, Etc........ 21
----------------------------------------------
m. No Modification of the Purchase and Sale Agreement.... 21
--------------------------------------------------
ARTICLE VII. INDEMNIFICATION...................................... 21
Section 7.1. Indemnification Generally........................ 21
-------------------------
Section 7.2. Capital Adequacy, Etc............................ 23
---------------------
ARTICLE VIII. GUARANTY............................................ 24
Section 8.1. Guaranty of Obligations.......................... 24
-----------------------
Section 8.2. Guaranty Continuing.............................. 24
-------------------
Section 8.3. Guarantor Directly Liable........................ 25
-------------------------
Section 8.4. No Impairment.................................... 25
-------------
Section 8.5. Waiver........................................... 25
------
Section 8.6. Subrogation...................................... 26
-----------
Section 8.7. Information...................................... 26
-----------
Section 8.8. Evidence of Obligations.......................... 26
-----------------------
ARTICLE IX. THE AGENT............................................. 26
Section 9.1. Appointment...................................... 26
-----------
Section 9.2. Attorneys-in-fact................................ 27
-----------------
Section 9.3. Limitation on Liability.......................... 27
-----------------------
Section 9.4. Reliance......................................... 27
--------
Section 9.5. Notice of Termination Event...................... 28
---------------------------
Section 9.6. No Representations............................... 28
------------------
Section 9.7. Indemnification.................................. 28
---------------
Section 9.8. Purchaser........................................ 29
---------
Section 9.9. Resignation...................................... 29
-----------
Section 9.10. Sharing of Payments, etc........................ 29
------------------------
Section 9.11. Independent Agreements.......................... 30
----------------------
ARTICLE X. TERMINATION EVENTS AND TERMINATION EVENT
REMEDIES...................................................... 30
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 10.1. Termination Events Defined...................... 30
--------------------------
Section 10.2. Termination Event Remedies...................... 31
--------------------------
ARTICLE XI. MISCELLANEOUS......................................... 31
Section 11.1. Waivers; Amendments, Etc........................ 31
------------------------
Section 11.2. Notices, Etc.................................... 32
------------
Section 11.3. Governing Law; Integration...................... 32
--------------------------
Section 11.4. Severability; Counterparts...................... 32
--------------------------
Section 11.5. Successors and Assigns.......................... 32
----------------------
Section 11.6. Confidentiality................................. 33
---------------
Section 11.7. Assignments; Participations..................... 33
---------------------------
Section 11.8. Termination of Prior Transfer and Administration
------------------------------------------------
Agreement....................................... 34
---------
Section 11.9. Set Off......................................... 35
-------
</TABLE>
iii
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
This Receivables Purchase Agreement (as amended, supplemented or otherwise
modified from time to time, the "Agreement") is entered into as of March 11,
1998, among Mattel Factoring, Inc., a Delaware corporation, as transferor (the
"Transferor"), Mattel, Inc., a Delaware corporation ("Mattel"), as servicer (the
- ----------- ------
"Servicer") and as guarantor (the "Guarantor"), the financial institutions party
-------- ---------
hereto from time to time as purchasers (together with any successors and
assigns, the "Purchasers"), and NationsBank of Texas, N.A., a national banking
----------
association, as agent for the Purchasers (in such capacity, together with any
successors and assigns, the "Agent").
For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
Section 1.1 Certain Defined Terms. The following terms used in this
---------------------
Agreement shall have the following meanings:
"Adverse Claim" means a lien, security interest or other charge or
-------------
encumbrance, or any other type of right or claim (other than a lien or other
interest in favor of the Agent or the Purchasers pursuant to this Agreement).
"Agent" has the meaning set forth in the preamble.
-----
"Agent's Account" means Account No. 1292000883, reference "Mattel
---------------
Factoring," ABA No. 111000025, Attention: Corporate Credit Services, maintained
at the Agent, or any other account designated in writing by the Agent to the
Purchasers, the Servicer and the Transferor, from time to time.
"Applicable Margin" means, for each Obligor, that margin set forth in the
-----------------
table below opposite the Obligor's second highest long-term unsecured debt
ratings issued by S&P, Moody's or Duff & Phelps:
<TABLE>
<CAPTION>
S&P/Moody's/Duff & Phelps Applicable Margin
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
<S> <C>
AA-/Aa3/AA- or higher 17.0
- ----------------------------------------------------------------------------
A/A2/A or higher 21.0
- ----------------------------------------------------------------------------
A-/A3/A- or lower 24.0
- ----------------------------------------------------------------------------
</TABLE>
The Applicable Margins as of the date hereof are 17.0 for Wal-Mart Stores, Inc.
and 21.0 for Toys "R" Us, Inc.
1
<PAGE>
"Assignee" shall have the meaning set forth in Section 11.7.
-------- ------------
"Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978 (11
---------------
U.S.C. (S) 101, et seq.), as amended from time to time.
-- ----
"Business Day" means any day other than Saturday, Sunday or other day on
------------
which commercial banks in Dallas, Texas, New York, New York, or San Francisco,
California, are authorized or required by law to close and, if the applicable
Business Day relates to the Eurodollar Rate, means such a day on which dealings
are carried on in the applicable offshore dollar interbank market.
"Collection Account" has the meaning set forth in Section 2.4.
------------------ -----------
"Collections" means, with respect to any Listed Receivable, (a) all funds
-----------
which are received by the Transferor, any Seller or the Servicer (or any sub-
servicer) in payment of any amounts owed in respect of such Listed Receivable
(including, without limitation, purchase price, finance charges, interest and
all other charges), or applied to amounts owed in respect of such Listed
Receivable (including, without limitation, insurance payments and net proceeds
of the sale or other disposition of repossessed goods or other collateral or
property of the applicable Obligor or any other Person directly or indirectly
liable for the payment of such Listed Receivable and available to be applied
thereon), and (b) all other proceeds of such Listed Receivable.
"Commitment Fee" has the meaning set forth in Section 2.8.
-------------- -----------
"Contract" means, with respect to any Listed Receivable, any and all
--------
contracts, understandings, instruments, agreements, leases, invoices, notes, or
other writings pursuant to which such Listed Receivable arises or which
evidences such Listed Receivable or under which the applicable Obligor becomes
or is obligated to make payment in respect of such Listed Receivable.
"Credit and Collection Policy" means those receivables credit and
----------------------------
collection policies and practices of the Sellers in effect on the date of this
Agreement, as amended from time to time to the extent not prohibited by this
Agreement or the Purchase and Sale Agreement.
"Deficiency Advance" has the meaning set forth in Section 2.7.
------------------ -----------
"Dilution" means any adjustment in the outstanding principal balance of a
--------
Listed Receivable attributable to any credits, rebates, billing errors, sales or
similar taxes, discounts, setoffs, disputes, chargebacks, returns, allowances or
similar items.
"Dividend" means in respect of the Transferor, (i) cash distributions or
--------
any other distributions on, or in respect of, any class of capital stock of the
Transferor, and (ii) any and all funds, cash or other payments made in respect
of the redemption, repurchase or acquisition of such stock.
2
<PAGE>
"Due Date" means, with respect to any Purchase Date, a date selected by the
--------
Transferor which shall not be later than ninety days thereafter, excluding the
Purchase Date and including such Due Date.
"Eligible Receivables" means, on an applicable Purchase Date, any
--------------------
Receivable: (i) which has a stated maturity and which stated maturity is not
later than the related Due Date; (ii) which is an "account" as defined in the
UCC of any applicable jurisdiction; (iii) which is denominated and payable only
in United States dollars in the United States; (iv) which, together with the
Contract related thereto, is in full force and effect and constitutes the legal,
valid and binding obligation of the applicable Obligor enforceable against such
Obligor in accordance with its terms and subject to no offset, counterclaim or
other defense; (v) 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; (vi) which satisfies all
applicable requirements of the Credit and Collection Policy, including that the
Receivable not be delinquent or defaulted; and (vii) which was generated in the
ordinary course of the related Seller's business and which was purchased by the
Transferor from such Seller in accordance with the Purchase and Sale Agreement.
"Eurodollar Rate" means, for each Yield Period, a 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 Yield Period is determined (whether or
not applicable to any Purchaser) 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
Yield 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 purchase to be made or continued as a
Eurodollar Rate purchase by such Reference Bank and having a maturity
comparable to such Yield 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 Yield
Period.
3
<PAGE>
"Facility Termination Date" means the earlier of (i) March 31, 2003, as
-------------------------
such date may be extended pursuant to Section 2.5, or (ii) the date on which the
-----------
Agent delivers a notice of termination as a result of a Termination Event in
accordance herewith.
"Fisher-Price" means Fisher-Price, Inc., a Delaware corporation.
------------
"Guarantor" has the meaning set forth in the preamble to this Agreement.
---------
"Guaranty" has the meaning set forth in Section 8.1.
-------- -----------
"Indemnified Amounts" means any and all claims, damages, costs, expenses,
-------------------
losses and liabilities (including all reasonable fees and other charges of any
law firm or other external counsel, the reasonable allocated cost of internal
legal services and all reasonable other charges of internal counsel).
"Indemnified Parties" means the Agent, the Purchasers and their respective
-------------------
Affiliates, together with each of their respective employees, agents,
successors, transferees and assigns.
"Insolvency Proceeding" means (a) any case, action or proceeding before any
---------------------
court or other Governmental Person relating to bankruptcy, reorganization,
insolvency, liquidations, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors; and in the case of clause (a) or (b), undertaken under U.S. Federal,
state or foreign law, including the Bankruptcy Code.
"Listed Receivables" means the Receivables the outstanding principal
------------------
balances of which were reflected in the applicable Purchase Notice and
subsequently identified pursuant to Section 2.2(a)(iii).
-------------------
"Material Adverse Effect" means (i) a material adverse effect upon the
-----------------------
business, operations, properties, assets, business prospects or condition
(financial or otherwise) of the Transferor or Mattel and its Subsidiaries, taken
as a whole, or (ii) a material impairment of the ability of any Seller Party to
perform its obligations under this Agreement.
"Mattel" has the meaning set forth in the preamble to this Agreement.
------
"Mattel Credit Agreement" means the Second Amended and Restated Credit
-----------------------
Agreement dated as of March 11, 1998, among Mattel, the financial institutions
parties thereto, and Bank of America, as Agent, as such agreement may be
amended, amended and restated or otherwise modified from time to time. In the
event that any term of or section number in the Mattel Credit Agreement that is
incorporated by reference in this Agreement (including pursuant to Section 7.2
-----------
of this Agreement) is changed by any amendment or amendment and restatement of
the Mattel Credit Agreement (e.g., an amendment and restatement that renumbers
Section 10.14 of the Mattel Credit Agreement as Section 10.16 of the amended and
restated agreement), the parties hereto shall cooperate in good faith to amend
this Agreement in order to correct the references
4
<PAGE>
herein to the applicable terms and section numbers of the Mattel Credit
Agreement incorporated by reference in this Agreement. In the event that the
Mattel Credit Agreement shall cease to be in effect, then all references herein
to the Mattel Credit Agreement shall be deemed to refer to the Mattel Credit
Agreement as in effect immediately prior to such cessation.
"Mattel Factoring" has the meaning set forth in the preamble to this
----------------
Agreement.
"Mattel Sales" means Mattel Sales Corp., a California corporation.
------------
"Obligations" has the meaning set forth in Section 8.1.
----------- -----------
"Obligors" means Toys "R" Us, Inc., a Delaware corporation, and Wal-Mart
--------
Stores, Inc., a Delaware corporation.
"Participant" has the meaning set forth in Section 11.7.
----------- ------------
"Percentage" means, with respect to any Purchaser 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 Purchaser's
Purchaser Commitment, and the denominator of which is equal to the Purchasers'
Investment Limit.
"Permitted Accounts Receivable Financing Facilities" means this Agreement;
--------------------------------------------------
the Purchase and Sale Agreement dated as of December 18, 1997, among Mattel
Sales and Fisher-Price, as sellers, Mattel, as servicer, and Mattel Factoring,
as buyer (as amended, supplemented or otherwise modified from time to time),
with respect to the purchase of certain Wal-Mart Stores, Inc. Receivables; the
Receivables Purchase Agreement dated as of December 18, 1997, among Mattel
Factoring, as transferor, Mattel, as servicer and guarantor, and Bank of
America, NT & SA, as purchaser (as amended, supplemented or otherwise modified
from time to time), with respect to the sale of certain Wal-Mart Stores, Inc.
Receivables; and the Other Permitted Accounts Receivable Financing Facilities.
"Prior Transfer and Administration Agreement" means that certain Transfer
-------------------------------------------
and Administration Agreement dated as of March 11, 1997, among Mattel Factoring,
as transferor, Mattel, as guarantor and servicer, certain financial institutions
party thereto from time to time, as purchasers, and NationsBank of Texas, N.A.,
as agent for such purchasers.
"Proofs of Claim" mean collectively, proofs of claim under the Bankruptcy
---------------
Code or any analogous or similar item or items which may or shall be filed by or
on behalf of a creditor of any party to an Insolvency Proceeding.
"Purchase and Sale Agreement" means the Purchase and Sale Agreement dated
---------------------------
as of the date hereof (as amended, amended and restated or otherwise modified
from time to time), among the Sellers, Mattel, as servicer thereunder, and the
Transferor, as buyer thereunder.
5
<PAGE>
"Purchase Date" means the proposed date on which the Transferor proposes to
-------------
sell to the Purchasers an undivided percentage ownership interest in the Listed
Receivables identified on the related Purchase Notice.
"Purchase Notice" means a notice from the Servicer to the Agent
---------------
substantially in the form attached hereto as Exhibit I.
---------
"Purchased Interest" means, at any time the undivided percentage ownership
------------------
interest of the Purchasers acquired pursuant to this Agreement from the
Transferor in the Listed Receivables reflected on the applicable Purchase
Notice, Related Security with respect to such Receivables, Collections with
respect to such Receivables, and proceeds of, and amounts received or receivable
under any or all of, the foregoing. Such undivided percentage ownership
interest shall be computed as
PI+YR
-----
LRB
where:
PI = the Purchasers' Investment with respect to such
Purchased Interest at the related Purchase Date;
YR = the Yield Reserve of such Purchased Interest at the
related Purchase Date; and
LRB = the outstanding principal balance of the related
Listed Receivables as of the date the related
Purchase Notice is sent to the Agent;
provided, however, that the Purchased Interest shall never be more than 1.0.
- -----------------
"Purchasers" has the meaning set forth in the preamble to this Agreement.
----------
"Purchase Rate" means a rate per annum equal to the Eurodollar Rate, plus
------------- ----
the Applicable Margin. The Purchase Rate for a Yield Period shall be
established on the applicable day contemplated by the definition of Eurodollar
Rate.
"Purchaser Commitment" means, for each Purchaser, such Purchaser's
--------------------
Percentage of the Purchasers' Investment Limit.
"Purchasers' Investment" means the amount to be paid by the Purchasers for
----------------------
the account of the Transferor with respect to a Purchased Interest.
"Purchasers' Investment Limit" means Three Hundred Million Dollars
----------------------------
($300,000,000).
"Receivable" means any indebtedness and other obligations owed to a Seller,
----------
or any right of a Seller to payment, from or on behalf of either Obligor
(determined prior to giving effect to any purchase by the Transferor under the
Purchase and Sale Agreement or to any purchase hereunder by the Purchasers)
whether constituting an account, chattel paper, instrument or
6
<PAGE>
general intangible, arising in connection with the sale or lease of goods or the
rendering of services by such Seller, and includes, without limitation, the
obligation to pay any finance charges, fees and other charges with respect
thereto.
"Reference Banks" means Bank of America National Trust and Savings
---------------
Association and NationsBank of Texas, N.A. In the event that at any time of
determination only one bank designated as "Reference Banks" are providing rates
for deposits referred to in the definition of "Eurodollar Rate," that bank shall
be the "Reference Banks" for purposes of this Agreement.
"Related Security" means with respect to any Listed Receivable: (i) all of
----------------
the Transferor's interest in any goods (including returned goods), and
documentation of title evidencing the shipment or storage of any goods
(including returned goods), relating to any sale giving rise to such Receivable;
(ii) all other security interests or liens and property subject thereto from
time to time purporting to secure payment of such Receivable, whether pursuant
to the Contract related to such Receivable or otherwise, together with all UCC
financing statements or similar filings signed by any Obligor relating thereto;
and (iii) all guarantees, indemnities, insurance and other agreements (including
the related Contract) or arrangements of whatever character from time to time
supporting or securing payment of such Receivable or otherwise relating to such
Receivable whether pursuant to the Contract related to such Receivable or
otherwise, including, without limitation, all of the Transferor's rights with
respect to such Receivables under the Purchase and Sale Agreement.
"Requisite Purchasers" means, at any date of determination, Purchasers
--------------------
having at least 66 2/3% of the aggregate Purchaser Commitments at such time.
"Restricted Payments" has the meaning set forth in Section 6.1(k).
------------------- --------------
"Seller Party" means each of the Transferor and Mattel (in its capacity as
------------
the Servicer or the Guarantor).
"Sellers" means, collectively, Mattel Sales and Fisher-Price. A reference
-------
to the "related" Seller means with respect to a Receivable, that such Receivable
by its original terms was owed to such Seller.
"Servicer" has the meaning set forth in the preamble to this Agreement;
--------
provided that following the appointment of a successor Servicer in accordance
- --------
with this Agreement, all references herein to the Servicer shall be references
to such successor Servicer.
"Servicer Default" has the meaning set forth in Section 4.3.
---------------- -----------
"Solvent" means, as to any Person at any time, that (a) the fair value of
-------
the property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(32) of the Bankruptcy Code and, in the alternative, for purposes of
applicable state fraudulent conveyance law; (b) the present fair saleable value
of the property of such Person is not less than the amount that shall be
required to pay the probable liability of such Person on its
7
<PAGE>
debts as they become absolute and matured; (c) such Person is able to realize
upon its property and pay its debts and other liabilities (including disputed,
contingent and unliquidated liabilities) as they mature in the normal course of
business; (d) such Person does not intend to, and does not believe that it
shall, incur debts or liabilities beyond such Person's ability to pay as such
debts and liabilities mature; and (e) such Person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute unreasonably small capital.
"Specified Assets" means, whether now or hereafter owned, existing or
----------------
arising: (A) Listed Receivables, (B) all Related Security with respect to such
Receivables, (C) all Collections with respect to such Receivables (including
Collections received on and after the date that the related Purchase Notice is
sent to the Agent and prior to the related Purchase Date), and (D) all proceeds
of, and all amounts received or receivable under any or all of, the foregoing.
"Subordinated Note" has the meaning specified in the Purchase and Sale
-----------------
Agreement.
"Termination Event" has the meaning set forth in Section 10.1.
----------------- ------------
"Termination Event Day" means a day on which a Termination Event exists.
---------------------
"Transaction Documents" means this Agreement, the Purchase and Sale
---------------------
Agreement, the Subordinated Notes and all certificates, instruments, UCC
financing statements, reports, notices, letters, agreements and documents
executed or delivered by any Seller Party or a Seller under or in connection
with this Agreement, thereby excluding, for example, the Mattel Credit
Agreement, in each case as any such Transaction Documents may be amended,
amended and restated, extended or otherwise modified from time to time. The
Demand Note referred to in Section 3.1 to the Purchase and Sale Agreement will
-----------
not be a Transaction Document for purposes of this Agreement.
"Transferor" has the meaning set forth in the preamble to this Agreement.
----------
"UCC" means the Uniform Commercial Code as from time to time in effect in
---
the applicable jurisdiction.
"UCC Filing Date" means the first date on which any UCC financing statement
---------------
is filed pursuant hereto.
"Yield," for any Purchased Interest for the related Yield Period, means an
-----
amount determined as follows:
PR x YP x 1/360
where:
PR = the Purchase Rate for such Yield Period; and
YP = the number of days in such Yield Period.
8
<PAGE>
"Yield Period" means each period from and including a Purchase Date to but
------------
excluding the related Due Date.
"Yield Reserve" means the Yield with respect to an applicable Purchased
-------------
Interest, times the applicable Purchasers' Investment; provided that no
----- --------
provision in this Agreement shall require the payment or permit the collection
of Yield Reserve in excess of the maximum permitted by applicable law.
Section 1.2 Other Terms. All accounting terms not specifically defined
-----------
herein shall be construed in accordance with generally accepted accounting
practices. All terms used in Division 9 of the UCC in the State of California,
and not specifically defined herein, are used herein as defined in such Division
9. Unless the context otherwise requires, (i) "or" means "and/or," (ii)
"including" (and with correlative meaning "include" and "includes") means
including, without limiting the generality of any description preceding such
term, (iii) the meanings of defined terms are equally applicable to the singular
and plural forms of such defined terms, and (iv) all other terms not otherwise
defined herein shall have the meanings assigned to such terms in the Mattel
Credit Agreement.
ARTICLE II. AMOUNTS AND TERMS OF THE PURCHASES
Section 2.1 Purchase Facility. On the terms and conditions hereinafter
-----------------
set forth, each Purchaser hereby agrees to purchase from time to time from the
Transferor, without recourse (except as expressly provided herein), undivided
percentage ownership interests in the Listed Receivables and other items
included in the related Purchased Interest.
Section 2.2 Making Purchases.
----------------
(a) (i) Each purchase of undivided percentage ownership interests
hereunder shall be made upon the Servicer's delivery to the Agent of a Purchase
Notice, which notice shall be irrevocable. Each Purchase Notice must be
received by the Agent not later than 9:00 a.m., Los Angeles time, on the third
Business Day prior to the related Purchase Date. A Purchase Notice shall
specify for each Obligor (A) the aggregate amount of the Listed Receivables, (B)
the Purchase Date (which must be a Business Day), (C) the related Due Date, and
(D) the proposed amount of the Purchasers' Investment.
(ii) Not later than 9:00 a.m. (Los Angeles time) on the second
Business Day prior to the related Purchase Date, the Agent shall send to the
Servicer a notice setting forth a calculation of the related Purchased Interest,
including a description of the related Purchasers' Investment and the Yield
Reserve. The Agent shall calculate the Purchasers' Investment with respect to a
Purchased Interest as an amount which, when added to the related Yield Reserve,
is as close as reasonably practicable to (but not in excess of) the aggregate
outstanding principal balances of the related Eligible Receivables set forth in
the related Purchase Notice; it being understood and agreed that the aggregate
outstanding Purchasers' Investments shall not exceed the Purchasers' Investment
Limit.
9
<PAGE>
(iii) The Transferor shall send to the Agent for receipt by the
Agent not later than the Business Day prior to the related Purchase Date, a
schedule of the Listed Receivables, identifying the invoice number, outstanding
principal balance and maturity date of each such Receivable (in each case as of
the date of the related Purchase Notice). None of such Listed Receivables shall
have been the subject of a prior Purchase Notice.
(b) Promptly after receipt of a Purchase Notice, the Agent shall notify
each Purchaser of the proposed purchase (such notice to normally be given within
two hours of receipt by the Agent). Each Purchaser shall make available to the
Agent its pro rata share of the Purchase Price by remitting such funds to the
Agent's Account prior to 2:00 p.m., Dallas, Texas time on the Purchase Date. On
each Purchase Date, the Agent shall, upon satisfaction of the applicable
conditions set forth in Article III hereto, pay to the Servicer, for the account
-----------
of the Transferor, in same day funds, an amount equal to the aggregate of the
amounts so made available by the Purchasers. The Agent shall cause an amount of
same-day funds equal to such aggregate amount received by the Agent to be
credited to the Transferor's account at Bank of America National Trust & Savings
Association, Account No. 1235906117, reference "Mattel Factoring," ABA No.
121000358, or any other account designated in writing by the Transferor or the
Servicer to the Agent from time to time. No Purchaser shall be obligated to
make a purchase in excess of its Purchase Commitment.
(c) On each Purchase Date, effective upon the payment contemplated by
Section 2.2(b) (and without the necessity of any formal or other instrument of
assignment or other further action), the Transferor hereby sells and assigns to
the Purchasers an undivided percentage ownership interest equal to the Purchased
Interest in each related Listed Receivable reflected on the applicable Purchase
Notice (and subsequently identified pursuant to Section 2.2(a)(iii)) and the
other Specified Assets related thereto.
(d) To secure all of the obligations (monetary or otherwise) of the
Transferor under this Agreement and the other Transaction Documents to which it
is a party, whether now or hereafter existing or arising, due or to become due,
direct or indirect, absolute or contingent, the Transferor hereby grants to the
Agent for the benefit of the Agent and the Purchasers a security interest in, to
and under all of the Transferor's right, title and interest (including any
undivided interest of the Transferor) in all of the Specified Assets. The
Agent, on behalf of itself and the Purchasers, shall have, with respect to the
Specified Assets, and in addition to all the other rights and remedies available
to the Agent, all the rights and remedies of a secured party under any
applicable UCC.
Section 2.3 Payments and Computations, Etc. All amounts to be paid or
------------------------------
deposited by a Seller Party hereunder shall be paid or deposited, without
setoff, counterclaim or reduction of any kind, no later than 10:00 a.m. (Los
Angeles time) on the day when due in same day funds to the Agent's Account. All
amounts received after noon (Los Angeles time) shall be deemed to have been
received on the immediately succeeding Business Day. The Transferor shall, to
the extent permitted by Governmental Rule, pay to the Agent, for the benefit of
the Purchasers, upon demand, interest on all amounts not paid or deposited when
due to the Purchasers hereunder at a rate per annum equal to 2% in excess of the
prime rate of interest announced by the Agent from
10
<PAGE>
time to time, changing when and as said prime rate changes (such rate not
necessarily being the lowest or best rate charged by the Agent). All
computations of Yield and Commitment Fee shall be made on the basis of a year of
360 days for the actual number of days elapsed. Whenever any payment or deposit
to be made hereunder shall be due on a day other than a Business Day, such
payment or deposit shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of such payment or
deposit. All payments received by the Agent or any Purchaser hereunder (other
than the Commitment Fee) on account of a Purchased Interest shall be applied by
the Agent, first to pay due and payable Yield Reserve with respect to the
related Purchasers' Investment, second to pay all due and payable fees and
expenses and other amounts due to the Purchasers and the Agent hereunder, and
third, to repay any such Purchasers' Investment. The amount of each Purchasers'
Investment shall be reduced by payments received by the Agent and applied on
account of such Purchasers' Investment pursuant to this Agreement.
Section 2.4 Collection Account. (a) At any time the second highest
------------------
long-term unsecured debt rating issued to the Servicer by S&P, Moody's or Duff &
Phelps is lower than BBB-, Baa3 or BBB-, respectively, there shall be
established and maintained, in the name of the Agent for the benefit of the
Purchasers, 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 Purchasers. 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 Agent or the Purchasers. Upon the
earlier of (i) the Servicer's second highest long-term unsecured debt rating
issued to the Servicer by S&P, Moody's or Duff & Phelps is BBB-, Baa3 or BBB-,
respectively, or higher or (ii) the date on which the Purchasers' Investment is
zero, any funds remaining on deposit in the Collection Account shall be released
to the Transferor in same-day funds.
(b) During such time that the second highest long-term unsecured debt
rating issued to the Servicer by S&P, Moody's or Duff & Phelps is lower than
BBB-, Baa3 or BBB-, respectively, the Servicer shall deposit within two Business
Days all Collections it receives into the Collection Account. Such Collections
shall be retained in the Collection Account by the Agent until the next
succeeding Due Date, at which time such amounts shall be applied pursuant to the
terms hereof.
Section 2.5 Facility Termination Date. The Facility Termination Date may
-------------------------
be extended to any subsequent date agreed upon from time to time by the parties
hereto in accordance with this Section. During the thirty (30) day period ending
on the thirtieth (30th) day before the then existing Facility Termination Date,
the Servicer, the Transferor and the Guarantor may, by sending a letter to the
Agent, request that the Facility Termination Date be extended for an additional
period of time, not to exceed 365 days. The Purchasers may, in their sole
discretion, agree to extend such Facility Termination Date. If the Agent and the
Purchasers agree to extend such Facility Termination Date, then they shall sign
a copy of such letter and send the same to the Servicer. The Facility
Termination Date shall then be extended to, and shall be deemed to have been
amended to be, the applicable date specified in such letter. If the Agent and
11
<PAGE>
the Purchasers do not sign a copy of such letter and send the same to the
Servicer prior to the then existing Facility Termination Date, then the Agent
and the Purchasers shall be deemed to have declined to extend (and to have
declined to amend) the Facility Termination Date.
Section 2.6 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 Purchasers'
Investment Limit; provided that the Purchasers' Investment Limit, as reduced,
--------
shall equal or exceed the total outstanding Purchasers' 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 Purchaser and Bank
of America National Trust and Savings Association as agent under the Mattel
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 Purchaser's Purchase
Commitment.
Section 2.7 Deficiency Advances. No Purchaser shall be responsible for
-------------------
any default of any other Purchaser in respect of such other Purchaser's
obligation to fund any portion of a purchase hereunder, nor shall the commitment
of any Bank hereunder be increased as a result of such default by any other
Purchaser. Without limiting the generality of the foregoing, in the event any
Purchaser shall fail to advance funds as provided herein, the Agent may, in its
discretion but shall not be obligated to, advance as a Purchaser 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 Purchaser would have been entitled had it made
such advance itself; provided that, upon payment to the Agent from such other
--------
Purchaser of the entire outstanding amount of such Deficiency Advance, together
with interest thereon, at the Applicable Margin applicable to the related
Purchase, then such payment shall be credited against the Agent's share of the
total outstanding Purchaser' 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 Purchaser failing
to fund its pro rata portion (based on its Percentage) of the Purchase Price of
any purchase hereunder.
Section 2.8 Commitment and Other Fees. (a) The Transferor hereby agrees
-------------------------
to pay to the Agent for the rateable benefit of the Purchasers, for the period
from and including the date hereof through the Facility Termination Date, a non-
refundable fee (the "Commitment Fee") equal to six and one-half basis points
--------------
(0.065%) per annum on the excess of (i) the average Purchasers' Investment Limit
over (ii) the average outstanding amount of the Purchasers' Investments on each
day during each applicable period described below. The Commitment Fee shall be
payable in arrears on the first Business Day of each calendar quarter occurring
after the first Purchase Date, and on the Facility Termination Date; provided,
--------
however, that the
- -------
12
<PAGE>
Commitment fee shall increase to eight and one-half basis points (0.085%) at any
time the second highest long-term unsecured debt rating of any Obligor issued by
S&P, Moody's or Duff & Phelps is lower than A, A2 or A, respectively.
(b) Mattel agrees to pay to the Agent on the date hereof and annually
thereafter such fees as are described in that certain fee letter between the
Agent and Mattel, dated January 29, 1998.
ARTICLE III. CONDITIONS OF PURCHASES
Section 3.1. Conditions Precedent to Initial Purchase. The initial purchase
----------------------------------------
of an undivided interest pursuant to this Agreement is subject to the conditions
precedent that the Agent shall have received on or before the related Purchase
Date the following, each in form and substance (including the date thereof)
satisfactory to the Agent: (a) a counterpart of this Agreement and the Purchase
and Sale Agreement duly executed by the Seller Parties and the Sellers, as the
case may be; (b) favorable opinions of (x) the General Counsel or an Assistant
General Counsel of Mattel, relating to the Seller Parties and (y) Latham &
Watkins, special counsel to the Seller Parties; (c) a certificate of the
Assistant Secretary of each Seller Party certifying in each case (i) the names
and signatures of its applicable officers that shall execute and deliver the
Transaction Documents (on which certificate the Agent may conclusively rely
until such time as the Agent shall receive a revised certificate meeting the
requirements of this clause), (ii) that attached thereto is a true and correct
copy of the certificate or articles of incorporation (certified by the Secretary
of State of Delaware or California, as the case may be), by-laws of such Seller
Party, in each case as in effect on the date of such certification, (iii) that
attached thereto are true and complete copies of excerpts of resolutions adopted
by the Board of Directors of such Seller Party, approving the execution,
delivery and performance of this Agreement and all other Transaction Documents
to which such Seller Party is a party; and (iv) that attached thereto are good
standing certificates issued by the Secretary of State of Delaware with respect
to Mattel and Mattel Factoring; (d) a UCC-1 financing statement signed by the
Transferor in form for filing with the Secretary of State of California; (f)
good standing certificates dated as of a recent date for each Seller Party from
the Secretary of State of the States of Delaware and California; (g) copies of
searches of financing statements filed with the (i) Secretary of State of the
State of California, naming each of the Transferor and Mattel Sales as the
debtor, and (ii) the Secretary of State of the State of New York, naming Fisher-
Price as the debtor; (h) all accrued and outstanding amounts owing under the
Prior Transfer and Administration Agreement which have been detailed in writing
and delivered to the transferor or servicer thereunder shall have been paid in
full, and (i) each other item to be delivered pursuant to Section 3.1 of the
Purchase and Sale Agreement.
Section 3.2. Conditions Precedent to All Purchases. Each purchase
-------------------------------------
(including the initial purchase) of undivided interests pursuant to this
Agreement shall be subject to the further conditions precedent that: (a) on the
Purchase Date applicable to such purchase the following statements shall be true
(and acceptance of the proceeds of such purchase shall be deemed a
representation and warranty by the Transferor that such statements are then
true): (i) the representations and warranties contained in Section 5.1 are true
-----------
and correct on and as of such Purchase Date as though made on and as of such
date (except to the extent any representation and
13
<PAGE>
warranty is expressly made as of an earlier date); and (ii) no event has
occurred and is continuing, or would result from such purchase, that constitutes
a Termination Event or that would constitute a Termination Event but for the
requirement that notice be given or time elapse or both; (b) after giving effect
to the payment contemplated by Section 2.2 on the date of such purchase, the
-----------
aggregate outstanding Purchasers' Investments shall not exceed the Purchasers'
Investment Limit; (c) the Agent shall have received a list of Eligible
Receivables in accordance with Section 2.2; (d) such Purchase Date is also a
-----------
"Purchase Date" as defined in the Purchase and Sale Agreement; (e) the related
Due Date is prior to the Facility Termination Date; and (f) after giving effect
to the Yield Period in connection with such purchase, there are no other Yield
Periods in effect.
ARTICLE IV. SERVICING AND SETTLEMENT PROCEDURES
Section 4.1. Appointment of Servicer. Until the Agent gives notice to the
-----------------------
Transferor of the designation of a new Servicer in accordance with the last
sentence of this Section, Mattel 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 Listed Receivables, Mattel
--------
(solely in its capacity as Servicer) may, at any time, upon prior written notice
to the Agent, designate any Affiliate of Mattel as sub-servicer hereunder;
provided, however, that such Affiliate shall not become the Servicer and,
- -------- -------
notwithstanding any such delegation, Mattel shall remain liable for the
performance of the duties and obligations of the Servicer in accordance with the
terms of this Agreement without diminution of such liability by virtue of such
delegation and to the same extent and under the same terms and conditions as if
Mattel alone were performing such duties and obligations. Subject to the
foregoing, Mattel hereby delegates to Fisher-Price all of Mattel's duties and
obligations under Section 4.2 below with respect to the Listed Receivables
-----------
originated by Fisher-Price. Mattel acknowledges that the Agent and the
Purchasers have relied on the agreement of Mattel to act as the Servicer
hereunder in making their decision to execute and deliver this Agreement.
Accordingly, Mattel agrees that it shall not voluntarily resign as the Servicer.
In the event that a new "Servicer" has been designated pursuant to the Purchase
and Sale Agreement or upon the occurrence of a Servicer Default as contemplated
by Section 4.4, the Agent may designate as Servicer any Person (including the
-----------
Agent) to succeed Mattel 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 4.2. Duties of Servicer. The Servicer shall take or cause to be
------------------
taken all such action as may be necessary or advisable to collect each Listed
Receivable from time to time, all in accordance with this Agreement and all
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Policy; provided, however, that the
-------- -------
Servicer shall not extend the maturity of any Listed Receivable. The Transferor
shall deliver to the Servicer and the Servicer shall hold for the benefit of the
Transferor and the Agent for the benefit of the Purchasers in accordance with
their respective interests, all records and documents (including computer tapes
or disks) with respect to such Listed Receivables. Notwithstanding anything to
the contrary contained herein, the Agent, with the consent or direction of the
Requisite Purchasers, may direct the Servicer to commence or settle any legal
action to enforce collection of any Listed Receivable or to foreclose upon or
repossess any
14
<PAGE>
Related Security; provided, however, that no such direction may be given unless
-------- -------
(x) a Termination Event has occurred and is continuing, and (y) the Requisite
Purchasers believe in good faith that failure to commence, settle, or effect
such legal action, foreclosure or repossession could materially and adversely
affect a material portion of the Listed Receivables. Subject to Section 2.4, the
-----------
Servicer shall hold (and shall cause each sub-servicer to hold) in trust (and,
during the continuance of a Termination Event, at the request of the Agent,
segregate) for the Agent for the benefit of the Purchasers, from Collections
received by the Transferor, any Seller or the Servicer (or any sub-servicer)
with respect to the Listed Receivables, the percentage of such Collections
represented by the related Purchased Interest. On each Due Date, the Servicer
shall deposit into the Agent's Account the amount of Collections required to be
held for the Agent for the benefit of the Purchasers pursuant to the preceding
sentence.
Section 4.3. Servicer Default. The occurrence of any one or more of
----------------
the following events shall constitute a Servicer Default hereunder:
(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 Transaction Document shall prove to
have been incorrect in any material respect when made or deemed made; or
(c) an Insolvency Proceeding shall have commenced and be continuing with
respect to the Servicer; or
(d) an Event of Default under and as defined in the Mattel Credit
Agreement shall have occurred and be continuing.
Section 4.4. Servicer Default Remedies. Notwithstanding any other
-------------------------
provision of this Agreement, during the continuation of a Servicer Default, the
Agent, upon the written request of the Requisite Purchasers, shall, by written
notice to the Transferor, the Guarantor and the Servicer:
(i) direct the Obligors that payment of all amounts payable under
any Listed Receivable be made directly to the Agent or its designee;
(ii) instruct the Transferor to give notice of the Purchasers'
Interest in the Listed Receivables to the Obligors, which notice shall be
given at the Transferor's expense and shall direct that payments be made
directly to the Agent or its designee; or
(iii) terminate and replace the Servicer.
Section 4.5. Responsibilities of the Transferor. Anything herein to the
----------------------------------
contrary notwithstanding, the Transferor shall (x) perform all of its
obligations (if any) under the Contracts related to Listed Receivables to the
same extent as if interests in such Listed
15
<PAGE>
Receivables had not been transferred hereunder and the exercise by the Agent of
its rights hereunder shall not relieve any Seller or Seller Party from such
obligations and (y) pay when due any taxes payable by the Transferor under
applicable law, including any sales taxes payable in connection with the Listed
Receivables and their creation and satisfaction. The Transferor shall provide to
the Servicer on a timely basis all information needed for such servicing,
administration and collection, including notice of the occurrence of any
Termination Event Day. Neither the Agent nor any Purchaser shall have any
obligation or liability with respect to any Listed Receivable, any Related
Security or any related Contract, nor shall the Agent or any Purchaser be
obligated to perform any of the obligations of any Seller or Seller Party under
any of the foregoing.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
Section 5.1. Representations and Warranties. Each Seller Party severally
------------------------------
represents and warrants, as to itself alone, as applicable, to the Agent and the
Purchasers as follows:
(a) Such Seller Party is a corporation duly incorporated, validly existing
and in good standing under the laws of the state of its incorporation, and is
duly qualified to do business, and is in good standing, as a foreign corporation
in every jurisdiction where the nature of its business requires it to be so
qualified, except in jurisdictions in which the failure to be qualified or in
good standing has or will have no Material Adverse Effect.
(b) The execution, delivery and performance by such Seller Party of this
Agreement and the other Transaction Documents to which it is a party, including
such Seller Party's use of the proceeds of purchases, (i) are within such Seller
Party's corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) do not contravene or result in a default under or
conflict with (1) such Seller Party's charter or by-laws, (2) any law, rule or
regulation applicable to such Seller Party, the violation of which would result
in a Material Adverse Effect, (3) any Contractual Obligation of such Seller
Party the violation of which would have a Material Adverse Effect or (4) any
order, writ, judgment, award, injunction or decree binding on or affecting such
Seller Party or its property, the violation of which would result in a Material
Adverse Effect, and (iv) do not result in or require the creation of any
material Adverse Claim upon or with respect to any of its material properties or
upon or with respect to the Listed Receivables (other than pursuant to the
Transaction Documents). This Agreement and the other Transaction Documents to
which it is a party have been duly executed and delivered by such Seller Party.
(c) No authorization or approval or other action by, and no notice to or
filing with any or other Person is required for the due execution, delivery and
performance by such Seller Party of this Agreement or any other Transaction
Document to which it is a party, other than UCC financing statements related
hereto or to the Purchase and Sale Agreement.
(d) This Agreement and the other Transaction Documents to which it is a
party constitutes the legal, valid and binding obligation of such Seller Party
enforceable against such Seller Party in accordance with its terms, except as
enforcement may be limited by bankruptcy,
16
<PAGE>
insolvency, reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally.
(e) There is no pending or, to the knowledge of such Seller Party,
threatened action or proceeding affecting such Seller Party or any of its
Subsidiaries before any Governmental Person or arbitrator which, in the
reasonable opinion of such Seller Party and its executive officers, would result
in a Material Adverse Effect, or which affects or purports to affect the
legality, validity or enforceability of this Agreement or the other Transaction
Documents.
(f) With respect to the Transferor, the Transferor is the legal and
beneficial owner of the Listed Receivables and all other Specified Assets, free
and clear of any Adverse Claim; upon each purchase, the Agent, for the benefit
of itself and the Purchasers, shall have a valid and enforceable first priority,
perfected undivided percentage ownership interest to the extent of the Purchased
Interest or a valid and enforceable first priority, perfected security interest
in each such Listed Receivable and other Specified Assets, in each case free and
clear of any Adverse Claim. No effective UCC financing statement or other
instrument similar in effect covering any of the Specified Assets is on file in
any recording office other than any UCC financing statement filed pursuant to
this Agreement in favor of the Agent.
(g) All exhibits, financial statements, documents, books, records,
Purchase Notices, other information or reports furnished or to be furnished at
any time by or on behalf of such Seller Party to the Agent in connection with
this Agreement are or will be accurate in all material respects as of their
respective dates or (except as otherwise disclosed to the Agent at such time) as
of the date so furnished, and no such item contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained therein, in the light of the
circumstances under which they were made, 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 Agent prior to the date of this
Agreement.
(h) With respect to the Transferor, the principal place of business and
chief executive office (as such terms are used in the UCC) of the Transferor and
the office where the Transferor keeps its records concerning the Listed
Receivables are located at the address referred to in Section 6.1(b).
--------------
(i) Each Seller Party is not in violation of any order of any court,
arbitrator or Governmental Person, which violation would have a Material Adverse
Effect.
(j) With respect to the Transferor, no proceeds of any purchase from the
Transferor shall be used for any purpose that violates any applicable law, rule
or regulation, including Regulations G or U of the Federal Reserve Board.
(k) No event has occurred and is continuing, or would result from a
purchase in respect of the related Purchased Interest or from the application of
the proceeds therefrom, which constitutes a Termination Event.
17
<PAGE>
(1) With respect to the Transferor, the Transferor has accounted for each
sale of undivided percentage ownership interests in its Listed Receivables in
its books and financial statements as sales, consistent with generally accepted
accounting practices.
(m) With respect to each Seller Party, such Seller Party has complied with
all of the material terms, covenants and agreements contained in this Agreement
and the other Transaction Documents and applicable to it, except, in any such
case, where the consequences, direct or indirect, of any such noncompliance, if
any, would not result in a Material Adverse Effect.
(n) With respect to the Transferor, the Transferor's complete corporate
name is set forth in the preamble to this Agreement. The Transferor (i) does
not use, and has not during the last five years changed its name or used, any
other corporate name, trade name, doing business name or fictitious name, except
for names first used after the date of this Agreement and set forth in a notice
delivered to the Agent pursuant to of Section 6.1(b), and (ii) has never merged
--------------
with or into or consolidated with any other Person.
ARTICLE VI. COVENANTS
Section 6.1. Covenants. Until the latest of (i) the date on which no
---------
Purchasers' Investment or Yield Reserve in respect of any Purchased Interest
shall be outstanding and the Purchasers shall have no further obligation
hereunder to purchase interests in Listed Receivables, (ii) the date all other
amounts owed by the Transferor or the Servicer under this Agreement to the
Agent, any Purchasers and any other Indemnified Party shall be paid in full and
the Purchasers shall have no further obligation hereunder to purchase interests
in Listed Receivables, and (iii) the date on which this Agreement has been
terminated:
a. Compliance with Laws, Etc. Each Seller Party shall comply in all
-------------------------
material respects with all applicable laws, rules, regulations and orders, and
preserve and maintain its corporate existence, rights, franchises,
qualifications, and privileges except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve and
maintain such existence, rights, franchises, qualifications, and privileges
would not result in a Material Adverse Effect and not result in any Adverse
Claim on the Listed Receivables.
b. Offices, Records and Books of Account; Etc. The Transferor (i) shall
-------------------------------------------
keep its principal place of business and chief executive office (as such terms
are used in the UCC) and the office where it keeps its records concerning the
Listed Receivables at the address of the Transferor set forth under its name on
the signature page hereto or, upon at least 15 days' prior written notice of a
proposed change to the Agent, at any other locations, so long as, prior to
making such a change, the Transferor shall have taken all actions in any
applicable jurisdiction that may be requested by the Agent in accordance with
Section 6.1(d)); and (ii) shall provide the Agent with at least 15 days' written
- ---------------
notice prior to making any change in the Transferor's name or making any other
change in the Transferor's identity or corporate structure (including a merger)
which could render any UCC financing statement theretofore filed with respect to
such Person by any other Person (including, if applicable, any UCC financing
statements filed in connection with this Agreement) "seriously misleading" as
such term is used in the UCC, so long as, prior to making such a change, the
Transferor shall have taken all actions in any applicable
18
<PAGE>
jurisdiction that may be requested by the Agent in accordance with Section
-------
6.1(d)); each notice to the Agent pursuant to this Section shall set forth
- -------
the applicable change and the effective date thereof. The Transferor also will
maintain and implement administrative and operating procedures (including an
ability to recreate records evidencing Listed Receivables and related Contracts
in the event of the destruction of the originals thereof), and keep and maintain
all documents, books, records, computer tapes and disks and other information
reasonably necessary or advisable for the collection of all Listed Receivables
(including records adequate to permit the daily identification of each
Receivable and all Collections of and adjustments to each existing Listed
Receivable).
c. Performance and Compliance with Contracts and Credit and Collection
-------------------------------------------------------------------
Policy. Each Seller Party shall, at its expense, timely and fully perform and
- ------
comply in all material respects with all material provisions, covenants and
other promises required to be observed by it under the Contracts related to the
Listed Receivables, and timely and fully comply in all material respects with
the Credit and Collection Policy with regard to each such Listed Receivable and
the related Contract.
d. Ownership Interest, Etc. The Transferor shall, at its expense, take
-----------------------
all action necessary or reasonably desirable to maintain a valid, enforceable
and first priority, perfected security interest in the Specified Assets in favor
of the Agent for the benefit of itself and the Purchasers, free and clear of any
Adverse Claim, including taking such action to protect and perfect or more fully
evidence the interest of the Agent and the Purchasers under this Agreement, as
the Agent may request.
e. Sales, Liens, Etc. The Transferor shall not sell, assign (by
-----------------
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Adverse Claim upon or with respect to, any or all of its right, title
or interest in, to or under the Specified Assets or upon or with respect to any
account to which any Collections of any Listed Receivables are deposited (except
as required by this Agreement or the rights of the depository institution that
maintains such account), or assign any right to receive income in respect of any
items contemplated by this Section.
f. Extension or Amendment of Receivables. Except as expressly provided in
-------------------------------------
this Agreement, no Seller Party shall adjust the outstanding principal balance
of, or otherwise modify the terms of, any of the Listed Receivables, or amend,
modify or waive any term or condition of any related Contract; provided that
--------
notwithstanding any other provision of this Agreement, no Seller Party shall
extend the maturity of any Listed Receivable.
g. Change in Business or Credit and Collection Policy. No Seller Party
--------------------------------------------------
shall make any change in the character of its business, or in the Credit and
Collection Policy, that would result in a Material Adverse Effect. No Seller
Party shall make any other change in the Credit and Collection Policy without
the prior written consent of the Agent.
h. Audits. Each Seller Party shall, from time to time during regular
------
business hours (and with reasonable advance notice) as requested by the Agent,
permit the Agent, or its agents or representatives, (x) to examine and make
copies of and abstracts from all books, records and
19
<PAGE>
documents (including computer tapes and disks) in the possession or under the
control of such Seller Party relating to Listed Receivables and the Related
Security, including the related Contracts, and (y) to visit the offices and
properties of such Seller Party for the purpose of examining such materials
described in clause (x) above, and to discuss matters relating to Listed
Receivables and the Related Security or such Seller Party's performance
hereunder or under the Contracts with any of the officers, employees, agents or
contractors of such Seller Party having knowledge of such matters. Without
limiting the foregoing, such examinations, copies, abstracts, visits and
discussions may cover, among other things, maturity dates, agings, past dues,
charge-offs, and offsets with respect to the Listed Receivables.
i. Status of Listed Receivables. In the event that any third party and
----------------------------
any Seller Party enter into negotiations or discussions regarding the provision
of financing (whether in the form of a loan, purchase or otherwise) with respect
to any Listed Receivable, such Seller Party shall inform such third party that
the Transferor has sold an undivided percentage ownership interest in such
Listed Receivable to the Purchasers.
j. Reporting Requirements.
----------------------
(i) If a Purchasers' Investment with respect to an undivided
interest purchased by the Purchasers remains outstanding on the applicable
Due Date, then the Transferor or the Servicer shall provide to the Agent on
a weekly basis a report, in form and substance satisfactory to the Agent,
with respect to the related Listed Receivables (including with respect to
collection efforts pertaining thereto).
(ii) Each Seller Party shall provide to the Agent as soon as possible
and in any event within five Business Days after the occurrence of each
Termination Event or event which, with the giving of notice or lapse of
time, or both, would constitute a Termination Event, a statement of the
chief financial officer of such Seller Party setting forth details of such
Termination Event or event and the action that such Seller Party has taken
and proposes to take with respect thereto.
(iii) The Servicer shall provide to the Agent the financial statements
described in Section 6.1(a) and (b) of the Mattel Credit Agreement,
pursuant to the terms of such Sections.
(iv) Each Seller Party shall provide to the Agent such other
information respecting Listed Receivables or the condition or operations,
financial or otherwise, of the Transferor or any of its Affiliates as the
Agent may from time to time reasonably request (including listings
identifying the outstanding principal balance of each Listed Receivable).
k. General Restrictions. (i) The Transferor shall not (A) pay or
--------------------
declare any Dividend, (B) lend or advance any funds, or (C) repay any loans or
advances to, for or from any Seller or other Affiliate of the Transferor
(actions of the type described in clauses (A), (B) and (C) are herein
collectively called "Restricted Payments"), unless (i) in the case of Dividends,
such Dividends comply with applicable law, and (ii) in the case of any
Restricted Payment, the
20
<PAGE>
Transferor would be Solvent after giving effect to such Restricted Payment.
l. Mergers, Acquisitions, Sales, Investments, Etc. The Transferor shall
-----------------------------------------------
not:
(i) be a party to any merger or consolidation, or directly or
indirectly purchase or otherwise acquire all or substantially all of the
assets or any stock of any class of, or any partnership or joint venture
interest in, any other Person;
(ii) sell, transfer, convey or lease any of its assets, other than
pursuant to or, as expressly permitted by this Agreement or any other
Permitted Accounts Receivable Financing Facilities; or
(iii) make, incur or suffer to exist any investment in, equity
contribution to, loan or advance to, or payment obligation in respect of
the deferred purchase price of property from, any other Person, (x) except
as expressly contemplated by the Purchase and Sale Agreement or any
Permitted Accounts Receivable Financing Facility and (y) except, in the
case of loans, under the Demand Note described in Section 3 to the Purchase
and Sale Agreement (or other similar demand notes delivered in connection
with Permitted Accounts Receivable Financing Facilities).
m. No Modification of the Purchase and Sale Agreement. The Transferor
--------------------------------------------------
will not agree to any amendment, supplement, waiver, alternation or other
modification of the Purchase and Sale 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 collectibility of the
Receivables.
ARTICLE VII. INDEMNIFICATION
Section 7.1. Indemnification Generally. (a) Without limiting any other
-------------------------
rights that the Indemnified Parties may have hereunder or under applicable law,
the Transferor hereby agrees (x) to indemnify each Indemnified Party from and
against any and all Indemnified Amounts awarded against or incurred by such
Indemnified Party arising out of or resulting from this Agreement or the use of
proceeds of purchases or the ownership of the Purchased Interest, or any
interest therein, or in respect of any Listed Receivable or any related
Contract, and (y) to pay within 15 days of demand to each Indemnified Party any
and all amounts necessary to indemnify such Indemnified Party from and against
such Indemnified Amounts, including Indemnified Amounts relating to or resulting
from any of the following: (i) the failure of any information provided to the
Agent with respect to Listed Receivables or the other Specified Assets; (ii) the
failure of any representation or warranty or statement made or deemed made by
the Transferor or the Servicer under or in connection with this Agreement to
have been true and correct in all respects when made (it being understood and
agreed that for purposes of this Section, in determining whether any such
representation or warranty or statement was true and correct in all respects
when made, any qualification in Article V as to materiality or to a Material
---------
Adverse Effect or to limitations on enforcement shall be disregarded); (iii) the
failure by the Transferor or the Servicer to comply with any applicable law,
rule or regulation with respect to any Listed Receivable or the related
Contract, or the failure of any Listed Receivable or the related Contract
21
<PAGE>
to conform to any applicable law, rule or regulation; (iv) the failure to vest
in the Agent for the benefit of the Purchasers a valid and enforceable first
priority perfected (A) undivided percentage ownership interest, to the extent of
the related Purchased Interest, in the Specified Assets, and (B) security
interest in the Specified Assets, in each case free and clear of any Adverse
Claim; (v) any dispute, claim, counterclaim, offset or defense (other than
discharge in an Insolvency Proceeding in which an Obligor is a debtor, which
Insolvency Proceeding was Commenced prior to the Due Date for the applicable
Listed Receivable) of such Obligor to the payment of such any Listed Receivable
(including a defense based on such Listed Receivable or the related Contract not
being a legal, valid and binding obligation of such Obligor enforceable against
it in accordance with its terms), any Dilution or other adjustment with respect
to a Listed Receivable (excluding, however, adjustments required as a matter of
law because an Obligor is a debtor in any such Insolvency Proceeding), or any
claim resulting from the sale of the goods or services related to such Listed
Receivable or the furnishing or failure to furnish such goods or services or
relating to collection activities with respect to such Listed Receivable; (vi)
any failure of the Transferor or the Servicer to perform its duties or
obligations in accordance with the provisions of this Agreement (including,
without limitation, the failure to make any payment when due hereunder), or to
perform its duties or obligations (if any) under any Contract (it being
understood and agreed that for purposes of this Section, in determining whether
the Transferor or the Servicer has performed its duties or obligations in
accordance with the provisions of this Agreement or has performed its duties or
obligations (if any) under any Contract, any qualification in Article V or
---------
Article VI as to materiality or to a Material Adverse Effect or to the rights of
- ----------
any depository institution that maintains any account to which any Collections
of Listed Receivables are sent shall be disregarded); (vii) any breach of
warranty, products liability or other claim, investigation, litigation or
proceeding arising out of or in connection with goods or services which are the
subject of any Listed Receivables; (viii) the commingling of Collections of
Listed Receivables at any time with other funds; (ix) any investigation,
litigation or proceeding related to this Agreement or the use of proceeds of
purchases or the ownership of the related Purchased Interest or in respect of
any Listed Receivable or any related Specified Asset in respect thereof; (x)
subject to Section 7.1(b), the occurrence of any Termination Event; (xi) in the
--------------
event any Purchased Interest is greater than 1.0; (xii) the failure of any
Listed Receivables to be Eligible Receivables; (xiii) the failure of the
Transferor or the Servicer to comply with the terms of the Credit and Collection
Policy; (xiv) the failure of any Contract relating to Listed Receivables to have
terms that are consistent with customary terms for the related Seller's industry
and type of Receivable; (xv) the failure of any Seller to complete the sale and
delivery of the goods (or the performance of the services, if any) which are the
subject of any Listed Receivables; (xvi) the existence of any contingent
performance requirements of any Seller in respect of any Listed Receivables;
(xvii) subject to Section 7.1(b), the failure of an Obligor to make payment on
--------------
the Listed Receivables prior to or as of the Due Date; or (xviii) any action or
inaction by the Transferor or the Servicer which impairs the interest of the
Agent or any Purchaser in any Listed Receivables or other Specified Assets.
(b) Notwithstanding Section 7.1(a), the Transferor shall not be obligated
--------------
to indemnify any Indemnified Party at any time for (x) Receivables which are
uncollectible, or amounts paid over or repaid to any Person with respect to any
Receivable, as a result of the applicable Obligor being a debtor in an
Insolvency Proceeding Commenced as of or prior to the Due Date, it being
22
<PAGE>
understood and agreed that this clause shall not limit the Transferor's
obligations under this Section arising out of or relating to any other event,
occurrence or circumstance which would give rise to an obligation of the
Transferor pursuant to this Section (to the extent that such event, occurrence
or circumstance adversely affects repayment of the Purchasers' Investments, plus
accrued Yield Reserve thereon during or in connection with such Insolvency
Proceeding), (y) any overall net income taxes or franchise taxes imposed on such
Indemnified Party by the jurisdiction under the laws of which such Indemnified
Party is organized or any political subdivision thereof or (z) Indemnified
Amounts resulting from the gross negligence or willful misconduct on the part of
the Indemnified Party proposed to be indemnified. Notwithstanding any other
provision of this Agreement, in the event that an Obligor becomes a debtor in an
Insolvency Proceeding that was Commenced prior to an applicable Due Date for any
Listed Receivables: (i) each Seller Party shall promptly (and in any event not
later than thirty days) after receipt provide to the Agent a copy of any
document, pleading, report, notice, information or other writing provided to
such Seller Party, during or in connection with such Insolvency Proceeding, by
or on behalf of such Obligor, any committee, court, other Governmental Person,
trustee, receiver, liquidator, custodian or similar official in such Insolvency
Proceeding, relating to the forms, procedures, bar date or other timing issues
with respect to the filing of a Proof of Claim in such Insolvency Proceeding;
provided, however, that this clause (i) shall not become effective until the
- -------- -------
Agent shall have sent a notice to the Servicer to the effect that the Agent
desires that the Seller Parties comply with this clause (i); (ii) the Servicer,
as agent for the Transferor, shall file Proofs of Claim, at the request and
direction of the Agent, with respect to the Listed Receivables with such court,
other Governmental Person, trustee, receiver, liquidator, custodian or similar
official, which Proofs of Claim shall be in form and substance reasonably
satisfactory to the Agent, it being understood and agreed that the Agent and the
Purchasers shall jointly and severally be liable for, and shall reimburse the
Servicer for, the Servicer's reasonable expenses in making such filing to the
extent that such expenses relate to the Listed Receivables; and (iii) the Agent,
as agent for the Transferor, shall have the right but not the obligation to file
Proofs of Claim with respect to the Listed Receivables with such court, other
Governmental Person, trustee, receiver, liquidator or similar official, it being
understood and agreed that the Agent shall not file such a Proof of Claim until
the earlier to occur of (x) the sixtieth day following the date on which the
Agent has sent a written request to the Transferor requesting the Transferor to
file such a Proof of Claim and (y) the thirtieth day prior to the bar date or
equivalent last day on which such a Proof of Claim may be filed in such
Insolvency Proceeding.
(c) If and to the extent the Agent or any Purchaser shall be required for
any reason to pay over to the Transferor, any Seller, the Servicer or an Obligor
(or any trustee, receiver, custodian or similar official in any Insolvency
Proceeding) any amount received by such Person hereunder, such amount shall be
deemed not to have been so received and, the Agent shall have a claim against
the Transferor to the extent provided herein.
Section 7.2. Capital Adequacy, Etc. Sections 3.1(a)-(e), 3.2, 3.3, 3.4,
--------------------- ------------------- --- --- ---
3.5 and 3.6 of the Mattel Credit Agreement are hereby incorporated by
- --- ---
reference as if set forth in full herein, except that for purposes of such
incorporation by reference: (i) all references to "the Company" shall be deemed
to be references to the Transferor; (ii) all references to "Bank" or "Banks"
shall be deemed to be references to "Purchaser" or "Purchasers," respectively;
(iii) all references to
23
<PAGE>
"Lending Office" shall be deemed to be a reference to the office of the
Purchasers identified on the signature pages to this Agreement; (iv) all
references to "this Agreement" or "Loan Documents" shall be deemed to be
references to this Agreement or any other Transaction Documents; (v) all
references to "Loans" shall be deemed to be references to the Purchasers'
Investments; (vi) all references to "Eurodollar Rate Loans" shall be deemed to
be references to Purchasers' Investments with respect to which Yield Reserve
would then be calculated based on the Eurodollar Rate; (vii) all references to
"CD Rate" or "CD Rate Loans" shall be deemed to have been deleted; (viii) all
references to "interest" shall be deemed to be references to Yield and to any
"Interest Period" shall be deemed to be references to a "Yield Period"; (ix) the
following words in Section 3.3(b) of the Mattel Credit Agreement, "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," shall be deemed to be replaced by the word "promptly"; (x) Section
3.5(b) of the Mattel Credit Agreement shall be deemed to be replaced by the
following: "(b) the failure of the Transferor to sell Listed Receivables after
the Transferor has delivered the related Purchase Notice pursuant to this
Agreement,"; and (xi) Section 3.5(c) of the Mattel Credit Agreement shall be
deemed deleted.
ARTICLE VIII. GUARANTY
Section 8.1. Guaranty of Obligations. For valuable consideration, the
-----------------------
Guarantor unconditionally, absolutely and irrevocably guarantees and promises to
pay to the Agent for the benefit of the Agent and the Purchasers 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 or the Purchasers (such guarantee and promise being
referred to as this "Guaranty"). The phrase "payment and performance obligations
--------
of the Transferor" (hereinafter collectively referred to in this Article 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 any and all reasonable attorneys' fees, costs,
charges, Yield Reserve or interest owed by the Transferor to the Purchasers,
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 advances, debts, obligations or
liabilities may be or hereafter becomes barred by any statute of limitations or
whether such advances, debts, obligations or liabilities may be or hereafter
become otherwise unenforceable.
Section 8.2. 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.
24
<PAGE>
Section 8.3. Guarantor Directly Liable. The Guarantor agrees that it is
-------------------------
directly and primarily liable to the Agent and the Purchasers, 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 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 Purchasers to
the Transferor or any other guarantor shall not release it from this Guaranty.
Section 8.4. 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 Mattel 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 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 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, readjustment, assignment for the
benefit of creditors, or other similar proceedings which affect the Guarantor or
the Transferor, 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 (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
Purchasers may take, the Guarantor hereby agrees that the Agent or the
Purchasers may take such actions in such manner, upon such terms, and at such
times as the Agent or any Purchaser, in its discretion, deems 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 8.5. Waiver. The Guarantor hereby waives: (a) any and
------
all rights to require the Agent or the Purchasers to prosecute or seek to
enforce any remedies against the Transferor or any other Person liable to the
Agent or the Purchasers on account of the Obligations; (b) any right to assert
against the Agent or the Purchasers 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 Person liable to the Agent or the Purchasers
in any way or manner under this Agreement; (c) all defenses, counterclaims and
offsets 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 hereto; (d) any defense
arising by reason of any claim or defense based upon an election of remedies by
the Agent or the Purchasers, including any direction to proceed by judicial or
nonjudicial foreclosure or by deed
25
<PAGE>
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 Transferor, against any other guarantor, or against any
other security, with the Guarantor understanding that the exercise by the Agent
or the Purchasers 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 nonreimbursable liability hereunder;
(e) except as otherwise provided herein, 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 advances,
debts, obligations or liabilities, and all other notices or formalities, in each
case, to which the Guarantor may be entitled; and (f) any and all benefits of
California Civil Code Sections 2809, 2810, 2819, 2825, 2839, 2845-2850, 2899 and
3433.
Section 8.6. Subrogation. The Guarantor hereby agrees that, unless and
-----------
until this Agreement has been terminated and all Obligations have been paid to
the Purchasers in full, it shall not have any rights of subrogation,
reimbursement or contribution as against the Transferor or any other guarantor,
if any, with respect to this Guaranty or any Obligations and shall not seek to
assert or enforce the same. The Guarantor understands that the exercise by the
Agent or the Purchasers of certain rights and remedies contained in this
Agreement may affect or eliminate the Guarantor's right of subrogation, if any,
against the Transferor and that the Guarantor may therefore incur a partially or
totally nonreimbursable liability hereunder. Nevertheless, the Guarantor hereby
authorizes and empowers the Agent and the Purchasers to exercise, in their
respective sole discretion, any right or remedy, or any combination thereof,
which may then be available, since it is the intent and purpose of the Guarantor
that the obligations hereunder shall be absolute, independent and unconditional
under any and all circumstances.
Section 8.7. Information. The Guarantor is presently informed of the
-----------
financial condition of the Transferor and of all other circumstances which
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 Transferor and of all other
circumstances which bear upon such risk of nonpayment. The Guarantor hereby
waives its right, if any, to require the Agent or any Purchaser to disclose to
it any information which such Person may now or hereafter acquire concerning
such condition or circumstances including the release of any other guarantor.
Section 8.8. Evidence of Obligations. The Agent'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.
ARTICLE IX. THE AGENT
Section 9.1. Appointment. Each Purchaser hereby irrevocably designates
-----------
and appoints NationsBank of Texas, N.A., as the Agent of the Purchasers under
this Agreement, and each of
26
<PAGE>
the Purchasers hereby irrevocably authorizes NationsBank of Texas, N.A., as the
Agent for such Purchaser, 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 Purchasers, 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 Purchasers 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 Purchasers 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
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
Purchasers as provided in this Agreement (or from all of the Purchasers if so
specified herein) or it shall first be indemnified to its satisfaction by the
Purchasers 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 Purchasers, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Purchasers.
27
<PAGE>
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 failed to receive on account of
any Purchaser such Purchaser's Purchasers' Investment, plus Yield Reserve, on or
before the applicable Due Date or has received written notice from a Purchaser,
the Transferor, the Servicer or the Guarantor, describing such Termination Event
or Servicer Default. In the event that the Agent fails to receive such amount or
receives such a notice, the Agent shall promptly give notice thereof to the
Purchasers and Bank of America National Trust and Savings Association as agent
under the Mattel Credit Agreement. Except as otherwise provided herein, the
Agent shall take such action to enforce this Agreement as shall be directed by
the Requisite Purchasers. In the event that any remedy is exercised pursuant to
Sections 4.2, 4.4 or 10.2 of this Agreement, each Purchaser and the Agent shall
- -------------------------
pursue remedies designated by the Requisite Purchasers to the same extent as
though such demand was caused by the action of all Purchasers, and each
Purchaser agrees to act as expeditiously as possible so as to maximize recovery.
Each Purchaser agrees that no Purchaser shall have any right individually to
take action with respect to the Purchased Interest, it being understood and
agreed that such rights and remedies with respect to any portion of the
Purchased Interest may be exercised by the Agent as directed by the Requisite
Purchasers for the ratable benefit of the Purchasers.
Section 9.6. No Representations. Each Purchaser 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 Purchaser. Each
Purchaser represents to the Agent that it has, independently and without
reliance upon the Agent or any other Purchaser, 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 Purchaser also represents that it will,
independently and without reliance upon the Agent or any other Purchaser, 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 Purchasers by the
Agent hereunder, the Agent shall not have any duty or responsibility to provide
any Purchaser 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 Purchasers agree to indemnify the Agent
---------------
in its capacity as such (to the extent not reimbursed by the Transferor or the
Guarantor 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 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
28
<PAGE>
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 Purchaser 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 Section shall
survive the termination of this Agreement.
Section 9.8. Purchaser. The Agent and its Affiliates may make loans to,
---------
accept deposits from and generally engage in any kind of business with any
Obligor, the Transferor and the Guarantor as though it were not the Agent
hereunder. With respect to its purchases hereunder, the Agent shall have the
same rights and powers under this Agreement as any Purchaser and may exercise
the same as though it were not the Agent, and the terms "Purchaser" and
"Purchasers" 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 Purchasers may appoint a successor Agent for the
Purchasers, which shall be a commercial Purchaser 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 canceled, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Agreement. The former Agent's resignation shall not become
effective until such successor Agent-has been appointed and has succeeded of
record to all right, title and interest of the former Agent in the Purchased
Interest; provided, however, that if the Requisite Purchasers 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, further, 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 shall inure to its benefit as to any acaations taken
or omitted to be taken by it while it was Agent under this Agreement.
Section 9.10. Sharing of Payments, etc. The Purchasers agree that (i)
------------------------
with respect to all amounts received by each of them hereunder, whether in the
nature of a return of any investment or discount, or amounts due to a particular
Purchaser 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 Purchasers in proportion to the portion of the obligations due
each Purchaser hereunder shall be shared by the Purchasers in proportion to the
amounts due them hereunder, whether received by voluntary payment, or by the
exercise of the right of set-off or Purchaser'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, Purchaser'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 Purchaser
29
<PAGE>
hereunder, which is greater than the proportion received by any other Purchaser
in respect of the amounts due hereunder to such other Purchaser, then the
Purchaser receiving such proportionately greater payment shall (x) notify each
other Purchaser 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 Purchasers so that all such
recoveries of amounts due hereunder. If all or any portion of such payment is
thereafter recovered from such Purchaser, 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 constitute independent
- ---------------------------------
obligations and agreements of the Agent and the Purchasers, 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 Purchasers and the
Agent under Section 9.8.
-----------
ARTICLE X. TERMINATION EVENTS AND TERMINATION EVENT REMEDIES
Section 10.1. Termination Events Defined. The occurrence of any one or
--------------------------
more of the following events shall constitute a Termination Event hereunder:
(a) any Seller Party shall fail (i) to make when due any payment or
deposit to be made by it under this Agreement with respect to any Purchased
Interest (including, in the case of the Servicer, failing to deliver to the
Agent on any Due Date an amount equal to the Purchasers' Investments plus
accrued Yield Reserve thereon) or (ii) to perform or observe in any material
respect, within 15 days after written notice thereof, any other material term,
covenant or agreement contained in any Transaction Document on its part to be
performed or observed;
(b) any representation or warranty made or deemed made by any Seller Party
(or any of its officers) under or in connection with any Transaction Document or
any material information or report delivered by any Seller Party pursuant to any
Transaction Document shall prove to have been incorrect or untrue in any
material respect when made or deemed made or delivered;
(c) an Event of Default or any other Servicer Default shall have occurred
and be continuing;
(d) an Insolvency Proceeding shall have been commenced and is continuing
in which any Seller Party or Seller is the debtor;
(e) an Insolvency Event shall have been commenced and is continuing in
which either Obligor is the debtor;
(f) the Transferor shall fail to have a valid and enforceable first
priority, perfected (i) ownership interest in, or (ii) security interest in,
each Listed Receivable and the other Specified Assets, in each case, free and
clear of any Adverse Claim (other than a lien or other interest in favor of the
Transferor pursuant to the Purchase and Sale Agreement);
30
<PAGE>
(g) the Agent for the benefit of the Purchasers shall fail to have a valid
and enforceable first priority, perfected (i) undivided percentage ownership
interest in, or (ii) security interest in, each Listed Receivable and the other
Specified Assets, in each case free and clear of any Adverse Claim;
(h) a Seller Party shall merge with or into any other entity whereby it is
not the surviving entity;
(i) the second highest short-term unsecured debt rating assigned to an
Obligor by S&P, Moody's or Duff & Phelps is less than A-1, P-1 or D-1,
respectively, or the second highest long-term unsecured debt rating assigned to
an Obligor by S&P, Moody's or Duff & Phelps is less than A-, A3 or A-,
respectively; or
(j) there shall have occurred any event not otherwise covered by this
definition which has or will have a Material Adverse Effect.
Section 10.2. Termination Event Remedies. Any time during a Termination
--------------------------
Event, the Agent, upon the written request of the Requisite Purchasers, shall,
by written notice to the Transferor, the Guarantor, the Servicer and the
Purchasers, terminate the commitment of the Purchasers to purchase undivided
interests in the Receivables from the Transferor. Notwithstanding the foregoing,
upon the occurrence of a Termination Event described in Section 10.1(d), the
---------------
commitment of the Purchasers to purchase undivided interests in the Receivables
from the Transferor shall terminate automatically.
ARTICLE XI. MISCELLANEOUS
Section 11.1. Waivers; Amendments, Etc. No failure or delay on the part of
------------------------
the Agent or the Purchasers 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 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 Purchasers;
provided, however, that no such waiver, amendment or consent shall, unless in
- -------- -------
writing and signed by each of the affected Purchasers, the Transferor, the
Servicer, the Guarantor and acknowledged by the Agent, (a) increase or extend
such Purchaser's Purchaser Commitment or subject such Purchaser to additional
obligations; (b) postpone or delay any date fixed for any payment of fees or any
other amounts due to such Purchaser hereunder; (c) reduce any fees or other
amounts payable to such Purchaser hereunder; (d) change such Purchaser's
Percentage; (e) amend this Section or Section 9.10; or (f) release the Guarantor
------------
from any obligation undertaken by it pursuant to this Agreement.
31
<PAGE>
Section 11.2. Notices, Etc. All notices and other communications hereunder
------------
shall, unless otherwise stated herein, be in writing (which shall include
facsimile communication) and sent or delivered, to each party hereto, at its
address set forth under its name on the signature pages attached hereto (except
that Purchase Notices shall be sent to the address set forth in the form of
Purchase Notice attached as Exhibit I) or at such other address as shall be
---------
designated by such party in a written notice to the other parties hereto.
Notices and communications to either Seller shall made in accordance with
Section 4.2 of the Purchase and Sale Agreement. Notices and communications by
facsimile shall be effective when sent (and shall be followed by hard copy sent
by first class mail), and notices and communications sent by other means shall
be effective when received.
Section 11.3. 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 hereto 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, the Agent and the Purchasers consents,
for itself and in respect of its property, to the non-exclusive jurisdiction of
those courts. Each of the Guarantor, the Transferor, the Agent and the
Purchasers irrevocably waives any objection to the laying 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 other
Transaction Document. The Guarantor, the Transferor, the Agent and the
Purchasers each waive personal service of any summons, complaint or other
process, which may be made by any other means permitted by California law.
Section 11.4. 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 the Agreement which are prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibitions or unenforceability without invalidating the remaining
provisions hereof, any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
Section 11.5. Successors and Assigns. This Agreement shall be binding on
----------------------
the parties hereto and their respective successors; provided, however, that,
-------- -------
subject to Article IV (with respect to the Servicer) and Section 11.7, no party
---------- ------------
to this Agreement may assign any of its rights or delegate any of its duties
hereunder. Any purported assignment in contravention of the foregoing shall be
null and void.
32
<PAGE>
Section 11.6. Confidentiality. (i) Each of the Agent and each of the
---------------
Purchasers 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 any agent or representative
thereof, or by the Agent on such Guarantor's or Subsidiary's behalf, in
connection with this Agreement or any other Transaction Documents, 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 Agent or a Purchaser, or (ii) was
or becomes available on a non-confidential basis from a source other than the
Guarantor, so long as such source is not bound by a confidentiality agreement
with the Guarantor known to the Agent or Purchaser, as applicable. The Agent and
any Purchaser, however, may disclose such information (A) at the request or
pursuant to any requirement of any Governmental Person to which the Agent or
such Purchaser, as applicable is subject or in connection with an examination of
the Agent or such Purchaser, as applicable, 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 Agent or
--------
such Purchaser, as applicable 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 another Purchaser or the Agent or any Affiliate thereof and the
independent auditors and other professional advisors of the Agent or such
Purchaser, as applicable, so long as such Persons are obligated to keep such
information confidential. Neither the Agent nor any Purchaser nor any of their
respective Affiliates shall use any information provided to any of the by or on
behalf of any Guarantor or any of its Subsidiaries for any purpose or in any
manner other than pursuant to the terms contemplated by this Agreement.
Notwithstanding the foregoing, the Guarantor authorizes each Purchaser to
disclose to any Participant or Assignee and to any prospective Participant or
Assignee, such financial and other information in such Purchaser's possession
concerning the Guarantor or its Subsidiaries which has been delivered to the
Agent or the Purchasers pursuant to this Agreement or which has been delivered
to the Agent or the Purchasers by the Guarantor in connection with the
Purchasers' 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 writing to such Purchaser to keep such
information confidential to the same extent required of the Purchasers
hereunder.
Section 11.7. Assignments; Participations. (a) Any Purchaser may, with the
---------------------------
advance written consent of the Transferor at all times other than during the
existence of a Termination Event, which consent of the Transferor shall not be
unreasonably withheld, and the Agent, 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
Purchaser to an Eligible Assignee that is an Affiliate of such Purchaser) (each
an "Assignee") all, or any ratable part of all, of the Purchased Interest and
--------
the other rights and obligations of such Purchaser hereunder, in a minimum
amount of $10,000,000 and such Purchaser shall concurrently therewith assign a
ratable portion in the Mattel Credit Agreement; provided, however, that the
-------- -------
Transferor and the Agent may continue to deal solely and directly with such
Purchaser in connection with the interest so assigned to an Assignee until (i)
written notice of
33
<PAGE>
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 Purchaser and the Assignee; (ii) such Purchaser
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 Purchaser or Assignee has paid to the Agent a processing
fee in the amount of $3,000.
(b) From and after the date that the Agent notifies the assignor Purchaser
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 Purchaser under this Agreement, and
(ii) the assignor Purchaser 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 Purchaser 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 Purchased Interest, to one or more
Affiliates of such Purchaser or to one or more commercial banks, merchant banks,
savings and loan associations or any other institution (a "Participant");
-----------
provided that such Purchaser 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 "Purchaser"; provided further, that in the case of a
- ---- -------- -------
participation, (i) the Purchaser's obligations under this Agreement shall remain
unchanged, (ii) the Purchaser 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 Purchaser in connection with the
Purchaser's rights and obligations under this Agreement, and (iv) no Purchaser
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 documents
related hereto, and all amounts payable by the Transferor hereunder shall be
determined as if such Purchaser 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 Purchaser under this Agreement.
Section 11.8. Termination of Prior Transfer and Administration Agreement.
----------------------------------------------------------
Certain of the Purchasers party hereto are all of the purchasers party to
the Prior Transfer and Administration Agreement. Each of such purchasers hereby
consent to the termination of such Transfer and Administration Agreement and
agree to, and authorize and direct NationsBank of Texas, N.A., as agent
thereunder, upon payment by the Transferor of all amounts due thereunder
34
<PAGE>
and described in reasonable detail in writing to Transferor, to take any action
necessary or reasonably requested by Mattel Factoring or Mattel to terminate
such Transfer and Administration Agreement (except those provisions thereof
which expressly survive).
Section 11.9. 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 Termination Event (after the
giving of any notice and the expiration of any grace period contained in the
definition thereof), each Purchaser is hereby authorized by each Seller Party at
any time or from time to time, without notice to the Seller Parties 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 Purchaser or any Affiliate thereof to or for the credit or the account
of a Seller Party and to apply any such amounts in accordance with the
provisions of Section 9.10 irrespective of whether or not that shall have made
------------
any demand hereunder, and each such Purchaser or Affiliate is hereby irrevocably
authorized to permit such set-off and appropriation.
[SIGNATURES FOLLOW]
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Receivables Purchase 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
Notice Address: M.S. 24-199
2043 East Mariposa
El Segundo, CA 90245
Telecopy:
MATTEL, INC.,
as Guarantor and Servicer
By:/s/ William Stavro
-----------------------------------
Name: William Stavro
Title: Senior Vice President
and Treasurer
Notice Address: 333 Continental Blvd.
El Segundo, CA 90245
Telecopy:
NATIONSBANK OF TEXAS, N.A.,
as Agent
By: /s/ Charles F. Lilygren
-----------------------------------
Name: Charles F. Lilygren
Title: Senior Vice President
Notice
Address: 444 S. Flower Street, Suite 4100
Los Angeles, California 90071
Telecopy:
<PAGE>
Dollar Amount
of Percentage
of Original
Percentage (%) Facility Limit ($)
-------------------- -------------------
9.000000000 27,000,000 NATIONSBANK OF TEXAS,
N.A.
By:/s/ Charles F. Lilygren
-----------------------
Name: Charles F. Lilygren
Title:Senior Vice President
Notice Address: 444 S. Flower Street, Suite 4100
Los Angeles, California 90071
Attn: Charles F. Lilygren
<PAGE>
Dollar Amount
of Percentage
of Original
Percentage (%) Facility Limit ($)
----------------------- ---------------------
12.000000000 36,000,000 BANK OF AMERICA
NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:/s/ Robert W. Troutman
----------------------
Name: Robert W. Troutman
Title: Managing Director
Notice Address: Credit Products Department #5618
555 S. Flower Street, 11th Floor
Los Angeles, California 90071
Attn: Robert W. Troutman
<PAGE>
Dollar Amount
of Percentage
of Original
Percentage (%) Facility Limit ($)
----------------------- ------------------------
9.000000000 27,000,000 THE CHASE MANHATTAN
BANK, N.A.
By:/s/ Lenard Weiner
-----------------
Name: Lenard Weiner
Title:M.D.
Notice Address: Banking & Corporate Finance
101 California Street, Suite 2725
San Francisco, California 94111
Attn:
<PAGE>
Dollar Amount
of Percentage
of Original
Percentage (%) Facility Limit ($)
--------------------- ----------------------------
7.500000000 22,500,000 TORONTO DOMINION
(TEXAS), INC.
By:/s/ Debbie A. Greene
--------------------
Name: DEBBIE A. GREENE
Title: VICE PRESIDENT
Notice Address: Houston Agency
900 Fanin Street, Suite 1700
Houston, Texas 77010
Attn:
<PAGE>
Dollar Amount
of Percentage
of Original
Percentage (%) Facility Limit ($)
----------------------- ------------------------
7.500000000 22,500,000 CITICORP USA, INC.
By:/s/ Deborah Ironson
-------------------
Name: Deborah Ironson
Title:Attorney-In-Fact
Notice Address: c/o Citicorp Securities, Inc.
725 South Figueroa Street, 5th Floor
Los Angeles, California 90017
Attn: Deborah Ironson
c/o Citibank, N.A.
2 Penn's Way, Suite 200
New Castle, Delaware 19720
Attn: Sally Schoenleber
<PAGE>
Dollar Amount
of Percentage
of Original
Percentage (%) Facility Limit ($)
---------------------- -------------------------
7.500000000 22,500,000 ABN AMRO BANK, N.V.
Los Angeles International
Branch
By:/s/ Ellen M. Coleman
--------------------
Name: ELLEN M. COLEMAN
Title: VICE PRESIDENT/
DIRECTOR
By:/s/ Heather F. Brandt
----------------------
Name: HEATHER F. BRANDT
Title: VICE PRESIDENT
Notice Address: Los Angeles International Branch
300 South Grand Avenue, Suite 1115
Los Angeles, California 90071
Attn:
<PAGE>
Dollar Amount
of Percentage
of Original
Percentage (%) Facility Limit ($)
--------------------- ------------------------
7.500000000 22,500,000 BANKBOSTON, N.A.
By:/s/ Debra L. Zurka
------------------
Name: Debra L. Zurka
Title: Director
Notice Address: U.S. Corporate Division
Mail Stop 01-09-05
100 Federal Street
Boston, Massaachusetts 02110
Attn: Debra L. Zurka
<PAGE>
Dollar Amount
of Percentage
of Original
Percentage (%) Facility Limit ($)
--------------------- --------------------------
5.000000000 15,000,000 SOCIETE GENERALE
By:/s/ J. Blaine Shaum
-------------------
Name: J. Blaine Shaum
Title:Regional Manager
Notice Address: 2029 Century Park East, Suite 2900
Los Angeles, California 90067
Attn: J. Staley Stewart
<PAGE>
Dollar Amount
of Percentage
of Original
Percentage (%) Facility Limit ($)
---------------------- ------------------------
5.000000000 15,000,000 BANQUE NATIONALE
DE PARIS
By:/s/ Clive Bettles
------------------
Name: Clive Bettles
Title: Senior Vice President
& Manager
By:/s/ Mitchell M. Ozawa
---------------------
Name: Mitchell M. Ozawa
Title: Vice President
Notice Address: 725 South Figueroa Street, Suite 2090
Los Angeles, California 90017-5420
Attn: Mitchell M. Ozawa
<PAGE>
Dollar Amount
of Percentage
of Original
Facility
Percentage (%) Facility Limit ($)
-------------------- ------------------------
5.000000000 15,000,000 UNION BANK OF CALIFORNIA,
N.A.
By:/s/ Scott M. Lane
-------------------
Name: Scott M. Lane
Title: Vice President
Notice Address: 550 South Hope Street, 3rd Floor
Los Angeles, California 90071
Attn: Scott M. Lane
<PAGE>
Dollar Amount
of Percentage
of Original
Facility
Percentage (%) Facility Limit ($)
--------------------- -------------------------
5.000000000 15,000,000 PNC BANK, NATIONAL
ASSOCIATION
By:/s/ Timothy J. Marchando
-------------------------
Name: Timothy J. Marchando
Title: Vice President
Notice Address: Mail Stop P-1-POPP-02-4
249 Fifth Avenue, 2nd Floor
Pittsburgh, Pennsylvania 15222-2707
Attn: Timothy J. Marchando
<PAGE>
Dollar Amount
of Percentage
of Original
Percentage (%) Facility Limit ($)
--------------------- ----------------------
5.000000000 15,000,000 MANUFACTURERS & TRADERS
TRUST CO.
By:/s/ Geoffrey R. Fenn
-----------------------
Name: Geoffrey R. Fenn
Title: Vice President
Notice Address: 1 Fountain Plaza, 12th Floor
Buffalo, New York 14203
Attn: Geoffrey R. Fenn
<PAGE>
Dollar Amount
of Percentage
of Original
Percentage (%) Facility Limit ($)
----------------------- -----------------------
5.000000000 15,000,000 ISTITUTO BANARIO SAN
PAOLO DI TORINO SPA
By:/s/ Carlo Persico
-----------------
Name: Carlo Persico
Title:Deputy Manager
By:/s/ Wendell Jones
-----------------
Name: Wendell Jones
Title:Vice President
Notice Address: 444 South Flower Street, Suite 4550
Los Angeles, California 90071
Attn: Donald W. Brown
<PAGE>
Dollar Amount
of Percentage
of Original
Percentage (%) Facility Limit ($)
--------------------- -----------------------
5.000000000 15,000,000 DRESDNER BANK AG
New York Branch
and
Grand Cayman Branch
By:/s/ John W. Sweeney
-------------------
Name: JOHN W. SWEENEY
Title:ASSISTANT VICE
PRESIDENT
By:/s/ Brigitte Sacin
-------------------
Name: BRIGITTE SACIN
Title:ASSISTANT VICE
PRESIDENT
Notice Address: Los Angeles Agency
333 South Grand Avenue, Suite 1700
Los Angeles, California 90071-5439
Attn: Jon M. Bland
<PAGE>
Dollar Amount
of Percentage
of Original
Percentage (%) Facility Limit ($)
--------------------- ------------------------
2.500000000 7,500,000 NORTHERN TRUST COMPANY
By:/s/ Martin G. Alston
--------------------
Name: Martin G. Alston
Title:Vice President
Notice Address: 50 South LaSalle Street
Chicago, Illinois 60675
Attn:
<PAGE>
Dollar Amount
of Percentage
of Original
Facility
Percentage (%) Facility Limit ($)
-------------------- -----------------------
2.500000000 7,500,000 THE INDUSTRIAL BANK OF
JAPAN, LIMITED
By:/s/ Vicente L. Timiraos
--------------------------
Name: Vicente L. Timiraos
Title:Senior Vice President
& Senior Deputy General
Manager
Notice Address: 350 South Grand Avenue, Suite 1500
Los Angeles, California 90071
Attn: J. Blake Seaton
<PAGE>
EXHIBIT I
[FORM OF] PURCHASE NOTICE
[Date]
VIA FACSIMILE
- -------------
NationsBank of Texas, N.A.
[Address]
Attention: _________________
Facsimile: ______________
Ladies and Gentlemen:
This Purchase Notice is being delivered to you pursuant to Section 2.2 of
-----------
the Receivables Purchase Agreement dated as of March ___, 1998 (as amended,
amended and restated or otherwise modified from time to time in accordance with
its terms, the "Receivables Purchase Agreement") among Mattel Factoring, Inc.,
------------------------------
Mattel, Inc., the financial institutions party thereto from time to time as
Purchasers, and NationsBank of Texas, N.A., as agent for such Purchasers.
Capitalized terms used herein without definition shall have the meanings
assigned thereto in the Receivables Purchase Agreement.
The Servicer hereby notifies the Agent that the Transferor proposes to sell
to the Purchasers on [insert date] (the "Purchase Date") an undivided percentage
-------------
ownership interest in the Eligible Receivables and other items contemplated by
Section 2.2(c) of the Receivables Purchase Agreement, which Eligible Receivables
- --------------
and other items shall be purchased by the
I - 1
<PAGE>
Transferor on such Purchase Date from the Sellers pursuant to the Purchase and
Sale Agreement. The Due Date for such sale will be [insert date], and the
proposed amount of the Purchasers' Investment would be $__________. As of the
date of this Purchase Notice, the aggregate outstanding principal balances of
such Eligible Receivables is $____________.
Very truly yours,
MATTEL, INC., as the Servicer
By:_________________________________________
Name:_______________________________________
Title:______________________________________
I - 2
<PAGE>
Attachment A to
[Form of] Purchase Notice
<TABLE>
<CAPTION>
Obligor
------------------------------------------------
Toys "R" Us, Inc. Wal-Mart Stores, Inc.
----------------------- ----------------------
<S> <C> <C> <C>
Eligible Receivables:
Mattel Sales Corp. $ $
---------------------- ---------------------
Fisher-Price, Inc. $ $
---------------------- ---------------------
Total Eligible Receivables: "A" $ $
---------------------- ---------------------
Purchase Date: ________ ________
Due Date: ________ ________
Yield Period in Number of Days: "B" ________ ________
Purchase Rate:
Estimated LIBOR ____% ___%
plus: Applicable Margin ________ ________
Total Purchase Rate: "C" ____% ___%
Yield [(B x C)/360]: "D" ____% ___%
Purchasers' Investments: "E" $ $
---------------------- ---------------------
Yield Reserve [D x E]: "F" ________ ________
</TABLE>
I - 3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Purchased Interest [E + F)/A]: $ $
---------------------- ---------------------
</TABLE>
/*/ Purchasers' Investment shall be less than[A/(1+D)].
/*/ Total Purchasers' Investment cannot exceed the Purchasers' Investment
Limit.
/*/ Purchased Interest cannot be more than 1.0.
I - 4
<PAGE>
EXHIBIT 99.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") between Mattel, Inc., a Delaware
corporation ("Mattel"), and GARY BAUGHMAN (the "Executive"), dated as of the 5th
day of May, 1997.
1. Employment Period. Mattel hereby agrees to employ and continue in its
-----------------
employ the Executive, and the Executive hereby accepts such employment and
agrees to remain in the employ of Mattel, for the period commencing on the date
of this Agreement and ending on the third anniversary of such date (the
"Employment Period"); provided that commencing on the first day of the month
next following the effective date hereof, and on the first day of each month
thereafter (the most recent of such dates is hereinafter referred to as the
"Renewal Date"), the Employment Period shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least 60 days prior to
any Renewal Date Mattel or the Executive shall give notice to the other that the
Employment Period shall not be so extended.
2. Duties.
------
(a) Executive's Position and Duties. During the Employment Period, the
-------------------------------
Executive's position (including titles), authority and responsibilities shall be
similar to, but no less than those held by the Executive on the date hereof with
such additions and modifications consistent with responsibilities
<PAGE>
generally assigned to executive officers of Mattel as the Chief Executive
Officer of Mattel ("CEO") may in her discretion and acting in good faith from
time to time assign to the Executive. It is herein provided that Executive shall
initially report to the CEO and upon an appropriate future date, most likely in
and around the month of September, in the year 1997, Executive shall commence
reporting to the Chief Operating Officer of Mattel ("COO"). During the initial
period, while Executive is reporting to the CEO, he shall have responsibility
over the Tyco Preschool group and the Fisher-Price Infant & Preschool lines of
businesses, as well as other lines of businesses currently under the dominion of
the Fisher-Price brand, including Power Wheels. Upon commencement of a
reporting relationship to the COO as previously noted, Executive shall assume
added responsibility for the balance of the Company's Infant & Preschool lines
of businesses, including Disney Infant & Preschool, Pooh and See'N Say. The
Executive's services shall be performed in the general area in which the
Executive was employed on the date of this Agreement and the Executive will not
be transferred outside the area without the Executive's consent, other than for
normal business travel and temporary assignments. It is further agreed that
Executive shall be the next Mattel employee duly appointed and slated for
election to the Board of Directors of Mattel, Inc. pursuant to the next ensuing
annual meeting of Mattel, Inc.'s shareholders.
-2-
<PAGE>
(b) Full Time. The Executive agrees to devote his full business time
---------
to the business and affairs of Mattel and to use his best efforts to perform
faithfully and efficiently the responsibilities assigned to him hereunder to the
extent necessary to discharge such responsibilities, except for (i) services on
corporate, civic or charitable boards or committees not significantly
interfering with the performance of such responsibilities; (ii) periods of
vacation and sick leave to which he is entitled; and (iii) the management of
personal investments and affairs. The Executive will not engage in any outside
business activity (as distinguished from personal investment activity and
affairs) including, but not limited to, activity as a consultant, agent, partner
or officer, or provide business services of any nature directly or indirectly to
a corporation or other business enterprise.
3. Compensation.
------------
(a) Base Salary. During the Employment Period, the Executive shall
-----------
receive a base salary ("Base Salary") at a bi-weekly rate at least equal to the
bi-weekly salary paid to the Executive by Mattel on the date of this Agreement
($21,154). The Base Salary shall be reviewed at least every 18 months and may be
increased at any time and from time to time by action of the Board of Directors
of Mattel or the Compensation/Options
-3-
<PAGE>
Committee thereof or any individual having authority to take such action in
accordance with Mattel's regular practices. Any increase in the Base Salary
shall not serve to limit or reduce any other obligation of Mattel hereunder and,
after any such increase, the Base Salary shall not be reduced.
(b) Hiring Bonus. Executive shall be paid a hiring bonus in the lump sum
------------
amount of $1,100,000, less applicable taxes, as an inducement to join the
Company and not one of its competitors following the merger of Tyco Toys, Inc.
and Mattel, Inc., and such hiring bonus shall be paid to Executive not later
than ten (10) days following the commencement of Executive's employment with the
Company, and further Executive agrees to refrain for at least one year, from
voluntarily resigning to join a competitor, lest he incur an obligation to
promptly repay to the Company, the full amount of the proceeds as attributable
to previous receipt of said hiring bonus.
(c) Bonus Programs. In addition to the Base Salary, the Executive shall
--------------
participate throughout the Employment Period in Mattel's cash or deferred bonus
incentive plans and programs ("Bonus Programs") as may be in effect from time to
time with respect to executives employed by Mattel at a participation level
reflecting the Executive's responsibilities, including, but not limited to, the
Management Incentive Plan ("MIP") and the Long-
-4-
<PAGE>
Term Incentive Plan ("LTIP") as they may be modified from time to time and any
plans or programs substituted therefor; provided that, except as provided in
Section 5(f) hereof, the determination of the amounts to be paid pursuant to
such plans or programs shall be made by the Board of Directors of Mattel or a
committee thereof authorized to take such action and shall be made in accordance
with Mattel's compensation practice and the terms and provisions of such plans
or programs; provided further that the Executive's eligibility for and
participation in each of the Bonus Programs shall be at a level and on terms and
conditions no less favorable than those available to any other comparably
situated executive or consultant. Notwithstanding the foregoing, it is
expressly and specifically provided that Executive's participation in the Mattel
1996-1998 Long-Term Incentive Plan shall be on a full term, non-prorated basis
as if Executive had been employed upon inception of this particular Plan, with
the only exception and omission being the interim payment applicable to 1996
performance under the Plan, the latter having been previously disbursed to
participants prior to execution of this Agreement. It is further provided that
for the 1997 Plan year, Executive shall receive a guaranteed minimum "MIP" award
of not less than $200,000, payable the earlier of: (i) on the date that such
awards are distributed to other eligible participants at a comparable level as
Executive, or (ii) on April 10, 1998, whichever occurs first.
-5-
<PAGE>
(d) Incentive and Savings Plans. In addition to the Base Salary and
---------------------------
participation in the Bonus Programs, during the Employment Period the Executive
shall be entitled to participate in all incentive and savings plans and
programs, including, but not limited, to stock option plans and retirement
plans, as may be in effect from time to time with respect to executives employed
by Mattel at the Executive's level so as to reflect the Executive's
responsibilities. Notwithstanding the foregoing, it is expressly and
specifically provided that the Company shall cause to be effected an initial
grant of 200,000 stock options to Executive upon commencement of his employment
with the Company and further, over the initial 3-year period of his employment,
Executive shall receive grants of not less than an aggregate of 500,000 stock
options, inclusive of the aforestated initial grant and pursuant to Executive's
eligibility for annual grants of stock options. Executive shall be accorded
full Mattel credit for all prior service accrued while in the employ of Tyco
Toys, Inc., and such credit shall be applicable in the computation of all of
Mattel's benefits-related plans and programs, specifically including the Mattel
1994 Supplemental Executive Retirement Plan ("SERP"), which provide thereupon
for a service-related component in the computation of Executive's eligibility
for benefits and/or receipt thereof.
(e) Benefit Plans. The Executive and/or his family, as the case may be,
-------------
shall be entitled to receive all amounts which he or his family is or would have
been entitled to receive as benefits under all medical, dental, disability,
group life,
-6-
<PAGE>
accidental death and travel accident insurance plans and programs of Mattel in
which the Executive is a participant as in effect from time to time with respect
to executives employed by Mattel.
(f) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the policies and practices of Mattel as in
effect from time to time with respect to executives employed by Mattel.
(g) Fringe Benefits. The Executive shall be entitled to fringe benefits,
---------------
commensurate with those available to comparable level executives, including an
automobile and related expenses as well as the use of a company-issued gasoline
credit card, club memberships and related expenses, and financial counseling,
including tax preparation and a one-time estate planning service, in accordance
with the policies of Mattel as in effect from time to time with respect to
executives employed by Mattel.
(h) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the policies of Mattel as in effect
from time to time with respect to executives employed by Mattel.
-7-
<PAGE>
(i) Certain Amendments. Nothing herein shall be construed to prevent
------------------
Mattel from amending, altering, eliminating or reducing any plans, benefits or
programs so long as the Executive continues to have the opportunity to receive
compensation and benefits consistent with Sections 3(a) through (h).
4. Termination.
-----------
(a) Death or Disability. This Agreement shall terminate automatically
-------------------
upon the Executive's death; provided that Base Salary, all bonuses and earned
benefits will be continued and paid for a period of six (6) months thereafter,
unless a longer period is otherwise specified. Mattel may terminate this
Agreement, after having established the Executive's Disability, by giving to the
Executive written notice of its intention to terminate his employment, and his
employment with Mattel shall terminate effective on the 90th day after receipt
of such notice (the "Disability Effective Date"). For purposes of this
Agreement, the Executive's Disability shall occur and shall be deemed to have
occurred only when the Executive becomes entitled to receive disability benefits
under the Mattel Long-Term Disability Plan for exempt employees.
(b) Cause. Mattel may terminate the Executive's employment for "Cause"
-----
if a majority, consisting of at least 2/3
-8-
<PAGE>
of the non-management members of the Board of Directors of Mattel, determines
that "Cause" exists. For purposes of this Agreement, "Cause" means (i) an act or
acts of dishonesty on the Executive's part which are intended to result in his
substantial personal enrichment at the expense of Mattel; (ii) repeated
violations by the Executive of his obligations under Section 2 of this Agreement
which are demonstrably willful and deliberate on the Executive's part and which
resulted in material injury to Mattel; (iii) conduct of a criminal nature which
has or which is more likely than not to have a material adverse effect on
Mattel's reputation or standing in the community or on its continuing
relationships with its customers or those who purchase or use its products; or
(iv) fraudulent conduct in connection with the business or affairs of Mattel,
regardless of whether said conduct is designed to defraud Mattel or others;
provided that, in each case, the Executive has received written notice of the
described activity, has been afforded a reasonable opportunity to cure or
correct the activity described in the notice, and has failed to substantially
cure, correct or cease the activity, as appropriate.
(c) Good Reason. The Executive may terminate his employment at any
-----------
time for Good Reason. For purposes of this Agreement, "Good Reason" means the
good faith determination by
-9-
<PAGE>
the Executive that any one or more of the following have occurred:
(i) without the express written consent of the Executive, any change(s)
in any of the duties, authority, or responsibilities of the Executive which is
(are) inconsistent in any substantial respect with the Executive's position,
authority, duties, or responsibilities as contemplated by Section 2 of this
Agreement;
(ii) any failure by Mattel to comply with any of the provisions of
Section 3 of this Agreement, other than an insubstantial and inadvertent failure
remedied by Mattel promptly after receipt of notice thereof given by the
Executive;
(iii) without the Executive's consent, any requirement by Mattel that
Executive be based at any office or location other than an office or location in
East Aurora, New York, except for travel reasonably required in the performance
of the Executive's responsibilities;
(iv) any proposed termination by Mattel of the Executive's employment
otherwise than as permitted by this Agreement; or
(v) any failure by Mattel to obtain the assumption and agreement to
perform this Agreement by a successor as contemplated by Section 11(b).
-10-
<PAGE>
(d) Change of Control. A "Change of Control" shall be deemed to have
-----------------
occurred if:
(i) any "Person," which shall mean a "person" as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (other than Mattel, any trustee or other fiduciary holding
securities under an employee benefit plan of Mattel) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of Mattel representing 20% or more of the combined
voting power of Mattel's then outstanding voting securities;
(ii) during any period of 24 consecutive months, individuals, who at
the beginning of such period constitute the Board of Directors of Mattel, and
any new director whose election by the Board of Directors, or whose nomination
for election by Mattel's stockholders, was approved by a vote of at least one-
half (1/2) of the directors then in office (other than in connection with a
contested election), cease for any reason to constitute at least a majority of
the Board of Directors;
(iii) the stockholders of Mattel approve (I) a plan of complete
liquidation of Mattel or (II) the sale or other disposition by Mattel of all or
substantially all of Mattel's assets unless the acquirer of the assets or its
board of
-11-
<PAGE>
directors shall meet the conditions for a merger or consolidation in
subparagraphs (iv)(I) or (iv)(II) below; or
(iv) the consummation of a merger or consolidation of Mattel with any
other entity other than:
(I) a merger or consolidation which results in the voting
securities of Mattel outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the surviving entity's outstanding voting securities immediately after such
merger or consolidation; or
(II) a merger or consolidation which would result in the directors
of Mattel (who were directors immediately prior thereto) continuing to
constitute at least 50% of all directors of the surviving entity immediately
after such merger or consolidation.
In this paragraph (iv), "surviving entity" shall mean only an entity in which
all of Mattel's stockholders immediately before such merger or consolidation
(determined without taking into account any stockholders properly exercising
appraisal or similar rights) become stockholders by the terms of such merger or
consolidation, and the phrase "directors of Mattel (who were directors
immediately prior thereto)" shall include only
-12-
<PAGE>
individuals who were directors of Mattel at the beginning of the 24 consecutive
month period preceding the date of such merger or consolidation.
(e) Notice of Termination. Any termination of the Executive's
---------------------
employment by Mattel for Cause following a Change of Control or by the Executive
for Good Reason shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 13(b). Any termination by Mattel
due to Disability shall be given in accordance with Section 4(a). For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon; (ii)
except in the event of a termination following a Change of Control, sets forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated; and
(iii) specifies the Date of Termination (defined below).
(f) Date of Termination. "Date of Termination" means the date of actual
-------------------
receipt of the Notice of Termination or any later date specified therein (but
not more than fifteen (15) days after the giving of the Notice of Termination),
as the case may be; provided that (i) if the Executive's employment is
terminated by Mattel for any reason other than Cause or Disability, the Date
-13-
<PAGE>
of Termination is the date on which Mattel notifies the Executive of such
termination; (ii) if the Executive's employment is terminated due to Disability,
the Date of Termination is the Disability Effective Date; and (iii) if the
Executive's employment is terminated due to the Executive's death, the Date of
Termination shall be the date of death.
5. Obligations of Mattel upon Termination. Other than as specifically set
--------------------------------------
forth or referenced in this Agreement, the Executive shall not be entitled to
any benefits on or after the Date of Termination.
(a) Death. If the Executive's employment is terminated by reason of the
-----
Executive's death, this Agreement shall terminate without further obligations by
Mattel to the Executive's legal representatives under this Agreement other than
those obligations accrued hereunder or under the terms of the applicable Mattel
plan or program which takes effect at the date of his death or as otherwise
provided in Section 4(a) or this Section 5(a). As of the Date of Termination,
the Executive's family shall be entitled to the Executive's benefits on the
terms described in Section 5(d)(iv) (other than outplacement services and leased
car benefits, which are excluded), except that healthcare insurance coverage and
financial and legal counseling services shall terminate on the third anniversary
of the Date of
-14-
<PAGE>
Termination. The Executive's country club membership must be converted or sold,
as the case may be, by the Executive's successor-in-interest within one year
after the Date of Termination on the terms described in Section 5(d)(iv)(III);
provided that no such conversion or sale shall be required and Mattel shall
cause the membership to be transferred to the Executive's spouse at no cost to
the spouse if the Executive has had the membership for at least three years.
(b) Disability. If the Executive's employment is terminated by reason
----------
of the Executive's Disability, the Executive shall be entitled to receive after
the Disability Effective Date (i) disability benefits, if any, at least equal to
those then provided by Mattel to disabled employees and/or their families and
(ii) other benefits on the terms described in Section 5(d)(iv).
(c) Cause. If the Executive's employment is terminated for Cause or if
-----
the Executive terminates his employment without Good Reason, Mattel shall pay
the Executive his full Base Salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given, and Mattel shall have no
further obligations to the Executive under this Agreement.
-15-
<PAGE>
(d) Good Reason; Other Than for Cause or Disability. If Mattel
-----------------------------------------------
terminates the Executive's employment other than for Cause or Disability, or the
Executive terminates his employment for Good Reason (in each case, other than
within 18 months following a Change of Control as provided in Section 5(e)):
(i) Mattel shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
(A) if not theretofore paid, the Executive's Base Salary through the
Date of Termination at the rate in effect at the time of Notice of Termination
was given;
(B) a current year MIP bonus equal to the average of the greatest
two out of the three most recent annual MIP bonuses received by the Executive
(which two greatest MIP bonuses need not represent consecutive years) (the
"Average Annual Bonus") and prorated to reflect the total number of full months
the Executive is employed in the year in which termination occurs;
(C) an LTIP payment reflective of the Executive's participation in
the three-year plan, so that at the time that final performance under the LTIP
is determinable and individual payouts calculated, the Executive shall promptly
receive an amount equivalent to what he would have received if he
-16-
<PAGE>
had remained employed through the date of such payouts, less any interim
payments already made pursuant to the Executive's continuing eligibility for
full participation in the LTIP; and
(D) three times the sum of (x) the Executive's annual Base Salary at
the rate in effect at the time the Notice of Termination is given and (y) if
eligible, the Average Annual Bonus defined in Section 5(d)(i)(B), but without
proration (and, in each such case, without regard to any contributions by Mattel
for the Executive's benefit to the Mattel Personal Investment Plan ("PIP")).
(ii) Options granted to the Executive under Mattel's stock option plans
(the "Stock Option Plans") which options have been granted for more than six
months shall become immediately exercisable and the Executive shall have a
period of 90 days following the Date of Termination (but in no event past the
expiration of the term of the option grant) to exercise all options granted
under the Stock Option Plans then exercisable or which become exercisable
pursuant to this clause (ii). In the event the Executive is age 52 or older on
the Date of Termination, he will be treated as a retiree under the Stock Option
Plans, which will enable the Executive to vest in and exercise stock options
theretofore granted thereunder, at the election of the Executive, (x) in the
manner described in the immediately preceding sentence, or (y) for a period of
up to five
-17-
<PAGE>
years after the Date of Termination (but in no event past the expiration of the
term of the option grant).
(iii) Mattel shall, promptly upon submission by the Executive of
supporting documentation, pay or reimburse to the Executive any costs and
expenses paid or incurred by the Executive which would have been payable under
Section 3(e) if his employment had not terminated.
(iv) Until the earlier of (x) the third anniversary of the Date of
Termination or (y) the date the Executive accepts other employment, Mattel shall
provide to the Executive at Mattel's expense:
(I) medical, dental, prescription drug and vision care group
insurance in accordance with the coverage in effect immediately prior to the
Date of Termination (the last 18 months of the Executive's coverage under such
insurance shall be deemed to be participation under an election to continue such
benefits under the Consolidated Omnibus Budget Reconciliation Act at Mattel's
expense);
(II) outplacement services at the expense of Mattel commensurate
with those provided to terminated executives of comparable level and made
available through and at the facilities of a reputable and experienced vendor;
and
(III) continuation of country-club membership
"signatory/representative" status as in effect immediately prior
-18-
<PAGE>
to the Date of Termination; provided that within one year after Mattel ceases to
provide such benefit, the Executive shall (a) convert the country-club
membership from "signatory/representative" status under the membership provided
and paid for by Mattel to sole and personal ownership status by paying to Mattel
the fair market value of that membership as of the date Mattel ceases to provide
such benefit, less any transfer/reconveyance fees that may be required by and
paid directly to the country club by the Executive, or (b) comply with club
rules in consummating a fair, reasonable and expeditious sale of the membership
and any proceeds derived therefrom which are payable to the Executive shall
belong to and must be promptly delivered to Mattel; provided further that no
such conversion or sale shall be required and Mattel shall cause the membership
to be transferred to the Executive at no cost to the Executive (but subject to
tax reporting as imputed income applicable to the year in which the membership
is transferred), if the Executive has had the membership for at least three
years.
For the three-year period after the Date of Termination, the Executive shall
remain eligible for use of personal financial and legal counseling services
through the vendor engaged and paid for by Mattel. The Executive may continue
to use the car leased by Mattel that is in the Executive's possession on the
Date of Termination until the earlier of (x) the end of the lease term or
-19-
<PAGE>
(y) the third anniversary of the Date of Termination, at which time the
Executive may purchase the car for $1.00 (if at the end of the lease term) or
Mattel's book value (if on the third anniversary of the Date of Termination).
As of the Date of Termination, all expenses related to such leased car,
including but not limited to repairs, maintenance, gasoline, and car phone and
associated expenses, shall be the sole responsibility of the Executive.
(v) Credit shall be given for three years of service (in addition to
actual service) and for three years of attained age to be added to the
Executive's actual age for purposes of computing any service and age-related
benefits for which the Executive is eligible under the plans and programs of
Mattel, including but not limited to the 1994 Supplemental Executive Retirement
Plan (including any successor plan thereto in which the Executive is a
participant, the "SERP"), the Mattel Deferred Compensation Plan, the PIP, the
Mattel Retiree Medical Plan, and the Stock Option Plans. Further, with regard to
computing the Executive's benefit under the SERP, the formula described in
Section 5(d)(i)(B) shall be utilized in calculating the maximum benefit, namely:
the formula shall be 25% of the average of the final three years of annual Base
Salary (including the calendar year in which the Date of Termination occurs),
plus the average of the greatest two out of the three most recent annual MIP
bonuses received by the Executive.
-20-
<PAGE>
(e) Change of Control. If, within 18 months following a Change of
-----------------
Control, the Executive terminates his employment for Good Reason or Mattel or
the surviving entity terminates the Executive's employment other than for Cause
or Disability:
(i) Mattel shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
(A) if not theretofore paid, the Executive's Base Salary through
the Date of Termination at the rate in effect at the time of Notice of
Termination was given;
(B) an amount equal to the MIP bonus that would have been payable
to executives of Mattel in the same bonus category as the Executive pursuant to
the Bonus Programs provided in Section 3(c) assuming, for purposes of
calculating the amount of the bonus pool under the plan, that the "maximum"
amount, as that term is used in the plan, was achieved for the current plan year
(the "Maximum Annual Bonus"), with such amount prorated to reflect the number of
full months the Executive is employed in the year in which termination occurs;
(C) an LTIP payment for the current year, assuming achievement of
the three-year maximum award, prorated to
-21-
<PAGE>
reflect the total number of full months the Executive is employed in the year in
which termination occurs;
(D) three times the sum of (x) the Executive's annual Base Salary
at the rate in effect at the time the Notice of Termination is given and (y) the
Maximum Annual Bonus defined in Section 5(e)(i)(B), but without proration (and,
in each such case, without regard to any contributions by Mattel for the
Executive's benefit to the PIP); and
(E) the full term payout for the three-year period of the LTIP,
assuming for purposes of calculating the amount earned under the LTIP,
achievement of the three-year maximum award (including the full amount of the
premium), less any interim payments previously received by the Executive.
(ii) If it is determined that any payment or distribution by Mattel to
the Executive pursuant to Section 5(e) (determined without regard to any
additional payments required pursuant to this sentence) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive with respect to
each Payment an additional payment (a "Gross-Up Payment") in an
-22-
<PAGE>
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(iii) In addition, the Executive shall receive the amounts and be
entitled to the benefits provided in clauses (ii), (iii), (iv) and (v) of
Section 5(d).
(f) Bonus During Cancellation Period. If Mattel notifies the Executive
--------------------------------
that the Employment Period provided in Section 1 hereof will not be
automatically extended as provided therein, the compensation of the Executive
shall continue as provided in this Agreement for the period provided therein,
except that the amount of MIP compensation payable under the Bonus Programs with
respect to each fiscal year during such period (including the year in which the
notice was given) shall be the Average Annual Bonus as determined in Section
5(d)(i)(B). Amounts payable with respect to the year in which the term specified
in Section 1 expires shall be prorated based on a fraction the numerator of
which is the number of full months from the beginning of such year until the
date of the expiration of this Agreement and denominator of which is 12.
-23-
<PAGE>
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by Mattel and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any stock option or other agreement with
Mattel or any of its affiliated companies. Except as otherwise provided herein,
amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan or program of Mattel at or subsequent to the Date of
Termination shall be payable in accordance with such plan or program.
7. No Set Off, Payment of Fees. Except as provided herein, Mattel's
---------------------------
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any circumstances,
including without limitation any set-off, counterclaim, recoupment, defense or
other right which Mattel may have against the Executive or others. Mattel
agrees to pay, to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by Mattel or others of the validity or enforceability
of, or liability under, any provision of this
-24-
<PAGE>
Agreement other than expenses relating to a claim by the Executive that he
terminated for Good Reason or that the termination for Cause was improper, in
which case such fees and expenses shall be paid only if the Executive prevails
in whole or in part. All amounts provided herein shall include, in each case,
interest, compounded quarterly, on the total unpaid amount determined to be
payable under this Agreement, such interest to be calculated on the basis of the
prime commercial lending rate announced by Bank of America National Trust and
Savings Association in effect from time to time during the period of such
nonpayment. In the event that the Executive shall in good faith give a Notice
of Termination for Good Reason and it shall thereafter be determined that Good
Reason did not exist, the employment of the Executive shall, unless Mattel and
the Executive shall otherwise mutually agree, be deemed to have terminated at
the Date of Termination specified in such purported Notice of Termination by
mutual consent of Mattel and the Executive and thereupon, the Executive shall be
entitled to receive only those payments and benefits which he would have been
entitled to receive at such date.
8. Arbitration of Disputes
-----------------------
(a) The parties agree that any disputes, controversies or claims which arise
out of or relate to this Agreement, the Executive's employment or the
termination of his employment,
-25-
<PAGE>
including, but not limited to, any claim relating to the purported validity,
interpretation, enforceability or breach of this Agreement, and/or any other
claim or controversy arising out of the relationship between the Executive and
Mattel (or the nature of the relationship) or the continuation or termination of
that relationship, including, but not limited to, claims that a termination was
for Cause, including the determination of Mattel's Board of Directors in
accordance with Section 4(b), or for Good Reason, claims for breach of covenant,
breach of an implied covenant of good faith and fair dealing, wrongful
termination, breach of contract, or intentional infliction of emotional
distress, defamation, breach of right of privacy, interference with advantageous
or contractual relations, fraud, conspiracy or other tort or property claims of
any kind, which are not settled by agreement between the parties, shall be
settled by arbitration under the labor arbitration rules of the American
Arbitration Association before a board of three arbitrators, as selected
thereunder.
One arbitrator shall be selected by the Executive, one by Mattel and the third
by the two persons so selected, all in accordance with the labor arbitration
rules of the American Arbitration Association then in effect. In the event that
the arbitrator selected by the Executive and the arbitrator selected by Mattel
are unable to agree upon a third arbitrator, then the
-26-
<PAGE>
third arbitrator shall be selected from a list of seven provided by the office
of the American Arbitration Association nearest to the Executive's residence
with the parties striking names in order and the party striking first to be
determined by the flip of a coin. The arbitration shall be held in a location
to be mutually agreed upon by the parties. In the absence of agreement, the
Chairman of the Board of Mattel shall determine the location.
(b) In consideration of the parties' agreement to submit to arbitration
all disputes with regard to this Agreement and/or with regard to any alleged
contract, or any other claim arising out of their conduct, the relationship
existing hereunder or the continuation or termination of that relationship, and
in further consideration of the anticipated expedition and the minimizing of
expense resulting from this arbitration remedy, the arbitration provisions of
this Agreement shall provide the exclusive remedy, and each party expressly
waives any right he or it may have to seek redress in any other forum.
(c) Any claim which either party has against the other party which could
be submitted for resolution pursuant to this Section 8 must be presented in
writing by the claiming party to the other within one year of the date the
claiming party knew or should have known of the facts giving rise to the claim,
except
-27-
<PAGE>
that claims arising out of or related to the termination of the Executive's
employment must be presented by him within one year after the Date of
Termination. Unless the party against whom any claim is asserted waives the time
limits set forth above, any claim not brought within the time periods specified
shall be waived and forever barred.
(d) Mattel will pay all costs and expenses of the arbitration to the
extent provided in this Section 8. In the event expenses are not paid by Mattel,
and without diminishing the Executive's right to reimbursement as provided in
this Section, costs and expenses shall be paid as follows: (x) the expenses of
the neutral arbitrator and of a transcript of any arbitration proceeding shall
be divided equally between the Executive and Mattel; and (y) each party shall
bear the expenses of the arbitrator selected by it and of the witnesses it
calls.
(e) Any decision and award or order of a majority of the arbitrators
shall be binding upon the parties hereto and judgment thereon may be entered in
the Superior Court of the State of California or any other court having
jurisdiction.
(f) Each of the above terms and conditions of this Section 8 shall have
separate validity and the invalidity of any part thereof shall not affect the
remaining parts.
-28-
<PAGE>
(g) Any decision and award or order of a majority of the arbitrators
shall be final and binding between the parties as to all claims which were
raised in connection with the dispute to the full extent permitted by law. In
all other cases, the parties agree that a decision of a majority of arbitrators
shall be a condition precedent to the institution or maintenance of any legal,
equitable, administrative, or other formal proceeding by the Executive in
connection with the dispute, and that the decision and opinion of the board of
arbitrators may be presented in any other forum on the merits of the dispute.
9. General Release. The Executive acknowledges and agrees that this
---------------
Agreement includes the entire agreement and understanding between the parties
with regard to the Executive's employment, the termination thereof during the
Employment Period, and all amounts to which the Executive shall be entitled
whether during the term of employment or upon termination thereof. Accordingly,
upon Mattel's fulfilling its obligations to the Executive hereunder, the
Executive, on behalf of himself and his successors, assigns, heirs and any and
all other persons claiming through the Executive, if any, and each of them,
shall and does hereby forever relieve, release, and discharge Mattel and its
respective predecessors, successors, assigns, owners, attorneys,
representatives, affiliates, parent corporations, subsidiaries
-29-
<PAGE>
(whether or not wholly-owned), divisions, partners and their officers,
directors, agents, employees, servants, executors, administrators, accountants,
investigators, insurers, and any and all other related individuals and entities,
if any, and each of them, in any and all capacities, from any and all claims,
debts, liabilities, demands, obligations, liens, promises, acts, agreements,
costs and expenses (including, but not limited to, attorneys' fees), damages,
actions and causes of action, of whatever kind or nature, including, without
limitation, any statutory, civil or administrative claim, or any claim, arising
out of acts or omissions occurring before the execution of this Agreement,
whether known or unknown, suspected or unsuspected, fixed or contingent,
apparent or concealed (collectively referred to as "claims"), including, but not
limited to, any claims based on, arising out of, related to or connected with
the subject matter of this Agreement, the Executive's employment or the
termination thereof, and any and all facts in any manner arising out of, related
to or connected with the Executive's employment with, or termination of
employment from, Mattel or any of its related entities, including, but not
limited to, any claims arising from rights under federal, state, and local laws
prohibiting discrimination on the basis of race, national origin, sex, religion,
age, marital status, pregnancy, handicap, ancestry, sexual orientation, or any
other form of discrimination, and any common law claims of any kind, including,
-30-
<PAGE>
but not limited to, contract, tort, and property rights including, but not
limited to, breach of contract, breach of the implied covenant of good faith and
fair dealing, tortious interference with contract or current or prospective
economic advantage, fraud, deceit, misrepresentation, defamation, wrongful
termination, infliction of emotional distress, breach of fiduciary duty, and any
other common law claim of any kind whatever.
Upon Mattel's fulfilling its obligations to the Executive here-under, the
Executive expressly waives any and all rights under Section 1542 of the Civil
Code of the State of California, and all other federal or state statutory
rights, rules, and principles of common law or equity, including without
limitation those of any jurisdiction, government, or political subdivision
thereof, similar to Section 1542 ("similar provision"). Thus the Executive may
not invoke the benefits of Section 1542 or any similar provision in order to
prosecute or assert in any manner any claims released hereunder. Section 1542
provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
-31-
<PAGE>
10. Confidential Information. The Executive shall hold in a fiduciary
------------------------
capacity for the benefit of Mattel all secret or confidential information,
knowledge or data relating to Mattel or any of its affiliated companies, and
their respective businesses, which shall have been obtained by the Executive
during his employment by Mattel or any of its affiliated companies and which
shall not be public knowledge and will continue to be bound by the provisions of
the Patent and Confidence Agreement previously executed by the Executive. After
termination of the Executive's employment with Mattel, he shall not, without the
prior written consent of Mattel, communicate or divulge any such information,
knowledge or data to anyone other than Mattel and those designated by it.
11. Successors.
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of Mattel shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
Mattel and its successors. Mattel shall require
-32-
<PAGE>
any successor to all or substantially all of the business and/or assets of
Mattel, whether direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as Mattel would be required
to perform if no such succession had taken place.
12. Amendment; Waiver. This Agreement contains the entire agreement between
--------- ------
the parties with respect to the subject matter hereof and may be amended,
modified or changed only by a written instrument executed by the Executive and
Mattel. No provision of this Agreement may be waived except by a writing
executed and delivered by the party sought to be charged. Any such written
waiver will be effective only with respect to the event or circumstance
described therein and not with respect to any other event or circumstance,
unless such waiver expressly provides to the contrary.
13. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of California, without reference to principles of conflict
of laws. The captions of this Agreement are not part of the provisi ons hereof
and shall have no force or effect.
-33-
<PAGE>
(b) All notices and other communications hereunder shall be in writing;
shall be delivered by hand delivery to the other party or mailed by registered
or certified mail, return receipt requested, postage prepaid; shall be deemed
delivered upon actual receipt; and shall be addressed as follows:
if to the Executive:
--------------------
Gary Baughman
471 Windrow Cluster Drive
Moorestown, NJ 08057
if to Mattel:
-------------
MATTEL, INC.
333 Continental Blvd.
El Segundo, CA 90245
ATTENTION: Ned Mansour
or to such other address as either party shall have furnished to the other in
writing in accordance herewith.
(c) Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction will, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction.
-34-
<PAGE>
(d) Mattel may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first set forth above.
EXECUTIVE:
/s/ Gary Baughman
-----------------------------------
Gary Baughman
MATTEL: MATTEL, INC.,
a Delaware corporation
By:/s/ Ned Mansour
________________________________
Ned Mansour
President, Corporate Operations
ATTEST:
/s/ Stephen Hartley
- ---------------------------------
Assistant Secretary
-35-
<PAGE>
EXHIBIT 99.3
MATTEL, INC.
PERSONAL INVESTMENT PLAN
APRIL 1, 1997 RESTATEMENT
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I GENERAL
1.1 Plan Name............................................................. 1
1.2 Plan Purpose.......................................................... 1
1.3 Effective Date........................................................ 1
1.4 Plan Merger........................................................... 1
ARTICLE II DEFINITIONS
2.1 Accounts.............................................................. 3
2.2 Affiliated Company.................................................... 4
2.3 After-Tax Contributions............................................... 5
2.4 Before-Tax Contributions.............................................. 5
2.5 Beneficiary........................................................... 5
2.6 Reserved for Plan Modifications....................................... 5
2.7 Board of Directors.................................................... 6
2.8 Reserved for Plan Modifications....................................... 6
2.9 Reserved for Plan Modifications....................................... 6
2.10 Code.................................................................. 6
2.11 Committee............................................................. 6
2.12 Company............................................................... 6
2.13 Company Contributions................................................. 6
2.14 Company Matching Contributions........................................ 7
2.15 Company Stock......................................................... 7
2.16 Compensation.......................................................... 7
2.17 Deferral Limitation................................................... 10
2.18 Distributable Benefit................................................. 10
2.19 Early Retirement Date................................................. 11
2.20 Effective Date........................................................ 11
2.21 Eligible Employee..................................................... 11
2.22 Employee.............................................................. 12
2.23 Employment Commencement Date.......................................... 12
2.24 ERISA................................................................. 13
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
- continued -
<TABLE>
<CAPTION>
PAGE
<S> <C>
2.25 F-P Savings Plan...................................................... 13
2.26 Highly Compensated Employee........................................... 13
2.27 Hour of Service....................................................... 17
2.28 Investment Manager.................................................... 19
2.29 Normal Retirement..................................................... 19
2.30 Normal Retirement Date................................................ 19
2.31 Participant........................................................... 20
2.32 Participation Commencement Date....................................... 20
2.33 Participating Company................................................. 20
2.34 Period of Severance................................................... 20
2.35 Plan.................................................................. 20
2.36 Plan Administrator.................................................... 21
2.37 Plan Year............................................................. 21
2.38 Reserved for Plan Modifications....................................... 21
2.39 Severance Date........................................................ 21
2.40 Reserved for Plan Modifications....................................... 22
2.41 Reserved for Plan Modifications....................................... 22
2.42 Reserved for Plan Modifications....................................... 22
2.43 Reserved for Plan Modifications....................................... 22
2.44 Total and Permanent Disability........................................ 22
2.45 Trust and Trust Fund.................................................. 23
2.46 Trustee............................................................... 23
2.47 Valuation Date........................................................ 23
2.48 Year of Service....................................................... 23
ARTICLE III ELIGIBILITY AND PARTICIPATION
3.1 Eligibility to Participate............................................. 26
3.2 Commencement of Participation.......................................... 26
3.3 Former Participants in F-P Savings Plan................................ 27
ARTICLE IV TRUST FUND
4.1 Trust Fund............................................................. 28
ARTICLE V EMPLOYEE CONTRIBUTIONS
5.1 Employee Contributions................................................. 29
5.2 Amount Subject to Election............................................. 29
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
- continued -
<TABLE>
<CAPTION>
PAGE
<S> <C>
5.3 Termination of, Change in Rate of, or Resumption of Deferrals................. 31
5.4 Limitation on Before-Tax Contributions by Highly Compensated Employees........ 32
5.5 Provisions for Disposition of Excess Before-Tax Contributions by Highly
Compensated Employees...................................................... 37
5.6 Provisions for Return of Annual Before-Tax Contributions in Excess of the
Deferral Limitation........................................................ 41
5.7 Character of Amounts Contributed as Before-Tax Contributions.................. 44
5.8 Participant Transfer/Rollover Contributions................................... 45
ARTICLE VI COMPANY CONTRIBUTIONS
6.1 General....................................................................... 47
6.2 Requirement for Net Profits................................................... 49
6.3 Special Limitations on After-Tax Contributions and Company Matching
Contributions.............................................................. 49
6.4 Provision for Return of Excess After-Tax Contributions and Company Matching
Contributions on Behalf of Highly Compensated Employees.................... 54
6.5 Forfeiture of Company Matching Contributions Attributable to Excess
Deferrals or Contributions................................................. 58
6.6 Investment and Application of Plan Contributions.............................. 58
6.7 Irrevocability................................................................ 61
6.8 Company, Committee and Trustee Not Responsible for Adequacy of Trust Fund..... 62
ARTICLE VII PARTICIPANT ACCOUNTS AND ALLOCATIONS
7.1 General....................................................................... 63
7.2 Participants' Accounts........................................................ 63
7.3 Revaluation of Participants' Accounts......................................... 63
7.4 Treatment of Accounts Following Termination of Employment..................... 64
7.5 Accounting Procedures......................................................... 64
ARTICLE VIII VESTING; PAYMENT OF PLAN BENEFITS
8.1 Vesting....................................................................... 66
8.2 Distribution Upon Retirement.................................................. 67
</TABLE>
-iii-
<PAGE>
TABLE OF CONTENTS
- continued -
<TABLE>
<CAPTION>
PAGE
<S> <C>
8.3 Distribution Upon Death Prior to Termination of Employment................... 68
8.4 Death After Termination of Employment........................................ 69
8.5 Termination of Employment Prior to Normal Retirement Date.................... 70
8.6 Withdrawals.................................................................. 73
8.7 Form of Distribution......................................................... 79
8.8 Election for Direct Rollover of Distributable Benefit to Eligible Retirement
Plan....................................................................... 80
8.9 Designation of Beneficiary................................................... 83
8.10 Facility of Payment.......................................................... 85
8.11 Requirement of Spousal Consent............................................... 85
8.12 Additional Documents......................................................... 86
8.13 Company Stock Distribution................................................... 86
8.14 Valuation of Accounts........................................................ 87
8.15 Forfeitures; Repayment....................................................... 90
8.16 Loans........................................................................ 90
8.17 Special Rule for Disabled Employees.......................................... 95
8.18 Election for Fully Vested Employees Transferred to Fisher-Price, Inc......... 97
8.19 Provision for Small Benefits................................................. 98
ARTICLE IX OPERATION AND ADMINISTRATION OF THE PLAN
9.1 Plan Administration.......................................................... 99
9.2 Committee Powers............................................................. 100
9.3 Investment Manager........................................................... 102
9.4 Periodic Review.............................................................. 103
9.5 Committee Procedure.......................................................... 103
9.6 Compensation of Committee.................................................... 104
9.7 Resignation and Removal of Members........................................... 105
9.8 Appointment of Successors.................................................... 105
9.9 Records...................................................................... 105
9.10 Reliance Upon Documents and Opinions......................................... 106
9.11 Requirement of Proof......................................................... 107
9.12 Reliance on Committee Memorandum............................................. 107
9.13 Multiple Fiduciary Capacity.................................................. 108
</TABLE>
-iv-
<PAGE>
TABLE OF CONTENTS
- continued -
<TABLE>
<CAPTION>
PAGE
<S> <C>
9.14 Limitation on Liability...................................................... 108
9.15 Indemnification.............................................................. 108
9.16 Reserved for Plan Modifications.............................................. 109
9.17 Allocation of Fiduciary Responsibility....................................... 119
9.18 Bonding...................................................................... 110
9.19 Reserved for Plan Modifications.............................................. 110
9.20 Reserved for Plan Modifications.............................................. 110
9.21 Reserved for Plan Modifications.............................................. 111
9.22 Prohibition Against Certain Actions.......................................... 111
9.23 Plan Expenses................................................................ 111
ARTICLE X SPECIAL PROVISIONS CONCERNING COMPANY STOCK
EFFECTIVE AS OF OCTOBER 1,1992
10.1 Securities Transactions...................................................... 113
10.2 Valuation of Company Securities.............................................. 114
10.3 Allocation of Stock Dividends and Splits..................................... 115
10.4 Reinvestment of Dividends.................................................... 115
10.5 Voting of Company Stock...................................................... 116
10.6 Confidentiality Procedures................................................... 117
10.7 Securities Law Limitation.................................................... 117
ARTICLE XI MERGER OF COMPANY; MERGER OF PLAN
11.1 Effect of Reorganization or Transfer of Assets............................... 118
11.2 Merger Restriction........................................................... 118
ARTICLE XII PLAN TERMINATION AND DISCONTINUANCE OF CONTRIBUTIONS
12.1 Plan Termination............................................................. 120
12.2 Discontinuance of Contributions.............................................. 121
12.3 Rights of Participants....................................................... 122
12.4 Trustee's Duties on Termination.............................................. 122
12.5 Partial Termination.......................................................... 124
12.6 Failure to Contribute........................................................ 124
ARTICLE XIII APPLICATION FOR BENEFITS
13.1 Application for Benefits..................................................... 125
13.2 Action on Application........................................................ 125
13.3 Appeals...................................................................... 126
ARTICLE XIV LIMITATIONS ON CONTRIBUTIONS
</TABLE>
-v-
<PAGE>
TABLE OF CONTENTS
- continued -
<TABLE>
<CAPTION>
PAGE
<S> <C>
14.1 General Rule................................................................ 128
14.2 Annual Additions............................................................ 128
14.3 Other Defined Contribution Plans............................................ 129
14.4 Combined Plan Limitation (Defined Benefit Plan)............................. 129
14.5 Adjustments for Excess Annual Additions..................................... 130
14.6 Disposition of Excess Amounts............................................... 133
14.7 Affiliated Company.......................................................... 133
ARTICLE XV RESTRICTION ON ALIENATION
15.1 General Restrictions Against Alienation..................................... 134
15.2 Nonconforming Distributions Under Court Order............................... 135
ARTICLE XVI PLAN AMENDMENTS
16.1 Amendments.................................................................. 138
16.2 Retroactive Amendments...................................................... 139
16.3 Amendment of Vesting Provisions............................................. 139
ARTICLE XVII TOP-HEAVY PROVISIONS
17.1 Minimum Company Contributions............................................... 141
17.2 Compensation................................................................ 142
17.3 Top-Heavy Determination..................................................... 142
17.4 Maximum Annual Addition..................................................... 146
17.5 Aggregation................................................................. 147
ARTICLE XVIII MISCELLANEOUS
18.1 No Enlargement of Employee Rights........................................... 148
18.2 Mailing of Payments; Lapsed Benefits........................................ 148
18.3 Addresses................................................................... 151
18.4 Notices and Communications.................................................. 151
18.5 Reporting and Disclosure.................................................... 151
18.6 Governing Law............................................................... 152
18.7 Interpretation.............................................................. 152
18.8 Certain Securities Laws Rules............................................... 152
18.9 Withholding for Taxes....................................................... 153
18.10 Limitation on Company; Committee and Trustee Liability...................... 153
18.11 Successors and Assigns...................................................... 153
18.12 Counterparts................................................................ 153
</TABLE>
-vi-
<PAGE>
PERSONAL INVESTMENT PLAN
ARTICLE I
GENERAL
1.1 Plan Name.
---------
This instrument evidences the terms of a tax-qualified retirement plan
for the Eligible Employees of Mattel, Inc. and its participating affiliates to
be known as the "Mattel, Inc. Personal Investment Plan" ("Plan").
1.2 Plan Purpose.
------------
This Plan is intended to qualify under Code Section 401(a) as a profit
sharing plan, although contributions may be made to the Plan without regard to
profits, and with respect to the portion hereof intended to qualify as a
Qualified Cash or Deferred Arrangement, to satisfy the requirements of Code
Section 401(k).
1.3 Effective Date.
--------------
The original effective date of this Plan is November 1, 1983. This
amendment and restatement of the Plan reflects the provisions of the Plan as in
effect as of April 1, 1997, except as otherwise expressly provided herein.
1.4 Plan Merger.
-----------
Effective April 1, 1997, the Fisher-Price, Inc. Matching Savings Plan
(the "F-P Savings Plan") has been merged with and into this Plan and the account
balances under the former
-1-
<PAGE>
F-P Savings Plan have been transferred to corresponding accounts under this
Plan, as follows:
F-P SAVINGS PLAN ACCOUNT CORRESPONDING PLAN ACCOUNT
Employee Contribution Account Before-Tax Contributions Account
Company Matching Account Company Matching Account
Discretionary Contribution Account Company Matching Account
Profit Sharing Account Transfer/Rollover Account
Rollover Contributions Account Transfer/Rollover Account
-2-
<PAGE>
ARTICLE II
DEFINITIONS
2.1 Accounts.
--------
"Accounts" or "Participant's Accounts" means the following Plan
accounts maintained by the Committee for each Participant as required by Article
VII:
(a) "Before-Tax Contributions Account" shall mean the account
established and maintained for each Participant under Article VII for
purposes of holding and accounting for amounts held in the Trust Fund which
are attributable to Participant Before-Tax Contributions, and any earnings
thereon, in accordance with Article V.
(b) "After-Tax Contributions Account" shall mean the account
established and maintained for each Participant under Article VII to
reflect amounts held in the Trust Fund on behalf of such Participant which
are attributable to Participant After-Tax Contributions and any earnings
thereon, in accordance with Article V.
(c) "Company Matching Account" shall mean the account established
and maintained for each Participant under Article VII for purposes of
holding and accounting for amounts held in the Trust Fund which are
attributable to Company Matching Contributions, and any earnings thereon,
pursuant to Section 6.1(d).
(d) "Company Contributions Account" shall mean the account
established and maintained for each Participant
-3-
<PAGE>
under Article VII for purposes of holding and accounting for amounts held
in the Trust Fund which are attributable to Company Contributions, and any
earnings thereon, pursuant to Section 6.1(a).
(e) "Transfer/Rollover Account" shall mean the account
established and maintained for each Participant under Article VII for
purposes of holding and accounting for amounts held in the Trust Fund which
are attributable to amounts distributed to the Participant from any other
plan qualified under Code Section 401(a), or from an Individual Retirement
Account attributable to employer contributions under another plan qualified
under Code Section 401(a), and any earnings on such amounts, as provided in
Section 5.8.
2.2 Affiliated Company.
------------------
"Affiliated Company" shall mean:
(a) Any corporation that is included in a controlled group of
corporations, within the meaning of Section 414(b) of the Code, that
includes the Company,
(b) Any trade or business that is under common control with the
Company within the meaning of Section 414(c) of the Code,
(c) Any member of an affiliated service group, within the meaning
of Section 414(m) of the Code, that includes the Company, and
-4-
<PAGE>
(d) Any other entity required to be aggregated with the Company
pursuant to regulations under Section 414(o) of the Code.
2.3 After-Tax Contributions.
-----------------------
"After-Tax Contributions" shall mean those contributions by a
Participant to the Trust Fund in accordance with Article V which do not qualify
as Before-Tax Contributions.
2.4 Before-Tax Contributions.
------------------------
"Before-Tax Contributions" shall mean those amounts contributed to the
Plan as a result of a salary or wage reduction election made by the Participant
in accordance with Article V, to the extent such contributions qualify for
treatment as contributions made under a "qualified cash or deferred arrangement"
within the meaning of Section 401(k) of the Code.
2.5 Beneficiary.
-----------
"Beneficiary" or "Beneficiaries" shall mean the person or persons last
designated by a Participant as set forth in Section 8.9 or, if there is no
designated Beneficiary or surviving Beneficiary, the person or persons
designated in Section 8.9 to receive the interest of a deceased Participant in
such event.
2.6 Reserved for Plan Modifications.
-------------------------------
-5-
<PAGE>
2.7 Board of Directors.
------------------
"Board of Directors" shall mean the Board of Directors (or its
delegate) of Mattel, Inc. as it may from time to time be constituted.
2.8 Reserved for Plan Modifications.
--------------------------------
2.9 Reserved for Plan Modifications.
--------------------------------
2.10 Code.
-----
"Code" shall mean the Internal Revenue Code of 1986, as in effect on
the date of execution of this Plan document and as thereafter amended from time
to time.
2.11 Committee.
----------
"Committee" shall mean the Committee described in Article IX hereof.
2.12 Company.
--------
"Company" shall mean Mattel, Inc., or any successor thereof, if its
successor shall adopt this Plan.
2.13 Company Contributions.
----------------------
"Company Contributions" shall mean amounts paid by a Participating
Company into the Trust Fund in accordance with Section 6.1(a).
2.14 Company Matching Contributions.
-------------------------------
"Company Matching Contributions" shall mean amounts paid by a
Participating Company into the Trust Fund in accordance with Section 6.1(d).
-6-
<PAGE>
2.15 Company Stock.
--------------
"Company Stock" shall mean whichever of the following is applicable:
(a) So long as the Company has only one class of stock, that
class of stock.
(b) In the event the Company at any time has more than one class
of stock, the class (or classes) of the Company's stock constituting
"employer securities" as that term is defined in Section 409(1) of the
Code.
2.16 Compensation.
-------------
(a) "Compensation" shall mean the full salary and wages
(including overtime, shift differential and holiday, vacation and sick pay)
and other compensation paid by a Participating Company during a Plan Year
by reason of services performed by an Employee, subject, however, to the
following special rules and to the provisions of Subsections 2.16(b)
through (e):
(i) Except as specified in (ii) below, fringe benefits and
contributions by the Participating Company to and benefits under any employee
benefit shall not be taken into account in determining compensation;
(ii) Amounts deducted pursuant to authorization by an
Employee or pursuant to requirements of law (including amounts of salary or
wages deferred in accordance with the provisions of Section 5.1 and which
qualify for treatment under Code Section 401(k) or amounts deducted pursuant to
Code
-7-
<PAGE>
Section 125 or 129) shall be included in "Compensation" except as specifically
provided to the contrary elsewhere in this Plan;
(iii) Amounts paid or payable by reason of services performed
during any period in which an Employee is not a Participant under the Plan shall
not be taken into account in determining Compensation;
(iv) Amounts deferred by the Employee pursuant to non-
qualified deferred compensation plans, regardless of whether such amounts are
includable in the Employee's gross income for his current taxable year, shall
not be taken into account in determining Compensation;
(v) Amounts included in any Employee's gross income with
respect to life insurance as provided by Code Section 79 shall not be taken into
account in determining compensation; and
(vi) Amounts paid to Employees as "bonuses" shall not be
taken into account in determining compensation.
(b) To the extent permitted by Code Section 415(c)(3), in the
case of a Participant who ceases actively to perform services for a
Participating Company prior to January 1, 1989 because such person has
sustained a Total and Permanent Disability, such Participant shall be
deemed to have "Compensation" to the extent provided in the provisions of
Section 8.17(d), for the limited purposes of determining the amount of
certain contributions to this Plan.
-8-
<PAGE>
(c) The term "Compensation," for purposes of Article XIV of this
Plan, shall mean wages as defined in Section 3401(a) and all other payments
of compensation to an Employee by the Company (in the course of the
Company's trade or business) for which the Company is required to furnish
the Employee a written statement under Code Sections 6041(d) and
6051(a)(3). Compensation for purposes of this Subsection (c) shall be
determined without regard to any rules under Code Section 3401(a) that
limit the remuneration included in wages based on the nature or location of
the employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).
(d) In the event that this Plan is deemed a Top-Heavy Plan as set
forth in Article XVII, the term "Compensation" shall not include amounts
excluded by reason of and to the extent provided by Sections 17.1 and 17.2.
(e) Effective for Plan Years commencing on and after January 1,
1994, the "Compensation" of any Employee taken into account under the Plan
for any Plan Year shall not exceed $150,000 (or such adjusted amount as may
be prescribed for such Plan Year pursuant to Section 401(a)(17) of the
Code). In determining the Compensation of a Participant for purposes of
this limitation, the rules of Section 414(q)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only
-9-
<PAGE>
the Spouse of the Participant and any lineal descendants of the Participant
who have not attained age 19 before the close of the year. If, as a result
of the application of such rules the adjusted $150,000 limitation is
exceeded, then, the limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation as
determined under this Subsection (e) prior to the application of this
limitation.
2.17 Deferral Limitation.
-------------------
"Deferral Limitation" shall mean the dollar limitation on the
exclusion of elective deferrals from a Participant's gross income under Section
402(g) of the Code, as in effect with respect to the taxable year of the
Participant.
2.18 Distributable Benefit.
---------------------
"Distributable Benefit" shall mean the vested interest of a
Participant in this Plan which is determined and distributable in accordance
with the provisions of Article VIII following the termination of the
Participant's employment.
2.19 Early Retirement Date.
---------------------
"Early Retirement Date" shall mean the later of the Participant's 55th
birthday or the date on which the Participant completes five Years of Service.
2.20 Effective Date.
--------------
"Effective Date" shall mean November 1, 1983, which shall be the
original effective date of this Plan.
-10-
<PAGE>
2.21 Eligible Employee.
-----------------
"Eligible Employee" shall include any individual who (i) prior to
April 1, 1997 is at least age twenty-one (21) or on or after April 1, 1997 is at
least age twenty and one-half (20-1/2) and (ii) is employed by a Participating
Company, except
(a) any Employee who is covered by a collective bargaining
agreement to which a Participating Company is a party if there is evidence
that retirement benefits were the subject of good faith bargaining between
the Participating Company and the collective bargaining representative,
unless the collective bargaining agreement provides for coverage under this
Plan,
(b) any Employee who is a "leased employee," within the meaning
of Code Section 414(n), or
(c) any Employee who is classified as a temporary Employee,
unless such temporary Employee has been an Employee for a twelve (12)
consecutive month period.
2.22 Employee.
--------
(a) "Employee" shall mean each person currently employed in any
capacity by the Company or Affiliated Company any portion of whose income
is subject to withholding of income tax and/or for whom Social Security
contributions are made by the Company. The term "Employee" also includes a
"leased employee," to the extent required by Code Section 414(n).
-11-
<PAGE>
(b) Although Eligible Employees are the only class of Employees
eligible to participate in this Plan, the term "Employee" is used to refer
to persons employed in a non-Eligible Employee capacity as well as Eligible
Employee category. Thus, those provisions of this Plan that are not
limited to Eligible Employees, such as those relating to Hours of Service,
apply to both Eligible and non-Eligible Employees.
2.23 Employment Commencement Date.
----------------------------
"Employment Commencement Date" shall mean each of the following:
(a) The date on which an Employee first performs an Hour of
Service in any capacity for the Company or an Affiliated Company with
respect to which the Employee is compensated or is entitled to compensation
by the Company or the Affiliated Company.
(b) In the case of an Employee who has a one-year Period of
Severance and who is subsequently reemployed by the Company or an
Affiliated Company, the term "Employment Commencement Date" shall also mean
the first day following such one-year Period of Severance on which the
Employee performs an Hour of Service for the Company or an Affiliated
Company with respect to which he is compensated or entitled to compensation
by the Company or Affiliated Company.
-12-
<PAGE>
2.24 ERISA.
-----
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
2.25 F-P Savings Plan.
----------------
"F-P Savings Plan" shall mean the Fisher-Price, Inc. Matching Savings
Plan, which was merged with and into this Plan effective April 1, 1997.
2.26 Highly Compensated Employee.
---------------------------
(a) "Highly Compensated Employee" shall mean any Employee who
(i) was a 5% owner during the Determination Year or the
Look Back Year;
(ii) received Compensation from the Company in excess of
$75,000 during the Look Back Year;
(iii) received Compensation from the Company in excess of
$50,000 during the Look Back Year and was in the "top-paid group" of Employees
for such Look Back Year;
(iv) was at any time an officer during the Look Back Year
and received Compensation greater than fifty percent (50%) of the amount in
effect under Section 415(b)(1)(A) of the Code in such Look Back Year; or
(v) was an Employee described in Paragraph (ii), (iii), or
(iv) above for the Determination Year and was a member of the group consisting
of the 100 Employees paid the greatest Compensation during the Determination
Year.
-13-
<PAGE>
(b) Determination of a Highly Compensated Employee shall be in
accordance with the following definitions and special rules:
(i) "Determination Year" means the Plan Year for which the
determination of Highly Compensated Employee is being made.
(ii) "Look Back Year" is the twelve (12) month period
preceding the Determination Year.
(iii) An Employee shall be treated as a 5% owner for any
Determination Year or Look Back Year if at any time during such Year such
Employee was a 5% owner (as defined in Section 17.3).
(iv) An Employee is in the "top-paid group" of Employees for
any Determination Year or Look Back Year if such Employee is in the group
consisting of the top twenty percent (20%) of the Employees when ranked on the
basis of Compensation paid during such Year.
(v) For purposes of this Section, no more than fifty (50)
Employees (or, if lesser, the greater of three (3) Employees or ten percent
(10%) of the Employees) shall be treated as officers. To the extent required by
Code Section 414(q), if for any Determination Year or Look Back Year no officer
of the Company is described in this Section, the highest paid officer of the
Company for such year shall be treated as described in this Section.
-14-
<PAGE>
(vi) If any individual is a "family member" with respect to
a 5% owner or of a Highly Compensated Employee in the group consisting of the
ten (10) Highly Compensated Employees paid the greatest Compensation during the
Determination Year or Look Back Year, then
(A) such individual shall not be considered a separate
Employee, and
(B) any Compensation paid to such individual (and any
applicable contribution or benefit on behalf of such individual) shall be
treated as if it were paid to (or on behalf of) the 5% owner or Highly
Compensated Employee.
For purposes of this Paragraph (vi), the term "family member" means,
with respect to any Employee, such Employee's spouse and lineal ascendants or
descendants and the spouses of such lineal ascendants or descendants.
(vii) For purposes of this Section the term "Compensation"
means Compensation as defined in Code Section 415(c)(3), as set forth in Section
2.16(c), without regard to the limitations of Section 2.16(e); provided,
however, the determination under this Paragraph (vi) shall be made without
regard to Code Sections 125, 402(a)(8), and 401(h)(1)(B), and in the case of
Participant contributions made pursuant to a salary reduction agreement, without
regard to Code Section 403(b).
(viii) For purposes of determining the number of Employees in
the "top-paid" group under this Section, the following Employees shall be
excluded:
-15-
<PAGE>
(A) Employees who have not completed six (6) months of
service,
(B) Employees who normally work less than 17-1/2 hours
per week,
(C) Employees who normally work not more than six (6)
months during any Plan Year, and
(D) Employees who have not attained age 20-1/2,
(E) Except to the extent provided in Treasury
Regulations, Employees who are included in a unit of employees covered by an
agreement which the Secretary of Labor finds to be a collective bargaining
agreement between Employee representatives and the Company, and
(F) Employees who are nonresident aliens and who
receive no earned income (within the meaning of Code Section 911(d)(2) from the
Company which constitutes income from sources within the United States (within
the meaning of Code Section 861(a)(3)).
The Company may elect to apply Subparagraphs (A) through (D) above by
substituting a shorter period of service, smaller number of hours or months, or
lower age for the period of service, number of hours or months, or (as the case
may be) than as specified in such Subparagraphs.
(ix) A former Employee shall be treated as a Highly
Compensated Employee if
-16-
<PAGE>
(A) such Employee was a Highly Compensated Employee
when such Employee incurred a severance, or
(B) such Employee was a Highly Compensated Employee at
any time after attaining age fifty-five (55).
(x) Code Sections 414(b), (c), (m), and (o) shall be applied
before the application of this Section. Also, the term "Employee" shall include
"leased employees," within the meaning of Code Section 414(n), unless such
leased Employee is covered under a "safe harbor" plan of the leasing
organization and not covered under a qualified plan of the Affiliated Company.
(c) To the extent permissible under Code Section 414(q), the
Committee may determine which Employees shall be categorized as Highly
Compensated Employees by applying a simplified method and calendar year
election prescribed by the Internal Revenue Service.
2.27 Hour of Service.
---------------
(a) "Hour of Service" of an Employee shall mean the following:
(i) Each hour for which the Employee is paid by the Company or an
Affiliated Company or entitled to payment for the performance of services as an
Employee.
(ii) Each hour in or attributable to a period of time during which the
Employee performs no duties (irrespective of whether he has terminated his
Employment) due to a vacation, holiday, illness, incapacity (including pregnancy
or
-17-
<PAGE>
disability), layoff, jury duty, military duty or a Leave of Absence, for which
he is so paid or so entitled to payment, whether direct or indirect. However, no
such hours shall be credited to an Employee if such Employee is directly or
indirectly paid or entitled to payment for such hours and if such payment or
entitlement is made or due under a plan maintained solely for the purpose of
complying with applicable workmen's compensation, unemployment compensation or
disability insurance laws or is a payment which solely reimburses the Employee
for medical or medically related expenses incurred by him.
(iii) Each hour for which he is entitled to back pay,
irrespective of mitigation of damages, whether awarded or agreed to by the
Company or an Affiliated Company, provided that such Employee has not previously
been credited with an Hour of Service with respect to such hour under paragraphs
(i) or (ii) above.
(b) Hours of Service under Subsections (a)(ii) and (a)(iii)
shall be calculated in accordance with Department of Labor Regulation 29
C.F.R. (S) 2530.200b-2(b). Hours of Service shall be credited to the
appropriate computation period according to the Department of Labor
Regulation (S) 2530.200b-2(c). However, an Employee will not be considered
as being entitled to payment until the date when the Company or the
Affiliated Company would normally make payment to the Employee for such
Hour of Service.
-18-
<PAGE>
2.28 Investment Manager.
------------------
"Investment Manager" means the one or more Investment Managers, if
any, that are appointed pursuant to Section 9.3.
2.29 Normal Retirement.
-----------------
"Normal Retirement" shall mean a Participant's termination of
employment on or after attaining the Plan's Normal Retirement Date.
2.30 Normal Retirement Date.
----------------------
"Normal Retirement Date" shall be the Participant's sixty-fifth
birthday.
2.31 Participant.
-----------
"Participant" shall mean any Eligible Employee who has satisfied the
participation eligibility requirements set forth in Section 3.1 and has begun
participation in this Plan in accordance with the provisions of Section 3.2.
2.32 Participation Commencement Date.
-------------------------------
"Participation Commencement Date" shall mean the day on which an
Employee's participation in this Plan may commence in accordance with the
provisions of Article III.
2.33 Participating Company.
---------------------
"Participating Company" shall mean Mattel, Inc., Mattel Sales, Inc.
and each other Affiliated Company (or similar entity) that has been granted
permission by the Board of Directors to participate in this Plan, provided that
contributions are being made hereunder for the Employees of such Participating
Company. Permission to become a Participating Company shall be granted
-19-
<PAGE>
under such conditions and upon such conditions as the Board of Directors deems
appropriate. Effective April 1, 1997, Fisher-Price, Inc. and each other adopting
employer in the F-P Savings Plan shall be a Participating Company in this Plan.
2.34 Period of Severance.
-------------------
"Period of Severance" shall mean the period of time commencing on the
Participant's Severance Date and continuing until the first day, if any, on
which the Participant completes one or more Hours of Service following such
Severance Date.
2.35 Plan.
----
"Plan" shall mean the Mattel, Inc. Personal Investment Plan herein set
forth, and as it may be amended from time to time.
2.36 Plan Administrator.
------------------
"Plan Administrator" shall mean the administrator of the Plan, within
the meaning of Section 3(16)(A) of ERISA. The Plan Administrator shall be
Mattel, Inc.
2.37 Plan Year.
---------
"Plan Year" shall mean the fiscal year of the Company. Effective as
of January 1, 1992, the fiscal year of the Company is the twelve consecutive
month period ending each December 31.
2.38 Reserved for Plan Modifications.
-------------------------------
2.39 Severance Date.
--------------
"Severance Date" shall mean the earlier of (a) the date on which an
Employee quits, retires, is discharged, or dies; or
-20-
<PAGE>
(b) the first anniversary of the first date of a period in which an Employee
remains absent from service (with or without pay) with the Company or an
Affiliated Company for any reason other than quit, retirement, discharge or
death (such as vacation, holiday, sickness, disability, leave of absence or
layoff).
In the case of an Employee who has a maternity or paternity absence
described in Code Sections 410(a)(5)(E) and 411(a)(6)(E), the Employee's Period
of Severance will begin on the second anniversary of the date the Employee is
first absent for a maternity or paternity leave, provided the Employee does not
perform an Hour of Service during such period. The first one-year period of the
absence will be included in the Employee's period of service and the second one-
year period is neither part of the period of service nor part of the Period of
Severance. The Committee may require that the Employee furnish such timely
information as the Committee may reasonably require to establish that the
absence from work is for such a maternity or paternity absence, and the number
of days for which there was such an absence.
2.40 Reserved for Plan Modifications.
-------------------------------
2.41 Reserved for Plan Modifications.
-------------------------------
2.42 Reserved for Plan Modifications.
-------------------------------
-21-
<PAGE>
2.43 Reserved for Plan Modifications.
-------------------------------
2.44 Total and Permanent Disability.
------------------------------
An individual shall be considered to be suffering from a Total and
Permanent Disability if he is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to last for a continuous period of not less than 12
months. An individual's disabled status shall be determined by the Committee,
based on such evidence as the Committee determines to be sufficient. The rules
of this Section 2.44 shall be applied by the Committee in accordance with
Treasury Regulations, if any, promulgated under Code Section 415 or Code Section
22(e)(3).
2.45 Trust and Trust Fund.
--------------------
"Trust" or "Trust Fund" shall mean the one or more trusts created for
funding purposes under the Plan.
2.46 Trustee.
-------
"Trustee" shall mean the corporation appointed by the Company to act
as Trustee of the Trust Fund, or any successor or other corporation acting as a
trustee of the Trust Fund.
2.47 Valuation Date.
--------------
"Valuation Date" shall mean the last day of each calendar month and
such additional dates as may be determined in rules prescribed by the Committee.
-22-
<PAGE>
2.48 Year of Service.
---------------
"Year of Service" means three hundred sixty five (365) days included
in a period of service recognized under this Section 2.48.
(a) Subject to the succeeding provisions of this Section 2.48, a
Participant shall be credited with a period of service equal to the elapsed
time between his Employment Commencement Date and his subsequent Severance
Date.
(b) A Participant additionally shall receive credit for a Period
of Severance in computing his service hereunder if such Participant
completes an Hour of Service prior to the first anniversary of his
Severance Date. Except as provided in this Section 2.48(b), a Period of
Severance shall not be included in a Participant's period of service
hereunder.
(c) If a Participant who does not have any vested interest in his
accounts under the Plan has five (5) consecutive one-year Periods of
Severance, any prior period of service shall be disregarded for all
purposes of the Plan. Periods of service credited under this Section 2.48
before such five (5) consecutive one-year Periods of Severance shall not
include any period or periods of service that are not required to be taken
into account under this Section 2.48(c) by reason of any prior Periods of
Severance.
(d) The number of a Participant's Years of Service for vesting
shall be determined by reference to each
-23-
<PAGE>
three hundred sixty five day period of service recognized under this
Section 2.48, whether or not consecutive.
(e) Notwithstanding any other provision of this Plan, service
performed by Employees for employers other than the Company or Affiliated
Companies may be taken into account in computing service for any purpose of
this Plan to the extent and in the manner determined by resolution of the
Committee in its sole discretion.
(f) Notwithstanding any other provision of this Plan, service
performed for an Affiliated Company prior to such entity becoming an
Affiliated Company may be taken into account for purposes of computing
service for any purpose of this Plan to the extent and in the manner
determined by resolution of the Board of Directors of the Company in its
sole discretion.
-24-
<PAGE>
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility to Participate.
--------------------------
(a) Every Eligible Employee shall become eligible to participate
in the Plan on the date he becomes an Eligible Employee.
(b) If an Eligible Employee ceases to be an Eligible Employee he
shall again become eligible to participate in the Plan on the date he again
becomes an Eligible Employee.
(c) Notwithstanding the preceding rules of this Section 3.1, the
actual date upon which an Employee will commence participation will be
determined pursuant to the rules of Section 3.2.
3.2 Commencement of Participation.
-----------------------------
(a) Each Eligible Employee shall be entitled automatically to
commence participation in this Plan with respect to the Company
Contributions described in Section 6.1(a) and (b).
(b) From January 1, 1987 to June 30, 1988, each Eligible Employee
shall be entitled to commence Employee contributions as set forth in
Article V and Company Matching Contributions as set forth in Section 6.1(d)
on the January 1 after their Employment Commencement Date.
(c) Effective July 1, 1988, each Eligible Employee shall be
entitled to commence After-Tax
-25-
<PAGE>
Contributions and Company Matching Contributions as set forth in Section
6.1(d) as of the date he becomes an Eligible Employee.
(d) Effective January 1, 1989, each Eligible Employee shall be
entitled to commence Before-Tax Contributions and Company Matching
Contributions as set forth in Section 6.1(d) as of the date he becomes an
Eligible Employee.
(e) The Committee may prescribe such rules as it deems necessary
or appropriate regarding times and procedures for Participants to make
elections to contribute a portion of Compensation as provided in Section
5.1.
3.3 Former Participants in F-P Savings Plan
---------------------------------------
Notwithstanding anything in this Article to the contrary, any
individual who was a participant in the F-P Savings Plan on March 31, 1997 shall
automatically become a Participant in this Plan effective as of April 1, 1997.
-26-
<PAGE>
ARTICLE IV
TRUST FUND
4.1 Trust Fund.
----------
(a) The Company has entered into a Trust Agreement for the
establishment of a Trust to hold the assets of the Plan. Simultaneously
with the establishment of this Plan the Company shall pay to the Trustee a
specified sum of money as its initial contribution to the Trust Fund. The
Trustee shall acknowledge receipt of this contribution and shall agree to
hold and administer this contribution together with such additional funds
and assets that may be subsequently deposited with the Trustee pursuant to
the terms of this Plan.
(b) The Trust Fund is authorized to invest in either Company
Stock or such other assets as the Committee or the Investment Manager (if
applicable) may direct. Participants may direct the investment of the
assets in their Accounts in the Trust Fund from among the acceptable
investment alternatives which the Committee may from time to time make
available.
(c) The Committee shall not be required to engage in any
transaction, including without limitation, directing the purchase or sale
of Company Stock, which it determines in its sole discretion, might tend to
subject itself, its members, the Plan, the Company, or any Participant to
liability under federal or state securities law.
-27-
<PAGE>
ARTICLE V
EMPLOYEE CONTRIBUTIONS
5.1 Employee Contributions.
----------------------
In accordance with rules which the Committee shall prescribe from time
to time, each Participant shall be given an opportunity to elect to have a
percentage of his or her Compensation contributed to the Plan. A contribution
election by a Participant shall remain in effect from year to year
(notwithstanding salary or wage rate changes) until changed by the Participant.
Effective January 1, 1987, at the election of the Participant, contributions
shall be made as Before-Tax Contributions, After-Tax Contributions or a
combination thereof.
5.2 Amount Subject to Election.
--------------------------
(a) Effective for Plan Years commencing on and after January 1,
1989, but prior to January 1, 1997, and for the period January 1, 1997
through March 31, 1997, subject to the limitations of this Article V, the
amount of an individual's Compensation that may be contributed subject to
the election provided in Section 5.1 shall be a whole percentage of the
individual's Compensation, which percentage is not less than one percent
(1%) nor more than the difference between (i) the Participant's Company
Contributions percentage determined under Section 6.1(a) and (ii) seventeen
percent (17%).
(b) Effective April 1, 1997, subject to the limitations of this
Article V, the amount of a Participant's
-28-
<PAGE>
Compensation that may be contributed subject to the election provided in
Section 5.1 shall be a whole percentage of the Participant's Compensation,
which percentage is not less than one percent (1%) nor more than: (i) in
the case of a Participant employed by Fisher-Price, Inc. or Mattel
Operations, Inc., fifteen percent (15%); and (ii) in the case of any other
Participant, the difference between (x) the Participant's Company
Contributions percentage determined under Section 6.1(a) and (y) seventeen
percent (17%).
(c) No Participant shall be permitted to make Before-Tax
Contributions in excess of the Deferral Limitation. Any election by a
Participant to make Before-Tax Contributions shall be deemed to include an
election to automatically substitute After-Tax Contributions for such
Before-Tax Contributions, effective for the period starting on the date
immediately following the date the Participant's Before-Tax Contributions
for a calendar year equal the Deferral Limitation and ending on the
immediately following December 31. In the event a Participant's Before-Tax
Contributions exceed the Deferral Limitation, excess contributions shall be
subject to the provisions of Section 5.6.
(d) For purposes of satisfying one of the tests described under
Section 5.4 and Section 6.3, the Committee may prescribe such rules as it
deems necessary or
-29-
<PAGE>
appropriate regarding the maximum amount that a Participant may elect to
contribute and the timing of such an election. These rules may prescribe a
maximum percentage of Compensation that may be contributed, or may provide
that the maximum percentage of Compensation that a Participant may
contribute will be a lower percentage of his Compensation above a certain
dollar amount of Compensation than the maximum deferral percentage below
that dollar amount of Compensation. These rules shall apply to all
individuals eligible to make the election described in Section 5.1, except
to the extent that the Committee prescribes special or more stringent rules
applicable only to Highly Compensated Employees.
5.3 Termination of, Change in Rate of, or Resumption of Deferrals.
-------------------------------------------------------------
(a) A Participant may at any time submit a request to the
Committee to terminate his contributions made pursuant to this Article V.
(b) A Participant may at any time (but not more frequently than
once every two weeks) submit a request to the Committee to alter the rate
of, or resume his contributions made pursuant to this Article V.
(c) A request for termination, alteration, or resumption or
alteration of the rate of contributions shall be in form satisfactory to
the Committee. The Committee may require at least thirty (30) days notice
prior to
-30-
<PAGE>
commencement of the payroll period for which such change is to be
effective.
5.4 Limitation on Before-Tax Contributions by Highly Compensated Employees
----------------------------------------------------------------------
With respect to each Plan Year, Participant Before-Tax Contributions
under the Plan for the Plan Year shall not exceed the limitations on
contributions on behalf of Highly Compensated Employees under Section 401(k) of
the Code, as provided in this Section. In the event that Before-Tax
Contributions under this Plan on behalf of Highly Compensated Employees for any
Plan Year exceed the limitations of this Section for any reason, such excess
contributions and any income allocable thereto shall be returned to the
Participant or recharacterized as Participant After-Tax Contributions, as
provided in Section 5.5.
(a) The Before-Tax Contributions by a Participant for a Plan Year
shall satisfy the Average Deferral Percentage test set forth in (i)(A)
below, or the alternative Average Deferral Percentage test set forth in
(i)(B) below, and to the extent required by regulations under Code Section
401(m), also shall satisfy the test identified in (ii) below:
(i) (A) The "Actual Deferral Percentage" for Eligible Employees who
are Highly Compensated Employees shall not be more than the "Actual Deferral
Percentage" of all other Eligible Employees multiplied by 1.25, or
-31-
<PAGE>
(i) (B) The excess of the "Actual Deferral Percentage" for Eligible
Employees who are Highly Compensated Employees over the "Actual Deferral
Percentage" for all other Eligible Employees shall not be more than two
percentage points, and the "Actual Deferral Percentage" for Highly Compensated
Employees shall not be more than the "Actual Deferral Percentage" of all other
Eligible Employees multiplied by 2.00.
(ii) The Average Contribution Percentage for Highly Compensated
Employees eligible to participate in this Plan and a plan of the Company or an
Affiliated Company that is subject to the limitations of Section 401(m) of the
Code including, if applicable, this Plan, shall be reduced in accordance with
Section 6.4, to the extent necessary to satisfy the requirements of Treasury
Regulations Section 1.401(m)-2.
(b) For the purposes of the limitations of this Section 5.4, the
following definitions shall apply:
(i) "Actual Deferral Percentage" means, with respect to Eligible
Employees who are Highly Compensated Employees and all other Eligible Employees
for a Plan Year, the average of the ratios, calculated separately for each
Eligible Employee in such group, of the amount of Before-Tax Contributions under
the Plan allocated to each Eligible Employee for such Plan Year to such
Employee's "Compensation" for such Plan Year. An Eligible Employee's Before-Tax
Contributions may be taken into account for purposes of determining his Actual
Deferral Percentage for a particular Plan Year only if such Before-Tax
-32-
<PAGE>
Contributions relate to Compensation that either would have been received by the
Eligible Employee in the Plan Year (but for the deferral election), or is
attributable to services performed in the Plan Year and would have been received
by the Eligible Employee within two and one-half (2 1/2) months after the close
of the Plan Year (but for the deferral election), and such Before-Tax
Contributions are allocated to the Eligible Employee as of a date within that
Plan Year. For purposes of this rule, an Eligible Employee's Before-Tax
Contributions shall be considered allocated as of a date within a Plan Year only
if (A) the allocation is not contingent upon the Eligible Employee's
participation in the Plan or performance of services on any date subsequent to
that date, and (B) the Before-Tax Contribution is actually paid to the Trust no
later than the end of the twelve month period immediately following the Plan
Year to which the contribution relates. To the extent determined by the
Committee and in accordance with regulations issued by the Secretary of the
Treasury, contributions on behalf of an Eligible Employee that satisfy the
requirements of Code Section 401(k)(3)(C)(ii) may also be taken into account for
the purpose of determining the Actual Deferral Percentage of such Eligible
Employee.
(ii) "Compensation" means Compensation determined by the Committee in
accordance with the requirements of Section 414(s) of the Code, including, to
the extent elected by the Committee, amounts deducted from an Employee's wages
or
-33-
<PAGE>
salary that are excludable from income under Sections 125, 129, or 402(a)(8)
of the Code.
(c) In the event that as of the last day of a Plan Year this Plan
satisfies the requirements of Section 401(a)(4) or 410(b) of the Code only
if aggregated with one or more other plans which include arrangements under
Code Section 401(k), then this Section 5.4 shall be applied by determining
the Actual Deferral Percentages of Eligible Employees as if all such plans
were a single plan, in accordance with regulations prescribed by the
Secretary of the Treasury under Section 401(k) of the Code.
(d) For the purposes of this Section, the Actual Deferral
Percentage for any Highly Compensated Employee who is a participant under
two or more Code Section 401(k) arrangements of the Company or an
Affiliated Company shall be determined by taking into account the Highly
Compensated Employee's Compensation under each such arrangement and
contributions under each such arrangement which qualify for treatment under
Code Section 401(k), in accordance with regulations prescribed by the
Secretary of the Treasury under Section 401(k) of the Code.
(e) If an Eligible Employee (who is also a Highly Compensated
Employee) is subject to the family aggregation rules in Section
2.26(b)(vi), the combined Actual Deferral Percentage for the family group
(which is treated as one Highly Compensated Employee) shall be the Actual
Deferral
-34-
<PAGE>
Percentage determined by combining the Before-Tax Contributions, amounts
treated as Before-Tax Contributions under Code Section 401(k)(3)(D)(ii),
and Compensation of all eligible family members.
(f) For purposes of this Section, the amount of Before-Tax
Contributions by a Participant who is not a Highly Compensated Employee for
a Plan Year shall be reduced by any Before-Tax Contributions in excess of
the Deferral Limitation which have been distributed to the Participant
under Section 5.6, in accordance with regulations prescribed by the
Secretary of the Treasury under Section 401(k) of the Code.
(g) The determination of the Actual Deferral Percentage of any
Participant shall be made after applying the provisions of Section 14.5
relating to certain limits on Annual Additions under Section 415 of the
Code.
(h) The determination and treatment of Before-Tax Contributions
and the Actual Deferral Percentage of any Participant shall satisfy such
other requirements as may be prescribed by the Secretary of the Treasury.
(i) The Committee shall keep or cause to have kept such records
as are necessary to demonstrate that the Plan satisfies the requirements of
Code Section 401(k) and the regulations thereunder, in accordance with
regulations prescribed by the Secretary of the Treasury.
-35-
<PAGE>
5.5 Provisions for Disposition of Excess Before-Tax Contributions by Highly
-----------------------------------------------------------------------
Compensated Employees.
---------------------
(a) The Committee shall determine, as soon as is reasonably
possible following the close of each Plan Year, the extent, if any, to
which deferral treatment under Code Section 401(k) may not be available for
Before-Tax Contributions by Highly Compensated Employees. If, pursuant to
the determination by the Committee, any or all of a Participant's Before-
Tax Contributions are not eligible for tax-deferral treatment, then any
excess Before-Tax Contributions shall be disposed of in accordance with (i)
below or any Excess Before-Tax Contribution and any income for the Plan
Year ("Non-Gap Period Income") allocable thereto shall be disposed of in
accordance with (ii) below.
(i) To the extent permissible under Section 6.3, excess Before-Tax
Contributions by the Highly Compensated Employee in a Plan Year may be
recharacterized as After-Tax Contributions for the Plan Year not later than two
and one-half (2-1/2) months following the close of the Plan Year. Any
recharacterization shall be effective retroactive to the date of the Highly
Compensated Employee's earliest Before-Tax Contributions during the Plan Year in
which the excess Before-Tax Contributions were made. To the extent required by
Treas. Reg. Section 1-401(k)-1(f)(3), Before-Tax Contributions recharacterized
as After-Tax Contributions shall continue to be treated as Before-Tax
Contributions for purposes of Article VIII.
-36-
<PAGE>
(ii) To the extent a Participant's Before-Tax Contributions cannot be
recharacterized in accordance with (i) above, any excess Before-Tax
Contributions (and any Non-Gap Period income allocable thereto) in a Plan Year
shall, if administratively feasible, be distributed to the Participant not later
than two and one-half (2-1/2) months following the close of the Plan Year in
which such excess Before-Tax Contributions were made, but in any event no later
than the close of the first Plan Year following the Plan Year in which such
excess Before-Tax Contributions were made (after withholding any applicable
income taxes due on such amounts).
(b) For purposes of this Section, the amount of excess Before-Tax
Contributions to be distributed to a Participant for a Plan Year or
recharacterized shall be reduced by the amount of any Before-Tax
Contributions in excess of the Deferral Limitation (for the Participant's
taxable year that ends with or within the Plan Year) which have been
distributed to the Participant under Section 5.6, in accordance with
regulations prescribed by the Secretary of the Treasury under Section
401(k) of the Code.
(c) The Committee shall determine the amount of any excess
Before-Tax Contributions by Highly Compensated Employees for a Plan Year by
application of the leveling method set forth in Treasury Regulation Section
1.401(k)-1(f)(2) under which the Deferral Percentage of the Highly
Compensated Employee who has the highest such percentage for
-37-
<PAGE>
such Plan Year is reduced to the extent required (i) to enable the Plan to
satisfy the Actual Deferral Percentage test, or (ii) to cause such Highly
Compensated Employee's Deferral Percentage to equal the Deferral Percentage
of the Highly Compensated Employee with the next highest Deferral
Percentage. This process shall be repeated until the Plan satisfies the
Actual Deferral Percentage test. For each Highly Compensated Employee, the
amount of excess Before-Tax Contributions shall be equal to the total
Before-Tax Contributions (plus any amounts treated as Before-Tax
Contributions) made or deemed to be made by such Highly Compensated
Employee (determined prior to the application of the foregoing provisions
of this Subsection (c)) minus the amount determined by multiplying the
Highly Compensated Employee's Deferral Percentage (determined after
application of the foregoing provisions of this Subsection (c)) by his
Compensation.
(d) The determination and correction of excess Before-Tax
Contributions of a Highly Compensated Employee whose Actual Deferral
Percentage is determined under the family aggregation rules in Section
5.4(e) shall be accomplished by reducing the Actual Deferral Percentage as
required under Subsections (a) and (b) above and allocating the excess
Before-Tax Contributions for the family unit among family members in
proportion to the Before-Tax
-38-
<PAGE>
Contributions of each family member that are combined to determine the
Actual Deferral Percentage.
(e) For purposes of satisfying the Actual Deferral Percentage
test, Non-Gap Period income allocable to a Participant's excess Before-Tax
Contributions, as determined under (b) above, shall be determined in
accordance with any reasonable method used by the Plan for allocating
income to Participant Accounts, provided such method does not discriminate
in favor of Highly Compensated Employees and is consistently applied to all
Participants for all corrective distributions or recharacterizations under
the Plan for a Plan Year. The Committee shall not be liable to any
Participant (or his Beneficiary, if applicable) for any losses caused by
misestimating the amount of any Before-Tax Contributions in excess of the
limitations of this Article V and any income allocable to such excess.
(f) To the extent required by regulations under Section 401(k) or
415 of the Code, any excess Before-Tax Contributions with respect to a
Highly Compensated Employee shall be treated as Annual Additions under
Article XIV for the Plan Year for which the excess Before-Tax Contributions
were made, notwithstanding the distribution or recharacterization of such
excess in accordance with the provisions of this Section.
-39-
<PAGE>
5.6 Provisions for Return of Annual Before-Tax Contributions in Excess of the
-------------------------------------------------------------------------
Deferral Limitation.
-------------------
(a) In the event that due to error or otherwise, a Participant's
Before-Tax Contributions under this Plan exceed the Deferral Limitation for
any calendar year (but without regard to amounts of compensation deferred
under any other plan), the excess Before-Tax Contributions for the Plan
Year, if any, together with any Non-Gap Period income allocable to such
amount shall be distributed to the Participant on or before the first April
15 following the close of the calendar year in which such excess
contribution is made. The amount of excess Before-Tax Contributions that
may be distributed to a Participant under this Section for any taxable year
shall be reduced by any excess Before-Tax Contributions previously
distributed or recharacterized in accordance with Section 5.5 for the Plan
Year beginning with or within such taxable year.
(i) Income on Before-Tax Contributions in excess of the Deferral
Limitation shall be calculated in accordance with Section 5.5(e), except
calculations of allocable Non-Gap Period income shall be made with reference to
the calendar year (if the Plan Year is not the calendar year).
(ii) For the 1987 calendar year only, income shall be calculated on a
reasonable and consistent basis; provided, however, if there is a loss allocable
to the excess Before-Tax Contributions, the amount distributed shall be the
excess amount adjusted to reflect such loss.
-40-
<PAGE>
(iii) The Committee shall not be liable to any Participant (or his
Beneficiary, if applicable) for any losses caused by misestimating the amount of
any Before-Tax Contributions in excess of the limitations of this Article V and
any income allocable to such excess.
(b) If in any calendar year a Participant makes Before-Tax
Contributions under this Plan and additional elective deferrals, within the
meaning of Code Section 402(g)(3), under any other plan maintained by the
Company or an Affiliated Company, and the total amount of the Participant's
elective deferrals under this Plan and all such other plans exceed the
Deferral Limitation, the Company and each Affiliated Company maintaining a
plan under which the Participant made any elective deferrals shall notify
the affected plans in writing, and corrective distributions of the excess
elective deferrals, and any income allocable thereto, shall be made from
one or more such plans, to the extent determined by the Company and each
Affiliated Company. The determination of the amount of a Participant's
elective deferrals for any calendar year shall be made after applying the
provisions of Section 14.5 relating to certain limits on Annual Additions
under Section 415 of the Code. All corrective distributions of excess
elective deferrals shall be made on or before the first April 15 following
the close of the calendar year in which the excess elective deferrals were
made.
-41-
<PAGE>
(c) In accordance with rules and procedures as may be established
by the Committee, a Participant may submit a claim to the Committee in
which he certifies in writing the specific amount of his Before-Tax
Contributions for the preceding calendar year which, when added to amounts
deferred for such calendar year under any other plans or arrangements
described in Section 401(k), 408(k) or 403(b) of the Code (other than a
plan maintained by the Company or an Affiliated Company), will cause the
Participant to exceed the Deferral Limitation for the calendar year in
which the deferral occurred. Any such claim must be submitted to the
Committee no later than the March 1 of the calendar year following the
calendar year of deferral. To the extent the amount specified by the
Participant does not exceed the amount of the Participant's Before-Tax
Contributions under the Plan for the applicable calendar year, the
Committee shall treat the amount specified by the Participant in his claim
as a Before-Tax Contribution in excess of the Deferral Limitation for such
calendar year and return such excess and any income allocable thereto to
the Participant, as provided in (a) above. In the event that for any
reason such Participant's Before-Tax Contributions in excess of the
Deferral Limitation for any calendar year are not distributed to the
Participant by the time prescribed in (a) above, such excess shall be held
in the Participant's
-42-
<PAGE>
Before-Tax Contribution Account until distribution can be made in
accordance with the provisions of this Plan.
(d) To the extent required by regulations under Section 402(g) or
415 of the Code, Before-Tax Contributions with respect to a Participant in
excess of the Deferral Limitation shall be treated as Annual Additions
under Article XIV for the Plan Year for which the excess contributions were
made, notwithstanding the distribution of such excess in accordance with
the provisions of this Section.
5.7 Character of Amounts Contributed as Before-Tax Contributions.
------------------------------------------------------------
Unless otherwise specifically provided to the contrary in this Plan,
amounts deferred pursuant to a Participant's election to make Before-Tax
Contributions in accordance with Section 5.1 (and which qualify for treatment
under Code Section 401(k) and are contributed to the Trust Fund pursuant to
Article VI) shall be treated, for federal and state income tax purposes, as
Participating Employer contributions.
5.8 Participant Transfer/Rollover Contributions.
-------------------------------------------
Effective as of an Eligible Employee's Employment Commencement Date,
or such later date as may be determined by the Administrator, amounts, if any,
distributed to such Eligible Employee or payable to such Eligible Employee from
another plan that satisfies the requirements of Code Section 401(a), or held in
an individual retirement account which is attributable solely
-43-
<PAGE>
to a rollover contribution within the meaning of Code Section 408(d)(3), may be
transferred to this Plan, including by direct rollover from another plan that
satisfies the requirements of Code Section 401(a), and credited to the
Participant's Transfer/Rollover Account in accordance with Code Section 402 and
rules which the Committee shall prescribe from time to time; provided, however,
the Committee determines that the continued qualification of this Plan under
Code Section 401(a) or 401(k) would not be adversely affected by such transfer,
or would cause this Plan to become a "transferee plan," within the meaning of
Code Section 401(a)(11). Any amounts transferred in accordance with this Section
5.8, which shall be in cash, shall not be subject to distribution to the
Participant except as expressly provided under the terms of this Plan.
An Eligible Employee who prior to April 1, 1997 has transferred
employment to the Company (or other Participating Company) from Fisher-Price,
Inc., and who has elected to transfer directly to this Plan his entire account
balance in the Fisher-Price, Inc. Matching Savings Plan in accordance with the
terms of such plan, shall be permitted to transfer such account balance directly
to this Plan. The transfer must be made in cash, except that any promissory
note evidencing an outstanding loan to such Eligible Employee from the Fisher-
Price, Inc. Matching Savings Plan may be transferred to this Plan in kind. Any
transferred promissory note shall thereafter be repayable by the Participant to
the Plan in accordance with its terms. Any amounts
-44-
<PAGE>
transferred from the Fisher-Price, Inc. Matching Savings Plan shall not be
subject to distribution to the Participant except as expressly provided under
the terms of this Plan.
-45-
<PAGE>
ARTICLE VI
COMPANY CONTRIBUTIONS
6.1 General.
-------
Subject to the requirements and restrictions of this Article VI and
Article XIV, and subject also to the amendment or termination of the Plan or the
suspension or discontinuance of contributions as provided herein, a
Participating Company shall contribute for each Participant who is an Employee
of such Participating Company, as follows:
(a) In the case of a Participating Company other than Fisher-
Price, Inc., for each month of each Plan Year commencing on and after
January 1, 1989 but prior to April 1, 1997, an amount to the Participant's
Company Contributions Account equal to a percentage of the Participant's
Compensation during such month according to the Participant's attained age
as of the last day of the preceding month, as follows:
Age as of Last Day Percentage of
of Preceding Month Compensation
------------------ -------------
Under 40 2%
40 - 44 4%
45 - 49 5%
50 - 54 6%
55+ 7%
(b) In the case of a Participating Company other than Fisher-Price,
Inc. for each month of each Plan Year commencing on and after April 1, 1997, an
amount to the Participant's Company Contributions Account equal to a percentage
-46-
<PAGE>
of the Participant's Compensation during such month according to the
Participant's attained age as of the last day of the preceding month, as
follows:
Age as of Last Day
------------------
of Preceding Month Percentage of Compensation
------------------ ---------------------------
Under 30 3%
30 - 39 4%
40 - 44 5%
45 - 49 6%
50 - 54 7%
55+ 8%
(c) An amount to the Participant's Before-Tax Contributions Account
which is equal to the amount of the Participant's Before-Tax Contributions
pursuant to Section 5.1 and which qualify for tax treatment under Code Section
401(k).
(d) An amount to the Participant's Company Matching Account which
is the sum of the amounts in (i) and (ii) below:
(i) A dollar amount equal to the dollar amount of the first two
percent (2%) of the sum of a Participant's Before-Tax and After-Tax
Contributions pursuant to Section 5.1.
(ii) A dollar amount equal to 50% of the dollar amount of the next
four percent (4%) of the sum of a Participant's Before-Tax and After-Tax
Contributions pursuant to Section 5.1.
The maximum Company Matching Contribution pursuant to this Section 6.1(d)
shall be four percent (4%) of the Participant's Compensation (such
Compensation to be
-47-
<PAGE>
determined prior to reduction for Before-Tax Contributions pursuant to
Section 5.1).
6.2 Requirement for Net Profits.
---------------------------
Contributions by a Participating Employer shall be made without regard
to current or accumulated profits for the year; provided, however, that the Plan
is intended to be designed to qualify as a profit sharing plan for purposes of
Sections 401(a) et seq. of the Code.
-- ----
6.3 Special Limitations on After-Tax Contributions and Company Matching
-------------------------------------------------------------------
Contributions.
-------------
With respect to each Plan Year, After-Tax Contributions and Company
Matching Contributions under the Plan for the Plan Year shall not exceed the
limitations on contributions on behalf of Highly Compensated Employees under
Section 401(m) of the Code, as provided in this Section. For purposes of this
Section, excess Before-Tax Contributions recharacterized as After-Tax
Contributions after the close of a Plan Year shall be treated as After-Tax
Contributions in a Plan Year as provided in Section 5.5(a)(i). In the event
that After-Tax Contributions and Company Matching Contributions under this Plan
on behalf of Highly Compensated Employees for any Plan Year exceed the
limitations of this Section for any reason, such excess contributions and any
income allocable thereto shall be disposed of in accordance with Section 6.4.
For purposes of this Section 6.3, the meaning of the term "Compensation" shall
be as defined in Section 5.4(b).
-48-
<PAGE>
(a) After-Tax Contributions and Company Matching Contributions on
behalf of Participants under Section 6.1(c) for a Plan Year shall satisfy
the Average Contribution Percentage test set forth in (i)(A) below, or the
Average Contribution Percentage test set forth in (i)(B) below:
(i) (A) The "Average Contribution Percentage" for Eligible Employees
who are Highly Compensated Employees shall not be more than the "Average
Contribution Percentage" of all other Eligible Employees multiplied by 1.25, or
(i) (B) The excess of the "Average Contribution Percentage" for
Eligible Employees who are Highly Compensated Employees over the "Average
Contribution Percentage" for the other Eligible Employees shall not be more than
two (2) percentage points, and the "Average Contribution Percentage" for
Eligible Employees who are Highly Compensated Employees shall not be more than
the "Average Contribution Percentage" of all other Eligible Employees multiplied
by 2.00.
(ii) The Average Contribution Percentage for Highly Compensated
Employees eligible to participate in this Plan and a plan of the Company or an
Affiliated Company that satisfies the requirements of Section 401(k) of the
Code, including, if applicable, this Plan, shall be reduced to the extent
necessary to satisfy the requirements of Treasury Regulations Section 1.401(m)-2
or similar such rule.
-49-
<PAGE>
(b) For purposes of this Section, "Average Contribution
Percentage" means, with respect to a group of Eligible Employees for a Plan
Year, the average of the "Contribution Percentage," calculated separately
for each Eligible Employee in such group. The "Contribution Percentage"
for any Eligible Employee is determined by dividing the sum of After-Tax
Contributions during the Plan Year and Company Matching Contributions under
the Plan on behalf of each Eligible Employee for such Plan Year, by such
Eligible Employee's Compensation for such Plan Year. "Company Matching
Contributions" for purposes of the Average Contribution Percentage test
shall include a Company Matching Contribution only if it is allocated to
the Participant's Company Matching Contributions Account during the Plan
Year and is paid to the Trust Fund by the end of the twelfth month
following the close of the Plan Year. To the extent determined by the
Committee and in accordance with regulations issued by the Secretary of the
Treasury under Code Section 401(m)(3), the Before-Tax Contributions on
behalf of an Eligible Employee and any "qualified nonelective
contributions," within the meaning of Code Section 401(m)(4)(c), on behalf
of an Eligible Employee may also be taken into account for purposes of
calculating the Contribution Percentage of such Eligible Employee, but
shall not otherwise be taken into account. However, any Company Matching
Contributions taken into account for purposes of
-50-
<PAGE>
determining the Actual Deferral Percentage of an Eligible Employee under
Section 5.4(a) shall not be taken into account under this Section 6.3.
(c) In the event that as of the last day of a Plan Year this Plan
satisfies the requirements of Section 410(b) of the Code only if aggregated
with one or more other plans, or if one or more other plans satisfy the
requirements of Section 410(b) of the Code only if aggregated with this
Plan, then this Section 6.3 shall be applied by determining the
Contribution Percentages of Eligible Employees as if all such plans were a
single plan, in accordance with regulations prescribed by the Secretary of
the Treasury under Section 401(m) of the Code.
(d) For the purposes of this Section, the Contribution Percentage
for any Eligible Employee who is a Highly Compensated Employee under two or
more Code Section 401(a) plans of the Company or an Affiliated Company to
the extent required by Code Section 401(m), shall be determined in a manner
taking into account the participant contributions and matching
contributions for such Eligible Employee under each of such plans.
(e) If an Eligible Employee (who is also a Highly Compensated
Employee) is subject to the family aggregation rules in Section
2.26(b)(vi), the combined Average Contribution Percentage for the family
group (which is treated as one Highly Compensated Employee) shall be the
-51-
<PAGE>
Average Contribution Percentage determined by combining the After-Tax
Contributions, Company Matching Contributions, amounts treated as Company
Matching Contributions under Code Section 401(m)(3), and Compensation of
all the eligible family members.
(f) The determination of the Contribution Percentage of any
Participant shall be made after first applying the provisions of Section
14.5 relating to certain limits on Annual Additions under Section 415 of
the Code, then applying the provisions of Section 5.6 relating to the
return of Before-Tax Contributions in excess of the Deferral Limitation,
then applying the provisions of Section 5.5 relating to certain limits
under Section 401(k) of the Code imposed on Pre-Tax Contributions of Highly
Compensated Employees, and last, applying the provisions of Section 6.5
relating to the forfeiture of Company Matching Contributions attributable
to excess Before-Tax or After-Tax Contributions.
(g) The determination and treatment of the Contribution
Percentage of any Participant shall satisfy such other requirements as may
be prescribed by the Secretary of the Treasury.
(h) The Committee shall keep or cause to have kept such records
as are necessary to demonstrate that the Plan satisfies the requirements of
Code Section 401(m) and
-52-
<PAGE>
the regulations thereunder, in accordance with regulations prescribed by
the Secretary of the Treasury.
6.4 Provision for Return of Excess After-Tax Contributions and Company Matching
---------------------------------------------------------------------------
Contributions on Behalf of Highly Compensated Employees .
------------------------------------------------------- -
(a) The Committee shall determine, as soon as is reasonably
possible following the close of the Plan Year, the extent (if any) to which
After-Tax and Company Matching Contributions on behalf of Highly
Compensated Employees may cause the Plan to exceed the limitations of
Section 6.3 for such Plan Year. If, pursuant to the determination by the
Committee, After-Tax and Company Matching Contributions on behalf of a
Highly Compensated Employee may cause the Plan to exceed such limitations,
then the Committee shall take the following steps:
(i) First, any excess After-Tax Contributions that were not matched
by Company Matching Contributions, and any Non-Gap Period income allocable
thereto, shall be distributed to the Highly Compensated Employee (after
withholding any applicable income taxes on such amounts).
(ii) Second, if any excess remains after the provisions of (i) above
are applied, to the extent necessary to eliminate the excess, Company Matching
Contributions on behalf of the Highly Compensated Employee, and any Non-Gap
Period income allocable thereto, shall be forfeited, to the extent forfeitable
under the Plan, or distributed to the Highly Compensated Employee, to the extent
non-forfeitable under the Plan (after
-53-
<PAGE>
withholding any applicable income taxes on such amounts). Any corresponding
After-Tax Contributions, and any Non-Gap Period income allocable thereto, shall
be distributed to the Highly Compensated Employee (after withholding any
applicable income taxes on such amounts).
(iii) If administratively feasible, excess After-Tax Contributions
and Company Matching Contributions which are nonforfeitable under the Plan,
including any Non-Gap Period income allocable thereto, shall be distributed to
Highly Compensated Employees, or, to the extent forfeitable, forfeited, within
two and one-half (2-1/2) months following the close of the Plan Year for which
the excess Contributions were made, but in any event no later than the end of
the first Plan Year following the Plan Year for which the excess Contributions
were made, notwithstanding any other provision in this Plan. Amounts of excess
Company Matching Contributions forfeited by Highly Compensated Employees under
this Section, including any income allocable thereto, shall be applied, to the
maximum extent practicable, to reduce Company Matching Contributions for the
Plan Year for which such excess Contributions were made and thereafter shall be
applied as soon as possible to reduce Company Matching Contributions for
succeeding Plan Years.
(b) The Committee shall determine the amount of any excess After-
Tax Contributions and Company Matching Contributions made by or on behalf
of Highly Compensated Employees for a Plan Year by application of the
leveling
-54-
<PAGE>
method set forth in Proposed Treasury Regulation Section 1.401(m)-1(e)(2)
under which the Contribution Percentage of the Highly Compensated Employee
who has the highest such percentage for such Plan Year is reduced, to the
extent required (i) to enable the Plan to satisfy the Average Contribution
Percentage test, or (ii) to cause such Highly Compensated Employee's
Contribution Percentage to equal the Contribution Percentage of the Highly
Compensated Employee with the next highest Contribution Percentage. This
process shall be repeated until the Plan satisfies the Average Contribution
Percentage test. For each Highly Compensated Employee, the amount of excess
After-Tax and Company Matching Contributions shall be equal to the total
After-Tax and Company Matching Contributions (plus any amounts treated as
Company Matching Contributions) made on behalf of such Highly Compensated
Employee (determined prior to the application of the foregoing provisions
of this Subsection (b)) minus the amount determined by multiplying the
Highly Compensated Employee's Contribution Percentage (determined after the
application of the foregoing provisions of this Subsection (b)) by his
Compensation.
(c) The determination and correction of excess After-Tax and
Company Matching Contributions made by and on behalf of a Highly
Compensated Employee whose Average Contribution Percentage is determined
under the family aggregation rules in Section 6.3(e) shall be accomplished
by
-55-
<PAGE>
reducing the Average Contribution Percentage of the Highly Compensated
Employee as required under Subsections (a) and (b) above and allocating the
excess After-Tax and Company Matching Contributions for the family unit
among the family members in proportion to the After-Tax and Company
Matching Contributions of each family member that are combined to determine
the Average Contribution Percentage.
(d) For purposes of satisfying the Average Contribution
Percentage test, Non-Gap Period income allocable to a Participant's excess
After-Tax Contributions or Company Matching Contributions, as determined
under (b) above, shall be determined by applying procedures comparable to
those provided under Section 5.5.
(e) To the extent required by regulations under Section 414(m) or
415 of the Code, any excess After-Tax Contributions or matching Company
Contribution forfeited by or distributed to a Highly Compensated Employee
in accordance with this Section shall be treated as an Annual Addition
under Article XIV for the Plan Year for which the excess contribution was
made, notwithstanding such forfeiture or distribution.
6.5 Forfeiture of Company Matching Contributions Attributable to Excess
-------------------------------------------------------------------
Deferrals or Contributions.
--------------------------
To the extent any Company Matching Contributions allocated to a
Participant's Company Matching Contributions Account are attributable to excess
Before-Tax Contributions
-56-
<PAGE>
required to be distributed to the Participant in accordance with Section 5.5 or
5.6, or excess After-Tax Contributions required to be distributed to the
Participant in accordance with Section 6.4, such Company Matching Contributions,
including any Non-Gap Period income allocable thereto, shall be forfeited,
notwithstanding that such Company Matching Contributions may otherwise be
nonforfeitable under the terms of the Plan. Any Company Matching Contributions
forfeited by a Participant in accordance with this Section 6.5 shall be applied
to reduce Company Matching Contributions.
6.6 Investment and Application of Plan Contributions.
------------------------------------------------
(a) Subject to the provisions of Section 4.1(b), all
contributions to the Trust Fund under Section 6.1 (including Before-Tax
Contributions) and Participant After-Tax Contributions under Section 5.1
shall be invested as provided in this Section 6.6, subject to such rules as
the Committee may adopt, in its sole discretion, to implement the
provisions of this Section 6.6. The Committee may establish a choice of
investment alternatives for Accounts from which each Participant may select
in determining the manner in which his Account will be invested. In its
sole discretion, the Committee may establish an investment alternative
consisting of Company Stock. If investment alternatives are established in
accordance with this Section 6.6, the following provisions of this Section
6.6 shall apply, including, in the event the Committee
-57-
<PAGE>
establishes a Company Stock alternative, the limitations of (iv) below and
the provisions of Article X relating to investments in Company Stock.
(i) A Participant may elect at any time to change an investment
election with respect to the allocation of future contributions made by him or
on his behalf (such election to apply to all such contributions without regard
to any distinction between Company contributions or Participant contributions)
among the investment alternatives. The Committee may require at least thirty
(30) days notice prior to the commencement of the payroll period for which such
change is to be effective. Any such election shall be made in any whole
percentage, subject to the provisions of Subsection (iv) below.
(ii) Separate Trust Fund Subaccounts shall be established for each
investment alternative selected by a Participant, and each such Subaccount shall
be valued separately.
(iii) A Participant may elect twice per calendar quarter to change
the investment of his Accounts and reallocate such Accounts among the investment
alternatives in any whole percentage, subject to the limitations of (iv) below.
Subject to such rules as the Committee may prescribe, any such election to
change shall be effective as soon as practical following receipt of the
Participant's election. Any such change shall be implemented by the Committee
in accordance with practices and procedures established by the Committee to
provide for the orderly liquidation and/or purchase of investments.
-58-
<PAGE>
(iv) If a Company Stock alternative is established by the Committee,
each Participant may elect to invest up to a maximum of fifty percent (50%) of
contributions made by him or on his behalf (such limitation to apply to all
contributions without regard to any distinction between Company contributions
and Participant contributions) in the Company Stock alternative in accordance
with this Section 6.6; provided, however, that the 50% limitation shall not
apply to Company Stock held in the F-P Savings Plan on March 31, 1997 and
transferred to this Plan on April 1, 1997. Such a Participant may also elect to
transfer amounts from his Accounts held in other investment alternatives to the
Company Stock alternative in accordance with this Section 6.6, provided,
however, that no such transfer shall be implemented to the extent that such
transfer would result in the value of the Participant's interest in the Company
Stock Fund exceeding fifty percent (50%) of the value of his interest in all
investment alternatives held under the Plan. Notwithstanding the preceding
sentence, neither the Company nor the Committee, nor any representative of the
Company, the Committee or of the Plan shall have any obligation to monitor the
value of a Participant's interest in the Company Stock Fund, or to manage said
fund, and no person shall or shall have any authority to dispose of any
Participant's interest in the Company Stock Fund except in accordance with a
Participant's valid election or otherwise in accordance with express provisions
of this Plan.
-59-
<PAGE>
(v) In the case of a Participant who fails to make an effective
election, for any reason whatsoever, as to how all or any portion of his
interest therein shall be invested, the Committee shall prescribe rules which
shall require that the Accounts of such Participant be invested in the stable
asset fund.
6.7 Irrevocability.
--------------
A Participating Company shall have no right or title to, nor interest
in, the contributions made to the Trust Fund, and no part of the Trust Fund
shall revert to the Participating Company except that on and after the Effective
Date funds may be returned to a Participating Company as follows:
(a) In the case of a Participating Company contribution which is
made by a mistake of fact, that contribution may be returned to the
Participating Company within one (1) year after it is made.
(b) All contributions to the Trust Fund are conditioned on
deductibility under Code Section 404. In the event deduction is disallowed
for any such contribution, such contribution may be returned to the
Participating Company.
6.8 Company, Committee and Trustee Not Responsible for Adequacy of Trust Fund.
-------------------------------------------------------------------------
The Company, Committee and Trustee shall not be liable or responsible
for the adequacy of the Trust Fund to meet and discharge any or all payments and
liabilities hereunder. All
-60-
<PAGE>
Plan benefits will be paid only from the Trust assets, and neither the Company,
the Committee nor the Trustee shall have any duty or liability to furnish the
Trust with any funds, securities or other assets except as expressly provided in
the Plan. Except as required under the Plan or Trust or under Part 4 of Title I
of ERISA, the Company shall not be responsible for any decision, act or omission
of the Trustee, the Committee, or the Investment Manager (if applicable), and
shall not be responsible for the application of any moneys, securities,
investments or other property paid or delivered to the Trustee.
-61-
<PAGE>
ARTICLE VII
PARTICIPANT ACCOUNTS AND ALLOCATIONS
7.1 General.
-------
(a) All contributions under this Plan shall be held in the Trust
Fund.
(b) All gains, losses, dividends and other property acquisitions
and/or transfers that occur with respect to the Trust Fund shall be held,
charged, credited, debited or otherwise accounted for under said fund on an
unallocated basis until allocated to Participants' Accounts as of a
Valuation Date as provided under this Plan or otherwise used or applied in
accordance with the provisions of this Plan.
7.2 Participants' Accounts.
----------------------
In order to account for the allocated interest of each Participant in
the Trust Fund, there shall be established and maintained the Accounts described
in Section 2.1.
7.3 Revaluation of Participants' Accounts.
-------------------------------------
As of each Valuation Date, the Accounts of each Participant shall be
revalued so as to reflect a proportionate share in any increase or decrease in
the fair market value of the assets in the Trust Fund as of that date as
compared with the value of the assets in the Trust Fund as of the immediately
preceding Valuation Date. The valuation and allocation provisions of this
Section 7.3 shall be applied and implemented in accordance with the following
rules:
-62-
<PAGE>
(a) As of each Valuation Date the Accounts holding such assets
shall be revalued so as to reflect to each such Account a proportionate
share in the net income or loss of the assets since the immediately
preceding Valuation Date.
(b) The Company, Committee and Trustee do not in any manner or
to any extent whatsoever warrant, guarantee or represent that the value of
a Participant's Accounts shall at any time equal or exceed the amount
previously contributed thereto.
7.4 Treatment of Accounts Following Termination of Employment.
---------------------------------------------------------
Following a Participant's termination of employment, pending
distribution of the Participant's Distributable Benefit pursuant to the
provisions of Article VIII below, the Participant's Plan Accounts shall continue
to be maintained and accounted for in accordance with all applicable provisions
of this Plan.
7.5 Accounting Procedures.
---------------------
The Committee and the Trustee shall establish accounting procedures
for the purpose of making the allocations, valuations and adjustments to
Participants' Accounts provided for in this Article VII. From time to time the
Committee and Trustee may modify such accounting procedures for the purpose of
achieving equitable, nondiscriminatory, and administratively feasible
allocations among the Accounts of Participants in
-63-
<PAGE>
accordance with the general concepts of the Plan and the provisions of this
Article VII.
-64-
<PAGE>
ARTICLE VIII
VESTING; PAYMENT OF PLAN BENEFITS
8.1 Vesting.
-------
Each Participant's vested interest in his Accounts shall be
determined as follows:
(a) Each Participant shall at all times be one hundred percent
(100%) vested in his Before-Tax Contributions Account, his After-Tax
Contributions Account and his Transfer/Rollover Account under the Plan.
(b) Except as provided in (c) and (d) below, each Participant
shall become vested in his Company Matching Account and his Company
Contributions Account according to the table set forth below:
<TABLE>
<CAPTION>
Number of Vesting
Years of Service Percentage
---------------- ----------
<S> <C>
Less than 1 0
At least 1 but less than 2 0
At least 2 but less than 3 25
At least 3 but less than 4 50
At least 4 but less than 5 75
5 or more 100
</TABLE>
(c) Notwithstanding the foregoing, each Participant who completed
an Hour of Service prior to July 1, 1989 shall at all times be one hundred
percent (100%) vested in his Company Contributions Account.
(d) Notwithstanding the foregoing, each Participant who was
eligible to participate in the F-P Savings Plan on March 31, 1997, shall at
all times be one
-65-
<PAGE>
hundred percent (100%) vested in his Company Matching Account.
(e) Additionally a Participant shall become one hundred percent
(100%) vested in his Company Matching Account and his Company Contributions
Account upon attainment of Normal Retirement Date while an Employee, or in
the event of death or Total and Permanent Disability while an Employee.
8.2 Distribution Upon Retirement.
----------------------------
(a) A Participant may retire from the employment of the Company
on his Normal Retirement Date. Subject to the required distribution rules
under (b) below, if the Participant continues in the service of the Company
beyond his Normal Retirement Date, he shall continue to participate in the
Plan in the same manner as Participants who have not reached their Normal
Retirement Dates. At the subsequent termination of the Participant's
employment on his late retirement date, his Distributable Benefit shall be
based upon the value of his Accounts as of the applicable Valuation Date
determined with reference to the date of distribution. After a Participant
has reached his Normal Retirement Date, any termination of the
Participant's employment (other than by reason of death or disability)
shall be deemed a Normal Retirement.
(b) Upon Normal Retirement a Participant shall be entitled to a
distribution of his Distributable Benefit in
-66-
<PAGE>
the Trust Fund. Such distribution shall be made or commence to be made as
soon as practicable but no later than the sixtieth day after the close of
the Plan Year in which occurs the Participant's termination of employment
with the Company and all Affiliated Companies, unless a later date is
specified by the Participant in a written election filed with the Plan
Administrator on or after April 1, 1997. Notwithstanding the foregoing, in
the case of a Participant who is a "5-percent owner" (within the meaning of
Section 401(a)(9) of the Code) and, in the case of any Participant who
attains age 70-1/2 after December 31, 1987, distribution shall be made or
commence to be made not later than April 1 following the calendar year in
which such Participant attains age 70-1/2, whether or not the Participant's
employment has terminated.
8.3 Distribution Upon Death Prior to Termination of Employment.
----------------------------------------------------------
(a) Upon the death of a Participant during his employment the
Committee shall direct the Trustee to make a distribution of the
Participant's Distributable Benefit in the Trust Fund in a single lump sum
to the Beneficiary designated by the deceased Participant, or as otherwise
determined under Section 8.9.
(b) Distribution as provided in Section 8.3(a) shall be made as
soon as practicable but in no event later than sixty (60) days after the
close of the Plan Year in which all facts required by the Committee to be
established
-67-
<PAGE>
as a condition of payment shall have been established to the satisfaction
of the Committee (provided that, to the extent required by Section
401(a)(9) of the Code, his entire Distributable Benefit shall be
distributed within five (5) years of such Participant's death).
8.4 Death After Termination of Employment.
-------------------------------------
(a) Upon the death of a former Participant after his retirement or
other termination of employment, but prior to the distribution of his
entire Distributable Benefit in the Trust Fund to which he is entitled, the
Committee shall direct the Trustee to make a distribution of the balance to
which the deceased Participant was entitled, in a single lump sum, to the
Beneficiary designated by the deceased Participant or as otherwise
determined under Section 8.9.
(b) Distribution as provided in Section 8.4(a) shall be made as
soon as practicable but in no event later than sixty (60) days after the
close of the Plan Year in which all facts required by the Committee to be
established as a condition of payment shall have been established to the
satisfaction of the Committee (provided that, to the extent required by
Section 401(a)(9) of the Code, his entire Distributable Benefit shall be
distributed within five (5) years of such Participant's death).
-68-
<PAGE>
8.5 Termination of Employment Prior to Normal Retirement Date.
---------------------------------------------------------
(a) Subject to the provisions of Section 8.5(b) below, if a
Participant's employment for the Company and all Affiliated Companies
terminates prior to his Normal Retirement Date, his Distributable Benefit
in the Trust Fund shall be paid as soon as administratively feasible
following his Normal Retirement Date, unless a later date is specified by
the Participant in a written election filed with the Plan Administrator on
or after April 1, 1997. Unless elected otherwise, in no event shall such
distribution be later than sixty (60) days after the close of the Plan Year
in which occurs the Participant's Normal Retirement Date. Notwithstanding
the foregoing, in the case of a Participant who is a "5-percent owner"
(within the meaning of Section 401(a)(9) of the Code) and, in the case of
any Participant who attains age 70-1/2 after December 31, 1987,
distribution shall be made or commence to be made not later than April 1
following the calendar year in which such Participant attains age 70-1/2.
(b) If the Participant makes a valid written election in
accordance with (c) below, payment of his Distributable Benefit pursuant to
this Section 8.5 may be made on an earlier date which is not later than
sixty (60) days after the close of the Plan Year in which occurs the later
of (i) the Participant's termination of employment with the Company and all
Affiliated Companies, or (ii) a
-69-
<PAGE>
date specified by the Participant in the valid written election filed by
the Participant, on or after April 1, 1997, to the extent administratively
feasible. For purposes of Section 72(t) of the Code, any distribution to a
Participant in accordance with this Section 8.5 during or following the
year in which he attains age fifty-five (55) shall be deemed to be on
account of an event enumerated in Code Section 72(t)(2).
(c) Effective as of January 1, 1989, any written election by a
Participant to receive payment of his Distributable Benefit prior to Normal
Retirement Date shall not be valid unless such election is made both (A)
after the Participant receives a written notice advising him of his right
to defer payment to Normal Retirement Date and (B) within the ninety (90)
day period ending on the Participant's "Benefit Starting Date." The notice
to the Participant advising him of his right to defer payment shall be
given no less than thirty (30) nor more than ninety (90) days prior to the
Participant's Benefit Starting Date. For purposes of this Subsection(c),
"Benefit Starting Date" shall mean the first day of the first period for
which the Participant's Distributable Benefit is paid. Notwithstanding the
foregoing, payment of the Participant's Distributable Benefit may commence
less than thirty (30) days after receipt of the notice, provided that the
Plan Administrator clearly informs the Participant that the Participant has
a
-70-
<PAGE>
right to a period of at least thirty (30) days after receiving the notice
to consider the decision of whether or not to elect to receive payment and
the Participant, after receiving the notice, affirmatively elects to
receive payment.
(d) In the event a Participant is not fully vested in all of his
Company Contributions Account or Company Matching Account under the Plan,
the portion of such Accounts which is not vested shall be forfeited as of
the earlier of the date the vested portion of such Accounts is completely
distributed to him or the date he incurs five (5) consecutive one-year
Periods of Severance.
(e) Notwithstanding the foregoing, if a Participant ceases to be
an Employee by reason of the disposition by the Company or an Affiliated
Company of either (i) substantially all of the assets used by the Company
or an Affiliated Company, as the case may be, in a trade or business, or
(ii) the interest of the Company or an Affiliated Company, as the case may
be, in a subsidiary, such Participant shall be entitled to distribution of
his Distributable Benefit as if, for purposes of this Plan only, such event
constitutes a termination of employment.
8.6 Withdrawals.
-----------
(a) Subject to the succeeding provisions of this Section 8.6,
while he is still an Eligible Employee, a Participant may withdraw amounts
from his Accounts under the
-71-
<PAGE>
Plan; provided, however, that not more than one withdrawal may be made by a
Participant from his Accounts within any single quarter of a Plan Year and
a withdrawal must be for at least $200 (or the entire amount available for
withdrawal, if less). A withdrawal other than on account of Hardship shall
be made from the Participant's Accounts in the following order, in each
case up to the amount available for withdrawal in such Accounts (i) After-
Tax Contributions Account; (ii) Transfer/Rollover Account; and (iii)
Company Matching Account. Payment of a withdrawal shall be made only in
cash and shall be allocated pro rata among the Participant's investment
fund subaccounts, including any Company Stock subaccount. In no event may
any amount be withdrawn by a Participant after he ceases to be an Eligible
Employee.
(b) A withdrawal from a Participant's Transfer/Rollover Account
may be made in accordance with rules of uniform application which the
Committee may from time to time prescribe; provided, however, that, except
in the case of a Participant who is determined to have a Total and
Permanent Disability and who is ineligible to make further contributions
under Section 5.1, no amount representing Employee contributions made
within the preceding six months to the Mattel Investment Plan which were
matched by Company matching contributions under said Plan may be withdrawn
from such Account; and provided
-72-
<PAGE>
further, that unless the Participant has completed an aggregate of at least
sixty (60) months of participation in this Plan and the Mattel Investment
Plan as of the date of withdrawal or has attained age 59-1/2 or is
determined by the Committee to have a Total and Permanent Disability, the
withdrawal shall not include amounts attributable to Company contributions
made under the Mattel Investment Plan within the two (2) year period
preceding withdrawal.
(c) A withdrawal from a Participant's After-Tax Contribution
Account may be made in accordance with rules of uniform application which
the Committee may from time to time prescribe; provided, however, that
except in the case of a Participant who is determined to have a Total and
Permanent Disability and who is ineligible to make further contributions
under Section 5.1, no amount representing After-Tax Contributions made
within the preceding six months to the Plan which were matched by Company
Matching Contributions may be withdrawn from such Account.
(d) A withdrawal from a Participant's Before-Tax Contributions
Account may be made in accordance with rules of uniform application which
the Committee may from time to time prescribe; provided, however, that no
Participant may make a withdrawal from his Before-Tax Contributions Account
prior to attaining age 59-1/2, or a determination by the Committee that
such Participant has a Total and Permanent Disability or that the
withdrawal is necessary to relieve a
-73-
<PAGE>
hardship of the Participant or his family. A Participant may receive a
withdrawal due to hardship only if the withdrawal both is made due to an
immediate and heavy financial need of the Participant within the meaning of
(i) below and is necessary to satisfy such financial need within the
meaning of (ii) below.
(i) For purposes of this Section 8.6(d), a withdrawal will be
considered to be on account of an immediate and heavy financial need of the
Participant only if the withdrawal is for: (A) expenses for medical care
described in Code Section 213(d) previously incurred by the Participant, or his
Spouse or dependents (as defined in Code Section 152), or expenses which are
necessary for such persons to obtain medical care (as defined above); (B)
costs directly related to the purchase of a principal residence for the
Participant (excluding mortgage payments); (C) payment of tuition, related
educational fees, and room and board expenses for the next 12 months of post-
secondary education for the Participant, or his Spouse, children, or dependents
(as defined above); (D) payments necessary to prevent the eviction of the
Participant from his principal residence or foreclosure on the mortgage on such
residence; or (E) such other deemed immediate and heavy financial needs as are
set forth by the Internal Revenue Service through the publication of revenue
rulings, notices, and other documents of general applicability.
-74-
<PAGE>
(ii) For purposes of this Section 8.6(d), a distribution shall be
considered to be necessary to satisfy an immediate and heavy financial need of
the Participant only if all of the following conditions are satisfied: (A) the
distribution is not in excess of the amount of the immediate and heavy financial
need of the Participant, which may include amounts necessary to pay federal,
state, or local income taxes or penalties reasonably anticipated to result from
the distribution; (B) the Participant has obtained all distributions (other
than hardship distributions) and all non-taxable loans (at the time of the loan)
currently available under all plans maintained by the Company; (C) the
Deferral Limitation for the Participant for the Participant's taxable year
following the taxable year of the hardship distribution shall be reduced by the
amount of the Participant's Before-Tax Contributions for the taxable year of the
hardship distribution withdrawal; and (D) the Participant's Before-Tax
Contributions and After-Tax Contributions to the Plan and employee contributions
under all qualified and non-qualified plans of deferred compensation maintained
by the Company, including a stock option, stock purchase, or similar plan, or a
cash-or-deferred arrangement that is part of a cafeteria plan (within the
meaning of Code Section 125), will be suspended under the terms of each such
plan, or in accordance with the terms of an otherwise legally enforceable
agreement, for twelve (12) months following the receipt of the hardship
distribution.
-75-
<PAGE>
Notwithstanding the foregoing, the amount of any hardship withdrawal
shall not exceed a Participant's 'distributable amount,' which consists of the
total of such Participant's Before-Tax Contributions as of the date of the
hardship withdrawal, including earnings credited thereon before December 31,
1988 (if any), reduced by the amount of any previous hardship withdrawals. The
Committee will determine whether a hardship withdrawal satisfies the foregoing
standards in a uniform and nondiscriminatory manner consistent with Code Section
401(k) and the regulations promulgated thereunder.
(e) A withdrawal from a Participant's vested interest in his
Company Contributions Account may be made in accordance with rules of
uniform application which the Committee may from time to time prescribe;
provided, however, that no participant may withdraw from his Company
Contributions Account prior to attaining age 59-1/2 or a determination by
the Committee that such Participant has a Total and Permanent Disability or
that the withdrawal is necessary to relieve a hardship of the Participant
or his family within the meaning of Section 8.6(d) of the Plan.
(f) A withdrawal from the vested portion of a Participant's
Company Matching Account may be made in accordance with rules of uniform
application which the Committee may from time to time prescribe; provided,
however, that unless the Participant has completed an aggregate of at least
sixty (60) months of participation in
-76-
<PAGE>
this Plan and the Mattel Investment Plan or the F-P Savings Plan as of the
date of withdrawal or has attained age 59-1/2 or is determined by the
Committee to have Total and Permanent Disability, any withdrawal from such
Company Matching Account shall not include amounts attributable to Company
contributions made within the two (2) year period preceding withdrawal.
(g) If a Participant makes an in-service withdrawal from his
Company Contributions Account or Company Matching Account at a time when
the Participant does not have a one hundred percent (100%) vested interest
in the value of such Account, and the Participant may increase his vested
interest in the Account:
(i) such Account shall be established as a separate Account
as of the date of distribution, and
(ii) at any relevant time the Participant's vested interest
in the value of such separate Account shall be equal to an amount ("X")
determined by the formula:
X = P(AB + D) - D
For purposes of applying the formula above: P is the nonforfeitable
percentage at the relevant time, AB is the Account balance at the relevant
time, and D is the amount of the withdrawal.
(h) Disbursement of withdrawals shall be as soon as
administratively practicable after the submission of a
-77-
<PAGE>
request for withdrawal in form satisfactory to the Committee.
8.7 Form of Distribution.
--------------------
(a) Unless a Participant makes a written election in accordance
with Section 8.7(c) or 8.8 below, a Participant's Distributable Benefit
shall be payable in the form of a single sum distribution. Except for any
portion of such Distributable Benefit that is payable in the form of
Company Stock in accordance with Section 8.13, such distribution shall be
in cash.
(b) In the case of any cash disbursement from a Participant's
Accounts, such disbursement shall be made ratably from such investment
funds or investment vehicles in which such Participant's Accounts affected
by such disbursement are invested.
(c) Effective April 1, 1997, a Participant who terminates
employment on or after his Normal Retirement Date, Early Retirement Date or
by reason of Total and Permanent Disability may elect to receive his
benefit in installments payable monthly, quarterly or annually for a period
of five, ten or fifteen years (but not longer than the Participant's life
expectancy determined as of his Benefit Starting Date). The installments
for each year shall not be less than the annual installment determined
under the requirements of Section 401(a)(9) of the Code. All such
installments shall be paid in cash or Company Stock
-78-
<PAGE>
and the installment or installments for the year in which the Participant
attains age 70-1/2 and all subsequent years shall be paid to the
Participant on or before December 31 of such year.
8.8 Election for Direct Rollover of Distributable Benefit to Eligible
-----------------------------------------------------------------
Retirement Plan.
---------------
(a) Effective as of January 1, 1993, to the extent required by
Section 401(a)(31) of the Code, a Participant who is eligible to receive
payment of his Distributable Benefit shall be entitled to elect a direct
rollover of all or part of the taxable portion of his Distributable Benefit
to an "eligible retirement plan." For purposes of this Section, an
"eligible retirement plan" shall mean any plan described in Code Section
402(c)(8)(B), except that such plan must be a defined contribution plan,
the terms of which permit the acceptance of a direct rollover from a
qualified plan. Any non-taxable portion of the Participant's Distributable
Benefit shall be payable to the Participant in accordance with Section 8.7
above.
(b) A Participant's direct rollover election under this Section
shall be in writing and shall be made in accordance with rules and
procedures established by the Committee. Such election shall specify the
dollar or percentage amount of the Distributable Benefit to be rolled over,
the name of the eligible retirement plan selected by the Participant, and
such additional information as the
-79-
<PAGE>
Committee deems necessary or appropriate in order to implement the
election. It shall be the Participant's responsibility to confirm that the
eligible retirement plan designated in his direct rollover election will
accept the direct rollover of his Distributable Benefit. The Committee
shall be entitled to direct the rollover based on its reasonable reliance
on information provided by the Participant, and shall be not required to
independently verify such information, unless it is clearly unreasonable
not to do so.
(c) At least thirty (30) days, but not more than ninety (90)
days, prior to the date a Participant's Distributable Benefit becomes
payable, the Participant shall be given written notice of any right he may
have to elect a direct rollover of the taxable portion of his Distributable
Benefit to an eligible retirement plan. Notwithstanding the foregoing, a
direct rollover of the Participant's Distributable Benefit may be made less
than thirty (30) days after receipt of the notice, provided that the Plan
Administrator clearly informs the Participant that the Participant has a
right to a period of at least thirty (30) days after receiving the notice
to consider the decision of whether or not to elect a direct rollover and
the Participant, after receiving the notice, affirmatively elects a direct
rollover.
-80-
<PAGE>
(d) If a Participant who attained his Normal Retirement Date or
whose Distributable Benefit does not exceed $3,500 fails to file a written
election with the Committee within ninety (90) days after notice is given,
or if the Committee cannot effect the direct rollover within a reasonable
time after the election is filed due to the failure of the Participant to
take such actions as may be required by the eligible retirement plan before
it will accept the direct rollover, the Participant's Distributable Benefit
shall be paid to him after withholding applicable income taxes.
(e) If a Participant has made a direct rollover election with
respect to any portion of his Distributable Benefit that is payable in
Company Stock, as provided in Section 8.13, unless the eligible retirement
plan specified by the Participant will accept a direct rollover of such
Stock, the Stock will be distributed to the Participant, notwithstanding
the Participant's direct rollover election.
(f) To the extent required by Section 401(a)(31) of the Code, if
all or a portion of a Participant's Distributable Benefit is payable to the
Participant's surviving Spouse, or to a former Spouse in accordance with a
"qualified domestic relations order," such surviving Spouse or former
Spouse shall be entitled to elect a direct rollover of all or a portion of
such distribution in accordance with the provisions of this Section.
-81-
<PAGE>
8.9 Designation of Beneficiary.
--------------------------
(a) Subject to the provisions of Section 8.11, each Participant
shall have the right to designate a Beneficiary or Beneficiaries to receive
his interest in the Trust Fund in the event of his death before receipt of
his entire interest in the Trust Fund. This designation is to be made on
the form prescribed by and delivered to the Committee.
(b) Subject to the provisions of Section 8.11, a Participant
shall have the right to change or revoke any such designation by filing a
new designation or notice of revocation with the Committee. Subject to the
provisions of Section 8.11, no notice to any Beneficiary nor consent by any
Beneficiary shall be required to effect any such change or revocation.
(c) If a deceased Participant shall have failed to designate a
Beneficiary, or if the Company shall be unable to locate a designated
Beneficiary after reasonable efforts have been made, or if for any reason
the designation shall be legally ineffective, or if the Beneficiary shall
have predeceased the Participant without effectively designating a
successor Beneficiary, any distribution required to be made under the
provisions of this Plan shall commence within three (3) years after the
Participant's death to the person or persons included in the highest
priority category among the following, in order of priority:
-82-
<PAGE>
(i) The Participant's surviving spouse;
(ii) The Participant's surviving children, including
adopted children;
(iii) The Participant's surviving parents; or
(iv) The Participant's estate.
The determination by the Committee as to which persons, if any, qualify
within the foregoing categories shall be final and conclusive upon all
persons.
(d) In the event that the deceased Participant was not a resident
of California at the date of his death, the Committee, in its discretion,
may require the establishment of ancillary administration in California.
In the event that a Participant shall predecease his Beneficiary and on the
subsequent death of the Beneficiary a remaining distribution is payable
under the applicable provisions of this Plan, the distribution shall be
payable in the same order of priority categories as set forth above but
determined with respect to the Beneficiary, subject to the same provisions
concerning non-California residency, the unavailability of an estate
representative and/or the absence of administration of the Beneficiary's
estate as are applicable on the death of the Participant.
8.10 Facility of Payment.
-------------------
If any payee under the Plan is a minor or if the Committee reasonably
believes that any payee is legally incapable
-83-
<PAGE>
of giving a valid receipt and discharge for any payment due him, the Committee
may have the payment, or any part thereof, made to the person (or persons or
institution) whom it reasonably believes is caring for or supporting the payee,
unless it has received due notice of claim therefor from a duly appointed
guardian or committee of the payee. Any payment shall be a payment from the
Accounts of the payee and shall, to the extent thereof, be a complete discharge
of any liability under the Plan to the payee.
8.11 Requirement of Spousal Consent.
------------------------------
Notwithstanding any Beneficiary designation submitted by a
Participant, any distribution required to be made under the terms of the Plan by
reason of the death of the Participant shall be paid in full to the
Participant's surviving spouse, unless there is no surviving spouse or the
spouse consents in writing to the beneficiary designation, acknowledging the
effect of the election. Any such spousal consent, to be valid, must be
witnessed by a plan representative or a notary public. The spousal consent
requirement of this Section 8.11 shall be waived and the Participant's
Beneficiary designation shall be made effective if the Participant establishes
to the satisfaction of the Committee that the required consent cannot be
obtained because there is no spouse or the spouse cannot be located.
8.12 Additional Documents.
--------------------
(a) The Committee or Trustee, or both, may require the execution
and delivery of such documents, papers
-84-
<PAGE>
and receipts as the Committee or Trustee may determine necessary or
appropriate in order to establish the fact of death of the deceased
Participant and of the right and identity of any Beneficiary or other
person or persons claiming any benefits under this Article VIII.
(b) The Committee or the Trustee, or both, may, as a condition
precedent to the payment of death benefits hereunder, require an
inheritance tax release and/or such security as the Committee or Trustee,
or both, may deem appropriate as protection against possible liability for
state or federal death taxes attributable to any death benefits.
8.13 Company Stock Distribution.
--------------------------
Except in the case of a withdrawal in accordance with Section 8.6,
payment of any portion of a Participant's Distributable Benefit held in his
Company Stock subaccount shall be paid in cash, unless the Participant elects in
writing in accordance with procedures established by the Committee that payment
shall be made in Company Stock in lieu of cash (which election may apply to a
payment to the trustee of an "eligible retirement plan" in accordance with
Section 8.8). Within a reasonable period of time prior to the date such
Participant's Distributable Benefit is to be paid, the Committee shall notify
the Participant of his right to elect to have payment of the value of his
Company Stock subaccount made in the form of a cash distribution in lieu of a
Company Stock distribution. Upon being
-85-
<PAGE>
so notified, the Participant shall have a reasonable time (at least thirty (30)
days) in which to file a written election to have such payment made in cash. Any
such election shall be irrevocable and shall operate to require the Trustee to
value such Company Stock as of the immediately following Valuation Date at the
then prevailing purchase price. Neither the Company, the Committee, nor the
Trustee shall be required to time the distribution or sale of Company Stock to
anticipate fluctuations in the purchase price. If a Participant fails to file a
written election to receive an in kind payment of the value of the portion of
his Distributable Benefit attributable to his Company Stock subaccount within
thirty (30) days of receiving notification, payment shall be made in cash.
8.14 Valuation of Accounts.
---------------------
(a) For purposes of determining a Participant's Distributable
Benefit under this Plan, the value of a Participant's Accounts shall be
determined in accordance with rules prescribed by the Committee, subject,
however, to the following provisions:
(i) Unless the provisions of (ii) below apply, if a
Participant's employment terminates for any reason other than death, the value
of a Participant's Accounts shall be determined as of the Valuation Date
coinciding with or next following the date on which a properly completed
application for payment or transfer of the Participant's Distributable Benefit,
and such other forms as may be required by the Committee in order
-86-
<PAGE>
to process the distribution or transfer, are received by the Committee.
(ii) If a Participant's employment terminates for any reason other
than death and the Committee does not receive the Participant's properly
completed application for the payment or transfer of the Participant's
Distributable Benefit, and such other forms as may be required by the Committee
to process the payment or transfer, and the value of such Participant's Accounts
at the applicable Valuation Date does not exceed $3500, the applicable Valuation
Date shall be the Valuation Date coinciding with or next following the
expiration of a reasonable period of time after the Participant is furnished
with such application and forms, including any tax notice required under Code
Section 402(f).
(iii) In the case of a Participant's death, the value of a
Participant's Accounts for purposes of determining the Participant's
Distributable Benefit shall be determined as of the Valuation Date coinciding
with or next following the date on which the Committee has been furnished with
all documents and information (including but not limited to proof of death,
facts demonstrating the identity and entitlement of any Beneficiary or other
payee, and any and all releases) necessary to distribute such Participant's
Accounts.
(iv) In the case of any withdrawal or loan, the value of a
Participant's Accounts under the Plan shall be determined as of the Valuation
Date coinciding with or next
-87-
<PAGE>
following the date on which the Participant submits a request for such
withdrawal or loan in a form satisfactory to the Committee and the withdrawal or
loan is approved.
(v) The value of a Participant's Accounts shall be increased
or decreased (as appropriate) by any contributions, forfeitures, or
distributions properly allocable under the terms of this Plan to his Accounts
that occurred on or after the most recent Valuation Date or for any other reason
were not otherwise reflected in the valuation of his Accounts on such Valuation
Date.
(b) Neither the Committee, the Company, nor the Trustee shall
have any responsibility for any increase or decrease in the value of a
Participant's Accounts as a result of any valuation made under the terms of
this Plan after the date of his termination of employment and before the
date of the distribution of his Accounts to him. Also, neither the
Committee, the Company, nor the Trustee shall have any responsibility for
failing to make any interim valuation of a Participant's Accounts between
the date of distribution to the Participant of his Accounts and the
applicable Valuation Date, even though the Plan assets may have been
revalued in that interim for a purpose other than to revalue the Accounts
under this Plan.
-88-
<PAGE>
8.15 Forfeitures; Repayment.
----------------------
(a) Amounts forfeited in accordance with Section 8.5(d) shall be
applied as soon as practicable to reduce future Company contributions.
(b) A Participant who elects to receive a distribution pursuant
to Subsection 8.5(b) may, in the case of his reemployment as an Eligible
Employee, repay the total amount distributed and shall in such case be
fully restored in amounts forfeited in accordance with Section 8.5(d);
provided, however, that no such repayment shall be permitted unless such
repayment is made prior to the date the Participant incurs five (5)
consecutive one-year Periods of Severance and prior to the second
anniversary of his Employment Commencement Date following the Period of
Severance.
8.16 Loans.
-----
(a) From time to time, the Committee may adopt procedures whereby
a Participant may borrow from his Accounts under the Plan. In no event may
any amount be borrowed by a Participant after he ceases to be an Eligible
Employee. In addition to such other requirements as may be imposed by
applicable law, any such loan shall bear a reasonable rate of interest,
shall be adequately secured by proper collateral, and shall be repaid
within a specified period of time according to a written repayment schedule
-89-
<PAGE>
that calls for substantially level amortization over the term of the loan.
(b) In connection with the requirements set forth in Subsection
(a) above, the Committee shall establish the applicable interest rate,
which shall be reasonably equivalent to interest rates available
commercially with respect to similar loans. Without prejudice to the right
of any Participant and the Trustee to enter into other appropriate
arrangements to secure repayment of a loan pursuant to this Section 8.16, a
loan to a Participant hereunder may be secured by an interest in the
Participant's vested interest in his Accounts under this Plan. Any loan
shall by its terms require repayment within five (5) years in substantially
level payments made no less frequently than quarterly, except that the
repayment period may be up to a maximum of fifteen (15) years in the case
of a loan certified by the Participant to be used to acquire any dwelling
unit which within a reasonable time is to be used (determined at the time
the loan is made) as a principal residence of the Participant.
(c) In no event shall the principal amount of a loan hereunder,
at the time the loan is made, together with the outstanding balance of all
other loans to the Participant under this Plan, exceed the lesser of:
(i) fifty percent (50%) of the value of the Participant's
vested interest in his Accounts under this Plan
-90-
<PAGE>
(provided, however, for loans granted or renewed prior to October 19, 1989, the
amount determined under this Subsection 8.16(c)(i) shall not be less than the
lesser of ten thousand dollars ($10,000) or the full value of all such Accounts
of the Participant where such value is less than twenty thousand dollars
($20,000)), or
(ii) fifty thousand dollars ($50,000), reduced by the
highest outstanding loan balance of the Participant from the Plan during the 1-
year period ending on the day before the date on which such loan was made.
No loan less than two thousand dollars ($2,000) will be made. Unless
otherwise determined by the Committee, no Participant may have more than
one loan outstanding under this Plan on any date; provided, however, that a
Participant who was a participant in the F-P Savings Plan on March 31, 1997
may apply for one additional loan on or before December 31, 1997, even if
he then has one or more loans outstanding.
(d) Each Participant desiring to enter into a loan arrangement
pursuant to this Section 8.16 shall apply for a loan by submitting a loan
request in form satisfactory to the Committee. The Committee shall notify
the Participant within a reasonable time whether the request is approved or
denied. Upon approval of the request by the Committee, the Participant
shall enter into a loan agreement with the Trustee. Such a Participant
shall execute such further written agreements as may be necessary or
-91-
<PAGE>
appropriate to establish a bona fide debtor-creditor relationship between
such Participant and the Trustee and to protect against the impairment of
any security for said loan.
(e) Any loan made to a Participant shall be secured by a pro rata
portion of his vested investment fund subaccounts, including any Company
Stock subaccount. Repayments of a loan by a Participant shall be invested
among the Participant's investment fund subaccounts in accordance with the
Participant's investment election then in effect under Section 6.6(a)(i).
(f) Loans shall be repaid in accordance with the repayment
schedule provided under the terms of the loan agreement. Notwithstanding
the repayment schedule provided in a loan agreement, however, the amount of
any outstanding loan shall be due and payable on the earlier to occur of
(a) the date on which distribution is made or commences to be made of the
participant's vested interest under the Plan or (b) the expiration of one
hundred eighty (180) days following the date the Participant ceases to be
an Employee. Following a Participant's Severance Date, any outstanding
loan amount which has become due and payable under the foregoing rule or
otherwise, and which is secured by the Participant's vested interest in his
Accounts, shall be treated as distributed from the Plan to the Participant.
-92-
<PAGE>
(g) In the event a Participant fails to repay a loan in
accordance with the terms of a loan agreement, such loan shall be treated
as in default. The date of the enforcement of the security interest due to
a loan in default shall be determined by the Committee, provided no loss of
principal or income shall result due to any delay in the enforcement of the
security interest due to the default. As of the Participant's Severance
Date, the Participant's Distributable Benefit shall be reduced by the
outstanding amount of a loan which is then in default, including any
accrued interest thereon, that is secured by the Participant's vested
interest in his Accounts. Any reasonable costs related to collection of a
loan made hereunder shall be borne by the Participant.
(h) To the extent required to comply with the requirements of
Section 401(a)(4) of the Internal Revenue Code, loans hereunder shall be
made in a uniform and non-discriminatory manner.
8.17 Special Rule for Disabled Employees.
-----------------------------------
(a) Subsection 8.17(b) shall apply to any Participant whose
active performance of services for a Participating Company has ceased by
reason of disability, and who has not subsequently resumed the active
performance of such services. Subsections 8.17(c) and (d) shall apply only
to a Participant whose active performance of services for a Participating
Company ceases prior to January 1, 1989
-93-
<PAGE>
by reason of disability, and who has not subsequently resumed the active
performance of such services.
(b) In the case of a Participant to whom this Section 8.17(b)
applies, so long as such Participant continues to receive Compensation from
a Participating Company, but in no event for longer than a period of six
(6) months commencing with the date of such Participant's cessation of
active service, such Participant may continue to participate in this Plan
in the same manner as any other Participant.
(c) In the case of a Participant to whom this Section 8.17
applied by reason of a disability prior to January 1, 1989 and who, on or
after expiration of the period described in Section 8.17(b) above,
commences to receive payments under the long term disability benefit
coverage provided by a Participating Company and who also is determined to
be suffering from a Total and Permanent Disability, contributions shall be
made by the Participating Company pursuant to Section 6.1(a) (relating to
contributions to Participants' Company Contributions Accounts) with respect
to the Participant's "Compensation" as defined in Subsection 8.17(d) below,
but the Participant shall not be eligible to make any contributions with
respect to his own Compensation, and shall not be entitled to share in any
other Participating Company contributions to the Plan (including but not
limited to contributions to the Company
-94-
<PAGE>
Matching Account). Contributions by a Participating Company pursuant to
this Section 8.17(c) shall be subject to amendment or termination of the
Plan or other suspension or discontinuance of contributions, and in any
event shall cease to be made with respect to any Participant after the
earlier to occur of such Participant's death or termination of employment
for any other reason, cessation of Total and Permanent Disability, or
attainment of age sixty-five (65).
(d) In the case of a Participant to whom Section 8.17 applied by
reason of a disability prior to January 1, 1989 and who is eligible to
share in contributions of a Participating Company as provided in Subsection
8.17(c) above, the Compensation of such Participant for a Plan Year shall
be deemed to equal the amount of Compensation which the Participant was
paid (and which was taken into account for purposes of Sections 5.1 and 6.1
hereof) immediately before sustaining such Total and Permanent Disability,
provided, however, that such amounts shall be included in Compensation only
upon the following conditions:
(i) the Participant is not an officer, owner, or highly
compensated individual (within the meaning of such terms under Code Section
415(c)(3));
(ii) the payments to such Participant under such long term
disability benefit coverage shall be treated as "Compensation" only to the
extent that such payments do not
-95-
<PAGE>
exceed the Participant's wage or salary rate paid immediately before becoming
disabled to an extent constituting a Total and Permanent Disability; and
(iii) the Participant's accounts under the Plan, to the
extent attributable to contributions made during a period of Total and Permanent
Disability shall be nonforfeitable.
(e) For purposes of this Plan, a Participant shall not be deemed
to have terminated employment prior to his ceasing to be eligible for
contributions under this Section 8.17, and upon such cessation of
eligibility shall be deemed to have terminated employment only if he did
not then begin or recommence employment for the Company or an Affiliated
Company.
8.18 Election for Fully Vested Employees Transferred to Fisher-Price, Inc.
--------------------------------------------------------------------
A fully vested Participant who prior to April 1, 1997 transfers
employment from the Company (or other Participating Company) to Fisher-Price,
Inc. and who is eligible to participate in the Fisher-Price, Inc. Matching
Savings Plan may elect to transfer his entire vested account balance in the Plan
to the Fisher-Price, Inc. Matching Savings Plan by filing an election form at
the time and in the manner prescribed by the Committee. The transfer must be
made in cash except that any promissory note evidencing an outstanding loan to
the Participant from the Plan may be transferred in kind. Any transferred
promissory note
-96-
<PAGE>
shall thereafter be repayable by the Participant to the Fisher-Price, Inc.
Matching Savings Plan in accordance with its terms.
8.19 Provision for Small Benefits.
----------------------------
Notwithstanding anything in this Article to the contrary, a
Participant who terminates employment with the Company and all Affiliated
Companies shall receive a distribution of his Distributable Benefit in a single
lump sum payment no later than sixty (60) days after the close of the Plan Year
in which the Participant's termination of employment occurs to the extent
administratively feasible, provided that the value of such Distributable Benefit
is equal to or less than $3,500, determined as of the Valuation Date coincident
with or immediately preceding his termination of employment.
-97-
<PAGE>
ARTICLE IX
OPERATION AND ADMINISTRATION OF THE PLAN
9.1 Plan Administration.
-------------------
(a) Authority to control and manage the operation and
administration of the Plan shall be vested in a committee ("Committee") as
provided in this Article IX.
(b) The members of the Committee shall be appointed by the Board
of Directors and shall hold office until resignation, death or removal by
the Board of Directors. Members of the Committee may, but need not be,
appointed by appropriate designation of a Committee heretofore constituted
pursuant to the provisions of another employee benefit plan maintained by
the Company.
(c) For purposes of ERISA Section 402(a), the members of the
Committee shall be the Named Fiduciaries of this Plan.
(d) The Secretary of the Committee shall cause to be attached to
the copy of the Plan maintained in the office of the Committee for the
purpose of inspection an accurate schedule listing the names of all persons
from time to time serving as the Named Fiduciaries of the Plan.
(e) Notwithstanding the foregoing, a Trustee with whom Plan
assets have been placed in trust or an Investment Manager appointed
pursuant to Section 9.3 may be granted exclusive authority and discretion
to manage and control all or any portion of the assets of the Plan.
-98-
<PAGE>
9.2 Committee Powers.
----------------
The Committee shall have all powers and discretion necessary to
supervise the administration of the Plan and control its operations. In
addition to any powers and authority conferred on the Committee elsewhere in the
Plan or by law, the Committee shall have, by way of illustration but not by way
of limitation, the following powers and authority:
(a) To allocate fiduciary responsibilities (other than trustee
responsibilities) among the Named Fiduciaries and to designate one or more
other persons to carry out fiduciary responsibilities (other than trustee
responsibilities). However, no allocation or delegation under this Section
9.2(a) shall be effective until the person or persons to whom the
responsibilities have been allocated or delegated agree to assume the
responsibilities. The term "trustee responsibilities" as used herein shall
have the meaning set forth in Section 405(c) of ERISA. The preceding
provisions of this Section 9.2(a) shall not limit the authority of the
Committee to appoint one or more Investment Managers in accordance with
Section 9.3.
(b) To designate agents to carry out responsibilities relating to
the Plan, other than fiduciary responsibilities.
(c) To employ such legal, actuarial, medical, accounting,
clerical and other assistance as it may deem appropriate in carrying out
the provisions of this Plan,
-99-
<PAGE>
including one or more persons to render advice with regard to any
responsibility any Named Fiduciary or any other fiduciary may have under
the Plan.
(d) To establish rules and regulations from time to time for the
conduct of the Committee's business and the administration and effectuation
of this Plan.
(e) To administer, interpret, construe and apply this Plan in its
discretion and to decide all questions which may arise or which may be
raised under this Plan by any Employee, Participant, former Participant,
Beneficiary or other person whatsoever, including but not limited to all
questions relating to eligibility to participate in the Plan, the amount of
service of any Participant, and the amount of benefits to which any
Participant or his Beneficiary may be entitled by reason of his service
prior to or after the Effective Date hereof.
(f) To determine the manner in which the assets of this Plan, or
any part thereof, shall be disbursed.
(g) To direct the Trustee, in writing, from time to time, to
invest and reinvest the Trust Fund, or any part thereof, or to purchase,
exchange, or lease any property, real or personal, which the Committee may
designate. This shall include the right to direct the investment of all or
any part of the Trust in any one security or any one type of securities
permitted hereunder. Among the securities which the Committee may direct
the Trustee to purchase are
-100-
<PAGE>
"employer securities" as defined in Code Section 409(1) or any successor
statute thereto.
(h) To perform or cause to be performed such further acts as it
may deem to be necessary, appropriate or convenient in the efficient
administration of the Plan.
Any action taken in good faith by the Committee in the exercise of authority
conferred upon it by this Plan shall be conclusive and binding upon the
Participants and their Beneficiaries. All discretionary powers conferred upon
the Committee shall be absolute.
9.3 Investment Manager.
------------------
(a) The Committee, by action reflected in the minutes thereof,
may appoint one or more Investment Managers, as defined in Section 3(38) of
ERISA, to manage all or a portion of the assets of the Plan.
(b) An Investment Manager shall discharge its duties in
accordance with applicable law and in particular in accordance with Section
404(a) (1) of ERISA.
(c) An Investment Manager, when appointed, shall have full power
to manage the assets of the Plan for which it has responsibility, and
neither the Company nor the Committee shall thereafter have any
responsibility for the management of those assets.
9.4 Periodic Review.
---------------
(a) At periodic intervals, not less frequently than annually, the
Committee shall review the long-run and
-101-
<PAGE>
short-run financial needs of the Plan and shall determine a funding policy
for the Plan consistent with the objectives of the Plan and the minimum
funding standards of ERISA, if applicable. In determining the funding
policy the Committee shall take into account, at a minimum, not only the
long-term investment objectives of the Trust Fund consistent with the
prudent management of the assets thereof, but also the short-run needs of
the Plan to pay benefits.
(b) All actions taken by the Committee with respect to the
funding policy of the Plan, including the reasons therefor, shall be fully
reflected in the minutes of the Committee.
9.5 Committee Procedure.
-------------------
(a) A majority of the members of the Committee as constituted at
any time shall constitute a quorum, and any action by a majority of the
members present at any meeting, or authorized by a majority of the members
in writing without a meeting, shall constitute the action of the Committee.
(b) The Committee may designate certain of its members as
authorized to execute any document or documents on behalf of the Committee,
in which event the Committee shall notify the Trustee of this action and
the name or names of the designated members. The Trustee, Company,
Participants, Beneficiaries, and any other party dealing with the Committee
may accept and rely upon any document
-102-
<PAGE>
executed by the designated members as representing action by the Committee
until the Committee shall file with the Trustee a written revocation of the
authorization of the designated members.
9.6 Compensation of Committee.
-------------------------
(a) Members of the Committee shall serve without compensation
unless the Board of Directors shall otherwise determine. However, in no
event shall any member of the Committee who is an Employee receive
compensation from the Plan for his services as a member of the Committee.
(b) All members shall be reimbursed for any necessary or
appropriate expenditures incurred in the discharge of duties as members of
the Committee.
(c) The compensation or fees, as the case may be, of all
officers, agents, counsel, the Trustee, or other persons retained or
employed by the Committee shall be fixed by the Committee.
9.7 Resignation and Removal of Members.
----------------------------------
Any member of the Committee may resign at any time by giving written
notice to the other members and to the Board of Directors effective as therein
stated. Any member of the Committee may, at any time, be removed by the Board
of Directors.
9.8 Appointment of Successors.
-------------------------
(a) Upon the death, resignation, or removal of any Committee
member, the Board of Directors may appoint a successor.
-103-
<PAGE>
(b) Notice of appointment of a successor member shall be given by
the Secretary of the Company in writing to the Trustee and to the members
of the Committee.
(c) Upon termination, for any reason, of a Committee member's
status as a member of the Committee, the member's status as a Named
Fiduciary shall concurrently be terminated, and upon the appointment of a
successor Committee member the successor shall assume the status of a Named
Fiduciary as provided in Section 9.1.
9.9 Records.
-------
(a) The Committee shall keep a record of all its proceedings and
shall keep, or cause to be kept, all such books, accounts, records or other
data as may be necessary or advisable in its judgment for the
administration of the Plan and to properly reflect the affairs thereof.
(b) However, nothing in this Section 9.9 shall require the
Committee or any member thereof to perform any act which, pursuant to law
or the provisions of this Plan, is the responsibility of the Plan
Administrator, nor shall this Section relieve the Plan Administrator from
such responsibility.
9.10 Reliance Upon Documents and Opinions.
------------------------------------
(a) The members of the Committee, the Board of Directors, the
Company and any person delegated under the provisions hereof to carry out
any fiduciary responsibilities under the Plan ("delegated fiduciary"),
-104-
<PAGE>
shall be entitled to rely upon any tables, valuations, computations,
estimates, certificates and reports furnished by any consultant, or firm or
corporation which employs one or more consultants, upon any opinions
furnished by legal counsel, and upon any reports furnished by the Trustee.
The members of the Committee, the Board of Directors, the Company and any
delegated fiduciary shall be fully protected and shall not be liable in any
manner whatsoever for anything done or action taken or suffered in reliance
upon any such consultant or firm or corporation which employs one or more
consultants, Trustee, or counsel.
(b) Any and all such things done or actions taken or suffered by
the Committee, the Board of Directors, the Company and any delegated
fiduciary shall be conclusive and binding on all Employees, Participants,
Beneficiaries, and any other persons whomsoever, except as otherwise
provided by law.
(c) The Committee and any delegated fiduciary may, but are not
required to, rely upon all records of the Company with respect to any
matter or thing whatsoever, and may likewise treat those records as
conclusive with respect to all Employees, Participants, Beneficiaries, and
any other persons whomsoever, except as otherwise provided by law.
9.11 Requirement of Proof.
--------------------
The Committee or the Company may require satisfactory proof of any
matter under this Plan from or with respect to any
-105-
<PAGE>
Employee, Participant, or Beneficiary, and no person shall acquire any rights or
be entitled to receive any benefits under this Plan until the required proof
shall be furnished.
9.12 Reliance on Committee Memorandum.
--------------------------------
Any person dealing with the Committee may rely on and shall be fully
protected in relying on a certificate or memorandum in writing signed by any
Committee member or other person so authorized, or by the majority of the
members of the Committee, as constituted as of the date of the certificate or
memorandum, as evidence of any action taken or resolution adopted by the
Committee.
9.13 Multiple Fiduciary Capacity.
---------------------------
Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan.
9.14 Limitation on Liability.
-----------------------
(a) Except as provided in Part 4 of Title I of ERISA, no person
shall be subject to any liability with respect to his duties under the Plan
unless he acts fraudulently or in bad faith.
(b) No person shall be liable for any breach of fiduciary
responsibility resulting from the act or omission of any other fiduciary or
any person to whom fiduciary responsibilities have been allocated or
delegated, except as provided in Part 4 of Title I of ERISA.
-106-
<PAGE>
(c) No action or responsibility shall be deemed to be a fiduciary
action or responsibility except to the extent required by ERISA.
9.15 Indemnification.
---------------
(a) To the extent permitted by law, the Company shall indemnify
each member of the Board of Directors and the Committee, and any other
Employee of the Company with duties under the Plan, against expenses
(including any amount paid in settlement) reasonably incurred by him in
connection with any claims against him by reason of his conduct in the
performance of his duties under the Plan, except in relation to matters as
to which he acted fraudulently or in bad faith in the performance of such
duties. The preceding right of indemnification shall pass to the estate of
such a person.
(b) The preceding right of indemnification shall be in addition
to any other right to which the Board member or Committee member or other
person may be entitled as a matter of law or otherwise.
9.16 Reserved for Plan Modifications.
-------------------------------
9.17 Allocation of Fiduciary Responsibility.
--------------------------------------
(a) Part 4 of Title I of ERISA permits the division, allocation
and delegation between Plan fiduciaries of the fiduciary responsibilities
owed to the Plan Participants. Under this concept, each fiduciary,
including
-107-
<PAGE>
a Named Fiduciary, is accountable only for his own functions, except to the
extent of his co-fiduciary liability under Section 405 of ERISA.
(b) Under the preceding provisions of this Article IX, the day-
to-day operational, administrative and investment aspects of the Plan have
been delegated to the Committee. Except to the extent expressly provided
to the contrary in the Plan document, the responsibilities delegated to the
Committee include, by way of illustration but not by way of limitation,
such matters as:
(i) Satisfying accounting and auditing requirements;
(ii) Satisfying insurance and bonding requirements;
(iii) Administering the Plan's claims procedure; and
(iv) Appointing Investment Managers.
9.18 Bonding.
-------
(a) Except as is prescribed by the Board of Directors, as
provided in Section 412 of ERISA, or as may be required under any other
applicable law, no bond or other security shall be required by any member
of the Committee, or any other fiduciary under this Plan.
(b) Notwithstanding the foregoing, for purposes of satisfying its
indemnity obligations under Section 9.15, the Company may (but need not)
purchase and pay premiums for
-108-
<PAGE>
one or more policies of insurance. However, this insurance shall not
release the Company of its liability under the indemnification provisions.
9.19 Reserved for Plan Modifications.
-------------------------------
9.20 Reserved for Plan Modifications.
-------------------------------
9.21 Reserved for Plan Modifications.
-------------------------------
9.22 Prohibition Against Certain Actions.
-----------------------------------
(a) To the extent prohibited by law, in administering this Plan
the Committee shall not discriminate in favor of any class of Employees and
particularly it shall not discriminate in favor of highly compensated
Employees, or Employees who are officers or shareholders of the Company.
(b) The Committee shall not cause the Plan to engage in any
transaction that constitutes a nonexempt prohibited transaction under
Section 4975(c) of the Code or Section 406(a) of ERISA.
(c) All individuals who are fiduciaries with respect to the Plan
(as defined in Section 3(21) of ERISA) shall discharge their fiduciary
duties in accordance with applicable law, and in particular, in accordance
with the standards of conduct contained in Section 404 of ERISA.
-109-
<PAGE>
9.23 Plan Expenses.
----------------
(a) All expenses incurred in the establishment, administration
and operation of the Plan, including but not limited to the expenses
incurred by the members of the Committee in exercising their duties, shall
be charged to the Trust Fund and allocated to Participants Accounts as
determined by the Committee, but shall be paid by the Company if not paid
by the Trust Fund.
(b) Notwithstanding the foregoing, the cost of interest and
normal brokerage charges which are included in the cost of securities
purchased by the Trust Fund (or charged to proceeds in the case of sales)
or other charges relating to specific assets of the Plan shall be charged
and allocated in a fair and equitable manner to the Accounts to which the
securities (or other assets) are allocated.
-110-
<PAGE>
ARTICLE X
SPECIAL PROVISIONS
CONCERNING COMPANY STOCK
EFFECTIVE AS OF OCTOBER 1, 1992
10.1 Securities Transactions.
-----------------------
Subject to the limitations of Section 6.6(a)(iv), the Trustee shall
acquire Company Stock in the open market or from the Company or any other
person, including a party in interest, pursuant to a Participant's election to
invest any Company contributions on his behalf (including Before-Tax
Contributions), or Participant After-Tax Contributions, in the Company Stock
alternative established by the Committee in accordance with Section 6.6, or to
transfer amounts held in other investment alternatives to such Company Stock
alternative. No commission will be paid in connection with the Trustee's
acquisition of Company Stock from a party in interest. Pending acquisition of
Company Stock and pursuant to a Participant's investment election, elected
amounts shall be allocated to the Participant's Company Stock subaccount in cash
and may be invested in any short-term interest fund of the Trustee. Neither the
Company, nor the Committee, nor any Trustee have any responsibility or duty to
time any transaction involving Company Stock in order to anticipate market
conditions or changes in Company Stock value. Neither the Company, nor the
Committee nor any Trustee have any responsibility or duty to sell Company Stock
held in the Trust Fund in order to maximize return or minimize loss.
-111-
<PAGE>
10.2 Valuation of Company Securities.
-------------------------------
When it is necessary to value Company Stock held by the Plan, the
value will be the current fair market value of the Company Stock, determined in
accordance with applicable legal requirements.
If the Company Stock is publicly traded, fair market value will be
based on the most recent closing price in public trading, as reported in The
---
Wall Street Journal or any other publication of general circulation designated
- -------------------
by the Committee, unless another method of valuation is required by the
standards applicable to prudent fiduciaries.
If the Company Stock cannot be valued on the basis of its closing
price in recent public trading, fair market value will be determined by the
Company in good faith based on all relevant factors for determining the fair
market value of securities. Relevant factors include an independent appraisal
by a person who customarily makes such appraisals, if an appraisal of the fair
market value of the Company Stock as of the relevant date was obtained.
In the case of a transaction between the Plan and a party in interest,
the fair market value of the Company Stock must be determined as of the date of
the transaction rather than as of some other Valuation Date occurring before or
after the transaction. In other cases, the fair market value of the Company
Stock will be determined as of the most recent Valuation Date.
-112-
<PAGE>
10.3 Allocation of Stock Dividends and Splits.
----------------------------------------
Company Stock received by the Trust as a result of a Company Stock
split or Company Stock dividend on Company Stock held in Participants' Accounts
will be allocated as of the Valuation Date coincident with or following the date
of such split or dividend, to each Participant who has such an Account. The
amount allocated will bear substantially the same proportion to the total number
of shares received as the number of shares in the Participant's Account bears to
the total number of shares allocated to such Accounts of all Participants
immediately before the allocation. The shares will be allocated to the nearest
thousandth of a share.
10.4 Reinvestment of Dividends.
-------------------------
Upon direction of the Committee, cash dividends may be reinvested as
soon as practicable by the Trustee in shares of Company Stock for Participants'
Accounts. Cash dividends may be reinvested in Company Stock purchased as
provided in Section 10.1 or purchased from the Accounts of Participants who
receive cash distributions of a fractional share or a fractional interest
therein.
10.5 Voting of Company Stock.
-----------------------
The Trustee shall have no discretion or authority to vote Company
Stock held in the Trust on any matter presented for a vote by the stockholders
of the Company except in accordance with timely directions received by the
Trustee from Participants, unless otherwise required by applicable law.
-113-
<PAGE>
(a) Each Participant shall be entitled to direct the Trustee as
to the voting of all Company Stock allocated and credited to his Account.
(b) All Participants entitled to direct such voting shall be
notified by the Company, pursuant to its normal communications with
shareholders, of each occasion for the exercise of such voting rights
within a reasonable time before such rights are to be exercised. Such
notification shall include all information distributed to shareholders
either by the Company or any other party regarding the exercise of such
rights. If a Participant shall fail to direct the Trustee as to the
exercise of voting rights arising under any Company Stock credited to his
Accounts, or if any Company Stock held in the Plan has not been allocated
to Participants' Accounts, the Trustee shall not be required to vote such
Company Stock except as otherwise required by applicable law. The Trustee
shall maintain confidentiality with respect to the voting directions of all
Participants.
(c) Each Participant shall be a Named Fiduciary (as that term is
defined in ERISA Section 402(a)(2)) with respect to Company Stock for which
he has the right to direct the voting under the Plan but solely for the
purpose of exercising voting rights pursuant to this Section 10.5.
-114-
<PAGE>
10.6 Confidentiality Procedures.
--------------------------
The Committee shall establish procedures intended to ensure the
confidentiality of information relating to Participant transactions involving
Company Stock, including the exercise of voting, tender and similar rights. The
Committee shall also be responsible for ensuring the adequacy of the
confidentiality procedures and monitoring compliance with such procedures. The
Committee may, in its sole discretion, appoint an independent fiduciary to carry
out any activities that it determines involve a potential for undue Company
influence on Participants with respect to the exercise of their rights as
shareholders.
10.7 Securities Law Limitation.
-------------------------
Neither the Committee nor the Trustee shall be required to engage in
any transaction, including, without limitation, directing the purchase or sale
of Company Stock, which it determines in its sole discretion might tend to
subject itself, its members, the Plan, the Company, or any Participant or
Beneficiary to a liability under federal or state securities laws.
-115-
<PAGE>
ARTICLE XI
MERGER OF COMPANY; MERGER OF PLAN
11.1 Effect of Reorganization or Transfer of Assets.
----------------------------------------------
In the event of a consolidation, merger, sale, liquidation, or other
transfer of the operating assets of the Company to any other company, the
ultimate successor or successors to the business of the Company shall
automatically be deemed to have elected to continue this Plan in full force and
effect, in the same manner as if the Plan had been adopted by resolution of its
Board of Directors, unless the successor(s), by resolution of its Board of
Directors, shall elect not to so continue this Plan in effect, in which case the
Plan shall automatically be deemed terminated as of the applicable effective
date set forth in the board resolution.
11.2 Merger Restriction.
------------------
Notwithstanding any other provision in this Article, this Plan shall
not in whole or in part merge or consolidate with, or transfer its assets or
liabilities to any other plan unless each affected Participant in this Plan
would receive a benefit immediately after the merger, consolidation, or transfer
(if the Plan then terminated) which is equal to or greater than the benefit he
would have been entitled to receive immediately before the merger,
consolidation, or transfer (if the Plan had then terminated).
-116-
<PAGE>
ARTICLE XII
PLAN TERMINATION AND
DISCONTINUANCE OF CONTRIBUTIONS
12.1 Plan Termination.
----------------
(a) (i) Subject to the following provisions of this Section 12.1, the
Company may terminate the Plan and the Trust Agreements at any time by an
instrument in writing executed in the name of the Company by an officer or
officers duly authorized to execute such an instrument, and delivered to the
Trustee.
(ii) The Plan and Trust Agreements may terminate if the Company
merges into any other corporation, if as the result of the merger the entity of
the Company ceases, and the Plan is terminated pursuant to the rules of Section
11.1.
(b) Upon and after the effective date of the termination, the Company
shall not make any further contributions under the Plan and no
contributions need be made by the Company applicable to the Plan year in
which the termination occurs, except as may otherwise be required by law.
(c) The rights of all affected Participants to benefits accrued to the
date of termination of the Plan, to the extent funded as of the date of
termination, shall automatically become fully vested as of that date.
12.2 Discontinuance of Contributions.
-------------------------------
(a) In the event the Company decides it is impossible or
inadvisable for business reasons to continue
-117-
<PAGE>
to make contributions under the Plan, the Company by resolution of its
Board of Directors may discontinue contributions to the Plan. Upon and
after the effective date of this discontinuance, no Participating Company
or Participant shall make any further contributions under the Plan and no
contributions need be made by a Participating Company with respect to the
Plan Year in which the discontinuance occurs, except as may otherwise be
required by law. A Participant shall be released from any salary reduction
agreement under the Plan as of the effective date of a discontinuance of
contributions.
(b) The discontinuance of contributions on the part of the
Company shall not terminate the Plan as to the funds and assets then held
by the Trustee, or operate to accelerate any payments of distributions to
or for the benefit of Participants or Beneficiaries, and the Trustee shall
continue to administer the Trust Fund in accordance with the provisions of
the Plan until all of the obligations under the Plan shall have been
discharged and satisfied.
(c) However, if this discontinuance of contributions shall cause
the Plan to lose its status as a qualified plan under Code Section 401(a),
the Plan shall be terminated in accordance with the provisions of this
Article XII.
(d) On and after the effective date of a discontinuance of
contributions, the rights of all affected
-118-
<PAGE>
Participants to benefits accrued to that date, to the extent funded as of
that date, shall automatically become fully vested as of that date.
12.3 Rights of Participants.
----------------------
In the event of the termination of the Plan, for any cause whatsoever,
all assets of the Plan, after payment of expenses, shall be used for the
exclusive benefit of Participants and their Beneficiaries and no part
thereof shall be returned to the Company, except as provided in Section
6.7 of this Plan.
12.4 Trustee's Duties on Termination.
-------------------------------
(a) On or before the effective date of termination of this Plan,
the Trustee shall proceed as soon as possible, but in any event within six
months from the effective date, to reduce all of the assets of the Trust
Fund to cash and other securities in such proportions as the Committee
shall determine (after approval by the Internal Revenue Service, if
necessary or desirable, with respect to any portion of the assets of the
Trust Fund held in common stock or securities of the Company).
(b) After first deducting the estimated expenses for liquidation
and distribution chargeable to the Trust Fund, and after setting aside a
reasonable reserve for expenses and liabilities (absolute or contingent) of
the Trust, the Committee shall make required allocations of items of income
and expense to the Accounts.
-119-
<PAGE>
(c) Following these allocations, the Trustee shall promptly,
after receipt of appropriate instructions from the Committee, distribute in
accordance with Section 8.7 to each former Participant in Company stock or
cash an amount equal to the amount credited to his Accounts as of the date
of completion of the liquidation.
(d) The Trustee and the Committee shall continue to function as
such for such period of time as may be necessary for the winding up of this
Plan and for the making of distributions in accordance with the provisions
of this Plan.
(e) Notwithstanding the foregoing, distributions to Participants
upon Plan termination in accordance with this Section 12.4 shall only be
made if a "successor plan," within the meaning of regulations under Code
Section 401(k)(10), is not established. In the event a "successor plan" is
established prior to or subsequent to the termination of the Plan, the
Committee shall direct the Trustee to continue to hold any assets of the
Trust Fund not payable upon the termination until such assets may, at the
direction of the Committee, be transferred to and held in the successor
plan until distributable under the terms of that successor plan.
12.5 Partial Termination.
-------------------
(a) In the event of a partial termination of the Plan within the
meaning of Code Section 411(d)(3), the
-120-
<PAGE>
interests of affected Participants in the Trust Fund, as of the date of the
partial termination, shall become nonforfeitable as of that date.
(b) That portion of the assets of the Plan affected by the
partial termination shall be used exclusively for the benefit of the
affected Participants and their Beneficiaries, and no part thereof shall
otherwise be applied.
(c) With respect to Plan assets and Participants affected by a
partial termination, the Committee and the Trustee shall follow the same
procedures and take the same actions prescribed in this Article XII in the
case of a total termination of the Plan.
12.6 Failure to Contribute.
---------------------
The failure of a Participating Company to contribute to the Trust in
any year, if contributions are not required under the Plan for that year, shall
not constitute a complete discontinuance of contributions to the Plan.
-121-
<PAGE>
ARTICLE XIII
APPLICATION FOR BENEFITS
13.1 Application for Benefits.
------------------------
The Committee may require any person claiming benefits under the Plan
to submit an application therefor, together with such documents and information
as the Committee may require. In the case of any person suffering from a
disability which prevents the claimant from making personal application for
benefits, the Committee may, in its discretion, permit another person acting on
his behalf to submit the application.
13.2 Action on Application.
---------------------
(a) Within ninety days following receipt of an application and
all necessary documents and information, the Committee's authorized
delegate reviewing the claim shall furnish the claimant with written notice
of the decision rendered with respect to the application.
(b) In the case of a denial of the claimant's application, the
written notice shall set forth:
(i) The specific reasons for the denial, with reference to
the Plan provisions upon which the denial is based;
(ii) A description of any additional information or material
necessary for perfection of the application (together with an explanation why
the material or information is necessary); and
-122-
<PAGE>
(iii) An explanation of the Plan's claim review procedure.
(c) A claimant who wishes to contest the denial of his
application for benefits or to contest the amount of benefits payable to
him shall follow the procedures for an appeal of benefits as set forth in
Section 13.3 below, and shall exhaust such administrative procedures prior
to seeking any other form of relief.
13.3 Appeals.
-------
(a) (i) A claimant who does not agree with the decision rendered
with respect to his application may appeal the decision to the Committee.
(ii) The appeal shall be made, in writing, within sixty days
after the date of notice of the decision with respect to the application.
(iii) If the application has neither been approved nor denied
within the ninety day period provided in Section 13.2 above, then the appeal
shall be made within sixty days after the expiration of the ninety day period.
(b) The claimant may request that his application be given full and
fair review by the Committee. The claimant may review all pertinent
documents and submit issues and comments in writing in connection with the
appeal.
(c) The decision of the Committee shall be made promptly, and not
later than sixty days after the Committee's receipt of a request for
review, unless special
-123-
<PAGE>
circumstances require an extension of time for processing, in which case a
decision shall be rendered as soon as possible, but not later than one
hundred twenty days after receipt of a request for review.
(d) The decision on review shall be in writing and shall include
specific reasons for the decision, written in a manner calculated to be
understood by the claimant with specific reference to the pertinent Plan
provisions upon which the decision is based.
-124-
<PAGE>
ARTICLE XIV
LIMITATIONS ON CONTRIBUTIONS
14.1 General Rule.
------------
(a) Notwithstanding anything to the contrary contained in this
Plan, the total Annual Additions under this Plan to a Participant's Plan
Accounts for any Limitation Year shall not exceed the lesser of:
(i) Thirty Thousand Dollars ($30,000) (or such greater
amount as may be in effect for the Limitation Year under Section 415(c)(1)(A)
and 415(d) of the Code; or
(ii) Twenty-five percent of the Participant's total
Compensation from the Company and any Affiliated Companies for the year,
excluding amounts otherwise treated as Annual Additions under Section 14.2.
(b) For purposes of this Article XIV, the Company has elected a
"Limitation Year" corresponding to the Plan Year.
14.2 Annual Additions.
----------------
For purposes of Section 14.1, the term "Annual Additions" shall mean,
for any Limitation Year, the sum of:
(a) the amount credited to the Participant's Accounts from
Company contributions for such Limitation Year;
(b) any Employee contributions for the Limitation Year; and
-125-
<PAGE>
(c) any amounts described in Section 415(l)(1) or 419(A)(d)(2) of
the Code.
Annual Additions for Limitation Years commencing prior to 1987 shall
not be recalculated to take into account all Employee contributions.
14.3 Other Defined Contribution Plans.
--------------------------------
If the Company or an Affiliated Company is contributing to any other
defined contribution plan (as defined in Section 415(k) of the Code) for its
Employees, some or all of whom may be Participants in this Plan, then
contributions to the other plan shall be aggregated with contributions under
this Plan for the purposes of applying the limitations of Section 14.1.
14.4 Combined Plan Limitation (Defined Benefit Plan).
-----------------------------------------------
In the event a Participant hereunder also is a participant in any
qualified defined benefit plan (within the meaning of Section 415(k) of the
Code) of the Company or an Affiliated Company, then the benefit payable under
such other defined benefit plan, or any of them, shall be reduced for so long
and to the extent necessary to provide that the sum of the "defined benefit
fraction" and the "defined contribution fraction," for any Limitation Year, as
defined in Section 415(e) of the Code, shall not exceed one (1).
14.5 Adjustments for Excess Annual Additions.
---------------------------------------
In general, the amount of excess for any Limitation Year under this
Plan and any other defined contribution plan (as defined in Code Section 414(i))
or defined benefit plan (as
-126-
<PAGE>
defined in Code Section 414(j)) maintained by the Company or an Affiliated
Company will be determined so as to avoid Annual Additions in excess of the
limitations set forth in Sections 14.1 through 14.4. However, if as a result of
an administrative error, the Annual Additions to a Participant's Accounts under
this Plan (after giving effect to the maximum permissible adjustments under the
other plans) would exceed the applicable limitations described in Sections 14.1
through 14.4, the excess amount shall be subject to this Section 14.5.
(a) For Plan Years commencing prior to January 1, 1993, the
following rules shall apply:
(i) If the Participant made any after-tax contributions to
any defined contribution plan that is maintained by the Company or an Affiliated
Company, which after-tax contributions were not matched by matching
contributions, these contributions shall be returned to the Participant to the
extent of any excess Annual Additions arising under Section 14.1(a)(ii).
(ii) If excess Annual Additions remain after the application
of the above rule, such excess amounts (if any) allocated to the Participant's
Company Contributions Account shall be reduced to the extent necessary to
eliminate (if possible) any remaining excess Annual Additions.
(iii) If excess Annual Additions remain after the application
of (i) and (ii) above, such excess amounts (if any) allocated to the
Participant's Company Matching
-127-
<PAGE>
Contribution Account shall be reduced to the extent necessary to eliminate (if
possible) any remaining excess Annual additions.
(iv) If any excess Annual Additions remain after the
application of (i), (ii) and (iii) above, such excess amounts (if any) allocated
to the Participant's Before-Tax Contributions Account shall be reduced to the
extent necessary to eliminate (if possible) any remaining excess Annual
Additions.
(b) For Plan Years commencing on or after January 1, 1993, the
following rules shall apply:
(i) If the Participant made any after-tax contributions to
this or any other defined contribution plan that is maintained by the Company or
an Affiliated Company, which after-tax contributions were not matched by
matching contributions, within the meaning of Code Section 401(m), such after-
tax contributions and any earnings thereon shall be returned to the Participant
to the extent of any excess Annual Additions.
(ii) If excess Annual Additions remain after the application
of the above rule, if the Participant made any Before-Tax Contributions for the
Plan Year to this or any other defined contribution plan that is maintained by
the Company or an Affiliated Company, which Before-Tax Contributions were not
matched by matching contributions, within the meaning of Code Section 401(m),
Before-Tax Contributions and any earnings thereon shall be returned to the
Participant to the extent of any excess Annual Additions.
-128-
<PAGE>
(iii) If excess Annual Additions remain after the application
of the above rule, if the Participant made any after-tax contributions for the
Plan Year to this or any other defined contribution plan that is maintained by
the Company or an Affiliated Company, which after-tax contributions were matched
by matching contributions, within the meaning of Code Section 401(m), any such
after-tax contributions and any earnings thereon shall be returned to the
Participant and any matching contributions attributable thereto shall be reduced
to the extent necessary to eliminate any remaining excess Annual Additions.
(iv) If excess Annual Additions remain after the application
of the above rule, if the Participant made any Before-Tax Contributions for the
Plan Year to this or any other defined contribution plan that is maintained by
the Company or an Affiliated Company, which Before-Tax Contributions were
matched by matching contributions, within the meaning of Code Section 401(m),
any such Before-Tax Contributions and any earnings thereon shall be returned to
the Participant and any matching contributions attributable thereto shall be
reduced to the extent necessary to eliminate any remaining excess Annual
Additions.
(v) If excess Annual Additions remain after the application
of the above rule, any other Company contributions for the Plan Year shall be
reduced to the extent necessary to eliminate any remaining excess Annual
Additions.
-129-
<PAGE>
14.6 Disposition of Excess Amounts.
-----------------------------
Any excess amounts contributed by a Participating Company on behalf of
a Participant for any Plan Year (other than Before-Tax Contributions) shall be
held unallocated in a suspense account for the Plan Year and applied, to the
extent possible, first to reduce the Participating Company contributions for the
Plan Year, and next, to reduce the Participating Company contributions for the
succeeding Plan Year, or Years, if necessary. No investment gains or losses
shall be allocated to a suspense account.
14.7 Affiliated Company.
------------------
For purposes of this Article XIV, the status of an entity as an
Affiliated Company shall be determined by reference to the percentage tests set
forth in Code Section 415(h).
-130-
<PAGE>
ARTICLE XV
RESTRICTION ON ALIENATION
15.1 General Restrictions Against Alienation.
---------------------------------------
(a) The interest of any Participant or Beneficiary in the income,
benefits, payments, claims or rights hereunder, or in the Trust Fund shall
not in any event be subject to sale, assignment, hypothecation, or
transfer. Each Participant and Beneficiary is prohibited from
anticipating, encumbering, assigning, or in any manner alienating his or
her interest under the Trust Fund, and is without power to do so, except as
may otherwise be provided for in the Trust Agreement. The interest of any
Participant or Beneficiary shall not be liable or subject to his debts,
liabilities, or obligations, now contracted, or which may be subsequently
contracted. The interest of any Participant or Beneficiary shall be free
from all claims, liabilities, bankruptcy proceedings, or other legal
process now or hereafter incurred or arising; and the interest or any part
thereof, shall not be subject to any judgment rendered against the
Participant or Beneficiary.
(b) In the event any person attempts to take any action contrary
to this Article XV, that action shall not be effective, and all
Participants and their Beneficiaries, may disregard that action and shall
not suffer any liability for any disregard of that action, and shall be
reimbursed on demand out of the Trust Fund for the amount of any loss,
-131-
<PAGE>
cost or expense incurred as a result of disregarding or of acting in
disregard of that action.
(c) The preceding provisions of this Section 15.1 shall be
interpreted and applied by the Committee in accordance with the
requirements of Code Section 401(a)(13) as construed and interpreted by
authoritative judicial and administrative rulings and regulations.
(d) The provisions of Subsections 15.1(a) and 15.1(b) are
expressly subject to qualified domestic relations orders, as provided in
Code Section 401(a)(13)(B).
15.2 Nonconforming Distributions Under Court Order.
---------------------------------------------
(a) In the event that a court with jurisdiction over the Plan and
the Trust Fund shall issue an order or render a judgment requiring that all
or part of a Participant's interest under the Plan and in the Trust Fund be
paid to a spouse, former spouse and/or children of the Participant by
reason of or in connection with the marital dissolution and/or marital
separation of the Participant and the spouse, and/or some other similar
proceeding involving marital rights and property interests, then
notwithstanding the provisions of Section 15.1 the Committee may, in its
absolute discretion, direct the applicable Trustee to comply with that
court order or judgment and distribute assets of the Trust Fund in
accordance therewith. Pending distribution to an alternate payee of any
portion of a Participant's vested interest in the Trust Fund, pursuant to
-132-
<PAGE>
a court order or judgment, such portion shall be segregated and invested in
accordance with rules prescribed by the Committee, and neither the
Participant nor the alternate payee shall be entitled to make an election
with respect to the investment of such segregated portion.
(b) The Committee's decision with respect to compliance with any
such court order or judgment shall be made in its absolute discretion and
shall be binding upon the Trustee and all Participants and their
Beneficiaries; provided, however, that the Committee in the exercise of its
discretion shall not make payments in accordance with the terms of an order
which is not a qualified domestic relations order or which the Committee
determines would jeopardize the continued qualification of the Plan and
Trust under Section 401 of the Code. Notwithstanding the foregoing, the
Committee may make a distribution to an alternate payee prior to the date
the Participant attains age fifty (50), if such distribution is required by
a qualified domestic relations order.
(c) Neither the Plan, the Company, the Committee nor the Trustee
shall be liable in any manner to any person, including any Participant or
Beneficiary, for complying with any such court order or judgment.
(d) Nothing in this Section 15.2 shall be interpreted as placing
upon the Company, the Committee or any Trustee any duty or obligation to
comply with any such
-133-
<PAGE>
court order or judgment. The Committee may, if in its absolute discretion
it deems it to be in the best interests of the Plan and the Participants,
determine that any such court order or judgment shall be resisted by means
of judicial appeal or other available judicial remedy, and in that event
the Trustee shall act in accordance with the Committee's directions.
(e) The Committee shall adopt procedures and provide
notifications to a Participant and alternate payees in connection with a
qualified domestic relations order, to the extent required under Code
Section 414(p).
-134-
<PAGE>
ARTICLE XVI
PLAN AMENDMENTS
16.1 Amendments.
----------
The Board of Directors may at any time, and from time to time, amend
the Plan by an instrument in writing executed in the name of the Company by an
officer or officers duly authorized to execute such instrument, and delivered to
the applicable Trustee. However, to the extent required by law, no amendment
shall be made at any time, the effect of which would be:
(a) To cause any assets of the Trust Fund to be used for or
diverted to purposes other than providing benefits to the Participants and
their Beneficiaries, and defraying reasonable expenses of administering the
Plan, except as provided in Section 6.7;
(b) To have any retroactive effect so as to deprive any
Participant or Beneficiary of any accrued benefit to which he would be
entitled under this Plan, in contravention of Code Section 411(d)(6), if
his employment were terminated immediately before the amendment;
(c) To eliminate or reduce an optional form of benefit to the
extent so doing would contravene Code Section 411(d)(6); or
(d) To increase the responsibilities or liabilities of a Trustee
or an Investment Manager without his written consent.
-135-
<PAGE>
16.2 Retroactive Amendments.
----------------------
Notwithstanding any provisions of this Article XVI to the contrary,
the Plan may be amended prospectively or retroactively (as provided in Section
401(b) of the Code) to make the Plan conform to any provision of ERISA, any Code
provisions dealing with tax-qualified employees' trusts, or any regulation under
either.
16.3 Amendment of Vesting Provisions.
-------------------------------
Effective January 1, 1989, if the Plan is amended in any way that
directly or indirectly affects the computation of a Participant's vested
interest in his Accounts, each Participant who has completed at least three (3)
Years of Service may elect, within a reasonable time after the adoption of the
amendment, to continue to have his vested interest computed under the Plan
without regard to such amendment. The period during which the election may be
made shall commence when the date of the amendment is adopted and shall end on
the latest of: (i) 60 days after the amendment is adopted; (ii) 60 days after
the amendment is effective; or (iii) 60 days after the Participant is issued
written notice of the amendment.
In the event that the Plan's vesting schedule is amended, the
nonforfeitable percentage of every Employee who is a Participant on the date the
amendment is adopted, or the date the amendment is effective, if later, in his
Company Matching Account and/or Company Contributions Account shall be not less
than his
-136-
<PAGE>
percentage computed under the Plan without regard to the amendment.
-137-
<PAGE>
ARTICLE XVII
TOP-HEAVY PROVISIONS
17.1 Minimum Company Contributions.
-----------------------------
In the event that this Plan is deemed a Top-Heavy plan with respect to
any Plan Year, each Non-Key Employee who is a Participant shall receive Company
contributions that in the aggregate are at least equal to the lesser of three
percent (3%) of Compensation or the percentage at which Company contributions
are made for the Key Employee (under any plan required to be included in an
Aggregation Group) for whom such percentage is the highest for the Plan Year,
regardless of whether the Non-Key Employee elected to make Before-Tax
Contributions to the Plan for the Plan Year, completed less than 1,000 Hours of
Service during such Plan Year, or the Non-Key Employee's level of Compensation.
For purposes of this Section 17.1, Company contributions shall include amounts
considered contributed by Key Employees and which qualify for treatment under
Code Section 401(k), and any Company contributions for Key Employees taken into
account under Section 401(k)(3) or 401(m) of the Code, but shall not include
such amounts considered as contributed by or for Non-Key Employees. Further, in
determining the percentage at which Company contributions are made for the Plan
Year for the Key Employee for whom such percentage is the highest, the
contributions for a Key Employee shall be divided by so much of a Key Employee's
compensation for the Plan Year as does not exceed
-138-
<PAGE>
$200,000, as that amount is adjusted each year by the Secretary of the Treasury.
In the event a Participant is covered by both a defined contribution
and a defined benefit plan maintained by the Company, both of which are
determined to be Top-Heavy Plans, the defined benefit minimum, offset by the
benefits provided under the defined contribution plan, shall be provided under
the defined benefit plan.
17.2 Compensation.
------------
For the purpose of calculating Company contributions to be made to a
Participant for Plan Years commencing prior to January 1, 1989, the annual
Compensation taken into account for any Employee shall not exceed $200,000
(increased by any adjustments made pursuant to Section 416(d)(2) of the Code or
regulations thereunder) if the Plan is deemed a Top-Heavy Plan with respect to
any Plan Year.
17.3 Top-Heavy Determination.
-----------------------
This Plan shall be deemed a Top-Heavy Plan with respect to any Plan
Year in which, as of the Determination Date: (a) the aggregate of the Accounts
of Key Employees under the Plan exceeds 60% of the aggregate of the Accounts of
all Employees; or (b) the aggregate of the Accounts of Key Employees under all
defined contribution plans and the present value of the cumulative accrued
benefits for Key Employees under all defined benefit plans includable in an
Aggregation Group exceed 60% of a similar sum for all employees in such group.
As used above, the term
-139-
<PAGE>
"Aggregation Group" includes all plans of Participating Companies having one or
more Key Employees as Participants and any other defined contribution plan of a
Participating Company that permits a plan of a Participating Company having one
or more Key Employees to meet the qualification requirements of Sections
401(a)(4) or 410 of the Code.
The present value of account balances under a defined contribution
plan shall be determined as of the most recent valuation date that falls within
or ends on the Determination Date. The present value of accrued benefits under
a defined benefit plan shall be determined as of the same valuation date used
for computing plan costs for minimum funding. The present value of the
cumulative accrued benefits of a Non-Key Employee shall be determined under
either:
(i) the method, if any, that uniformly applies for accrual
purposes under all plans maintained by affiliated companies, within the
meaning of Code Sections 414(b), (c), (m) or (o); or
(ii) if there is no such method, as if such benefit accrued not
more rapidly than the lowest accrual rate permitted under the fractional
accrual rate of Section 411(b)(1)(C) of the Code.
For purposes of this Article XVII, "Determination Date" shall mean,
with respect to any Plan Year, the last day of the preceding Plan Year, or, in
the case of the first Plan Year, the last day of such Plan Year.
-140-
<PAGE>
The term, "Key Employee" shall mean, for purposes of this Article
XVII, any Employee or former Employee who, at any time during such Plan Year (or
any of the 4 preceding Plan Years) is:
(1) an officer of a Participating Company having an annual
compensation in excess of 50 percent of the amount in effect under Section
415(b)(1)(A) of the Code for such Plan Year;
(2) one of the 10 Employees having an annual compensation in
excess of 150 percent of the amount in effect under Section 415(c)(1)(A) of
the Code owning (or considered as owning within the meaning of Section 318
of the Code) the largest interests in a Participating Company;
(3) a 5% owner of a Participating Company; or
(4) 1% owner of a Participating Company having an annual
compensation from a Participating Company of more than $150,000.
For purposes of (1) above, no more than 50 Employees (or, if lesser,
the greater of 3 or 10% of the Employees) shall be treated as officers.
A 5% (or 1%, if applicable) owner means any person who owns (or is
considered as owning within the meaning of Section 318 of the Code) more than 5%
(1%) of the outstanding stock of the Participating Company or stock possessing
more than 5% (1%) of the total combined voting power of all stock of the
Participating Company.
-141-
<PAGE>
For purposes of applying the constructive ownership rules under
Section 318(a)(2) of the Code, subparagraph (C) of such Section shall be applied
by substituting "5 percent" for "50 percent."
For purposes of determining "5% owners" and/or "1% owners," the
aggregating rules of Sections 414(b), (c) and (m) of the Code shall not apply.
For purposes of determining whether an Employee has compensation of more than
$150,000, however, compensation from each entity required to be aggregated under
Sections 414(b), (c) and/or (m) of the Code shall be taken into account.
For purposes of determining the amount of a Participant's Account for
purposes of this Section 17.3, the amount shall include the aggregate
distributions under the Plan made to the Participant during the five year period
ending on the Determination Date.
The following shall not be taken into account for purposes of
determining whether this Plan is a Top-Heavy Plan: (1) any rollover to the Plan
that is initiated by a Participant; (2) the account value of any Participant who
is not a Key Employee with respect to any Plan Year but was a Key Employee with
respect to any prior Plan Year; and (3) the account value of a Participant who
has not received any compensation from any Participating Company under the Plan
(other than benefits under the Plan) during the five year period ending on the
Determination Date.
-142-
<PAGE>
17.4 Maximum Annual Addition.
-----------------------
(a) Except as set forth below, in the case of any Top-Heavy Plan
the rules of Section 14.4 shall be applied by substituting "1.0" for "1.25"
in the defined benefit plan fraction and the defined contribution fraction.
(b) The rule set forth in Subsection (a) above shall not apply if
the requirements of both Paragraphs (i) and (ii), below, are satisfied.
(i) The requirements of this Paragraph (i) are
satisfied if the rules of Section 17.4(a) above would be satisfied after
substituting "four percent (4%)" for "three percent (3%)" where it appears
therein with respect to Participants covered only under a defined contribution
plan.
(ii) The requirements of this Paragraph (ii) are
satisfied if the Plan would not be a Top-Heavy Plan if "ninety percent (90%)"
were substituted for "sixty percent (60%)" each place it appears in Section
17.3(a)(ii).
(c) The rules of Subsection (a) shall not apply with respect to
any Employee as long as there are no --
(i) Company contributions, forfeitures, or voluntary
nondeductible contributions allocated to the Employee under a defined
contribution plan maintained by the Company, or
(ii) Accruals by the Employee under a defined benefit
plan maintained by the Company.
-143-
<PAGE>
17.5 Aggregation.
-----------
Each Plan of a Participating Company required to be included in an
"Aggregation Group" shall be treated as a Top-Heavy Plan if such group is a
"Top-Heavy Group."
For purposes of this Article XVII, an "Aggregation Group" shall mean:
(i) each plan of a Participating Company in which a Key Employee is a
Participant, and (ii) each other plan of a Participating Company which enables
any plan described in (i) above to meet the requirements of Section 401(a)(4) or
410 of the Code.
Any plan of a Participating Company that is not required to be
included in an Aggregation Group may be treated as part of such group if such
group would continue to meet the requirements of Section 401(a)(4) and 410 of
the Code with such plan taken into account.
For purposes of this Section 17.5, a "Top-Heavy Group" means any
Aggregation Group if the sum (as of the Determination Date) of the present value
of the cumulative accrued benefits for Key Employees under all defined benefit
plans included in such group and the aggregate of the accounts of Key Employees
under all defined contribution plans included in such group exceed 60% of a
similar sum determined for all Employees.
-144-
<PAGE>
ARTICLE XVIII
MISCELLANEOUS
18.1 No Enlargement of Employee Rights.
---------------------------------
(a) This Plan is strictly a voluntary undertaking on the part of
the Company and shall not be deemed to constitute a contract between the
Company and any Employee, or to be consideration for, or an inducement to,
or a condition of, the employment of any Employee.
(b) Nothing contained in this Plan or the Trust shall be deemed
to give any Employee the right to be retained in the employ of the Company
or to interfere with the right of the Company to discharge or retire any
Employee at any time.
(c) No Employee, nor any other person, shall have any right to or
interest in any portion of the Trust Fund other than as specifically
provided in this Plan.
18.2 Mailing of Payments; Lapsed Benefits.
------------------------------------
(a) All payments under the Plan shall be delivered in person or
mailed to the last address of the Participant (or, in the case of the death
of the Participant, to the last address of any other person entitled to
such payments under the terms of the Plan) furnished pursuant to Section
18.3 below.
(b) In the event that a benefit is payable under this Plan to a
Participant or any other person and after reasonable efforts such person
cannot be located for the
-145-
<PAGE>
purpose of paying the benefit for a period of three (3) consecutive years,
the Committee, in its sole discretion, may determine that such person
conclusively shall be presumed dead and upon the termination of such three
(3) year period the benefit shall be forfeited and as soon thereafter as
practicable shall be applied to reduce future Company Contributions;
provided, however, should any person entitled to such benefit thereafter
claim such benefit, such benefit shall be restored. Alternatively, benefits
that cannot be paid may escheat to the state in accordance with applicable
state law.
(c) For purposes of this Section 18.2, the term "Beneficiary"
shall include any person entitled under Section 8.9 to receive the interest
of a deceased Participant or deceased designated Beneficiary. It is the
intention of this provision that the benefit will be distributed to an
eligible Beneficiary in a lower priority category under Section 8.9 if no
eligible Beneficiary in a higher priority category can be located by the
Committee after reasonable efforts have been made.
(d) The Accounts of a Participant shall continue to be maintained
until the amounts in the Accounts are paid to the Participant or his
Beneficiary. Notwithstanding the foregoing, in the event that the Plan is
terminated, the following rules shall apply:
-146-
<PAGE>
(i) All Participants (including Participants who have
not previously claimed their benefits under the Plan) shall be notified of their
right to receive a distribution of their interests in the Plan;
(ii) All Participants shall be given a reasonable length
of time, which shall be specified in the notice, in which to claim their
benefits;
(iii) All Participants (and their Beneficiaries) who do
not claim their benefits within the designated time period shall be presumed to
be dead. The Accounts of such Participants shall be forfeited at such time.
These forfeitures shall be disposed of according to rules prescribed by the
Committee, which rules shall be consistent with applicable law.
(iv) The Committee shall prescribe such rules as it may
deem necessary or appropriate with respect to the notice and forfeiture rules
stated above.
(e) Should it be determined that the preceding rules relating to
forfeiture of benefits upon Plan termination are inconsistent with any of
the provisions of the Code and/or ERISA, these provisions shall become
inoperative without the need for a Plan amendment and the Committee shall
prescribe rules that are consistent with the applicable provisions of the
Code and/or ERISA.
-147-
<PAGE>
18.3 Addresses.
---------
Each Participant shall be responsible for furnishing the Committee
with his correct current address and the correct current name and address of his
Beneficiary or Beneficiaries.
18.4 Notices and Communications.
--------------------------
(a) All applications, notices, designations, elections, and other
communications from Participants shall be in writing, on forms prescribed
by the Committee and shall be mailed or delivered to the office designated
by the Committee, and shall be deemed to have been given when received by
that office.
(b) Each notice, report, remittance, statement and other
communication directed to a Participant or Beneficiary shall be in writing
and may be delivered in person or by mail. An item shall be deemed to have
been delivered and received by the Participant when it is deposited in the
United States Mail with postage prepaid, addressed to the Participant or
Beneficiary at his last address of record with the Committee.
18.5 Reporting and Disclosure.
------------------------
The Plan Administrator shall be responsible for the reporting and
disclosure of information required to be reported or disclosed by the Plan
Administrator pursuant to ERISA or any other applicable law.
-148-
<PAGE>
18.6 Governing Law.
-------------
All legal questions pertaining to the Plan shall be determined in
accordance with the provisions of ERISA and the laws of the State of California.
All contributions made hereunder shall be deemed to have been made in
California.
18.7 Interpretation.
--------------
(a) Article and Section headings are for convenient reference
only and shall not be deemed to be part of the substance of this instrument
or in any way to enlarge or limit the contents of any Article or Section.
Unless the context clearly indicates otherwise, masculine gender shall
include the feminine, and the singular shall include the plural and the
plural the singular.
(b) The provisions of this Plan shall in all cases be interpreted
in a manner that is consistent with this Plan satisfying:
(i) The requirements (of Code Section 401(a) and related
statutes) for qualification as a Profit Sharing Plan; and
(ii) The requirements (of Code Section 401(k) and related
statutes) for qualification as a Qualified Cash or Deferred Arrangement.
18.8 Certain Securities Laws Rules.
-----------------------------
Any election or direction made under this Plan by an individual who is
or may become subject to liability under Section 16 of the Securities Exchange
Act of l934, as amended
-149-
<PAGE>
(the "Exchange Act"), may be conditioned upon such restrictions as are necessary
or appropriate to qualify for an applicable exemption under Section 16(b) of the
Exchange Act, or any rule promulgated thereunder. To the extent required by
Section 401(a)(4) of the Code, the rules under this Section 18.8 shall be
administered in a non-discriminatory manner.
18.9 Withholding for Taxes.
---------------------
Any payments out of the Trust Fund may be subject to withholding for
taxes as may be required by any applicable federal or state law.
18.10 Limitation on Company; Committee and Trustee Liability.
------------------------------------------------------
Any benefits payable under this Plan shall be paid or provided for
solely from the Trust Fund and neither the Company, the Committee nor the
Trustee assume any responsibility for the sufficiency of the assets of the Trust
to provide the benefits payable hereunder.
18.11 Successors and Assigns.
----------------------
This Plan and the Trust established hereunder shall inure to the
benefit or, and be binding upon, the parties hereto and their successors and
assigns.
18.12 Counterparts.
------------
This Plan document may be executed in any number of identical
counterparts, each of which shall be deemed a complete original in itself and
may be introduced in evidence or used for any other purpose without the
production of any other counterparts.
-150-
<PAGE>
IN WITNESS WHEREOF, in order to record the adoption of this Plan,
Mattel, Inc. has caused this instrument to be executed by its duly authorized
officers this 29th day of April 1998,
-151-
<PAGE>
effective, however, as of April 1, 1997, except as otherwise expressly provided
herein.
MATTEL, INC.
By: /s/ Alan Kaye
----------------------
Alan Kaye
-152-
