- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-05647 ---------------- MATTEL, INC. (Exact name of registrant as specified in its charter) Delaware 95-1567322 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 333 Continental Boulevard El Segundo, California 90245-5012 (Address of principal executive offices) (310) 252-2000 (Registrant's telephone number) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock, $1.00 par value New York Stock Exchange Pacific Exchange, Inc. ---------------- Securities registered pursuant to Section 12(g) of the Act: NONE ---------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. [_] The aggregate market value of the voting stock held by non-affiliates of the registrant as of the close of business on March 22, 2002 was $9,109,214,827. Number of shares outstanding of registrant's common stock, $1.00 par value, (including 1,070,962 common shares issuable upon exchange of outstanding exchangeable shares of Softkey Software Products Inc.) as of March 22, 2002: 433,772,135 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the Mattel, Inc. 2002 Notice of Annual Meeting of Stockholders and Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after the close of the registrant's fiscal year (Incorporated into Part III). - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------

PART I Item 1. Business Mattel, Inc. ("Mattel") designs, manufactures, and markets a broad variety of toy products on a worldwide basis through sales both to retailers and direct to consumers. Mattel believes its products are among the most widely recognized toy products in the world. Mattel's portfolio of brands and products are grouped in the following categories: Girls--including Barbie(R) fashion dolls and accessories, collector dolls, Polly Pocket!(R), Diva Starz(TM), What's Her Face!(TM) and American Girl(R) Boys-Entertainment--including Hot Wheels(R), Matchbox(R), Hot Wheels(R) Electric Racing and Tyco(R) Radio Control vehicles and playsets (collectively "Wheels"), and Disney, Nickelodeon(R), Harry Potter(TM), Max Steel(TM) and games and puzzles (collectively "Entertainment") Infant & Preschool--including Fisher-Price(R), Power Wheels(R), Sesame Street(R), Disney preschool and plush, Winnie the Pooh(R), Blue's Clues(R), See "N Say(R), Magna Doodle(R) and View-Master(R) In 2000, Mattel's management articulated its overall company vision: to create and market "the world's premier toy brands for today and tomorrow." Management set five key company strategies: (i) improve execution of the existing toy business; (ii) globalize the brands; (iii) extend the brands; (iv) catch new trends; and (v) develop employees. In 2001, Mattel focused on executing these strategies. Among other key initiatives, Mattel sought to improve customer service levels by enhancing supply chain performance. Mattel also initiated significant employee development measures, including performance tracking, leadership classes, global employee surveys and follow-up action plans. In addition, in 2001, Mattel added two new independent directors to its Board of Directors. In 2001, Mattel continued to excecute its financial realignment plan, originally announced during the third quarter of 2000, designed to improve gross margin; selling and administrative expenses; operating profit; and cash flow. The plan will require a total pre-tax charge estimated at approximately $250 million, or $170 million on an after-tax basis. Through December 31, 2001, Mattel had recorded pre-tax charges totaling $175.4 million or approximately $119 million on an after-tax basis. Under the plan, Mattel expects to generate approximately $200 million of cumulative pre-tax cost savings over the three year duration of the plan. Mattel recognized savings of approximately $55 million in 2001 and expects to achieve savings of approximately $65 million in 2002. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--2000 Financial Realignment Plan" and Item 8 "Financial Statements and Supplementary Data--Note 9 to the Consolidated Financial Statements." In 2000, Mattel implemented a two phase interactive media strategy, consisting of the disposition of the Learning Company division that had been acquired in 1999 and the licensing of Mattel's core brands to leading interactive companies. The disposition of the Learning Company division was completed in October 2000. Licensing agreements with Vivendi Universal Publishing for Barbie(R) and Fisher-Price(R) brands, and THQ, Inc. for Hot Wheels(R) and Matchbox(R) brands, were announced in January 2001. Mattel was incorporated in California in 1948 and reincorporated in Delaware in 1968. Its executive offices are located at 333 Continental Boulevard, El Segundo, California 90245-5012, telephone (310) 252-2000. Business Segments "Mattel" refers to Mattel, Inc. and its subsidiaries as a whole, unless the context requires otherwise. Mattel's reportable segments are separately managed business units and are divided on a geographic basis between domestic and international. The domestic segment is further divided into US Girls, US Boys- 2

Entertainment, and US Infant & Preschool. For additional information with respect to Mattel's business segment reporting, including revenue, profit and loss and assets, see Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Continuing Operations--Business Segment Results" and Item 8 "Financial Statements and Supplementary Data--Note 10 to the Consolidated Financial Statements." For additional information regarding geographic areas, see Item 8 "Financial Statements and Supplementary Data--Note 10 to the Consolidated Financial Statements." Domestic Segment The Domestic segment develops toys that it markets and sells in the US Girls, US Boys-Entertainment and US Infant & Preschool segments. US Girls segment includes brands such as Barbie(R) fashion dolls and accessories, collector dolls, Polly Pocket!(R), Diva Starz(TM), What's Her Face!(TM) and American Girl(R). In 2002, Mattel expects to introduce Barbie(R) as Rapunzel(TM), a hair-play fashion doll and computer graphic imagery video, Fashion Polly(TM) Sparkle Style(TM) House and Malibu Barbie(R), a reissue of one of the most popular Barbie(R) dolls ever. US Boys-Entertainment segment includes Hot Wheels(R), Matchbox(R), Hot Wheels(R) Electric Racing and Tyco(R) Radio Control (collectively "Wheels") and Disney, Nickelodeon(R), Harry Potter(TM), Max Steel(TM) and games and puzzles (collectively "Entertainment") products. New Boys-Entertainment products in 2002 are expected to include Hot Wheels(R) Turbo Jet City(TM) Playset, Matchbox(R) Radio Rescue Playset, Harry Potter(TM) Polyjuice Potion Maker, Tyco(R) RC Extreme Stunt Scooter and a toy line based on Yu-Gi-Oh!(TM), the Japanese cartoon and card game property. US Infant & Preschool segment includes Fisher-Price(R), Power Wheels(R), Sesame Street(R), Disney preschool and plush, Winnie the Pooh(R), Blue's Clues(R), See N Say(R), Magna Doodle(R), and View-Master(R) brands. New product introductions for 2002 are expected to include Guess What Elmo, Magic Rattle(TM) Pooh, Blue's Clues(R) Music Studio, Rescue Heroes(TM) new Power Force figures, Pixter(TM) PRO digital creative system, Lightning PAC(TM) battery-powered kid scooter and a preschool Grow With Me(TM) Remote Control Raceway. International Segment Generally, products marketed by the International segment are the same as those developed and marketed by the Domestic segment, although some are developed or adapted for particular international markets. Mattel's products are sold directly in Canada and most European, Asian and Latin American countries, and through agents and distributors in those countries where Mattel has no direct presence. See "Licenses and Distribution Agreements." Revenues from Mattel's International segment represented approximately 31% of total consolidated net sales in 2001. The strength of the US dollar relative to other currencies can significantly affect the revenues and profitability of Mattel's international operations. Mattel enters into foreign currency forward exchange and option contracts primarily to hedge its purchase and sale of inventory, and enters into other intercompany transactions denominated in foreign currencies to limit the effect of exchange rate fluctuations on its results of operations and cash flows. See Item 7a "Quantitative and Qualitative Disclosures About Market Risk" and Item 8 "Financial Statements and Supplementary Data--Note 8 to the Consolidated Financial Statements." For financial information by geographic area, see Item 8 "Financial Statements and Supplementary Data--Note 10 to the Consolidated Financial Statements." Manufacturing Mattel manufactures toy products both in company-owned facilities and through independent contractors. Products are also purchased from unrelated entities that design, develop and manufacture the products. In order to provide greater flexibility in the manufacture and delivery of products, and as part of a continuing effort to reduce manufacturing costs, Mattel has concentrated production of most of its core products in Mattel's facilities and generally uses independent contractors for the production of non-core products. 3

Mattel's principal manufacturing facilities are located in China, Indonesia, Italy, Malaysia, Mexico and Thailand. Mattel also utilizes independent contractors to manufacture products in the US, Europe, Mexico, the Far East and Australia. To help avoid disruption of its product supply due to political instability, civil unrest, economic instability, changes in government policies and other risks, Mattel produces many of its key products in more than one facility. During 1999, Mattel closed three of its higher-cost manufacturing facilities and in 2001 announced plans to close a distribution and manufacturing facility in Murray, Kentucky. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--2000 Financial Realignment Plan and 1999 Restructuring and Other Charges" and Item 8 "Financial Statements and Supplementary Data--Note 9 to the Consolidated Financial Statements." Mattel believes that its existing production capacity at its own and its independent contractors' manufacturing facilities is sufficient to handle expected volume in the foreseeable future. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Factors That May Affect Future Results." Mattel bases its production schedules for toy products on customer orders, taking into account historical trends, results of market research and current market information. Actual shipments of products ordered and order cancellation rates are affected by consumer acceptance of product lines, strength of competing products, marketing strategies of retailers and overall economic conditions. Unexpected changes in these factors could result in a lack of product availability or excess inventory in a particular product line. The foreign countries in which most of Mattel's products are manufactured (principally China, Indonesia, Thailand, Malaysia and Mexico) all enjoy permanent "normal trade relations" ("NTR") status under US tariff laws, which provides a favorable category of US import duties. China's NTR status became permanent on January 1, 2002, following enactment of a bill authorizing such status upon the country's accession to the World Trade Organization, which occurred in December 2001. This substantially reduces the possibility of China losing its NTR status, which would result in increased costs for Mattel and others in the toy industry. With the implementation of the Uruguay Round agreement effective January 1, 1995, all US duties on dolls and traditional toys were completely eliminated. Canada also eliminated its tariffs on dolls and most toy categories in 1995, with the exception of certain toy sets and board games that will have their duties eliminated over ten years. Meanwhile, both the European Union and Japan are in the process of implementing Uruguay Round tariff concessions that reduced their tariffs on dolls by 40% and 15%, respectively, as of January 1, 1999, and will lead to the phased elimination of their duties on several other toy categories by January 1, 2004. Virtually all of Mattel's raw materials are available from numerous suppliers but may be subject to fluctuations in price. Mattel has long-term agreements in place with major suppliers that allow the suppliers to pass on only their actual raw material cost increases. Competition and Industry Background Competition in the toy industry is intense and is based primarily on price, quality and play value. Mattel's US Girls and US Boys-Entertainment segments compete with several large toy companies, including Hasbro, Inc., and many smaller toy companies. The US Infant & Preschool market, which includes Fisher-Price, Inc. as one of the leading companies, is more fragmented. In the infant category, competitors include Kids II, V-Tech, Hasbro and The First Years. In the preschool category, competitors include Leap Frog, Hasbro and Learning Curve. In the plush category, competitors include Dan-Dee, Commonwealth and Hasbro. Mattel's International segment competes with global toy companies including Hasbro, Lego, Tomy and Bandai, as well as national and regional toy companies. Foreign national and regional toy markets may include competitors who are strong in a particular toy line or geographical area, but do not compete with Mattel and other international toy companies on a worldwide basis. 4

Seasonality Mattel's business is highly seasonal, with consumers making a large percentage of all toy purchases around the traditional holiday season in the fourth quarter. A significant portion of Mattel's customers' purchasing occurs in the third and fourth quarters in anticipation of such holiday buying. As a result of the seasonal purchasing patterns and production lead times, Mattel's business is subject to risks associated with the underproduction of popular toys and the overproduction of toys that do not match consumer demand. Retailers are also attempting to manage their inventories more tightly, requiring Mattel to ship products closer to the time the retailers expect to sell the products to consumers. These factors increase the risk that Mattel may not be able to meet demand for certain products at peak demand times, or that Mattel's own inventory levels may be adversely impacted by the need to pre- build products before orders are placed. Additionally, as retailers manage their inventories, Mattel experiences cyclical ordering patterns for products and product lines that may cause its sales to vary significantly from period to period. In anticipation of retail sales in the traditional holiday season, Mattel significantly increases its production in advance of the peak selling period, resulting in a corresponding build-up of inventory levels in the first three quarters of the year. Seasonal shipping patterns result in significant peaks in the third and fourth quarters in the respective levels of inventories and accounts receivable, which result in seasonal working capital financing requirements. See "Seasonal Financing." Product Design and Development Through its product design and development group, Mattel regularly refreshes, redesigns and extends existing toy product lines and develops innovative new toy product lines. Mattel's success is dependent on its ability to continue this activity. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--Factors That May Affect Future Results." Product design and development are principally conducted by a group of professional designers and engineers employed by Mattel. Independent toy designers and developers bring concepts and products to Mattel and are generally paid a royalty on the net selling price of products licensed to Mattel. These independent toy designers may also create different products for other toy companies. With respect to new product introductions, Mattel's strategy is to begin production on a limited basis until a product's initial success has been proven in the marketplace. The production schedule is then modified to meet anticipated demand. Mattel further limits its risk by generally having independent contractors manufacture new product lines in order to minimize capital expenditures associated with new product introductions. This strategy has reduced inventory risk and limited the potential loss associated with new product introductions. Mattel devotes substantial resources to product design and development. During the years ended December 31, 2001, 2000 and 1999, Mattel spent approximately $176 million, $180 million and $172 million, respectively, in connection with the design and development of products, exclusive of royalty payments. See Item 8 "Financial Statements and Supplementary Data--Note 12 to the Consolidated Financial Statements." Advertising, Marketing and Sales Mattel supports its product lines with extensive advertising and consumer promotions. Advertising continues at varying levels throughout the year and peaks during the Christmas season. Advertising includes television and radio commercials, and magazine and newspaper advertisements. Promotions include in- store displays, coupons, sweepstakes, merchandising materials and major events focusing on products and tie-ins with various consumer products companies. Mattel has a retail store, American Girl(TM) Place, in Chicago featuring children's products from Mattel's Pleasant Company division. During the years ended December 31, 2001, 2000 and 1999, Mattel spent approximately $662 million (13.8% of net sales), $686 million (14.7% of net sales) and $685 million (14.9% of net sales), respectively, on worldwide advertising and promotion. 5

Mattel's products are sold throughout the world. Products within the Domestic segment are distributed directly to large retailers, including discount and free-standing toy stores, chain stores, department stores, other retail outlets and, to a limited extent, wholesalers. Mass merchandisers, such as Wal-Mart and Target, continue to increase their market share. Products within the International segment are sold directly in Canada and most European, Asian and Latin American countries, and through agents and distributors in those countries where Mattel has no direct presence. During the year ended December 31, 2001, Mattel's three largest customers, Wal-Mart, Toys "R" Us and Target, accounted for approximately 50% of consolidated net sales. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--Factors That May Affect Future Results" and Item 8 "Financial Statements and Supplementary Data--Note 8 to the Consolidated Financial Statements." In the International segment, there is also significant concentration of sales to certain large customers. The customers and the degree of concentration vary depending upon the region or nation. Licenses and Distribution Agreements Mattel has license agreements with third parties that permit Mattel to utilize the trademark, character, or inventions of the licensor in product lines that Mattel manufactures. A number of these licenses relate to product lines that are significant to Mattel's business and operations. An important licensor is Warner Bros., which licenses the Harry Potter(TM) book and movie property for use on Mattel's products. Mattel also has entered into license agreements with, among others: Disney Enterprises, Inc., relating to classic Disney characters such as Mickey Mouse(R), Winnie the Pooh(R) and the Disney Princesses; Sesame Workshop relating to its Sesame Street(R) properties; Viacom International, Inc. relating to its Nickelodeon(R) properties; and Lyons Partnership, L.P. relating to Barney(TM), the purple dinosaur, as well as Barney(TM) for Baby, for infant and preschool toys, feature plush, electronic learning aids, games and puzzles. In November 2001, Mattel entered into a license agreement with Nihon Ad Systems Inc. for the master toy license to the Yu-Gi-Oh!(TM) property worldwide, excluding Asia, for a term of four years, which includes the categories of action figures, vehicles, activity toys, games and puzzles. Royalty expense during the years ended December 31, 2001, 2000 and 1999 was approximately $220 million, $259 million and $220 million, respectively. See "Product Design and Development" and Item 8 "Financial Statements and Supplementary Data--Note 7 to the Consolidated Financial Statements." Mattel also licenses a number of its trademarks, characters and other property rights to others for use in connection with the sale of non-toy products that do not compete with Mattel's products, in particular for consumer software products. Mattel distributes some third party finished products that are independently designed and manufactured. Trademarks, Copyrights, and Patents Most of Mattel's products are sold under trademarks, trade names and copyrights and a number of those products incorporate patented devices or designs. Trade names and trademarks are significant assets of Mattel in that they provide product recognition and acceptance worldwide. Mattel customarily seeks patent, trademark or copyright protection covering its products, and it owns or has applications pending for US and foreign patents covering many of its products. A number of these trademarks and copyrights relate to product lines that are significant to Mattel's business and operations. Mattel believes its rights to these properties are adequately protected, but there can be no assurance that its rights can be successfully asserted in the future or will not be invalidated, circumvented or challenged. 6

Commitments In the normal course of business, Mattel enters into contractual arrangements for future purchases of goods and services to ensure availability and timely delivery, and to obtain and protect Mattel's right to create and market certain products. Certain of these commitments routinely contain provisions for guaranteed or minimum expenditures during the term of the contracts. Current and future commitments for guaranteed payments reflect Mattel's focus on expanding its product lines through alliances with businesses in other industries. As of December 31, 2001, Mattel had outstanding commitments for 2002 purchases of inventory of approximately $121 million. Licensing and similar agreements with terms extending through the year 2010 contain provisions for future guaranteed minimum payments aggregating approximately $379 million. See Item 8 "Financial Statements and Supplementary Data--Note 7 to the Consolidated Financial Statements." Mattel ships products in accordance with delivery schedules specified by its customers, which usually request delivery within three to six months. In the toy industry, orders are subject to cancellation or change at any time prior to shipment. In recent years, a trend toward just-in-time inventory practices in the toy industry has resulted in fewer advance orders and therefore less backlog of orders. Mattel believes backlog orders at any given time may not accurately indicate future sales. Financial Instruments Mattel's results of operations and cash flow may be impacted by exchange rate fluctuations. Mattel seeks to mitigate its exposure to market risk by monitoring its currency exchange exposure for the year and partially or fully hedging such exposure using foreign currency forward exchange and option contracts primarily to hedge its purchase and sale of inventory, and other intercompany transactions denominated in foreign currencies. These contracts generally have maturity dates of up to 18 months. In addition, Mattel manages its exposure through the selection of currencies used for international borrowings and intercompany invoicing. Mattel's results of operations can also be affected by the translation of foreign revenues and earnings into US dollars. Mattel does not trade in financial instruments for speculative purposes. For additional information regarding foreign currency contracts, see "International Segment" above, Item 7a "Quantitative and Qualitative Disclosures About Market Risk" and Item 8 "Financial Statements and Supplementary Data--Note 8 to the Consolidated Financial Statements." Seasonal Financing Mattel's financing of seasonal working capital, as well as that of the industry taken as a whole, typically grows throughout the first half of the year and peaks in the third or fourth quarter, when accounts receivable are at their highest due to increased sales volume, and when inventories are at their highest in anticipation of expected second half sales volume. See "Seasonality." Mattel expects to finance its seasonal working capital requirements for the coming year by using existing and internally generated cash, issuing commercial paper, selling certain trade receivables under one of its committed domestic revolving credit facilities, and using various short- term bank lines of credit. In addition, Mattel avails itself of individual short-term foreign credit lines with a number of banks and enters into agreements with banks of its foreign subsidiaries for non-recourse sales of certain of its foreign subsidiary receivables, which arrangements will be used as needed to finance seasonal working capital requirements of certain foreign subsidiaries. Mattel's domestic unsecured committed revolving credit facility provides $1.0 billion in short-term borrowings from a commercial bank group. This facility was originally executed in 1998 for a term of five years, expiring in 2003. In March 2002, Mattel amended and restated this facility into a $1.060 billion, 3-year facility that expires in 2005 with substantially similar terms and conditions. In first quarter 2001, Mattel renewed its 364-day, $400.0 million unsecured committed credit facility, with essentially the same terms and 7

conditions as the $1.0 billion revolving credit facility. Mattel has elected not to renew this facility when it expires in March 2002, as it believes that cash on hand at the beginning of 2002 and its $1.060 billion domestic unsecured committed revolving credit facility will be sufficient to meet its seasonal working capital requirements in 2002. The unsecured credit facilities and another $200.0 million term loan currently in place require Mattel to meet financial covenants for consolidated debt-to-capital and interest coverage. Currently, Mattel is in compliance with such covenants. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Seasonal Financing" and Item 8 "Financial Statements and Supplementary Data--Note 4 to the Consolidated Financial Statements." To meet seasonal borrowing requirements of certain foreign subsidiaries, Mattel negotiates individual financing arrangements. Foreign credit lines total approximately $368 million. Mattel expects to extend these credit lines through 2002. In the fourth quarter of 2001, Mattel entered into a securitization agreement with a European bank to sell certain receivables of its French and German subsidiaries. Mattel also enters into agreements with banks of its foreign subsidiaries for non-recourse sales of certain of its foreign subsidiary receivables. Mattel believes the amounts available from financing sources outlined above will be adequate to meet its seasonal financing requirements for 2002. Government Regulations Mattel's toy products sold in the US are subject to the provisions of the Consumer Product Safety Act and the Federal Hazardous Substances Act, and may also be subject to the requirements of the Flammable Fabrics Act or the Food, Drug and Cosmetics Act, and the regulations promulgated pursuant to such statutes. The Consumer Product Safety Act and the Federal Hazardous Substances Act enable the Consumer Product Safety Commission to exclude from the market consumer products that fail to comply with applicable product safety regulations or otherwise create a substantial risk of injury, as well as articles that contain excessive amounts of a banned hazardous substance. The Consumer Product Safety Commission may also require the recall and repurchase or repair by the manufacturer of articles that are banned. Similar laws exist in some states and cities and in various international markets. Fisher-Price's car seats are subject to the provisions of the National Highway Transportation Safety Act, which enables the National Highway Traffic Safety Administration to promulgate performance standards for child restraint systems. Fisher-Price conducts periodic tests to ensure that its child restraint systems meet applicable standards. A Canadian agency, Transport Canada, also regulates child restraint systems sold for use in Canada. As with the Consumer Product Safety Commission, the National Highway Transportation Safety Administration and Transport Canada can require the recall and repurchase or repair of products that do not meet their respective standards. In 2001, Fisher-Price announced plans to exit the car seat business. Mattel maintains a quality control program to ensure compliance with various US federal, state and applicable foreign product safety requirements. Notwithstanding the foregoing, there can be no assurance that all of Mattel's products are or will be free from defects or hazard-free. A product recall could have a material adverse effect on Mattel's results of operations and financial condition, depending on the product affected by the recall and the extent of the recall efforts required. A product recall could also negatively effect Mattel's reputation and the sales of other Mattel products. Mattel's advertising is subject to the Federal Trade Commission Act, The Children's Television Act of 1990, the rules and regulations promulgated by the Federal Trade Commission and the Federal Communications Commission as well as laws of certain countries that regulate advertising to children. In addition, Mattel's websites that are directed to children are subject to the Children's Online Privacy Protection Act. Mattel is subject to various other federal, state and local laws and regulations applicable to its business. Mattel believes that it is in substantial compliance with these laws and regulations. 8

Employees The total number of persons employed by Mattel and its subsidiaries at any one time varies because of the seasonal nature of its manufacturing operations. At December 31, 2001, Mattel's total number of employees, including its international operations, was approximately 27,000. Executive Officers of the Registrant The current executive officers of Mattel, all of which are appointed annually by the board of directors and serve at the pleasure of the board, are as follows: Executive Officer Name Age Position Since ---- --- -------- --------- Robert A. Eckert........ 47 Chairman of the Board of Directors and Chief Executive Officer 2000 Matthew C. Bousquette... 43 President, Boys/Entertainment 1999 Thomas A. Debrowski..... 51 Executive Vice President, Worldwide Operations 2000 Joseph F. Eckroth, Jr... 43 Chief Information Officer 2000 Kevin M. Farr........... 44 Chief Financial Officer 1996 Adrienne Fontanella..... 43 President, Girls/Barbie 1999 Neil B. Friedman........ 54 President, Fisher-Price Brands 1999 Alan Kaye............... 48 Senior Vice President, Human Resources 1997 Douglas E. Kerner....... 44 Senior Vice President and Corporate Controller 2001 Robert Normile.......... 42 Senior Vice President, General Counsel and Secretary 1999 William Stavro.......... 62 Senior Vice President and Treasurer 1993 Bryan Stockton.......... 48 Executive Vice President, Business Planning and Development 2000 Mr. Eckert has been Chairman of the Board of Directors and Chief Executive Officer since May 2000. He was formerly President and Chief Executive Officer of Kraft Foods, Inc., the largest packaged food company in North America and a subsidiary of Philip Morris Companies Inc., from October 1997 until May 2000. From 1995 to 1997, Mr. Eckert was Group Vice President of Kraft Foods, Inc. From 1993 to 1995, Mr. Eckert was President of the Oscar Mayer foods division of Kraft Foods, Inc. Mr. Eckert worked for Kraft Foods, Inc. for 23 years prior to joining Mattel. Mr. Bousquette has been President, Boys/Entertainment since March 1999. From May 1998 to March 1999, he was Executive Vice President and General Manager- Boys Toys. From 1995 to 1998, he was General Manager--Boys Toys. He joined Mattel in December 1993 as Senior Vice President-Marketing. Mr. Debrowski has been Executive Vice President, Worldwide Operations, since November 2000. From February 1992 until November 2000, he was Senior Vice President-Operations and a director of The Pillsbury Company. From September 1991 until February 1992, he was Vice President of Operations for The Baked Goods Division of The Pillsbury Company. Prior to that, he served as Vice President and Director of Grocery Operations for Kraft U.S.A. Mr. Eckroth has been Chief Information Officer since July 2000. From July 1998 until July 2000, he was Chief Information Officer of General Electric Company's Medical Systems unit. From November 1995 until June 1998, he served as Chief Information Officer of General Electric Company's Industrial Controls Systems division. Prior to that, he held several senior positions within Operations and Information Technology at the Northrop Grumman Corporation. Mr. Farr has been Chief Financial Officer since February 2000. From September 1996 to February 2000, he was Senior Vice President and Corporate Controller. From June 1993 to September 1996, he served as Vice President, Tax. Prior to that, he served as Senior Director, Taxes from August 1992 to June 1993. 9

Ms. Fontanella has been President, Girls/Barbie since March 1999. From November 1998 to March 1999, she was General Manager and Senior Vice President- Worldwide Barbie Licensing and Collectibles. From February to November 1998, she was Senior Vice-President-Worldwide Barbie Licensing and New Ventures. She joined Mattel in May 1996 as Vice President. Prior to joining Mattel, she held senior positions within the cosmetics industry, including Chairman of January Productions from 1995 to 1996. Mr. Friedman has been President, Fisher-Price Brands since March 1999. From August 1995 to March 1999, he was President-Tyco Preschool. For more than five years prior to that time, he was President of MCA/Universal Merchandising, Executive Vice President and Chief Operating Officer of Lionel Leisure, Inc., and President of Aviva/Hasbro. Mr. Kaye has been Senior Vice President of Human Resources since July 1997. From June 1996 to June 1997 he was President, Texas Division of Kaufman and Broad Homes, a home building company. From June 1991 to June 1996, he served as Senior Vice President, Human Resources for Kaufman and Broad Homes. Prior to that he worked for two years with the Hay Group, a compensation consulting firm and for 12 years with IBM in various Human Resources positions. Mr. Kerner has been Senior Vice President and Corporate Controller since April 2001, when he joined Mattel. Prior to joining Mattel, he served as Executive Vice President, Finance, of Premier Practice Management, Inc. from November 1998 to March 2001. From February to June 1998, he worked for FPA Medical Management, Inc., most recently serving as Vice President, Treasurer and Acting Chief Financial Officer. From 1991 to 1997 he worked for Total Petroleum (North America) Ltd., most recently as Vice President & Treasurer. Mr. Normile has been Senior Vice President, General Counsel and Secretary since March 1999. He served as Vice President, Associate General Counsel and Secretary from August 1994 to March 1999. From June 1992 to August 1994, he served as Assistant General Counsel. Prior to that, he was associated with the law firms of Latham & Watkins and Sullivan & Cromwell. Mr. Stavro has been Senior Vice President and Treasurer since May 1995. From November 1993 to May 1995, he was Vice President & Treasurer. From March 1992 to November 1993, he was Vice President & Assistant Treasurer. Prior to that, he was Assistant Treasurer for more than five years. Mr. Stockton has been Executive Vice President, Business Planning and Development, since November 2000. From April 1998 until November 2000, he was President and Chief Executive Officer of Basic Vegetable Products, the largest manufacturer of vegetable ingredients in the world. For more than five years prior to that, he was employed by Kraft Foods, Inc., the largest packaged food company in North America, and was President of Kraft North American Food Service from August 1996 to March 1998. Mr. Stockton worked for Kraft Foods, Inc. for 22 years. Item 2. Properties Mattel owns its corporate headquarters in El Segundo, California, consisting of 335,000 square feet, which is subject to a $42 million mortgage, and an adjacent 55,000 square foot office building. Mattel also leases buildings in El Segundo consisting of approximately 327,000 square feet. All segments use these facilities. Mattel's Fisher-Price subsidiary owns its headquarters facilities in East Aurora, New York, consisting of approximately 535,000 square feet, which is used by the US Infant & Preschool segment. Pleasant Company owns its headquarters facilities in Middleton, Wisconsin, consisting of approximately 420,000 square feet, which is used by the US Girls segment. Mattel maintains leased sales offices in California, Illinois, New York, North Carolina, Arkansas, Michigan, Georgia and Texas used by the Domestic segment and leased warehouse and distribution facilities in California, Kentucky, New Jersey, Wisconsin and Texas, all of which are used by the Domestic segment. Mattel 10

owns a computer facility in Phoenix, Arizona used by all segments. Internationally, Mattel has its principal offices and/or warehouse space in Australia, Brazil, Canada, Chile, France, Germany, Hong Kong, Italy, Mexico, The Netherlands, Spain, and the United Kingdom, all of which are leased and which are used by the International segment. Mattel's principal manufacturing facilities are located in China, Indonesia, Italy, Malaysia, Mexico and Thailand. See Item 1 "Business--Manufacturing." With respect to leases that are scheduled to expire during the next twelve months, Mattel may negotiate new lease agreements, renew leases or utilize alternative facilities. See Item 8 "Financial Statements and Supplementary Data--Note 7 to the Consolidated Financial Statements." Mattel believes that its owned and leased facilities, in general, are suitable and adequate for its present and currently foreseeable needs. Item 3. Legal Proceedings See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--Litigation" and Item 8 "Financial Statements and Supplementary Data--Note 7 to the Consolidated Financial Statements." Item 4. Submission of Matters to a vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. 11

PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters For information regarding the markets in which Mattel's common stock, par value $1.00 per share, is traded, see the cover page hereof. For information regarding the high and low closing prices of the common stock for the last two calendar years, see Item 8 "Financial Statements and Supplementary Data--Note 11 to the Consolidated Financial Statements." As of March 22, 2002, Mattel had approximately 49,000 holders of record of its common stock. Mattel paid dividends on its common stock of $0.08 per share in January and April 1999, and $0.09 per share in July and October 1999 and January, April, July and October of 2000. As part of its financial realignment plan, Mattel announced during the third quarter of 2000 a change in its dividend policy consisting of a reduction in the annual cash dividend from $0.36 per share to $0.05 per share. In 2001, a $0.05 per share dividend was declared by the board of directors in November and paid in December. The payment of dividends on common stock is at the discretion of Mattel's board of directors and is subject to statutory and customary limitations. 12

Item 6. Selected Financial Data For the Year Ended December 31, (a)(b) ---------------------------------------------------------- 2001 2000 1999 1998 1997 ---------- ---------- ---------- ---------- ---------- (In thousands, except per share and percentage information) Operating Results: Net sales............... $4,804,062 $4,669,942 $4,595,490 $4,698,337 $4,778,663 Gross profit............ 2,266,884 2,100,785 2,182,021 2,309,795 2,364,085 % of net sales........ 47.2% 45.0% 47.5% 49.2% 49.5% Operating profit (c).... 585,142 378,403 301,773 570,279 515,212 % of net sales........ 12.2% 8.1% 6.6% 12.1% 10.8% Income from continuing operations before income taxes, cumulative effect of change in accounting principles and extraordinary item..... 430,010 225,424 170,164 459,446 425,082 Provision for income taxes.................. 119,090 55,247 61,777 131,193 135,288 Income from continuing operations before cumulative effect of change in accounting principles and extraordinary item..... 310,920 170,177 108,387 328,253 289,794 Loss from discontinued operations (a)......... -- (601,146) (190,760) (122,200) (467,905) Cumulative effect of change in accounting principles............. (12,001) -- -- -- -- Extraordinary item-loss on early retirement of debt................... -- -- -- -- (4,610) Net income (loss)....... 298,919 (430,969) (82,373) 206,053 (182,721) Income (Loss) Per Common Share (d): Income (loss) per common share--Basic Income from continuing operations........... 0.72 0.40 0.25 0.82 0.76 Loss from discontinued operations (a)....... -- (1.41) (0.46) (0.31) (1.27) Cumulative effect of change in accounting principles........... (0.03) -- -- -- -- Extraordinary item.... -- -- -- -- (0.01) Net income (loss)..... 0.69 (1.01) (0.21) 0.51 (0.52) Income (loss) per common share--Diluted Income from continuing operations........... 0.71 0.40 0.25 0.76 0.74 Loss from discontinued operations (a)....... -- (1.41) (0.45) (0.29) (1.24) Cumulative effect of change in accounting principles........... (0.03) -- -- -- -- Extraordinary item.... -- -- -- -- (0.01) Net income (loss)..... 0.68 (1.01) (0.20) 0.47 (0.51) Dividends Declared Per Common Share (d)....... 0.05 0.27 0.35 0.31 0.27 As of Year End (a)(b) ---------------------------------------------------------- 2001 2000 1999 1998 1997 ---------- ---------- ---------- ---------- ---------- (In thousands) Financial Position: Total assets............ $4,540,561 $4,313,397 $4,673,964 $4,612,770 $3,915,059 Long-term liabilities... 1,205,122 1,407,892 1,145,856 1,124,756 808,297 Stockholders' equity.... 1,738,458 1,403,098 1,962,687 2,170,803 1,933,338 - -------- (a) Financial data for 1997 through 1999 reflect the retroactive effect of the merger, accounted for as a pooling of interests, with The Learning Company, Inc. ("Learning Company") in May 1999. As more fully described in Note 13 to the Consolidated Financial Statements, the Consumer Software segment, which was comprised primarily of Learning Company, was reported as a discontinued operation effective 13

March 31, 2000, and the consolidated financial statements were reclassified to segregate the net investment in, and the liabilities and operating results of the Consumer Software segment. (b) Consolidated financial information for 1997 has been restated retroactively for the effects of the March 1997 merger with Tyco Toys, Inc. ("Tyco"), accounted for as a pooling of interests. (c) Represents income from continuing operations before interest expense and provision for income taxes. (d) Per share data reflect the retroactive effect of the mergers with Learning Company and Tyco in 1999 and 1997, respectively. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Factors That May Affect Future Results (Cautionary Statement Under the Private Securities Litigation Reform Act of 1995) Certain written and oral statements made or incorporated by reference from time to time by Mattel or its representatives in this Annual Report on Form 10- K, other filings or reports filed with the Securities and Exchange Commission, press releases, conferences, or otherwise, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and may include, but are not limited to, statements about sales levels, restructuring, special charges, other non-recurring charges, cost savings, operating efficiencies and profitability. Mattel is including this Cautionary Statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any such forward- looking statements. Forward-looking statements include any statement that may predict, forecast, indicate, or imply future results, performance, or achievements. Forward-looking statements can be identified by the use of terminology such as "believe," "anticipate," "expect," "estimate," "may," "will," "should," "project," "continue," "plans," "aims," "intends," "likely," or other similar words or phrases. Management cautions you that forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. In addition to the important factors detailed herein and from time to time in other reports filed by Mattel with the Securities and Exchange Commission, including Forms 8-K, 10- Q and 10-K, the following important factors could cause actual results to differ materially from past results or those suggested by any forward-looking statements. Competition and New Product Introductions Mattel's business and operating results depend largely upon the appeal of its toy products. Consumer preferences are continuously changing. In recent years there have been trends towards shorter life cycles for individual products, the phenomenon of children outgrowing toys at younger ages-- particularly in favor of interactive and high technology products--and an increasing use of high technology in toys. In addition, Mattel competes with many other companies, both large and small, which means that Mattel's market position is always at risk. Mattel's ability to maintain its current market share, and increase its market share or establish market share in new product categories, will depend on Mattel's ability to satisfy consumer preferences, enhance existing products, develop and introduce new products, and achieve market acceptance of such products. If Mattel does not successfully meet these challenges in a timely and cost-effective manner, demand for its products will decrease and Mattel's results of operations will suffer. Seasonality, Managing Production and Predictability of Orders Mattel's business is subject to risks associated with the underproduction of popular toys and the overproduction of toys that do not match consumer demand. Sales of toy products at retail are seasonal, with a majority of retail sales occurring during the period from September through December. As a result, Mattel's annual operating results will depend, in large part, on sales during the relatively brief holiday season. Retailers are attempting to manage their inventories better, requiring Mattel to ship products closer to the time the retailers expect to sell the products to consumers. This in turn results in shorter lead times for production. 14

Shortages of raw materials or components also may affect Mattel's ability to produce products in time to meet retailer demand. These factors increase the risk that Mattel may not be able to meet demand for certain products at peak demand times, or that Mattel's own inventory levels may be adversely impacted by the need to pre-build products before orders are placed. Adverse General Economic Conditions Mattel's results of operations may be negatively affected by adverse changes in general economic conditions in the US and internationally, including adverse changes in the retail environment. These adverse changes may be as a result of softening global economies, wavering consumer confidence caused by the threat or occurrence of terrorist attacks such as those in the US on September 11, 2001, or other factors affecting economic conditions generally. Such changes may negatively affect the sales of Mattel's products, increase exposure to losses for bad debt, or increase costs associated with manufacturing and distributing these products. Customer Concentration A small number of Mattel's customers account for a large share of net sales. For the year ended December 31, 2001, Mattel's three largest customers, Wal- Mart, Toys "R Us and Target, in the aggregate accounted for approximately 50% of net sales, and the ten largest customers in the aggregate accounted for approximately 64% of net sales. The concentration of Mattel's business with a relatively small number of customers may expose Mattel to a material adverse effect if one or more of Mattel's large customers were to significantly reduce purchases for any reason. In addition, some large chain retailers have begun to sell private-label toys designed and branded by the retailers themselves. Such toys may be sold at prices lower than comparable toys sold by Mattel, and may result in lower purchases of Mattel-branded products by such retailers. Rationalization of Mass Market Retail Channel and Bankruptcy of Key Customers Many of Mattel's key customers are mass market retailers. The mass market retail channel has experienced significant shifts in market share among competitors in recent years, causing some large retailers to experience liquidity problems. In 2001 and 2002, two large customers of Mattel filed for bankruptcy. Mattel's sales to customers are typically made on credit without collateral. There is a risk that customers will not pay, or that payment may be delayed, because of bankruptcy or other factors beyond the control of Mattel. This could increase Mattel's exposure to losses from bad debts. In addition, if these or other customers were to cease doing business as a result of bankruptcy, it could have a material adverse affect on Mattel's business, financial condition and results of operations. Litigation and Disputes Mattel is involved in a number of litigation matters, including purported securities class action claims stemming from the merger with The Learning Company and the performance of the Learning Company division in the second half of 1999. An unfavorable resolution of the pending litigation could have a material adverse effect on Mattel's financial condition. The litigation may result in substantial costs and expenses and significantly divert the attention of Mattel's management regardless of the outcome. There can be no assurance that Mattel will be able to achieve a favorable settlement of the pending litigation or obtain a favorable resolution of such litigation if it is not settled. In addition, current and future litigation, governmental proceedings, labor disputes or environmental matters could lead to increased costs or interruptions of normal business operations of Mattel. Protection of Intellectual Property Rights The value of Mattel's business depends to a large degree on its ability to protect its intellectual property, including its trademarks, trade names, copyrights, patents and trade secrets in the US and around the world. 15

Any failure by Mattel to protect its proprietary intellectual property and information, including any successful challenge to Mattel's ownership of its intellectual property or material infringements of such property, could have a material adverse effect on Mattel's business, financial condition and results of operations. Political Developments, including Trade Relations, and the Threat or Occurrence of Terrorist Activities Mattel's business is worldwide in scope, including operations in 36 countries. The deterioration of the political situation in a country in which Mattel has significant sales or operations, or the breakdown of trade relations between the US and a foreign country in which Mattel has significant manufacturing facilities or other operations, could adversely affect Mattel's business, financial condition and results of operations. For example, a change in trade status for China could result in a substantial increase in the import duty of toys manufactured in China and imported into the US. In addition, the occurrence or threat of terrorist activities, and the responses to and results of such activities, could materially impact Mattel, its personnel and facilities, its customers and suppliers, retail and financial markets and general economic conditions. Manufacturing Risk Mattel owns and operates manufacturing facilities and utilizes third-party manufacturers throughout Asia, primarily in China, Indonesia, Malaysia and Thailand. A risk of political instability and civil unrest exists in these countries, which could temporarily or permanently damage Mattel's manufacturing operations located there. Mattel's business, financial position and results of operations would be negatively impacted by a significant disruption to its manufacturing operations or suppliers. Financial Realignment Plan Mattel announced a significant financial realignment plan in 2000, which was designed to improve gross margins; selling and administrative expenses; operating profit; and cash flow. See "2000 Financial Realignment Plan" and Item 8 "Financial Statements and Supplementary Data--Note 9 to the Consolidated Financial Statements." The financial realignment plan requires substantial management and financial resources to implement. The plan may not achieve intended cost reductions or adequately address significant operating issues. The failure of the plan to meet its objectives in whole or in part, or any delay in implementing the plan, could have a material adverse effect on Mattel's business, financial condition and results of operations. In 2002, as part of the financial realignment plan, Mattel will commence a long-term information technology strategy to help it better manage the business, while lowering costs in procurement, finance, distribution and manufacturing. The failure of this program to meet its objectives in whole or in part, or any delay in implementing the program, could have a material adverse effect on Mattel's business, financial condition and results of operations. Financing Matters Increases in interest rates, both domestically and internationally, could negatively affect Mattel's cost of financing both its operations and investments. Foreign currency exchange fluctuations may affect Mattel's reportable income. Reductions in Mattel's credit ratings may negatively impact the cost of satisfying Mattel's financing requirements. Advertising and Promotion Mattel's products are marketed worldwide through a diverse spectrum of advertising and promotional programs. Mattel's ability to sell products is dependent in part upon the success of such programs. If Mattel does not successfully market its products or if media or other advertising or promotional costs increase, these factors could have a material adverse affect on Mattel's business, financial condition and results of operations. 16

Success of New Initiatives Mattel has announced initiatives to improve the execution of its core business, globalize and extend Mattel's brands, catch new industry trends and develop employees. Successful implementation of Mattel's initiatives will require substantial resources and the attention of Mattel's management team. Failure to successfully implement any of these initiatives could have a material adverse effect on Mattel's business, financial condition and results of operations. Changes in Laws and Regulations Mattel operates in a highly regulated environment in the US and internationally. US federal, state and local governmental entities and foreign governments regulate many aspects of Mattel's business including its products and the importation and export of its products. Such regulations may include taxes, trade restrictions, regulations regarding financial matters, environmental regulations and other administrative and regulatory restrictions. Changes in laws or regulations may lead to increased costs or the interruption of normal business operations. Acquisition, Dispositions and Takeover Defenses Mattel may engage in acquisitions, mergers or dispositions, which may affect the profit, revenues, profit margins, debt-to-equity ratios, capital expenditures, or other aspects of Mattel's business. In addition, Mattel has certain anti-takeover provisions in its charter and by-laws that may make it more difficult for a third party to acquire Mattel without its consent, which may adversely affect Mattel's stock price. If any of the risks and uncertainties described in the cautionary factors listed above actually occur, Mattel's business, financial condition and results of operations could be materially and adversely affected. The factors listed above are not exhaustive. Other sections of this Annual Report on Form 10-K include additional factors that could materially and adversely impact Mattel's business, financial condition and results of operations. Moreover, Mattel operates in a very competitive and rapidly changing environment. New factors emerge from time to time and it is not possible for management to predict the impact of all such factors on Mattel's business, financial condition or results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward- looking statements. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in this Annual Report on Form 10-K and any other public statement made by Mattel or its representatives may turn out to be wrong. Mattel expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise. Summary The following discussion should be read in conjunction with the consolidated financial statements and the related notes. See Item 8 "Financial Statements and Supplementary Data." Mattel's consolidated financial statements for all periods present the Consumer Software segment as a discontinued operation. See "Discontinued Operations." Unless otherwise indicated, the following discussion relates only to Mattel's continuing operations. Additionally, the segment and brand category information was restated from the prior year presentation to conform to the current management structure. See "Business Segment Results." Mattel designs, manufactures, and markets a broad variety of toy products on a worldwide basis through both sales to retailers (i.e., "customers") and direct to consumers. Mattel's business is dependent in great part on its ability each year to redesign, restyle and extend existing core products and product lines, to design and develop innovative new products and product lines, and to successfully market those products and product lines. Mattel plans to continue to focus on its portfolio of traditional brands that have historically had worldwide sustainable appeal, to create new brands utilizing its knowledge of children's play patterns and to 17

target customer and consumer preferences around the world. Mattel also intends to expand its core brands through the Internet, and licensing and entertainment partnerships. Mattel's portfolio of brands and products are grouped in the following categories: Girls--including Barbie(R) fashion dolls and accessories, collector dolls, Polly Pocket!(R), Diva Starz(TM), What's Her Face!(TM) and American Girl(R) Boys-Entertainment--including Hot Wheels(R), Matchbox(R), Hot Wheels(R) Electric Racing, and Tyco(R) Radio Control vehicles and playsets (collectively "Wheels"), and Disney, Nickelodeon(R), Harry Potter(TM), Max Steel(TM), and games and puzzles (collectively "Entertainment") Infant & Preschool--including Fisher-Price(R), Power Wheels(R), Sesame Street(R), Disney preschool and plush, Winnie the Pooh(R), Blue's Clues(R), See "N Say(R), Magna Doodle(R), and View-Master(R) Results of Continuing Operations 2001 Compared to 2000 Consolidated Results Net income from continuing operations for 2001 was $310.9 million or $0.71 per diluted share as compared to net income from continuing operations of $170.2 million or $0.40 per diluted share in 2000. Profitability in 2001 was negatively impacted by $50.2 million of charges related to the financial realignment plan and a $5.5 million charge related to a pre-tax loss on derivative instruments. The combined effect of these items resulted in pre-tax charges totaling $55.7 million, approximately $41 million after-tax or $0.10 per diluted share. Profitability in 2000 was negatively impacted by a $125.2 million pre-tax charge related to the initial phase of the financial realignment plan, a $53.1 million pre-tax charge for the departure of certain senior executives in the first quarter, and an $8.4 million pre-tax charge related to losses realized on the disposition of a portion of the stock received as part of the sale of CyberPatrol. These charges were partially offset by a $7.0 million reversal of the 1999 reserve related to restructuring and other charges. The combined effect of these items resulted in net pre-tax charges totaling $179.7 million, approximately $123 million after-tax or $0.29 per diluted share. The following table provides a comparison of the reported results and the results excluding charges (in millions): For the Year ----------------------------------------------------- 2001 2000 -------------------------- -------------------------- Reported Results Reported Results Results Charges Ex. Chgs Results Charges Ex. Chgs -------- ------- -------- -------- ------- -------- Net sales........................ $4,804.1 $ -- $4,804.1 $4,669.9 $ -- $4,669.9 ======== ====== ======== ======== ======= ======== Gross profit..................... $2,266.9 $(28.2) $2,295.1 $2,100.8 $ (78.6) $2,179.4 Advertising and promotion expenses........................ 661.5 0.3 661.2 685.9 4.8 681.1 Other selling and administrative expenses........................ 936.1 1.5 934.6 967.0 59.0 908.0 Amortization of intangibles...... 51.1 -- 51.1 52.0 0.5 51.5 Restructuring and other charges.. 15.7 15.7 -- 15.9 15.9 -- Other expense (income), net...... 17.4 10.0 7.4 1.6 20.9 (19.3) -------- ------ -------- -------- ------- -------- Operating income................. 585.1 (55.7) 640.8 378.4 (179.7) 558.1 Interest expense................. 155.1 -- 155.1 153.0 -- 153.0 -------- ------ -------- -------- ------- -------- Income from continuing operations before income taxes............. $ 430.0 $(55.7) $ 485.7 $ 225.4 $(179.7) $ 405.1 ======== ====== ======== ======== ======= ======== 18

The year 2001 presented substantial obstacles for Mattel. Global economies softened; the September 11th terrorist attacks eroded US consumer confidence; and as a result, several important US retailers cancelled holiday reorders as they intensified their focus on inventory management in light of uncertain consumer spending prospects. The difficult retail environment, combined with increased competitive pressures, resulted in a weakening in the financial strength of some major US retail industry participants. Kmart, the second largest US retailer, filed for bankruptcy in January 2002. On March 8, 2002, Kmart announced plans to close 284 stores. This action will likely have a negative impact on Mattel's US sales growth in 2002. Net sales from continuing operations for 2001 increased 3% to $4.8 billion, from $4.7 billion in 2000. In local currency, net sales were up 4% compared to 2000. Net sales within the US declined less than 1% from 2000 and accounted for 69% of consolidated net sales in 2001 compared to 71% in 2000. In 2001, net sales outside the US increased 11% from 2000. Excluding the unfavorable foreign currency exchange impact, international net sales increased 13% compared to 2000. Worldwide gross sales in the Girls category, which includes American Girl(R), increased 3%, or 4% in local currency, to $2.2 billion. Domestic sales declined by 4%, while international sales increased by 17%, or 20% in local currency. The growth in the Girls category was driven by Polly Pocket!(R), Diva Starz(TM), What's Her Face!(TM), American Girl(R) and international sales of Barbie(R). Worldwide Barbie(R) sales decreased 3% in both US dollars and in local currency. Barbie(R) sales in the US declined 12% in 2001 as compared to the strong growth recorded last year, when sales increased 9% over 1999. The decline in US Barbie(R) sales was largely due to lower shipments of Holiday Celebration(TM) Barbie(R) in response to lower demand at retail, lower sales of adult-targeted collector dolls resulting from a weakening retail climate for higher-priced collectible items, and continuing inventory management by retailers. International sales for Barbie(R) were up 12%, or 15% in local currency, reflecting the benefit of early product availability and stronger alignment of worldwide sales and marketing plans. Worldwide gross sales in the Boys-Entertainment category grew 6%, or 7% in local currency, to $1.3 billion. Domestic sales grew by 2%, while international sales increased by 13%, or 16% in local currency. The worldwide Wheels business increased 1% due to a 9% sales growth in Hot Wheels(R) products, which was partially offset by declines in the Matchbox(R) and Tyco(R) Radio Control brands. The Entertainment business grew 14%, largely due to the global introduction of Harry Potter(TM) products. Sales generated by the Harry Potter(TM) brand more than offset the decline of the Disney entertainment business, which will be completely phased out in 2002. In second quarter 2001, Mattel expanded its games business through the acquisition of Pictionary(R) Inc. ("Pictionary(R)"), worldwide owner of the Pictionary(R) game brand and associated rights. Beginning in January 2002, Mattel will manufacture, market and distribute Pictionary(R) to international markets. In the US and Canada, Mattel is the licensor of the property through an independent contractor. Worldwide sales in the Infant & Preschool category were $1.6 billion, down 1% both in US dollars and in local currency. Domestic sales were flat, while international sales decreased 4%, or 3% in local currency. Growth in sales of core Fisher-Price(R) and Power Wheels(R) products was offset by a decline in licensed character brands. In 2001, Mattel executed a worldwide license agreement to sell Barney(TM) products, the full impact of which will be included in 2002 sales of licensed character brands. Gross profit, as a percentage of net sales, was 47.2% in 2001 compared to 45.0% in 2000. Cost of sales in 2001 includes a $28.2 million charge, largely related to accelerated depreciation resulting from the planned closure of the Murray, Kentucky manufacturing facility ("North American Strategy") and termination of a licensing agreement as part of the financial realignment plan. Cost of sales in 2000 includes a $78.6 million charge related to the termination of a variety of licensing agreements and other contractual arrangements and elimination of product lines that did not deliver an adequate level of profitability. Excluding the financial realignment plan charges, gross profit, as a percentage of net sales, was up by 110 basis points to 47.8% in 2001 versus 46.7% a year ago. Gross profit was positively impacted by savings realized from the financial realignment plan and lower product costs achieved through the supply chain initiative, partially offset by the negative impact of foreign exchange. The supply chain initiative has focused on improving customer service 19

levels by partnering with retailers to get the right products in the right place at the right time, lowering costs by restructuring Mattel's manufacturing and distribution facilities, and improving processes such as launching fewer new SKU's by taking advantage of multi-lingual packaging. The multi-lingual packaging provides Mattel with increased distribution options for any given toy. Advertising and promotion expense was 13.8% of net sales for 2001, compared to 14.7% in 2000. Advertising and promotion expense for 2001 and 2000 includes $0.3 million and $4.8 million of charges, respectively, largely related to exiting certain product lines. Excluding these financial realignment charges, advertising and promotion expenses, as a percentage of net sales, declined from 14.6% in 2000 to 13.8% in 2001, largely due to lower prices charged by media companies on a cost per rating point basis. Mattel's 2001 media plan was actually stronger than last year's in terms of gross rating points. Mattel expects media costs for 2002 will remain at approximately the same level for the first half of the year, and will likely increase towards the second half of the year. Beginning in 2002, advertising and promotion expenses related to certain customer benefits will be recorded as an adjustment to net sales in accordance with Emerging Issues Task Force ("EITF") No. 01-09, Accounting for Consideration Given by a Vendor to a Customer. Prior years' results will be retroactively restated to reflect this change. See "New Accounting Pronouncements." Other selling and administrative expenses were $936.1 million or 19.5% of net sales in 2001 compared to $967.0 million or 20.7% of net sales in 2000. Other selling and administrative expenses in 2001 includes a $22.1 million charge recorded in the fourth quarter related to the bankruptcy filing of Kmart and a $1.5 million charge related to streamlining back office functions as part of the financial realignment plan. The $22.1 million charge for the Kmart bankruptcy represents approximately one-half of Mattel's outstanding pre- petition account receivable after offsetting customer benefits, which Mattel believes it is no longer obligated to pay to Kmart under the terms of its customer agreement. Mattel's remaining pre-petition account receivable from Kmart, after offsetting the reserve for bad debts and reserves for customer benefits that were not earned by Kmart, is $36.2 million. To estimate the net realizable value of the Kmart pre-petition account receivable, management considered the post-petition market price for the Kmart bank debt, bonds and trade receivables. Other selling and administrative expenses for 2000 includes a $5.9 million charge related to settlement of certain litigation matters and a $53.1 million charge related to termination costs for the departure of senior executives. Excluding the aforementioned charges, other selling and administrative expenses declined from 19.4% of net sales in 2000 to 19.0% of net sales in 2001. The improvement in other selling and administrative expenses, excluding the charges, is largely due to tight management of costs, savings realized from the financial realignment plan, and a reduction in management bonuses, partially offset by increased bad debt charges. Other expense (income), net in 2001 includes a $5.5 million loss on derivative instruments and $4.5 million of charges primarily related to asset writedowns and other costs associated with implementing the North American Strategy. Other expense (income), net in 2000 includes $12.5 million of charges primarily related to the writeoff of certain noncurrent assets and an $8.4 million charge related to losses realized on the disposition of a portion of the stock received as part of the sale of CyberPatrol. Excluding these charges, other expense (income), net decreased from income of $19.3 million in 2000 to expense of $7.4 million in 2001. The decline was primarily due to unfavorable foreign exchange, lower investment income and increased charitable contributions. Interest expense was $155.1 million in 2001 compared with $153.0 million in 2000. The increase was due to the allocation in 2000 of $36.4 million in interest to discontinued operations. In 2001, lower average borrowing rates and lower short-term seasonal borrowings resulted in a decrease in interest expense. For 2002, Mattel expects interest expense to decrease slightly compared to 2001, reflecting the anticipated lower average borrowings combined with increasing short-term interest rates beginning mid-year as Mattel moves towards its peak borrowing period for seasonal working capital financing. 20

Business Segment Results Mattel's reportable segments are separately managed business units and are divided on a geographic basis between domestic and international. The domestic segment is further divided into US Girls, US Boys-Entertainment, and US Infant & Preschool. The US Girls segment includes brands such as Barbie(R), Polly Pocket!(R), Diva Starz(TM), What's Her Face!(TM) and American Girl(R). The US Boys-Entertainment segment includes Hot Wheels(R), Matchbox(R), Hot Wheels(R) Electric Racing and Tyco(R) Radio Control (collectively "Wheels"), and Disney, Nickelodeon(R), Harry Potter(TM), Max Steel(TM) and games and puzzles (collectively "Entertainment") products. The US Infant & Preschool segment includes Fisher-Price(R), Disney preschool and plush, Power Wheels(R), Sesame Street(R) and other preschool products. The International segment sells products in all toy categories. Mattel's segments were revised in January 2001 to conform to the current management structure. Specifically, the results of Pleasant Company, which had been previously reported as part of Other, are now being reported as part of US Girls, which is consistent with management responsibility for this business. Additionally, Mattel's toy manufacturing unit is now being managed as a cost center instead of as a profit center; therefore, toy manufacturing is no longer being reported as a separate segment. Lastly, certain overhead costs incurred at the headquarters' level in El Segundo, including facilities, information technology, and other administration support costs, are now being allocated to the US Girls and US Boys-Entertainment segments, to more accurately reflect the costs associated with operating these businesses. These types of overhead costs were already being reported as part of the US Infant & Preschool and International segments since these businesses maintain their own, separate headquarters locations. All prior periods have been restated to reflect these changes. As used in this Form 10-K, "sales" or "gross sales" means sales excluding the impact of sales adjustments, such as trade discounts or other allowances. "Net sales" includes the impact of such sales adjustments. Business Segment Results should be read in conjunction with Item 8 "Financial Statements and Supplementary Data--Note 10 to the Consolidated Financial Statements." US Girls segment sales decreased by 4% in 2001 compared to 2000. A 12% decline in Barbie(R) sales was partially offset by increased sales of Polly Pocket!(R), Diva Starz(TM), What's Her Face!(TM) and American Girl(R). The decrease in US Barbie(R) sales compared to 2000 was primarily due to lower shipments of Holiday Celebration(TM) Barbie(R) in response to lower demand at retail, lower sales of adult-targeted collector dolls resulting from a weakening retail climate for higher-priced collectible items, and continuing inventory management by retailers. US Boys-Entertainment segment sales increased 2%. The US Entertainment business grew 6%, largely due to increased sales of Harry Potter(TM) products. The US Wheels business was flat with last year as increased sales of Hot Wheels(R) products were offset by declines in Tyco(R) Radio Control and Matchbox(R). US Infant & Preschool segment sales were flat with 2000. Growth in sales of core Fisher-Price(R) and Power Wheels(R) products was offset by a decline in sales of licensed character brand products. Management believes the difficult retail environment, especially combined with the events of September 11, 2001, caused its retail customers to curtail their orders across all of the US segments during the fourth quarter, resulting in an 8% decline in total US sales for the fourth quarter. However, despite weaker- than-expected shipments to retailers, all of Mattel's major brands showed strength with consumers and posted sales increases at retail. According to NPD industry data for toy sales at the consumer level, Mattel gained market share in the US in dolls, vehicles, action figures, games and puzzles and core infant and preschool categories. Mattel's market share of total traditional toys grew 1.2 percentage points to 23.5% in the US. International segment sales increased by 10% in 2001 compared to 2000. Excluding the unfavorable foreign exchange impact, sales grew by 13% due to double digit growth in Barbie(R), Polly Pocket!(R), core Fisher-Price(R) and Hot Wheels(R) products combined with the expansion of Diva Starz(TM) and Harry Potter(TM) products. Mattel also recorded strong market share gains outside the US, with market share growing in the five major European markets, as well as in Canada, Mexico and Australia. Improved product availability, better alignment of worldwide marketing and sales plans and strong product launches were the primary drivers for the growth in International segment sales and market share. 21

Operating profit in the US Girls segment decreased by 2%, primarily due to lower sales volume. Operating profit in the US Boys-Entertainment segment increased 39%, primarily due to increased sales volume and improved margins. Operating profit in the US Infant & Preschool segment increased 2%, primarily due to improved margins, partially offset by higher selling and administrative expenses to support certain new product lines. All the US segments benefited from lower costs per rating point for media purchases. The International segment operating profit increased 26%, largely due to increased sales volume and improved margins, partially offset by lower operating profit in certain Latin American countries and unfavorable foreign exchange. In Latin America, Mattel has appointed a new management team with the goal of converting sales growth into increased cash flow and profitability in this region. 2000 Compared to 1999 Consolidated Results Net income from continuing operations for 2000 was $170.2 million or $0.40 per diluted share as compared to net income from continuing operations of $108.4 million or $0.25 per diluted share in 1999. Profitability in 2000 was negatively impacted by a $125.2 million pre-tax charge related to the initial phase of the financial realignment plan, a $53.1 million pre-tax charge for the departure of certain senior executives in the first quarter, and an $8.4 million pre-tax charge related to losses realized on the disposition of a portion of the stock received as part of the sale of CyberPatrol. These charges were partially offset by a $7.0 million reversal of the 1999 reserve related to restructuring and other charges. The combined effect of theses items, resulted in a pre-tax net charge of $179.7 million, approximately $123 million after-tax or $0.29 per diluted share. Profitability in 1999 was negatively impacted by a $281.1 million charge, approximately $218 million after-tax or $0.51 per diluted share, related to restructuring and other charges. The following table provides a comparison of the reported results and the results excluding charges (in millions): For the Year ------------------------------------------------------- 2000 1999 -------------------------- --------------------------- Reported Results Reported Results Results Charges Ex. Chgs Results Charges Ex. Chgs -------- ------- -------- -------- ------- -------- Net sales........................ $4,669.9 $ -- $4,669.9 $4,595.5 $ -- $4,595.5 ======== ======= ======== ======== ======= ======== Gross profit..................... $2,100.8 $ (78.6) $2,179.4 $2,182.0 $ -- $2,182.0 Advertising and promotion expenses........................ 685.9 4.8 681.1 684.5 -- 684.5 Other selling and administrative expenses........................ 967.0 59.0 908.0 867.9 867.9 Amortization of intangibles...... 52.0 0.5 51.5 52.0 -- 52.0 Restructuring and other charges.. 15.9 15.9 -- 281.1 281.1 -- Other expense (income), net...... 1.6 20.9 (19.3) (5.3) -- (5.3) -------- ------- -------- -------- ------- -------- Operating income................. 378.4 (179.7) 558.1 301.8 (281.1) 582.9 Interest expense................. 153.0 -- 153.0 131.6 -- 131.6 -------- ------- -------- -------- ------- -------- Income from continuing operations before income taxes............. $ 225.4 $(179.7) $ 405.1 $ 170.2 $(281.1) $ 451.3 ======== ======= ======== ======== ======= ======== Net sales from continuing operations for 2000 increased 2% to $4.7 billion, from $4.6 billion in 1999. In local currency, net sales were up 4% in 2000 compared to 1999. Net sales within the US increased 4% and accounted for 71% of consolidated net sales in 2000 compared to 70% in 1999. Net sales outside the US decreased 3% from 1999. Excluding the unfavorable exchange impact, international net sales increased 6% compared to 1999. Worldwide gross sales in the Girls category, which includes American Girl(R), increased 5%, or 8% in local currency, to $2.1 billion. Domestic sales increased by 10%, while international sales decreased by 4%. The worldwide growth in the Girls category was due to increased sales of Barbie(R) and American Girl(R) products, 22

partially offset by decreased sales of large dolls. Worldwide Barbie(R) sales increased 5%, up 9% in the US and down 1% in international markets. Excluding the unfavorable exchange impact, Barbie(R) sales were up 8% in international markets. Worldwide gross sales in the Boys-Entertainment category were flat, or up 2% in local currency. Domestic sales decreased by 4%, while international sales increased by 7%, or 14% in local currency. The Boys-Entertainment category was negatively impacted by lower sales of Toy Story 2 products in 2000 compared to 1999. Excluding the impact of Toy Story 2 and Harry Potter(TM) products, the Boys-Entertainment category grew 2% for the year. Worldwide Wheels sales decreased 2%, or were flat before the unfavorable impact of foreign exchange. Sales of Entertainment products increased 2% worldwide, driven by strength of Max Steel(TM), Mattel games and Harry Potter(TM) products, partially offset by lower sales of Toy Story 2 products. Worldwide gross sales in the Infant & Preschool category were flat, or up 3% in local currency. Domestic sales grew by 4%, while international sales decreased by 10%, or 2% in local currency. Worldwide sales of core Fisher- Price(R) products grew 26%, up 37% in the US and flat in international markets. Excluding the unfavorable exchange impact, core Fisher-Price(R) products were up 11% in international markets. Declines in worldwide sales for Sesame Street(R), Disney preschool and Winnie the Pooh(R) offset domestic growth in core Fisher-Price(R) products. Gross profit, as a percentage of net sales, was 45.0% in 2000 compared to 47.5% in 1999. Cost of sales in 2000 includes a $78.6 million charge related to the termination of a variety of licensing agreements and other contractual arrangements and elimination of product lines that did not deliver an adequate level of profitability. Excluding financial realignment plan charges, gross profit was 46.7% in 2000 compared to 47.5% in 1999 due to unfavorable product mix, unfavorable foreign exchange rates and higher shipping costs. Advertising and promotion expense was 14.7% of net sales in 2000 compared to 14.9% in 1999. Excluding the $4.8 million financial realignment plan charge, largely related to exiting certain product lines, advertising and promotion expenses, as a percentage of net sales, was 14.6% in 2000. The decrease was attributable to improved efficiencies of promotional spending. Other selling and administrative expenses were 20.7% of net sales in 2000 compared to 18.9% in 1999. Excluding the $5.9 million charge related to settlement of certain litigation matters and the $53.1 million charge related to termination costs for the departure of senior executives, other selling and administrative expenses were 19.4% of net sales in 2000. The increase was largely due to compensation costs incurred for the recruitment and retention of senior executives. Other expense (income), net in 2000 includes a $12.5 million charge primarily related to the writeoff of certain noncurrent assets and an $8.4 million charge related to losses realized on the disposition of a portion of the stock received as part of the sale of CyberPatrol. Excluding these charges, the $14.1 million increase in other expense (income), net was largely due to investment and interest income. Interest expense was $153.0 million in 2000 compared with $131.6 million in 1999, largely due to higher borrowings necessitated by the funding of Mattel's Consumer Software business. In addition, Mattel's overall interest rate was higher due to increased market rates and debt refinancing that occurred during the second half of the year. Business Segment Results US Girls segment sales increased by 10% in 2000 compared to 1999 due to a 9% increase in sales of Barbie(R) products and a 7% increase in sales of American Girl(R) products. US Boys-Entertainment segment sales decreased 4% due to a 3% decrease in sales of Wheels products and a 7% decrease in sales of Entertainment products. Within the Wheels category, Mattel gained market share. However, sales fell below 1999 levels as relatively high retail inventories were adjusted down throughout 2000. Within the Entertainment 23

category, growth from Max Steel(TM) and Mattel games were more than offset by lower sales of movie-related toy products relative to the 1999 strong sales of Toy Story 2 products. Excluding Harry Potter(TM) and Toy Story 2, Entertainment sales were up 10% in domestic markets. US Infant & Preschool segment sales increased 4%, largely due to increased sales of core Fisher-Price(R) and Power Wheels(R) products, partially offset by declines in sales of Sesame Street(R), Disney preschool and Winnie the Pooh(R) products. International segment sales decreased by 3% in 2000 compared to 1999. Excluding the unfavorable foreign exchange impact, sales grew by 6% in 2000 due to increased sales across all core categories, including Barbie(R), Fisher- Price(R), Wheels and Entertainment products. Operating profit in the US Girls segment increased by 9%, largely due to higher sales volume. The US Boys-Entertainment segment experienced a 26% decline in operating profit, largely due to lower sales volume and higher shipping costs. Operating profit in the US Infant & Preschool segment increased 7% due to greater sales of relatively higher margin core Fisher-Price(R) products. The International segment operating profit decreased 19%, largely due to unfavorable foreign exchange rates. 2000 Financial Realignment Plan During the third quarter of 2000, Mattel initiated a financial realignment plan designed to improve gross margin; selling and administrative expenses; operating profit; and cash flow. The financial realignment plan, together with the disposition of Learning Company, was part of management's strategic plan to focus on growing Mattel's core brands and lowering operating costs and interest expense. The plan will require a total pre-tax charge estimated at approximately $250 million or $170 million on an after-tax basis, of which approximately $100 million represents cash expenditures and $70 million represents non-cash writedowns. Total cash outlay will be funded from existing cash balances and internally generated cash flows from operations. Under the plan, Mattel expects to generate approximately $200 million of cumulative pre-tax cost savings over the three year duration of the plan. Mattel recognized savings of approximately $55 million in 2001 and expects to achieve savings of approximately $65 million in 2002. However, there is no assurance that Mattel will be able to successfully implement all phases of its financial realignment plan or that it will realize the anticipated cost savings and improved cash flows. Through December 31, 2001, Mattel has recorded pre-tax charges totaling $175.4 million, or approximately $119 million on an after-tax basis, related to this plan. Of the total charge, $125.2 million (approximately $84 million after-taxes) was recorded in 2000 and $50.2 million (approximately $35 million after-taxes) was recorded in 2001. In accordance with generally accepted accounting principles, future pre-tax implementation costs of approximately $75 million have not been accrued as of December 31, 2001. Management expects these costs will be recorded over approximately the next two years. The following are the major initiatives included in the financial realignment plan: . Reduce excess manufacturing capacity; . Terminate a variety of licensing and other contractual arrangements that do not deliver an adequate level of profitability; . Eliminate product lines that do not meet required levels of profitability; . Improve supply chain performance and economics; . Eliminate positions at US-based headquarters locations in El Segundo, Fisher-Price and Pleasant Company through a combination of layoffs, elimination of open requisitions, attrition and retirements; and . Close and consolidate certain international offices. 24

In April 2001, as part of the financial realignment plan, Mattel announced the closure of its Murray, Kentucky manufacturing facility (the "North American Strategy"). Production from this facility will be consolidated into other Mattel-owned and operated facilities in North America with the final shutdown of Murray operations occurring in 2002. This action is one of the realignment measures taken to lower costs. Mattel believes this action was necessary in order to maintain a competitive cost structure in today's global marketplace. In 2000, Mattel recorded a $22.9 million pre-tax restructuring charge as part of the initial phase of the financial realignment plan. This charge, combined with a $7.0 million adjustment to the 1999 restructuring plan, resulted in $15.9 million of net pre-tax restructuring and other charges in 2000. The $22.9 million charge related to the elimination of positions at headquarters locations in El Segundo, Fisher-Price and Pleasant Company, closure of certain international offices, and consolidation of facilities. During 2001, Mattel recorded a $15.7 million pre-tax restructuring charge as part of the financial realignment plan, largely related to the North American Strategy. Total worldwide headcount reduction as a result of the restructuring is planned to be approximately 1,700 employees, of which approximately 1,100 are related to the North American Strategy. From inception through December 31, 2001, a total of approximately $19 million has been incurred related to the termination of nearly 980 employees, of which approximately 640 were terminated during 2001. The components of the restructuring charges are as follows (in millions): Balance Balance 2000 Amounts Dec. 31, 2001 Amounts Dec. 31, Charges Incurred 2000 Charges Incurred 2001 ------- -------- -------- ------- -------- -------- Severance and other compensation............. $19 $(3) $16 $ 9 $(16) $ 9 Asset writedowns.......... 2 (2) -- Lease termination costs... 1 -- 1 2 (1) 2 Other..................... 1 -- 1 5 (5) 1 --- --- --- --- ---- --- Total restructuring charge................... $23 $(5) $18 $16 $(22) $12 === === === === ==== === In January 2002, as part of the financial realignment plan, Mattel announced a further headcount reduction of approximately 240 positions at its domestic headquarters locations through a combination of layoffs, elimination of open requisitions, attrition and retirements. Additionally, in 2002, Mattel will commence a long-term information technology strategy aimed at achieving operating efficiencies and cost savings across all disciplines. The program is focused on simplifying Mattel's organization by defining common global processes based on industry best practices, streamlining its organization by eliminating redundancies, and upgrading its systems to have greater visibility to information and data on a global basis. 1999 Restructuring and Other Charges During 1999, Mattel initiated a restructuring plan for its continuing operations and incurred certain other charges totaling $281.1 million, approximately $218 million after-tax. The 1999 restructuring plan was aimed at leveraging global resources in the areas of manufacturing, marketing and distribution, eliminating duplicative functions worldwide and achieving improved operating efficiencies. As of December 31, 2000, the restructuring activities provided for by this charge were complete and substantially all amounts previously accrued had been paid as of December 31, 2001. Other charges incurred in 1999 principally related to the 1998 recall of Mattel's Power Wheels(R) vehicles and environmental remediation costs related to a former manufacturing facility on a leased property in Beaverton, Oregon. The liability remaining related to these charges was approximately $22 million and $24 million at December 31, 2001 and 2000, respectively. 25

Income Taxes The effective income tax rate on continuing operations was 27.7% in 2001 compared to 24.5% in 2000 and 36.3% in 1999. The difference in the overall tax rate on continuing operations between 1999, 2000 and 2001 was caused by the restructuring and other charges. In 1999, a significant portion of the restructuring expenses consisted of transactional expenses which were not deductible for tax purposes, resulting in a lower effective tax benefit on these restructuring charges, and a higher overall effective tax rate. In 2000 and 2001, most of the restructuring and other charges were deductible for tax purposes and provided a benefit at or near the effective US tax rate, resulting in a relatively lower overall effective tax rate for 2001 and 2000 as compared to 1999. The pre-tax income (loss) from US operations includes interest expense, amortization of intangibles and corporate headquarters expenses. Therefore, the pre-tax income (loss) from US operations, as a percentage of the consolidated pre-tax income, was less than the sales to US customers as a percentage of the consolidated gross sales. The Internal Revenue Service has completed its examination of the Mattel, Inc. federal income tax returns through December 31, 1994 and is currently examining Mattel's federal income tax returns for fiscal years 1995 through 1997. Liquidity and Capital Resources Mattel's primary sources of liquidity over the last three years have been cash on hand at the beginning of the year, cash flows generated from continuing operations, long-term debt issuances and short-term seasonal borrowings. Cash flows from continuing operations could be negatively impacted by decreased demand for Mattel's products, which could result from factors such as adverse economic conditions and changes in public and consumer preferences, or increased costs associated with manufacturing and distribution of products or realized shortages in raw materials or component parts. Additionally, Mattel's ability to issue long-term debt and obtain seasonal borrowing could be adversely affected by factors such as an inability to meet its debt covenant requirements, which include maintaining consolidated debt-to-capital and interest coverage ratios, or a deterioration of Mattel's credit ratings. Mattel's ability to conduct its operations could be negatively impacted should these or other adverse conditions affect its primary sources of liquidity. Operating Activities Operating activities generated cash flows from continuing operations of $756.8 million during 2001, compared to $555.1 million in 2000 and $430.5 million in 1999. The increase in cash flows from operating activities in 2001 was largely due to increased income from continuing operations and increased cash collections. In addition, the disposition of Learning Company in the fourth quarter 2000 resulted in improved cash flows since Mattel was no longer required to fund this business. Investing Activities Mattel invested its cash flows during the last three years mainly in tooling to support new products and construction of new manufacturing facilities. In 2001, Mattel acquired Pictionary(R) for approximately $29 million, of which approximately $21 million was paid in 2001 and the remaining $8 million will be paid over the next 3 years. Financing Activities In 2001, as part of Mattel's goal to improve its debt-to-capital ratio, cash flows from operating activities were used to repay short-term borrowing obligations. Additionally, Mattel announced during the third quarter of 2000 a change in its dividend policy consisting of a reduction in the annual cash dividend from $0.36 per share 26

to $0.05 per share when and as declared by the board of directors. The $0.05 per share annual dividend rate under the new dividend policy became effective in December 2001. The reduction of the dividend resulted in annual cash savings of approximately $132 million, which Mattel used to reduce debt. During 2001, Mattel repaid $30.5 million of its medium-term notes, which became due in the fourth quarter. In 2000, Mattel received proceeds from the issuance of a term loan and Euro Notes, which were used to repay its 6-3/4% Senior Notes upon maturity and to support operating activities. In 1999, Mattel increased its short-term borrowings to support its operating activities and to fund the Consumer Software segment. During 1999, Mattel repaid $30.0 million of its medium-term notes. During 2001, 2000 and 1999, Mattel paid dividends on its common stock and, in 1999, Mattel repurchased treasury stock. In 2001 and 2000, Mattel did not repurchase treasury stock. Seasonal Financing Mattel expects to finance its seasonal working capital requirements for the coming year by using existing and internally generated cash, issuing commercial paper, selling certain trade receivables and using various short-term bank lines of credit. Mattel's domestic unsecured committed revolving credit facility provides $1.0 billion in short-term borrowings from a commercial bank group. Within this facility, up to $300.0 million is available for non-recourse sales of certain trade accounts receivable to the bank group as an additional source of liquidity and to lower its borrowing cost. Such non-recourse sales are made pursuant to an arrangement whereby certain of Mattel's subsidiaries sell receivables to Mattel Factoring, Inc., which in turn sells those receivables to the commercial bank group. Mattel Factoring, Inc. is a separate special-purpose legal entity with its own assets and liabilities. This facility was executed in 1998 for a term of five years, expiring in 2003. In March 2002, Mattel amended and restated this facility into a $1.060 billion, 3-year facility that expires in 2005 with substantially similar terms and conditions. Additionally, during 2001, Mattel utilized a 364-day $400.0 million unsecured committed credit facility with essentially the same terms and conditions as the $1.0 billion revolving credit facility. Mattel has elected not to renew this facility when it expires in March 2002, as it believes that cash on hand at the beginning of 2002 and its $1.060 billion domestic unsecured committed revolving facility will be sufficient to meet its seasonal working capital requirements in 2002. Mattel also has a $200.0 million senior unsecured term loan that matures in July 2003. Interest is charged at various rates, ranging from a LIBOR-based rate to the bank reference rate (3.66% as of December 31, 2001). Both the unsecured credit facilities and term loan require Mattel to meet financial covenants for consolidated debt-to-capital and interest coverage. Mattel was in compliance with such covenants during 2001. In addition, Mattel avails itself of uncommitted domestic facilities provided by certain banks to issue short- term money market loans. To meet seasonal borrowing requirements of certain foreign subsidiaries, Mattel negotiates individual financing arrangements, generally with the same group of banks that provided credit in the prior year. Foreign credit lines total approximately $368 million, a portion of which is used to support letters of credit. Mattel expects to extend these credit lines throughout 2002 and believes available amounts will be adequate to meet its seasonal financing requirements. Mattel also enters into agreements with banks of its foreign subsidiaries for non-recourse sales of certain of its foreign subsidiary receivables. In fourth quarter 2001, Mattel entered into a securitization agreement to sell certain receivables of its French and German subsidiaries with one of its European banks. 27

Mattel's accounts receivable sold or anticipated, and therefore excluded from its consolidated balance sheets, is summarized as follows (in millions): As of Year End ------------- 2001 2000 ------ ------ Domestic factoring and anticipation.............................. $261.5 $347.5 Foreign factoring................................................ 237.2 196.9 ------ ------ Total factoring and anticipation................................. $498.7 $544.4 ====== ====== Financial Position Mattel's cash and short-term investments increased by $384.2 million to $616.6 million at year end 2001 compared to $232.4 million at year end 2000. The increase was primarily due to cash flows generated from operating activities. Accounts receivable, net decreased by $143.0 million to $696.6 million at year end 2001, reflecting improved cash collections and the bad debt write-off resulting from the bankruptcy of Kmart. Inventories decreased slightly to $487.5 million at year end 2001. Inventory levels were negatively impacted by lower than expected domestic fourth quarter sales and the pre-build initiative to prepare for the closing of the Murray, Kentucky plant in 2002 in connection with the North American Strategy. During 2002, Mattel plans to continue to build inventory levels for preschool products in conjunction with executing the North American Strategy. Mattel intends to continue its plan to move towards more optimal accounts receivable and inventory levels through its focus on improving its supply chain performance. Prepaid expenses and other current assets increased by $102.1 million to $291.9 million at year end 2001 compared to 2000, primarily due to increased prepaid income taxes and receivable collections deposits with banks. Property, plant and equipment, net decreased $21.1 million to $626.7 million at year end 2001, largely due to depreciation, partially offset by capital spending. Intangibles decreased $26.9 million to $1.1 billion at year end 2001, mainly due to goodwill amortization, partially offset by the acquisition of Pictionary(R) in June 2001. Other noncurrent assets declined by $54.3 million to $711.3 million at year end 2001, principally due to decreased noncurrent deferred tax assets. Short-term borrowings decreased $188.3 million to $38.1 million at year end 2001 compared to $226.4 million at year end 2000, due to the repayment of debt. Current portion of long-term debt increased by $177.4 million to $210.1 million at year end 2001, largely due to the reclassification of 200 million of Euro Notes from long-term debt since they mature in July 2002. A summary of Mattel's capitalization is as follows (in millions): As of Year End -------------------------- 2001 2000 ------------ ------------ Medium-term notes................................... $ 480.0 17% $ 510.0 18% Senior notes........................................ 500.0 17 690.7 25 Other long-term debt obligations.................... 40.9 1 41.7 1 -------- --- -------- --- Total long-term debt................................ 1,020.9 35 1,242.4 44 Other long-term liabilities......................... 184.2 6 165.5 6 Stockholders' equity................................ 1,738.5 59 1,403.1 50 -------- --- -------- --- $2,943.6 100% $2,811.0 100% ======== === ======== === Total long-term debt decreased by $221.5 million at year end 2001 compared to year end 2000 due to the aforementioned reclassification of 200 million of Euro Notes and $30.0 million of medium-term notes maturing in the next twelve months to current portion of long-term debt. Mattel expects to satisfy its future long-term capital needs through the retention of corporate earnings and the issuance of long-term debt instruments. Stockholders' equity of $1.7 billion at year end 2001 increased $335.4 million from year end 2000, primarily as a result of income from continuing operations and cash received from exercise of employee stock options, partially offset by payment of common dividends and the unfavorable effect of foreign currency translation. 28

Mattel's total debt to capital ratio, including current portion of long-term debt, improved from 52% at year end 2000 to 42% at year end 2001 due to the repayment of debt combined with improvement in its operating results. Mattel continues to target a goal of reducing the year end ratio to approximately one- third of capital. Commitments In the normal course of business, Mattel enters into debt arrangements and contractual arrangements for future purchases of goods and services to ensure availability and timely delivery, and to obtain and protect Mattel's right to create and market certain products. These arrangements include commitments for future inventory purchases and licensing payments. Certain of these commitments routinely contain provisions for guaranteed or minimum expenditures during the term of the contracts. Mattel's commitments for debt and other contractual arrangements is summarized as follows (in thousands): Payments Due by Period ------------------------------------------------ Total 2002 2003 2004 Thereafter ---------- -------- -------- -------- ---------- Long-term debt................. $1,231,009 $210,090 $380,849 $ 50,939 $589,131 Licensing minimums............. 379,000 106,000 84,000 81,000 108,000 Inventory purchases............ 121,000 121,000 -- -- -- Operating leases............... 168,100 38,800 29,800 26,800 72,700 Capitalized leases............. 10,100 300 300 300 9,200 ---------- -------- -------- -------- -------- Total.......................... $1,909,209 $476,190 $494,949 $159,039 $779,031 ========== ======== ======== ======== ======== Discontinued Operations In May 1999, Mattel completed its merger with Learning Company, pursuant to which Learning Company was merged with and into Mattel, with Mattel being the surviving corporation. Due to substantial losses experienced in its Consumer Software segment, which was comprised primarily of Learning Company, Mattel's board of directors, on March 31, 2000, resolved to dispose of its Consumer Software segment. As a result of this decision, the Consumer Software segment was reported as a discontinued operation effective March 31, 2000, and the consolidated financial statements were reclassified to segregate the net investment in, and the liabilities and operating results of the Consumer Software segment. On October 18, 2000, Mattel disposed of Learning Company to an affiliate of Gores Technology Group in return for a contractual right to receive future consideration based on income generated from its business operations and/or the net proceeds derived by the new company upon the sale of its assets or other liquidation events, or 20% of its enterprise value at the end of five years. In the fourth quarter of 2001, Mattel received proceeds totaling $10.0 million from Gores Technology Group as a result of liquidation events related to Gores Technology's sale of the entertainment and education divisions. Mattel also incurred additional costs of approximately $10 million in 2001 related to the wind down of the Consumer Software segment. Accordingly, no income was recorded in the consolidated statement of operations for discontinued operations. With respect to Gores Technology Group's disposition of the education division, there is additional contingent consideration that may be received by Mattel. At December 31, 2001, Mattel had net obligations related to its discontinued Consumer Software segment of approximately $24 million. Mattel believes that it has adequately reserved for future obligations of this segment. Any additional proceeds that are recognized will be recorded as part of the discontinued operations. In December 2000 and January 2001, Mattel entered into worldwide, multi-year licensing agreements with Vivendi Universal Publishing and THQ, respectively, for the development and publishing of gaming, educational and productivity software based on Mattel's brands, which Mattel had previously developed and 29

sold directly through its Mattel Media division. These partnerships allow Mattel to provide the content from its library of brands, while Vivendi Universal Publishing and THQ provide software development and distribution expertise. Litigation Litigation Related to Learning Company Following Mattel's announcement in October 1999 of the expected results of its Learning Company division for the third quarter of 1999, several of Mattel's stockholders filed purported class action complaints naming Mattel and certain of its present and former officers and directors as defendants. The complaints generally allege, among other things, that the defendants made false or misleading statements, in the joint proxy statement for the merger of Mattel and Learning Company and elsewhere, that artificially inflated the price of Mattel's common stock. In March 2000, these shareholder complaints were consolidated into two lead cases: Thurber v. Mattel, Inc. et al. (containing claims under (S)10(b) of the 1934 Securities Exchange Act ("Act")) and Dusek v. Mattel, Inc. et al (containing claims under (S)14(a) of the Act). In January 2001, the Court granted defendants' motions to dismiss both Thurber and Dusek, and gave plaintiffs leave to amend. In December 2001, the Court denied defendants' motions to dismiss the amended complaints in both Thurber and Dusek. In each case, the plaintiffs have asked for compensatory damages. Both Thurber and Dusek are currently pending in the United States District Court for the Central District of California. Other purported class action litigation has been brought against Mattel as successor to Learning Company and the former directors of Learning Company on behalf of former stockholders of Broderbund Software, Inc. who acquired shares of Learning Company in exchange for their Broderbund common stock in connection with the Learning Company-Broderbund merger on August 31, 1998. The consolidated complaint in In re Broderbund generally alleges that Learning Company misstated its financial results prior to the time it was acquired by Mattel. The defendants' motion to dismiss the complaint in In re Broderbund was granted in May 2001, and the case was dismissed. The In re Broderbund plaintiffs appealed the dismissal, and the case is currently pending before the Ninth Circuit Court of Appeals. The plaintiffs have asked for compensatory damages. Several stockholders have filed derivative complaints on behalf and for the benefit of Mattel, alleging, among other things, that Mattel's directors breached their fiduciary duties, wasted corporate assets, and grossly mismanaged Mattel in connection with Mattel's acquisition of Learning Company and its approval of severance packages to certain former executives. These derivative actions have been filed in the Court of Chancery in Delaware, in Los Angeles Superior Court in California, and in the United States District Court for the Central District of California, and are all in a preliminary stage. The plaintiffs have asked for unspecified monetary damages. Plaintiffs filed an amended consolidated complaint in February 2002 in the California state court actions and defendants have filed a demurrer seeking dismissal of that action. Mattel believes that the actions are without merit and intends to defend them vigorously. Environmental Fisher-Price Fisher-Price has executed a consent order with the State of New York to implement a groundwater remediation system at one of its former manufacturing plants. The execution of the consent order was in response to the New York State Department of Environmental Conservation Record of Decision issued in March 2000. The Department approved a conceptual work plan in March 2001, with work scheduled to begin in 2001. However, in response to concerns expressed by a number of nearby residents, the Department has requested that Mattel postpone implementation of the groundwater remediation plan until 2002 after the 30

installation of a public water line to those residents is completed. The ultimate liability associated with this cleanup presently is estimated to be approximately $1.76 million, approximately $1.26 million of which has been incurred through December 31, 2001. Beaverton, Oregon Mattel previously operated a manufacturing facility on a leased property in Beaverton, Oregon that was acquired as part of the March 1997 merger with Tyco. In March 1998, samples of groundwater used by the facility for process water and drinking water disclosed elevated levels of certain chemicals, including trichloroethylene. Mattel immediately closed the water supply and self-reported the sample results to the Oregon Department of Environmental Quality and the Oregon Health Division. Mattel also implemented a community outreach program to employees, former employees and surrounding landowners. In November 1998, Mattel and another potentially responsible party entered into a consent order with the Oregon Department of Environmental Quality to conduct a remedial investigation/feasibility study at the property, to propose an interim remedial action measure, and to continue the community outreach program. Mattel has recorded pre-tax charges totaling $19.0 million for environmental remediation costs related to this property, based on the completion and approval of the remediation plan and feasibility study. Approximately $3 million has been incurred through December 31, 2001, largely related to attorney fees, consulting work and an employee medical screening program. General Mattel is also involved in various other litigation and legal matters, including claims related to intellectual property, product liability and labor, which Mattel is addressing or defending in the ordinary course of business. Management believes that resolving such matters is not likely to have a material adverse effect on Mattel's business, financial condition or results of operations. Effects of Inflation Inflation rates in the US and in major foreign countries where Mattel does business have not had a significant impact on its results of operations or financial position during the three years ended December 31, 2001. The US Consumer Price Index increased 1.6% in 2001, 3.4% in 2000 and 2.7% in 1999. Mattel receives some protection from the impact of inflation from high turnover of inventories and its ability to pass on higher prices to consumers. Employee Savings Plan Certain employee savings plan provisions used by other companies can result in requirements to hold substantial portions of a participant's account balance in the stock of the sponsoring company, significantly increasing the exposure of the account to market risk associated with a single company's stock. However, the Mattel Personal Investment Plan is designed to allow participants to limit their exposure to market changes in Mattel's stock price. Mattel makes company contributions in cash and allows employees to allocate both individual and company contributions to a balanced variety of investment funds. Furthermore, Mattel's plan limits a participant's allocation to the Mattel Stock Fund, which is fully invested in Mattel stock, to 50% of the account balance. Participants may generally reallocate their account balances on a daily basis. This reallocation is only limited for participants classified as insiders who wish to change their investment in the Mattel Stock Fund. Insiders are limited to certain window periods for making a reallocation out of or into the Mattel Stock Fund. Critical Accounting Policies and Estimates Mattel makes certain estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses. The accounting policies described below are those Mattel 31

considers critical in preparing its consolidated financial statements. These policies include significant estimates made by management using information available at the time the estimates are made. However, as described below, these estimates could change materially if different information or assumptions were used. Allowance for Doubtful Accounts The allowance for doubtful accounts represents adjustments to customer trade accounts receivable for amounts deemed partially or entirely uncollectible. The allowance for doubtful accounts is a reserve used to reduce gross trade receivables to their net realizable value. Mattel's reserve is based on management's assessment of the business environment, customers' financial condition, historical trends, receivable aging and customer disputes. Mattel's allowance for doubtful accounts increased from approximately $25 million at year end 2000 to $56 million at year end 2001. In 2001, bad debt expense increased by approximately $40 million to $58 million. As more fully discussed in the section entitled "Results of Continuing Operations--2001 Compared to 2000--Consolidated Results," in the fourth quarter of 2001, Mattel recorded a $22.1 million charge related to the Kmart bankruptcy filing announced in January 2002. Mattel also recorded approximately $9 million in bad debt expense in the third quarter 2001, primarily related to the bankruptcy declared by a US retailer during the quarter. The remaining increase in bad debt expense was due to exposure associated with various other retailers. The difficult domestic retail environment has resulted in bankruptcies of large customers and represents the underlying cause for the increased bad debt expense in 2001. Mattel will continue to proactively review its credit risks and adjust its customer terms to reflect the current environment. The increased level of risk associated with credit given to customers may result in a continuation of bad debt charges at higher levels than historically experienced or lower sales. Inventories Inventories, net of an allowance for excess quantities and obsolescence, are stated at the lower of cost or market. Inventory reserves are recorded for damaged, obsolete, excess and slow-moving inventory. Mattel's management uses estimates to record these reserves. Slow-moving inventory is reviewed by category and may be partially or fully reserved for depending on the type of product and the length of time the product has been included in inventory. Changes in public and consumer preferences and demand for product or changes in the buying patterns and inventory management of customers, could adversely impact the inventory valuation. Impairment of Long-Lived Assets Long-lived assets, identifiable intangibles and goodwill related to those assets have been reviewed for impairment based on Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed Of. This statement requires that an impairment loss be recognized whenever the sum of the expected future cash flows (undiscounted and without interest charges) resulting from the use and ultimate disposal of an asset is less than the carrying amount of the asset. Mattel's management reviews for indicators that might suggest an impairment loss exists. Testing long-lived assets, identifiable intangibles and goodwill for recoverability requires estimates of expected cash flows to be generated from the use of the assets. Various uncertainties, including changes in consumer preferences, deterioration in the political situation in a country or adverse changes in the general economic conditions in the US and internationally, could adversely impact the expected cash flows to be generated by an asset or group of assets. See discussion under "New Accounting Pronouncements" regarding SFAS No. 144, which supercedes SFAS No. 121 effective the first quarter of 2002. Deferred Tax Assets Mattel records valuation allowances against its deferred tax assets. In determining the requisite allowance, management considers all available evidence for certain tax credit, net operating loss, and capital loss carryforwards that would likely expire prior to their utilization. Management believes that it is more likely than 32

not that Mattel will generate sufficient taxable income in the appropriate carryforward periods to realize the benefit of its remaining net deferred tax assets. However, if the available evidence were to change in the future, an adjustment to the valuation allowances may be required. New Accounting Pronouncements In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, Business Combinations, which supercedes Accounting Principles Board Opinion ("APB") No. 16, Business Combinations. This statement requires that all business combinations be accounted for by the purchase method and establishes specific criteria for the recognition of intangible assets separately from goodwill. The statement also requires unallocated negative goodwill to be written off immediately as an extraordinary gain. The provisions of the statement apply to business combinations initiated after June 30, 2001. For business combinations accounted for using the purchase method before July 1, 2001, the provisions of this statement will be effective in the first quarter of 2002. Mattel does not expect that the adoption of SFAS No. 141 will have a material effect on its consolidated financial position or results of operations. In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, which supercedes APB Opinion No. 17, Intangible Assets. This statement addresses the accounting and reporting of goodwill and other intangible assets subsequent to their acquisition. The statement also provides specific guidance on testing goodwill and intangible assets for impairment. SFAS No. 142 provides that (i) goodwill and indefinite-lived intangible assets will no longer be amortized; (ii) impairment will be measured using various valuation techniques based on discounted cash flows; (iii) goodwill will be tested for impairment at least annually at the reporting unit level; (iv) intangible assets deemed to have an indefinite life will be tested for impairment at least annually; and (v) intangible assets with finite lives will be amortized over their useful lives. Goodwill and intangible assets acquired after June 30, 2001 were subjected to the provisions of this statement. All provisions of this statement will be effective in the first quarter of 2002. Mattel's goodwill amortization was approximately $46 million of the total $51.1 million in amortization of intangibles recorded in 2001. Mattel is in the process of evaluating the potential impact that the adoption of SFAS No. 142 will have on its consolidated financial position and results of operations. Based on preliminary results of its valuation study, Mattel anticipates that the total impairment to be recognized as a result of the transitional goodwill impairment test will be approximately $400 million pretax, relating entirely to the Pleasant Company reporting unit. In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. All provisions of this statement will be effective at the beginning of fiscal 2003. Mattel is in the process of determining the impact of this statement on its financial results when effective. In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of and amends APB No. 30, Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. This statement requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less costs to sell. SFAS No. 144 retains the fundamental provisions of SFAS No. 121 for (a) recognition and measurement of the impairment of long- lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. This statement also retains APB No. 30's requirement that companies report discontinued operations separately from continuing operations. All provisions of this statement will be effective in the first quarter of 2002. The adoption of this standard is not expected to have a significant impact on Mattel's consolidated financial position and results of operations. 33

Emerging Issues Task Force ("EITF") Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer, will be effective in the first quarter of 2002. This issue addresses (i) recognition, measurement, and income statement classification for sales incentives offered by a vendor without charge to a customer as a result of a single exchange transaction or as a result of attaining a specified cumulative level of transactions and (ii) whether certain consideration from a vendor to a reseller of the vendor's products is an adjustment to selling prices or cost. The following table presents the quarterly and full year restated balances, excluding charges, resulting from the implementation of EITF No. 01-09 (in millions): First Second Third Fourth Full Quarter Quarter Quarter Quarter Year ------- ------- -------- -------- -------- Year Ended December 31, 2001 Net sales..................... $715.2 $836.2 $1,575.3 $1,561.2 $4,687.9 Gross profit.................. 316.6 367.6 745.5 747.4 2,177.1 % of net sales................ 44.3% 44.0% 47.3% 47.9% 46.4% Advertising and promotion expenses..................... 79.4 84.9 174.9 204.0 543.2 Year Ended December 31, 2000 Net sales..................... $679.6 $803.0 $1,549.6 $1,533.3 $4,565.5 Gross profit.................. 299.9 348.3 703.7 719.9 2,071.8 % of net sales................ 44.1% 43.4% 45.4% 47.0% 45.4% Advertising and promotion expenses..................... 76.8 83.0 186.5 227.2 573.5 Year Ended December 31, 1999 Net sales..................... $676.0 $791.5 $1,557.4 $1,477.8 $4,502.7 Gross profit.................. 300.1 343.4 744.5 679.2 2,067.2 % of net sales................ 44.4% 43.4% 47.8% 46.0% 45.9% Advertising and promotion expenses..................... 75.9 80.6 185.3 227.9 569.7 Item 7a. Quantitative and Qualitative Disclosures About Market Risk Risk Management Mattel's results of operations and cash flows may be impacted by exchange rate fluctuations. Mattel seeks to mitigate its exposure to market risk by monitoring its currency exchange exposure for the year and partially or fully hedging such exposure using foreign currency forward exchange and option contracts primarily to hedge its purchase and sale of inventory, and other intercompany transactions denominated in foreign currencies. These contracts generally have maturity dates of up to 18 months. In addition, Mattel manages its exposure through the selection of currencies used for international borrowings and intercompany invoicing. Mattel's results of operations can also be affected by the translation of foreign revenues and earnings into US dollars. Mattel does not trade in financial instruments for speculative purposes. As of December 31, 2001, Mattel translated its Argentina peso denominated financial statements using the free floating market exchange rate as of January 11, 2002, of 1.6 pesos to the dollar. This translation did not have a significant impact on Mattel's results of operations in 2001 and management believes that the devaluation will have minimal impact to its results of operations in 2002. Mattel entered into a cross currency interest rate swap to convert the interest rate and principal amount from Euros to US dollars on its 200 million Euro Notes due July 2002. Interest is payable annually at the rate of Euro 6.625%. The weighted average interest rate after the swap is 9.0% in US dollars. 34

Mattel's foreign currency forward exchange contracts that were used to hedge firm foreign currency commitments as of December 31, 2001 are shown in the following table. All contracts are against the US dollar and are maintained by reporting units with a US dollar functional currency, with the exception of the Indonesian rupiah, Thai baht, Brazilian real and Venezuelan bolivar contracts that are maintained by entities with either a rupiah, baht, real or bolivar functional currency. Buy Sell -------------------------- -------------------------- Weighted Weighted Average Average (In thousands of US Contract Contract Fair Contract Contract Fair dollars) Amount Rate Value Amount Rate Value - ------------------- -------- -------- -------- -------- -------- -------- Euro*................... $128,041 0.88 $128,775 $346,861 0.90 $341,164 British pounds sterling*.............. 5,159 1.45 5,144 Canadian dollar*........ 4,375 0.63 4,399 31,478 0.65 30,646 Japanese yen............ 4,045 128 3,966 Australian dollar*...... 3,045 0.51 3,064 9,941 0.52 9,659 Swiss franc............. 3,052 1.69 3,083 Indonesian rupiah....... 27,300 11,219 28,197 New Zealand dollar*..... 619 0.42 607 Venezuelan bolivar...... 2,000 761 1,968 Singapore dollar........ 2,873 1.83 2,843 Hong Kong dollar........ 30,282 7.81 30,315 Brazilian real.......... 27,206 2.66 24,801 Polish zloty............ 2,091 3.97 2,211 Taiwanese dollar........ 3,352 34.87 3,326 Thai baht............... 3,970 44.49 3,938 -------- -------- -------- -------- $231,316 $230,538 $404,374 $397,568 ======== ======== ======== ======== * The currencies for these contracts are quoted in US dollar per local currency For the purchase of foreign currencies, fair value reflects the amount, based on dealer quotes, that Mattel would pay at maturity for contracts involving the same currencies and maturity dates, if they had been entered into as of year end 2001. For the sale of foreign currencies, fair value reflects the amount, based on dealer quotes, that Mattel would receive at maturity for contracts involving the same currencies and maturity dates, if they had been entered into as of year end 2001. The differences between the fair value and the contract amounts are expected to be fully offset by foreign currency exchange gains and losses on the underlying hedged transactions. In addition to the contracts involving the US dollar detailed in the above table, Mattel also had contracts to sell British pounds sterling for the purchase of Euros. As of December 31, 2001, these contracts had a notional amount of $79.5 million and a fair value of $80.7 million. Had Mattel not entered into hedges to limit the effect of exchange rate fluctuations on results of operations and cash flows, pre-tax income would have been reduced by approximately $10 million, $35 million, and $16 million for 2001, 2000 and 1999, respectively. In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. It also requires that gains or losses resulting from changes in the values of those derivatives be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. Mattel adopted SFAS No. 133 on January 1, 2001. Mattel recorded a one-time charge of approximately $12 million, net of tax, in the consolidated statements of operations for the quarter ended March 31, 2001, for the transition adjustment related to the adoption of SFAS No. 133. Interest Rate Sensitivity An assumed 50 basis point movement in interest rates affecting Mattel's variable rate borrowings would have had an immaterial impact on its 2001 results of operations. 35

Item 8. Financial Statements and Supplementary Data Report of Independent Accountants To the Board of Directors and Stockholders of Mattel, Inc. In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 74 present fairly, in all material respects, the financial position of Mattel, Inc. and its subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 14(a)(2) on page 74 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of Mattel's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Los Angeles, California January 30, 2002 36

MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, --------------------- 2001 2000 ---------- ---------- (In thousands) ASSETS - ------ Current Assets Cash and short term investments........................ $ 616,604 $ 232,389 Accounts receivable, less allowances of $55.9 million at December 31, 2001 and $24.6 million at December 31, 2000.................................................. 696,572 839,567 Inventories............................................ 487,505 489,742 Prepaid expenses and other current assets.............. 291,915 189,799 ---------- ---------- Total current assets................................. 2,092,596 1,751,497 ---------- ---------- Property, Plant and Equipment Land................................................... 33,273 32,793 Buildings.............................................. 267,719 257,430 Machinery and equipment................................ 616,609 564,244 Capitalized leases..................................... 23,271 23,271 Leasehold improvements................................. 81,628 74,988 ---------- ---------- 1,022,500 952,726 Less: accumulated depreciation....................... 550,073 472,986 ---------- ---------- 472,427 479,740 Tools, dies and molds, net............................. 154,295 168,092 ---------- ---------- Property, plant and equipment, net................... 626,722 647,832 ---------- ---------- Other Noncurrent Assets Intangibles, net....................................... 1,109,910 1,136,857 Other assets........................................... 711,333 765,671 Net investment in discontinued operations.............. -- 11,540 ---------- ---------- $4,540,561 $4,313,397 ========== ========== 37

MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS--(continued) December 31, ---------------------- 2001 2000 ---------- ---------- (In thousands, except share data) LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities Short-term borrowings................................ $ 38,108 $ 226,403 Current portion of long-term debt.................... 210,090 32,723 Accounts payable..................................... 334,247 338,966 Accrued liabilities.................................. 774,743 703,382 Income taxes payable................................. 239,793 200,933 ---------- ---------- Total current liabilities.......................... 1,596,981 1,502,407 ---------- ---------- Long-Term Liabilities Long-term debt....................................... 1,020,919 1,242,396 Other................................................ 184,203 165,496 ---------- ---------- Total long-term liabilities........................ 1,205,122 1,407,892 ---------- ---------- Stockholders' Equity Special voting preferred stock $1.00 par value, $10.00 liquidation preference per share, one share authorized, issued and outstanding, representing the voting rights of 1.1 million and 1.9 million outstanding exchangeable shares in 2001 and 2000, respectively........................................ -- -- Common stock $1.00 par value, 1.0 billion shares authorized; 436.3 million shares and 435.6 million shares issued in 2001 and 2000, respectively........ 436,307 435,560 Additional paid-in capital........................... 1,638,993 1,706,614 Treasury stock at cost; 5.4 million shares and 9.6 million shares in 2001 and 2000, respectively....... (161,944) (288,622) Retained earnings (accumulated deficit).............. 132,900 (144,417) Accumulated other comprehensive loss................. (307,798) (306,037) ---------- ---------- Total stockholders' equity......................... 1,738,458 1,403,098 ---------- ---------- $4,540,561 $4,313,397 ========== ========== The accompanying notes are an integral part of these statements. Commitments and Contingencies (See accompanying notes.) 38

MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Year ---------------------------------- 2001 2000 1999 ---------- ---------- ---------- (In thousands, except per share amounts) Net Sales................................. $4,804,062 $4,669,942 $4,595,490 Cost of sales............................. 2,537,178 2,569,157 2,413,469 ---------- ---------- ---------- Gross Profit.............................. 2,266,884 2,100,785 2,182,021 Advertising and promotion expenses........ 661,504 685,877 684,519 Other selling and administrative expenses................................. 936,078 966,998 867,955 Restructuring and other charges........... 15,700 15,900 281,107 Amortization of intangibles............... 51,144 52,000 52,010 Interest expense.......................... 155,132 152,979 131,609 Other expense (income), net............... 17,316 1,607 (5,343) ---------- ---------- ---------- Income From Continuing Operations Before Income Taxes............................. 430,010 225,424 170,164 Provision for income taxes................ 119,090 55,247 61,777 ---------- ---------- ---------- Income From Continuing Operations......... 310,920 170,177 108,387 Discontinued Operations (See Note 13) Loss from discontinued operations......... -- (601,146) (190,760) ---------- ---------- ---------- Income (Loss) Before Cumulative Effect of Change in Accounting Principles.......... 310,920 (430,969) (82,373) Cumulative effect of change in accounting principles, net of tax................... (12,001) -- -- ---------- ---------- ---------- Net Income (Loss)......................... 298,919 (430,969) (82,373) Preferred stock dividend requirements..... -- -- 3,980 ---------- ---------- ---------- Net Income (Loss) Applicable to Common Shares................................... $ 298,919 $ (430,969) $ (86,353) ========== ========== ========== Basic Income (Loss) Per Common Share Income from continuing operations......... $ 0.72 $ 0.40 $ 0.25 Loss from discontinued operations......... -- (1.41) (0.46) Cumulative effect of change in accounting principles............................... (0.03) -- -- ---------- ---------- ---------- Net income (loss)......................... $ 0.69 $ (1.01) $ (0.21) ========== ========== ========== Weighted average number of common shares.. 430,983 426,166 414,186 ========== ========== ========== Diluted Income (Loss) Per Common Share Income from continuing operations......... $ 0.71 $ 0.40 $ 0.25 Loss from discontinued operations......... -- (1.41) (0.45) Cumulative effect of change in accounting principles............................... (0.03) -- -- ---------- ---------- ---------- Net income (loss)......................... $ 0.68 $ (1.01) $ (0.20) ========== ========== ========== Weighted average number of common and common equivalent shares................. 436,166 427,126 425,281 ========== ========== ========== Dividends Declared Per Common Share....... $ 0.05 $ 0.27 $ 0.35 ========== ========== ========== The accompanying notes are an integral part of these statements. 39

MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Year ----------------------------- 2001 2000 1999 -------- --------- -------- (In thousands) Cash Flows From Operating Activities: Net income (loss).............................. $298,919 $(430,969) $(82,373) Deduct: loss from discontinued operations...... -- (601,146) (190,760) -------- --------- -------- Income from continuing operations.............. 298,919 170,177 108,387 Adjustments to reconcile income from continuing operations to net cash flows from operating activities: Cumulative effect of change in accounting principles, net of tax...................... 12,001 -- -- Noncash derivative loss...................... 5,532 -- -- Noncash restructuring and other charges...... 4,594 46,126 46,374 Depreciation................................. 201,012 192,638 187,455 Amortization................................. 61,496 63,751 58,555 Increase (decrease) from changes in assets and liabilities: Accounts receivable.......................... 125,598 143,920 (125,891) Inventories.................................. (14,144) (83,637) 118,703 Prepaid expenses and other current assets.... (120,019) (9,821) (23,707) Accounts payable, accrued liabilities and income taxes payable........................ 137,786 32,211 74,128 Deferred income taxes........................ 54,962 3,383 (7,151) Other, net................................... (10,944) (3,658) (6,390) -------- --------- -------- Net cash flows from operating activities of continuing operations......................... 756,793 555,090 430,463 -------- --------- -------- Cash Flows From Investing Activities: Purchases of tools, dies and molds............. (93,914) (85,258) (107,017) Purchases of other property, plant and equipment..................................... (100,737) (76,491) (94,158) Payment for businesses acquired................ (20,547) -- (1,091) Proceeds from sale of other property, plant and equipment..................................... 6,462 9,938 10,033 Investment in other long-term assets........... -- (877) (48,398) Other, net..................................... 15,548 1,462 (612) -------- --------- -------- Net cash flows used for investing activities of continuing operations......................... (193,188) (151,226) (241,243) -------- --------- -------- Cash Flows From Financing Activities: Short-term borrowings, net..................... (175,717) (134,997) 244,595 Proceeds from issuance of long-term debt....... -- 390,710 -- Payments of long-term debt..................... (31,261) (100,000) (30,254) Exercise of stock options...................... 53,516 25,189 51,207 Purchase of treasury stock..................... -- -- (75,507) Payment of dividends on common and preferred stock......................................... (21,602) (153,551) (125,673) Other, net..................................... -- (1,104) (572) -------- --------- -------- Net cash flows (used for) from financing activities of continuing operations........... (175,064) 26,247 63,796 -------- --------- -------- Net Cash Used for Discontinued Operations (See Note 13)...................................... (542) (444,173) (215,261) Effect of Exchange Rate Changes on Cash........ (3,784) (903) (2,855) -------- --------- -------- Increase (Decrease) in Cash and Short-term Investments................................... 384,215 (14,965) 34,900 Cash and Short-term Investments at Beginning of Year.......................................... 232,389 247,354 212,454 -------- --------- -------- Cash and Short-term Investments at End of Year.......................................... $616,604 $ 232,389 $247,354 ======== ========= ======== The accompanying notes are an integral part of these statements. 40

MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Retained Accumulated Total Additional Earnings Other Stock- Preferred Common Paid-In Treasury Deferred (Accumulated Comprehensive holders' Stock Stock Capital Stock Compensation Deficit) Income (Loss) Equity --------- -------- ---------- --------- ------------ ------------ ------------- ---------- (In thousands) Balance, December 31, 1998................... $ 780 $405,114 $1,845,222 $(495,347) $(12,265) $625,197 $(197,898) $2,170,803 Comprehensive (loss): Net (loss)............. (82,373) (82,373) Unrealized gain on securities: Unrealized holding gains............... 3,184 3,184 Less: reclassification adjustment for realized gains included in net (loss).............. (11,143) (11,143) Currency translation adjustments........... (33,790) (33,790) ----- -------- ---------- --------- -------- -------- --------- ---------- Comprehensive (loss).... (82,373) (41,749) (124,122) Conversion of Series A Preferred Stock........ (8) 18,000 (17,992) -- Redemption of Series C Preferred Stock........ (772) 6,382 (51,834) 46,224 -- Purchase of treasury stock.................. (75,507) (75,507) Issuance of treasury stock.................. (87,300) 134,977 47,677 Stock option exercises.. 1,447 13,018 14,465 Tax benefit of stock option exercises....... 15,000 15,000 Shares issued for acquisitions........... 241 5,306 5,547 Conversion of exchangeable shares.... 2,342 (2,342) -- Shares issued under employee stock purchase plan................... 37 719 756 Tax adjustment related to 1987 quasi- reorganization......... 33,400 33,400 Exercise of warrants.... (24,243) 27,828 3,585 Nonvested stock activity............... 12,265 12,265 Dividends declared on common stock........... (137,202) (137,202) Dividends declared on preferred stock........ (3,980) (3,980) ----- -------- ---------- --------- -------- -------- --------- ---------- Balance, December 31, 1999................... -- 433,563 1,728,954 (361,825) -- 401,642 (239,647) 1,962,687 Comprehensive (loss): Net (loss)............. (430,969) (430,969) Unrealized (loss) on securities: Unrealized holding losses.............. (25,118) (25,118) Less: reclassification adjustment for realized losses included in net (loss).............. 10,995 10,995 Minimum pension liability adjustment............ (1,782) (1,782) Currency translation adjustments........... (50,485) (50,485) ----- -------- ---------- --------- -------- -------- --------- ---------- Comprehensive (loss).... (430,969) (66,390) (497,359) 41

MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY-- (continued) Retained Accumulated Total Additional Earnings Other Stock- Preferred Common Paid-In Treasury Deferred (Accumulated Comprehensive holders' Stock Stock Capital Stock Compensation Deficit) Income (Loss) Equity --------- -------- ---------- --------- ------------ ------------ ------------- ---------- (In thousands) Issuance of treasury stock.................. (48,035) 73,224 25,189 Tax benefit of stock option exercises....... 2,300 2,300 Tax benefit of prior year stock option exercises.............. 19,200 19,200 Compensation cost related to stock option modifications.......... 382 382 Conversion of exchangeable shares.... 1,976 (1,976) -- Issuance of stock warrant................ 5,789 5,789 Shares issued for Learning Company treasury stock......... 21 (21) -- Dividends declared on common stock........... (115,090) (115,090) ---- -------- ---------- --------- ---- -------- --------- ---------- Balance, December 31, 2000................... -- 435,560 1,706,614 (288,622) -- (144,417) (306,037) 1,403,098 Comprehensive income: Net income............. 298,919 298,919 Unrealized holding losses................ (186) (186) Transition adjustment related to FAS 133.... 14,127 14,127 Net gain on derivative instruments........... 1,412 1,412 Minimum pension liability adjustment.. (2,518) (2,518) Currency translation adjustments........... (14,596) (14,596) ---- -------- ---------- --------- ---- -------- --------- ---------- Comprehensive income.... 298,919 (1,761) 297,158 Issuance of treasury stock.................. (73,162) 126,678 53,516 Tax benefit of stock option exercises....... 6,000 6,000 Compensation cost related to stock option modifications.......... 288 288 Conversion of exchangeable shares.... 747 (747) -- Dividends declared on common stock........... (21,602) (21,602) ---- -------- ---------- --------- ---- -------- --------- ---------- Balance, December 31, 2001................... $-- $436,307 $1,638,993 $(161,944) $-- $132,900 $(307,798) $1,738,458 ==== ======== ========== ========= ==== ======== ========= ========== The accompanying notes are an integral part of these statements. 42

Note 1--Summary of Significant Accounting Policies Principles of Consolidation and Basis of Preparation The consolidated financial statements include the accounts of Mattel, Inc. and its subsidiaries ("Mattel"). All significant intercompany accounts and transactions have been eliminated in consolidation, and certain amounts in the financial statements for prior years have been reclassified to conform to the current year presentation. Investments in joint ventures and other companies are accounted for by the equity method or cost basis, depending upon the level of the investment and/or Mattel's ability to exercise influence over operating and financial policies. Financial data for 1998 and 1999 reflect the retroactive effect of the merger, accounted for as a pooling of interests, with The Learning Company, Inc. ("Learning Company") in May 1999. As more fully described in Note 13, the Consumer Software segment, which was comprised primarily of Learning Company, was reported as a discontinued operation effective March 31, 2000, and the consolidated financial statements were reclassified to segregate the net investment in, and the liabilities and operating results of the Consumer Software segment. Preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Foreign Currency Translation Assets and liabilities of foreign subsidiaries are translated into US dollars at fiscal year-end exchange rates. Income, expense and cash flow items are translated at weighted average exchange rates prevailing during the fiscal year. The resulting currency translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity. Gains and losses from unhedged foreign currency transactions resulting from receivables and payables that are denominated in a currency other than the applicable functional currency are recognized in the results of operations in the period in which the exchange rate changes. For the year ended 2001, transaction losses included in other expense (income), net totaled approximately $9 million, while in 2000 and 1999, transaction gains totaled approximately $3 million and $7 million, respectively. Cash and Short-Term Investments Cash includes cash equivalents, which are highly liquid investments with maturities of three months or less when purchased. Marketable Securities Marketable securities are comprised of investments in publicly-traded securities, classified as available-for-sale, and are recorded at market value with unrealized gains or losses reported as a component of accumulated other comprehensive income (loss) within stockholders' equity until realized. Inventories Inventories, net of an allowance for excess quantities and obsolescence, are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over estimated useful lives of 10 to 40 years for 43

buildings, 3 to 10 years for machinery and equipment, and 10 to 20 years, not to exceed the lease term, for leasehold improvements. Tools, dies and molds are amortized using the straight-line method over 3 years. Intangibles and Long-Lived Assets Intangible assets consist of the excess of purchase price over the fair value of net assets acquired in purchase acquisitions, and the cost of acquired patents and trademarks. Intangible assets are amortized using the straight-line method over periods ranging from 2 to 40 years. Substantially all goodwill is amortized over 20 to 40 years. Accumulated amortization was $383.3 million and $332.2 million as of December 31, 2001 and 2000, respectively. The carrying value of fixed and intangible assets is periodically reviewed to identify and assess any impairment by evaluating the operating performance and future undiscounted cash flows of the underlying assets. In July 2001, the Financial Accounting Standards Boards ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations, which supercedes Accounting Principles Board Opinion ("APB") No. 16, Business Combinations. This statement requires that all business combinations be accounted for by the purchase method and establishes specific criteria for the recognition of intangible assets separately from goodwill. The statement also requires unallocated negative goodwill to be written off immediately as an extraordinary gain. The provisions of the statement apply to business combinations initiated after June 30, 2001. For business combinations accounted for using the purchase method before July 1, 2001, the provisions of this statement will be effective in the first quarter of 2002. In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, which supercedes APB Opinion No. 17, Intangible Assets. This statement addresses the accounting and reporting of goodwill and other intangible assets subsequent to their acquisition. The statement also provides specific guidance on testing goodwill and intangible assets for impairment. SFAS No. 142 provides that (i) goodwill and indefinite-lived intangible assets will no longer be amortized; (ii) impairment will be measured using various valuation techniques based on discounted cash flow; (iii) goodwill will be tested for impairment at least annually at the reporting unit level; (iv) intangible assets deemed to have an indefinite life will be tested for impairment at least annually; and (v) intangible assets with finite lives will be amortized over their useful lives. Goodwill and intangible assets acquired after June 30, 2001 are subject to the provisions of this statement. All provisions of this statement will become effective in the first quarter of 2002. Mattel's goodwill amortization was approximately $46 million of the total $51.1 million in amortization of intangibles recorded in 2001. Mattel is in the process of evaluating the potential impact that the adoption of SFAS No. 142 will have on its consolidated financial position and results of operations. Based on preliminary results of its valuation study, Mattel anticipates that the total impairment to be recognized as a result of the transitional goodwill impairment test will be approximately $400 million pre-tax, relating entirely to the Pleasant Company reporting unit. Revenue Recognition Revenue from the sale of toy products is recognized upon shipment or upon receipt of products by the customer, depending on customer terms. Accruals for customer discounts and rebates, and defective returns are recorded as the related revenues are recognized. Advertising and Promotion Costs Costs of media advertising are expensed the first time the advertising takes place, except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits. Direct-response advertising consists primarily of catalog production and mailing costs that are generally amortized within three months from the date catalogs are mailed. Advertising costs associated with customer benefit programs are accrued as the related revenues are recognized. 44

Emerging Issues Task Force Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer, will be effective in the first quarter of 2002. This issue addresses (i) recognition, measurement, and income statement classification for sales incentives offered by a vendor without charge to a customer as a result of a single exchange transaction or as a result of attaining a specified cumulative level of transactions and (ii) whether certain consideration from a vendor to a reseller of the vendor's products is an adjustment to selling prices or cost. The implementation of this issue results in reclassification of approximately $116 million, $104 million and $93 million from advertising and promotion expense to sales adjustments for the years ended 2001, 2000 and 1999, respectively, which will reduce net sales by a corresponding amount. The restatement will also result in a reclassification of approximately $2 million, $3 million and $22 million from advertising and promotion expense to cost of sales for the years ended 2001, 2000 and 1999, respectively. Research and Development Costs Research and development costs are charged to expense when incurred. Stock-Based Compensation Mattel has adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Accordingly, no compensation cost has been recognized in the results of operations for nonqualified stock options granted under Mattel's plans as such options are granted at not less than the quoted market price of Mattel's common stock on the date of grant. Income Taxes Mattel accounts for certain income and expense items differently for financial reporting and income tax purposes. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the differences are expected to reverse. Income and Dividends Per Common Share Share and per share data for 1999 presented in these financial statements reflect the retroactive effect of the May 1999 Learning Company merger. Basic income (loss) per common share is computed by dividing earnings available to common stockholders by the weighted average number of common shares and common shares obtainable upon the exchange of the exchangeable shares of Mattel's Canadian subsidiary, Softkey Software Products Inc., outstanding during each period. Earnings available to common stockholders represent reported net income (loss) less preferred stock dividend requirements. Diluted income (loss) per common share is computed by dividing diluted earnings available to common stockholders by the weighted average number of common shares, common shares obtainable upon the exchange of the exchangeable shares of Mattel's Canadian subsidiary, Softkey Software Products Inc., and other common equivalent shares outstanding during each period. The calculation of common equivalent shares assumes the exercise of dilutive stock options and warrants, net of assumed treasury share repurchases at average market prices, and conversion of dilutive preferred stock and convertible debt, as applicable. Dilutive securities are included in the calculation of weighted average shares outstanding for those periods in which Mattel recorded income from continuing operations. 45

A reconciliation of earnings available to common stockholders and diluted earnings available to common stockholders and the related weighted average shares for the years ended December 31 follows (in thousands): 2001 2000 1999 ---------------- ---------------- ----------------- Earnings Shares Earnings Shares Earnings Shares -------- ------- -------- ------- -------- ------- Income from continuing operations................... $310,920 $170,177 $108,387 Less: preferred stock dividend requirements................. -- -- (3,980) -------- -------- -------- Earnings available to common stockholders................. $310,920 430,983 $170,177 426,166 $104,407 414,186 Dilutive securities: Dilutive stock options...... 4,765 960 3,920 Warrants.................... 418 -- 665 Preferred stock............. -- -- 6,510 -------- ------- -------- ------- -------- ------- Diluted earnings available to common stockholders.......... $310,920 436,166 $170,177 427,126 $104,407 425,281 ======== ======= ======== ======= ======== ======= Premium price stock options totaling 15.2 million and other nonqualified stock options totaling 13.8 million were excluded from the calculation of diluted earnings per share in 2001 because they were anti-dilutive. Premium price stock options totaling 16.3 million and other nonqualified stock options totaling 25.6 million were excluded from the calculation of diluted earnings per share in 2000 because they were anti-dilutive. Premium price stock options totaling 16.9 million, other nonqualified stock options totaling 23.2 million, convertible debt, and Series C preferred stock were excluded from the calculation of diluted earnings per share in 1999 because they were anti- dilutive. Warrants of 3.0 million shares were excluded from the calculation of diluted earnings per share in 2001, 2000 and 1999 because they were anti- dilutive. Derivative Instruments Mattel uses foreign currency forward exchange and option contracts as cash flow hedges to hedge its forecasted purchases and sales of inventory denominated in foreign currencies. Mattel uses fair value hedges to hedge intercompany loans and management fees and marketable securities denominated in foreign currencies. Mattel also entered into a cross currency interest rate swap to convert the interest and principal amounts from Euros to US dollars on its 200 million Euro Notes due 2002. At the inception of the contracts, Mattel designates its derivatives as either cash flow or fair value hedges and documents the relationship of the hedge to the underlying forecasted transaction, for cash flow hedges, or the recognized asset or liability, for fair value hedges. Hedge effectiveness is assessed at inception and throughout the life of the hedge to ensure the hedge qualifies for hedge accounting treatment. Changes in fair value associated with hedge ineffectiveness, if any, are recorded in Mattel's results of operations currently. Changes in fair value of Mattel's cash flow derivatives are deferred and recorded as part of accumulated other comprehensive income (loss) in stockholders' equity until the underlying transaction is settled. Upon settlement, any gain or loss resulting from the derivative is recorded in Mattel's results of operations. In the event that an anticipated transaction is no longer likely to occur, Mattel recognizes the change in fair value of the derivative in its results of operations currently. Due to the short-term nature of the contracts involved, Mattel does not use hedge accounting for its fair value hedges for intercompany loans and management fees. Changes in the fair value of these derivatives are recorded in Mattel's results of operations currently. As a result of adopting SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, Mattel recorded a one-time transition adjustment of $12.0 million, net of tax, (or $0.03 per share) as the cumulative effect of change in accounting principles related to unrealized losses on the CyberPatrol securities that had been previously deferred in accumulated other comprehensive income (loss). Mattel also recorded a 46

one-time transition adjustment of $2.1 million in accumulated other comprehensive income (loss) related to unrealized gains on derivative instruments. New Accounting Pronouncements In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. All provisions of this statement will be effective at the beginning of fiscal 2003. Mattel is in the process of determining the impact of this standard on its financial results when effective. In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and amends APB No. 30, Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. This statement requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less costs to sell. SFAS No. 144 retains the fundamental provisions of SFAS No. 121 for (a) recognition and measurement of the impairment of long- lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. This statement also retains APB No. 30's requirement that companies report discontinued operations separately from continuing operations. All provisions of this statement will be effective the first quarter of 2002. The adoption of this statement is not expected to have a significant impact on Mattel's consolidated financial position and results of operations. Note 2--Income Taxes Consolidated income from continuing operations before income taxes consists of the following (in thousands): For the Year ------------------------------ 2001 2000 1999 --------- --------- --------- US operations................................... $ 29,431 $(140,747) $(126,675) Foreign operations.............................. 400,579 366,171 296,839 --------- --------- --------- $ 430,010 $ 225,424 $ 170,164 ========= ========= ========= The provision for current and deferred income taxes consists of the following (in thousands): For the Year ------------------------- 2001 2000 1999 -------- ------- ------- Current Federal............................................ $ 28,748 $ 2,860 $ 9,816 State.............................................. 4,700 3,500 7,400 Foreign............................................ 75,786 52,900 58,150 -------- ------- ------- 109,234 59,260 75,366 -------- ------- ------- Deferred Federal............................................ 787 (9,890) (30,109) State.............................................. 5,500 (13,400) 3,420 Foreign............................................ 3,569 19,277 13,100 -------- ------- ------- 9,856 (4,013) (13,589) -------- ------- ------- Total provision for income taxes..................... $119,090 $55,247 $61,777 ======== ======= ======= 47

Deferred income taxes are provided principally for net operating loss carryforwards, research and development expenses, certain reserves, depreciation, employee compensation-related expenses, and certain other expenses that are recognized in different years for financial statement and income tax purposes. Mattel's deferred income tax assets (liabilities) are comprised of the following (in thousands): As of Year End -------------------- 2001 2000 --------- --------- Operating loss and tax credit carryforwards............... $ 725,709 $ 797,216 Excess of tax basis over book basis....................... 130,077 21,841 Sales allowances and inventory reserves................... 89,834 75,785 Deferred compensation..................................... 43,397 45,371 Restructuring and other charges........................... 11,690 27,210 Postretirement benefits................................... 12,360 12,440 Other..................................................... 30,535 31,640 --------- --------- Gross deferred income tax assets........................ 1,043,602 1,011,503 --------- --------- Deferred intangible assets................................ (49,939) (40,374) Excess of book basis over tax basis....................... (30,249) (3,320) Retirement benefits....................................... (27,716) (20,872) Other..................................................... (26,810) (38,637) --------- --------- Gross deferred income tax liabilities................... (134,714) (103,203) Deferred income tax asset valuation allowances............ (374,448) (364,004) --------- --------- Net deferred income tax assets............................ $ 534,440 $ 544,296 ========= ========= Management considered all available evidence and determined that a valuation allowance of $374.4 million was required as of December 31, 2001, for certain tax credit, net operating loss, and capital loss carryforwards that would likely expire prior to their utilization. Management believes that it is more likely than not that Mattel will generate sufficient taxable income in the appropriate carryforward periods to realize the benefit of the remaining net deferred tax assets of $534.4 million. Differences between the provision for income taxes for continuing operations at the US federal statutory income tax rate and the provision in the consolidated statements of operations are as follows (in thousands): For the Year -------------------------- 2001 2000 1999 -------- ------- ------- Provision at federal statutory rates............... $150,504 $78,898 $59,557 Increase (decrease) resulting from: Losses without income tax benefit................ 13,623 12,777 21,170 Foreign earnings taxed at different rates, including withholding taxes..................... (37,774) (37,167) (62,488) State and local taxes, net of federal benefit.... 6,630 (6,435) 6,165 Non-deductible amortization and restructuring charges......................................... 2,092 2,093 25,986 Other............................................ (15,985) 5,081 11,387 -------- ------- ------- Total provision for income taxes................... $119,090 $55,247 $61,777 ======== ======= ======= Appropriate US and foreign income taxes have been provided for on earnings of foreign subsidiary companies that are expected to be remitted in the near future. The cumulative amount of undistributed earnings of foreign subsidiaries that Mattel intends to permanently invest and upon which no deferred US income taxes have been provided is $1.9 billion at December 31, 2001. The additional US income tax on the unremitted foreign earnings, if repatriated, would be offset in whole or in part by foreign tax credits. As of December 31, 2001, Mattel has US net operating loss carryforwards totaling $889.6 million and credit carryforwards of $139.1 million for federal income tax purposes. The net operating loss carryforwards 48

expire during the years 2002 to 2020, while $133.8 million of the tax credits expire during the years 2002 to 2020 with the remainder having no expiration date. Utilization of these loss and credit carryforwards is subject to annual limitations, and Mattel has established a valuation allowance for the carryforwards, which are not expected to be utilized. Certain foreign subsidiaries have net operating loss carryforwards totaling $210.2 million ($118.1 million with no expiration date, $78.8 million expiring during the years 2002 to 2006, and $13.3 million expiring after 2006). Generally accepted accounting principles require that tax benefits related to the exercise by employees of nonqualified stock options be credited to additional paid-in capital. In 2001, 2000 and 1999, nonqualified stock options exercised resulted in credits to additional paid-in capital totaling $6.0 million, $2.3 million and $15.0 million, respectively. The Internal Revenue Service has completed its examination of the Mattel, Inc. federal income tax returns through December 31, 1994 and is currently examining Mattel's federal income tax returns for fiscal years 1995 through 1997. Note 3--Employee Benefits Mattel and certain of its subsidiaries have retirement plans covering substantially all employees of these companies. Expense related to these plans totaled $23.7 million, $31.6 million, and $18.6 million in 2001, 2000 and 1999, respectively. Expense for 2000 included $10.8 million for retirement benefits related to the departure of certain senior executives during the first quarter. Pension Plans Mattel provides defined benefit pension plans, which satisfy the requirements of the Employee Retirement Income Security Act of 1974 ("ERISA"). With the exception of the Fisher-Price Pension Plan, activity related to Mattel's pension plans, including those of foreign subsidiaries, was not significant during any year. The components of net pension income for the Fisher-Price Pension Plan, based upon a December valuation date for the years ended December 31, 2001, 2000 and 1999, are detailed below (in thousands): For the Year Ended ------------------------- 2001 2000 1999 ------- ------- ------- Service cost........................................ $ 2,897 $ 2,609 $ 2,829 Interest cost....................................... 12,857 12,173 14,655 Expected return on plan assets...................... (22,939) (23,843) (27,237) Amortization of: Unrecognized prior service cost................... 108 109 88 Unrecognized net asset............................ -- -- (1,284) Curtailment gain.................................... (700) -- -- Plan amendment loss................................. 1,944 -- 1,386 ------- ------- ------- Net pension income.................................. $(5,833) $(8,952) $(9,563) ======= ======= ======= Reconciliation of the funded status of Fisher-Price's domestic pension plan to the related prepaid asset included in the consolidated balance sheets is as follows (in thousands): As of Year End --------------- 2001 2000 ------- ------- Funded status of the plan...................................... $37,699 $58,111 Unrecognized net loss (gain)................................... 22,764 (3,739) Unrecognized prior service cost................................ 863 1,121 ------- ------- Prepaid pension asset.......................................... $61,326 $55,493 ======= ======= 49

Reconciliation of the assets and liabilities of Fisher-Price's domestic pension plan are as follows (in thousands): As of Year End ------------------ 2001 2000 -------- -------- Change in Plan Assets Plan assets at fair value, beginning of year.............. $233,150 $222,793 Actual return on plan assets.............................. 9,631 18,391 Benefits paid............................................. (9,865) (8,034) -------- -------- Plan assets at fair value, end of year.................... $232,916 $233,150 ======== ======== Change in Projected Benefit Obligation Projected benefit obligation, beginning of year........... $175,039 $157,392 Service cost.............................................. 2,897 2,609 Interest cost............................................. 12,857 12,173 Plan amendments........................................... 1,932 -- Actuarial loss............................................ 12,357 10,899 Benefits paid............................................. (9,865) (8,034) -------- -------- Projected benefit obligation, end of year................. $195,217 $175,039 ======== ======== For the Year ---------------- 2001 2000 1999 ---- ---- ---- Assumptions: Weighted average discount rate................................ 7.0% 7.5% 8.0% Rate of future compensation increases......................... 4.0% 4.0% 4.0% Long-term rate of return on plan assets....................... 10.0% 11.0% 11.0% Other Retirement Plans Domestic employees are eligible to participate in 401(k) savings plans sponsored by Mattel or its subsidiaries, which are defined contribution plans satisfying ERISA requirements. Mattel makes company contributions in cash and allows participants to allocate both individual and company contributions to a balanced variety of investment funds. Furthermore, Mattel's plan limits a participant's allocation to the Mattel Stock Fund, which is fully invested in Mattel common stock, to 50% of the participants account balance. Mattel also maintains unfunded supplemental executive retirement plans that are nonqualified defined benefit plans covering certain key executives. For 2001, 2000 and 1999, the accumulated and vested benefit obligations and related expense of these plans were not significant. Deferred Compensation and Excess Benefit Plans Mattel provides a deferred compensation plan that permits certain officers and key employees to elect to defer portions of their compensation. The deferred compensation plan, together with certain contributions made by Mattel and employees to an excess benefit plan, earn various rates of return. The liability for these plans as of December 31, 2001 and 2000 was $36.8 million and $69.0 million, respectively. Mattel's contribution to these plans and the related administrative expense were not significant to the results of operations during any year. Mattel has purchased group trust-owned life insurance contracts designed to assist in funding these programs. The cash surrender value of these policies, valued at $57.8 million and $56.6 million as of December 31, 2001 and 2000, respectively, are held in an irrevocable rabbi trust which is included in other assets in the consolidated balance sheets. 50

Postretirement Benefits Fisher-Price has an unfunded postretirement health insurance plan covering certain eligible domestic employees hired prior to January 1, 1993. Details of the expense for the Fisher-Price plan recognized in the consolidated statements of operations are as follows (in thousands): For the Year -------------------- 2001 2000 1999 ------ ------ ------ Service cost.............................................. $ 273 $ 201 $ 224 Interest cost............................................. 2,808 2,886 2,531 Curtailment loss.......................................... 76 -- -- Recognized net actuarial loss............................. 303 202 -- ------ ------ ------ Net postretirement benefit cost........................... $3,460 $3,289 $2,755 ====== ====== ====== Amounts included in the consolidated balance sheets for this plan are as follows (in thousands): As of Year End ---------------- 2001 2000 ------- ------- Current retirees............................................... $34,758 $31,468 Fully eligible active employees................................ 3,621 3,980 Other active employees......................................... 4,799 4,272 ------- ------- Accumulated postretirement benefit obligation................ 43,178 39,720 Unrecognized net actuarial loss................................ (12,974) (9,105) ------- ------- Accrued postretirement benefit liability....................... $30,204 $30,615 ======= ======= Reconciliation of the liabilities of Fisher-Price's postretirement health insurance plan is as follows (in thousands): As of Year End ---------------- 2001 2000 ------- ------- Change in Accumulated Postretirement Benefit Obligation Accumulated postretirement benefit obligation, beginning of year...................................................... $39,720 $37,163 Service cost............................................... 273 201 Interest cost.............................................. 2,808 2,886 Actuarial loss............................................. 4,248 3,053 Benefits paid, net of participant contributions............ (3,871) (3,583) ------- ------- Accumulated postretirement benefit obligation, end of year...................................................... $43,178 $39,720 ======= ======= The discount rates used in determining the accumulated postretirement benefit obligation were 7.0% for 2001, 7.5% for 2000 and 8.0% for 1999. For all participants, the health care cost trend rate for expected claim costs was assumed to be as follows: Pre- Post- Year 65 65 ---- ----- ----- 2002........................................................... 10.0% 12.0% 2003........................................................... 9.0% 10.5% 2004........................................................... 8.0% 9.0% 2005........................................................... 7.0% 7.5% 2006........................................................... 6.0% 6.0% 2007 and thereafter............................................ 5.5% 5.5% 51

A one percentage point increase/(decrease) in the assumed health care cost trend rate for each future year would impact the accumulated postretirement benefit obligation as of December 31, 2001 by $4.7 million and $(4.0) million, respectively, while a one percentage point increase/(decrease) would impact the service and interest cost recognized for the year ended December 31, 2001 by $0.3 million and $(0.3) million, respectively. Domestic employees of Mattel participate in a contributory postretirement benefit plan. The ongoing costs and obligations associated with the Mattel, Inc. plan are not significant to the financial position and results of operations during any year. Incentive Awards Mattel has annual incentive compensation plans for officers and key employees based on Mattel's performance and subject to certain approvals of the Compensation/Options Committee of the board of directors. For 2001 and 2000, $36.2 million and $33.7 million, respectively, were charged to operating expense for awards under these plans. No expense was recorded in 1999 for awards under these plans. In November 2000, the Compensation/Options Committee of the board of directors approved the Long-Term Incentive Plan covering certain key executives of Mattel, Inc. for the performance period from August 15, 2000 through December 31, 2002. Awards are based upon the financial performance of Mattel during the performance period and are paid in the quarter following the end of the performance period. For 2001 and 2000, $4.9 million and $8.3 million, respectively, were charged to operating expense for this plan. In June 1999, the stockholders approved the Amended and Restated Mattel Long-Term Incentive Plan. The Compensation/Options Committee of the board of directors terminated this plan in November 2000, and no expense was recorded related to this plan. For 2001 and 2000, $11.1 million and $11.6 million, respectively, was charged to operating expense for costs related to the recruitment and retention of senior executives. For 1999, $22.0 million was charged to operating expense related to a special award. This special broad-based employee award was approved by Mattel's board of directors and was designed to provide a competitive compensation level to retain and motivate employees of Mattel. Note 4--Seasonal Financing and Long-Term Debt Seasonal Financing Mattel maintains and periodically amends or replaces an unsecured committed revolving credit agreement with a commercial bank group that is used as the primary source of financing the seasonal working capital requirements of its domestic and certain foreign subsidiaries. The agreement in effect during 2001 consisted of an unsecured committed revolving credit facility providing a total of $1.0 billion in seasonal financing available for advances and backup for the issuance of commercial paper (a five-year facility that expires in 2003). Interest was charged at various rates selected by Mattel, ranging from market commercial paper rates to the bank reference rate. Within this facility, up to $300.0 million is available for non-recourse sales of certain trade accounts receivable of Mattel to the commercial bank group providing the credit line. Such non-recourse sales are made pursuant to an arrangement whereby certain of Mattel's subsidiaries sell receivables to Mattel Factoring, Inc., which in turn sells those receivables to the commercial bank group. Mattel Factoring, Inc. is a separate special-purpose legal entity with its own assets and liabilities. In March 2002, Mattel amended and restated this facility into a $1.060 billion, 3- year facility that expires in 2005 with substantially similar terms and conditions. Additionally, during 2001, Mattel utilized a 364-day $400.0 million unsecured committed credit facility with essentially the same terms and conditions as the $1.0 billion revolving credit facility. Mattel has elected not to renew this facility when it expires in March 2002 since it believes that cash on hand at the beginning of 2002 and its $1.060 billion domestic unsecured committed revolving facility will be sufficient to meet its seasonal working capital requirements in 2002. 52

Mattel also has a $200.0 million senior unsecured term loan that matures in July 2003. Interest is charged at various rates, ranging from a LIBOR-based rate to the bank reference rate (3.66% as of December 31, 2001). The unsecured credit facilities and term loan require Mattel to meet financial covenants for consolidated debt-to-capital and interest coverage. Mattel was in compliance with such covenants during 2001. In addition, Mattel avails itself of uncommitted domestic facilities provided by certain banks to issue short-term money market loans. To meet seasonal borrowing requirements of certain foreign subsidiaries, Mattel negotiates individual financing arrangements, generally with the same group of banks that provided credit in the prior year. Foreign credit lines total approximately $368 million, a portion of which is used to support letters of credit. Mattel expects to extend these credit lines throughout 2002 and believes available amounts will be adequate to meet its seasonal financing requirements. Mattel also enters into agreements with banks of its foreign subsidiaries for non-recourse sales of certain of its foreign subsidiary receivables. In fourth quarter 2001, Mattel entered into a securitization agreement to sell certain receivables of its French and German subsidiaries with one of its European banks. Information relating to Mattel's unsecured committed credit facilities, foreign credit lines and other short-term borrowings is summarized as follows (in thousands): For the Year ---------------------------------- 2001 2000 1999 ---------- ---------- ---------- Balance at end of year Domestic................................ $ -- $ 178,017 $ 293,744 Foreign................................. 38,108 48,386 75,805 Maximum amount outstanding Domestic................................ $1,028,090 $1,320,000 $1,207,000 Foreign................................. 64,158 85,905 117,000 Average borrowing Domestic................................ $ 694,900 $ 835,200 $ 573,100 Foreign................................. 43,168 79,561 40,000 Weighted average interest rate on average borrowing Domestic (computed daily)............... 4.6% 6.7% 5.5% Foreign (computed monthly).............. 17.5% 15.7% 33.0% Mattel's accounts receivable sold or anticipated, and therefore excluded from its consolidated balance sheets, is summarized as follows (in millions): As of Year End ----------------- 2001 2000 ------ ------ Domestic factoring and anticipation........................... $261.5 $347.5 Foreign factoring............................................. 237.2 196.9 ------ ------ Total factoring and anticipation............................ $498.7 $544.4 ====== ====== 53

Long-Term Debt Mattel's long-term debt consists of the following (in thousands): As of Year End --------------------------- 2001 2000 ---------- ---------- Euro notes due 2002................................. $ 177,900 $ 190,710 Unsecured term loan due 2003........................ 200,000 200,000 6% senior notes due 2003............................ 150,000 150,000 6-1/8% senior notes due 2005........................ 150,000 150,000 Medium-term notes................................... 510,000 540,500 10.15% mortgage note due 2005....................... 41,686 42,380 Other............................................... 1,423 1,529 ---------- ---------- 1,231,009 1,275,119 Less: current portion............................. (210,090) (32,723) ---------- ---------- Total long-term debt............................ $1,020,919 $1,242,396 ========== ========== In 2000, Mattel completed an offering in Europe of Euro 200 million aggregate principal amount of notes due July 2002. Interest is payable annually at the rate of Euro 6.625%. Mattel entered into a cross currency interest rate swap to convert the interest and principal amounts from Euros to US dollars. Medium-term notes have maturity dates from 2002 through 2013 and bear interest at fixed rates from 6.50% to 8.55%. Mattel repaid its $100.0 million of 6-3/4% senior notes upon maturity in May 2000. Additionally, Mattel repaid $201.0 million of outstanding 5-1/2% senior convertible notes ("5-1/2% Notes") upon maturity in November 2000. Scheduled Maturities The aggregate amounts of long-term debt maturing in the next five years are as follows (in thousands): Senior MT Mortgage Notes Notes Note Other Total -------- -------- -------- ------ ---------- 2002............................... $177,900 $ 30,000 $ 767 $1,423 $ 210,090 2003............................... 350,000 30,000 849 -- 380,849 2004............................... -- 50,000 939 -- 50,939 2005............................... 150,000 -- 39,131 -- 189,131 2006............................... -- 50,000 -- -- 50,000 Thereafter......................... -- 350,000 -- -- 350,000 -------- -------- ------- ------ ---------- Total............................ $677,900 $510,000 $41,686 $1,423 $1,231,009 ======== ======== ======= ====== ========== Note 5--Stockholders' Equity Preference Stock and Preference Share Purchase Rights Mattel is authorized to issue up to 20.0 million shares of $0.01 par value preference stock, of which none is currently outstanding. There are 2.0 million shares of $0.01 par value preference stock designated as Series E Junior Participating Preference Stock in connection with a distribution of Preference Share Purchase Rights (the "Rights") to Mattel's common stockholders. The Rights expired on February 17, 2002. 54

Preferred Stock Mattel is authorized to issue 3.0 million shares of $1.00 par value preferred stock, of which none is currently outstanding. Special Voting Preferred Stock and Related Exchangeable Shares Mattel is authorized to issue one share of $1.00 par value Special Voting Preferred Stock, which was issued in exchange for one share of Learning Company special voting stock in connection with the May 1999 merger. The par value and liquidation preference of the Special Voting Preferred Stock are $1.00 and $10.00 per share, respectively. The Special Voting Preferred Stock has a number of votes equal to 1.2 times the number of outstanding exchangeable shares of Softkey Software Products Inc. that are not owned by Mattel, its subsidiaries or any entity controlled by Mattel. The Special Voting Preferred Stock votes together with the holders of Mattel's common stock as a single class on all matters on which the holders of Mattel's common stock may vote. No dividends are paid on the Special Voting Preferred Stock. The Special Voting Preferred Stock will be redeemed for $10.00 on February 4, 2005, the redemption date for the exchangeable shares, unless the board of directors of Mattel's Canadian subsidiary, Softkey Software Products Inc., extends or accelerates the redemption date. As of December 31, 2001 and 2000, there were 935.1 thousand and 1.6 million outstanding exchangeable shares, respectively, that were not owned by Mattel, its subsidiaries or any entity controlled by Mattel. As a result of the May 1999 merger, each exchangeable share is convertible at the option of the holder, without additional payment, for the right to receive 1.2 shares of Mattel common stock until February 4, 2005. On that date, any exchangeable shares not previously converted will be redeemed at the current market price of Mattel's common stock multiplied by 1.2. The redemption price will be paid in the form of Mattel's common stock, plus cash equal to any unpaid dividends. The board of directors of Softkey Software Products Inc. may extend the automatic redemption date at its option and may accelerate the automatic redemption date if the number of outstanding exchangeable shares is less than 0.5 million. Holders of exchangeable shares are entitled to receive dividends declared on Mattel's common stock with respect to each exchangeable share multiplied by 1.2. Holders of exchangeable shares vote their shares through the Special Voting Preferred Stock at the rate of 1.2 votes per exchangeable share on all matters on which the holders of Mattel's common stock may vote. During 2001, 2000 and 1999, 622.5 thousand, 1.6 million and 1.9 million exchangeable shares, respectively, were converted by the holders into common stock at the rate of 1.2 common shares per exchangeable share. Series C Mandatorily Convertible Redeemable Preferred Stock ("Series C Preferred Stock") In 1999, all 771.9 thousand shares of Series C Preferred Stock outstanding (and the related depositary shares) were converted by the holders into 7.7 million shares of Mattel common stock pursuant to terms of the certificate of designations. Stock Warrants In 2000, Mattel issued Warner Bros. Consumer Products a stock warrant to purchase 3.0 million shares of Mattel's common stock at an exercise price of $10.875 per share. This warrant expires on December 31, 2003. In 1996, Mattel issued Disney Enterprises, Inc. a warrant to purchase 3.0 million shares of Mattel's common stock at an exercise price of $27.375 per share. This warrant expires on October 2, 2002. The fair value of these warrants is being amortized as a component of royalty expense when the related properties are introduced over the period the related revenues are recognized. During 2001, 2000 and 1999, $8.0 million, $10.4 million and $5.6 million, respectively, was recognized in the results of operations related to these warrants. 55

In 1999, holders exercised all remaining outstanding stock subscription warrants assumed in connection with previous mergers resulting in the issuance of 865.6 thousand common shares. Common Stock Repurchase Plan Mattel's common stock repurchase plan, initiated in May 1990, provides for the repurchase of common shares to fund Mattel's stock option plans. The number of shares to be repurchased is authorized on an annual basis by the board of directors based upon anticipated reissuance needs. No shares were repurchased in 2001 and 2000 under this plan. During 1999, Mattel repurchased 4.0 million shares. Dividends As part of its financial realignment plan, Mattel announced during the third quarter of 2000 a change in its dividend policy consisting of a reduction in the annual cash dividend from $0.36 per share to $0.05 per share. In 2001, a $0.05 per share dividend was declared by the board of directors in November and paid in December. During 2000 and 1999, dividends totaling $0.27 per share and $0.35 per share were declared, respectively. The payment of dividends on common stock is at the discretion of Mattel's board of directors and is subject to statutory and customary limitations. Comprehensive Income (Loss) The changes in the components of other comprehensive income (loss) are as follows (in thousands): For the Year Ended ------------------------------ 2001 2000 1999 -------- --------- --------- Income from continuing operations.............. $310,920 $ 170,177 $ 108,387 Loss from discontinued operations.............. -- (601,146) (190,760) Cumulative effect of change in accounting principles.................................... (12,001) -- -- -------- --------- --------- Net income (loss).............................. 298,919 (430,969) (82,373) Currency translation adjustments............... (14,596) (50,485) (33,790) Minimum pension liability adjustments.......... (2,518) (1,782) -- Net unrealized gain on derivative instruments: Unrealized gains............................. 13,997 -- -- Reclassification adjustment for realized gains included in net income................ (10,459) -- -- -------- --------- --------- 3,538 -- -- -------- --------- --------- Net unrealized gains (losses) on securities: Unrealized holding gains (losses)............ (186) (25,118) 3,184 Reclassification adjustment for realized (gains) losses included in net income (loss)...................................... 12,001 10,995 (11,143) -------- --------- --------- 11,815 (14,123) (7,959) -------- --------- --------- Comprehensive income (loss).................... $297,158 $(497,359) $(124,122) ======== ========= ========= The components of accumulated other comprehensive loss are as follows (in thousands): As of Year End -------------------- 2001 2000 --------- --------- Currency translation adjustments......................... $(307,036) $(292,440) Unrealized holding loss.................................. -- (11,815) Minimum pension liability adjustment..................... (4,300) (1,782) Net unrealized gain on derivative instruments............ 3,538 -- --------- --------- $(307,798) $(306,037) ========= ========= 56

Note 6--Stock Compensation Plans Mattel Stock Option Plans Under various plans, Mattel has the ability to grant incentive stock options, nonqualified stock options, stock appreciation rights, nonvested stock awards, and shares of common stock to officers, key employees, and other persons providing services to Mattel. In addition, nonqualified stock options are granted to members of Mattel's board of directors who are not employees of Mattel. Generally, options are exercisable contingent upon the grantees' continued employment with Mattel. Nonqualified stock options are granted at not less than 100% of the fair market value of Mattel's common stock on the date of grant. Options granted at market price usually expire within ten years from the date of grant and vest on a schedule determined by the Compensation/Options Committee of the board of directors, generally over four years. Options granted at above market price expire five or ten years from the date of grant and vest based on whether the exercise price is achieved by a specified date. Mattel's current stock option plans, the 1997, 1996 and 1999 plans, expire on December 31, 2002, 2005 and 2009, respectively. All outstanding awards under plans that previously expired continue to be exercisable under the terms of their respective grant agreements. The aggregate number of shares of common stock available for grant under the 1997, 1996 and 1999 plans cannot exceed 24.0 million, 50.0 million and 12.8 million shares, respectively. The following is a summary of stock option information and weighted average exercise prices for Mattel's stock option plans during the year (options in thousands): 2001 2000 1999 -------------- --------------- -------------- Number Price Number Price Number Price ------ ------ ------- ------ ------ ------ Outstanding at January 1........ 54,313 $25.70 49,152 $30.51 34,736 $36.16 Options granted............... 5,651 15.05 17,900 11.01 21,628 21.91 Options exercised............. (2,650) 12.33 (1,064) 10.79 (201) 20.93 Options canceled.............. (4,841) 30.23 (11,675) 24.40 (7,011) 37.76 ------ ------- ------ Outstanding at December 31...... 52,473 $24.82 54,313 $25.70 49,152 $30.51 ====== ======= ====== Exercisable at December 31...... 38,958 $27.38 35,017 $29.41 10,813 $23.89 ====== ======= ====== Available for grant at December 31............................. 21,775 16,277 16,292 ====== ======= ====== The following table summarizes information about the weighted average remaining contractual life (in years) and the weighted average exercise prices for Mattel stock options outstanding as of December 31, 2001 (options in thousands): Options Options Outstanding Exercisable -------------------------------------- ------------------- Exercise Price Ranges Number Remaining Life Price Number Price - --------------------- ------ -------------- ------ ------ ------ $ 7.52--$ 7.52 7 0.12 $ 7.52 7 $ 7.52 8.41-- 10.38 6,630 7.93 10.37 2,908 10.36 10.50-- 11.88 6,286 8.19 11.46 4,220 11.56 12.00-- 14.86 9,260 8.18 14.29 4,553 13.88 15.00-- 22.50 5,903 5.54 19.40 4,102 18.77 24.00-- 25.75 6,783 4.84 25.31 6,775 25.31 26.13-- 42.00 4,036 5.16 37.62 2,825 37.01 42.31-- 42.31 6,833 1.03 42.31 6,833 42.31 44.87-- 44.87 6,735 1.04 44.87 6,735 44.87 ------ ------ $ 7.52--$44.87 52,473 5.34 $24.82 38,958 $27.88 ====== ====== 57

Learning Company Stock Option Plans Prior to the May 1999 merger, Learning Company and its subsidiaries had various incentive and nonqualified stock option plans that provided benefits for eligible employees and non-employee directors. Effective with the 1999 merger, each option outstanding under these plans was converted into an option to purchase 1.2 shares of Mattel common stock. The exercise price of such options was adjusted by dividing the Learning Company option price by 1.2. Other than options granted under some plans assumed by Learning Company in connection with acquisitions, all Learning Company stock options vested and became fully exercisable as a result of the 1999 merger. The following is a summary of stock option information and weighted average exercise prices for Learning Company's stock option plans during the year (options in thousands): 2001 2000 1999 -------------- -------------- -------------- Number Price Number Price Number Price ------ ------ ------ ------ ------ ------ Outstanding at January 1......... 2,674 $17.07 10,680 $16.19 17,626 $14.30 Options granted................ -- -- -- -- 1,415 21.12 Options exercised.............. (1,565) 13.33 (1,372) 9.99 (5,278) 10.99 Options canceled............... (984) 24.23 (6,634) 17.13 (3,083) 15.94 ------ ------ ------ Outstanding at December 31....... 125 $ 7.56 2,674 $17.07 10,680 $16.19 ====== ====== ====== Exercisable at December 31....... 125 $ 7.56 2,674 $17.07 9,473 $15.41 ====== ====== ====== Available for grant at December 31.............................. -- -- -- ====== ====== ====== The exercise price for Learning Company stock options outstanding as of December 31, 2001 ranges from $4.54 per share to $16.15 per share, with a weighted average of $7.56 per share. Compensation Cost Mattel adopted the disclosure-only provisions of SFAS No. 123. Accordingly, no compensation cost has been recognized in the results of operations for nonqualified stock options granted under these plans. Had compensation cost for nonqualified stock options been determined based on their fair value at the date of grant consistent with the method of accounting prescribed by SFAS No. 123, Mattel's net income (loss) and earnings per share would have been adjusted as follows (amounts in millions except per share data): For the Year Ended ------------------------ 2001 2000 1999 ------ ------- ------- Net income (loss) As reported........................................ $298.9 $(431.0) $ (82.4) Stock option plans................................. (14.9) (34.6) (50.2) ------ ------- ------- Pro forma income (loss).......................... $284.0 $(465.6) $(132.6) ====== ======= ======= Income (loss) per share Basic As reported........................................ $ 0.69 $ (1.01) $ (0.21) Stock option plans................................. (0.03) (0.08) (0.12) ------ ------- ------- Pro forma basic income (loss).................... $ 0.66 $ (1.09) $ (0.33) ====== ======= ======= Diluted As reported........................................ $ 0.68 $ (1.01) $ (0.20) Stock option plans................................. (0.03) (0.08) (0.12) ------ ------- ------- Pro forma diluted income (loss).................. $ 0.65 $ (1.09) $ (0.32) ====== ======= ======= 58

The pro forma amounts shown above are not indicative of the pro forma effect in future years since the estimated fair value of options is amortized to expense over the vesting period, and the number of options granted varies from year to year. The fair value of Mattel options granted has been estimated using the Black- Scholes pricing model. The expected life of these options used in this calculation has been determined using historical exercise patterns. The following weighted average assumptions were used in determining fair value: 2001 2000 1999 ----- ----- ----- Options granted at market price Expected life (in years)................................. 5.50 5.67 3.90 Risk-free interest rate.................................. 4.42% 5.03% 6.34% Volatility factor........................................ 16.76% 19.55% 18.46% Dividend yield........................................... 0.86% 0.83% 0.84% Options granted at above market price Expected life (in years)................................. -- 10.00 5.00 Risk-free interest rate.................................. -- 6.01% 5.16% Volatility factor........................................ -- 45.63% 39.90% Dividend yield........................................... -- 3.40% 0.89% The weighted average fair value of Mattel options granted at market price during 2001, 2000 and 1999 were $3.52, $2.96 and $4.85, respectively. The weighted average fair value of Mattel options granted at above market price during 2000 and 1999 were $3.18 and $5.43, respectively. The fair value of Learning Company options granted prior to the 1999 merger was determined using the Black-Scholes pricing model, assuming an expected life of four years (using historical exercise patterns), a dividend yield of zero, a risk-free interest rate of 6.35%, and a volatility factor of 51.0%. The weighted average fair value of Learning Company options granted prior to the 1999 merger was $9.83. Nonvested Stock Mattel awarded 685.5 thousand deferrable nonvested stock units to its chief executive officer pursuant to the terms of his employment contract. These units vest at a rate of 25% annually in 2000, 2001 and 2002, with the remaining units vesting in 2008. The aggregate fair market value of the nonvested stock units is being amortized to compensation expense over the vesting period. The amount charged to operating expense related to the vesting of these units was $1.6 million and $4.5 million in 2001 and 2000, respectively. Prior to the May 1999 merger, Learning Company maintained the 1990 Long-Term Equity Incentive Plan for certain senior executives. Under this plan, 0.8 million shares of nonvested stock were issued during 1998. At the time of the 1999 merger, the nonvested stock became fully vested as a result of change of control provisions and the remaining unamortized amount of $11.8 million was charged to results of continuing operations in 1999. Employee Stock Purchase Plan In December 1997, Learning Company stockholders approved the 1997 Employee Stock Purchase Plan, which provided certain eligible employees with the opportunity to purchase shares of common stock at a price of 85% of the price listed on the New York Stock Exchange at various specified purchase dates. The plan met the criteria established in SFAS No. 123 for noncompensatory employee stock purchase plans, and therefore, no compensation expense was recorded in connection with this plan. During 1999, approximately 37 thousand shares were purchased by employees under this plan. As a result of the May 1999 merger, the 1997 Employee Stock Purchase Plan was terminated. 59

Note 7--Commitments and Contingencies Leases Mattel routinely enters into noncancelable lease agreements for premises and equipment used in the normal course of business. The following table shows the future minimum obligations under lease commitments in effect at December 31, 2001 (in thousands): Capitalized Operating Leases Leases ----------- --------- 2002..................................................... $ 300 $ 38,800 2003..................................................... 300 29,800 2004..................................................... 300 26,800 2005..................................................... 300 20,700 2006..................................................... 300 16,200 Thereafter............................................... 8,600 35,800 ------- -------- $10,100(a) $168,100 ======= ======== (a) Includes $7.9 million of imputed interest. Rental expense under operating leases amounted to $60.9 million, $60.8 million and $59.9 million for 2001, 2000 and 1999, respectively, net of sublease income of $0.9 million, $0.7 million and $0.6 million in 2001, 2000 and 1999, respectively. Commitments In the normal course of business, Mattel enters into contractual arrangements to obtain and protect Mattel's right to create and market certain products, and for future purchases of goods and services to ensure availability and timely delivery. Such arrangements include royalty payments pursuant to licensing agreements and commitments for future inventory purchases. Certain of these commitments routinely contain provisions for guaranteed or minimum expenditures during the terms of the contracts. Current and future commitments for guaranteed payments reflect Mattel's focus on expanding its product lines through alliances with businesses in other industries. The largest commitment involves Mattel's agreement with Disney Enterprises, Inc., which expires in December 2004. This licensing agreement, which contains annual minimum royalty guarantees, permits Mattel to produce toys based on classic Disney characters such as Mickey Mouse(R), Winnie the Pooh(R) and the Disney Princesses, as well as any new infant and preschool toys based on film and television properties created by Disney. Licensing and related agreements provide for terms extending from 2002 through 2010 and contain provisions for future minimum payments as shown in the following table (in thousands): Minimum Payments -------- 2002................................................................... $106,000 2003................................................................... 84,000 2004................................................................... 81,000 2005................................................................... 28,000 2006................................................................... 23,000 Thereafter............................................................. 57,000 -------- $379,000 ======== 60

Royalty expense for 2001, 2000 and 1999 was $220.3 million, $258.8 million and $219.9 million, respectively. As of December 31, 2001, Mattel had outstanding commitments for 2002 purchases of inventory of approximately $121 million. Insurance Mattel has a wholly-owned insurance subsidiary, Far West Insurance Company, Ltd. ("Far West"). The purpose of this subsidiary is to insure Mattel's workers' compensation, general and product liability, and automobile liability risks. Far West insures the first $0.5 million of the workers' compensation, general liability and automobile liability risks and the first $1.0 million of Mattel's product liability risks. Risks in excess of these amounts are reinsured by various insurance companies that have an "A" or better AM Best rating. Mattel's liabilities for unpaid and incurred but not reported claims at December 31, 2001 and 2000 were $22.7 million and $20.5 million, respectively, and were included in the consolidated balance sheets. Loss reserves are accrued based upon Mattel's estimates of the aggregate liability for claims incurred using a study prepared by an outside independent actuary. Litigation Litigation Related to Learning Company Following Mattel's announcement in October 1999 of the expected results of its Learning Company division for the third quarter of 1999, several of Mattel's stockholders filed purported class action complaints naming Mattel and certain of its present and former officers and directors as defendants. The complaints generally allege, among other things, that the defendants made false or misleading statements, in the joint proxy statement for the merger of Mattel and Learning Company and elsewhere, that artificially inflated the price of Mattel's common stock. In March 2000, these shareholder complaints were consolidated into two lead cases: Thurber v. Mattel, Inc. et al. (containing claims under (S)10(b) of the 1934 Securities Exchange Act ("Act")) and Dusek v. Mattel, Inc. et al (containing claims under (S)14(a) of the Act). In January 2001, the Court granted defendants' motions to dismiss both Thurber and Dusek, and gave plaintiffs leave to amend. In December 2001, the Court denied defendants' motions to dismiss the amended complaints in both Thurber and Dusek. In each case, the plaintiffs have asked for compensatory damages. Both Thurber and Dusek are currently pending in the United States District Court for the Central District of California. Other purported class action litigation has been brought against Mattel as successor to Learning Company and the former directors of Learning Company on behalf of former stockholders of Broderbund Software, Inc. who acquired shares of Learning Company in exchange for their Broderbund common stock in connection with the Learning Company-Broderbund merger on August 31, 1998. The consolidated complaint in In re Broderbund generally alleges that Learning Company misstated its financial results prior to the time it was acquired by Mattel. The defendants' motion to dismiss the complaint in In re Broderbund was granted in May 2001, and the case was dismissed. The In re Broderbund plaintiffs appealed the dismissal, and the case is currently pending before the Ninth Circuit Court of Appeals. The plaintiffs have asked for compensatory damages. Several stockholders have filed derivative complaints on behalf and for the benefit of Mattel, alleging, among other things, that Mattel's directors breached their fiduciary duties, wasted corporate assets, and grossly mismanaged Mattel in connection with Mattel's acquisition of Learning Company and its approval of severance packages to certain former executives. These derivative actions have been filed in the Court of Chancery in Delaware, in Los Angeles Superior Court in California, and in the United States District Court for the Central 61

District of California, and are all in a preliminary stage. The plaintiffs have asked for unspecified monetary damages. Plaintiffs filed an amended consolidated complaint in February 2002 in the California state court actions and defendants have filed a demurrer seeking dismissal of that action. Mattel believes that the actions are without merit and intends to defend them vigorously. Environmental Fisher-Price Fisher-Price has executed a consent order with the State of New York to implement a groundwater remediation system at one of its former manufacturing plants. The execution of the consent order was in response to the New York State Department of Environmental Conservation Record of Decision issued in March 2000. The Department approved a conceptual work plan in March 2001, with work scheduled to begin in 2001. However, in response to concerns expressed by a number of nearby residents, the Department has requested that Mattel postpone implementation of the groundwater remediation plan until 2002 after the installation of a public water line to those residents is completed. The ultimate liability associated with this cleanup presently is estimated to be approximately $1.76 million, approximately $1.26 million of which has been incurred through December 31, 2001. Beaverton, Oregon Mattel previously operated a manufacturing facility on a leased property in Beaverton, Oregon that was acquired as part of the March 1997 merger with Tyco. In March 1998, samples of groundwater used by the facility for process water and drinking water disclosed elevated levels of certain chemicals, including trichloroethylene. Mattel immediately closed the water supply and self-reported the sample results to the Oregon Department of Environmental Quality and the Oregon Health Division. Mattel also implemented a community outreach program to employees, former employees and surrounding landowners. In November 1998, Mattel and another potentially responsible party entered into a consent order with the Oregon Department of Environmental Quality to conduct a remedial investigation/feasibility study at the property, to propose an interim remedial action measure, and to continue the community outreach program. Mattel has recorded pre-tax charges totaling $19.0 million for environmental remediation costs related to this property, based on the completion and approval of the remediation plan and feasibility study. Approximately $3 million has been incurred through December 31, 2001, largely related to attorney fees, consulting work and an employee medical screening program. General Mattel is also involved in various other litigation and legal matters, including claims related to intellectual property, product liability and labor, which Mattel is addressing or defending in the ordinary course of business. Management believes that resolving such matters is not likely to have a material adverse effect on Mattel's business, financial condition or results of operations. Note 8--Financial Instruments Marketable Securities Marketable securities totaling $16.3 million were stated at fair value based on quoted market prices and were classified as securities available-for-sale as of December 31, 2000. These securities, which had a cost basis of $28.3 million as of December 31, 2000, were received by Mattel as part of the sale of CyberPatrol. Upon the adoption of SFAS No. 133 on January 1, 2001, Mattel recorded a one-time transition adjustment of $12.0 million, net of tax, (or $0.03 per share) as the cumulative effect of change in accounting principles related to unrealized losses on these securities that had been previously deferred in accumulated other comprehensive income (loss). 62

Mattel entered into a derivative transaction designed to limit the impact of market fluctuations in the fair value of the stock on Mattel's results of operations. During the first quarter of 2001, Mattel recorded a pre-tax loss of $5.5 million in other expense, net related to the decrease in fair value of the derivative. In the second quarter of 2001, these securities were tendered for debt repayment under the derivative agreement at fair market value, at no gain or loss to Mattel. Foreign Exchange Risk Management Mattel's results of operations and cash flows may be impacted by exchange rate fluctuations. Mattel seeks to mitigate its exposure to market risk by monitoring its currency exchange exposure for the year and partially or fully hedging such exposure. In addition, Mattel manages its exposure through the selection of currencies used for international borrowings and intercompany invoicing. Mattel's results of operations can also be affected by the translation of foreign revenues and earnings into US dollars. Mattel does not trade in financial instruments for speculative purposes. Mattel uses foreign currency forward exchange and option contracts as cash flow hedges, which generally have maturity dates of up to 18 months, to hedge its forecasted purchases and sales of inventory denominated in foreign currencies. Changes in fair value of Mattel's cash flow derivatives are deferred and recorded as part of accumulated other comprehensive income (loss) in stockholders' equity until the underlying transaction is settled. Upon settlement, any gain or loss resulting from the derivative is recorded in Mattel's results of operations. To minimize the risk of counterparty non- performance, Mattel executes its foreign currency forward exchange and option contracts with financial institutions believed to be credit-worthy, generally those that provide Mattel with its working capital lines of credit. Mattel entered into a cross currency interest rate swap to convert the interest and principal amounts from Euros to US dollars on its 200 million Euro Notes due 2002. The debt and related interest payable are marked-to- market as of each balance sheet date with the change in fair value of the derivative recorded in accumulated other comprehensive income (loss) within stockholders' equity until the loan and related interest are paid. The weighted average interest rate after the swap is 9.0% in US dollars. Mattel uses fair value hedges to hedge intercompany loans and management fees denominated in foreign currencies. Due to the short-term nature of the contracts involved, Mattel does not use hedge accounting for these contracts. Changes in fair value of these derivatives are recorded in Mattel's results of operations currently. As a result of adopting SFAS No. 133, Mattel recorded a one-time transition adjustment of $2.1 million in comprehensive income (loss) related to unrealized gains on derivative instruments. During 2001, the ineffectiveness related to cash flow hedges was not significant. The net gain reclassified from accumulated other comprehensive income (loss) to Mattel's results of operations was $10.5 million. As of December 31, 2001, $3.5 million of net unrealized gains related to derivative instruments have been recorded in accumulated other comprehensive income (loss). Mattel expects to reclassify these unrealized gains from accumulated other comprehensive income (loss) to its results of operations over the life of the contracts, generally 18 months or less. As of year end, Mattel held the following foreign exchange risk management contracts (in thousands): 2001 2000 ----------------- ----------------- Notional Exposure Notional Exposure Amount Hedged Amount Hedged -------- -------- -------- -------- Foreign exchange forwards.................. $715,175 $715,175 $569,173 $569,173 Cross-currency swaps....................... 190,710 190,710 190,710 190,710 -------- -------- -------- -------- $905,885 $905,885 $759,883 $759,883 ======== ======== ======== ======== 63

Fair Value of Financial Instruments Mattel's financial instruments included cash, cash equivalents, marketable securities, investments, accounts receivable and payable, short-term borrowings, long-term debt, and foreign currency contracts as of December 31, 2001 and 2000. The fair values of cash, cash equivalents, accounts receivable and payable, and short-term borrowings approximated carrying values because of the short- term nature of these instruments. The estimated fair values of other financial instruments subject to fair value disclosure, determined based on broker quotes or rates for the same or similar instruments, and the related carrying amounts are as follows as of year end (in millions): 2001 2000 ----------------- ----------------- Book Fair Book Fair Value Value Value Value -------- -------- -------- -------- Long-term debt............................. $1,231.0 $1,206.5 $1,275.1 $1,170.9 Risk management contracts: Foreign exchange forwards................ 715.2 708.8 569.2 566.6 -------- -------- -------- -------- $1,946.2 $1,915.3 $1,844.3 $1,737.5 ======== ======== ======== ======== Credit Concentrations Credit is granted to customers on an unsecured basis, and generally provides for extended payment terms, which result in a substantial portion of trade receivables being collected during the latter half of the year. Mattel's three largest customers accounted for the following percentage of consolidated net sales and net accounts receivable: 2001 2000 1999 ---- ---- ---- Worldwide sales for the year ended............................... 50% 50% 43% Accounts receivable as of December 31............................ 28% 51% 43% Note 9--Restructuring and Other Charges 2000 Financial Realignment Plan During the third quarter of 2000, Mattel initiated a financial realignment plan designed to improve gross margin; selling and administrative expenses; operating profit; and cash flow. The plan will require a total pre-tax charge estimated at $250 million, or $170 million on an after-tax basis, of which approximately $100 million represents cash expenditures and $70 million represents non-cash writedowns. Through December 31, 2001, Mattel has recorded pre-tax charges totaling $175.4 million, or approximately $119 million on an after-tax basis, related to this plan. Of the total charge, $125.2 million (approximately $84 million after-taxes) was recorded in 2000 and $50.2 million (approximately $35 million after-taxes) was recorded in 2001. In accordance with generally accepted accounting principles, future pre-tax implementation costs of approximately $75 million have not been accrued as of December 31, 2001. Management expects these costs will be recorded over approximately the next two years. The following are the major initiatives included in the financial realignment plan: . Reduce excess manufacturing capacity; . Terminate a variety of licensing and other contractual arrangements that do not deliver an adequate level of profitability; . Eiminate product lines that do not meet required levels of profitability; 64

. Improve supply chain performance and economics; . Eliminate positions at US-based headquarters locations in El Segundo, Fisher-Price and Pleasant Company through a combination of layoffs, elimination of open requisitions, attrition and retirements; and . Close and consolidate certain international offices. In April 2001, as part of the financial realignment plan, Mattel announced the closure of its Murray, Kentucky manufacturing facility (the "North American Strategy"). Production from this facility will be consolidated into other Mattel-owned and operated facilities in North America with the final shutdown of Murray operations occurring in 2002. This action is one of the realignment measures taken to lower costs. Mattel believes this action was necessary in order to maintain a competitive cost structure in today's global marketplace. In 2000, Mattel recorded a $22.9 million pre-tax restructuring charge as part of the initial phase of the financial realignment plan. This charge, combined with a $7.0 million adjustment to the 1999 restructuring plan, resulted in $15.9 million of net pre-tax restructuring and other charges in 2000. The $22.9 million charge related to the elimination of positions at headquarters locations in El Segundo, Fisher-Price and Pleasant Company, closure of certain international offices, and consolidation of facilities. During 2001, Mattel recorded a $15.7 million pre-tax restructuring charge as part of the financial realignment plan, largely related to the North American Strategy. Total worldwide headcount reduction as a result of the restructuring is planned to be approximately 1,700 employees, of which approximately 1,100 are related to the North American Strategy. From inception through December 31, 2001, a total of approximately $19 million has been incurred related to the termination of nearly 980 employees, of which approximately 640 were terminated during 2001. The components of the restructuring charges are as follows (in millions): Balance Balance 2000 Amounts Dec. 31, 2001 Amounts Dec. 31, Charges Incurred 2000 Charges Incurred 2001 ------- -------- -------- ------- -------- -------- Severance and other compensation............. $19 $(3) $16 $ 9 $(16) $ 9 Asset writedowns.......... 2 (2) -- Lease termination costs... 1 -- 1 2 (1) 2 Other..................... 1 -- 1 5 (5) 1 --- --- --- --- ---- --- Total restructuring charge................. $23 $(5) $18 $16 $(22) $12 === === === === ==== === 1999 Restructuring and Other Charges During 1999, Mattel initiated a restructuring plan for its continuing operations and incurred certain other nonrecurring charges totaling $281.1 million, approximately $218 million after-tax. The 1999 restructuring plan was aimed at leveraging global resources in the areas of manufacturing, marketing and distribution, eliminating duplicative functions worldwide and achieving improved operating efficiencies. As of December 31, 2000, the restructuring activities provided for by this charge were complete and substantially all amounts previously accrued had been paid as of December 31, 2001. Other charges incurred in 1999 principally related to the 1998 recall of Mattel's Power Wheels(R) vehicles and environmental remediation costs related to a former manufacturing facility on a leased property in Beaverton, Oregon. The liability remaining related to these charges was approximately $22 million and $24 million at December 31, 2001 and 2000, respectively. Note 10--Segment Information The tables below present information about segment revenues, operating profit and assets. Mattel's reportable segments are separately managed business units and are divided on a geographic basis between 65

domestic and international. The domestic segment is further divided into US Girls, US Boys-Entertainment, and US Infant & Preschool. The US Girls segment includes brands such as Barbie(R), Polly Pocket!(R), Diva Starz(TM), What's Her Face!(TM) and American Girl(R). The US Boys-Entertainment segment includes Hot Wheels(R), Matchbox(R), Hot Wheels(R) Electric Racing and Tyco(R) Radio Control (collectively "Wheels"), and Disney, Nickelodeon(R), Harry Potter(TM), Max Steel(TM) and games and puzzles (collectively "Entertainment") products. The US Infant & Preschool segment includes Fisher-Price(R), Disney preschool and plush, Power Wheels(R), Sesame Street(R) and other preschool products. The International segment sells products in all toy categories. Segment revenues do not include sales adjustments such as trade discounts and other allowances. However, such adjustments are included in the determination of segment income from operations. Segment income from operations represents income from continuing operations before interest expense and income taxes, while consolidated income from operations represents income from continuing operations before income taxes as reported in the consolidated statements of operations. The segment assets are comprised of accounts receivable and inventories, net of applicable reserves and allowances. Certain information presented in the tables below has been restated to conform to the current management structure as of January 2001. Specifically, the results and assets of Pleasant Company, which had been reported as part of Other, are now being reported as part of US Girls, which is consistent with management responsibility for this business. Additionally, Mattel's toy manufacturing unit is now being managed as a cost center instead of as a profit center; therefore, toy manufacturing is no longer being reported as a separate segment. Lastly, certain overhead costs incurred at the headquarters' level in El Segundo, including facilities, information technology, and other administration support costs, are now being allocated to the US Girls and US Boys-Entertainment segments, to more accurately reflect the costs associated with operating these businesses. These types of overhead costs were already being reported as part of the US Infant & Preschool and International segments since these businesses maintain their own headquarters locations. For the Year ---------------------------------- 2001 2000 1999 ---------- ---------- ---------- (In thousands) Revenues Domestic: US Girls................................ $1,402,549 $1,457,444 $1,325,273 US Boys-Entertainment................... 768,005 753,149 786,578 US Infant & Preschool................... 1,234,169 1,232,992 1,185,484 Other................................... 8,878 6,484 28,187 ---------- ---------- ---------- Total Domestic............................ 3,413,601 3,450,069 3,325,522 International............................. 1,690,513 1,531,590 1,571,149 ---------- ---------- ---------- 5,104,114 4,981,659 4,896,671 Sales adjustments......................... (300,052) (311,717) (301,181) ---------- ---------- ---------- Net sales from continuing operations...... $4,804,062 $4,669,942 $4,595,490 ========== ========== ========== Operating Profit Domestic: US Girls................................ $ 355,319 $ 361,670 $ 331,187 US Boys-Entertainment................... 78,644 56,627 76,773 US Infant & Preschool................... 141,714 139,219 130,409 ---------- ---------- ---------- Total Domestic............................ 575,677 557,516 538,369 International............................. 184,351 146,776 182,043 ---------- ---------- ---------- 760,028 704,292 720,412 Interest expense.......................... (155,132) (152,979) (131,609) Corporate and other (a)................... (174,886) (325,889) (418,639) ---------- ---------- ---------- Income from continuing operations before income taxes............................. $ 430,010 $ 225,424 $ 170,164 ========== ========== ========== 66

For the Year -------------------------------- 2001 2000 1999 ---------- ---------- ---------- (In thousands) Depreciation/Amortization Domestic: US Girls.................................... $ 56,003 $ 75,030 $ 65,548 US Boys-Entertainment....................... 37,046 30,189 31,158 US Infant & Preschool....................... 45,206 45,978 44,855 ---------- ---------- ---------- Total Domestic................................ 138,255 151,197 141,561 International................................. 60,721 57,278 52,366 ---------- ---------- ---------- 198,976 208,475 193,927 Corporate and other........................... 63,532 47,914 52,083 ---------- ---------- ---------- Depreciation and amortization from continuing operations................................... $ 262,508 $ 256,389 $ 246,010 ========== ========== ========== As of Year End -------------------------------- 2001 2000 1999 ---------- ---------- ---------- (In thousands) Assets Domestic: US Girls (b)................................ $ 236,104 US Boys-Entertainment (b)................... 141,992 ---------- ---------- ---------- 378,096 $ 429,829 $ 536,235 US Infant & Preschool....................... 250,603 254,748 280,237 ---------- ---------- ---------- Total Domestic................................ 628,699 684,577 816,472 International................................. 488,352 555,988 556,103 ---------- ---------- ---------- 1,117,051 1,240,565 1,372,575 Corporate and other........................... 67,026 88,744 65,713 ---------- ---------- ---------- Accounts receivable and inventories from continuing operations........................ $1,184,077 $1,329,309 $1,438,288 ========== ========== ========== (a) For the year ended December 31, 2001, corporate and other includes $50.2 million of charges related to the financial realignment plan (see Note 9) and a $5.5 million loss on derivative instruments. For the year ended December 31, 2000, corporate and other includes $125.2 million of charges related to the financial realignment plan, a $53.1 million charge related to the departure of certain senior executives, and an $8.4 million charge related to the losses realized on the disposition of a portion of the stock received as part of the sale of CyberPatrol, partially offset by a $7.0 million reversal of prior year restructuring charges. For the year ended December 31, 1999 corporate and other includes $281.1 million related to the 1999 restructuring plan and other charges (see Note 9). (b) Asset information was not maintained by individual segment in 1999 and 2000. Mattel sells a broad variety of toy products, which are grouped into three major categories: Girls, Boys-Entertainment and Infant & Preschool. The table below presents worldwide revenues by category: For the Year ---------------------------------- 2001 2000 1999 ---------- ---------- ---------- (In thousands) Girls....................................... $2,193,174 $2,130,174 $2,024,258 Boys-Entertainment.......................... 1,269,142 1,195,811 1,200,130 Infant & Preschool.......................... 1,621,292 1,636,278 1,633,855 Other....................................... 20,506 19,396 38,428 ---------- ---------- ---------- 5,104,114 4,981,659 4,896,671 Sales adjustments........................... (300,052) (311,717) (301,181) ---------- ---------- ---------- Net sales from continuing operations........ $4,804,062 $4,669,942 $4,595,490 ========== ========== ========== 67

The tables below present information by geographic area. Revenues are attributed to countries based on location of customer. Long-lived assets principally include net property, plant and equipment, and goodwill. For the Year -------------------------------- 2001 2000 1999 ---------- ---------- ---------- (In thousands) Net Sales United States.................................. $3,298,845 $3,312,162 $3,194,780 International.................................. 1,505,217 1,357,780 1,400,710 ---------- ---------- ---------- Consolidated total............................. $4,804,062 $4,669,942 $4,595,490 ========== ========== ========== As of Year End -------------------------------- 2001 2000 1999 ---------- ---------- ---------- (In thousands) Long-Lived Assets United States.................................. $1,134,991 $1,198,080 $1,242,786 International.................................. 588,247 593,563 673,635 ---------- ---------- ---------- 1,723,238 1,791,643 1,916,421 Corporate and other............................ 260,038 243,507 257,786 ---------- ---------- ---------- Consolidated total............................. $1,983,276 $2,035,150 $2,174,207 ========== ========== ========== Note 11--Quarterly Financial Information (Unaudited) First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- ---------- ---------- (In thousands, except per share amounts) Year Ended December 31, 2001 Net sales............................ $731,948 $854,266 $1,612,767 $1,605,081 Gross profit......................... 327,224 378,909 773,279 787,472 Advertising and promotion expenses... 96,898 103,366 212,885 248,355 Other selling and administrative expenses............................ 205,319 214,303 230,264 286,192 Restructuring and other charges...... -- 13,000 -- 2,700 Other expense, net................... 6,483 2,737 2,258 5,838 Income (loss) from continuing operations before income taxes...... (29,230) (6,792) 275,591 190,441 Income (loss) from continuing operations.......................... (22,038) (4,855) 199,835 137,978 Cumulative effect of change in accounting principles............... (12,001) -- -- -- Net income (loss) applicable to common shares....................... (34,039) (4,855) 199,835 137,978 Basic income (loss) per common share: Income (loss) from continuing operations........................ $ (0.05) $ (0.01) $ 0.46 $ 0.32 Cumulative effect of change in accounting principles............. (0.03) -- -- -- Net income (loss).................. $ (0.08) $ (0.01) $ 0.46 $ 0.32 Weighted average number of common shares............................ 429,936 430,909 431,250 431,813 Diluted income (loss) per common share: Income (loss) from continuing operations........................ $ (0.05) $ (0.01) $ 0.46 $ 0.31 Cumulative effect of change in accounting principles............. (0.03) -- -- -- Net income (loss).................. $ (0.08) $ (0.01) $ 0.46 $ 0.31 Weighted average number of common and common equivalent shares ..... 429,936 430,909 436,316 437,505 Dividends declared per common share.. $ -- $ -- $ -- $ 0.05 Common stock market price: High............................... $ 18.80 $ 18.92 $ 18.97 $ 19.75 Low................................ 13.70 15.44 15.19 15.24 68

First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- ---------- ---------- (In thousands, except per share amounts) Year Ended December 31, 2000 Net sales.......................... $693,261 $817,797 $1,583,763 $1,575,121 Gross profit....................... 314,357 363,879 666,618 755,931 Advertising and promotion expenses.......................... 91,287 98,586 225,209 270,795 Other selling and administrative expenses.......................... 254,199 218,711 224,695 269,393 Restructuring and other charges.... -- (2,000) 17,900 -- Other (income) expense, net........ (6,373) (9,026) 7,656 9,350 Income (loss) from continuing operations before income taxes ... (61,644) 8,290 135,258 143,520 Income (loss) from continuing operations........................ (44,630) 6,005 103,694 105,108 Loss from discontinued operations (a)............................... (126,606) -- (440,560) (33,980) Net income (loss) applicable to common shares..................... (171,236) 6,005 (336,866) 71,128 Basic income (loss) per common share: Income (loss) from continuing operations...................... $ (0.10) $ 0.01 $ 0.24 $ 0.25 Loss from discontinued operations (a)............................. (0.30) -- (1.03) (0.08) Net income (loss)................ $ (0.40) $ 0.01 $ (0.79) $ 0.17 Weighted average number of common shares.......................... 425,495 425,818 426,394 426,949 Diluted income (loss) per common share: Income (loss) from continuing operations...................... $ (0.10) $ 0.01 $ 0.24 $ 0.25 Loss from discontinued operations (a)............................. (0.30) -- (1.03) (0.08) Net income (loss)................ $ (0.40) $ 0.01 $ (0.79) $ 0.17 Weighted average number of common and common equivalent shares ... 425,495 427,782 426,945 428,457 Dividends declared per common share............................. $ 0.09 $ 0.09 $ 0.09 $ -- Common stock market price: High............................. $ 13.75 $ 15.00 $ 13.81 $ 14.44 Low.............................. 9.06 10.50 9.89 10.81 (a) As more fully described in Note 13 to the Consolidated Financial Statements, the Consumer Software segment, which was comprised primarily of Learning Company, was reported as a discontinued operation effective March 31, 2000, and the consolidated financial statements were reclassified to segregate the net investment in, and the liabilities and operating results of the Consumer Software segment. 69

Note 12--Supplemental Financial Information As of Year End --------------------- 2001 2000 ---------- ---------- (In thousands) Inventories include the following: Raw materials and work in process..................... $ 34,922 $ 34,357 Finished goods........................................ 452,583 455,385 ---------- ---------- $ 487,505 $ 489,742 ========== ========== Prepaid expenses and other current assets include the following: Prepaid income taxes.................................. $ 97,482 $ 53,608 Receivable collections deposits with banks............ 64,269 -- Other................................................. 130,164 136,191 ---------- ---------- $ 291,915 $ 189,799 ========== ========== Intangibles, net include the following: Goodwill.............................................. $1,089,362 $1,111,106 Other................................................. 20,548 25,751 ---------- ---------- $1,109,910 $1,136,857 ========== ========== Other assets include the following: Deferred income taxes................................. $ 464,689 $ 515,210 Other................................................. 246,644 250,461 ---------- ---------- $ 711,333 $ 765,671 ========== ========== Short-term borrowings include the following: Notes payable......................................... $ 38,108 $ 68,386 Commercial paper...................................... -- 158,017 ---------- ---------- $ 38,108 $ 226,403 ========== ========== Accrued liabilities include the following: Advertising and promotion............................. $ 131,393 $ 142,196 Receivable collections due to banks................... 131,399 -- Royalties............................................. 109,724 137,173 Restructuring and other charges....................... 45,360 64,661 Other................................................. 356,867 359,352 ---------- ---------- $ 774,743 $ 703,382 ========== ========== 70

For the Year -------------------------- 2001 2000 1999 -------- -------- -------- (In thousands) Selling and administrative expenses include the following: Research and development......................... $175,629 $179,525 $171,537 Bad debt expense................................. 57,746 18,280 19,050 Supplemental disclosure of cash flow information: Cash paid during the year for: Interest......................................... $157,926 $168,591 $134,086 Income taxes..................................... 61,438 44,839 81,345 Noncash investing and financing activities: Marketable securities tendered for debt repayment....................................... $ 10,144 $ -- $ -- Liability for Pictionary(R) acquisition.......... 8,419 -- -- Receipt of marketable securities from sale of business........................................ -- 42,167 -- Issuance of stock warrant........................ -- 5,789 -- Common stock issued for acquisitions: Settlement of earn-out agreements.............. -- -- 5,547 Note 13--Discontinued Operations In May 1999, Mattel completed its merger with Learning Company, pursuant to which Learning Company was merged with and into Mattel, with Mattel being the surviving corporation. Learning Company had been a leading publisher of consumer software for home personal computers, including educational, productivity and entertainment software. Each share of Learning Company Series A Preferred Stock was converted into 20 shares of Learning Company common stock immediately prior to the consummation of the merger. Pursuant to the merger agreement, each outstanding share of Learning Company common stock was then converted into 1.2 shares of Mattel common stock upon consummation of the merger. As a result, approximately 126 million Mattel common shares were issued in exchange for all shares of Learning Company common stock outstanding as of the merger date. The outstanding share of Learning Company special voting stock was converted into one share of Mattel Special Voting Preferred Stock. Each outstanding exchangeable share of Learning Company's Canadian subsidiary, Softkey Software Products Inc., remained outstanding, but upon consummation of the merger became exchangeable for 1.2 shares of Mattel common stock. This transaction was accounted for as a pooling of interests. On March 31, 2000, Mattel's board of directors resolved to dispose of its Consumer Software segment, which was comprised primarily of Learning Company. As a result of this decision, the Consumer Software segment was reported as a discontinued operation effective March 31, 2000, and the consolidated financial statements were reclassified to segregate the net investment in, and the liabilities and operating results of the Consumer Software segment. On October 18, 2000, Mattel disposed of Learning Company to an affiliate of Gores Technology Group in return for a contractual right to receive future consideration based on income generated from its business operations and/or the net proceeds derived by the new company upon the sale of its assets or other liquidation events, or 20% of its enterprise value at the end of five years. In the fourth quarter of 2001, Mattel received proceeds totaling $10.0 million from Gores Technology Group as a result of liquidation events related to Gores Technology's sale of the entertainment and education divisions. Mattel also incurred additional costs of approximately $10 million in 2001 related to the wind down of the Consumer Software segment. Accordingly, no income was recorded in the consolidated statement of operations for discontinued operations. 71

Summary financial information for the discontinued operations is as follows (in millions): For the Year ---------------- 2000 1999 ------- ------- Net sales.................................................... $ 337.9 $ 919.5 ======= ======= Loss before income taxes..................................... $(179.6) $(280.9) Benefit for income taxes..................................... (53.0) (90.1) ------- ------- Net loss................................................... (126.6) (190.8) ------- ------- Loss on disposal............................................. (406.8) -- Actual and estimated losses during phase-out period.......... (238.3) -- ------- ------- (645.1) -- Benefit for income taxes..................................... (170.6) -- ------- ------- Net loss on disposal....................................... (474.5) -- ------- ------- Total loss from discontinued operations...................... $(601.1) $(190.8) ======= ======= As of Year End -------------- 2000 -------------- Accounts receivable, net......................................... $33.1 Inventories...................................................... 4.0 Other current assets............................................. 1.8 Other noncurrent assets.......................................... 1.6 Current liabilities.............................................. (29.0) ----- Net investment in discontinued operations........................ $11.5 ===== Actual losses of the Consumer Software segment from the measurement date of March 31, 2000 as well as estimated losses through the date of disposal were recorded as part of the loss from discontinued operations for 2000. Transaction costs of approximately $24 million related to the disposal of the Consumer Software segment, primarily consisting of royalty commitments and severance, have been accrued as of December 31, 2001 and are included in accrued liabilities in the consolidated balance sheets. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 72

PART III Item 10. Directors and Executive Officers of the Registrant Information required under this Item relating to members of Mattel's board of directors is incorporated by reference herein from its 2002 Notice of Annual Meeting of Stockholders and Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after December 31, 2001. The information with respect to the executive officers of Mattel appears under the heading "Executive Officers of the Registrant" in Part I herein. Item 11. Executive Compensation The information required under this Item is incorporated by reference herein from Mattel's 2002 Notice of Annual Meeting of Stockholders and Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after December 31, 2001. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required under this Item is incorporated by reference herein from Mattel's 2002 Notice of Annual Meeting of Stockholders and Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after December 31, 2001. Item 13. Certain Relationships and Related Transactions The information required under this Item is incorporated by reference herein from Mattel's 2002 Notice of Annual Meeting of Stockholders and Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after December 31, 2001. 73

PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) The following documents are filed as part of this report: 1. Financial Statements Page ----- Report of Independent Accountants...................................... 36 Consolidated Balance Sheets as of December 31, 2001 and 2000........... 37-38 Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999 .................................................. 39 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999................................................... 40 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999...................................... 41-42 Notes to Consolidated Financial Statements............................. 43-72 2. Financial Statement Schedule for the years ended December 31, 2001, 2000 and 1999(1) Schedule II--Valuation and Qualifying Accounts and Allowances 3. Exhibits (Listed by numbers corresponding to Item 601 of Regulation S-K) 2.0 Agreement and Plan of Merger, dated as of December 13, 1998, between Mattel and The Learning Company, Inc. (incorporated by reference to Exhibit 2.1 of Mattel's Current Report on Form 8-K dated December 15, 1998) 2.1 Sale and Purchase Agreement between Mattel and Alec E. Gores, Trustee of the Revocable Living Trust Agreement of Alec E. Gores, and GTG/Wizard, LLC (incorporated by reference to Exhibit 99.1 to Mattel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000) 2.2 Sale and Purchase Agreement Amendment No. 1 between Mattel and Alec E. Gores, Trustee of the Revocable Living Trust Agreement of Alec E. Gores, and GTG/Wizard, LLC (incorporated by reference to Exhibit 2.2 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 2.3 Amendment No. 2 to the Sale and Purchase Agreement between Mattel and Alec E. Gores, Trustee of the Revocable Living Trust Agreement of Alec E. Gores, and GTG/Wizard, LLC (incorporated by reference to Exhibit 2.3 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 3.0 Restated Certificate of Incorporation of Mattel (File No. 001-05647) (incorporated by reference to Exhibit 3.0 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 3.1* Certificate of Amendment of Restated Certificate of Incorporation of Mattel 3.2 Certificate of Amendment of Restated Certificate of Incorporation of Mattel (incorporated by reference to Exhibit B to Mattel's Proxy Statement dated March 30, 1998) 3.3* Amended and Restated By-laws of Mattel 3.4 Certificate of Designations, Preferences, Rights and Limitations of Special Voting Preferred Stock of Mattel (incorporated by reference to Exhibit 3.0 to Mattel's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999) 4.0* Specimen Stock Certificate with respect to Mattel's Common Stock - -------- (1) All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. 74

4.1* Indenture dated as of February 15, 1996 between Mattel and Chase Manhattan Bank and Trust Company, National Association, formerly Chemical Trust Company of California, as Trustee 4.2 Plan of Arrangement of Softkey Software Products Inc. under Section 182 of the Business Corporations Act (Ontario) (incorporated by reference to Exhibit 4.4 of Learning Company's Registration Statement on Form S-3, Registration No. 333-40549) 4.3 Voting and Exchange Trust Agreement, dated as of February 4, 1994 among Learning Company, Softkey Software Products Inc. and R-M Trust Company, as Trustee (incorporated by reference to Exhibit 4.3 to Learning Company's Registration Statement on Form S-3, Registration No. 333- 40549) 4.4 Support Agreement, dated as of February 4, 1994 between Learning Company and Softkey Software Products Inc. (incorporated by reference to Exhibit 99.4 of Mattel's Form S-4, Registration No. 333-71587) 4.5 Voting and Exchange Trust Supplement dated as of May 12, 1999 between Mattel, Learning Company, Softkey Software Products Inc. and CIBC Mellon Trust Company, as Trustee (incorporated by reference to Exhibit 99.3 of Mattel's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999) 4.6 Support Agreement Amending Agreement dated as of May 12, 1999 between Mattel, Learning Company and Softkey Software Products Inc. (incorporated by reference to Exhibit 99.4 of Mattel's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999) 4.7 Warrant to Purchase Shares of Common Stock of Mattel, Inc., dated as of June 27, 1996 (incorporated by reference to Exhibit 4.6 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1998) 4.8 Warrant Purchase Agreement dated July 26, 2000 between Mattel and Warner Bros., a division of Time Warner Entertainment Company, L.P. (incorporated by reference to Exhibit 99.0 of Mattel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000) 4.9 Warrant to Purchase 3,000,000, shares of Common Stock of Mattel, Inc., dated as of July 26, 2000 (incorporated by reference to Exhibit 4.13 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) (Mattel has not filed certain long-term debt instruments under which the principal amount of securities authorized to be issued does not exceed 10% of its total assets. Copies of such agreements will be provided to the Securities and Exchange Commission upon request.) 10.0* Amended and Restated Credit Agreement dated as of March 20, 2002 among Mattel, Inc., as Borrower, Bank of America, N.A. as Administrative Agent, and the financial institutions party thereto. 10.1* First Amended and Restated Receivables Purchase Agreement dated as of March 20, 2002 among Mattel Factoring, Inc., as Transferor, Mattel, Inc., as Servicer, Bank of America, N.A., as Administrative Agent, and the financial institutions party thereto 10.2 Distribution Agreement dated November 12, 1997 among Mattel, Morgan Stanley & Co. Incorporated and Credit Suisse First Boston Corporation (incorporated by reference to Exhibit 1.0 to Mattel's Current Report on Form 8-K dated November 12, 1997) 10.3* Term Loan Agreement dated as of July 17, 2000 among Mattel, the Lenders (as defined) and The Industrial Bank of Japan, as agent 10.4* First Amendment to Term Loan Agreement dated August 17, 2000 among Mattel, the Lenders (as defined) and The Industrial Bank of Japan, as agent 10.5 Second Amendment to Term Loan Agreement among Mattel, the Lenders (as defined) and The Industrial Bank of Japan, as agent (incorporated by reference to Exhibit 99.4 to Mattel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000) 75

10.6* Master Agreement for the Transfer of Receivables dated 30th November, 2001 among Societe Generale Bank Nederland N.V., Mattel International Holdings B.V. as Depositor and Mattel France S.A. and Mattel GmbH as the Sellers 10.7* Amendment to Master Agreement for the Transfer of Receivables dated December 20, 2001 among Societe Generale Bank Nederland N.V., Mattel International Holdings B.V., Mattel France S.A. and Mattel GmbH. Executive Compensation Plans and Arrangements of Mattel 10.8 Form of Indemnity Agreement between Mattel and its directors and certain of its executive officers (incorporated by reference to Exhibit 10.9 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.9 Executive Employment Agreement dated October 18, 2000 between Mattel and Robert A. Eckert (incorporated by reference to Exhibit 10.10 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.10 Loan Agreement dated May 18, 2000 between Mattel and Robert A. Eckert (incorporated by reference to Exhibit 99.3 to Mattel's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000) 10.11 Executive Employment Agreement dated January 31, 2000 between Mattel and Adrienne Fontanella (incorporated by reference to Exhibit 10.6 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.12 Amendment to Employment Agreement dated July 20, 2000 between Mattel and Adrienne Fontanella (incorporated by reference to Exhibit 10.19 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.13 Loan Agreement dated October 29, 1999 between Mattel and Adrienne Fontanella (incorporated by reference to Exhibit 10.7 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.14 Loan Agreement dated April 7, 2000 between Mattel and Adrienne Fontanella (incorporated by reference to Exhibit 99.0 to Mattel's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000) 10.15 Amendment to Employment Agreement and Stock Option Grant Agreements between Mattel and Adrienne Fontanella dated February 10, 2000 (incorporated by reference to Exhibit 10.8 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.16 Executive Employment Agreement dated January 31, 2000 between Mattel and Matthew C. Bousquette (incorporated by reference to Exhibit 10.9 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.17 Amendment to Employment Agreement dated July 20, 2000 between Mattel and Matthew C. Bousquette (incorporated by reference to Exhibit 10.24 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.18 Loan Agreement dated October 29, 1999 between Mattel and Matthew C. Bousquette (incorporated by reference to Exhibit 10.10 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.19 Loan Agreement dated April 7, 2000 between Mattel and Matthew C. Bousquette (incorporated by reference to Exhibit 99.1 to Mattel's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000) 10.20 Amendment to Employment Agreement and Stock Option Grant Agreements between Mattel and Matthew C. Bousquette dated February 10, 2000 (incorporated by reference to Exhibit 10.11 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 76

10.21 Executive Employment Agreement dated January 31, 2000 between Mattel and Neil B. Friedman (incorporated by reference to Exhibit 10.12 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.22 Amendment to Employment Agreement dated November 14, 2000 between Mattel and Neil B. Friedman (incorporated by reference to Exhibit 10.29 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.23 Loan Agreement dated October 29, 1999 between Mattel and Neil B. Friedman (incorporated by reference to Exhibit 10.13 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.24 Loan Agreement dated April 7, 2000 between Mattel and Neil B. Friedman (incorporated by reference to Exhibit 99.2 to Mattel's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000) 10.25 Amendment to Employment Agreement and Stock Option Grant Agreements between Mattel and Neil B. Friedman dated February 10, 2000 (incorporated by reference to Exhibit 10.14 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.26 Amended and Restated Executive Employment Agreement dated March 28, 2000 between Mattel and Kevin M. Farr (incorporated by reference to Exhibit 10.33 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.27 Amendment to Employment Agreement and Stock Option Grant Agreements dated July 20, 2000 between Mattel and Kevin M. Farr (incorporated by reference to Exhibit 10.34 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.28 Loan Agreement dated as of February 3, 2000 between Mattel and Kevin M. Farr (incorporated by reference to Exhibit 10.35 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.29 Loan Agreement dated as of April 7, 2000 between Mattel and Kevin M. Farr (incorporated by reference to Exhibit 10.36 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.30* Amendment to Employment Agreement dated March 6, 2002 between Mattel and Kevin M. Farr 10.31 Mattel, Inc. Management Incentive Plan (incorporated by reference to Exhibit 10.37 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.32 Amendment No. 1 to Mattel, Inc. Management Incentive Plan (incorporated by reference to Exhibit 10.16 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.33 Amended and Restated Mattel Long-Term Incentive Plan (incorporated by reference to Appendix A to Mattel's Proxy Statement dated April 26, 1999) 10.34 Amendment No. 1 to Amended and Restated Mattel Long-Term Incentive Plan (incorporated by reference to Exhibit 10.19 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.35 Mattel, Inc. Deferred Compensation Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.12 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1998) 10.36 Amendment No. 1 to Mattel, Inc. Deferred Compensation Plan for Non- Employee Directors (incorporated by reference to Exhibit 10.43 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.37* Mattel, Inc. Amended & Restated Supplemental Executive Retirement Plan as of May 1, 1996 10.38 Amendment No. 1 to Mattel, Inc. Amended & Restated Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.22 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 77

10.39 Mattel, Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 10.14 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1998) 10.40 Amendment No. 1 to Mattel, Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 10.24 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.41* The Fisher-Price, Inc. Pension Plan (1994 Restatement) 10.42 Fifth Amendment to The Fisher-Price Pension Plan (incorporated by reference to Exhibit 10.49 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.43* Sixth Amendment to The Fisher-Price Pension Plan 10.44 The Fisher-Price Section 415 Excess Benefit Plan (incorporated by reference to Exhibit 10(n) to Fisher-Price's Registration Statement on Form 10 dated June 28, 1991) 10.45* Mattel, Inc. Personal Investment Plan, October 1, 2001 Restatement 10.46 Mattel, Inc. PIP Excess Plan (incorporated by reference to Exhibit 10.18 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1998) 10.47 Amendment No. 1 to Mattel, Inc. PIP Excess Plan (incorporated by reference to Exhibit 10.29 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.48 Pleasant Company Retirement Savings Plan and Trust Agreement, dated July 1, 1995 (incorporated by reference to Exhibit 10.19 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1998) 10.49* Mattel, Inc. Amended and Restated 1990 Stock Option Plan 10.50 Amendment No. 1 to the Mattel, Inc. 1990 Stock Option Plan (incorporated by reference to the information under the heading "Amendment to Mattel 1990 Stock Option Plan" on page F-1 of the Joint Proxy Statement/Prospectus of Mattel and Fisher-Price included in Mattel's Registration Statement on Form S-4, Registration No. 33-50749) 10.51 Amendment No. 2 to the Mattel, Inc. 1990 Stock Option Plan (incorporated by reference to Exhibit 10.57 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.52 Amendment No. 3 to the Amended and Restated Mattel, Inc. 1990 Stock Option Plan (incorporated by reference to Exhibit 10.34 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.53 Amendment No. 4 to the Amended and Restated Mattel, Inc. 1990 Stock Option Plan (incorporated by reference to Exhibit 99.0 to Mattel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000) 10.54 Form of First Amendment to Award Agreement (incorporated by reference to Exhibit 10.60 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.55 Notice of Grant of Stock Options and Grant Agreement (incorporated by reference to Exhibit 10.61 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.56 Grant Agreement for a Non-Qualified Stock Option (incorporated by reference to Exhibit 10.62 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.57 Award Cancellation Agreement (incorporated by reference to Exhibit 10.63 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.58* Amended and Restated Mattel, Inc. 1996 Stock Option Plan (the "1996 Plan") 10.59 Amendment to Amended and Restated Mattel, Inc. 1996 Stock Option Plan (incorporated by reference to Exhibit 4.2 to Mattel's Registration Statement on Form S-8 dated March 26, 1999) 78

10.60 Amendment No. 2 to Amended and Restated Mattel 1996 Stock Option Plan (incorporated by reference to Exhibit 10.42 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.61 Amendment No. 3 to Amended and Restated Mattel 1996 Stock Option Plan (incorporated by reference to Exhibit 99.1 to Mattel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000) 10.62 Amendment No. 4 to Amended and Restated Mattel 1996 Stock Option Plan (incorporated by reference to Exhibit 10.68 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.63 Amendment No. 5 to Amended and Restated Mattel 1996 Stock Option Plan (incorporated by reference to Exhibit 99.1 to Mattel's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001) 10.64* Amendment to Amended and Restated Mattel 1996 Stock Option Plan 10.65 Form of Option Agreement for Outside Directors under the 1996 Plan, as amended (incorporated by reference to Exhibit 10.43 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.66 Form of Option Agreement under the 1996 Plan, as amended (incorporated by reference to Exhibit 10.44 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.67 Mattel, Inc. 1997 Premium Price Stock Option Plan (incorporated by reference to Exhibit A to Mattel's Proxy Statement dated March 30, 1998) 10.68 First Amendment to the Mattel, Inc. 1997 Premium Price Stock Option Plan (incorporated by reference to Exhibit 10.0 to Mattel's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998) 10.69 Second Amendment to the Mattel, Inc. 1997 Premium Price Stock Option Plan (incorporated by reference to Exhibit 10.26 to Mattel's Annual report on Form 10-K for the year ended December 31, 1998) 10.70 Amendment No. 3 to the Mattel, Inc. 1997 Premium Price Stock Option Plan (incorporated by reference to Exhibit 10.48 of Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.71 Amendment No. 4 to the Mattel, Inc. 1997 Premium Price Stock Option Plan (incorporated by reference to Exhibit 10.75 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 10.72 Form of Option and TLSAR Agreement under the Mattel, Inc. 1997 Premium Price Stock Option Plan (25% Premium Grant), as amended (incorporated by reference to Exhibit 10.1 to Mattel's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998) 10.73 Form of Option and TLSAR Agreement under the Mattel, Inc. 1997 Premium Price Stock Option Plan (33 /1/3/% Premium Grant), as amended (incorporated by reference to Exhibit 10.2 to Mattel's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998) 10.74 Mattel 1999 Stock Option Plan (incorporated by reference to Exhibit 10.51 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.75 Amendment No. 1 to Mattel 1999 Stock Option Plan (incorporated by reference to Exhibit 99.2 to Mattel's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000) 10.76 Amendment No. 2 to Mattel 1999 Stock Option Plan (incorporated by reference to Exhibit 10.80 to Mattel's Annual Report on Form 10-K for the year ended December 31, 2000) 79

10.77 Form of Option Agreement under the Mattel 1999 Stock Option Plan (Two Year Vesting) (incorporated by reference to Exhibit 10.52 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 10.78 Form of Option Agreement under the Mattel 1999 Stock Option Plan (Three Year Vesting) (incorporated by reference to Exhibit 10.53 to Mattel's Annual Report on Form 10-K for the year ended December 31, 1999) 11.0* Computation of Income per Common and Common Equivalent Share 12.0* Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends 21.0* Subsidiaries of the Registrant 23.0* Consent of PricewaterhouseCoopers LLP 24.0* Power of Attorney (on page 81 of Form 10-K) - -------- * Filed herewith (b) Reports on Form 8-K Mattel filed no Current Reports on Form 8-K during the quarterly period ended December 31, 2001. (c) Exhibits Required by Item 601 of Regulation S-K See Item (3) above (d) Financial Statement Schedule See Item (2) above Copies of Form 10-K (which includes Exhibit 24.0), Exhibits 11.0, 12.0, 21.0 and 23.0 are available to stockholders of Mattel without charge. Copies of other Exhibits can be obtained by stockholders of Mattel upon payment of twelve cents per page for such Exhibits. Written requests should be sent to Secretary, Mattel, Inc., 333 Continental Boulevard, El Segundo, California 90245-5012. 80

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MATTEL, INC. Registrant /s/ Kevin M. Farr By: _________________________________ Kevin M. Farr Chief Financial Officer Date: As of March 28, 2002 POWER OF ATTORNEY We, the undersigned directors and officers of Mattel, Inc. do hereby severally constitute and appoint Robert A. Eckert, Robert Normile, Christopher O'Brien, and John L. Vogelstein, and each of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or any of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically, but without limitation, power and authority to sign for us or any of us, in our names in the capacities indicated below, any and all amendments hereto; and we do each hereby ratify and confirm all that said attorneys and agents, or any one of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /s/ Robert A. Eckert Chairman of the Board and March 28, 2002 ____________________________________ Chief Executive Officer Robert A. Eckert /s/ Kevin M. Farr Chief Financial Officer March 28, 2002 ____________________________________ (principal financial and Kevin M. Farr accounting officer) /s/ Eugene P. Beard Director March 28, 2002 ____________________________________ Eugene P. Beard /s/ Harold Brown Director March 28, 2002 ____________________________________ Harold Brown /s/ Tully M. Friedman Director March 28, 2002 ____________________________________ Tully M. Friedman /s/ Ronald M. Loeb Director March 28, 2002 ____________________________________ Ronald M. Loeb 81

Signature Title Date --------- ----- ---- /s/ Andrea L. Rich Director March 28, 2002 ____________________________________ Andrea L. Rich /s/ William D. Rollnick Director March 28, 2002 ____________________________________ William D. Rollnick /s/ Christopher A. Sinclair Director March 28, 2002 ____________________________________ Christopher A. Sinclair /s/ G. Craig Sullivan Director March 28, 2002 ____________________________________ G. Craig Sullivan /s/ John L. Vogelstein Director March 28, 2002 ____________________________________ John L. Vogelstein /s/ Kathy B. White Director March 28, 2002 ____________________________________ Kathy Brittain White /s/ Ralph V. Whitworth Director March 28, 2002 ____________________________________ Ralph V. Whitworth 82

SCHEDULE II MATTEL, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES (In thousands) Balance at Additions Balance Beginning Charged to Net at End of Year Operations Deductions of Year ---------- ---------- ---------- ------- Allowance for Doubtful Accounts Year Ended December 31, 2001.. $24,640 $57,746(a) $(26,474)(b) $55,912 Year Ended December 31, 2000.. 29,520 18,280 (23,160)(b) 24,640 Year Ended December 31, 1999.. 40,594 19,050 (30,124)(b) 29,520 Allowance for Inventory Obsolescence Year Ended December 31, 2001.. $58,559 $40,813 $(36,256)(c) $63,116 Year Ended December 31, 2000.. 35,327 61,313 (38,081)(c) 58,559 Year Ended December 31, 1999.. 57,322 48,530 (70,525)(c) 35,327 - -------- (a) Increase in bad debt expense charged to operations in 2001 compared to prior years is due to bankruptcy filings of Kmart and Ames, as well as exposure with other retailers. (b) Includes write-offs, recoveries of previous write-offs, and currency translation adjustments. (c) Primarily represents relief of previously established reserves resulting from the disposal of related inventory, raw materials, write-downs and currency translation adjustments.

EXHIBIT 3.1 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF MATTEL, INC. PURSUANT TO SECTION 242 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE Mattel, Inc. (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST. At a meeting of the Board of Directors of the Corporation duly called and held on February 8, 1996, resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation of the Corporation, declaring such amendment to be advisable and directing that such amendment be submitted to the stockholders of the Corporation for approval at an Annual Meeting of Stockholders to be held on May 8, 1996. Such resolutions recommended that the first paragraph of Article FOURTH of the Restated Certificate of Incorporation of the Corporation be amended and restated in its entirety as follows: "FOURTH. The Company is authorized to issue a total of six hundred twenty three million (623,000,000) shares of all classes of stock. Of such total number of authorized shares of stock, six hundred million (600,000,000) shares are Common Stock, each of which shares of Common Stock has a par value of One Dollar ($1.00), three million (3,000,000) shares are Preferred Stock, each of which shares of Preferred Stock has a par value of One Dollar ($1.00), and twenty million (20,000,000) shares of Preference Stock, each of which shares of Preference Stock has a par value of one cent ($0.01)." SECOND. At an Annual Meeting of Stockholders of the Corporation duly called and held on May 8, 1996, the affirmative vote of a majority of the votes permitted to be cast by the holders of the outstanding shares of the Corporation's common stock, par value $1.00 per share, was obtained in favor of such amendment with respect to Article FOURTH. THIRD. Said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. In Witness Whereof, Mattel, Inc. has caused this Certificate of Amendment to be signed by , its [President/Vice President], and attested by , its [Secretary/Assistant Secretary], this day of , 1996. _____________________________________ [President/Vice President] Attest: _______________________________ [Secretary/Assistant Secretary] B-1

Exhibit 3.3 Amended and restated on November 8, 2001 MATTEL, INC. AMENDED AND RESTATED BYLAWS ARTICLE I - STOCKHOLDERS Section 1. Annual Meeting. -------------------------- An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall each year fix, which date shall be within thirteen months subsequent to the later of the date of incorporation or the last annual meeting of stockholders. Section 2. Special Meetings. ----------------------------- Special meetings of the stockholders, for any purpose or purposes prescribed in the notice of the meeting, may be called by the Board of Directors or the Chief Executive Officer and shall be held at such place, on such date, and at such time as they or he shall fix. Section 3. Notice of Meetings. ------------------------------- Written notice of the place, date, and time of all meetings of the stockholders shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held to each stockholder entitled to vote at such meeting, except as otherwise provided herein, in the Restated Certificate of Incorporation or required by law. When a meeting is adjourned to another place, date, or time, written notice need not be given of the adjourned meeting if the place, date, and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting. Section 4. Quorum. ------------------ At any meeting of the stockholders, the holders of a majority of the voting power of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law. 1

If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of the stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time. If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then except as otherwise required by law, those present at such adjourned meeting shall constitute a quorum, and all matters shall be determined by a majority of the votes cast at such meeting. Section 5. Organization. ------------------------ Such person as the Board of Directors may have designated or, in the absence of such a person, the highest ranking officer of the corporation who is present shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the Secretary of the corporation, the secretary of the meeting shall be such person as the chairman appoints. Section 6. Conduct of Business. ------------------------------- The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him in order. Section 7. Proxies and Voting. ------------------------------ At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy in accordance with the procedure established for the meeting. Each holder of common stock shall have one vote for every share of common stock entitled to vote which is registered in his name on the record date for the meeting, except as otherwise provided herein or required by law. As provided by the Certificate of Incorporation, at all elections of directors each stockholder who is entitled to vote shall be entitled to as many votes as shall equal the number of votes which (except for the provisions as to cumulative voting contained in the Certificate of Incorporation) he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them as he may see fit. All voting in person at the meeting, except for the election of directors and where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or his proxy, a stock vote shall be taken. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. Every vote taken by ballots shall be counted by an inspector or inspectors appointed by the chairman of the meeting. 2

All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law, all other matters shall be determined by a majority of the votes cast. Section 8. Stock List. ---------------------- A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, at the principal place of business of the corporation. The list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. Section 9. Business Brought Before the Meeting. ----------------------------------------------- At any annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting or any adjournment thereof (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the corporation who is entitled to vote with respect thereto and who complies with the notice procedures set forth in this Section 9. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder's notice must be delivered or mailed to and received at the principal executive offices of the corporation not later than the close of business on the 90/th/ day nor earlier than the 120/th/ day prior to the anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120/th/ day prior to such annual meeting and not later than the 90/th/ day prior to such annual meeting or the 10/th/ day following the day on which public announcement of the date of such meeting is first made by the corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. ("Public announcement" means disclosure in a press release, national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended). A stockholder's notice to the Secretary shall set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the corporation's books, of the stockholder proposing such business, (iii) the class and number of shares of the corporation's capital stock that are beneficially owned by such stockholder, (iv) any material interest of such stockholder in such business, and (v) if the stockholder intends to deliver a proxy statement and form of proxy to holders of at least the percentage of the corporation's voting shares required under applicable law to carry the proposal, a representation 3

to that effect; provided, however, that compliance by such stockholder with the ----------------- notice provisions and other requirements in this Section 9 shall not create a duty of the corporation to include such stockholder's business or proposal in the corporation's proxy statement or proxy, and notwithstanding such compliance the corporation shall retain such discretion as it has to omit such business or proposal from such proxy statement or proxy or both. Notwithstanding anything in the Bylaws to the contrary, no business shall be brought before or conducted at an annual meeting (i) except in accordance with the provisions of this Section 9 or (ii) if the stockholder solicits proxies in support of such stockholder's proposal, without such stockholder having made the representation required by clause (v) of the preceding sentence. The officer of the corporation or other person presiding over the annual meeting shall, if the facts so warrant, determine and declare to the meeting that business was not properly brought before the meeting or any adjournment thereof in accordance with the provisions of this Section 9 and, if he or she should so determine, he or she shall so declare to the meeting and any such business so determined to be not properly brought before the meeting shall not be transacted. At any special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Board of Directors. Section 10. Nomination for Election to Board. --------------------------------------------- Only persons who are properly nominated in accordance with the procedures set forth in these Bylaws shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders or any adjournment thereof (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 10. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely and complete notice in writing to the Secretary of the corporation. For elections at an annual meeting, to be timely, a stockholder's notice must be delivered or mailed to and received at the principal executive offices of the corporation not later than the close of business on the 90/th/ day nor earlier than the 120/th/ day prior to the anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120/th/ day prior to such annual meeting and not later than the 90/th/ day prior to such annual meeting or the 10/th/ day following the day on which public announcement of the date of such meeting is first made by the corporation. In the event the corporation calls a special meeting of the stockholders for the purpose of electing one or more directors to the Board of Directors, a stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the corporation's notice of meeting, if the stockholder's notice shall be delivered or mailed to and received at the principal executive offices of the corporation not earlier than the close of business on the 120/th/ day prior to such special meeting and not later than the close of business on the later of the 90/th/ day prior to such meeting or the 10/th/ day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of an annual or special meeting commence a new time period for the giving of a stockholder's notice 4

as described above. ("Public announcement" is defined in Section 9 herein.) Such stockholder's notice shall be complete provided it sets forth (i) as to each person whom such stockholder proposes to nominate for election or re-election as a director, (a) the name, age, business address and residence address of the person, (b) the principal occupation or employment of the person, (c) the class and number of shares of capital stock of the corporation which are owned directly or beneficially by the person, (d) a statement as to the person's citizenship, and (e) such person's written consent to serve as a director if elected; (ii) as to the stockholder giving the notice (a) the name and address, as they appear on the corporation's books, of such stockholder and (b) the class and number of shares of the corporation's stock which are owned by such stockholder, and (iii) if the stockholder intends to solicit proxies in support of such stockholder's nominee(s), a representation to that effect; provided, -------- however, that compliance by a stockholder with the notice provisions and other - ------- requirements in this Section 10 shall not create a duty of the corporation to include the stockholder's nominee in the corporation's proxy statement or proxy if the stockholder's nominee is not nominated by the Board of Directors, and the corporation shall retain any discretion it has to omit the nominee from the corporation's proxy statement and proxy. At the request of the Board of Directors any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the provisions of this Section 10. The officer of the corporation or other person presiding at the meeting shall, if the facts so warrant, determine and declare to the meeting that a nomination made at the meeting or any adjournment thereof was not made in accordance with the provisions of this Section 10, with law or rules applicable to the meeting, or if the stockholder solicits proxies in support of such stockholder's nominee(s) without such stockholder having made the representation required by clause (iii) of this Section 10, and if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded. Section 11. Inspectors of Written Consent. ------------------------------------------ In the event of the delivery, in the manner provided by ARTICLE V, Section 3(b), to the corporation of the requisite written consent or consents to take corporate action and/or any related revocation or revocations, the corporation shall engage nationally recognized independent inspectors of elections for the purpose of promptly performing a ministerial review of the validity of the consents and revocations. For the purpose of permitting the inspectors to perform such review, no action by written consent without a meeting shall be effective until such date as the independent inspectors certify to the corporation that the consents delivered to the corporation in accordance with ARTICLE V, Section 3(b) represent at least the minimum number of votes that would be necessary to take the corporate action. Nothing contained in this paragraph shall in any way be construed to suggest or imply that the Board of Directors or any stockholder shall not be entitled to contest the validity of any consent or revocation thereof, whether before or after such certification by the independent inspectors, or take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation). 5

Section 12. Effectiveness of Written Consent. --------------------------------------------- Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the date the earliest dated written consent was received in accordance with ARTICLE V, Section 3(b), a written consent or consents signed by a sufficient number of holders to take such action are delivered to the corporation in the manner prescribed in ARTICLE V, Section 3(b). ARTICLE II - BOARD OF DIRECTORS Section 1. Number and Term of Office ------------------------------------- The Board of Directors shall consist of one or more members, the number thereof to be determined from time to time by resolution of the Board of Directors. Each director shall hold office until the annual meeting of stockholders next succeeding his election and until his successor is elected and qualified, except as otherwise provided herein or required by law. The Chairman of the Board of Directors, if there be one, shall be a director and shall serve as Chairman of the Board of Directors at the pleasure of the Board of Directors. The Chairman of the Board of Directors shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board of Directors shall also perform such other duties and may exercise such other powers as may from time to time be assigned by these Bylaws or by the Board of Directors. If there shall be no Chairman of the Board of Directors, the Board may designate a director to act in place of a Chairman of the Board of Directors for any purpose. Whenever the authorized number of directors is increased between annual meetings of the stockholders, a majority of the directors then in office shall have the power to elect such new directors for the balance of a term and until their successors are elected and qualified. Any decrease in the authorized number of directors shall not become effective until the expiration of the term of the directors then in office unless, at the time of such decrease, there shall be vacancies on the board which are being eliminated by the decrease. Section 2. Vacancies. --------------------- If the office of any director becomes vacant by reason of death, resignation, disqualification, removal or other cause, a majority of the directors remaining in office, although less than a quorum, may elect a successor for the unexpired term and until his successor is elected and qualified. Section 3. Regular Meetings. ---------------------------- Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of 6

Directors and publicized among all directors. A notice of each regular meeting shall not be required. Section 4. Special Meetings. ---------------------------- Special meetings of the Board of Directors may be called by one-third of the directors then in office or by the chief executive officer and shall be held at such place, on such date, and at such time as they or he shall fix. Notice of the place, date and time of each such special meeting shall be given each director by whom it is not waived by mailing written notice not less than three days before the meeting or by telegraphing, sending by facsimile transmission or by electronic mail the same not less than eighteen hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. Section 5. Quorum. ------------------ At any meeting of the Board of Directors, one-third of the total number of the whole board, but not less than two, shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof. Section 6. Conduct of Business. ------------------------------- At any meeting of the Board of Directors, business shall be transacted in such order and manner as the board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided herein or required by law. Section 7. Powers. ------------------ The Board of Directors may, except as otherwise required by law, exercise all such power and do all such acts and things as may be exercised or done by the corporation, including, without limiting the generality of the foregoing, the unqualified power: (1) To declare dividends from time to time in accordance with law; (2) To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine; (3) To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, and to do all things necessary in connection therewith; (4) To remove any officer of the corporation with or without cause, from time to time to devolve the powers and duties of any officer upon any other person for the time being; 7

(5) To confer upon any officer of the corporation the power to appoint, remove and suspend subordinate officers and agents; (6) To adopt from time to time such bonus or other compensation plans for directors, officers and agents of the corporation and its subsidiaries as it may determine; (7) To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers and agents of the corporation and its subsidiaries as it may determine; and (8) To adopt from time to time regulations, not inconsistent with these Bylaws, for the management of the corporation's business and affairs . Section 8. Compensation of Directors. ------------------------------------- Directors, as such, may receive, pursuant to resolution of the Board of Directors, fixed fees and other compensation for their services as directors, including, without limitation, their services as members of committees of the directors. Section 9. Action without Meeting. ---------------------------------- Any action required or permitted to be taken at any meeting of the Board of Directors or of any Committee thereof may be taken without a meeting if all members of the Board or Committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board or Committee. ARTICLE III - COMMITTEES Section 1. Committees of the Board of Directors. ------------------------------------------------ The Board of Directors, by a vote of a majority of the whole Board, may from time to time designate committees of the Board, including an Executive/Finance Committee, with the powers and duties it thereby confers, to serve at the pleasure of the Board and shall, for those committees and any others provided for herein, elect the director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. Committees other than the Executive/Finance Committee may have only one member. In the absence or disqualification of any member of any committee and any alternate member in his place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. 8

Section 2. Executive/Finance Committee. ---------------------------------------- If the Board of Directors shall designate an Executive/Finance Committee, said Committee shall have the following powers: During the intervals between meetings of the Board of Directors, that Committee shall have all of the powers and duties of the Board of Directors, except with respect to matters delegated to another committee and except as shall have been otherwise provided by the Board of Directors. All action taken by the Executive/Finance Committee since the last meeting of the Board of Directors shall be reported to the Board at its next meeting. During the intervals between meetings of the Executive/Finance Committee, the chairman thereof shall have such of the powers and duties of such Committee as shall have been conferred upon him by the Board of Directors or the Committee. Section 3. Conduct of Business. -------------------------------- Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-third of the members, but not less than two, shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Section 4. Emergency Management Committee. ------------------------------------------ If as a result of a catastrophe or other emergency condition a quorum of any committee of the Board of Directors having power to act in the premises cannot readily be convened and a quorum of the Board of Directors cannot readily be convened, then all the powers and duties of the Board of Directors shall automatically vest and continue, until a quorum of the Board of Directors can be convened, in the Emergency Management Committee, which shall consist of all readily available members of the Board of Directors and two of whose members shall constitute a quorum. The Emergency Management Committee shall call a meeting of the Board of Directors as soon as circumstances permit for the purpose of filling any vacancies on the Board of Directors and its committees and taking such other action as may be appropriate. ARTICLE IV - OFFICERS Section 1. Generally. ---------------------- The officers shall consist of a Chief Executive Officer, one or more Vice Presidents (who may at the pleasure of the Board of Directors be designated as Senior Vice Presidents, Executive Vice Presidents, Vice Presidents in charge of a particular function such as Vice President-Administration, or merely Vice President), a Secretary, a Treasurer, a Controller, and such assistants to such officers as may from time to time be appointed by the Board of 9

Directors. There may also be the following additional officers of the corporation: a President of the corporation and Presidents of business units of the corporation. Officers shall be elected by the Board of Directors, which shall consider that subject at its first meeting after every annual meeting of stockholders. Each officer shall hold his office at the pleasure of the Board of Directors and until his successor is elected and qualified or until his earlier resignation or removal. Any number of offices may be held by the same person. The Board of Directors may appoint such other officers as the business of the corporation may require, each of whom shall have such authority and perform such duties as are provided in these Bylaws or as the Board of Directors or the Chief Executive Officer may from time to time specify. Section 2. Chief Executive Officer. ------------------------------------ Subject to the provisions of these Bylaws and to the direction of the Board of Directors, the Chief Executive Officer of the corporation shall have the responsibility for the general management and control of the affairs and business of the corporation and shall perform all duties and have all powers which are commonly incident to the office of chief executive or which are delegated to him by the Board of Directors. The Chief Executive Officer shall have power to sign all stock certificates, contracts and other instruments of the corporation which are authorized. He shall have general supervision and direction of all of the other officers and agents of the corporation. Section 3. Presidents. ----------------------- The President of the corporation, if there is one, shall have such duties and powers as may from time to time be delegated to him by the Board of Directors or by the Chief Executive Officer. In the absence or disability of the Chief Executive Officer, or during the period of a vacancy in that office, he shall act as the Chief Executive Officer of the corporation and shall have the duties and powers such office. The Presidents of business units of the corporation, if there are any, shall have such duties and powers as may from time to time be delegated to them by the Board of Directors or the Chief Executive Officer. Section 4. Vice Presidents. ---------------------------- Each of the Vice Presidents shall have such duties and powers as may from time to time be delegated to him by the Board of Directors, by the Chief Executive Officer, or by the President of the corporation. 10

Section 5. The Treasurer. -------------------------- The Treasurer shall have the custody of all monies and securities of the corporation and shall keep regular books of account. He shall make such disbursement of the funds of the corporation as are proper and shall render from time to time an account of all such transactions and of the financial condition of the corporation. He shall have such other duties and powers as are commonly incident to this office or are delegated to him by the Board of Directors, by the Chief Executive Officer, or by the President of the corporation. Section 6. The Secretary. ------------------------- The Board of Directors shall appoint a Secretary or, at its discretion, more than one Secretary, each of whom shall have such duties and other powers are commonly incident to this office or are delegated to him or her by the Board of Directors, by the Chief Executive Officer, or by the President of the corporation. A Secretary shall issue all authorized notices for, and shall keep minutes of, all meetings of the stockholders and the Board of Directors. A Secretary shall have charge of the corporate books. Section 7. Delegation of Authority. ---------------------------------- The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agents, notwithstanding any provision hereof. Section 8. Removal. ------------------- Any officer of the corporation may be removed at any time, with or without cause, by the Board of Directors. Section 9. Action with Respect to Securities of Corporation. ------------------------------------------------------------- Unless otherwise directed by the Board of Directors, the Chief Executive Officer and the President of the corporation, and each of them, shall have power to vote and otherwise act on behalf of the corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this corporation may hold securities and otherwise to exercise any and all rights and powers which this corporation may possess by reason of its ownership of securities in such other corporation. ARTICLE V - STOCK Section 1. Certificates of Stock. ---------------------------------- Each stockholder shall be entitled to a certificate signed by, or in the name of the corporation by, the Chief Executive Officer, or the President of the corporation or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by him. Signatures required on such 11

certificates may be manually signed by the transfer agent, registrar or officer, or such signatures may be facsimile. Section 2. Transfer of Stock. ----------------------------- Transfers of stock shall be made only upon the transfer books of the corporation kept at an office of the corporation or by transfer agents designated to transfer shares of the stock of the corporation. Except where a certificate is issued in accordance with Section 4 of ARTICLE V of these Bylaws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor. Section 3. Record Dates. ------------------------- (a) The Board of Directors may fix a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of any meeting of stockholders, nor more than sixty (60) days prior to the time for the other action hereinafter described (except as otherwise set forth in paragraph (b) of this Section), as of which there shall be determined the stockholders who are entitled: to notice of or to vote at any meeting of stockholders or any adjournment thereof; to receive payment of any dividend or other distribution or allotment of any rights; or to exercise any rights with respect to any change, conversion or exchange of stock or with respect to any other lawful action. (b) In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten (10) days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or any officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action. 12

Section 4. Lost, Stolen or Destroyed Certificates. --------------------------------------------------- In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity. Section 5. Regulations. ----------------------- The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish. ARTICLE VI - INDEMNIFICATION Section 1. Right to Indemnification. ------------------------------------ Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or person of whom he or she is the legal representative, is or was a director or officer of the corporation, including when any such director or officer is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended, (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment) against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, -------- ------- that, except as provided in Section 2 of this ARTICLE VI, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition, such advances to be paid by the corporation within 20 days after the receipt by the corporation of a statement or statements from the claimant requesting such advance or advances from time to time; provided, however, that, if the Delaware -------- ------- General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without 13

limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. Section 2. Right of Claimant to Bring Suit. ------------------------------------------- If a claim under Section 1 of this ARTICLE VI, is not paid in full by the corporation within thirty days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 3. Non-Exclusivity of Rights. -------------------------------------- The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this ARTICLE VI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, bylaw, agreement, vote of stockholders or otherwise. No repeal or modification of this ARTICLE VI shall in any way diminish or adversely affect the rights of any director, officer, employee or agent of the corporation hereunder in respect of any occurrence or matter arising prior to any such repeal or modification. Section 4. Insurance. ---------------------- The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. To the extent that the corporation maintains any policy or policies providing such insurance, each such director or officer, and each such agent or employee to which rights to indemnification have been granted as provided in Section 7 14

of this ARTICLE VI, shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such director, officer, employee or agent. Section 5. Procedures for Indemnification. ------------------------------------------- To obtain indemnification under this ARTICLE VI, a claimant shall submit to the corporation a written request, including therein or therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to indemnification. Upon written request by a claimant for indemnification pursuant to the first sentence of this Section 5, a determination, if required by applicable law, with respect to the claimant's entitlement thereto shall be made as follows: (1) if requested by the claimant, by independent legal counsel (as hereinafter defined), or (2) if no request is made by the claimant for a determination by independent legal counsel, (i) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (ii) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by independent legal counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (iii) if a quorum of Disinterested Directors so directs, by the stockholders of the corporation. In the event the determination of entitlement to indemnification is to be made by independent legal counsel at the request of the claimant, the independent legal counsel shall be selected by the Board of Directors unless there shall have occurred within two years prior to the date of the commencement of the action, suit or proceeding for which indemnification is claimed a Change of Control (as hereinafter defined), in which case the independent legal counsel shall be selected by the claimant unless the claimant shall request that such selection be made by the Board of Directors. If it is so determined that the claimant is entitled to indemnification, payment to the claimant shall be made within 10 days after such determination. Section 6. Effect and Validity. -------------------------------- If a determination shall have been made pursuant to ARTICLE VI, Section 5 that the claimant is entitled to indemnification, the corporation shall be bound by such determination in any judicial proceeding commenced pursuant to ARTICLE VI, Section 2. The corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to ARTICLE VI, Section 2 that the procedures and presumptions of this ARTICLE VI are not valid, binding and enforceable and shall stipulate in such proceeding that the corporation is bound by all the provisions of this ARTICLE VI. If any provision or provisions of this ARTICLE VI shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this ARTICLE VI (including, without limitation, each portion of any paragraph of this ARTICLE VI containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this ARTICLE VI (including, without limitation, each such portion of any paragraph of this 15

ARTICLE VI containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. Section 7. Employees and Agents. -------------------------------- The corporation may grant rights to indemnification, and rights to be paid by the corporation the expenses incurred in defending any proceeding in advance of its final disposition, to any employee or agent of the corporation, including when any such person is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the corporation, to the fullest extent of the provision of this ARTICLE VI with respect to the indemnification and advancement of expenses of directors and officers of the corporation. Section 8. Definitions. ------------------------ For purposes of this ARTICLE VI: (a) "Change of Control" means (i) The acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the corporation (the "Outstanding Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the corporation entitled to vote generally in the election of directors (the "Outstanding voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the corporation, (ii) any acquisition by the corporation, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the corporation or any corporation controlled by the corporation or (iv) any acquisition pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (a)(iii) of this Section 7; or (ii) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the corporation's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or (iii) Consummation by the corporation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the corporation 16

or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individual and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the corporation or all or substantially all of the corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the corporation or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination; or (iv) Approval by the stockholders of the corporation of a complete liquidation or dissolution of the corporation. (b) "Disinterested Director" means a director of the corporation who is not and was not a party to the matter in respect of which indemnification is sought by the claimant. (c) "independent legal counsel" means a law firm, a member of a law firm, or an independent practitioner that is experienced in matters of corporation law and shall include any person who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the corporation or the claimant in an action to determine the claimant's rights under this ARTICLE VI." ARTICLE VII - NOTICES Section 1. Notices. ------------------- Whenever notice is required to be given to any stockholder, director, officer, or agent, such requirement shall not be construed to mean personal notice. Such notice may in every instance be effectively given by depositing a writing in a post office or letter box, in a postpaid, sealed wrapper, or by dispatching a prepaid telegram, addressed to such stockholder, director, officer, or agent at his or her address as the same appears on the books of the corporation. The time when such notice is dispatched shall be the time of the giving of the notice. 17

Section 2. Waivers. ------------------- A written waiver of any notice, signed by a stockholder, director, officer or agent, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such stockholder, director, officer, or agent. Neither the business nor the purpose of any meeting need be specified in such a waiver. ARTICLE VIII - MISCELLANEOUS Section 1. Facsimile Signatures. -------------------------------- In addition to the provisions for the use of facsimile signatures elsewhere specifically authorized in these bylaws, facsimile signatures of any officer or officers of the corporation may be used whenever and as authorized by the Board of Directors or the Executive Committee. Section 2. Corporate Seal. -------------------------- The Board of Directors shall provide a suitable seal, containing the name of the corporation, which seal shall be in charge of the Secretary. If and when so directed by the Board of Directors or by the Executive Committee, duplicates of the seal may be kept and used by the Treasurer or by any Assistant Secretary or Assistant Treasurer. Section 3. Reliance upon Books, Reports and Records. ---------------------------------------------------- Each director, each member of any committee designated by the Board of Directors, and each officer of the corporation shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or other records of the corporation, including reports made to the corporation by any of its officers, by an independent certified public accountant, or by an appraiser selected with reasonable care. Section 4. Fiscal Year. ----------------------- The fiscal year of the corporation shall terminate at the end of business on December 31 in each year, and the following year shall begin on the next day thereafter. Section 5. Time Periods. ------------------------ In applying any provision of these Bylaws which require that an act be done or not done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to any event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included. 18

Section 6. Independent Accountants. ------------------------------------ The Board of Directors shall appoint on an annual basis such firm of independent public accountants as it shall deem appropriate to examine the Company's financial books and records on at least an annual basis. The appointment of said independent accountants shall, at the next succeeding annual meeting of stockholders be presented to the stockholders of the Company for ratification. Should the stockholders fail to ratify the appointment by the Board of Directors of said independent public accountants, the Board of Directors shall take the matter under consideration and the vote of the stockholders in that regard shall be deemed advisory in nature. Section 7. Gender. ------------------ Any reference to the masculine gender in these Bylaws shall be construed to mean the feminine gender, as the situation may demand. ARTICLE IX - AMENDMENTS Section 1. Amendments. ---------------------- These Bylaws may be amended or repealed by the Board of Directors at any meeting or by the stockholders at any meeting. 19

EXHIBIT 4.0 COMMON THIS CERTIFICATE IS TRANSFERABLE INCORPORATED UNDER IN THE CITY OF BOSTON, NEW YORK THE LAWS OF THE OR IN LOS ANGELES STATE OF DELAWARE ________________ ________________ | NUMBER | | SHARES | |NYS | | | |________________| |________________| SEE REVERSE SIDE FOR CERTAIN DEFINITIONS MATTEL, INC. CUSIP 577081 10 2 SEE REVERSE FOR RIGHTS LEGEND __________________________________________________________ |This certifies that | | | | | | | [Mattel logo] | | | | | | |is the record holder of | |__________________________________________________________| FULL PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $1.00 EACH OF THE COMMON STOCK OF Mattel, Inc., transferable on the share register of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar. Witness the seal of the Corporation and the signatures of its duly authorized officers. [Mattel Corporate Seal] Dated /s/ Ned Mansour /s/ John W. Amerman SECRETARY CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER COUNTERSIGNED AND REGISTERED: THE FIRST NATIONAL BANK OF BOSTON (BOSTON, MASS) TRANSFER AGENT AND REGISTRAR, BY /s/ M. Penezik AUTHORIZED SIGNATURE

[from left to right across the top of the certificate] [Picture of girl with large doll] [Picture of boy with See 'N Say toy] [Picture of girl with Barbie doll] [Picture of boy with Hot Wheels track set] [from left to right in the bottom right hand corner of the certificate] [Picture of Mattel's corporate headquarters building] [Picture of girl with Barbie doll] MATTEL, INC. Mattel, Inc. will furnish without charge to each stockholder who so requests, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Such information may be obtained from the Secretary of the corporation at 333 Continental Boulevard, El Segundo, CA 90245. This certificate also evidences and entitles the holder hereof to certain rights as set forth in a Rights Agreement between Mattel, Inc. and The First National Bank of Boston, dated as of February 7, 1992 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Mattel, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Mattel, Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights issued to any Person who becomes an Acquiring Person (as defined in the Rights Agreement) may become null and void. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - .............. Custodian ............. (Cust) (Minor) under Uniform Gifts to Minors Act .............................. (State) UNIF TRF MIN ACT - .............. Custodian (until age......) (Cust) .............. under Uniform Transfers (Minor) to Minors Act .......................... (State) Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, _________________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ___________________ | | |___________________|________________________________________________________ (Please Print of Typewrite Name and Address, Including Zip Code, of Assignee) ______________________________________________________________________ Shares of Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint _______________________________________________ Attorney to transfer the said shares on the books of the within-named Corporation with full power of substitution in the premises. Dated: ________________________, 19__. _________________________________ Signature _________________________________ Signature [along right hand margin, perpendicular to the transfer section] NOTICE: The signature to this assignment must correspond with the name(s) as written upon the face of the certificate in every particular without alteration or enlargement or any change whatever.

EXHIBIT 4.1 =============================================================================== MATTEL, INC. -------------------- INDENTURE Dated as of February 15, 1996 -------------------- CHEMICAL TRUST COMPANY OF CALIFORNIA Trustee ================================================================================

TABLE OF CONTENTS ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE............ 1 SECTION 1.1 Definitions............................................ 1 SECTION 1.2 Other Definitions...................................... 7 SECTION 1.3 Incorporation by Reference of Trust Indenture Act...... 7 SECTION 1.4 Rules of Construction.................................. 8 ARTICLE II THE SECURITIES........................ 8 SECTION 2.1 Issuable in Series.................................... 8 SECTION 2.2 Establishment of Terms of Series of Securities........ 8 SECTION 2.3 Execution and Authentication.......................... 10 SECTION 2.4 Registrar and Paying Agent............................ 11 SECTION 2.5 Paying Agent to Hold Money in Trust................... 12 SECTION 2.6 Securityholder Lists.................................. 12 SECTION 2.7 Transfer and Exchange................................. 13 SECTION 2.8 Mutilated, Destroyed, Lost and Stolen Securities...... 13 SECTION 2.9 Outstanding Securities................................ 14 SECTION 2.10 Treasury Securities................................... 14 SECTION 2.11 Temporary Securities.................................. 15 SECTION 2.12 Cancellation.......................................... 15 SECTION 2.13 Defaulted Interest.................................... 15 SECTION 2.14 Global Securities..................................... 15 SECTION 2.15 CUSIP Numbers......................................... 17 ARTICLE III REDEMPTION............................. 17 SECTION 3.1 Notice to Trustees.................................... 17 SECTION 3.2 Selection of Securities to be Redeemed................ 17 SECTION 3.3 Notice of Redemption.................................. 17 SECTION 3.4 Effect of Notice of Redemption........................ 18 SECTION 3.5 Deposit of Redemption Price........................... 18 SECTION 3.6 Securities Redeemed in Part........................... 18 i

ARTICLE IV COVENANTS.............................. 19 SECTION 4.1 Payment of Principal and Interest..................... 19 SECTION 4.2 SEC Reports........................................... 19 SECTION 4.3 Compliance Certificate................................ 19 SECTION 4.4 Stay, Extension and Usury Laws........................ 19 SECTION 4.5 Corporate Existence................................... 20 SECTION 4.6 Taxes................................................. 20 SECTION 4.7 Limitation on Liens................................... 20 SECTION 4.8 Limitation on Sale/Leaseback Transactions............. 21 ARTICLE V SUCCESSORS........................... 22 SECTION 5.1 When Company May Merge, Etc........................... 22 SECTION 5.2 Successor Corporation Substituted..................... 22 ARTICLE VI DEFAULTS AND REMEDIES....................... 23 SECTION 6.1 Events of Default.................................... 23 SECTION 6.2 Acceleration of Maturity; Rescission and Annulment... 24 SECTION 6.3 Collection of Indebtedness and Suits for Enforcement by Trustee......................................... 25 SECTION 6.4 Trustee May File Proofs of Claim..................... 26 SECTION 6.5 Trustee May Enforce Claims Without Possession of Securities......................................... 27 SECTION 6.6 Application of Money Collected....................... 27 SECTION 6.7 Limitation on Suits.................................. 28 SECTION 6.8 Unconditional Right of Holders to Receive Principal and Interest........................................ 28 SECTION 6.9 Restoration of Rights and Remedies................... 28 SECTION 6.10 Rights and Remedies Cumulative....................... 29 SECTION 6.11 Delay or Omission Not Waiver......................... 29 SECTION 6.12 Control by Holders................................... 29 SECTION 6.13 Waiver of Past Defaults.............................. 29 SECTION 6.14 Undertaking for Costs................................ 30 ARTICLE VII TRUSTEE................................ 30 SECTION 7.1 Duties of Trustee.................................... 30 SECTION 7.2 Rights of Trustee.................................... 31 SECTION 7.3 Individual Rights of Trustee......................... 32 ii

SECTION 7.4 Trustee's Disclaimer................................. 32 SECTION 7.5 Notice of Defaults................................... 32 SECTION 7.6 Reports by Trustee to Holders........................ 33 SECTION 7.7 Compensation and Indemnity........................... 33 SECTION 7.8 Replacement of Trustee............................... 34 SECTION 7.9 Successor Trustee by Merger, etc..................... 35 SECTION 7.10 Eligibility; Disqualification........................ 35 SECTION 7.11 Preferential Collection of Claims Against Company.... 35 ARTICLE VIII SATISFACTION AND DISCHARGE.................. 35 SECTION 8.1 Satisfaction and Discharge of Indenture............... 35 SECTION 8.2 Application of Trust Funds; Indemnification........... 36 SECTION 8.3 Satisfaction, Discharge and Defeasance of Securities of any Series....................................... 37 SECTION 8.4 Defeasance of Certain Obligations..................... 39 SECTION 8.5 Repayment to Company.................................. 40 ARTICLE IX AMENDMENTS AND WAIVERS................... 40 SECTION 9.1 Without Consent of Holders............................ 40 SECTION 9.2 With Consent of Holders............................... 41 SECTION 9.3 Limitations........................................... 41 SECTION 9.4 Compliance with Trust Indenture Act................... 42 SECTION 9.5 Revocation and Effect of Consents..................... 42 SECTION 9.6 Notation on or Exchange of Securities................. 42 SECTION 9.7 Trustee Protected..................................... 42 ARTICLE X MISCELLANEOUS........................ 43 SECTION 10.1 Trust Indenture Act Controls.......................... 43 SECTION 10.2 Notices............................................... 43 SECTION 10.3 Communication by Holders with Other Holders........... 44 SECTION 10.4 Certificate and Opinion as to Conditions Precedent.... 44 SECTION 10.5 Statements Required in Certificate or Opinion......... 44 SECTION 10.6 Rules by Trustee and Agents........................... 44 SECTION 10.7 Legal Holidays........................................ 45 SECTION 10.8 No Recourse Against Others............................ 45 SECTION 10.9 Counterparts.......................................... 45 SECTION 10.10 Governing Laws........................................ 45 SECTION 10.11 No Adverse Interpretation of Other Agreements......... 45 iii

SECTION 10.12 Successors........................................... 45 SECTION 10.13 Severability......................................... 45 SECTION 10.14 Table of Contents, Headings, Etc..................... 46 SECTION 10.15 Securities in a Foreign Currency or in ECU........... 46 SECTION 10.16 Judgment Currency.................................... 46 ARTICLE XI SINKING FUNDS......................... 47 SECTION 11.1 Applicability of Article............................. 47 SECTION 11.2 Satisfaction of Sinking Fund Payments with Securities......................................... 47 SECTION 11.3 Redemption of Securities for Sinking Fund............ 48 iv

Indenture dated as of February 15, 1996 between Mattel, Inc., a Delaware corporation ("Company"), and Chemical Trust Company of California, a California corporation ("Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Securities issued under this Indenture. ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 Definitions. ----------- "Affiliate" of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such person, whether through the ownership of voting securities or by agreement or otherwise. "Agent" means any Registrar, Paying Agent or Service Agent. "Authorized Newspaper" means a newspaper in an official language of the country of publication customarily published at least once a day for at least five days in each calendar week and of general circulation in the place in connection with which the term is used. If it shall be impractical in the opinion of the Trustee to make any publication of any notice required hereby in an Authorized Newspaper, any publication or other notice in lieu thereof that is made or given by the Trustee shall constitute a sufficient publication of such notice. "Bearer" means anyone in possession from time to time of a Bearer Security. "Bearer Security" means any Security that does not provide for the identification of the Holder thereof. "Board of Directors" means the Board of Directors of the Company or any duly authorized committee thereof. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been adopted by the Board of Directors or pursuant to authorization by the Board of Directors and to be in full force and effect on the date of the certificate and delivered to the Trustee.

"Capitalized Lease" means any lease of property where the obligations of the lessee thereunder are required to be classified and accounted for as a capitalized lease on a balance sheet of such lessee under generally accepted accounting principles. "Company" means the party named as such above until a successor replaces it and thereafter means the successor. "Company Order" means a written order signed in the name of the Company by two Officers, one of whom must be the Company's principal executive officer, principal financial officer or principal accounting officer. "Company Request" means a written request signed in the name of the Company by its Chairman of the Board, a President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Consolidated Net Tangible Assets" means the total amount of assets of the Company and its Subsidiaries on a consolidated basis (less applicable depreciation, amortization and other valuation reserves), except to the extent resulting from write-ups occurring after January 1, 1988 of capital assets (excluding in any case write-ups in connection with accounting for acquisitions in conformity with generally accepted accounting principles), after deducting therefrom (i) all current liabilities of the Company and its Subsidiaries, (ii) all investments in unconsolidated Subsidiaries of the Company and in persons which are not Subsidiaries of the Company (except, in each case, investments in marketable securities) and (iii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other intangible items, all as set forth on the most recently available consolidated balance sheet of the Company and its Subsidiaries, prepared in conformity with generally accepted accounting principles. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered. "Current Assets" means any asset of the Company or any of its Subsidiaries that would be classified as a current asset on an audited consolidated balance sheet of the Company prepared, in accordance with generally accepted accounting principles, on the date any Lien (as hereinafter defined) on such asset is incurred. "Default" means any event which is, or after notice or passage of time would be, an Event of Default. "Depository" means, with respect to the Securities of any Series issuable or issued in whole or in part in the form of one or more Global Securities, the person designated as Depository for such Series by the Company, which Depository shall be a clearing agency registered under the Exchange Act; and if at any time there is more than one such person, "Depository" as used with respect to the Securities of any Series shall mean the Depository with respect to the Securities of such Series. 2

"Discount Security" means any Security that provides for an amount less than the stated principal amount thereof to be due and payable upon declaration of acceleration of the maturity thereof pursuant to Section 6.2. "Dollars" means the currency of the United States of America. "ECU" means the European Currency Unit as determined by the Commission of the European Union. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Foreign Currency" means any currency issued by a government other than the government of the United States of America. "Foreign Government Securities" means with respect to Securities of any Series that are denominated in a Foreign Currency, noncallable (i) direct obligations of the government that issued such Foreign Currency for the payment of which obligations its full faith and credit is pledged or (ii) obligations of a person controlled or supervised by and acting as an agency or instrumentality of such government, the payment of which obligations is unconditionally guaranteed as a full faith and credit obligation of such government. "Global Security" or "Global Securities" means a Security or Securities, as the case may be, in the form established pursuant to Section 2.1 evidencing all or part of a Series of Securities, issued to the Depository for such Series or its nominee, and registered in the name of such Depository or nominee. "Holder" or "Securityholder" means a person in whose name a Security is registered or the holder of a Bearer Security. "Indebtedness" means, with respect to any person, and without duplication: (a) any liability of such person (A) for borrowed money, or (B) for any letter of credit for the account of such person supporting obligations of such person or other persons, or (C) evidenced by a bond, note, debenture or similar instrument (including a purchase money obligation) given in connection with the acquisition of any businesses, properties or assets of any kind (other than a trade payable or a current liability arising in the ordinary course of business), or (D) for the payment of money relating to a Capitalized Lease; (b) any liability of others described in the preceding clause (a) that the person has guaranteed or that is otherwise its legal liability; and (c) any amendment, supplement, modification, deferral, renewal, extension or refunding of any liability of the types referred to in clauses (a) and (b) above. 3

"Indenture" means this Indenture as amended from time to time and shall include the form and terms of particular Series of Securities established or contemplated hereunder. "Lien" means any lien, security interest, charge, mortgage, pledge or other 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 security interest). "Maturity," when used with respect to any Security or installment of principal thereof, means the date on which the principal of such Security or such installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officer" means the Chairman of the Board, any President, any Vice- President, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers, one of whom must be the Company's principal executive officer, principal financial officer or principal accounting officer. "Opinion of Counsel" means a written opinion of legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company. "Ordinary Course Lien" means (a) Liens of taxes, assessments or governmental charges or levies on the property of the Company or any of its Subsidiaries if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with generally accepted accounting principles shall have been set aside on the books of the Company; (b) Liens imposed by law, such as carriers', warehousemen's, landlords', materialmen's and mechanics' liens and other similar liens, arising in the ordinary course of business which secure obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with generally accepted accounting principles shall have been set aside on the books of the Company; (c) Liens (other than any Lien imposed by the Employee Retirement Income Security Act of 1974, as amended) arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation; (d) Liens incurred or deposits made to secure the performance of tenders, bids, surety bonds or performance and return-of-money bonds incurred in the ordinary course of business; 4

(e) utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Company or any of its Subsidiaries, as the case may be; (f) Liens relating to a judgment or other court-ordered award or settlement as to which the Company has not exhausted its appellate rights. (g) Leases or subleases granted to or by the Company or any Subsidiary not pursuant to a Sale/Leaseback Transaction undertaken in the ordinary course of the business of the Company or any such Subsidiary and not for the purpose of providing a lien, security interest, charge, mortgage, pledge or other such encumbrance to secure another obligation. "person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "principal" of a Security means the principal of the Security plus, when appropriate, the premium, if any, on the Security. "Responsible Officer" when used with respect to the Trustee, means the chairman or the vice-chairman of the board of directors or trustees, the chairman or vice-chairman of the executive committee of the board of directors or trustees, the president, any vice-president, the treasurer, the secretary, any trust officer, any second or assistant vice-president or any officer or assistant officer of the Trustee other than those specifically above mentioned customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject. "Sale/Leaseback Transaction" means any arrangement with any person (other than the Company or any of its Subsidiaries) providing for the leasing by the Company or any of its Subsidiaries of any property which has been or is to be sold or transferred by the Company or such Subsidiary to such person or to any person (other than the Company or any of its Subsidiaries) to which funds have been or are to be advanced by such person on the security of the leased property. "SEC" means the Securities and Exchange Commission. "Securities" means the debentures, notes or other debt instruments of the Company of any Series authenticated and delivered under this Indenture. "Series" or "Series of Securities" means each series of debentures, notes or other debt instruments of the Company created pursuant to Sections 2.1 and 2.2 hereof. 5

"Significant Subsidiary" means (i) any direct or indirect Subsidiary of the Company that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act of 1933, as amended, as such regulation is in effect on the date hereof, or (ii) any group of direct or indirect Subsidiaries of the Company that, taken together as a group, would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act of 1933, as amended, as such regulation is in effect on the date hereof, "Stated Maturity" when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" of any specified person means (i) a corporation a majority of whose capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such person or by such person and a subsidiary or subsidiaries of such person or by a subsidiary or subsidiaries of such person or (ii) any other person (other than a corporation) in which such person or such person and a subsidiary or subsidiaries of such person or a subsidiary or subsidiaries of such person directly or indirectly, at the date of determination thereof has at least majority ownership interest. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of this Indenture; provided, however, -------- ------- that in the event the Trust Indenture Act of 1939 is amended after such date, "TIA" means, to the extent required by any such amendment, the Trust Indenture Act as so amended. "Trustee" means the person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each person who is then a Trustee hereunder, and if at any time there is more than one such person, "Trustee" as used with respect to the Securities of any Series shall mean the Trustee with respect to Securities of that Series. "U.S. Government Obligations" means securities which are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America which are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation evidenced by such depository receipt. 6

SECTION 1.2 Other Definitions. ------------------ DEFINED IN TERM SECTION ---- ---------- "Bankruptcy Law".................. 6.1 "Custodian"....................... 6.1 "Event of Default"................ 6.1 "Journal"......................... 10.15 "Judgment Currency"............... 10.16 "Legal Holiday"................... 10.7 "mandatory sinking fund payment".. 11.1 "Market Exchange Rate"............ 10.15 "New York Banking Day"............ 10.16 "optional sinking fund payment"... 11.1 "Paying Agent".................... 2.4 "Registrar"....................... 2.4 "Required Currency"............... 10.16 "Service Agent"................... 2.4 SECTION 1.3 Incorporation by Reference of Trust Indenture Act. ------------------------------------------------- Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any successor obligor upon the Securities. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA and not otherwise defined herein are used herein as so defined. 7

SECTION 1.4 Rules of Construction. --------------------- Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles; (c) references to "generally accepted accounting principles" shall mean generally accepted accounting principles in effect as of the time when and for the period as to which such accounting principles are to be applied; (d) "or" is not exclusive; (e) words in the singular include the plural, and in the plural include the singular; and (f) provisions apply to successive events and transactions. ARTICLE II THE SECURITIES SECTION 2.1 Issuable in Series. ------------------ The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more Series. All Securities of a Series shall be identical except as may be provided in a Board Resolution and/or an Officers' Certificate detailing the adoption of the terms thereof pursuant to the Board Resolution or a supplemental indenture hereto. In the case of Securities of a Series to be issued from time to time, the Officers' Certificate may provide for the method by which specified terms (such as interest rate, maturity date, record date or date from which interest should accrue) are to be determined. Securities may differ between Series, in respect of any matters; provided that all Series of Securities shall be equally and ratably entitled to the benefits of the Indenture. SECTION 2.2 Establishment of Terms of Series of Securities. ---------------------------------------------- At or prior to the issuance of any Securities within a Series, the following shall be established (as to the Series generally, in the case of Subsections 2.2.1 and 2.2.2 and either as to such Securities within the Series or as to the Series generally in the case of Subsections 2.2.3 through 2.2.22) by either a Board Resolution, a supplemental indenture hereto or an Officers' Certificate pursuant to authority granted under a Board Resolution: 8

2.2.1 the title of the Series (which shall distinguish the Securities of that particular Series from the Securities of any other Series); 2.2.2 any limit upon the aggregate principal amount of the Securities of the Series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the Series pursuant to Section 2.7, 2.8 or 2.11); 2.2.3 the date or dates on which the principal of the Securities of the Series is payable; 2.2.4 the rate or rates and, if applicable, the method used to determine the rate including, but not limited to, any commodity, commodity index, stock exchange index or financial index, at which the Securities of the Series shall bear interest, if any, the date or dates from which such interest shall accrue, the dates on which such interest shall be payable and the record date for the interest payable on any interest payment date; 2.2.5 the place or places where the principal of and interest on the Securities of the Series shall be payable, or the method of such payment, if by wire transfer, mail or other means; 2.2.6 the period or periods within which, the price or prices at which and the terms and conditions upon which the Securities of the Series may be redeemed, in whole or in part, at the option of the Company; 2.2.7 the obligation, if any, of the Company to redeem or purchase the Securities of the Series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the Series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; 2.2.8 if other than denominations of $1,000 and any integral multiple thereof, the denominations in which the Securities of the Series shall be issuable; 2.2.9 if other than the principal amount thereof, the portion of the principal amount of the Securities of the Series that shall be payable upon declaration of acceleration of the maturity thereof pursuant to Section 6.2; 2.2.10 the currency of denomination of the Securities of the Series, which may be Dollars, any Foreign Currency or composite currency, including, but not limited to, the ECU, and if such currency of denomination is a composite currency other than the ECU, the agency or organization, if any, responsible for overseeing such composite currency; 2.2.11 the designation of the currency or currencies in which payment of the principal of and interest on the Securities of the Series will be made, and the 9

designation, if any, of the currency or currencies in which payment of the principal of or interest on the Securities of the Series, at the election of a Holder thereof, may also be payable; 2.2.12 if the payments of principal of or interest on the Securities of the Series are to be made in a Foreign Currency other than the currency in which such Securities are denominated, the manner in which the exchange rate with respect to such payments shall be determined; 2.2.13 if the amount of payments of principal of or interest on the Securities of the Series may be determined with reference to an index based on a currency or currencies other than that in which the Securities are denominated or designated to be payable or determined by reference to a commodity, commodity index, stock exchange index or financial index, the manner in which such amounts shall be determined; 2.2.14 provisions, if any, granting special rights to the Holders of Securities of the Series upon the occurrence of such events as may be specified and the provisions, if any, relating to the subordination of the Securities of the Series to other obligations of the Company; 2.2.15 any provision for the conversion or exchange of Securities of the Series, either at the option of the Holder thereof or the Company, into or for another security or securities of the Company, the security or securities into or for which, the period or periods within which, the price or prices, including any adjustments thereto, at which and the other terms and conditions upon which any Securities of the Series shall be converted or exchanged, in whole or in part, pursuant to such obligation; 2.2.16 if the Securities of such Series are to be issued upon the exercise of warrants, the time, manner and place for such Securities to be authenticated and delivered; 2.2.17 the provisions, if any, relating to any security provided for the Securities of the Series; 2.2.18 any addition to or change in the Events of Default which applies to any Securities of the Series and any change in the right of the Trustee or the requisite Holders of such Securities to declare the principal amount thereof due and payable pursuant to Section 6.2; 2.2.19 any addition to or change in the covenants set forth in Article IV which applies to Securities of the Series; 2.2.20 any other terms of the Securities of the Series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 9.1); 10

2.2.21 the forms of the Securities of the Series in bearer or fully registered form (and, if in fully registered form, whether the Securities will be issuable as Global Securities); and 2.2.22 any depositories, interest rate calculation agents, exchange rate agents or other agents with respect to Securities of such Series if other than those appointed herein. All Securities of any one Series need not be issued at the same time and may be issued from time to time, consistent with the terms of this Indenture, if so provided by or pursuant to the Board Resolution or Officers' Certificate referred to above or as set forth in a supplemental indenture hereto, and, unless otherwise provided, the authorized principal amount of any Series may be increased to provide for issuances of additional Securities of such Series. SECTION 2.3 Execution and Authentication. ---------------------------- One Officer shall sign the Securities for the Company by manual or facsimile signature. The Company's seal, which may be in facsimile form, shall be reproduced on the Securities. If an Officer whose signature is on a Security no longer holds that office at the time the Security is authenticated, the Security shall nevertheless be valid. A Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall at any time, and from time to time, authenticate Securities for original issue in the principal amount provided in the Board Resolution or Officers' Certificate detailing the adoption of terms pursuant to the Board Resolution, upon receipt by the Trustee of a Company Order. If provided for in such procedures, such Company Order may authorize authentication and delivery pursuant to oral or electronic instructions from the Company or its duly authorized agent or agents, which oral instructions shall be promptly confirmed in writing. Each Security shall be dated the date of its authentication unless otherwise provided by Board Resolution or supplemental indenture hereto. The aggregate principal amount of Securities of any Series outstanding at any time may not exceed any limit upon the maximum principal amount for such Series set forth in the Board Resolution or Officers' Certificate or supplemental indenture hereto delivered pursuant to Section 2.2, except as provided in Section 2.8. Prior to the issuance of Securities of any Series, the Trustee shall have received and (subject to Section 7.2) shall be fully protected in relying on: (a) the Board Resolution or Officers' Certificate detailing the adoption of terms pursuant to the Board Resolution or a supplemental indenture hereto establishing the form of the Securities of that Series or of Securities within that Series and the terms of the Securities of that Series or of Securities within 11

that Series, (b) an Officers' Certificate complying with Section 10.4, and (c) an Opinion of Counsel complying with Section 10.4. The Trustee shall have the right to decline to authenticate and deliver any Securities of such Series: (a) if the Trustee, being advised by counsel, determines that such action may not lawfully be taken; or (b) if the Trustee in good faith by its board of directors or trustees, executive committee or a trust committee of directors and/or vice-presidents shall determine that such action would expose the Trustee to personal liability to Holders of any then outstanding Series of Securities. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate. SECTION 2.4 Registrar and Paying Agent. -------------------------- The Company shall maintain, with respect to each Series of Notes, at the place or places specified with respect to such Series pursuant to Section 2.2, an office or agency where Securities of such Series may be presented or surrendered for payment ("Paying Agent"), where Securities of such Series may be surrendered for registration of transfer or exchange ("Registrar") and where notices and demands to or upon the Company in respect of the Securities of such Series and this Indenture may be served ("Service Agent"). The Registrar shall keep a register with respect to each Series of Securities and to their transfer and exchange. The Company will give prompt written notice to the Trustee of the name and address, and any change in the name or address, of each Registrar, Paying Agent or Service Agent. If at any time the Company shall fail to maintain any such required Registrar, Paying Agent or Service Agent or shall fail to furnish the Trustee with the name and address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more co- registrars, additional paying agents or additional service agents and may from time to time rescind such designations; provided, however, that no such -------- ------- designation or rescission shall in any manner relieve the Company of its obligations to maintain a Registrar, Paying Agent and Service Agent in each place so specified pursuant to Section 2.2 for Securities of any Series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the name or address of any such co-registrar, additional paying agent or additional service agent. The term "Registrar" includes any co-registrar; the term "Paying Agent" includes any additional paying agent; and the term "Service Agent" includes any additional service agent. 12

The Company hereby appoints the Trustee the initial Registrar, Paying Agent and Service Agent for each Series unless another Registrar, Paying Agent or Service Agent, as the case may be, is appointed prior to the time Securities of that Series are first issued. SECTION 2.5 Paying Agent to Hold Money in Trust. ----------------------------------- The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust, for the benefit of Securityholders of any Series of Securities, or the Trustee, all money held by the Paying Agent for the payment of principal or interest on the Series of Securities, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of Securityholders of any Series of Securities all money held by it as Paying Agent. SECTION 2.6 Securityholder Lists. -------------------- The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders of each Series of Securities and shall otherwise comply with TIA (S) 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least ten days before each interest payment date and at such other times as the Trustee may request in writing a list, in such form and as of such date as the Trustee may reasonably require, of the names and addresses of Securityholders of each Series of Securities. SECTION 2.7 Transfer and Exchange. --------------------- Where Securities of a Series are presented to the Registrar or a co- registrar with a request to register a transfer or to exchange them for an equal principal amount of Securities of the same Series and date of maturity of other denominations, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Trustee shall authenticate Securities at the Registrar's request. No service charge shall be made for any registration of transfer or exchange (except as otherwise expressly permitted herein), but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer tax or similar governmental charge payable upon exchanges pursuant to Sections 2.11 or 9.6). Neither the Company nor the Registrar shall be required (a) to issue, register the transfer of, or exchange Securities of any Series for the period beginning at the opening of business fifteen days immediately preceding the mailing of a notice of redemption of Securities of that Series selected for redemption and ending at the close of business on the day of such mailing, or (b) to register the transfer of or exchange Securities of any Series selected, called 13

or being called for redemption as a whole or the portion being redeemed of any such Securities selected, called or being called for redemption in part. SECTION 2.8 Mutilated, Destroyed, Lost and Stolen Securities. ------------------------------------------------ If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same Series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and make available for delivery, in lieu of any such destroyed, lost or stolen Security, a new Security of the same Series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any Series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that Series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.9 Outstanding Securities. ---------------------- The Securities outstanding at any time are all the Securities authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those reductions in the interest on a Global Security effected by the Trustee in accordance with the provisions hereof and those described in this Section as not outstanding. 14

If a Security is replaced pursuant to Section 2.8, it ceases to be outstanding until the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds on the Maturity date of Securities of a Series money sufficient to pay such Securities payable on that date, then on and after that date such Securities of the Series cease to be outstanding and interest on them ceases to accrue. A Security does not cease to be outstanding because the Company or an Affiliate holds the Security. In determining whether the Holders of the requisite principal amount of outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, the principal amount of a Discount Security that shall be deemed to be outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the Maturity thereof pursuant to Section 6.2. SECTION 2.10 Treasury Securities. ------------------- In determining whether the Holders of the required principal amount of Securities of a Series have concurred in any direction, waiver or consent, Securities of a Series owned by the Company or an Affiliate shall be disregarded, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities of a Series that the Trustee knows are so owned shall be so disregarded. SECTION 2.11 Temporary Securities. -------------------- Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities upon a Company Order. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee upon request shall authenticate definitive Securities of the same Series and date of maturity in exchange for temporary Securities. Until so exchanged, temporary securities shall have the same rights under this Indenture as the definitive Securities. SECTION 2.12 Cancellation. ------------ The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee shall cancel all Securities surrendered for transfer, exchange, payment, replacement or cancellation and shall destroy such cancelled Securities (subject to the record retention requirement of the Exchange Act) and deliver a certificate of such destruction to the Company, unless the Company otherwise directs. The 15

Company may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation. SECTION 2.13 Defaulted Interest. ------------------ If the Company defaults in a payment of interest on a Series of Securities, it shall pay the defaulted interest, plus, to the extent permitted by law, any interest payable on the defaulted interest, to the persons who are Securityholders of the Series on a subsequent special record date. The Company shall fix the record date and payment date. At least 30 days before the record date, the Company shall mail to the Trustee and to each Securityholder of the Series a notice that states the record date, the payment date and the amount of interest to be paid. The Company may pay defaulted interest in any other lawful manner. SECTION 2.14 Global Securities. ----------------- 2.14.1 Terms of Securities. A supplemental indenture to the ------------------- Indenture or a Board Resolution (and, to the extent not set forth in the Board Resolution, an Officers' Certificate detailing the adoption of terms pursuant to the Board Resolution) shall establish whether the Securities of a Series shall be issued in whole or in part in the form of one or more Global Securities and the Depository for such Global Security or Securities. 2.14.2 Transfer and Exchange. Notwithstanding any provisions to the --------------------- contrary contained in Section 2.7 of the Indenture and in addition thereto, any Global Security shall be exchangeable pursuant to Section 2.7 of the Indenture for securities registered in the names of Holders other than the Depository for such Security or its nominee only if (i) such Depository notifies the Company that it is unwilling or unable to continue as Depository for such Global Security or if at any time such Depository ceases to be a clearing agency registered under the Exchange Act, and, in either case, the Company fails to appoint a successor Depository within 90 days of such event, (ii) the Company executes and delivers to the Trustee an Officers' Certificate to the effect that such Global Security shall be so exchangeable or (iii) an event shall have happened and be continuing which is or after notice or lapse of time or both, would be, an Event of Default with respect to the Securities represented by such Global Security. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Securities registered in such names as the Depository shall direct in writing in an aggregate principal amount equal to the principal amount of the Global Security with like tenor and terms. Except as provided in this Section 2.14.2, a Global Security may not be transferred except as a whole by the Depository with respect to such Global Security to a nominee of such Depository, by a nominee of such Depository to such Depository or another nominee of such Depository or by the Depository or any such nominee to a successor Depository or a nominee of such a successor Depository. 16

2.14.3 Legend. Any Global Security issued hereunder shall bear a ------ legend in substantially the following form: "This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of the Depository or a nominee of the Depository. This Security is exchangeable for Securities registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Indenture, and may not be transferred except as a whole by the Depository to a nominee of the Depository, by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such a successor Depository." 2.14.4 Acts of Holders. The Depository, as a Holder, may appoint --------------- agents and otherwise authorize participants to give or take any request, demand, authorization, direction, notice, consent, waiver or other action which a Holder is entitled to give or take under the Indenture. 2.14.5 Payments. Notwithstanding the other provisions of this -------- Indenture, unless otherwise specified as contemplated by Section 2.2, payment of the principal of and interest on any Global Security shall be made to the person specified therein. 2.14.6 Consents, Declaration and Directions. Except as provided in ------------------------------------ Section 2.14.5, the Company, the Trustee and any Agent shall treat a person as the Holder of such principal amount of outstanding Securities of such Series represented by a Global Security as shall be specified in a written statement of the Depositary with respect to such Global Security, for purposes of obtaining any consents, declarations or directions required to be given by the Holders pursuant to this Indenture. SECTION 2.15 CUSIP Numbers. ------------- The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any -------- such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other elements of identification printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE III REDEMPTION SECTION 3.1 Notice to Trustees. ------------------ 17

The Company may, with respect to any Series of Securities, reserve the right to redeem and pay the Series of Securities or may covenant to redeem and pay the Series of Securities or any part thereof before maturity at such time and on such terms as provided for in such Securities. If a Series of Securities is redeemable and the Company wants or is obligated to redeem prior to the Stated Maturity thereof all or part of the Series of Securities pursuant to the terms of such Securities, it shall notify the Trustee of the redemption date and the principal amount of Series of Securities to be redeemed. The Company shall give the notice at least 60 days before the redemption date (or such shorter notice as may be acceptable to the Trustee). SECTION 3.2 Selection of Securities to be Redeemed. -------------------------------------- Unless otherwise indicated for a particular Series by Board Resolution or by a supplemental indenture hereto (or to the extent not set forth in such Board Resolution or supplemental indenture, in an Officers' Certificate so indicating pursuant to the Board Resolution), if less than all the Securities of a Series are to be redeemed, the Trustee shall select the Securities of the Series to be redeemed in any manner that the Trustee deems fair and appropriate. The Trustee shall make the selection from Securities of the Series outstanding not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities of the Series that have denominations larger than $1,000. Securities of the Series and portions of them it selects shall be in amounts of $1,000 or whole multiples of $1,000 or, with respect to Securities of any Series issuable in other denominations pursuant to Section 2.2.8, the minimum principal denomination for each Series and integral multiples thereof. Provisions of this Indenture that apply to Securities of a Series called for redemption also apply to portions of Securities of that Series called for redemption. SECTION 3.3 Notice of Redemption. -------------------- Unless otherwise indicated for a particular Series by Board Resolution or by a supplemental indenture hereto, at least 30 days but not more than 60 days before a redemption date, the Company shall mail a notice of redemption by first-class mail to each Holder whose Securities are to be redeemed and if any Bearer Securities are outstanding, publish on one occasion a notice in an Authorized Newspaper. The notice shall identify the Securities of the Series to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) the name and address of the Paying Agent; (d) that Securities of the Series called for redemption must be surrendered to the Paying Agent to collect the redemption price; 18

(e) that interest on Securities of the Series called for redemption ceases to accrue on and after the redemption date; and (f) any other information as may be required by the terms of the particular Series or the Securities of a Series being redeemed. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense. SECTION 3.4 Effect of Notice of Redemption. ------------------------------ Once notice of redemption is mailed or published as provided in Section 3.3, Securities of a Series called for redemption become due and payable on the redemption date and at the redemption price. A notice of redemption may not be conditional. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price plus accrued interest to the redemption date. SECTION 3.5 Deposit of Redemption Price. --------------------------- On or before the redemption date, the Company shall deposit with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Securities to be redeemed on that date. SECTION 3.6 Securities Redeemed in Part. --------------------------- Upon surrender of a Security that is redeemed in part, the Trustee shall authenticate for the Holder a new Security of the same Series and the same maturity equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE IV COVENANTS SECTION 4.1 Payment of Principal and Interest. --------------------------------- The Company covenants and agrees for the benefit of each Series of Securities that it will duly and punctually pay the principal of and interest on the Securities of that Series in accordance with the terms of such Securities and this Indenture. SECTION 4.2 SEC Reports. ----------- The Company shall deliver to the Trustee within 15 days after it files them with the SEC copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 19

15(d) of the Exchange Act. The Company also shall comply with the other provisions of TIA (S) 314(a). SECTION 4.3 Compliance Certificate. ---------------------- The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he may have knowledge). The Company will, so long as any of the Securities are outstanding, deliver to the Trustee, forthwith upon becoming aware of (i) any Default, Event of Default or default in the performance of any covenant, agreement or condition contained in this Indenture or (ii) any event of default referred to in Section 6.1(e), an Officers' Certificate specifying such Default, Event of Default or default. SECTION 4.4 Stay, Extension and Usury Laws. ------------------------------ The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.5 Corporate Existence. ------------------- Subject to Article V, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each Significant Subsidiary in accordance with the respective organizational documents of each Significant Subsidiary and the rights (charter and statutory), licenses and franchises of the Company and its Significant Subsidiaries; provided, however, -------- ------- that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any Significant Subsidiary, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole and that the loss thereof is not adverse in any material respect to the Holders. 20

SECTION 4.6 Taxes. ----- The Company shall, and shall cause each of its Significant Subsidiaries to, pay prior to delinquency all taxes, assessments and governmental levies, except as contested in good faith and by appropriate proceedings. SECTION 4.7 Limitation on Liens. ------------------- The Company shall not and shall not permit any of its Subsidiaries to, directly or indirectly, create, assume or otherwise cause or suffer to exist, except in favor of the Company, any Lien of or upon any of the properties or assets, real, personal or mixed (including stock and other securities of its Subsidiaries), of the Company or any of its Subsidiaries whether owned at the date of this Indenture or thereafter acquired, or of or upon any income or profits therefrom, except for: (a) Liens existing on the date hereof or arising under this Indenture; (b) any extension, renewal, or replacement (or successive extensions, renewals or replacements) of any Lien existing on the date hereof, if limited to the same property subject to, and securing not more than the amount secured by, the Lien extended, renewed or replaced; (c) Liens on Current Assets (or on any promissory note received in satisfaction of any accounts receivable of the Company or any of its Subsidiaries which, immediately prior to such satisfaction, was subject to such a Lien) securing Indebtedness incurred to finance working capital requirements, provided, however, that the Indebtedness secured by such Lien -------- ------- does not mature later than 36 months from the date incurred; (d) any Ordinary Course Lien arising, and only so long as continuing, in the ordinary course of the business of the Company or any of its Subsidiaries; (e) Liens upon any property hereafter acquired (including by reason of a merger or consolidation of another entity into the Company or a Subsidiary) existing thereon at the time of acquisition, provided that such -------- Liens (A) are not incurred in connection with, or in contemplation of, the acquisition of the property acquired, except as permitted under subsection (f) of this Section 4.7, and (B) do not extend to or cover any property or assets of the Company or any Subsidiary other than the property so acquired; (f) purchase money Liens upon or in any real or personal property (including fixtures and other equipment) acquired or held by the Company or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such property or to secure Indebtedness incurred solely for the purpose of financing or refinancing the acquisition or improvement of or construction costs related to such property, provided -------- 21

that no such Lien shall extend to or cover any property or assets of the Company or any Subsidiary other than the property being acquired or improved; (g) any interest or title of a lessor in the property subject to any Capitalized Lease or Sale/Leaseback Transaction that is permitted under Section 4.8; or (h) other Liens securing Indebtedness in an aggregate principal amount which, together with the aggregate outstanding principal amount of all other Indebtedness of the Company and its Subsidiaries secured by Liens permitted under the terms of this subsection (h), and the aggregate amount (before deducting expenses) of Sale/Leaseback Transactions which would otherwise be permitted under the provisions of Section 4.8(a), does not at the time such Liens are incurred exceed 10% of the Company's Consolidated Net Tangible Assets as shown on the most recent audited consolidated balance sheet of the Company and its Subsidiaries. SECTION 4.8 Limitation on Sale/Leaseback Transactions. ----------------------------------------- The Company shall not and shall not permit any of its Subsidiaries to, directly or indirectly, enter into any Sale/Leaseback Transaction unless either: (a) the Company or such Subsidiary would be permitted, pursuant to the terms of Section 4.7(h), to incur Indebtedness in an aggregate principal amount equal to or exceeding the aggregate amount (before deducting expenses) of the Sale/Leaseback Transaction secured by a Lien on the property subject to such Sale/Leaseback Transaction; or (b) the Company or such Subsidiary within 90 days of the effectiveness of such Sale/Leaseback Transaction applies or unconditionally agrees to apply to the retirement of Indebtedness an amount equal to the greater of (A) the net proceeds of the Sale/Leaseback Transaction or (B) the fair value, in the opinion of the Board of Directors of the Company, of the subject property of the Sale/Leaseback Transaction at the time of such transaction (in either case adjusted to reflect the remaining term of the lease subject to such Sale/Leaseback Transaction). ARTICLE V SUCCESSORS SECTION 5.1 When Company May Merge, Etc. --------------------------- The Company shall not consolidate or merge with or into, or sell, lease, convey or otherwise dispose of all or substantially all of its assets to, any person unless: (a) the Company is the surviving person or the person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, lease, conveyance or other disposition shall have been made, is a corporation organized 22

and existing under the laws of the United States, any state thereof or the District of Columbia; (b) the corporation formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, lease, conveyance or other disposition shall have been made, assumes by supplemental indenture all the obligations of the Company under the Securities and this Indenture; and (c) immediately after the transaction no Default or Event of Default exists. The Company shall deliver to the Trustee prior to the consummation of the proposed transaction an Officers' Certificate to the foregoing effect and an Opinion of Counsel stating that the proposed transaction and such supplemental indenture comply with this Indenture. SECTION 5.2 Successor Corporation Substituted. --------------------------------- Upon any consolidation or merger, or any sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.1, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, lease, conveyance or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor person has been named as the Company herein; provided, however, that the predecessor Company in the -------- ------- case of a sale, lease, conveyance or other disposition shall not be released from the obligation to pay the principal of and interest on the Securities. ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.1 Events of Default. ----------------- "Event of Default," wherever used herein with respect to Securities of any Series, means any one of the following events, except the events set forth in clause (e) below, which shall not apply for the benefit of Securities of a Series as to which, pursuant to Section 2.2.18 or Section 2.2.20 in the establishing Board Resolution and Officers' Certificate or supplemental indenture hereto, it is provided that such Series shall not have the benefit of said Event of Default (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of any interest on any Security of that Series when it becomes due and payable, and continuance of such default for a period of 30 days; or 23

(b) default in the payment of the principal of any Security of that Series at its Maturity; or (c) default in the deposit of any sinking fund payment, when and as due by the terms of a Security of that Series; or (d) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default whose performance or whose breach is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of Series of Securities other than that Series), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the outstanding Securities of that Series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) a default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company (including a default with respect to Securities of any Series other than that Series) or any Subsidiary (or the payment of which is guaranteed by the Company or a Subsidiary), whether such Indebtedness or guarantee now exists or shall be created hereafter, if (a) either (i) such default results from the failure to pay any such Indebtedness at its stated final maturity or (ii) relates to an obligation other than the obligation to pay such Indebtedness at its stated final maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity and (b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at stated final maturity or the maturity of which has been so accelerated, aggregates $25,000,000 or more at any one time outstanding; or (f) the Company or any of its Significant Subsidiaries pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is unable to pay its debts as the same become due; or 24

(g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Significant Subsidiaries in an involuntary case, (ii) appoints a Custodian of the Company or any of its Significant Subsidiaries or for all or substantially all of its property, or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries, and the order or decree remains unstayed and in effect for 60 days. The term "Bankruptcy Law" means title 11, U.S. Code or any similar Federal or State law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. (h) any other Event of Default provided with respect to Securities of that Series. SECTION 6.2 Acceleration of Maturity; Rescission and Annulment. -------------------------------------------------- If an Event of Default with respect to Securities of any Series at the time outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the outstanding Securities of that Series may declare the principal amount (or, if any Securities of that Series are Discount Securities, such portion of the principal amount as may be specified in the terms of such Securities) of all of the Securities of that Series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable. If an Event of Default specified in Section 6.1(f) or (g) shall occur, the principal amount (or specified amount) of all outstanding Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after such a declaration of acceleration with respect to any Series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the outstanding Securities of that Series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (a) the Company has paid or deposited with the Trustee a sum sufficient to pay (i) all overdue interest on all Securities of that Series, 25

(ii) the principal of any Securities of that Series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Securities, (iii) to the extent that payment of such interest is lawful, interest upon any overdue principal and overdue interest at the rate or rates prescribed therefor in such Securities, and (iv) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (b) all Events of Default with respect to Securities of that Series, other than the non-payment of the principal of Securities of that Series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 6.13. No such rescission shall affect any subsequent Default or impair any right consequent thereon. SECTION 6.3 Collection of Indebtedness and Suits for Enforcement by Trustee. --------------------------------------------------------------- The Company covenants that if (a) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 60 days, or (b) default is made in the payment of principal of any Security at the Maturity thereof, or (c) default is made in the deposit of any sinking fund payment when and as due by the terms of a Security, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal or any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or deemed to be payable in the manner provided by 26

law out of the property of the Company or any other obligor upon such Securities, wherever situated. If an Event of Default with respect to any Securities of any Series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such Series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 6.4 Trustee May File Proofs of Claim. -------------------------------- In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same, and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. 27

SECTION 6.5 Trustee May Enforce Claims Without Possession of Securities. ----------------------------------------------------------- All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 6.6 Application of Money Collected. ------------------------------ Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: First: To the payment of all amounts due the Trustee under Section 7.7; and Second: To the payment of the amounts then due and unpaid for principal of and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and interest, respectively; and Third: To the Company. SECTION 6.7 Limitation on Suits. ------------------- No Holder of any Security of any Series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that Series; (b) the Holders of not less than 25% in principal amount of the outstanding Securities of that Series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and 28

(e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the outstanding Securities of that Series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. SECTION 6.8 Unconditional Right of Holders to Receive Principal and Interest. ---------------------------------------------------------------- Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest on such Security on the Stated Maturity or Stated Maturities expressed in such Security (or, in the case of redemption, on the redemption date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 6.9 Restoration of Rights and Remedies. ---------------------------------- If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 6.10 Rights and Remedies Cumulative. ------------------------------ Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in Section 2.8, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 6.11 Delay or Omission Not Waiver. ---------------------------- No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every 29

right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 6.12 Control by Holders. ------------------ The Holders of a majority in principal amount of the outstanding Securities of any Series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such Series, provided that (a) such direction shall not be in conflict with any rule of law or with this Indenture, (b) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (c) subject to the provisions of Section 6.1, the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall, by a Responsible Officer of the Trustee, determine that the proceeding so directed would involve the Trustee in personal liability. SECTION 6.13 Waiver of Past Defaults. ----------------------- The Holders of not less than a majority in principal amount of the outstanding Securities of any Series may on behalf of the Holders of all the Securities of such Series waive any past Default hereunder with respect to such Series and its consequences, except a Default (1) in the payment of the principal of or interest on any Security of such Series or (2) in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Holder of each outstanding Security of such Series affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.14 Undertaking for Costs. --------------------- All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of 30

the outstanding Securities of any Series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or interest on any Security on or after the Stated Maturity or Stated Maturities expressed in such Security (or, in the case of redemption, on or after the redemption date). ARTICLE VII TRUSTEE SECTION 7.1 Duties of Trustee. ----------------- (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) The Trustee need perform only those duties that are specifically set forth in this Indenture and no others. (ii) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon Officers' Certificates or Opinions of Counsel furnished to the Trustee and conforming to the requirements of this Indenture; however, in the ------- case of any such Officers' Certificates or Opinions of Counsel which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall examine such Officers' Certificates and Opinions of Counsel to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) This paragraph does not limit the effect of paragraph (b) of this Section. (ii) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (iii) The Trustee shall not be liable with respect to any action taken, suffered or omitted to be taken by it with respect to Securities of any Series in good faith in accordance with the direction of the Holders of a majority in principal amount of the outstanding Securities of such Series relating to the time, method and place of conducting any proceeding for any remedy available 31

to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities of such Series. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraph (a), (b) and (c) of this Section. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to risk its own funds or otherwise incur any financial liability in the performance of any of its duties, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it. (h) The Paying Agent, the Registrar and any authenticating agent shall be entitled to the protections, immunities and standard of care as are set forth in paragraphs (a), (b) and (c) of this Section with respect to the Trustee. SECTION 7.2 Rights of Trustee. ----------------- (a) The Trustee may rely on and shall be protected in acting or refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. No Depository shall be deemed an agent of the Trustee and the Trustee shall not be responsible for any act or omission by any Depository. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (e) The Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect 32

of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. SECTION 7.3 Individual Rights of Trustee. ---------------------------- The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or an Affiliate with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11. SECTION 7.4 Trustee's Disclaimer. -------------------- The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities other than its authentication. SECTION 7.5 Notice of Defaults. ------------------ If a Default or Event of Default occurs and is continuing with respect to the Securities of any Series and if it is known to a Responsible Officer of the Trustee, the Trustee shall mail to each Securityholder of the Securities of that Series and, if any Bearer Securities are outstanding, publish on one occasion in an Authorized Newspaper, notice of a Default or Event of Default within 90 days after it occurs or, if later, after a Responsible Officer of the Trustee has knowledge of such Default or Event of Default. Except in the case of a Default or Event of Default in payment on any Security of any Series, the Trustee may withhold the notice if and so long as its corporate trust committee or a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Securityholders of that Series. SECTION 7.6 Reports by Trustee to Holders. ----------------------------- Within 60 days after May 15 in each year, the Trustee shall transmit by mail to all Securityholders, as their names and addresses appear on the Security Register, and, if any Bearer Securities are outstanding, publish in an Authorized Newspaper, a brief report dated as of such May 15, in accordance with, and to the extent required under, TIA (S) 313. A copy of each report at the time of its mailing to Securityholders of any Series shall be filed with the SEC and each stock exchange on which the Securities of that Series are listed. The Company shall promptly notify the Trustee when Securities of any Series are listed on any stock exchange. 33

SECTION 7.7 Compensation and Indemnity. -------------------------- The Company shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred by it. Such expenses shall include the reasonable compensation and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee (including the cost of defending itself) against any loss, liability or expense incurred by it except as set forth in the next paragraph in the performance of its duties under this Indenture as Trustee or Agent. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. This indemnification shall apply to officers, directors, employees, shareholders and agents of the Trustee. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee or by any officer, director, employee, shareholder or agent of the Trustee through negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities of any Series on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Securities of that Series. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.1(f) or (g) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.8 Replacement of Trustee. ---------------------- A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign with respect to the Securities of one or more Series by so notifying the Company. The Holders of a majority in principal amount of the Securities of any Series may remove the Trustee with respect to that Series by so notifying the Trustee and the Company. The Company may remove the Trustee with respect to Securities of one or more Series if: (a) the Trustee fails to comply with Section 7.10; 34

(b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee with respect to the Securities of any one or more Series does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the Securities of the applicable Series may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee with respect to the Securities of any one or more Series fails to comply with Section 7.10, any Securityholder of the applicable Series may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee subject to the lien provided for in Section 7.7, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee with respect to each Series of Securities for which it is acting as Trustee under this Indenture. A successor Trustee shall mail a notice of its succession to each Securityholder of each such Series and if any Bearer Securities are outstanding, publish such notice on one occasion in an Authorized Newspaper. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 hereof shall continue for the benefit of the retiring trustee with respect to expenses and liabilities incurred by it prior to such replacement. SECTION 7.9 Successor Trustee by Merger, etc. -------------------------------- If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10 Eligibility; Disqualification. ----------------------------- 35

This Indenture shall always have a Trustee who satisfies the requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee shall always have a combined capital and surplus of at least $10,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA (S) 310(b). SECTION 7.11 Preferential Collection of Claims Against Company. ------------------------------------------------- The Trustee is subject to TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to the extent indicated. ARTICLE VIII SATISFACTION AND DISCHARGE SECTION 8.1 Satisfaction and Discharge of Indenture. --------------------------------------- This Indenture shall upon Company Order cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (i) all Securities theretofore authenticated and delivered (other than Securities that have been destroyed, lost or stolen and that have been replaced or paid) have been delivered to the Trustee for cancellation; or (ii) all such Securities not theretofore delivered to the Trustee for cancellation (1) have become due and payable, or (2) will become due and payable at their Stated Maturity within one year, or (3) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, or (4) are deemed paid and discharged pursuant to Section 8.3, as applicable; and the Company, in the case of (1), (2) or (3) above, has deposited or caused to be deposited with the Trustee as trust funds in trust in an amount sufficient 36

for the purpose of paying and discharging the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and interest to the date of such deposit (in the case of Securities which become due and payable) or to the Stated Maturity or redemption date, as the case may be; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 7.7, and, if money shall have been deposited with the Trustee pursuant to clause (a) of this Section or if money or obligations shall have been deposited with or received by the Trustee pursuant to Section 8.3, the obligations of the Trustee under Section 8.2 and Section 8.5 shall survive. SECTION 8.2 Application of Trust Funds; Indemnification. ------------------------------------------- (a) Subject to the provisions of Section 8.5, all money deposited with the Trustee pursuant to Section 8.1, all money and U.S. Government Obligations or Foreign Government Securities deposited with the Trustee pursuant to Section 8.3 or 8.4 and all money received by the Trustee in respect of U.S. Government Obligations or Foreign Government Securities deposited with the Trustee pursuant to Section 8.3 or 8.4, shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the persons entitled thereto, of the principal and interest for whose payment such money has been deposited with or received by the Trustee or to make mandatory sinking fund payments or analogous payments as contemplated by Sections 8.3 or 8.4. (b) The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against U.S. Government Obligations or Foreign Government Securities deposited pursuant to Sections 8.3 or 8.4 or the interest and principal received in respect of such obligations other than any payable by or on behalf of Holders. (c) The Trustee shall deliver or pay to the Company from time to time upon Company Request any U.S. Government Obligations or Foreign Government Securities or money held by it as provided in Sections 8.3 or 8.4 which, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, are then in excess of the amount thereof which then would have been required to be deposited for the purpose for which such Obligations or Foreign Government Securities or money were deposited or received. 37

This provision shall not authorize the sale by the Trustee of any U.S. Government Obligations or Foreign Government Securities held under this Indenture. SECTION 8.3 Satisfaction, Discharge and Defeasance of Securities of any Series. ------------------------------------------------------------------ Unless this Section 8.3 is otherwise specified, pursuant to Section 2.2.20, to be inapplicable to Securities of any Series, the Company shall be deemed to have paid and discharged the entire indebtedness on all the outstanding Securities of any such Series on the 91st day after the date of the deposit referred to in subparagraph (d) hereof, and the provisions of this Indenture, as it relates to such outstanding Securities of any such Series, shall no longer be in effect (and the Trustee, at the expense of the Company, shall, at Company Request, execute proper instruments acknowledging the same), except as to: (a) the rights of Holders of Securities of such Series to receive, from the trust funds described in subparagraph (d) hereof, (i) payment of the principal of and each installment of principal of or interest on the outstanding Securities of such Series on the Stated Maturity of such principal or installment of principal or interest and (ii) the benefit of any mandatory sinking fund payments applicable to the Securities of such Series on the day on which such payments are due and payable in accordance with the terms of this Indenture and the Securities of such Series; (b) the Company's obligations with respect to such Securities of such Series under Sections 2.4, 2.7 and 2.8; and (c) the rights, powers, trust and immunities of the Trustee hereunder and the duties of the Trustee under Section 8.2 and the duty of the Trustee to authenticate Securities of such Series issued on registration of transfer or exchange; provided that, the following conditions shall have been satisfied: (d) the Company shall have deposited or caused to be deposited irrevocably with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for and dedicated solely to the benefit of the Holders of such Securities (i) in the case of Securities of such Series denominated in Dollars, cash in Dollars (or such other money or currencies as shall then be legal tender in the United States) and/or U.S. Government Obligations, or (ii) in the case of Securities of such Series denominated in a Foreign Currency (other than a composite currency), money and/or Foreign Government Securities in the same Foreign Currency, which through the payment of interest and principal in respect thereof, in accordance with their terms, will provide (and without reinvestment and assuming no tax liability will be imposed on such Trustee), not later than one day before the due date of any payment of money, an amount in cash, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge each installment of principal, (including mandatory sinking fund or analogous payments) of and any interest on all the Securities of such Series on the dates such installments of interest or principal are due; 38

(e) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound; (f) such provision would not cause any outstanding Securities of such Series then listed on the New York Stock Exchange or other securities exchange to be delisted as a result thereof; (g) no Default or Event of Default with respect to the Securities of such Series shall have occurred and be continuing on the date of such deposit or during the period ending on the 91st day after such date; (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel to the effect that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of execution of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Securities of such Series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposits, defeasance and discharge and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred; (i) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of the Securities of such Series over any other creditors of the company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (j) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to the defeasance contemplated by this Section have been complied with. SECTION 8.4 Defeasance of Certain Obligations. --------------------------------- Unless this Section 8.4 is otherwise specified pursuant to Section 2.2.20 to be inapplicable to Securities of any Series, on and after the 91st day after the date of the deposit referred to in subparagraph (a) hereof, the Company may omit to comply with any term, provision or condition set forth under Sections 4.2 (except as to corporate existence), 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, and 5.1 (and the failure to comply with any such provisions shall not constitute a Default or Event of Default under Section 6.1) and the occurrence of any event described in clause (e) of Section 6.1 shall not constitute a Default or Event of Default hereunder, with respect to the Securities of such Series, provided that the following conditions shall have been satisfied: (a) With reference to this Section 8.4, the Company has deposited or caused to be irrevocably deposited (except as provided in Section 8.3) with the Trustee as trust 39

funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities (i) in the case of Securities of such Series denominated in Dollars, cash in Dollars (or such other money or currencies as shall then be legal tender in the United States) and/or U.S. Government Obligations, or (ii) in the case of Securities of such Series denominated in a Foreign Currency (other than a composite currency), money and/or Foreign Government Securities in the same Foreign Currency, which through the payment of interest and principal in respect thereof, in accordance with their terms, will provide (and without reinvestment and assuming no tax liability will be imposed on such Trustee), not later than one day before the due date of any payment of money, an amount in cash, sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge each installment of principal (including mandatory sinking fund or analogous payments) of and any interest on all the Securities of such Series on the dates such installments of interest or principal are due; (b) Such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound; (c) No Default or Event of Default with respect to the Securities of such Series shall have occurred and be continuing on the date of such deposit or during the period ending on the 91st day after such date; (d) the Company shall have delivered to the Trustee an Opinion of Counsel confirming that Holders of the Securities of such Series will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; (e) the Company shall have delivered to the Trustee an Officers' Certificate stating the deposit was not made by the Company with the intent of preferring the Holders of the Securities of such Series over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (f) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the defeasance contemplated by this Section have been complied with. SECTION 8.5 Repayment to Company. -------------------- The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal and interest that remains unclaimed for two years. After that, Securityholders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person. 40

ARTICLE IX AMENDMENTS AND WAIVERS SECTION 9.1 Without Consent of Holders. -------------------------- The Company and the Trustee may amend or supplement this Indenture or the Securities of one or more Series without the consent of any Securityholder: (a) to cure any ambiguity, defect or inconsistency; (b) to comply with Article V; (c) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided that such amendment or -------- supplement does not adversely affect the rights of any Securityholders; (d) to make any change that does not adversely affect the rights of any Securityholder; (e) to provide for the issuance of and establish the form and terms and conditions of Securities of any Series as permitted by this Indenture; (f) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more Series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee; or (g) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA. SECTION 9.2 With Consent of Holders. ----------------------- The Company and the Trustee may enter into a supplemental indenture with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities of each Series affected by such supplemental indenture, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Securityholders of each such Series. Except as provided in Section 6.13, the Holders of at least a majority in principal amount of the outstanding Securities of each Series affected by such waiver by notice to the Trustee may waive compliance by the Company with any provision of this Indenture or the Securities with respect to such Series. It shall not be necessary for the consent of the Holders of Securities under this Section 9.2 to approve the particular form of any proposed supplemental indenture or waiver, but it shall be sufficient if such consent approves the substance thereof. After a supplemental indenture or waiver under this section becomes effective, the Company shall mail to the Holders 41

of Securities affected thereby and, if any Bearer Securities affected thereby are outstanding, publish on one occasion in an Authorized Newspaper, a notice briefly describing the supplemental indenture or waiver. Any failure by the Company to mail or publish such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. SECTION 9.3 Limitations. ----------- Without the consent of each Securityholder affected, an amendment or waiver may not: (a) change the amount of Securities whose Holders must consent to an amendment, supplement or waiver; (b) reduce the rate of or extend the time for payment of interest (including default interest) on any Security; (c) reduce the principal or change the Stated Maturity of any Security or reduce the amount of, or postpone the date fixed for, the payment of any sinking fund or analogous obligation; (d) waive a Default or Event of Default in the payment of the principal of or interest on any Security (except a rescission of acceleration of the Securities of any Series by the Holders of at least a majority in aggregate principal amount of the then outstanding Securities of such Series and a waiver of the payment default that resulted from such acceleration); (e) make the Security payable in currency other than that stated in the Security; (f) make any change in Sections 6.8, 6.13, 9.3 (this sentence), 10.15 or 10.16; or (g) waive a redemption payment with respect to any Security or change any of the provisions with respect to the redemption of any Securities. SECTION 9.4 Compliance with Trust Indenture Act. ----------------------------------- Every amendment to this Indenture or the Securities of one or more Series shall be set forth in a supplemental indenture hereto that complies with the TIA as then in effect. SECTION 9.5 Revocation and Effect of Consents. --------------------------------- Until an amendment or waiver becomes effective, a consent to it by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent 42

Holder may revoke the consent as to his Security or portion of a Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. Any amendment or waiver once effective shall bind every Securityholder of each Series affected by such amendment or waiver unless it is of the type described in any of clauses (a) through (g) of Section 9.3. In that case, the amendment or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security. SECTION 9.6 Notation on or Exchange of Securities. ------------------------------------- The Trustee may place an appropriate notation about an amendment or waiver on any Security of any Series thereafter authenticated. The Company in exchange for Securities of that Series may issue and the Trustee shall authenticate upon request new Securities of that Series that reflect the amendment or waiver. SECTION 9.7 Trustee Protected. ----------------- In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 7.1) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee shall sign all supplemental indentures, except that the Trustee need not sign any supplemental indenture that adversely affects its rights. 43

ARTICLE X MISCELLANEOUS SECTION 10.1 Trust Indenture Act Controls. ---------------------------- If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required or deemed to be included in this Indenture by the TIA, such required or deemed provision shall control. SECTION 10.2 Notices. ------- Any notice or communication by the Company or the Trustee to the other is duly given if in writing and delivered in person or mailed by first-class mail: if to the Company: Mattel, Inc. 333 Continental Boulevard El Segundo, California 90245-5012 Attention: Ned Mansour, President, Mattel USA if to the Trustee: Chemical Trust Company of California 50 California Street, 10th Floor San Francisco, California 94111 Attention: Paula Oswald, Assistant Vice President The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication to a Securityholder shall be mailed by first-class mail to his address shown on the register kept by the Registrar and, if any Bearer Securities are outstanding, published in an Authorized Newspaper. Failure to mail a notice or communication to a Securityholder of any Series or any defect in it shall not affect its sufficiency with respect to other Securityholders of that or any other Series. If a notice or communication is mailed or published in the manner provided above, within the time prescribed, it is duly given, whether or not the Securityholder receives it. If the Company mails a notice or communication to Securityholders, it shall mail a copy to the Trustee and each Agent at the same time. 44

SECTION 10.3 Communication by Holders with Other Holders. ------------------------------------------- Securityholders of any Series may communicate pursuant to TIA (S) 312(b) with other Securityholders of that Series or any other Series with respect to their rights under this Indenture or the Securities of that Series or all Series. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA (S) 312(c). SECTION 10.4 Certificate and Opinion as to Conditions Precedent. -------------------------------------------------- Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 10.5 Statements Required in Certificate or Opinion. --------------------------------------------- Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S) 314(e) and shall include: (a) a statement that the person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. SECTION 10.6 Rules by Trustee and Agents. --------------------------- The Trustee may make reasonable rules for action by or a meeting of Securityholders of one or more Series. Any Agent may make reasonable rules and set reasonable requirements for its functions. 45

SECTION 10.7 Legal Holidays. -------------- Unless otherwise provided by Board Resolution or supplemental indenture hereto for a particular Series, a "Legal Holiday" is a Saturday, a Sunday, or a day on which banking institutions are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 10.8 No Recourse Against Others. -------------------------- A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. SECTION 10.9 Counterparts. ------------ This Indenture may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 10.10 Governing Laws. -------------- THE INTERNAL LAWS OF THE STATE OF CALIFORNIA SHALL GOVERN THIS INDENTURE AND THE SECURITIES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISION THEREOF. SECTION 10.11 No Adverse Interpretation of Other Agreements. --------------------------------------------- This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 10.12 Successors. ---------- All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 10.13 Severability. ------------ In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 46

SECTION 10.14 Table of Contents, Headings, Etc. -------------------------------- The Table of Contents, Cross-Reference Table, and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 10.15 Securities in a Foreign Currency or in ECU. ------------------------------------------ Unless otherwise specified in an Officers' Certificate delivered pursuant to Section 2.2 of this Indenture with respect to a particular Series of Securities, whenever for purposes of this Indenture any action may be taken by the Holders of a specified percentage in aggregate principal amount of Securities of all Series or all Series affected by a particular action at the time outstanding and, at such time, there are outstanding Securities of any Series which are denominated in a coin or currency other than Dollars (including ECUs), then the principal amount of Securities of such Series which shall be deemed to be outstanding for the purpose of taking such action shall be that amount of Dollars that could be obtained for such amount at the Market Exchange Rate at such time. For purposes of this Section 10.15, "Market Exchange Rate" shall mean the noon Dollar buying rate in New York City for cable transfers of that currency as published by the Federal Reserve Bank of New York; provided, however, in -------- ------- the case of ECUs, Market Exchange Rate shall mean the rate of exchange determined by the Commission of the European Union (or any successor thereto) as published in the Official Journal of the European Union (such publication or any successor publication, the "Journal"). If such Market Exchange Rate is not available for any reason with respect to such currency, the Trustee shall use, in its sole discretion and without liability on its part, such quotation of the Federal Reserve Bank of New York or, in the case of ECUs, the rate of exchange as published in the Journal, as of the most recent available date, or quotations or, in the case of ECUs, rates of exchange from one or more major banks in The City of New York or in the country of issue of the currency in question or, in the case of ECUs, in Luxemburg or such other quotations or, in the case of ECUs, rates of exchange as the Trustee, upon consultation with the Company, shall deem appropriate. The provisions of this paragraph shall apply in determining the equivalent principal amount in respect of Securities of a Series denominated in currency other than Dollars in connection with any action taken by Holders of Securities pursuant to the terms of this Indenture. All decisions and determinations of the Trustee regarding the Market Exchange Rate or any alternative determination provided for in the preceding paragraph shall be in its sole discretion and shall, in the absence of manifest error, be conclusive to the extent permitted by law for all purposes and irrevocably binding upon the Company and all Holders. SECTION 10.16 Judgment Currency. ----------------- The Company agrees, to the fullest extent that it may effectively do so under applicable law, that (a) if for the purpose of obtaining judgment in any court it is necessary to convert the sum due in respect of the principal of or interest or other amount on the Securities of any Series (the "Required Currency") into a currency in which a judgment will be rendered (the "Judgment Currency"), the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Trustee could purchase in The City of New York the 47

Required Currency with the Judgment Currency on the day on which final unappealable judgment is entered, unless such day is not a New York Banking Day, then, to the extent permitted by applicable law, the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Trustee could purchase in The City of New York the Required Currency with the Judgment Currency on the New York Banking Day preceding the day on which final unappealable judgment is entered and (b) its obligations under this Indenture to take payments in the Required Currency (i) shall not be discharged or satisfied by any tender, any recovery pursuant to any judgment (whether or not entered in accordance with subsection (a)), in any currency other than the Required Currency, except to the extent that such tender or recovery shall result in the actual receipt, by the payee, of the full amount of the Required Currency expressed to be payable in respect of such payments, (ii) shall be enforceable as an alternative or additional cause of action for the purpose of recovering in the Required Currency the amount, if any, by which such actual receipt shall fall short of the full amount of the Required Currency so expressed to be payable, and (iii) shall not be affected by judgment being obtained for any other sum due under this Indenture. For purposes of the foregoing, "New York Banking Day" means any day except a Saturday, Sunday or a legal holiday in The City of New York on which banking institutions are authorized or required by law, regulation or executive order to close. ARTICLE XI SINKING FUNDS SECTION 11.1 Applicability of Article. ------------------------ The provisions of this Article shall be applicable to any sinking fund for the retirement of the Securities of a Series, except as otherwise permitted or required by any form of Security of such Series issued pursuant to this Indenture. The minimum amount of any sinking fund payment provided for by the terms of the Securities of any Series is herein referred to as a "mandatory sinking fund payment" and any other amount provided for by the terms of Securities of such Series is herein referred to as an "optional sinking fund payment." If provided for by the terms of Securities of any Series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 11.2. Each sinking fund payment shall be applied to the redemption of Securities of any Series as provided for by the terms of the Securities of such Series. SECTION 11.2 Satisfaction of Sinking Fund Payments with Securities. ----------------------------------------------------- The Company may, in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such Series to be made pursuant to the terms of such Securities (1) deliver outstanding Securities of such Series to which such sinking fund payment is applicable (other than any of such Securities previously called for mandatory sinking fund redemption) and (2) apply as credit Securities of such Series to which such sinking fund payment is applicable and which have been redeemed either at the election of the Company pursuant to the terms of such Series of Securities (except pursuant to any mandatory sinking fund) or through the application of permitted optional sinking fund payments or other optional 48

redemptions pursuant to the terms of such Securities, provided that such Securities have not been previously so credited. Such Securities shall be received by the Trustee, together with an Officers' Certificate with respect thereto, not later than 15 days prior to the date on which the Trustee begins the process of selecting Securities for redemption, and shall be credited for such purpose by the Trustee at the price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. If as a result of the delivery or credit of Securities in lieu of cash payments pursuant to this Section 11.2, the principal amount of Securities of such Series to be redeemed in order to exhaust the aforesaid cash payment shall be less than $100,000, the Trustee need not call Securities of such Series for redemption, except upon receipt of a Company Order that such action be taken, and such cash payment shall be held by the Trustee or a Paying Agent and applied to the next succeeding sinking fund payment, provided, however, that the Trustee or such Paying Agent shall from time to --------- -------- time upon receipt of a Company Order pay over and deliver to the Company any cash payment so being held by the Trustee or such Paying Agent upon delivery by the Company to the Trustee of Securities of that Series purchased by the Company having an unpaid principal amount equal to the cash payment required to be released to the Company. SECTION 11.3 Redemption of Securities for Sinking Fund. ----------------------------------------- Not less than 60 days (unless otherwise indicated in the Board Resolution or Officers' Certificate or supplemental indenture in respect of a particular Series of Securities) prior to each sinking fund payment date for any Series of Securities, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing mandatory sinking fund payment for that Series pursuant to the terms of that Series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting of Securities of that Series pursuant to Section 11.2, and the optional amount, if any, to be added in cash to the next ensuing mandatory sinking fund payment, and the Company shall thereupon be obligated to pay the amount therein specified. Not less than 45 days (unless otherwise indicated in the Board Resolution or Officers' Certificate or supplemental indenture in respect of a particular Series of Securities) before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 3.2 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 3.3. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 3.4, 3.5 and 3.6. 49

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. MATTEL, INC. (SEAL) By: /s/ WILLIAM STAVRO --------------------------- William Stavro Attest: Senior Vice President and Treasurer CHEMICAL TRUST COMPANY OF CALIFORNIA By: /s/ HANS H. HELLEY --------------------------- Hans H. Helley Assistant Vice President 50

EXHIBIT 10.0 =============================================================================== Amended and Restated Credit Agreement Dated as of March 20, 2002 among MATTEL, INC., as Borrower BANK OF AMERICA, N.A., as Administrative Agent and The Financial Institutions Party Hereto BANC OF AMERICA SECURITIES LLC, as Sole Lead Arranger and Sole Book Manager CITICORP USA, INC., and FLEET NATIONAL BANK, as Syndication Agents SOCIETE GENERALE and BNP PARIBAS, as Documentation Agents ===============================================================================

TABLE OF CONTENTS Section Page SECTION 1. DEFINITIONS........................................................1 1.01 Certain Defined Terms...........................................1 1.02 Other Definitional Provisions..................................14 SECTION 2. THE COMMITMENTS...................................................14 2.01 The Aggregate Facilities Commitment............................14 2.02 Loan Accounts and Notes........................................15 2.03 Borrowing Procedure............................................15 2.04 Conversion and Continuation Elections..........................16 2.05 Reduction or Termination of Aggregate Facilities Commitment....17 2.06 Voluntary Prepayments..........................................17 2.07 Repayment of Loans.............................................18 2.08 Interest on the Loans..........................................18 2.09 Fees...........................................................18 2.10 Calculation of Interest and Fees...............................19 2.11 Payments by the Company........................................19 2.12 Payments by the Lenders to the Administrative Agent............20 2.13 Sharing of Payments, Etc.......................................21 SECTION 3. PAYMENTS IN GENERAL...............................................21 3.01 Taxes..........................................................21 3.02 Capital Adequacy...............................................23 3.03 Illegality.....................................................23 3.04 Increased Costs and Reduction of Return........................24 3.05 Funding Losses.................................................24 3.06 Inability to Determine Rates...................................25 3.07 Survival.......................................................25 SECTION 4. CONDITIONS PRECEDENT..............................................25 4.01 Conditions to Effectiveness....................................25 4.02 Conditions to All Loans........................................27 SECTION 5. REPRESENTATIONS AND WARRANTIES....................................27 5.01 Organization and Powers........................................27 5.02 Good Standing..................................................28 5.03 Material Subsidiaries..........................................28 5.04 Authorization of Borrowing.....................................28 5.05 No Conflict....................................................28 5.06 Governmental Consents..........................................28 5.07 Binding Obligation.............................................28 5.08 Financial Condition............................................29 5.09 Changes, Etc...................................................29 5.10 Title to Properties............................................29 5.11 Litigation; Adverse Facts......................................29 5.12 Payment of Taxes...............................................30 5.13 Agreements.....................................................30 5.14 Performance....................................................30 5.15 Governmental Regulation........................................30 - i - Mattel, Inc. Amended and Restated Credit Agreement

5.16 Employee Benefit Plans.........................................30 5.17 Environmental Matters..........................................30 5.18 Disclosure.....................................................30 5.19 Subordination Agreements.......................................31 SECTION 6. AFFIRMATIVE COVENANTS.............................................31 6.01 Financial Statements...........................................31 6.02 Certificates; Other Information................................32 6.03 Notices........................................................33 6.04 Corporate Existence, etc.......................................34 6.05 Payment of Taxes and Claims; Tax Consolidation.................34 6.06 Maintenance of Properties; Insurance...........................34 6.07 Inspection of Property and Books and Records...................35 6.08 Use of Proceeds of Loans.......................................35 6.09 Environmental Laws.............................................35 6.10 Subordination Agreements.......................................35 6.11 Compliance with Laws...........................................35 SECTION 7. NEGATIVE COVENANTS................................................35 7.01 Indebtedness...................................................36 7.02 Liens..........................................................36 7.03 Restriction on Fundamental Changes.............................36 7.04 Sale or Discount of Receivables................................37 7.05 Consolidated Funded Indebtedness to Total Capitalization.......37 7.06 Interest Coverage Ratio........................................37 7.07 ERISA..........................................................38 7.08 Margin Regulations.............................................38 7.09 Independence of Covenants......................................38 SECTION 8. EVENTS OF DEFAULT.................................................38 8.01 Events of Default..............................................38 8.02 Remedies.......................................................41 8.03 Rights Not Exclusive...........................................41 SECTION 9. THE ADMINISTRATIVE AGENT..........................................41 9.01 Appointment and Authorization..................................41 9.02 Delegation of Duties...........................................41 9.03 Liability of Administrative Agent..............................41 9.04 Reliance by Administrative Agent...............................42 9.05 Notice of Default..............................................42 9.06 Credit Decision................................................43 9.07 Indemnification................................................43 9.08 Administrative Agent in Individual Capacity....................44 9.09 Successor Administrative Agent.................................44 9.10 Other Agents; Lead Managers....................................44 SECTION 10. MISCELLANEOUS................................................ ...45 10.01 Amendments and Waivers.........................................45 10.02 Notices and Other Communications; Facsimile Copies.............46 10.03 Failure or Indulgence Not Waiver; Remedies Cumulative..........47 10.04 Fees and Expenses..............................................47 10.05 Indemnity......................................................47 10.06 Set Off........................................................48 - ii - Mattel, Inc. Amended and Restated Credit Agreement

10.07 Survival of Warranties and of Certain Agreements...............48 10.08 Successors and Assigns.........................................49 10.09 Severability...................................................51 10.10 Obligations Several............................................52 10.11 Certain Changes................................................52 10.12 Headings.......................................................52 10.13 Counterparts...................................................52 10.14 Integration....................................................52 10.15 Tax Forms......................................................52 10.16 Applicable Law.................................................53 10.17 Waiver of Right to Trial by Jury...............................54 10.18 Amendment and Restatement......................................54 SIGNATURE PAGES S-1 EXHIBITS Form of: A Note B Notice of Borrowing C Notice of Conversion/Continuation D Officers' Certificate E Opinion of Assistant General Counsel or Senior 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 Assignment and Assumption SCHEDULES 1.01 Commitments and Pro Rata Shares 5.03 Material Subsidiaries of Company 5.11 Material Litigation 7.02 Certain Liens 10.02 Address and Notice Information - iii - Mattel, Inc. Amended and Restated Credit Agreement

MATTEL, INC. AMENDED AND RESTATED CREDIT AGREEMENT This AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is dated --------- as of March 20, 2002 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 "Lender" and collectively as ------ the "Lenders"), BANK OF AMERICA, N.A., as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), BANC OF AMERICA SECURITIES LLC, -------------------- as sole lead arranger and sole book manager (in such capacity, the "Arranger"), -------- CITICORP USA, INC., and FLEET NATIONAL BANK, as syndication agents (in such capacity, the "Syndication Agents") and SOCIETE GENERALE, and BNP PARIBAS as ------------------ documentation agents (in such capacity, the "Documentation Agents"). -------------------- PRELIMINARY STATEMENTS A. The Company, certain of the Lenders and the Administrative Agent are parties to that certain Credit Agreement dated as of March 10, 1995 (as amended) as amended and restated by a First Amended and Restated Credit Agreement dated as of March 13, 1997 (as amended) as further amended and restated by a Second Amended and Restated Credit Agreement dated as of March 11, 1998 (as amended) (as so amended and restated, the "Existing Multi-Year ------------------- Credit Agreement") pursuant to which the Lenders agreed to make certain credit - ---------------- facilities available to the Company in accordance with the terms of the Existing Multi-Year Credit Agreement. B. The Company, the Lenders and the Administrative Agent desire to further amend and restate the Existing Multi-Year 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 Lenders and the Administrative Agent agree to further amend and restate the Existing Multi-Year Credit Agreement in its entirety as follows: SECTION 1. DEFINITIONS 1.01 Certain Defined Terms. The following terms used in this Agreement shall have the following meanings: "Administrative Agent" has the meaning assigned to that term in the -------------------- introduction to this Agreement. "Administrative Agent's Office" means the Administrative Agent's ----------------------------- address and, as appropriate, account identified as such on Schedule 10.02, or -------------- such other address or account as the Administrative Agent may from time to time notify to the Company and the Lenders. - 1 - Mattel, Inc. Amended and Restated Credit Agreement

"Administrative Agent-Related Persons" means Administrative Agent and ------------------------------------ any successor administrative agent arising under Section 9.09, 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. "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. "Aggregate Facilities Commitment" means the combined Commitments of all ------------------------------- the Lenders and is the amount set forth opposite "Total" under "Aggregate Facilities Commitments" on Schedule 1.01, as such amount may be reduced from ------------- time to time in accordance with this Agreement. "Agreement" means this Credit Agreement, as it may hereafter be --------- amended, supplemented, restated or otherwise modified from time to time. - 2 - Mattel, Inc. Amended and Restated Credit Agreement

"Applicable Amount" means the commitment fee, utilization fee or the ----------------- margin applicable to 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 Fitch on the Company's senior unsecured long-term debt: Utilization Fee --------------------------------------- Senior Unsecured Long-Term Debt Eurodollar Rate When Loans exceed When Loans exceed Ratings Loans Commitment Fee 33%/1/ 66%/1/ - ------------------------------------------------------------------------------------------------------------------ A or higher by S&P 30.0 10.0 12.5 25.0 A2 or higher by Moody's A or higher by Fitch - ------------------------------------------------------------------------------------------------------------------ A- by S&P A3 by Moody's 50.0 12.5 12.5 25.0 A- by Fitch - ------------------------------------------------------------------------------------------------------------------ BBB+ by S&P 62.5 15.0 12.5 25.0 Baa1 by Moody's BBB+ by Fitch - ------------------------------------------------------------------------------------------------------------------ BBB by S&P Baa2 by Moody's 75.0 17.5 12.5 25.0 BBB by Fitch - ------------------------------------------------------------------------------------------------------------------ BBB- by S&P Baa3 by Moody's 112.5 22.5 12.5 25.0 BBB- by Fitch - ------------------------------------------------------------------------------------------------------------------ None of above criteria satisfied 125.0 30.0 12.5 25.0 - ------------------------------------------------------------------------------------------------------------------ Any change in the commitment fee, utilization fee or the margin applicable to 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. "Arranger" means Banc of America Securities LLC, in its capacity as -------- sole lead arranger and sole book manager. "Availability Period" means the period from the Effective Date to but ------------------- excluding the Termination Date. "Assignment and Assumption" means an Assignment and Assumption ------------------------- substantially in the form of Exhibit H. --------- ------------------------- /1/The specified utilization fee applicable when the aggregate principal amount of outstanding Loans exceeds the indicated percentage of an amount equal to (i) the Aggregate Facilities Commitment less (ii) the ---- aggregate outstanding amount of the Purchasers' Investments. - 3 - Mattel, Inc. Amended and Restated Credit Agreement

"Bank of America" means Bank of America, N.A. --------------- "Base Rate" means for any day a fluctuating rate per annum equal to the --------- higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its "prime rate." Such rate is a rate set by Bank of America based upon 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, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loans" means Loans made by the Lenders 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 are authorized to close under the laws of, or are in fact closed in, California or the state where the Administrative Agent's Office is located (which, as of the date hereof, is California) and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar 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 of Control" means, with respect to any Person, an event or ----------------- series of events by which: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire (such right, an "option ------ right"), whether such right is exercisable immediately or only after ----- the passage of time), directly or indirectly, of 33% or more of the equity securities of such Person entitled to vote for members of the board of directors or equivalent governing body of such Person on a partially-diluted basis (i.e., taking into account all such securities --- that such person or group has the right to acquire pursuant to any option right); or - 4 - Mattel, Inc. Amended and Restated Credit Agreement

(b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of such Person cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body. "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, as to each Lender, (a) its obligation to make Loans ---------- to the Company pursuant to Section 2.01 and (b) its Purchaser Commitment under ------------ the Receivables Purchase Agreement, in an aggregate amount equal to the amount set forth opposite such Lender's name on Schedule 1.01, as such amount may be ------------- reduced from time to time in accordance with this Agreement. "Company" means Mattel, Inc., a Delaware corporation. ------- "Company Party" means the Company, Mattel Sales, Fisher-Price and ------------- Mattel Factoring, Inc. "Consolidated Funded Indebtedness" means, at any date of determination, -------------------------------- for the Company and its Subsidiaries on a consolidated basis, the sum of (a) all obligations and liabilities, whether current or long-term, for borrowed money, (b) that portion of obligations with respect to Capital Leases which is capitalized on the consolidated balance sheet of the Company and its Subsidiaries, and (c) all guaranties of unconsolidated funded obligations for borrowed money, all determined in conformity with GAAP. "Consolidated Net Income" for any period, means the net income (or ----------------------- loss) of the Company and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP. "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 - 5 - Mattel, Inc. Amended and Restated Credit Agreement

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 written 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. "Default Rate" means an interest rate equal to the Base Rate plus 2% ------------ ---- per annum; provided, however, that with respect to the principal of a Eurodollar -------- ------- Rate Loan prior to the end of the Interest Period therefor, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Amount) otherwise applicable to such Loan plus 2% per annum, in each case to the fullest extent permitted by applicable laws. "Defaulting Lender" means any Lender that (a) has failed to fund any ----------------- portion of its Loans hereunder or Purchasers' Investment under the Receivables Purchase Agreement required to be funded by it within one Business Day of the date required to be funded by it, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder or under the Receivables Purchase Agreement within one Business Day of the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent by the Federal Deposit Insurance Company, the Comptroller of the Currency or the Federal Reserve Board or become the subject of a bankruptcy or insolvency proceeding. "Dollars" means lawful money of the United States of America. ------- "Domestic Subsidiary" means a Subsidiary of the Company that is ------------------- incorporated in a jurisdiction of the United States of America. "Effective Date" means the date on or after March 20, 2002 on which all -------------- the conditions in Section 4.01 are satisfied or waived. ------------ - 6 - Mattel, Inc. Amended and Restated Credit Agreement

"Eligible Assignee" has the meaning specified in Section 10.08(f). ----------------- ---------------- "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 2.08(a). --------------- "Eurodollar Rate" means for any Interest Period with respect to any --------------- Eurodollar Rate Loan, a rate per annum determined by Administrative Agent pursuant to the following formula: Eurodollar Base Rate Eurodollar Rate = -------------------------------------------- 1.00 - Eurodollar Reserve Percentage Where, "Eurodollar Base Rate" means, for such Interest Period: -------------------- (a) the rate per annum equal to the rate determined by Administrative Agent to be the offered rate that appears on the page of the Telerate screen that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (b) in the event the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or - 7 - Mattel, Inc. Amended and Restated Credit Agreement

(c) in the event the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by Administrative Agent as the rate of interest (rounded upward to the next 1/100th of 1%) at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by Administrative Agent (or its Affiliate) in its capacity as a Lender and with a term equivalent to such Interest Period would be offered by Bank of America's London Branch to major banks in the offshore Dollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. "Eurodollar Reserve Percentage" means, for any day during any ----------------------------- Interest Period, the reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the Board of Governors of the Federal Reserve System 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"). The Eurodollar Rate for each outstanding Eurodollar Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage. The determination of the Eurodollar Reserve Percentage and the Eurodollar Base Rate by Administrative Agent shall be conclusive in the absence of manifest error. "Event of Default" means any of the events set forth in Section 8.01. ---------------- ------------ "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 Multi-Year Credit Agreement" has the meaning set forth in ------------------------------------ Recital A hereto. "Existing 364-Day Credit Agreement" means that certain Credit Agreement --------------------------------- (364-Day Facility) dated as of March 29, 2001, among the Company, the banks party thereto and Bank of America, N.A. as agent. "Federal Funds Rate" means, for any day, the rate per annum equal to ------------------ the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the -------- Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Bank of America on such day on such transactions as determined by the Administrative Agent. "Federal Reserve Board" means the Board of Governors of the Federal --------------------- Reserve System or any successor thereof. - 8 - Mattel, Inc. Amended and Restated Credit Agreement

"Fisher-Price" means Fisher-Price, Inc., a Delaware corporation. ------------ "Fisher-Price Guaranty" means the 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 Amended and Restated ------------------------------------ Fisher-Price Subordination Agreement substantially in the form of Exhibit G-1 ----------- attached hereto signed by the Company and certain Affiliates of the Company with respect to which Fisher-Price has material outstanding obligations, as it may hereafter be amended, supplemented, restated or otherwise modified from time to time. "Fitch" means Fitch ICBA or any successor thereto. ----- "Foreign Lender" has the meaning specified in Section 10.15(a). -------------- ---------------- "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 any ------------------- foreign government 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, any foreign government 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. - 9 - Mattel, Inc. Amended and Restated Credit Agreement

"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 Business 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, 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: -------- (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. "Lender" has the meaning assigned to that term in the introduction to ------ this Agreement, together with any other financial institutions that become a party hereto as a "Lender" pursuant to Section 10.08. ------------- "Lending Office" means, with respect to any Lender, the office or -------------- offices of the Lender specified as its "Lending Office" under its name on Schedule 10.02 hereto, or such other office or offices of the Lender as it may - -------------- from time to time specify to the Company and the Administrative 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 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 herewith or therewith, but shall not include the Transaction Documents. - 10 - Mattel, Inc. Amended and Restated Credit Agreement

"Loans" has the meaning set forth in Section 2.01. ----- ------------ "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 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 Lenders to enforce the Obligations. "Material Subsidiary" means Mattel Sales, Fisher-Price, or any other ------------------- Subsidiary of the Company which meets any of the following conditions: (a) the Company's and its Subsidiaries' investments in, and advances to, the Subsidiary exceed 10 percent of the total assets of the Company and its Subsidiaries consolidated as of the end of the most recently completed fiscal year (for a proposed business combination to be accounted for as a pooling of interest, this condition is also met when the number of common shares exchanged or to be exchanged by the Company exceeds 10 percent of its total common shares outstanding at the date the combination is initiated); or (b) the Company and its other Subsidiaries' proportionate share of the total assets (after intercompany eliminations) of the Subsidiary exceeds 10 percent of the total assets of the Company and its Subsidiaries consolidated as of the end of the most recently completed fiscal year; or (c) the Company and its other Subsidiaries' equity in the income from continuing operations before income taxes, extraordinary items and cumulative effect of a change in accounting principles of the Subsidiary exceeds 10 percent of such income of the Company and its Subsidiaries consolidated for the most recently completed fiscal year. For purpose of meeting the prescribed income test the following guidance should be applied: (i) When a loss has been incurred by either the Company and its Subsidiaries consolidated or the tested Subsidiary, but not both, the equity in the income or loss of the tested Subsidiary should be excluded from the income of the Company and its Subsidiaries consolidated for purposes of the computation. (ii) If income of the Company and its Subsidiaries consolidated for the most recent fiscal year is at least 10 percent lower than the average of the income for the last five years, such average income should be substituted for purposes of the computation. Any loss years should be omitted for purposes of computing average income. (iii) Where the test involves combined entities, as in the case of determining whether summarized financial data should be presented, entities reporting losses shall not be aggregated with entities reporting income. "Mattel Sales" means Mattel Sales Corp., a California corporation. ------------ - 11 - Mattel, Inc. Amended and Restated Credit Agreement

"Mattel Sales Guaranty" means the 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 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. or any successor ------- thereto. "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. "Non-Priority Indebtedness" means Indebtedness which (a) is not senior ------------------------- to the Obligations, (b) does not have any priority of payment over the Obligations or (c) is not secured by Liens on any of the Company's or any Subsidiary's assets. "Note" means a promissory note of the Company payable to the order of a ---- Lender substantially in the form of Exhibit A hereto, evidencing the Loans made --------- by such Lender 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 ------- 2.03(a). - ------- "Notice of Conversion/Continuation" means a notice given by the Company --------------------------------- to the Administrative Agent pursuant to Section 2.04, in substantially the form ------------ of Exhibit C hereto. --------- "Obligations" means (a) all obligations of every nature of the Company, ----------- Fisher-Price and Mattel Sales from time to time owed to the Administrative Agent, the Lenders or any other Person required to be indemnified hereunder, or any of them, under any Loan Document and (b) all obligations of every nature of any Seller Party (as defined in the Receivables Purchase Agreement) from time to time owed to the Administrative Agent, the Purchasers or any other Person required to be indemnified thereunder, or any of them, under any Transaction 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 Lenders by the Company pursuant to Section 6.02(a). --------------- "Other Permitted Accounts Receivable Financing Facility" means a ------------------------------------------------------ financing arrangement (other than the Receivables Purchase Agreement and the Purchase and Sale Agreement) entered into in the ordinary course of business under which accounts receivable of - 12 - Mattel, Inc. Amended and Restated Credit Agreement

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 the Company or any of its Subsidiaries 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 10.08(d). ----------- ---------------- "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. "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 Lender the percentage set -------------- forth opposite such Lender's name on Schedule 1.01 hereto. Each Lender's Pro ------------- Rata Share shall at all times be equal to its Percentage as a Purchaser under the Receivables Purchase Agreement. "Purchase and Sale Agreement" means the First Amended and Restated --------------------------- Purchase and Sale Agreement dated as of even date herewith, among the sellers party thereto, the Company, as servicer and guarantor, and Mattel Factoring, Inc., as the buyer thereunder, as it may be amended, supplemented, restated or otherwise modified from time to time. "Purchasers" has the meaning set forth in the Receivables Purchase ---------- Agreement. "Purchaser Commitment" means, for each Lender, the amount set forth for -------------------- each Lender under "Purchaser Commitment" on Schedule 1.01, as such amount may be ------------- reduced from time to time in accordance with this Agreement and the Receivables Purchase Agreement. The Purchaser Commitment is part of, and not in addition to, the Commitment. "Purchasers' Investment" has the meaning set forth in the Receivables ---------------------- Purchase Agreement. "Purchasers' Investment Limit" has the meaning set forth in the ---------------------------- Receivables Purchase Agreement and shall be equal to the lesser of the Aggregate Facilities Commitment and $300,000,000, as such amount may be reduced pursuant to the Receivables Purchase Agreement. The Purchasers' Investment Limit is part of, and not in addition to, the Aggregate Facilities Commitment. - 13 - Mattel, Inc. Amended and Restated Credit Agreement

"Receivables Purchase Agreement" means the First Amended and Restated ------------------------------ Receivables Purchase Agreement dated as of even date herewith, among Mattel Factoring, Inc., as transferor, the Company, servicer, the Purchasers and the Administrative Agent, as it may be amended, supplemented, restated or otherwise modified from time to time. "Requisite Lenders" means, as of any date of determination, Lenders ----------------- having at least 66-2/3% of the Aggregate Facilities Commitment or, if the Aggregate Facilities Commitment has been terminated, Lenders holding in the aggregate at least 66-2/3% of all Loans and Purchasers' Investment; provided -------- that the Commitment of, and the outstanding principal amount of any Loans and portion of Purchasers' Investment held by any Defaulting Lender shall be excluded for purposes of making a determination of Requisite Lenders. "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. "S&P" means Standard & Poor's Ratings Services, a division of The --- McGraw-Hill Companies, Inc., or any successor thereto. "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 (a) March 31, 2005, or (b) such earlier date ---------------- upon which the Commitments are terminated in accordance with the terms hereof. At no time shall the Termination Date be earlier than the Facility Termination Date under and as defined in the Receivables Purchase Agreement. "Transaction Documents" has the meaning set forth in the Receivables --------------------- Purchase Agreement. 1.02 Other Definitional Provisions. References to "Sections" shall be to Sections of this Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.01 may, unless the context otherwise requires, ------------ be used in the singular or the plural depending on the reference. SECTION 2. THE COMMITMENTS 2.01 The Aggregate Facilities Commitment. Each Lender hereby severally agrees during the Availability Period (a) to make advances to the Company ("Loans") on the terms and conditions set forth in this Agreement and ----- (b) to purchase receivables on the terms and conditions set forth in the Receivables Purchase Agreement; provided, however, that: (i) the aggregate -------- ------- outstanding amount of all Loans and Purchasers' Investment shall not exceed the Aggregate Facilities Commitment; (ii) the aggregate outstanding Purchasers' Investments shall not exceed the Purchasers' Investment Limit; (iii) the aggregate outstanding principal amount of the Loans of any Lender, plus such ---- Lender's Percentage of the aggregate outstanding amount of - 14 - Mattel, Inc. Amended and Restated Credit Agreement

Purchasers' Investment in its capacity as a Purchaser under the Receivables Purchase Agreement shall not exceed such Lender's Commitment; (iv) each Lender's Percentage of the aggregate outstanding amount of Purchasers' Investment in its capacity as a Purchaser under the Receivables Purchase Agreement shall not exceed its Purchaser Commitment; and (v) each Lender's Pro Rata Share hereunder shall at all times be equal to such Lender's Percentage under, and as defined in, the Receivables Purchase Agreement. Within the limits of each Lender's Commitment, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.01, prepay pursuant to ------------ Section 2.06 and reborrow pursuant to this Section 2.01. - ------------ ------------ 2.02 LOAN ACCOUNTS AND NOTES. (a) Subject to Section 2.02(b), the Loans made by each Lender --------------- shall be evidenced by one or more loan accounts maintained by such Lender in the ordinary course of business. The loan accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lenders to the Company and the interest and payments thereon. Any failure to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay any amount owing with respect to the Loans. (b) Upon the written request of any Lender made through the Administrative Agent, the Loans made by such Lender may be evidenced by one or more Notes, instead of loan accounts. Each such Lender 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 Lender is irrevocably authorized by the Company to endorse the schedules annexed to its Note(s) and each Lender's record shall be conclusive absent manifest error; provided, however, that the failure of a -------- ------- Lender 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 Lender. 2.03 BORROWING PROCEDURE. (a) Whenever the Company desires to borrow hereunder, it shall deliver irrevocable telephonic notice to the Administrative Agent followed immediately by written notice in the form of a Notice of Borrowing, which telephonic notice must be received by the Administrative Agent no later than (i) 8:00 a.m. (California time) on the proposed Funding Date in the case of Base Rate Loans and (ii) 9:00 a.m. (California 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. - 15 - Mattel, Inc. Amended and Restated Credit Agreement

(b) Promptly (and normally within two hours) after receipt of a Notice of Borrowing (or telephone notice in lieu thereof), the Administrative Agent shall notify each Lender of the proposed borrowing. Each Lender shall make available to the Administrative 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 the Administrative Agent's Office no later than 11:00 a.m. (California time) on the Funding Date. Upon satisfaction of the conditions set forth in Section 4.02, the Administrative Agent shall ------------ make available to the Company on such Funding Date the aggregate of the amounts (if any) so made available by the Lenders by causing an amount of same day funds equal to such aggregate amount (if any) received by the Administrative Agent to be credited to the account of the Company at the Administrative Agent's Office. To the extent that Eurodollar Rate Loans made by the Lenders mature on any Funding Date, the Lenders 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. 2.04 CONVERSION AND CONTINUATION ELECTIONS. (a) The Company may upon irrevocable written notice to the Administrative 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 Administrative Agent followed immediately by written notice in the form of a Notice of Conversion/ Continuation, which telephonic notice must be received by the Administrative Agent prior to (i) 9:00 a.m. (California 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. (California 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. - 16 - Mattel, Inc. Amended and Restated Credit Agreement

(d) Upon receipt of a Notice of Conversion/Continuation, the Administrative Agent will promptly notify each Lender thereof, or, if no timely notice is provided, the Administrative Agent will promptly notify each Lender 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 Lender. (e) Unless the Requisite Lenders 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. 2.05 REDUCTION OR TERMINATION OF AGGREGATE FACILITIES COMMITMENT. (a) The Company may, upon notice to the Administrative Agent, terminate the Aggregate Facilities Commitment, or permanently reduce the Aggregate Facilities Commitment to an amount not less than the then aggregate outstanding amount of all Loans and Purchasers' Investment; provided that (i) -------- any such notice shall be received by the Administrative Agent not later than 8:00 a.m. (California time) three Business Days prior to the date of termination or reduction, and (ii) any such partial reduction shall be in an aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess thereof. The Administrative Agent shall promptly notify the Lenders of any such notice of reduction or termination of the Aggregate Facilities Commitment. Once reduced in accordance with this Section, the Aggregate Facilities Commitment may not be increased. Any reduction of the Aggregate Facilities Commitment shall be applied to the Commitment of each Lender according to its Pro Rata Share. All commitment and utilization fees accrued until the effective date of any termination of the Aggregate Facilities Commitment shall be paid on the effective date of such termination. (b) Any reduction or termination of the Purchasers' Investment Limit pursuant to the Receivables Purchase Agreement shall automatically and concurrently reduce the Purchasers' Investment Limit (but not the Aggregate Facilities Commitment) for purposes of this Agreement to an amount equal to such Purchasers' Investment Limit, as so reduced, or terminate the Purchasers' Investment Limit, as the case may be. 2.06 Voluntary Prepayments. The Company may, upon not less than one Business Days' prior written or telephonic notice confirmed in writing to the Administrative 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 Administrative Agent (in the case of a prepayment of a Eurodollar Rate Loan) (which notice the Administrative Agent will promptly transmit by telecopy, telex or telephone to each Lender), 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 - 17 - Mattel, Inc. Amended and Restated Credit Agreement

obligated to reimburse the Lenders in respect thereof pursuant to Section 3.05. ------------ 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 Administrative 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. 2.07 Repayment of Loans. Each Loan shall mature and the Company shall repay the unpaid principal amount of each Loan on the Termination Date. 2.08 INTEREST ON THE LOANS. (a) Subject to Section 2.08(c), the Loans shall bear interest on --------------- the unpaid principal amount thereof from the Funding Date until paid in full at a rate per annum equal to (i) with respect to Eurodollar Rate Loans, the Eurodollar Rate plus the Applicable Amount for Eurodollar Rate Loans or (ii) ---- with respect to Base Rate Loans the Base Rate plus the Applicable Amount for Base Rate Loans. (b) Subject to Section 2.08(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 equal to the Default Rate. Furthermore, while any Event of Default exists or after acceleration, the Company shall pay interest on the principal amount of all outstanding Loans at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Governmental Rule. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand. Notwithstanding the foregoing, interest shall not commence accruing at the Default Rate until the Administrative Agent, at the direction of the Requisite Lenders, has notified the Company thereof; provided, however, -------- ------- that upon the occurrence of an Event of Default specified in Section 8.01(f) or --------------- (g), the Default Rate shall thereupon automatically commence accruing and be - --- due and payable without further act of or demand by the Administrative Agent or any Lender. 2.09 FEES. (a) The Company agrees to pay a commitment fee equal to the Applicable Amount for the commitment fee on the daily actual unused portion of the Aggregate Facilities Commitment during the Availability Period. The Company shall pay the commitment fee to the Administrative Agent for distribution to each Lender in accordance with its Pro Rata Share. The commitment fee shall be calculated on the basis of a 360-day year and the actual number of days elapsed and shall be payable quarterly in arrears on the last Business Day of each calendar quarter, for all amounts accrued to such date, and on the Termination Date; provided that, in -------- - 18 - Mattel, Inc. Amended and Restated Credit Agreement

connection with any reduction or termination of the Aggregate Facilities Commitment pursuant to Section 2.05, the accrued fee calculated on the portion ------------ so terminated or reduced for the period ending on such date shall also be paid on the date of such reduction or termination. (b) The Company agrees to pay a utilization fee equal to the Applicable Amount therefor on the daily actual principal amount of all outstanding Loans on each day that the aggregate principal amount of outstanding Loans exceeds 33.00% or 66.00% of an amount equal to (i) the Aggregate Facilities Commitment less (ii) the aggregate outstanding amount of ---- the Purchasers' Investments. The Company shall pay the utilization fee to the Administrative Agent for distribution to each Lender in accordance with its Pro Rata Share. The utilization fee shall be calculated on the basis of a 360-day year and the actual number of days elapsed and shall be payable quarterly in arrears on the last Business Day of each calendar quarter, for all amounts accrued to such date, and on the Termination Date; provided that, in connection -------- with any reduction or termination of the Aggregate Facilities Commitment pursuant to Section 2.05, the accrued utilization 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. (c) The Company shall pay an arrangement fee to the Arranger for the Arranger's own account, and shall pay an agency fee to the Administrative Agent for the Administrative Agent's own account, in the amounts and at the times specified in the letter agreement, dated February 6, 2002 (the "Agent/Arranger Fee Letter"), among the Company, the Arranger and the ------------------------- Administrative Agent. Such fees shall be fully earned when paid and shall be nonrefundable for any reason whatsoever. (d) The Company shall pay to the Administrative Agent such fees as may from time to time be agreed upon between the Company and the Administrative 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 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 Administrative Agent pursuant hereto shall be conclusive and binding on the Company and the Lenders 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 in Dollars without setoff, counterclaim, recoupment or any other deduction, in same day - 19 - Mattel, Inc. Amended and Restated Credit Agreement

funds and delivered to the Administrative Agent at the Administrative Agent's Office for the account of the Lenders or the Administrative Agent not later than 11:00 a.m. (California time) on the date due. The Administrative Agent will promptly distribute to each Lender 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 Administrative Agent after that time shall be deemed to have been paid by the Company on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. (b) Subject to the provisions in the definition of "Interest Period", whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. (c) Unless the Administrative Agent shall have received notice from the Company prior to the date on which any payment is due to the Lenders hereunder that the Company will not make such payment in full as and when required hereunder, the Administrative Agent may assume that the Company has made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Company shall not have made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent on demand such amount distributed to such Lender, together with interest thereon for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate as in effect for each such day. 2.12 PAYMENTS BY THE LENDERS TO THE ADMINISTRATIVE AGENT. (a) Unless the Administrative Agent shall have received notice from a Lender on the Effective Date or, with respect to each borrowing after the Effective Date, by 12:00 noon (California time) one Business Day prior to the date of any proposed borrowing of Eurodollar Rate Loans, or by 10:00 a.m. (California time) on the date of any proposed borrowing of Base Rate Loans, that such Lender will not make available to the Administrative Agent as and when required hereunder for the account of the Company the amount of that Lender's Pro Rata Share of the borrowing, the Administrative Agent may assume that each Lender has made such amount available to the Administrative Agent in immediately available funds on the Funding Date and the Administrative 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 Lender shall not have made its full amount available to the Administrative Agent in immediately available funds and the Administrative Agent in such circumstances has made available to the Company such amount, that Lender shall on the next Business Day following the date of such borrowing make such amount available to the Administrative Agent, together with interest at the Federal Funds Rate for and determined as of each day during such period. A notice of the Administrative Agent submitted to any Lender 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 Administrative Agent shall constitute such Lender's Loan on the date of borrowing for all purposes of this Agreement. If such amount is not made available to the - 20 - Mattel, Inc. Amended and Restated Credit Agreement

Administrative Agent on the next Business Day following the date of such borrowing, the Administrative Agent shall notify the Company of such failure to fund and, upon demand by the Administrative Agent, the Company shall pay such amount to the Administrative Agent for the Administrative 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 Lender to make any Loan on any date of borrowing shall not relieve any other Lender of any obligation hereunder to make a Loan on the date of such borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any borrowing. 2.13 Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Lender 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 Lenders, such Lender shall forthwith (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them as shall be necessary to cause such purchasing Lender 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 Lender, such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender's Pro Rata Share (according to the proportion of (i) the amount of such paying Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Company agrees that any Lender so purchasing a participation from another Lender 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 Lender were the direct creditor of the Company in the amount of such participation. The Administrative 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 Lenders following any such purchases or repayments. SECTION 3. PAYMENTS IN GENERAL 3.01 TAXES. (a) Subject to Section 3.01(d) and Section 3.01(f), any and all --------------- --------------- payments by the Company to each Lender or the Administrative 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 Lender and the Administrative Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Lender's or the Administrative Agent's net income by the jurisdiction under the laws of which such Lender or the Administrative Agent, as the case may be, is organized or maintains a Lending Office or any political subdivision - 21 - Mattel, Inc. Amended and Restated Credit Agreement

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 3.01(f), the Company shall indemnify and --------------- hold harmless each Lender and the Administrative 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 3.01) paid by ------------ such Lender or the Administrative 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 Lender or the Administrative Agent makes written demand therefor. (d) If the Company shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Lender or the Administrative Agent, then, subject to Section 3.01(f): (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 3.01) such Lender or the Administrative 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 Administrative Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Administrative Agent. (f) The Company will not be required to pay any additional amounts in respect of Taxes pursuant to this Section 3.01 to any Lender for the account ------------ of any Lending Office of such Lender: (i) if the obligation to pay such additional amounts would not have arisen but for a failure by such Lender to comply with its obligations under Section 10.15 in respect of such Lending ------------- Office; or (ii) if such Lender shall have delivered to the Company the form(s) in respect of such Lending Office pursuant to Section 10.15, and such Lender ------------- 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(s). (g) If, at any time, the Company requests any Lender to deliver any forms or other documentation pursuant to Section 10.15, then the Company ------------- shall, on demand of such Lender through the Administrative Agent, reimburse such Lender for any costs and expenses (including - 22 - Mattel, Inc. Amended and Restated Credit Agreement

expenses of outside legal counsel and the allocated costs of in-house counsel) reasonably incurred by such Lender in the preparation or delivery of such forms or other documentation. (h) If the Company is required to pay additional amounts to any Lender or the Administrative Agent pursuant to Section 3.01(d), then such Lender --------------- 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 Lender is not otherwise disadvantageous to such Lender. (i) The agreements and obligations of the Company contained in this Section 3.01 shall survive the payment in full of all other Obligations. ------------ 3.02 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 Lender 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 Lender or any corporation controlling such Lender (a "Change in Law"), the result of which is to reduce the rate of return ------------- on such Lender's capital as a consequence of such commitments to a level below that which such Lender could have achieved but for such Change in Law, taking into consideration such Lender's policies with respect to capital adequacy, by an amount which such Lender deems to be material, the Lender shall deliver to the Company a statement of the amount necessary to compensate such Lender for the reduction in the rate of return on its capital attributable to such commitments (the "Capital Compensation Amount"). The Lender shall determine the --------------------------- Capital Compensation Amount in good faith, using reasonable attribution and averaging methods. The Lender 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 Lender ten Business Days after such notice is given. As soon as practicable after any Change in Law, each Lender seeking compensation under this Section shall submit to the Company estimates of the Capital Compensation Amounts that would be payable as a function of such Lender's commitments hereunder. 3.03 ILLEGALITY. (a) If any Lender shall determine that any Governmental Rule or any change therein or in the interpretation or administration there of has made it unlawful, or that any Governmental Person has asserted that it is unlawful, for any Lender or its Lending Office to make Eurodollar Rate Loans, then, on notice thereof by the Lender to the Company through the Administrative Agent, the obligation of the Lender to make Eurodollar Rate Loans shall be suspended until the Lender shall have notified the Administrative Agent and the Company that the circumstances giving rise to such determination no longer exists. - 23 - Mattel, Inc. Amended and Restated Credit Agreement

(b) If a Lender 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 Lender or its Lending Office to maintain any Eurodollar Rate Loan, the Company shall prepay all Eurodollar Rate Loans of the Lender then outstanding, together with interest accrued thereon, or convert all Eurodollar Rate Loans of the Lender then outstanding to Base Rate Loans pursuant to Section 2.04, either ------------ on the last day of the Interest Period thereof if the Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or promptly, if the Lender may not lawfully continue to maintain such Eurodollar Rate Loans, together with any amounts required to be paid in connection therewith pursuant to Section 3.05. ------------ (c) If the obligation of any Lender to make or maintain Eurodollar Rate Loans has been terminated, the Company may elect, by giving notice to the Lender through the Administrative Agent that all Loans which would otherwise be made by the Lender as Eurodollar Rate Loans shall be instead Base Rate Loans. (d) Before giving any notice to the Administrative Agent pursuant to this Section 3.03, the affected Lender 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 Lender, be illegal or otherwise disadvantageous to the Lender. 3.04 Increased Costs and Reduction of Return. If any Lender 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 Lender 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 Lender (with a copy of such demand to the Administrative Agent), pay to such Lender, additional amounts as are sufficient to compensate such Lender for such increased costs. Each Lender agrees to notify the Company of the occurrence of such an increased cost event promptly after obtaining knowledge thereof. 3.05 Funding Losses. The Company agrees to reimburse each Lender and to hold each Lender harmless from any loss or expense which the Lender 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 2.06; 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 Lenders under Section 3.04 and this Section 3.05, each ------------ ------------ Eurodollar Rate Loan made by a Lender (and each - 24 - Mattel, Inc. Amended and Restated Credit Agreement

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. 3.06 Inability to Determine Rates. If the Administrative Agent 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 Lenders advise the Administrative 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 Lenders of funding such Loan, the Administrative Agent will forthwith give notice of such determination to the Company and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans hereunder shall be suspended until the Administrative Agent upon the instruction of the Requisite Lenders 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 Lenders 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. 3.07 Survival. The agreements and obligations of the Company in this Section 3 shall survive the payment of all other Obligations. --------- SECTION 4. CONDITIONS PRECEDENT 4.01 Conditions to Effectiveness. The effectiveness of the Agreement is subject to satisfaction of the following conditions precedent: (a) The Company shall deliver to the Administrative Agent and Lenders (or to the Administrative Agent for the Lenders with sufficient originally executed copies for each Lender, except for any Notes): (i) This Agreement, duly executed and delivered by the Company, the Administrative Agent and all Lenders; (ii) A Note, duly executed and delivered by the Company, drawn to the order of each Lender requesting a Note, with appropriate insertions; (iii) The Mattel Sales Guaranty and the Fisher-Price Guaranty, duly executed and delivered by Mattel Sales and Fisher-Price, respectively; (iv) The Mattel Sales Subordination Agreement and the Fisher-Price Subordination Agreement duly executed and delivered by the Company and each - 25 - Mattel, Inc. Amended and Restated Credit Agreement

Affiliate of the Company to whom Mattel Sales or Fisher-Price owes any material outstanding obligations; (v) Copies of the resolutions of the board of directors or the executive committee of each Company Party approving and authorizing the execution, delivery and performance by such Company Party of each Loan Document to which it is a party, certified as of the Effective Date by the secretary or an assistant secretary of such Company Party; (vi) A certificate of the secretary or assistant secretary of each Company Party, certifying the names and true signatures of the officers of such Company Party authorized to execute and deliver the Loan Documents to which it is a party; (vii) The articles or certificate of incorporation or organization of each Company Party as in effect on the Effective Date, certified by the secretary of state of the state of its incorporation or formation as of a recent date, and the bylaws or operating agreement of each Company Party as in effect on the Effective Date, in each case, certified by the secretary or assistant secretary of such Company Party as of the Effective Date; (viii) A good standing certificate for each Company Party from the secretary of state of its state of incorporation or formation dated as of a recent date; (ix) Executed copies of one or more favorable written opinions of Christopher O'Brien, Esq., Assistant General Counsel of the Company, or a Senior Counsel of the Company, dated as of the Effective Date, substantially in the form of Exhibit E hereto --------- relating to the Company Parties and as to such other matters as the Administrative Agent and the Lenders may reasonably request; (x) A certificate signed by one of the officers authorized to deliver an Officers' Certificate certifying (A) that the conditions specified in Sections 4.01(c) and (d) have been ---------------- satisfied, (B) that there has been no event or circumstance since the date of the audited financial statements dated December 31, 2000 referred to in Section 5.08 which has a Material Adverse Effect; and ------------ (C) the current ratings on the Company's long-term unsecured Indebtedness by S&P, Moody's and Fitch; (xi) Evidence that all conditions precedent to the initial purchase under the Receivables Purchase Agreement have been, or concurrently herewith are being, satisfied or waived thereunder; and (xii) Evidence that the Existing 364-Day Credit Agreement is being terminated concurrently herewith. (b) The Company shall have paid all fees payable pursuant to Sections 2.09(c) and (d). - ---------------- --- - 26 - Mattel, Inc. Amended and Restated Credit Agreement

(c) The representations and warranties of each Company Party contained in any Loan Document shall be true, correct and complete in all material respects on and as of the Effective Date. (d) No Default or Event of Default shall exist. (e) 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 4.02 Conditions to All Loans. The obligation of each Lender to make any Loan is subject to the following further conditions precedent that, as of the applicable Funding Date: (a) The Administrative 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 Administrative Agent; (b) The representations and warranties of the Company contained in any Loan Document (except the representation and warranty contained in Section ------- 5.09 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 (except to the extent that such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier 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 4.02 are satisfied or waived. ------------ SECTION 5. REPRESENTATIONS AND WARRANTIES In order to induce the Lenders and the Administrative Agent to enter into this Agreement and to make any extension of credit hereunder, the Company represents and warrants to each Lender and the Administrative Agent that the following statements are true, correct and complete: 5.01 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 - 27 - Mattel, Inc. Amended and Restated Credit Agreement

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. 5.02 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. 5.03 Material Subsidiaries. Except for changes in the ordinary course of business or as permitted or contemplated by this Agreement, Schedule -------- 5.03 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. 5.04 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. 5.05 No Conflict. The execution, delivery and performance by the Company of this Agreement and the acknowledgement of the Fisher-Price Subordination Agreement, the Mattel Sales Subordination Agreement and the issuance, delivery and payment of the Notes do not and will not (a) violate the Restated Certificate of Incorporation or Bylaws of the Company, (b) violate any provision of law applicable to the Company, or any material order, judgment or decree of any court or other agency of government binding on the Company, the violation of which would result in a Material Adverse Effect, (c) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of the Company, (d) result in or require the creation or imposition of any material lien, security interest, charge or encumbrance of any nature whatsoever upon any of its material properties or assets, or (e) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of the Company. 5.06 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. 5.07 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, - 28 - Mattel, Inc. Amended and Restated Credit Agreement

except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally. 5.08 Financial Condition. The Company has heretofore delivered to the Lenders a consolidated balance sheet of the Company and its Subsidiaries for the fiscal year ended December 31, 2000 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 PriceWaterhouseCoopers. 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. 5.09 Changes, Etc. Since December 31, 2000, 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 5.08 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 disprove, and considering damages which in their best judgment is the maximum that would be awarded upon, and the likelihood of, an adverse determination of the claim or the amount which reflects their best judgment as to that required to be paid to settle the claims) would result in a Material Adverse Effect and there is no basis known to such executive officers for any such action, suit or proceeding. Neither the Company nor any of its Subsidiaries is (i) in violation of any applicable law which could result in a Material Adverse Effect, or (ii) subject to or in default with respect to any final judgment, writ, injunction, decree, rule or regulation of any court or Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which could result in a Material Adverse Effect. There is no action, suit, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries which provides a reasonable basis for questioning the validity or the enforceability of any Loan Document. - 29 - Mattel, Inc. Amended and Restated Credit Agreement

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 6.04. ------------ 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 $100,000,000. 5.17 Environmental Matters. The Company conducts in the ordinary course of business a review of the effect of existing Environmental Laws and existing Environmental Claims on its business, operations and properties, and as a result thereof the Company has reasonably concluded that such Environmental Laws and Environmental Claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.18 Disclosure. No representation or warranty of the Company contained in this Agreement or any other document, certificate or written statement furnished to the Lenders by the Company since January 1, 2002 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 Lenders prior to the date of this - 30 - Mattel, Inc. Amended and Restated Credit Agreement

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 Lenders 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 5.08 other ------------ than as disclosed in writing to the Lenders 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 Lenders shall otherwise give prior written consent, the Company will perform all covenants in this Section 6. --------- 6.01 Financial Statements. 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 Administrative Agent and to each Lender: (a) as soon as practicable and in any event not later than 55 days after the end of each of the first three fiscal quarters of the Company, consolidated balance sheets of the Company and its Subsidiaries as at the end of such period and for the fiscal year to date and the related consolidated statements of income, consolidated statements of stockholders' equity and consolidated statements of cash flow all in reasonable detail and certified by the Chief Financial Officer, Executive Vice President Finance or the Treasurer of the Company that the consolidated statements (and to the best of his or her belief, the consolidating statements) and other materials required by this clause (a) fairly present the financial condition of the Company and its Subsidiaries as at the dates indicated and the results of their operations for the periods indicated, subject to changes resulting from year-end audit and normal year-end adjustments; and (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 - 31 - Mattel, Inc. Amended and Restated Credit Agreement

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. 6.02 Certificates; Other Information. The Company will deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Requisite Lenders: (a) together with each delivery of financial statements of the Company and its Subsidiaries pursuant to Sections 6.01(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 7.05 and 7.06. ------------- ---- (b) together with each delivery of consolidated financial statements of the Company and its Subsidiaries pursuant to Section 6.01(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 Administrative Agent shall have the right, from time to time, to discuss the affairs of the Company directly with such independent certified public accountants; (c) promptly upon receipt thereof, copies of all reports submitted to the Company (including, without limitation, the Company's Board of Directors) by the Company's independent accountants in connection with each annual, interim or special audit of the consolidated financial statements of the Company made by such accountants, including, without limitation, any comment letter submitted by such accountants to management in connection with their annual audit; and - 32 - Mattel, Inc. Amended and Restated Credit Agreement

(d) 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. Each document required to be delivered pursuant to Section 6.01(a) or --------------- (b) or Section 6.02(d) shall be deemed to have been delivered on the date on - --- --------------- which the Company posts such document on the Company's website on the Internet at the website address listed on Schedule 10.02, or when such document is -------------- posted on the Securities and Exchange Commission's website at www.sec.gov or on IntraLinks; provided that the Company shall deliver paper copies of all such -------- documents to the Administrative Agent or any Lender that requests the Company to deliver such paper copies until a request to cease delivering paper copies is given by the Administrative Agent or such Lender. The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above in this paragraph, and in any event shall have no responsibility to monitor compliance by the Company with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents. 6.03 Notices. The Company will promptly notify the Administrative Agent and each Lender: (a) 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 Administrative Agent or any Lender 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 8.01, (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; - 33 - Mattel, Inc. Amended and Restated Credit Agreement

(b) 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; (c) promptly after the acquisition of any Material Subsidiary, notice of such acquisition; (d) 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, Fitch; and (e) with reasonable promptness, such other information and data with respect to the Company or any of its Subsidiaries as from time to time may be reasonably requested by any Lender or the Administrative Agent, including any financial reports regularly prepared by the Company for internal use. 6.04 Corporate Existence, etc. Except as permitted or not prohibited in Section 7.03, 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. 6.05 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). 6.06 Maintenance of Properties; Insurance. Except as permitted or not prohibited in Section 7.03, 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 - 34 - Mattel, Inc. Amended and Restated Credit Agreement

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. 6.07 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 Lender at the expense of that Lender, to visit and inspect any of the properties of the Company or any of its Subsidiaries, including its and their financial and accounting records, and to make copies and take extracts therefrom (but not records relating to intellectual property), and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants, all upon reasonable notice and at such reasonable times during normal business hours and as often as may be reasonably requested. 6.08 Use of Proceeds of Loans. 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. 6.09 Environmental Laws. The Company shall maintain and shall cause each of its Subsidiaries 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. 6.10 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 Administrative 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. 6.11 Compliance with Laws. The Company shall maintain and shall cause each of its Subsidiaries to, comply in all material respects with the requirements of all Governmental Rules applicable to it, except in such instances in which (i) such requirement of Governmental Rules is being contested in good faith by appropriate proceedings diligently conducted or a bona fide dispute exists with respect thereto; or (ii) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect. SECTION 7. NEGATIVE COVENANTS - 35 - Mattel, Inc. Amended and Restated Credit Agreement

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 Lenders shall otherwise give prior written consent, the Company will perform all covenants in this Section 7. --------- 7.01 Indebtedness. The Company will not, and will not permit any of its Material Subsidiaries to, directly or indirectly incur, assume, guaranty or otherwise become directly or indirectly liable with respect to any Indebtedness; except: ------ (a) Indebtedness permitted to be secured under Section 7.02; ------------ (b) Non-Priority Indebtedness of the Company; and (c) Non-Priority Indebtedness of Subsidiaries of the Company not exceeding 20% of Consolidated Net Worth in the aggregate at any time. 7.02 Liens. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of the Company or any Subsidiary except: (a) Liens securing Indebtedness for borrowed money not exceeding, together with the aggregate outstanding face amount of sales or discounting of notes or receivables permitted under Section 7.04(e), $100,000,000 in aggregate --------------- principal amount 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 or otherwise arising under transactions permitted pursuant to Section 7.04; ------------ (e) Liens listed on Schedule 7.02; 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. 7.03 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. (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: - 36 - Mattel, Inc. Amended and Restated Credit Agreement

(i) (A) the Company may merge or consolidate with any other Person provided that the Company shall be the continuing or surviving corporation, and (B) any Material Subsidiary may merge or consolidate with any other Person provided that the Company or a Material Subsidiary shall be the continuing or surviving corporation; provided, further, that (1) if any transaction shall be between a -------- ------- Subsidiary and a wholly-owned Subsidiary, a wholly-owned Subsidiary shall be the continuing or surviving corporation, (2) no Default or Event of Default shall result from such merger or consolidation, and (3) except where a wholly-owned Subsidiary merges or consolidates with another wholly-owned Subsidiary or the Company, no Default or Event of Default shall exist prior to such merger or consolidation; 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. 7.04 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; (c) sales of accounts receivable under Other Permitted Accounts Receivable Financing Facilities; (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; and (e) sales or discounting of any other notes or receivables, the aggregate outstanding face amount of which does not exceed, together with the aggregate outstanding principal amount of secured Indebtedness permitted under Section 7.02(a), $100,000,000 in the aggregate at any time. - --------------- 7.05 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) the consolidated net worth of the Company and its Subsidiaries on a consolidated basis determined in conformity with GAAP to exceed 60% at the end of each of the first three fiscal quarters in each fiscal year and 50% at the end of each fiscal year. 7.06 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 - 37 - Mattel, Inc. Amended and Restated Credit Agreement

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 3.50 to 1. 7.07 ERISA. The Company will not, and will not permit any of its ERISA Affiliates to, permit the aggregate actuarial present value of all benefit liabilities under all Pension Plans to exceed the aggregate fair market value of the assets of such Pension Plans allocable to such benefit liabilities by more than $100,000,000, determined in accordance with the actuarial assumptions and liabilities set forth in the most recent actuarial valuation prepared with respect to such Pension Plans. 7.08 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 in violation of Regulation U, of the Federal Reserve Board (or any other regulation of the Federal Reserve Board) or the Exchange Act, in each case as in effect on the date or dates of such borrowing and the use of such proceeds. 7.09 Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Default if such action is taken or condition exists. SECTION 8. EVENTS OF DEFAULT 8.01 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 by any Company Party 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 by any Company Party 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 by any Company Party to pay any other amount due under this Agreement or the Receivables Purchase Agreement within 90 days after written notice thereof; or - 38 - Mattel, Inc. Amended and Restated Credit Agreement

(b) Default in Other Agreements. (i) Failure of the Company 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, and such breach or default continues after the applicable grace or notice period, if any, specified in the document relating thereto, if the effect of such failure, default or breach is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, 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 6.03(a), ---------------- 6.04 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. Failure of any Company Party to perform or comply with any other term or condition contained in any Loan Document to which 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 Administrative Agent or any Lender of such default; or (f) Involuntary Bankruptcy; Appointment of Receiver, etc. (i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company or any of its Material Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed, or (ii) any other similar relief shall be granted under any applicable federal or state or applicable foreign law; a petition for an involuntary case shall be filed against the Company or any of its Material Subsidiaries under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over the Company or any of its Material Subsidiaries, or over all or substantially all of its property, shall have been entered; or an interim receiver, trustee or other custodian of the Company or any of its Material Subsidiaries for all or substantially all of the property of the Company or any of its Material Subsidiaries shall be appointed involuntarily; and the continuance of any such events in clause (ii) for 45 days unless dismissed, bonded or discharged; or (g) Voluntary Bankruptcy; Appointment of Receiver, etc. The Company or any of its Material Subsidiaries shall have an order for relief entered with respect to it or commence a voluntary case under any applicable bankruptcy, insolvency or 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 - 39 - Mattel, Inc. Amended and Restated Credit Agreement

or taking possession by a receiver, liquidator, sequestrator, trustee or other custodian for all or substantially all of its property; the making by the Company or any of its Material Subsidiaries of any assignment for the benefit of creditors; or the inability or failure of the Company or any of its Material Subsidiaries, or the admission by the Company or any of its Material Subsidiaries in writing of its inability, to generally pay its debts as such debts become due; or the Board of Directors of the Company or any of its Material Subsidiaries adopts any resolution or otherwise takes action to approve any of the foregoing; or (h) Judgments. Any final money judgment involving in any case an amount in excess of $20,000,000 or in excess of $40,000,000 in the aggregate at any one time for all final judgments shall be entered or filed against the Company or any Material Subsidiary or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 45 days or in any event later than five days prior to the date of any proposed sale thereunder; or (i) Dissolution. Any order, judgment or decree shall be entered against the Company or any Material Subsidiary decreeing the dissolution or split up of the Company and such order shall remain undischarged or unstayed for a period in excess of 30 days; or (j) ERISA. (i) Any Pension Plan maintained by the Company or any of its ERISA Affiliates shall be terminated within the meaning of Title IV of ERISA, or (ii) a trustee shall be appointed by an appropriate United States district court to administer any Pension Plan, or (iii) the Pension Benefit Guaranty Corporation (or any successor thereto) shall institute proceedings to terminate any Pension Plan or to appoint a trustee to administer any Pension Plan, or (iv) the Company or any of its ERISA Affiliates shall withdraw (under Section 4063 of ERISA) from a Pension Plan, if, as of the date of the event listed in clauses (i)-(iv) above or any subsequent date, any of the Company or its ERISA Affiliates has any liability (such liability to include, without limitation, any liability to the Pension Benefit Guaranty Corporation, or any successor thereto, or to any other party under Sections 4062, 4063 or 4064 of ERISA or any other provision of law) resulting from or otherwise associated with the events listed in clauses (i)-(iv) above for unfunded guarantied vested benefits under the Pension Plans which exceeds the current value of assets accumulated in such Pension Plan by more than $100,000,000; 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. A Servicer Default (as defined in the Receivables Purchase Agreement) shall occur and be continuing; or (n) Change of Control. There occurs any Change of Control. - 40 - Mattel, Inc. Amended and Restated Credit Agreement

8.02 Remedies. If any Event of Default occurs, the Administrative Agent shall, at the request of, or may, with the consent of, the Requisite Lenders, (a) declare the Commitment of each Lender to be terminated, whereupon such 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 Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law; provided, however, that upon the occurrence of any event -------- ------- specified in paragraph (f) or (g) of Section 8.01 above (in the case of clause ------------ (ii) of paragraph (f) upon the expiration of the 45-day period mentioned therein), the obligation of each Lender 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 Administrative Agent or any Lender. 8.03 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, including without limitation, under the Transaction Documents. SECTION 9. THE ADMINISTRATIVE AGENT 9.01 Appointment and Authorization. Each Lender hereby irrevocably appoints, designates and authorizes the Administrative 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 Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender, 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 Administrative Agent. 9.02 Delegation of Duties. The Administrative 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 Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 9.03 Liability of Administrative Agent. None of the Administrative 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 Lenders for - 41 - Mattel, Inc. Amended and Restated Credit Agreement

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 Administrative 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 Administrative Agent-Related Person shall be under any obligation to any Lender 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. 9.04 RELIANCE BY ADMINISTRATIVE AGENT. (a) The Administrative 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 Administrative Agent. The Administrative 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 Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders 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 Administrative 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 Lenders or all Lenders, as applicable, and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. (b) For purposes of determining compliance with the conditions specified in Sections 4.01 and 4.02, each Lender 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 Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender, unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from the Lender prior to any borrowing specifying its objection thereto and either such objection shall not have been withdrawn by notice to the Administrative Agent to that effect or the Lender shall not have made available to the Administrative Agent the Lender's ratable portion of such borrowing. 9.05 Notice of Default. The Administrative 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 Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Company referring to this Agreement, describing such - 42 - Mattel, Inc. Amended and Restated Credit Agreement

Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be requested by the Requisite Lenders in accordance with Section 8; provided, however, that unless and until the Administrative --------- -------- ------- Agent shall have received any such request, the Administrative 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 Lenders. 9.06 Credit Decision. Each Lender expressly acknowledges that none of the Administrative Agent-Related Persons has made any representation or warranty to it and that no act by the Administrative 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 Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative 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 Lender also represents that it will, independently and without reliance upon the Administrative 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 Lenders by the Administrative Agent, the Administrative Agent shall not have any duty or responsibility to provide any Lender 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 Administrative Agent-Related Persons. 9.07 Indemnification. Whether or not the transactions contemplated hereby shall be consummated, the Lenders shall indemnify upon demand the Administrative 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 Administrative 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 Lender shall be liable for the payment to the Administrative - ------- Agent-Related Persons of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or - 43 - Mattel, Inc. Amended and Restated Credit Agreement

disbursements resulting from such Person's gross negligence or willful misconduct. The obligation of the Lenders in this Section shall survive the payment of all Obligations hereunder. 9.08 Administrative 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 Administrative Agent hereunder and without notice to or consent of the Lenders. With respect to its Loans, Bank of America shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include Bank of America in its individual capacity. 9.09 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders; provided that any such resignation by Bank of America shall also constitute its resignation as Administrative Agent under the Receivables Purchase Agreement. If the Administrative Agent shall resign as Administrative Agent under this Agreement, the Requisite Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders which successor administrative agent shall be consented to by the Company at all times other than during the existence of an Event of Default (which consent of the Company shall not be unreasonably withheld or delayed). If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Company, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, the Person acting as such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent, and the term "Administrative Agent" shall mean such successor administrative agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 9 and Sections 10.04 and 10.05 shall inure to its benefit as to any - --------- -------------- ----- actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Requisite Lenders appoint a successor agent as provided for above. 9.10 Other Agents; Lead Managers. None of the Lenders identified on the facing page or signature pages of this Agreement as a "syndication agent," "documentation agent," "co-agent" or "lead manager" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. - 44 - Mattel, Inc. Amended and Restated Credit Agreement

SECTION 10. MISCELLANEOUS 10.01 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 Lenders and the Company, and acknowledged by the Administrative 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 each of the Lenders directly affected thereby and the Company, and acknowledged by the Administrative Agent, do any of the following: (a) increase or extend any Lender's Commitment or subject any Lender to any additional obligations; (b) postpone or delay any date fixed for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any Loan Document; (c) reduce the principal of, or the rate of interest specified herein on any Loan, or of any fees or other amounts payable hereunder or under any Loan Document; (d) change the percentage of the Aggregate Facilities Commitment or of the aggregate unpaid principal amount of the Loans and Purchasers' Investment which is required for the Lenders or any of them to take any action hereunder without the written consent of all of the Lenders; (e) amend this Section 10.01 or Section 2.13; and ------------- ------------ (f) amend Section 2.01, the definitions of "Pro Rata Share" or ------------ "Requisite Lenders;" or (g) discharge any Guarantor; provided further, that no amendment, waiver or consent shall (i), unless in - ---------------- writing and signed by the Administrative Agent in addition to the Requisite Lenders or all the Lenders, as the case may be, affect the rights or duties of the Administrative Agent under any Loan Document, or (ii) have the effect of making any Lender'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 10.01 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. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended nor the principal owing to such Lender be reduced without the consent of such Lender. - 45 - Mattel, Inc. Amended and Restated Credit Agreement

10.02 Notices and Other Communications; Facsimile Copies. (a) General. Unless otherwise expressly provided herein, all ------- notices and other communications provided for hereunder shall be in writing (including by facsimile transmission) and mailed, faxed or delivered, to the address, facsimile number or (subject to subsection (c) below) electronic mail address specified for notices on Schedule 10.02; or, in the case of the Company -------------- or the Administrative Agent, to such other address as shall be designated by such party in a notice to the other parties, and in the case of any other party, to such other address as shall be designated by such party in a notice to the Company or the Administrative Agent. All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the intended recipient and (ii) (A) if delivered by hand or by courier, when signed for by the intended recipient; (B) if delivered by mail, upon the earlier of receipt and four Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone during a Business Day; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of subsection (c) below), when delivered; provided, however, that notices and -------- ------- other communications to the Administrative Agent pursuant to Section 2 shall not be effective until actually received by such Person. Any notice or other communication permitted to be given, made or confirmed by telephone hereunder shall be given, made or confirmed by means of a telephone call to the intended recipient at the number specified on Schedule 10.02, it being understood and -------------- agreed that a voicemail message shall in no event be effective as a notice, communication or confirmation hereunder. (b) Effectiveness of Facsimile Documents and Signatures. Loan --------------------------------------------------- Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable Governmental Rule, have the same force and effect as manually-signed originals and shall be binding on all Loan Parties, the Administrative Agent and the Lenders. The Administrative Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided, however, that the -------- ------- failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature. (c) Limited Use of Electronic Mail. Electronic mail and Internet ------------------------------ and intranet websites may be used only to distribute routine communications, such as financial statements and other information as provided in Section 6.02, ------------ and to distribute Loan Documents for execution by the parties thereto, and may not be used for any other purpose. (d) Reliance by Administrative Agent and Lenders. The -------------------------------------------- Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Notices of Borrowing and Notices of Conversion/Continuation) purportedly given by or on behalf of the Company even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Company shall indemnify each Administrative Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Company. All telephonic notices to and other communications with the Administrative Agent pursuant to Section 2 may be --------- recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording. - 46 - Mattel, Inc. Amended and Restated Credit Agreement

10.03 Failure or Indulgence Not Waiver; Remedies Cumulative. No ----------------------------------------------------- failure or delay on the part of any Lender or any holder of any Note in the exercise of any power, right or privilege hereunder or under any Note shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Agreement or any Notes are cumulative to and not exclusive of, any rights or remedies otherwise available. 10.04 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 Lenders 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 Lenders any Notes pursuant to the provisions of this Agreement; (c) the reasonable fees, expenses and disbursements of the Administrative Agent and the Administrative Agent's counsel (including the allocated cost of Administrative 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 Lenders and the reasonable estimate of the allocable costs of counsel in the staff of legal departments of the Lenders and costs of settlement) incurred by the Administrative Agent and each Lender 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. 10.05 Indemnity. Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify and hold the Administrative Agent-Related Persons, and each Lender and each of its respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and against any and all liabilities, ------------------ obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including reasonable fees and out-of-pocket expenses of counsel and the allocated cost of internal counsel) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Administrative Agent or replacement of any Lender) 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, the Commitments, the use or proposed use of the proceeds from the Loans, 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 8.01(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 - 47 - Mattel, Inc. Amended and Restated Credit Agreement

Indemnified Liabilities resulting from the gross negligence or willful misconduct of such Indemnified Person. No Indemnified Person shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement; provided, that the Company shall -------- have no obligation hereunder to any Indemnified Person with respect to such damages resulting from the gross negligence or willful misconduct of such Indemnified Person. No Indemnified Person shall have any liability for any indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date). The agreements in this Section shall survive payment of all other Obligations. 10.06 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 Lender 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 Lender or that subsequent holder 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 Lender or that subsequent holder shall have made any demand hereunder and whether or not such deposits or other indebtedness are otherwise fully secured and Lender and that subsequent holder is hereby irrevocably authorized to permit such setoff and appropriation. Each Lender agrees promptly to notify the Company and the Administrative Agent after any such set-off and application made by such Lender; provided, however, that the failure to give -------- ------- such notice shall not affect the validity of such set-off and application. 10.07 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 2.09, 3, ------------- - 10.04 and 10.05 and the agreements of the Lenders set forth in Sections 2.13, - ----- ----- ------------- 9, 10.06 and 10.08 shall survive the payment of the Obligations by the Company - - ----- ----- and the termination of this Agreement. - 48 - Mattel, Inc. Amended and Restated Credit Agreement

10.08 SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Company may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Company without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) From time to time following the Effective Date, each Lender may assign to one or more Eligible Assignees all or any portion of its Loan Commitment and outstanding Loans; provided that (i) such Lender concurrently -------- assigns a ratable portion of its Purchaser Commitment and its Percentage of the Purchasers' Investment under the Receivables Purchase Agreement, (ii) such assignment, if not to a Lender or an Affiliate of the assigning Lender, shall be consented to by the Company at all times other than during the existence of a Default or Event of Default and by the Administrative Agent (which approval of the Company shall not be unreasonably withheld or delayed), (iii) a copy of a duly signed and completed Assignment and Assumption shall be delivered to the Administrative Agent and the Company, (iv) except in the case of an assignment (A) to an Affiliate of the assigning Lender or to another Lender or an Approved Fund (as defined in subsection (g) of this Section) with respect to a Lender or (B) of the entire remaining Commitment of the assigning Lender, the portion of the Aggregate Facilities Commitment assigned shall not be less than $10,000,000, (v) the assigning Lender shall have delivered any Note or Notes subject to the assignment to the Administrative Agent and (vi) the effective date of any such assignment shall be as specified in the Assignment and Assumption, but not earlier than the date which is five Business Days after the date the Administrative Agent has received the Assignment and Assumption. Upon satisfaction of the conditions set forth in the prior sentence, any forms required by Section 10.15 and payment of the requisite fee described below, the ------------- assignee named therein shall be a Lender for all purposes of this Agreement effective as of the specified effective date to the extent of the Assigned Interest (as defined in such Assignment and Assumption), and the assigning Lender shall be released from any further obligations under this Agreement to the extent of such Assigned Interest. Until satisfaction of the conditions set forth herein to any assignment, the Company and Administrative Agent may continue to deal solely and directly with the assigning Lender in connection the Assigned Interest. Upon request following satisfaction of the conditions set forth herein to any assignment, the Company shall execute and deliver new or replacement Notes to the assigning Lender and the assignee Lender to evidence Loans made by them. The Administrative Agent's consent to any assignment shall not be deemed to constitute any representation or warranty by any Administrative Agent-Related Person as to any matter. (c) After receipt of a completed Assignment and Assumption, and receipt of an assignment fee of $3,500 (which fee includes any assignment fees in connection with the concurrent assignment of interests under the Receivables Purchase Agreement) from such Eligible Assignee or such assigning Lender (including in the case of assignments to Affiliates of -49- Mattel, Inc. Amended and Restated Credit Agreement

assigning Lenders), the Administrative Agent shall, promptly following the effective date thereof, provide to the Company and Lenders a revised Schedule -------- 10.02 giving effect thereto. - ----- (d) Upon advance written notice to the Company, any Lender 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 Lender and the other interests of that Lender (the "originating Lender") hereunder and under the other Loan Documents; provided, ------------------ -------- however, that (i) such Lender 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 Lender's obligations under this Agreement shall remain unchanged, (iii) the originating Lender shall remain solely responsible for the performance of such obligations, (iv) the Company and the Administrative Agent shall continue to deal solely and directly with the originating Lender in connection with the originating Lender's rights and obligations under this Agreement and the other Loan Documents, and (v) no Lender 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 10.01. The ------------- Company hereby acknowledges and agrees that any such disposition will give rise to a direct obligation of the Company to the Participant with respect to, and the Participant shall be entitled to the benefit of, Sections 3.01, 3.02, 3.04, ------------- ---- ---- 3.05 and 10.05 as if it were a "Lender." To the extent permitted by law, each - ---- ----- Participant also shall be entitled to the benefits of Section 10.06 as though ------------- it were a Lender, provided such Participant agrees to be subject to Section ------- 2.13 as though it were a Lender. - ---- (e) A Participant shall not be entitled to receive any greater payment under Section 3.01, 3.02, 3.04, or 3.05 or 10.05 than the applicable ------------ ---- ---- ---- ----- Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Company's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Company is notified of the participation ------------ sold to such Participant and such Participant agrees, for the benefit of the Company, to comply with Section 10.15 as though it were a Lender. ------------- (f) Notwithstanding any other provision in this Agreement, any Lender 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 ss.203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. (g) As used herein, the following terms have the following meanings: "Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a ----------------- Lender; (iii) an Approved Fund; and (iv) any other Person (other than a natural person) approved by (A) the Administrative Agent and (B) unless an Event of Default has occurred and is continuing, the Company (each such approval not to be unreasonably withheld or -50- Mattel, Inc. Amended and Restated Credit Agreement

delayed); provided that notwithstanding the foregoing, "Eligible -------- Assignee" shall not include the Company or any of the Company's Affiliates or Subsidiaries. "Fund" means any Person (other than a natural person) that is ---- (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. "Approved Fund" means any Fund that is administered or managed ------------- by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender. (h) Each Lender 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 Administrative 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 Lender, 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 Lender; provided, however, that any Lender may disclose such information -------- ------- (A) at the request or pursuant to any requirement of any Governmental Person to which the Lender is subject or in connection with an examination of such Lender 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 Lender 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, (C) to such Lender's Affiliates and independent auditors and other professional advisors provided such Persons are obligated to keep such information confidential, (D) to any other party to this Agreement, and (E) if an Event of Default exists, in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to any Loan Document or Transaction Document or the enforcement of rights hereunder or thereunder. Notwithstanding the foregoing, the Company authorizes each Lender to disclose to any assignee or Participant and to any prospective assignee or Participant, such financial and other information in such Lender's possession concerning the Company or its Subsidiaries which has been delivered to Administrative Agent or the Lenders pursuant to this Agreement or which has been delivered to the Administrative Agent or the Lenders by the Company in connection with the Lenders' 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 Lender to keep such information confidential to the same extent required of the Lenders hereunder. 10.09 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. -51- Mattel, Inc. Amended and Restated Credit Agreement

10.10 Obligations Several. The obligation of each Lender hereunder is several, and no Lender shall be responsible for any obligation or commitment of any other Lender hereunder. Nothing contained in this Agreement and no action taken by Lenders pursuant hereto shall be deemed to constitute Lenders to be a partnership, an association, a joint venture or another entity. 10.11 Certain Changes. If (a) any changes in accounting principles from those used in the preparation of the financial statements referred to in Section 5.08 hereafter occasioned by the promulgation of rules, regulations, - ------------ pronouncements and opinions by or requested by the Financial Accounting Standards Board or the American Institute of Certified Public Accounts (or successors thereto or agencies with similar functions) result in a change in the method of calculation of financial covenants, standards or terms found in Sections 1, 6 and 7, or (b) the Company changes the manner in which its fiscal - ---------- - - year, fiscal quarters and fiscal months are determined, the parties hereto agree to enter into negotiations in order to amend the appropriate provisions of this Agreement so as to equitably reflect such changes with the desired result that the criteria for evaluating the Company's financial condition and operations or establishing limitations hereunder shall be the same after such changes as if such changes had not been made. 10.12 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. 10.13 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. 10.14 Integration. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of -------- supplemental rights or remedies in favor of the Administrative Agent or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof. 10.15 Tax Forms. (a) Each Lender that is not a "United States person" within the meaning of Section 7701(a)(30) of the Code (a "Foreign ------- Lender") shall deliver to the Administrative Agent, prior to receipt of any - ------ payment subject to withholding under the Code (or upon accepting an assignment of an interest herein), two duly signed completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Person and entitling it to an exemption from, or reduction of, withholding tax on all payments to be made to such Person by the Company pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Person by the Company pursuant to this Agreement) or such other evidence satisfactory to the Company and the Administrative Agent that such Person is entitled to an exemption from, or reduction of, U.S. withholding tax. Thereafter and from time to time, each such Person shall (i) promptly submit to the Administrative Agent such -52- Mattel, Inc. Amended and Restated Credit Agreement

additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to the Company and the Administrative Agent of any available exemption from or reduction of, United States withholding taxes in respect of all payments to be made to such Person by the Company pursuant to this Agreement, (ii) promptly notify the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (iii) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable Governmental Rules that the Company make any deduction or withholding for taxes from amounts payable to such Person. If such Person fails to deliver the above forms or other documentation, then the Administrative Agent may withhold from any interest payment to such Person an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction. (b) Upon the request of the Administrative Agent, each Lender that is a "United States person" within the meaning of Section 7701(a)(30) of the Code shall deliver to the Administrative Agent two duly signed completed copies of IRS Form W-9. If such Lender fails to deliver such forms, then the Administrative Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable back-up withholding tax imposed by the Code, without reduction. (c) If any Governmental Authority asserts that the Administrative Agent did not properly withhold or backup withhold, as the case may be, any tax or other amount from payments made to or for the account of any Lender, such Lender shall indemnify the Administrative Agent therefor, including all penalties and interest, any taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section, and costs and expenses (including Attorney Costs) of the Administrative Agent; provided, that no -------- Lender shall have any obligation hereunder to the Administrative Agent with respect to amounts resulting from the gross negligence or willful misconduct of the Administrative Agent.. The obligation of the Lenders under this Section shall survive the termination of the Aggregate Facilities Commitment, repayment of all Obligations and the resignation of the Administrative Agent. 10.16 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 Administrative Agent and the Lenders consents, for itself and in respect of its property, to the non-exclusive jurisdiction of those courts. Each of the Company, the Administrative Agent and the Lenders irrevocably waives any objection, including any objection -53- Mattel, Inc. Amended and Restated Credit Agreement

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 Administrative Agent and the Lenders each waive personal service of any summons, complaint or other process, which may be made by any other means permitted by California law. 10.17 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 10.18 Amendment and Restatement. This Agreement amends and restates the Existing Multi-Year Agreement. All notes issued under the Existing Multi-Year Credit Agreement are hereby cancelled. -54- Mattel, Inc. Amended and Restated Credit Agreement

IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Credit 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 Mattel, Inc. Amended and Restated Credit Agreement

BANK OF AMERICA, N.A., as Administrative Agent and a Lender By: /s/ CASEY COSGROVE ------------------------------------------------ Casey Cosgrove Vice President S - 2 Mattel, Inc. Amended and Restated Credit Agreement

BNP PARIBAS, as a Documentation Agent and a Lender By: /s/ JANICE S.H. HO ------------------------------------------------ Name: Janice S.H. Ho Title: Director By: /s/ TJALLING TERPSTRA ------------------------------------------------ Name: Tjalling Terpstra Title: Director S - 3 Mattel, Inc. Amended and Restated Credit Agreement

CITICORP USA, INC., as a Syndication Agent and a Lender By: /s/ WALT LARSEN ------------------------------------------------ Name Walt Larsen Title Vice President S - 4 Mattel, Inc. Amended and Restated Credit Agreement

FLEET NATIONAL BANK, as a Syndication Agent and a Lender By: /s/ MARIO F. TEIXEIRA ------------------------------------------------ Name Mario F. Teixeira Title Vice President S - 5 Mattel, Inc. Amended and Restated Credit Agreement

SOCIETE GENERALE, as a Documentation Agent and a Lender By: /s/ RICHARD BERNAL ------------------------------------------------ Name Richard Bernal Title Director, Corporate Banking S - 6 Mattel, Inc. Amended and Restated Credit Agreement

THE BANK OF NOVA SCOTIA By: /s/ R.P. REYNOLDS ------------------------------------------------ Name: R. P. Reynolds Title: Director S - 7 Mattel, Inc. Amended and Restated Credit Agreement

BARCLAYS BANK PLC By: /s/ NICHOLAS BELL ------------------------------------------------ Name: Nicholas Bell Title: Director S - 8 Mattel, Inc. Amended and Restated Credit Agreement

CREDIT SUISSE FIRST BOSTON By: /s/ ROBERT HETU ------------------------------------------------ Name: Robert Hetu Title: Director By: /s/ MARK HERON ------------------------------------------------ Name: Mark Heron Title: Associate S - 9 Mattel, Inc. Amended and Restated Credit Agreement

THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ VICENTE L. TIMIRAOS ------------------------------------------------ Name: Vicente L. Timiraos Title: Joint General Manager S - 10 Mattel, Inc. Amended and Restated Credit Agreement

MANUFACTURERS & TRADERS TRUST COMPANY By: /s/ CHRISTOPHER KANIA ------------------------------------------------ Name: Christopher Kania Title: Vice President S - 11 Mattel, Inc. Amended and Restated Credit Agreement

SANPAOLO IMI S.p.A. By: /s/ CARLO PERSICO ------------------------------------------------ Name: Carlo Persico Title: E.V.P./General Manager By: /s/ ETTORE VIAZZO ------------------------------------------------ Name: Ettore Viazzo Title: Vice President S - 12 Mattel, Inc. Amended and Restated Credit Agreement

WELLS FARGO BANK, N.A. By: /s/ PEITTY CHOU ------------------------------------------------ Name: Peitty Chou Title: Vice President S - 13 Mattel, Inc. Amended and Restated Credit Agreement

CREDIT LYONNAIS, Los Angeles Branch By: /s/ DIANNE M. SCOTT ------------------------------------------------ Name: Dianne M. Scott Title: Senior Vice President and Manager S - 14 Mattel, Inc. Amended and Restated Credit Agreement

UNION BANK OF CALIFORNIA, N.A. By: /s/ GAIL I. BOYLE ------------------------------------------------ Name: Gail I. Boyle Title: Vice President S - 15 Mattel, Inc. Amended and Restated Credit Agreement

FIRST UNION NATIONAL BANK By: /s/ DAVID SILANDER ------------------------------------------------ Name: David Silander Title: Director S - 16 Mattel, Inc. Amended and Restated Credit Agreement

JPMORGAN CHASE BANK By: /s/ WILLIAM P. RINDFUSS ------------------------------------------------ Name: William P. Rindfuss Title: Vice President S - 17 Mattel, Inc. Amended and Restated Credit Agreement

U.S. BANK NATIONAL ASSOCIATION By: /s/ JANET JORDAN ------------------------------------------------ Name: Janet E. Jordan Title: Vice President S - 18 Mattel, Inc. Amended and Restated Credit Agreement

BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ R. L. VAN DE BERGHE ------------------------------------------------ Name: R. L. Van de Berghe Title: Vice President S - 19 Mattel, Inc. Amended and Restated Credit Agreement

EXHIBIT 10.1 ================================================================================ First Amended and Restated Receivables Purchase Agreement (Receivables Purchase Subfacility) Dated as of March 20, 2002 among Mattel Factoring, Inc., as Transferor Mattel, Inc., as Servicer Bank of America, N.A., as Administrative Agent The Financial Institutions Party Hereto, as Purchasers and BANC OF AMERICA SECURITIES LLC, as Sole Lead Arranger and Sole Book Manager CITICORP USA, INC., and FLEET NATIONAL BANK, as Syndication Agents SOCIETE GENERALE and BNP PARIBAS, as Documentation Agents ================================================================================

TABLE OF CONTENTS SECTION.....................................................................PAGE SECTION 1. DEFINITIONS.........................................................1 1.01 Certain Defined Terms.............................................1 1.02 Other Terms......................................................10 SECTION 2. AMOUNTS AND TERMS OF THE PURCHASES.................................10 2.01 Purchase Facility................................................10 2.02 Making Purchases.................................................10 2.03 Payments and Computation, Etc....................................12 2.04 Collection Account...............................................12 2.05 Reduction or Termination of Purchasers' Investment Limit.........13 2.06 Deficiency Advances..............................................13 SECTION 3. CONDITIONS OF PURCHASES............................................13 3.01 Conditions Precedent to Initial Purchase.........................13 3.02 Conditions Precedent to All Purchases............................14 Section 4. SERVICING AND SETTLEMENT PROCEDURES................................16 4.01 Appointment of Servicer..........................................16 4.02 Duties of Servicer...............................................16 4.03 Servicer Default.................................................17 4.04 Servicer Default Remedies........................................17 4.05 Responsibilities of the Transferor...............................17 4.06 Servicing Fees...................................................18 SECTION 5. REPRESENTATIONS AND WARRANTIES.....................................18 5.01 Representations and Warranties...................................18 SECTION 6. COVENANTS..........................................................20 6.01 Covenants........................................................20 (a) Compliance with Laws, Etc................................20 (b) Offices, Records and Books of Account; Etc...............20 (c) Performance and Compliance with Contracts and Credit and Collection Policy.........................21 (d) Ownership Interest, Etc..................................21 (e) Sales, Liens, Etc........................................21 (f) Extension or Amendment of Receivables....................21 (g) Change in Business or Credit and Collection Policy.......22 (h) Audits...................................................22 (i) Status of Listed Receivables.............................22 (j) Reporting Requirements...................................22 (k) General Restrictions.....................................23 (l) Mergers, Acquisitions. Sales, Investments................23 (m) No Modification of the Purchase and Sale Agreement.......23 (n) Claim under Section 7.01 of the Purchase and Sale Agreement. SECTION 7. TERMINATION EVENTS AND TERMINATION EVENT REMEDIES................ 23 7.01 Termination Events Defined.......................................24 7.02 Termination Event Remedies.......................................25 - ii - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

7.03 Rights Not Exclusive.............................................25 SECTION 8. THE ADMINISTRATIVE AGENT...........................................25 8.01 Appointment and Authorization....................................25 8.02 Delegation of Duties.............................................25 8.03 Liability of Administrative Agent................................25 8.04 Reliance by Administrative Agent.................................26 8.05 Notice of Termination Event or Servicer Default..................26 8.06 Credit Decision..................................................27 8.07 Indemnification..................................................27 8.08 Administrative Agent in its Individual Capacity..................28 8.09 Successor Administrative Agent...................................28 8.10 Other Administrative Agents; Lead Managers.......................29 8.11 Sharing of Payments, Etc.........................................29 8.12 Independent Agreements...........................................29 SECTION 9. INDEMNIFICATION....................................................30 9.01 Indemnification Generally........................................30 9.02 Capital Adequacy, Etc............................................33 SECTION 10. MISCELLANEOUS.....................................................33 10.01 Waivers; Amendments. Etc.........................................33 10.02 Notices, Etc.....................................................34 10.03 Governing Law; Integration.......................................35 10.04 Severability; Counterparts.......................................36 10.05 Successors and Assigns...........................................36 10.06 Amendment and Restatement........................................39 10.07 Set Off..........................................................39 10.08 Waiver of Right to Trial by Jury.................................39 EXHIBITS A Form of Purchase Notice B. Form of Opinion - iii - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

FIRST AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (Receivables Purchase Subfacility) THIS FIRST AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (as amended, supplemented or otherwise modified from time to time, the "Agreement") --------- is entered into as of March 20 2002, among MATTEL FACTORING, INC., a Delaware corporation, as transferor (the "Transferor"), MATTEL, INC., a Delaware ---------- corporation ("Mattel"), as servicer (the "Servicer"), THE FINANCIAL INSTITUTIONS ------ -------- PARTY HERETO FROM TIME TO TIME as purchasers (together with any successors and assigns, the "Purchasers"), and BANK OF AMERICA, N.A., a national banking ---------- association, as agent for the Purchasers (in such capacity, together with any successors and assigns, the "Administrative Agent"), BANC OF AMERICA SECURITIES -------------------- LLC, as sole lead arranger and sole book manager (in such capacity, the "Arranger"), CITICORP USA, Inc., and FLEET NATIONAL BANK, as syndication agents (in such capacity, the "Syndication Agents") and SOCIETE GENERALE, and BNP ------------------ PARIBAS as documentation agents (in such capacity, the "Documentation Agents"), -------------------- and amends and restates the Existing Receivables Purchase Agreement. For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS 1.01 Certain Defined Terms. The following terms used in this Agreement shall have the following meanings: "Administrative Agent" has the meaning set forth in the Preamble. -------------------- "Administrative Agent's Office" means the Administrative Agent's ----------------------------- address and, as appropriate, account identified as such on Schedule 9.02 to the ------------- Mattel Credit Agreement, or such other address or account as the Administrative Agent may from time to time notify to the Purchasers, the Servicer and the Transferor. "Administrative Agent-Related Persons" means the Administrative Agent ------------------------------------ and any successor agent arising under Section 10.02, 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. "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 Administrative Agent or the Purchasers pursuant to this Agreement). "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 Fitch: - 1 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

Applicable S&P/Moody's/Fitch Margin ---------------------------------------- AA-/Aa3/AA- or higher 30.0 bps A/A2/A or higher 44.5 bps A-/A3/A- 52.5 bps "Assignment and Assumption" means an Assignment and Assumption ------------------------- substantially in the form of Exhibit H to the Mattel Credit Agreement. --------- "Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978 --------------- (11 U.S.C.[sec][sec].101, et seq.), as amended from time to time. ------- "Business Day" means any day other than a Saturday, Sunday or other day ------------ on which commercial banks are authorized to close under the laws of, or are in fact closed in, California and the state where the Administrative Agent's Office is located (which, as of the date hereof, is California) and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market. "Collection Account" has the meaning set forth in Section 2.04. ---------- ------------ "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 payment of such Listed Receivable and available to be applied thereon), and (b) all other proceeds of such Listed Receivable. "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 polices 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. "Default Rate" means an interest rate equal to the Base Rate plus 2% ------------ ---- per annum; provided, however, that with respect to the Purchasers' Investment -------- ------- prior to the end of the Yield Period therefor, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Margin) otherwise applicable thereto plus 2% per annum, in each case to the fullest extent permitted by applicable laws. - 2 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

"Defaulting Purchaser" means any Purchaser that (a) has failed to fund -------------------- any portion of its Loans under the Mattel Credit Agreement or Purchasers' Investment hereunder required to be funded by it within one Business Day of the date required to be funded by it, (b) has otherwise failed to pay over to the Administrative Agent or any other Purchaser any other amount required to be paid by it hereunder or under the Mattel Credit Agreement within one Business Day of the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent by the Federal Deposit Insurance Company, the Comptroller of the Currency or the Federal Reserve Board or become the subject of a bankruptcy or insolvency proceeding. "Deficiency Advance" has the meaning set forth in Section 2.06. ------------------ ------------ "Dilution" means any adjustment in the outstanding principal balance of -------- a Listed Receivable attributable to any credits, rebates, billing errors, 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. "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 Assignee" has the meaning specified in Section 10.05(g). ----------------- ---------------- "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" or "payment intangible" 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 any Yield Period with respect to any --------------- Eurodollar Rate Loan, a rate per annum determined by Administrative Agent pursuant to the following formula: Eurodollar Rate = Eurodollar Base Rate ------------------------------------ 1.00 - Eurodollar Reserve Percentage Where, - 3 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

"Eurodollar Base Rate" means, for such Yield Period: -------------------- (a) the rate per annum equal to the rate determined by Administrative Agent to be the offered rate that appears on the page of the Telerate screen that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Yield Period) with a term equivalent to such Yield Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Yield Period, or (b) in the event the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Yield Period) with a term equivalent to such Yield Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Yield Period, or (c) in the event the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by Administrative Agent as the rate of interest (rounded upward to the next 1/100th of 1%) at which deposits in Dollars for delivery on the first day of such Yield Period in same day funds in the approximate amount of the purchase to be made or continued by Administrative Agent (or its Affiliate) in its capacity as a Purchaser and with a term equivalent to such Yield Period would be offered by Bank of America's London Branch to major banks in the offshore Dollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Yield Period. "Eurodollar Reserve Percentage" means, for any day during any Yield ----------------------------- Period, the reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day, whether or not applicable to any Purchaser, under regulations issued from time to time by the Board of Governors of the Federal Reserve System 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"). The Eurodollar Rate for each outstanding Eurodollar Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage. The determination of the Eurodollar Reserve Percentage and the Eurodollar Base Rate by Administrative Agent shall be conclusive in the absence of manifest error. "Existing Receivables Purchase Agreement" means that certain Receivables --------------------------------------- Purchase Agreement dated as of March 11, 1998, as amended, among the Transferor, Servicer, Guarantor, the Administrative Agent and the purchasers party thereto. - 4 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

"Facility Termination Date" means the earliest to occur of (a) March ------------------------- 31, 2005, (b) the date upon which the Purchaser Commitments are terminated in accordance with the terms hereof, and (c) the Termination Date under and as defined in the Mattel Credit Agreement. "Fisher-Price" means Fisher-Price, Inc., a Delaware corporation. ------------ "Fitch" means Fitch ICBA or any successor thereto. ----- "Guarantor" means Mattel as guarantor under the Purchase and Sale --------- Agreement. "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 Administrative Agent, the Purchasers ------------------- and their respective Affiliates, together with each of their respective employees, agents, successors, transferees and assigns. "Insolvency Proceeding" means, with respect to any Person, (a) (i) a --------------------- court having jurisdiction in the premises entering a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed, or (ii) any other similar relief being granted under any applicable federal or state or applicable foreign law; a petition for an involuntary case being filed against such Person 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 such Person, or over all or substantially all of its property, being entered; or an interim receiver, trustee or other custodian of such Person for all or substantially all of the property of such Person being appointed involuntarily; and the continuance of any such events in clause (ii) for 45 days unless dismissed, bonded or discharged; or (b) such Person having 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 consenting 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 consenting 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 such Person of any assignment for the benefit of creditors; or the inability or failure of such Person, or the admission by such Person in writing of its inability, to generally pay its debts as such debts become due; or the Board of Directors of such Person adopting any resolution or otherwise takes action to approve any of the foregoing. "Listed Receivables" means the Receivables the outstanding principal ------------------ balances of which were reflected in the applicable Purchase Notice and subsequently identified pursuant to Section 2.02(a)(iii). -------------------- "Material Adverse Effect" means (i) a material adverse effect upon the ----------------------- business, operations, properties, assets or condition (financial or otherwise) of the Transferor or Mattel and - 5 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

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 Amended and Restated Credit ----------------------- Agreement dated as of even date herewith, among Mattel, the financial institutions parties thereto, and Bank of America, as Administrative Agent, as such agreement may be an 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 9.02 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 9.14 of the Mattel Credit Agreement as Section 9.16 of the amended and restated agreement), the parties hereto shall cooperate in good faith to amend this Agreement in order to correct the references 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. ------------ "Obligors" means Wal-Mart Stores, Inc., a Delaware corporation, and -------- Target Corporation, a Minnesota corporation. "Participant" has the meaning set forth in Section 10.05(d). ----------- ---------------- "Percentage" means with respect to each Purchaser the percentage set ---------- forth opposite such Purchaser's name on Schedule 1.01 to the Mattel Credit ------------- Agreement. Each Purchaser's Percentage shall at all times be equal to its Pro Rata Share as a Lender under and as defined in the Mattel Credit Agreement. "Proofs of Claim" means 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 and Guarantor thereunder, and the Transferor, as buyer thereunder. "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. - 6 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

"Purchase Notice" means a notice from the Servicer to the --------------- Administrative Agent substantially in the form attached hereto as Exhibit A. --------- "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. "Purchasers" has the meaning set forth in the preamble to this ---------- Agreement. "Purchaser Commitment" means, for each Purchaser, such Purchaser's -------------------- Percentage of the Purchasers' Investment Limit. "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 Administrative Agent; provided, however, that the Purchased Interest shall never be more than -------- ------- 1.0. "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) as such amount may be reduced or terminated pursuant to Section ------- 2.05 or otherwise pursuant to the terms hereof. - ---- "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 general intangible, arising in connection with the sale or lease of goods or the rendering of - 7 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

services by such Seller, and includes, without limitation, the obligation to pay any finance charges, fees and other charges with respect thereto. "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, as of any date of determination, -------------------- Purchasers having at least 66-2/3% of the Purchasers' Investment Limit or, if the Purchaser Commitments have been terminated, Purchasers holding in the aggregate at least 66-2/3% of all Loans and Purchasers' Investment; provided -------- that the Purchaser Commitment of, and the outstanding principal amount of any Loans and portion of Purchasers' Investment held by any Defaulting Purchaser shall be excluded for purposes of making a determination of Requisite Purchasers. "Restricted Payments" has the meaning set forth in Section 6.01(k)). ------------------- ---------------- "Seller Party" means each of the Transferor and the Servicer. ------------ "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 4.03. ---------------- ------------ "Servicing Fee" has the meaning set forth in Section 4.06. ------------- ------------ "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 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 - 8 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

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 Administrative 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 7.01. ----------------- ------------ "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, in each case as any such Transaction Documents may be amended, amended and restated, extended or otherwise modified from time to time. The Loan Documents will not be Transaction Documents for purposes of this Agreement. The Demand Note dated March 11, 1998 made by Mattel to the Buyer in the amount of approximately $9,000,000 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. "Unmatured Termination Event" means an event that, with the giving of --------------------------- any notice, the passage of time, or both, would be a Termination Event. "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. - 9 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

"Yield Period" 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. 1.02 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. SECTION 2. AMOUNTS AND TERMS OF THE PURCHASES 2.01 PURCHASE FACILITY. On the terms and conditions hereinafter set forth, each Purchaser hereby agrees to purchase from time to time from the Transferor until the Facility Termination Date, without recourse (except as expressly provided herein), undivided percentage ownership interests in the Listed Receivables and other items included in the related Purchased Interest; provided, however, that: -------- ------- (a) the aggregate outstanding Purchasers' Investments shall not exceed the Purchasers' Investment Limit; (b) no Purchaser shall be obligated to make a purchase in excess of its Purchaser Commitment; (c) the aggregate outstanding Purchasers' Investment plus the aggregate outstanding principal amount of all ---- Loans outstanding under the Mattel Credit Agreement shall not exceed the Aggregate Facilities Commitment; and (d) each Purchaser's Percentage of the aggregate outstanding Purchasers' Investment plus the aggregate outstanding ---- principal amount of all Loans of each Purchaser in its capacity as a Lender under the Mattel Credit Agreement shall not exceed its Commitment thereunder. 2.02 MAKING PURCHASES. (a) (i) Each purchase of undivided percentage ownership interests hereunder shall be made upon the Servicer's delivery to the Administrative Agent of a Purchase Notice, which notice shall be irrevocable. Each Purchase Notice must be received by the Administrative Agent not later than 9:00 a.m. (California time) on the third Business Day prior to the related Purchase Date. There may not be more than four Purchase Dates in any 12-month period. 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. - 10 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

(ii) Not later than 9:00 a.m. (California time) on the second Business Day prior to the related Purchase Date, the Administrative 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 Administrative 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. (iii) The Transferor shall send to the Administrative Agent for receipt by the Administrative 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 Administrative Agent shall notify each Purchaser of the proposed purchase (such notice to normally be given within two hours of receipt by the Administrative Agent). Each Purchaser shall make available to the Administrative Agent its Percentage of the purchase price by remitting such funds to the Administrative Agent's Office prior to 12:00 Noon (California time) on the Purchase Date. On each Purchase Date, the Administrative Agent shall, upon satisfaction of the applicable conditions set forth in Section 3 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 Administrative Agent shall cause an amount of same-day funds equal to such aggregate amount received by the Administrative Agent to be credited to the Transferor's account at the Administrative Agent's Office. (c) On each Purchase Date, effective upon the payment contemplated by Section 2.02(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 2.02(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 Administrative Agent for the benefit of the Administrative 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 and Transferor hereby authorizes the Administrative Agent to file a financing statement to perfect such interest. The Administrative Agent, on behalf of itself and the Purchasers, shall have, with respect to the Specified Assets, and in addition to all other rights and remedies available to the Administrative Agent, all the rights and remedies of a secured party under any applicable UCC. - 11 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

2.03 Payments and Computation, 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. (California time) on the day when due in same day funds to the Administrative Agent's Office. All amounts received after noon (California 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 Administrative 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 the Default Rate. Notwithstanding the foregoing, interest shall not commence accruing at the Default Rate until the Administrative Agent, at the direction of the Requisite Purchasers, has notified the Transferor thereof; provided, however, that upon the occurrence of a -------- ------- Termination Event specified in Section 7.01(d), the Default Rate shall thereupon --------------- automatically commence accruing and be due and payable without further act of or demand by the Administrative Agent or any Purchaser. All computations of Yield 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 Administrative Agent or any Purchaser hereunder on account of a Purchased Interest shall be applied by the Administrative 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 Administrative Agent hereunder, and third, to repay any such ----- Purchasers' Investment. The amount of each Purchasers' Investment shall be reduced by payments received by the Administrative Agent and applied on account of such Purchasers' Investment pursuant to this Agreement. 2.04 COLLECTION ACCOUNT. (a) At any time the second highest long-term unsecured debt rating issued to the Servicer by S&P, Moody's or Fitch is lower than BBB-, Baa3 or BBB-, respectively, there shall be established and maintained, in the name of the Administrative Agent for the benefit of the Purchasers, a segregated account (the "Collection Account"), at Administrative Agent's Office, 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 Administrative 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 Fitch 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 Fitch is lower than BBB-, Baa 3 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 Administrative Agent until the next succeeding Due Date, at which time such amounts shall be applied pursuant to the terms hereof. - 12 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

2.05 Reduction or Termination of Purchasers' Investment 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 Administrative 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 Administrative Agent shall notify each Purchaser and the administrative 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 ratably reduce the dollar amount of each Purchaser's Purchaser Commitment. (c) Any reduction or termination of the Aggregate Facilities Commitment under the Mattel Credit Agreement to an amount less than the Purchasers' Investment Limit at such time shall automatically and concurrently reduce the Purchasers' Investment Limit to an amount equal to such Aggregate Facilities Commitment amount, as so reduced, or terminate the Purchasers' Investment Limit, as the case may be. Any such reduction shall be applied ratably to each Purchaser's Purchaser Commitment. 2.06 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 Purchaser 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 Administrative 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 -------- Administrative 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 Administrative Agent's share of the total outstanding Purchasers' Investment in full payment of such Deficiency Advance. Acceptance by the Transferor of a Deficiency Advance from the Administrative 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 3. CONDITIONS OF PURCHASES 3.01 Conditions Precedent to Initial Purchase. The initial purchase of an undivided interest pursuant to this Agreement is subject to the conditions precedent that the Administrative - 13 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

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 Administrative 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, substantially in the form attached hereto as Exhibit B; ---------- (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 Administrative Agent may conclusively rely until such time as the Administrative 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 the state of its incorporation or formation as of a recent date, and the 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) 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; (e) an assignment of the Transferor's rights, title and interest in, to and under the obligations of the Transferor as "Buyer" under Section 9 of --------- the Purchase and Sale Agreement; (f) each other item to be delivered pursuant to Section 3.01 of the Purchase and Sale Agreement; (g) evidence that all conditions to the effectiveness of the Mattel Credit Agreement have been, or concurrently herewith are being, satisfied or waived thereunder; and (h) UCC-1 financing statements (a) signed by Mattel Sales as debtor and the Transferor as the secured party in form for filing with the Secretary of State of the State of California, (b) signed by Fisher-Price as debtor and the Transferor as the secured party in form for filing with the Secretary of State of the State of New York, and (c) signed by the Transferor as debtor and the Administrative Agent as secured party in form for filing with the Secretary of State of Delaware. 3.02 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: - 14 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

(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 5.01 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 warranty is expressly made as of an earlier date); (ii) the representations and warranties of Mattel contained in any Loan Document (except the representation and warranty contained in Section 5.09 of the Mattel Credit Agreement and, in the case of a ------------ purchase of where the aggregate Purchasers' Investment being made on that date equals or is less than the aggregate Purchasers' Investment maturing on that date, the representation and warranty contained in Section 5.11 of the Mattel Credit Agreement), shall be true, correct ------------ and complete in all material respects on and as of that Purchase Date (except to the extent that such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date) to the same extent as though made on and as of that Purchase Date; and (iii) no event has occurred and is continuing, or would result from such purchase, that constitutes a Termination Event or an Unmatured Termination Event that would constitute a Termination Event or an Unmatured Termination Event with respect to the Obligor in each case, other than a Termination Event or an Unmatured Termination Event as described in Sections 7.01(e) or (i) hereof with respect to an Obligor whose Receivables are not to be purchased on such Purchase Date on the Listed Receivables being purchased but for the requirement that notice be given or time elapse or both; (b) after giving effect to the payment contemplated by Section ------- 2.02 on the date of such purchase, the aggregate outstanding Purchaser's - ---- Investments shall not exceed the Purchasers' Investment Limit; (c) the Administrative Agent shall have received a list of Eligible Receivables in accordance with Section 2.02; ------------ (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. - 15 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

SECTION 4. SERVICING AND SETTLEMENT PROCEDURES 4.01 Appointment of Servicer. Until the Administrative 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 Administrative 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 4.02 below with respect to ------------ the Listed Receivables originated by Fisher-Price, and Fisher-Price hereby accepts such delegation. Mattel acknowledges that the Administrative 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 4.04, the Administrative Agent may designate as ------------ Servicer any Person (including the Administrative 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. 4.02 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 Administrative 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 Administrative 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 Related Security; provided, however, that no such direction may be given -------- ------- unless (x) a Termination Event has occurred and is continuing (other than a Termination Event described in Section 7.01(e) or (i) hereof), 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 2.04, the Servicer shall hold (and shall cause each sub-servicer to - ------------ hold) in trust (and, during the continuance of a Termination Event (other than a Termination Event described in Section 7.01(e) or (i) hereof), at the request ---------------------- of the Administrative Agent, segregate) for the Administrative 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 - 16 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

Receivables, the percentage of such Collections represented by the related Purchased Interest. On each Due Date, the Servicer shall deposit into the account at Administrative Agent's Office the amount of Collections required to be held for the Administrative Agent for the benefit of the Purchasers pursuant to the preceding sentence. 4.03 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. 4.04 Servicer Default Remedies. Notwithstanding any other provision of this Agreement, during the continuation of a Servicer Default, the Administrative Agent, upon the written request of the Requisite Purchasers, shall, by written notice to the Transferor and the Servicer: (i) direct the Obligors that payment of all amounts payable under any Listed Receivable be made directly to the Administrative 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 Administrative Agent or its designee; or (iii) terminate and replace the Servicer. 4.05 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 Receivables had not been transferred hereunder and the exercise by the Administrative Agent of 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. Neither the Administrative Agent nor any Purchaser shall have any obligation or liability - 17 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

with respect to any Listed Receivable, any Related Security or any related Contract, nor shall the Administrative Agent or any Purchaser be obligated to perform any of the obligations of any Seller or Seller Party under any of the foregoing. 4.06 Servicing Fees. In consideration of Mattel's agreement to act as Servicer hereunder, the Purchasers and the Administrative Agent hereby agree that, so long as Mattel shall perform as Servicer hereunder, the Transferor shall pay over to Mattel a fee (the "Servicing Fee"), payable quarterly in ------------- arrears on or before the tenth day of the following quarter, equal to 1.0% per annum times the face amount of the Listed Receivables, as compensation for its servicing activities. SECTION 5. REPRESENTATIONS AND WARRANTIES 5.01 Representations and Warranties. Each Seller Party severally represents and warrants, as to itself alone, as applicable, to the Administrative 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, - 18 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

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 Administrative 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 Administrative Agent. (g) No representation or warranty of any Seller Party contained in this Agreement or any other document, certificate or written statement furnished to the Purchasers by any Seller Party since January 1, 2002 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 any Seller Party 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 Purchasers 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 any Seller Party to be reasonable at the time made, it being recognized by the Purchasers 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 any Seller Party 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 any Seller Party and their respective Subsidiaries, taken as a whole, which has not been disclosed herein or in the written materials referred to in Section 5.08 of the Mattel Credit Agreement other than as disclosed in writing to the Purchasers on or before the date hereof. (h) With respect to the Transferor, the principal place of business, chief executive office and state of organization (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 6.01(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. - 19 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

(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 Regulation 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 (excluding a --------- Termination Event described in Section 7.01(e) or (i)). --------------- (l) 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 Administrative Agent pursuant to of Section ------- 6.01(b), and (ii) has never merged with or into or consolidated with any other - ------- Person. SECTION 6. COVENANTS 6.01 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 Administrative 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 state of organization, 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 Administrative Agent, at any other - 20 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

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 Administrative Agent to further assure and perfect the interests of the Administrative Agent and the Purchasers in the Listed Receivables; and (ii) shall provide the Administrative 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 jurisdiction that may be requested by the Administrative Agent to further assure and perfect the interests of the Administrative Agent and the Purchasers in the Listed Receivables; each notice to the Administrative 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 Administrative 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 Administrative Agent and the Purchasers under this Agreement, as the Administrative 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. - 21 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

(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 Administrative Agent. (h) Audits. Each Seller Party shall, from time to time during regular business hours (and with reasonable advance notice) as requested by the Administrative Agent, permit the Administrative Agent, or its agents or representatives, (x) to examine and make copies of and abstracts from all books, records and 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 Administrative Agent on a weekly basis a report, in form and substance satisfactory to the Administrative Agent, with respect to the related Listed Receivables (including with respect to collection efforts pertaining thereto). (ii) Each Seller Party shall provide to the Administrative 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 Administrative Agent the financial statements described in Section 6.01(a) and (b) of the Mattel Credit Agreement, pursuant to the terms of such Sections, including Section 10.02 permitting facsimiles or email. ------------- (iv) Each Seller Party shall provide to the Administrative Agent such other information respecting Listed Receivables or the condition or operations, financial or - 22 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

otherwise, of the Transferor or any of its Affiliates as the Administrative Agent may from time to time reasonably request (including listings identifying the outstanding principal balance of each Listed Receivable). (k) General Restrictions. The Transferor shall not (i) pay or declare any Dividend, (ii) lend or advance any funds; or (iii) repay any loans or advances to, for or from any Seller or other Affiliate of the Transferor (actions of the type described in clauses (i), (ii) and (iii) are herein collectively called "Restricted Payments"), unless (A) in the case of Dividends, such Dividends comply with applicable law, and (B) in the case of any Restricted Payment, the Transferor would be Solvent after giving effect to such Restricted Payment. (l) Mergers, Acquisitions. Sales, Investments. 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, the Purchase and Sale Agreement or any Other Permitted Accounts Receivable Financing Facility; 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 this Agreement, the Purchase and Sale Agreement or any Other Permitted Accounts Receivable Financing Facility and (y) except, in the case of loans, under the Demand Note dated March 11, 1998 made by Mattel to the Buyer in the amount of approximately $9,000,000 (or other similar demand notes delivered in connection with this Agreement, the Purchase and Sale Agreement or any Other Permitted Accounts Receivable Financing Facility). (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 Administrative Agent's right, title and interest in the Receivables or which may have a material adverse effect on the collectibility of the Receivables or which may limit or adversely affect Mattel's obligations as Guarantor thereunder. (n) Claim under Section 7.01 of Purchase and Sale Agreement. If the Administrative Agent or the Purchasers makes a claim under Section 9.01, the Transferor agrees to promptly make a corresponding claim - ------------ against the Sellers under Section 7.01of the Purchase and Sale Agreement. If the Transferor fails to make such claim, the Transferor hereby irrevocably authorizes the Administrative Agent, on behalf of itself and the Purchasers, to make such claim thereunder in the name of the Transferor. SECTION 7. TERMINATION EVENTS AND TERMINATION EVENT REMEDIES - 23 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

7.01 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 Administrative 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 Seller (or any of its officers) under or in connection with any Transaction Document or any material information or report delivered by any Seller Party or Seller 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 Servicer Default shall have occurred and be continuing; (d) an Insolvency Proceeding shall have been commenced and be 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); (g) the Administrative 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) any short-term unsecured debt rating assigned to an Obligor by S&P, Moody's or Fitch falls below "A-2," "P-2" or "F-2," respectively, or the second highest long-term unsecured debt rating assigned to an Obligor by S&P, Moody's or Fitch falls below "A-," "A3" or "A-," respectively; (j) there shall have occurred any event not otherwise covered by this definition which has or will have a Material Adverse Effect; or - 24 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

(k) the Commitments of the Lenders under the Mattel Credit Agreement shall have been terminated. 7.02 TERMINATION EVENT REMEDIES. Any time during a Termination Event, the Administrative Agent, upon the written request of the Requisite Purchasers, shall, by written notice to the Transferor, the Servicer and the Purchasers, terminate the Purchaser Commitments; provided, however, that with respect to a Termination Event -------- ------- described in Section 7.01(e) or (i), only the commitment of the Purchasers to --------------- --- purchase undivided interests in the Receivables of the affected Obligor may be terminated as aforesaid. Notwithstanding the foregoing, upon the occurrence of a Termination Event described in Section 7.01(d) or (k), the Purchaser Commitments --------------- --- shall terminate automatically. 7.03 Rights Not Exclusive. The rights provided for in this Agreement and the other Transaction 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, including without limitation, under the Transaction Documents. SECTION 8. THE ADMINISTRATIVE AGENT 8.01 Appointment and Authorization. Each Purchaser hereby irrevocably appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Transaction Document and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement or any other Transaction Document, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Transaction Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have 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 any other Transaction Document or otherwise exist against the Administrative Agent. 8.02 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement 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 Administrative 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. 8.03 Liability of Administrative Agent. None of the Administrative Agent-Related Persons shall (i) be liable to the Purchaser for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Transaction Document (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Purchasers for any recital, statement, representation or warranty made by the Transferor or the Guarantor, or any officer or partner thereof, contained in this Agreement or in any other - 25 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

Transaction Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Transaction Document, or for the value of any collateral or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Transaction Document, or for any failure of the Transferor or the Guarantor or any other to any Transaction Document to perform its obligations hereunder or thereunder. No Administrative Agent-Related Person shall be under any obligation to any Purchaser 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 Transaction Document, or to inspect the properties, books or records of the Transferor, the Servicer or the Guarantor or any of their respective Subsidiaries or Affiliates. 8.04 RELIANCE BY ADMINISTRATIVE AGENT. (a) The Administrative 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 Transferor, Servicer or the Guarantor), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Transaction Document unless it shall first receive such advice or concurrence of the Requisite Purchasers as it deems appropriate and, if it so requests, 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 Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Transaction Document in accordance with a request or consent of the Requisite Purchasers and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Purchasers. (b) For purposes of determining compliance with the conditions specified in Sections 3.01 and 3.02, each Purchaser 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 Administrative Agent to such Purchaser for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Purchaser, unless an officer of the Administrative Agent responsible for the transactions contemplated by the Transaction Documents shall have received notice from the Purchaser prior to any borrowing specifying its objection thereto and either such objection shall not have been withdrawn by notice to the Administrative Agent to that effect or the Purchaser shall not have made available to the Administrative Agent the Purchaser's ratable portion of such borrowing. 8.05 Notice of Termination Event or Servicer Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Termination Event or Servicer Default unless the Administrative 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 unless the Administrative Agent shall have received written notice from a Purchaser, the Transferor, Servicer or the Guarantor referring to this Agreement, describing - 26 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

such Termination Event or Servicer Default and stating that such notice is a "notice of termination event and/or servicer default." In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Purchasers. The Administrative Agent shall take such action with respect to such Termination Event or Servicer Default as shall be requested by the Requisite Purchasers in accordance with Section 7; --------- provided, however, that unless and until the Administrative Agent shall have - -------- ------- received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Termination Event or Servicer Default as it shall deem advisable or in the best interest of the Purchasers. In the event that any remedy is exercised pursuant to Sections 4.02, 4.04 or 7.02 of this Agreement, ------------- ---- ---- each Purchaser and the Administrative 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 Administrative Agent as directed by the Requisite Purchasers for the ratable benefit of the Purchasers. 8.06 Credit Decision. Each Purchaser expressly acknowledges that none of the Administrative Agent-Related Persons has made any representation or warranty to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Transferor, Servicer or the Guarantor shall be deemed to constitute any representation or warranty by the Administrative Agent to any Purchaser. Each Purchaser represents to the Administrative Agent that it has, independently and without reliance upon the Administrative 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 business, prospects, operations, property, financial and other condition and creditworthiness of the Transferor or Guarantor and their respective 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 hereunder. Each Purchaser also represents that it will, independently and without reliance upon the Administrative 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 the other Transaction Documents, and to make such investigation as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Transferor, Servicer or the Guarantor. Except for notices, reports and other documents expressly herein required to be furnished to the Purchasers by the Administrative Agent, the Administrative Agent shall not have any duty or responsibility to provide any Purchaser with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Transferor, Servicer or the Guarantor which may come into the possession of any of the Administrative Agent-Related Persons. 8.07 Indemnification. Whether or not the transactions contemplated hereby shall be consummated, the Purchasers shall indemnify upon demand the Administrative Agent-Related Persons (to the extent not reimbursed by or on behalf of the Transferor or the Guarantor and without limiting the obligation of the Transferor or the Guarantor to do so), ratably from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, - 27 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

costs, expenses and disbursements of any kind whatsoever which may at any time (including at any time following the repayment of the Purchased Interests and the termination or resignation of the related Administrative 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 Purchaser shall be liable for the -------- ------- payment to the Administrative 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 Purchaser shall reimburse the Administrative 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 Administrative 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 Transaction Document, or any document contemplated by or referred to herein to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Transferor or the Guarantor. 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 Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Purchaser (because the appropriate form was not delivered, was not properly executed, or because such Purchaser failed to notify the Administrative Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Purchaser shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Administrative 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 Purchasers in this Section shall survive the payment of all obligations hereunder. 8.08 Administrative Agent in its Individual Capacity. Bank of America and its Affiliates may make loans to, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory or other business with any Obligor, the Transferor or the Guarantor as though it were not the Administrative Agent hereunder and without notice to or consent of the Purchasers. With respect to its purchases hereunder, Bank of America shall have the same rights and powers under this Agreement as any other Purchaser and may exercise the same as though it were not the Administrative Agent, and the terms "Purchaser" and "Purchasers" shall include Bank of America in its individual capacity. 8.09 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Purchasers; provided that any such resignation by Bank of America shall also constitute its resignation as Administrative Agent under the Mattel Credit Agreement. If the Administrative Agent shall resign as Administrative Agent under this Agreement, then the Requisite Purchasers may appoint a successor Administrative Agent for the Purchasers, which shall be a commercial bank organized under the laws of the United States or any state thereof, having a combined surplus and capital of not less than - 28 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

$500,000,000, whereupon such successor Administrative Agent shall succeed to the rights, powers and duties of the former Administrative Agent and the obligations of the former Administrative Agent shall be terminated and canceled, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement. The former Administrative Agent's resignation shall not become effective until such successor Administrative Agent has been appointed and has succeeded of record to all right, title and interest of the former Administrative Agent in the Purchased Interest; provided, however, that if the Requisite Purchasers cannot -------- ------- agree as to a successor Administrative Agent within ninety (90) days after such resignation, the Administrative Agent shall appoint a successor Administrative 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 Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. 8.10 Other Administrative Agents; Lead Managers. None of the Purchasers identified on the facing page or signature pages of this Agreement as a "syndication agent," "documentation agent," "co-agent" or "lead manager" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Purchasers as such. Without limiting the foregoing, none of the Purchasers so identified shall have or be deemed to have any fiduciary relationship with any Purchaser. Each Purchaser acknowledges that it has not relied, and will not rely, on any of the Purchasers so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. 8.11 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 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 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 Administrative 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. 8.12 Independent Agreements. The provisions contained in Sections -------- 8.01 through 8.08 and 8.10 constitute independent obligations and agreements of - ---- --------------------- the Administrative Agent - 29 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

and the Purchasers, and the Transferor shall not be deemed parties thereto nor bound thereby. The Transferor acknowledge the rights of the Purchasers and the Administrative Agent under Section 8.08. ------------ SECTION 9. INDEMNIFICATION 9.01 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 Administrative 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 Section 5 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 to conform to any applicable law, rule or regulation; (iv) the failure to vest in the Administrative 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 - 30 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

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 Section 5 or Section 6 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 9.01(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 will 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 9.01(b), the failure of an Obligor --------------- to make payment on the Listed Receivables prior to or as of the Due Date; or - 31 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

(xviii) any action or inaction by the Transferor or the Servicer which impairs the interest of the Administrative Agent or any Purchaser in any Listed Receivables or other Specified Assets. (b) Notwithstanding Section 9.01(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 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 any 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 Administrative 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 Administrative Agent shall have sent a notice to the Servicer to the effect that the Administrative 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 Administrative 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 Administrative Agent, it being understood and agreed that the Administrative 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 Administrative 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 Administrative 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 Administrative 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 Administrative 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 - 32 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

by such Person hereunder, such amount shall be deemed not to have been so received and, the Administrative Agent shall have a claim against the Transferor to the extent provided herein. (d) No Indemnified Party shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement; provided, that the Transferor shall have no obligation -------- hereunder to any Indemnified Party with respect to such damages resulting from the gross negligence or willful misconduct of such Indemnified Party. No Indemnified Party shall have any liability for any indirect or consequential damages relating to this Agreement or any other Transaction Document or arising out of its activities in connection herewith or therewith (whether before or after the date hereof). 9.02 Capital Adequacy, Etc. Sections 3.01(a)-(e), 3.02, 3.03, 3.04, 3.05 and 3.06 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: except where direct quotations are made therefrom, (i) all references to "the Company" shall be deemed to be references to the Transferor; (ii) all references to "Lender" or "Lenders" shall be deemed to be references to "Purchaser" or "Purchasers," respectively; (iii) all references to "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 " interest" shall be deemed to be references to Yield and to any "Interest Period" shall be deemed to be references to a "Yield Period;" (viii) the following words in Section 3.03(b) of the Mattel Credit Agreement, "pursuant to Section 2.04, either on the last day of the Interest Period thereof if the - ------------ Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or promptly, if the Lender may not lawfully continue to maintain such Eurodollar Rate Loans," shall be deemed to be replaced by the word "promptly;" (x) Section 3.05(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 3.05(c) of the Mattel Credit Agreement shall be deemed deleted. SECTION 10. MISCELLANEOUS 10.01 Waivers; Amendments. Etc. No failure or delay on the part of the Administrative 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 or the Servicer in any case entitle the Transferor or the Servicer, as the case may be, to any other or further notice or demand in similar or other circumstances. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by Governmental Rule. Any provision of this Agreement may be amended if, but only if, such amendment is in writing and is - 33 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

signed by the Transferor, the Servicer, the Administrative 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, and acknowledged by the Administrative 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 8.10; ----------- (f) release the Guarantor from any obligation undertaken by it pursuant to the Purchase and Sale Agreement; (g) substitute or add Obligors; or (h) amend Section 7.01(i) of the Agreement to reduce the minimum debt ratings required as to any Obligor set forth therein. provided further, that no amendment, waiver or consent shall (i), unless in - -------- ------- writing and signed by the Administrative Agent in addition to the Requisite Purchasers or all the Purchasers, as the case may be, affect the rights or duties of the Administrative Agent under any Transaction Document, or (ii) have the effect of making any Purchaser's Percentage hereunder a different percentage than its Pro Rata Share under the Mattel Credit Agreement. No notice to or demand on any Seller Party in any case shall entitle any Seller Party 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 10.01 shall be binding upon each Purchaser at the time ------------- outstanding, each future Purchaser and, if signed by the Seller Parties, on the Seller Parties. Notwithstanding anything to the contrary herein, no Defaulting Purchaser shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Purchaser Commitment of such Purchaser may not be increased or extended nor the Purchaser Investment owing to such Purchaser be reduced without the consent of such Purchaser. 10.02 Notices, Etc. (a) General. Unless otherwise expressly provided ------- herein, all notices and other communications provided for hereunder shall be in writing (including by facsimile transmission) and mailed, faxed or delivered, to the address, facsimile number or (subject to subsection (c) below) electronic mail address specified for notices on Schedule 10.02 to the Mattel -------------- Credit Agreement; or, in the case of the Transfer or the Administrative Agent, to such other address as shall be designated by such party in a notice to the other parties, and in the case of any other party, to such other address as shall be designated by such party in a notice to Mattel or the Administrative Agent. All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the intended recipient and - 34 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

(ii) (A) if delivered by hand or by courier, when signed for by the intended recipient; (B) if delivered by mail, upon the earlier of receipt and four Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone during the Business Day; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of subsection (c) below), when delivered; provided, however, that notices and other communications to the Administrative - -------- ------- Agent pursuant to Section 2 shall not be effective until actually received by --------- such Person. Any notice or other communication permitted to be given, made or confirmed by telephone hereunder shall be given, made or confirmed by means of a telephone call to the intended recipient at the number specified on Schedule -------- 10.02 to the Mattel Credit Agreement, it being understood and agreed that a - ----- voicemail message shall in no event be effective as a notice, communication or confirmation hereunder. (b) Effectiveness of Facsimile Documents and Signatures. --------------------------------------------------- Transaction Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable Governmental Rule, have the same force and effect as manually-signed originals and shall be binding on all Seller Parties, the Administrative Agent and the Purchasers. The Administrative Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided, -------- however, that the failure to request or deliver the same shall not limit the - ------- effectiveness of any facsimile document or signature. (c) Limited Use of Electronic Mail. Electronic mail and Internet ----------------------------------------------- and intranet websites may be used only to distribute routine communications, such as financial statements and other information as provided in Section ------- 6.01(j), and to distribute Transaction Documents for execution by the parties - ------- thereto, and may not be used for any other purpose. (d) Reliance by Administrative Agent and Purchasers. The ----------------------------------------------- Administrative Agent and the Purchasers shall be entitled to rely and act upon any notices purportedly given by or on behalf of any Seller Party even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Transferor shall indemnify each Administrative Agent-Related Person and each Purchaser from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of any Seller Party. All telephonic notices to and other communications with the Administrative Agent pursuant to Section 2 --------- may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording. 10.03 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. - 35 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

(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 Transferor, the Administrative Agent and the Purchasers consents, for itself and in respect of its property, to the non-exclusive jurisdiction of those courts. Each of the Transferor, the Administrative 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 Transferor, the Administrative 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. 10.04 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. 10.05 SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Seller Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Purchaser (and any attempted assignment or transfer by any Seller Party without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) From time to time following the Effective Date, each Purchaser may assign to one or more Eligible Assignees all or any portion of its Purchaser Commitment and its Percentage of the Purchasers' Investment; provided -------- that (i) such Purchaser concurrently assigns a ratable portion of its Commitment and its Loans under the Mattel Credit Agreement, (ii) such assignment, if not to a Purchaser or an Affiliate of the assigning Purchaser, shall be consented to by the Transferor at all times other than during the existence of a Termination Event (other than a Termination Event described in Section 7.01(e) or (i)) or a Servicer Default and by the Administrative Agent - --------------- (which approval of the Transferor shall not be unreasonably withheld or delayed), (iii) a copy of a duly signed and completed Assignment and Assumption shall be delivered to the Administrative Agent and the Transferor, (iv) except in the case of an assignment (A) to an Affiliate of the assigning Purchaser or to another Purchaser or an Approved Fund (as defined in subsection (g) of this Section) with respect to a Purchaser or (B) of the entire remaining Purchaser Commitment of the assigning Purchaser, the portion of the Aggregate Facilities Commitment assigned shall not be less than $10,000,000, and (v) the effective date of any such assignment shall be as specified in the Assignment and Assumption, but not earlier than - 36 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

the date which is five Business Days after the date the Administrative Agent has received the Assignment and Assumption. Upon satisfaction of the conditions set forth in the prior sentence, any forms required by Section 10.15 of the ------------- Mattel Credit Agreement and payment of the requisite fee described below, the assignee named therein shall be a Purchaser for all purposes of this Agreement effective as of the specified effective date to the extent of the Assigned Interest (as defined in such Assignment and Assumption), and the assigning Purchaser shall be released from any further obligations under this Agreement to the extent of such Assigned Interest. Until satisfaction of the conditions set forth herein to any assignment, the Seller Parties and Administrative Agent may continue to deal solely and directly with the assigning Purchaser in connection the Assigned Interest. The Administrative Agent's consent to any assignment shall not be deemed to constitute any representation or warranty by any Administrative Agent-Related Person as to any matter. (c) After receipt of a completed Assignment and Assumption, and receipt of an assignment fee of $3,500 (which fee includes any assignment fees in connection with the concurrent assignment of interests under the Mattel Credit Agreement) from such Eligible Assignee or such assigning Purchaser (including in the case of assignments to Affiliates of assigning Purchasers), the Administrative Agent shall, promptly following the effective date thereof, provide to the Company and Purchasers a revised Schedule 10.02 to the Mattel -------------- Credit Agreement giving effect thereto. (d) Upon advance written notice to the Company, any Purchaser 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 ----------- Purchased Interest, the Purchaser Commitment of that Purchaser and the other interests of that Purchaser (the "originating Purchaser") hereunder and under --------------------- the other Transaction Documents; provided, however, that (i) such Purchaser -------- ------- shall concurrently with any sale of a participation herein sell a ratable participation in the Mattel Credit Agreement and thereafter cause any such participation herein to remain ratable with such participation in the Mattel Credit Agreement, (ii) the originating Purchaser's obligations under this Agreement shall remain unchanged, (iii) the originating Purchaser shall remain solely responsible for the performance of such obligations, (iv) the Seller Parties and the Administrative Agent shall continue to deal solely and directly with the originating Purchaser in connection with the originating Purchaser's rights and obligations under this Agreement and the other Transaction Documents, and (v) 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 as described in the first proviso to Section 10.01. The Seller Parties hereby ------------- acknowledge and agree that any such disposition will give rise to a direct obligation of the Seller Parties to the Participant with respect to, and the Participant shall be entitled to the benefit of, Section 9 (other than --------- references to Sections 3.03 and 3.06 of the Credit Agreement) as if it were a ------------- ---- "Purchaser." To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.07 as though it were a Purchaser, ------------- provided such Participant agrees to be subject to Section 8.11 as though it ------------ were a Purchaser. (e) A Participant shall not be entitled to receive any greater payment under Section 3.01(a)-(e), 3.02, 3.04 or 3.05 of the Mattel Credit Agreement (as referred to in Section 9.02) herein than the applicable Purchaser ------------ would have been entitled to receive with respect to the - 37 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

participation sold to such Participant, unless the sale of the participation to such Participant is made with the Company's prior written consent. (f) Notwithstanding any other provision in this Agreement, any Purchaser 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 [double sect].203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. (g) As used herein, the following terms have the following meanings: "Eligible Assignee" means (i) a Purchaser; (ii) an Affiliate ----------------- of a Purchaser; (iii) an Approved Fund; and (iv) any other Person (other than a natural person) approved by (A) the Administrative Agent and (B) unless a Termination Event has occurred and is continuing, the Transferor (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, -------- "Eligible Assignee" shall not include any Seller Party or any Affiliates or Subsidiaries of any Seller Party. "Fund" means any Person (other than a natural person) that is ---- (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. "Approved Fund" means any Fund that is administered or managed ------------- by (i) a Purchaser, (ii) an Affiliate of a Purchaser or (iii) an entity or an Affiliate of an entity that administers or manages a Purchaser. (h) Each Purchaser agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information provided to it by the Seller Parties or any Subsidiary of the Seller Parties, or by the Administrative Agent on a Seller Party's or Subsidiary's behalf, in connection with this Agreement or any other Transaction 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 Mattel Credit 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 Purchaser, or (ii) was or becomes available on a non-confidential basis from a source other than a Seller Party, provided that such source is not bound by a confidentiality agreement with a Seller Party known to the Purchaser; provided, however, that any Purchaser may disclose such -------- ------- information (A) at the request or pursuant to any requirement of any Governmental Person to which the Purchaser is subject or in connection with an examination of such Purchaser 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 Purchaser -------- shall disclose only the information required by such request and shall notify the Transferor in advance of such disclosure so that the Transferor may seek an appropriate protective order, (C) to such Purchaser's Affiliates and independent auditors and other professional advisors provided such Persons are obligated to keep such information confidential, (D) to any other party to this Agreement, and (E) if a Termination Event exists, in connection with the exercise of any remedies hereunder or any suit, action or - 38 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

proceeding relating to any Loan Document or Transaction Document or the enforcement of rights hereunder or thereunder. Notwithstanding the foregoing, the Seller Parties authorize each Purchaser to disclose to any assignee or Participant and to any prospective assignee or Participant, such financial and other information in such Purchaser's possession concerning the Seller Parties or their Subsidiaries which has been delivered to Administrative Agent or the Purchasers pursuant to this Agreement or which has been delivered to the Administrative Agent or the Purchasers by the Company in connection with the Purchasers' 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 Purchaser to keep such information confidential to the same extent required of the Purchasers hereunder. 10.06 AMENDMENT AND RESTATEMENT. This Agreement amends and restates the Existing Receivables Purchase Agreement and, subject to the Effectiveness Agreement Purchasers' Investment outstanding thereunder, shall be deemed continuing outstanding hereunder. 10.07 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 (other than Termination Events described in Section 7.01(e) or (i) hereof and after the ---------------------- giving of any notice and the expiration of any grace period otherwise 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 whether or not such deposits or other indebtedness are otherwise fully secured and to apply any such amounts in accordance with the provisions of Section 8.10 irrespective of whether or not ------------ wthat shall have made any demand hereunder, and each such Purchaser or Affiliate is hereby irrevocably authorized to permit such set-off and appropriation. 10.08 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY TRANSACTION DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY TRANSACTION DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. - 39 - Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

IN WITNESS WHEREOF, the parties hereto have executed and delivered this First Amended and Restated 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 MATTEL, INC., as Servicer By: /s/ WILLIAM STAVRO -------------------------------------- Name: William Stavro Title: Senior Vice President and Treasurer S-1 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

BANK OF AMERICA, N.A., as Administrative Agent and a Purchaser By: /s/ CASEY COSGROVE -------------------------------------- Casey Cosgrove Vice President S-2 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

BNP PARIBAS, as a Documentation Agent and a Purchaser By: /s/ JANICE S.H. HO -------------------------------------- Name: Janice S.H. Ho Title: Director By: /s/ TJALLING TERPSTRA -------------------------------------- Name: Tjalling Terpstra Title: Director S-3 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

CITICORP USA, INC., as a Syndication Agent and a Purchaser By: /s/ WALT LARSEN -------------------------------------- Name Walt Larsen Title Vice President S-4 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

FLEET NATIONAL BANK, as a Syndication Agent and a Purchaser By: /s/ MARIO F. TEIXEIRA -------------------------------------- Name Mario F. Teixeira Title Vice President S-5 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

SOCIETE GENERALE, as a Documentation Agent and a Purchaser By: /s/ RICHARD BERNAL -------------------------------------- Name Richard Bernal Title Director, Corporate Banking S-6 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

THE BANK OF NOVA SCOTIA By: /s/ R.P. REYNOLDS -------------------------------------- Name: R. P. Reynolds Title: Director S-7 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

BARCLAYS BANK PLC By: /s/ NICHOLAS BELL -------------------------------------- Name: Nicholas Bell Title: Director S-8 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

CREDIT SUISSE FIRST BOSTON By: /s/ ROBERT HETU -------------------------------------- Name: Robert Hetu Title: Director By: /s/ MARK HERON -------------------------------------- Name: Mark Heron Title: Associate S-9 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ VICENTE L. TIMIRAOS -------------------------------------- Name: Vicente L. Timiraos Title: Joint General Manager S-10 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

MANUFACTURERS & TRADERS TRUST COMPANY By: /s/ CHRISTOPHER KANIA -------------------------------------- Name: Christopher Kania Title: Vice President S-11 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

SANPAOLO IMI S.p.A. By: /s/ ETTORE VIAZZO -------------------------------------- Name: Ettore Viazzo Title: Vice President By: /s/ CARLO PERSICO -------------------------------------- Name: Carlo Persico Title: E.V.P./General Manager S-12 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

WELLS FARGO BANK, N.A. By: /s/ PEITTY CHOU -------------------------------------- Name: Peitty Chou Title: Vice President S-13 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

CREDIT LYONNAIS, Los Angeles Branch By: /s/ DIANNE M. SCOTT -------------------------------------- Name: Dianne M. Scott Title: Senior Vice President and Manager S-14 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

UNION BANK OF CALIFORNIA, N.A. By: /s/ GAIL I. BOYLE -------------------------------------- Name: Gail I. Boyle Title: Vice President S-15 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

FIRST UNION NATIONAL BANK By: /s/ DAVID SILANDER -------------------------------------- Name: David Silander Title: Director S-16 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

JPMORGAN CHASE BANK By: /s/ WILLIAM P. RINDFUSS -------------------------------------- Name: William P. Rindfuss Title: Vice President S-17 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

U.S. BANK NATIONAL ASSOCIATION By: /s/ JANET JORDAN -------------------------------------- Name: Janet E. Jordan Title: Vice President S-18 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

BANK OF TOYKO-MITSUBISHI TRUST COMPANY By: /s/ R. L. VAN DE BERGHE -------------------------------------- Name: R. L. Van de Berghe Title: Vice President S-19 Mattel, Inc. First Amended and Restated Receivables Purchase Agreement

EXHIBIT 10.3 =============================================================================== Term Loan Agreement Dated as of July 17, 2000 among Mattel, Inc. The Lenders Party hereto The Industrial Bank of Japan, Limited, as Administrative Agent and Co-Syndication Agent and Bear, Stearns & Co. Inc., as Co-Syndication Agent Bear, Stearns & Co. Inc., Arranger and The Industrial Bank of Japan, Limited, Co-Arranger ================================================================================

MATTEL INC. TERM LOAN AGREEMENT TABLE OF CONTENTS SECTION 1. DEFINITIONS............................................................. 1 1.01 Certain Defined Terms.................................................. 1 1.02 Other Definitional Provisions.......................................... 13 SECTION 2. THE COMMITMENTS......................................................... 13 2.01 The Commitments........................................................ 13 2.02 Loan Accounts and Notes................................................ 13 2.03 Borrowing Procedure.................................................... 13 2.04 Conversion and Continuation Elections.................................. 14 2.05 Voluntary Prepayments.................................................. 15 2.06 Repayment of Loans..................................................... 15 2.07 Interest on the Loans.................................................. 15 2.08 Fees................................................................... 16 2.09 Calculation of Interest and Fees....................................... 16 2.10 Payments by the Company................................................ 16 2.11 Payments by the Lenders to the Administrative Agent.................... 17 2.12 Sharing of Payments, Etc............................................... 17 SECTION 3. PAYMENTS IN GENERAL..................................................... 18 3.01 Taxes.................................................................. 18 3.02 Capital Adequacy....................................................... 20 3.03 Illegality............................................................. 21 3.04 Increased Costs and Reduction of Return................................ 21 3.05 Funding Losses......................................................... 21 3.06 Inability to Determine Rates........................................... 22 3.07 Survival............................................................... 22 SECTION 4. CONDITIONS PRECEDENT.................................................... 22 4.01 Conditions to Effectiveness............................................ 22 4.02 Conditions to Funding of Loans......................................... 24 SECTION 5. REPRESENTATIONS AND WARRANTIES.......................................... 24 5.01 Organization and Powers................................................ 24 5.02 Good Standing.......................................................... 25 5.03 Material Subsidiaries.................................................. 25 5.04 Authorization of Borrowing............................................. 25 5.05 No Conflict............................................................ 25 5.06 Governmental Consents.................................................. 25 5.07 Binding Obligation..................................................... 25 5.08 Financial Condition.................................................... 25 5.09 Changes, Etc........................................................... 26 5.10 Title to Properties.................................................... 26 5.11 Litigation; Adverse Facts.............................................. 26 5.12 Payment of Taxes....................................................... 26 5.13 Agreements............................................................. 27 5.14 Performance............................................................ 27 5.15 Governmental Regulation................................................ 27 5.16 Employee Benefit Plans................................................. 27 -i-

5.17 Environmental Matters.................................................. 27 5.18 Disclosure............................................................. 27 5.19 Subordination Agreements............................................... 28 SECTION 6. AFFIRMATIVE COVENANTS................................................... 28 6.01 Reporting and Information Requirements................................. 28 6.02 Corporate Existence, Etc............................................... 30 6.03 Payment of Taxes and Claims; Tax Consolidation......................... 30 6.04 Maintenance of Properties; Insurance................................... 31 6.05 Inspection of Property and Books and Records........................... 31 6.06 Use of Proceeds of Loans............................................... 31 6.07 Environmental Laws..................................................... 31 6.08 Subordination Agreements............................................... 31 SECTION 7. NEGATIVE COVENANTS...................................................... 32 7.01 Senior or Secured Indebtedness......................................... 32 7.02 Liens.................................................................. 32 7.03 Restriction on Fundamental Changes..................................... 32 7.04 Sale or Discount of Receivables........................................ 33 7.05 Consolidated Funded Indebtedness to Total Capitalization............... 33 7.06 Interest Coverage Ratio................................................ 33 7.07 ERISA.................................................................. 34 7.08 Margin Regulations..................................................... 34 7.09 Independence of Covenants.............................................. 34 SECTION 8. EVENTS OF DEFAULT....................................................... 34 8.01 Events of Default...................................................... 34 8.02 Remedies............................................................... 36 8.03 Rights Not Exclusive................................................... 37 SECTION 9. THE ADMINISTRATIVE AGENT................................................ 37 9.01 Appointment and Authorization.......................................... 37 9.02 Delegation of Duties................................................... 37 9.03 Liability of Administrative Agent...................................... 37 9.04 Reliance by Administrative Agent....................................... 38 9.05 Notice of Default...................................................... 38 9.06 Credit Decision........................................................ 39 9.07 Indemnification........................................................ 39 9.08 Administrative Agent in Individual Capacity............................ 40 9.09 Successor Administrative Agent......................................... 40 9.10 Co-Syndication Agents, Documentation Agent, Arranger and Co-Arranger... 40 SECTION 10. MISCELLANEOUS.......................................................... 41 10.01 Assignments, Participations, Etc....................................... 41 10.02 Survival of Warranties and of Certain Agreements....................... 44 10.03 Failure or Indulgence Not Waiver; Remedies Cumulative.................. 44 10.04 Fees and Expenses...................................................... 44 10.05 Setoff................................................................. 44 10.06 Notices................................................................ 45 10.07 Severability........................................................... 45 10.08 Amendments and Waivers................................................. 45 10.09 Obligations Several.................................................... 46 10.10 Certain Changes........................................................ 46 -ii-

10.11 Headings............................................................... 46 10.12 Applicable Law......................................................... 46 10.13 Successors and Assigns................................................. 47 10.14 Counterparts........................................................... 47 10.15 Indemnity.............................................................. 47 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 Agreement G-2 Mattel Sales Subordination Agreement H Notice of Assignment and Acceptance I Notice of Prepayment J Joining Lender Agreement SCHEDULES 1.01 Commitments and Pro Rata Shares 5.03 Material Subsidiaries of Company 5.11 Material Litigation 7.02 Certain Liens 10.06 Addresses for Notices and Lending Offices

MATTEL, INC. TERM LOAN AGREEMENT This TERM LOAN AGREEMENT (this "Agreement") is dated as of July 17, 2000 --------- 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 "Lender" and collectively as the ------ "Lenders"), THE INDUSTRIAL BANK OF JAPAN, LIMITED, as administrative agent for ------- the Lenders (in such capacity, the "Administrative Agent") and as co-syndication -------------------- agent (in such capacity, a "Co-Syndication Agent"), and BEAR, STEARNS & CO. -------------------- INC., as co-syndication agent (in such capacity, a "Co-Syndication Agent"). -------------------- RECITAL The Company has requested that the Lenders provide a term loan facility, and the Lenders and the Administrative Agent are willing to do so on the terms and conditions set forth herein. In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: SECTION 1. DEFINITIONS. 1.01 Certain Defined Terms. The following terms used in this Agreement shall have the following meanings: "Administrative Agent" has the meaning assigned to that term in the -------------------- introduction to this Agreement. "Administrative Agent's Office" means the Administrative Agent's address ----------------------------- and, as appropriate, account as set forth on Schedule 10.06 or such other -------------- address or account as the Administrative Agent hereafter may designate by written notice to the Company and the Lenders. "Administrative Agent-Related Persons" means the Administrative Agent and ------------------------------------ any successor agent arising under Section 9.09, together with their respective ------------ Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "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. "Agreement" means this Term Loan Agreement, as it may hereafter be amended, --------- supplemented, restated or otherwise modified from time to time. "Applicable Margin" means the margin applicable to Eurodollar Rate Loans ----------------- (expressed in basis points per annum) set forth in the chart below (i) opposite the second-highest rating issued from among S&P, Moody's and Fitch on the Company's senior unsecured long-term debt or (ii) if the Company's senior unsecured long-term debt is rated by only one of those three companies, opposite the rating issued by that company: Senior Unsecured Long-Term Debt Applicable Ratings Margin - --------------------------------------------------- A or higher by S&P A2 or higher by Moody's 52.5 A or higher by Fitch - --------------------------------------------------- A- by S&P A3 by Moody's 72.5 A- by Fitch - --------------------------------------------------- BBB+ by S&P Baa1 by Moody's 100.0 BBB+ by Fitch - --------------------------------------------------- BBB by S&P Baa2 by Moody's 125.0 BBB by Fitch - --------------------------------------------------- BBB- by S&P Baa3 by Moody's 150.0 BBB- by Fitch - --------------------------------------------------- BB+ or lower by S&P 200.0 Ba1 or lower by Moody's BB+ or lower by Fitch unrated by S&P, Moody's and Fitch - --------------------------------------------------- Any change in the Applicable Margin shall become effective upon any public announcement of any change in the above ratings that requires such a change according to the above chart. "Arranger" means Bear Stearns, in its capacity as arranger of the credit -------- facility provided pursuant to this Agreement. "Assignment and Acceptance" has the meaning set forth in Section 10.01(a). ------------------------- -------- "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 rate of interest publicly -2-

announced from time to time by IBJ as its prime rate, as in effect on such date of determination. Such prime rate is set by IBJ based on various factors including IBJ's costs and desired return, general economic conditions, and other factors, and is used as a reference point for pricing some loans. IBJ may make loans at, above or below the rate announced by it as its prime rate. "Base Rate Loans" means Loans, or portions thereof, made by the Lenders --------------- bearing interest at rates determined by reference to the Base Rate. "Bear Stearns" means Bear, Stearns & Co. Inc., a Delaware corporation. ------------ "Business Day" means any day other than a Saturday, Sunday or other day on ------------ which commercial banks in New York City, New York or Los Angeles, California are authorized or required by law to close and, if the applicable Business Day relates to any Eurodollar Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market. "Capital Assets" means, as at any date of determination, those assets of a -------------- Person that would, in conformity with GAAP, be classified as property, plant or equipment on the balance sheet of that Person. "Capital Lease", as applied to any Person, means any lease of any property ------------- (whether real, personal or mixed) by that Person as lessee which would, in conformity with GAAP, be required to be accounted for as a capital lease on the balance sheet of that Person other than, in the case of the Company or any of its Subsidiaries, any such lease under which the Company or any of its Subsidiaries is the lessor. "Co-Arranger" means IBJ, in its capacity as co-arranger of the credit ----------- facility provided pursuant to this Agreement. "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, for each Lender, the amount set forth under ---------- "Commitment" on Schedule 1.01 or in any applicable Joining Lender Agreement. ------------- "Company Party" means the Company or any Person (except the Lenders, the ------------- Administrative Agent, the Co-Syndication Agents, the Documentation Agent, the Arranger and the Co-Arranger and any of their respective Affiliates) from time to time party to a Loan Document. "Consolidated Funded Indebtedness" means, at any date of determination, for -------------------------------- the Company and its Subsidiaries on a consolidated basis, the sum of (a) all obligations and liabilities, whether current or long-term, for borrowed money, (b) that portion of obligations with respect to Capital Leases which is capitalized on the consolidated balance sheet of the Company and its Subsidiaries, and (c) all guaranties of unconsolidated funded obligations for borrowed -3-

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 Net Worth" means, as at any date of determination, the net ---------------------- worth of the Company and its Subsidiaries on a consolidated basis as 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 (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 subclause (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. "Co-Syndication Agent" has the meaning assigned to that term in the -------------------- introduction to this Agreement. "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. "Documentation Agent" means any Lender that is given the title of ------------------- "Documentation Agent," as agreed by the Company, IBJ and Bear Stearns, in such Lender's capacity as such. "Dollar Equivalent" means, with respect to any other currency, the ----------------- equivalent in Dollars -4-

of such other currency determined by using the quoted spot rate at which IBJ's principal office in New York offers to exchange Dollars for such other currency in New York at 11:00 a.m. (New York time) two Business Days before the date on which such equivalent is to be determined. "Dollars" means lawful money of the United States of America. ------- "Domestic Subsidiary" means a Subsidiary of the Company that is ------------------- incorporated in a jurisdiction of the United States of America. "Effective Date" means the date on which all the conditions in Section 4.01 -------------- ------------ 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; (iii) a Person that is primarily engaged in the business of commercial banking and that is (A) a Subsidiary of a Lender, (B) a Subsidiary of a Person of which a Lender is a Subsidiary, or (C) a Person of which a Lender is a Subsidiary; (iv) an insurance company, investment fund or other financial institution that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and has total assets in excess of $100,000,000; and (v) any other Person approved by the Administrative Agent and, in the absence of any Event of Default, the Company. "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, 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 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, or portions thereof, bearing interest --------------------- at rates determined by reference to the Eurodollar Rate as provided in Section ------- 2.07(a). - ------- -5-

"Eurodollar Rate" means for any Interest Period with respect to any --------------- Eurodollar Rate Loan, a rate per annum determined by the Administrative Agent pursuant to the following formula: Eurodollar Rate = Eurodollar Base Rate ------------------------------------------- 1.00 - Eurodollar Reserve Percentage Where, "Eurodollar Base Rate" means, for such Interest Period: -------------------- (a) the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page of the Telerate screen that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (b) in the event the rate referenced in the preceding Subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (c) in the event the rates referenced in the preceding Subsections (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest (rounded upward to the next 1/100th of 1%) at which deposits in Dollars for delivery on the first day of such Interest Period in same-day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by the Administrative Agent (or its Affiliate) in its capacity as a Lender and with a term equivalent to such Interest Period would be offered by IBJ's London Branch to major banks in the offshore Dollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. "Eurodollar Reserve Percentage" means, for any day during any Interest ----------------------------- Period, the reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the Board of Governors of the Federal Reserve System 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"). The Eurodollar Rate for each outstanding Eurodollar Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage. The determination of the Eurodollar Reserve Percentage and the Eurodollar Base -6-

Rate by the Administrative Agent shall be conclusive in the absence of manifest error. "Event of Default" means any of the events set forth in Section 8.01. ---------------- ------------ "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. "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 Administrative 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. "Fee Letter" means the fee letter agreement dated June 13, 2000 among the ---------- Company, IBJ and Bear Stearns. "Fisher-Price" means Fisher-Price, Inc., a Delaware corporation. ------------ "Fisher-Price Guaranty" means the Continuing Guaranty signed by Fisher- --------------------- Price substantially in the form of Exhibit F-1 hereto, as amended, supplemented, restated or otherwise modified from time to time. "Fisher-Price Subordination Agreement" means a Fisher-Price Subordination ------------------------------------ Agreement substantially in the form of Exhibit G-1 attached hereto signed by Fisher-Price and any of certain Affiliates of the Company to which Fisher-Price has material outstanding obligations, as it may hereafter be amended, supplemented, restated or otherwise modified from time to time. "Fitch" means Fitch, Inc. or any successor thereto. ----- "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 any ------------------- foreign government 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, any foreign government or any state or locality therein, including the Federal Deposit Insurance Company, the Comptroller of the Currency and the Federal Reserve Board. -7-

"Governmental Rule" means any law, statute, rule, regulation, ordinance, ----------------- order, judgment, guideline or decision of any Governmental Person. "IBJ" means The Industrial Bank of Japan, Limited, a Japanese bank, or any --- successor thereto. "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. "Initial Funding Date" means the Business Day of the funding of the initial -------------------- Loan(s) hereunder. "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 Maturity Date; provided, however, that if any Interest Period -------- ------- for a Eurodollar Rate Loan exceeds three months, 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: -------- (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 Maturity 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 -8-

thereunder. "Joining Lender" has the meaning set forth in Section 10.01(f). -------------- ---------------- "Joining Lender Agreement" means a Joining Lender Agreement signed by the ------------------------ Company and a Joining Lender and approved by the Administrative Agent, substantially in the form of Exhibit J hereto, as amended, supplemented, restated or otherwise modified from time to time. "Lender" has the meaning assigned to that term in the introduction to this ------ Agreement and includes any other financial institution that becomes a party hereto as a "Lender" pursuant to Section 10.01. ------------- "Lender Affiliate" means a Person engaged primarily in the business of ---------------- commercial banking and that is a Subsidiary of a Lender or of a Person of which a Lender is a Subsidiary. "Lending Office" means, with respect to any Lender, the office or offices -------------- of the Lender specified as its "Lending Office" under its name on Schedule -------- 10.06, or such other office or offices of the Lender as it may from time to time - ----- specify to the Company and the Administrative 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" means the amount initially advanced by a Lender to the Company ---- pursuant to this Agreement, whether pursuant to Section 2.01, 10.01(a) or ------------ -------- 10.01(f), as such amount may be decreased pursuant to Section 10.01(a) or - -------- ---------------- increased pursuant to Section 10.01(f). ---------------- "Loan Documents" means this Agreement, any Notes, the Mattel Sales -------------- Guaranty, the Fisher-Price Guaranty, all Mattel Sales Subordination Agreements, all Fisher-Price Subordination Agreements, the Fee Letter and all documents, certificates and instruments delivered in connection herewith or therewith; provided, however, that for the avoidance of doubt, "Loan Documents" shall not - -------- ------- include documents included in the definition of "Loan Documents" under (i) that certain Second Amended and Restated Credit Agreement dated as of March 11, 1998, among the Company, the banks from time to time party thereto and Bank of America, N.A., as agent thereunder, or (ii) that certain Credit Agreement (364- Day Facility) dated as of March 31, 2000, among the Company, the banks from time to time party thereto and Bank of America, N.A., as administrative agent thereunder, except to the extent that any document or instrument delivered in connection with either of those credit agreements is also delivered in connection herewith. "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 Lenders to enforce the Obligations. -9-

"Material Subsidiary" means Mattel Sales, Fisher-Price, or any other ------------------- Subsidiary of the Company which meets any of the following conditions: (a) the Company's and its Subsidiaries' investments in, and advances to, the Subsidiary exceed 10 percent of the total assets of the Company and its Subsidiaries consolidated as of the end of the most recently completed fiscal year (for a proposed business combination to be accounted for as a pooling of interests, 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; provided, however, that, notwithstanding the foregoing, TLC shall not be a - -------- ------- Material Subsidiary hereunder. For the 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 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. -10-

"Mattel Sales Subordination Agreement" means a Mattel Sales Subordination ------------------------------------ Agreement substantially in the form of Exhibit G-2 attached hereto signed by Mattel Sales and any of certain Affiliates of the Company to which Mattel Sales has material outstanding obligations, as it may hereafter be amended, supplemented, restated or otherwise modified from time to time. "Maturity Date" means July 17, 2003. ------------- "Moody's" means Moody's Investors Service, Inc. or any successor thereto. ------- "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 ---- Lender substantially in the form of Exhibit A hereto, evidencing the Loan made by such Lender 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 2.03(a). --------------- "Notice of Conversion/Continuation" means a notice given by the Company to --------------------------------- the Administrative Agent pursuant to Section 2.04, 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 Administrative Agent, the Lenders 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 Lenders by the Company pursuant to Section 6.01(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 receivable not actually sold or discounted. -11-

"Participant" has the meaning set forth in Section 10.01(c). ----------- ---------------- "Pension Plan" means any employee plan which is subject to Section 412 of ------------ the Internal Revenue Code and which is maintained for employees of the Company or any ERISA Affiliate of the Company other than a Multiemployer Plan. "Person" means any individual, partnership, corporation (including a ------ business trust), joint stock company, joint venture, trust, lender, trust company, unincorporated association or other entity or any Governmental Person. "Pro Rata Share" means with respect to each Lender the percentage set forth -------------- opposite such Lender's name on Schedule 1.01, as the same may be adjusted from ------------- time to time pursuant to Section 10.01. ------------- "Purchasers' Investment" has the meaning set forth in 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 party thereto and the Receivables Purchase Administrative Agent, as it may be amended, supplemented, restated or otherwise modified from time to time. "Regulation D" means Regulation D of the Federal Reserve Board as in effect ------------ from time to time. "Requisite Lenders" means, as at any date of determination, Lenders having ----------------- at least 51% of the then aggregate unpaid principal amount of the Loans (or if no Loans are then outstanding, Lenders having at least 51% of the combined Commitments). "Responsible Officer" means 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. Any document or certificate hereunder that is signed by a Responsible Officer shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of the Company, and such Responsible Officer shall be conclusively presumed to have acted on behalf of the Company. "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. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw- --- Hill Companies, Inc., or any successor thereto. "Subsidiary" means, with respect to any Person, any corporation, ---------- association or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. Unless otherwise specified herein, "Subsidiary" means a Subsidiary of the Company. -12-

"TLC" means TLC Multimedia, Inc., a Minnesota corporation. --- 1.02 Other Definitional Provisions. References to "Sections" shall be to Sections of this Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.01 may, ------------ unless the context otherwise requires, be used in the singular or the plural depending on the reference. The words "include," "includes" and "including" shall be deemed to be followed by the words "without limitation." SECTION 2. THE COMMITMENTS. 2.01 The Commitments. Each Lender that becomes a party to this Agreement on or before the Initial Funding Date hereby agrees severally, on the terms and conditions set forth in this Agreement, to make a single advance to the Company on the Initial Funding Date in an amount not to exceed such Lender's Commitment. Upon the making of each such Lender's Loan pursuant to this Section 2.01, the ------------ unused portion, if any, of each such Lender's Commitment shall terminate. Amounts borrowed hereunder and repaid or prepaid may not be reborrowed. 2.02 Loan Accounts and Notes. (a) Subject to Section 2.02(b), the Loan made by each Lender shall be --------------- evidenced by a loan account maintained by such Lender in the ordinary course of business. The loan accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lenders to the Company and the interest and payments thereon. Any failure to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay any amount owing with respect to the Loans. (b) Upon the written request of any Lender made through the Administrative Agent, the Loan made by such Lender may be evidenced by a Note instead of by a loan account. Each such Lender shall endorse on the schedules annexed to its Note the date, amount and maturity of the Loan made by it and the amount of each payment of principal made by the Company with respect thereto. Each such Lender is irrevocably authorized by the Company to endorse the schedules annexed to its Note, and each Lender's record shall be conclusive absent manifest error; provided, however, that the failure of a Lender to make, or an error in making, - -------- ------- a notation thereon with respect to its Loan shall not limit or otherwise affect the obligations of the Company hereunder or under any such Note to such Lender. 2.03 Borrowing Procedure. (a) When the Company desires to borrow pursuant to Section 2.01, it shall ------------ deliver irrevocable telephonic notice to the Administrative Agent followed immediately by written notice in the form of the Notice of Borrowing, which telephonic notice must be received by the Administrative Agent no later than (i) 11:00 a.m. (New York time) on the proposed Initial -13-

Funding Date in the case of Base Rate Loans and (ii) 12:00 noon (New York time) three Business Days in advance of the proposed Initial Funding Date in the case of Eurodollar Rate Loans, specifying (A) the proposed Initial 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 the Initial 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 the Initial 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 after receipt of the Notice of Borrowing (or telephonic notice in lieu thereof), the Administrative Agent shall notify each Lender of the proposed borrowing. Each Lender shall make available to the Administrative Agent its Pro Rata Share of the amount of the proposed borrowing on the Initial Funding Date, in same-day funds, by remitting such funds to the Administrative Agent's Office no later than 2:00 p.m. (New York time) on the Initial Funding Date. Upon satisfaction of the conditions set forth in Section 4.02, the ------------ Administrative Agent shall make available to the Company on the Initial Funding Date the aggregate of the amounts so made available by the Lenders by causing an amount of same-day funds equal to such aggregate amount received by the Administrative Agent to be credited to the account of the Company designated thereby. 2.04 Conversion and Continuation Elections. (a) The Company may upon irrevocable written notice to the Administrative 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 Administrative Agent followed immediately by written notice in the form of a Notice of Conversion/Continuation, which telephonic notice must be received by the Administrative Agent prior to (i) 12:00 noon (New York 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) 12:00 noon (New York 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. -14-

(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 a new 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 Administrative Agent will promptly notify each Lender thereof, or, if no timely notice is provided, the Administrative Agent will promptly notify each Lender 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 Lender. (e) Unless the Requisite Lenders 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. 2.05 Voluntary Prepayments. The Company may, upon not less than ten Business Days' prior written notice to the Administrative Agent in the form of Exhibit I hereto (which notice the Administrative Agent will promptly transmit by telecopier to each Lender), 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 Lenders in respect thereof pursuant to Section 3.05. 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 Administrative 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. 2.06 Repayment of Loans. Each Loan shall mature, and the Company shall repay the unpaid principal amount of each Loan, on the Maturity Date. 2.07 Interest on the Loans. (a) Subject to Section 2.07(c), the Loans shall bear interest on the unpaid --------------- principal amount thereof from the Initial Funding Date through maturity (whether by acceleration or otherwise) at a rate per annum equal to (i) with respect to Eurodollar Rate Loans, the Eurodollar Rate plus the Applicable Margin or (ii) ---- with respect to Base Rate Loans, the Base Rate. (b) Subject to Section 2.07(c), from and after the Effective Date, interest --------------- shall be payable in arrears on each Loan on each Interest Payment Date applicable to that Loan. Interest -15-

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. 2.08 Fees. The Company shall pay to the Administrative Agent, for the account of IBJ or Bear Stearns, as applicable, such fees as specified in the Fee Letter. 2.09 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 Margin or Eurodollar Reserve Percentage shall become effective as of the opening of business on the day on which such change in the Applicable Margin or Eurodollar Reserve Percentage becomes effective. Each determination of an interest rate by the Administrative Agent pursuant hereto shall be conclusive and binding on the Company and the Lenders in the absence of manifest error. 2.10 Payments by the Company. (a) All payments of principal, interest, fees and other amounts hereunder, under the Fee Letter and under any Notes shall be made without setoff, counterclaim, recoupment or any other deduction, in same-day funds, and delivered to the Administrative Agent at the Administrative Agent's Office not later than 12:00 noon (New York time) on the date due. The Administrative Agent will promptly distribute to each Lender its Pro Rata Share (or other applicable share as expressly provided herein) of such principal, interest or other amounts in like funds received. Any payment which is received by the Administrative Agent after that time shall be deemed to have been paid by the Company on the next succeeding Business Day, and any applicable interest or fee shall continue to accrue. (b) Subject to the provisions in the definition of "Interest Period", whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. (c) Unless the Administrative Agent shall have received notice from the Company prior to the date on which any payment is due to the Lenders hereunder that the Company will not make such payment in full as and when required hereunder, the Administrative Agent may -16-

assume that the Company has made such payment in full to the Administrative Agent on such date in immediately available funds, and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Company shall not have made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent on demand such amount distributed to such Lender, together with interest thereon for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate as in effect for each such day. 2.11 Payments by the Lenders to the Administrative Agent. (a) Unless the Administrative Agent shall have received notice from a Lender on the Initial Funding Date that such Lender will not make available to the Administrative Agent as and when required hereunder for the account of the Company the amount of that Lender's Pro Rata Share of the borrowing hereunder on the Initial Funding Date, the Administrative Agent may assume that each Lender has made such amount available to the Administrative Agent in immediately available funds on the Initial Funding Date, and the Administrative 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 Lender shall not have made its full amount available to the Administrative Agent in immediately available funds and the Administrative Agent in such circumstances has made available to the Company such amount, that Lender shall on the next Business Day following the Initial Funding Date make such amount available to the Administrative Agent, together with interest at the Federal Funds Rate for and determined as of each day during such period. A notice of the Administrative Agent submitted to any Lender with respect to amounts owing under this Section 2.11(a) shall be conclusive, absent manifest error. If such --------------- amount is so made available, such payment to the Administrative Agent shall constitute such Lender's Loan for all purposes of this Agreement. If such amount is not made available to the Administrative Agent on the next Business Day following the Initial Funding Date, the Administrative Agent shall notify the Company of such failure to fund and, upon demand by the Administrative Agent, the Company shall pay such amount to the Administrative Agent for the Administrative Agent's account, together with interest thereon for each day elapsed since the Initial Funding Date, at a rate per annum equal to the interest rate(s) applicable at the time to the Loans. (b) The failure of any Lender to make its Loan on the Initial Funding Date shall not relieve any other Lender of any obligation hereunder to make its Loan on the Initial Funding Date, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the Initial Funding Date. 2.12 Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Loan made by it any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) in excess of its Pro Rata Share of payments on account of the Loans obtained by all the Lenders, such Lender shall forthwith (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, - -------- ------- -17-

that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender, such purchase shall to that extent be rescinded, and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender's Pro Rata Share (according to the proportion of (i) the amount of such paying Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Company agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.12 ------------ may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of the Company in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased pursuant to this Section 2.12 and will in each case notify the Lenders ------------ following any such purchases or repayments. SECTION 3. PAYMENTS IN GENERAL. 3.01 Taxes. (a) Subject to Section 3.01(d) and Section 3.01(g), any and all payments by --------------- --------------- the Company to each Lender or the Administrative 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 Lender and the Administrative Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Lender's or the Administrative Agent's net income by the jurisdiction under the laws of which such Lender or the Administrative 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 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 3.01(g), the Company shall indemnify and hold --------------- harmless each Lender and the Administrative Agent for the full amount of Taxes and Other Taxes (including any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.01) paid by such Lender or the ------------ Administrative Agent and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto. Payment under this indemnification shall be made within 30 days from the date such Lender or the Administrative Agent makes written demand therefor. (d) If the Company shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Lender or the Administrative Agent, then, subject to Section 3.01(g): (i) the sum payable --------------- shall be increased as necessary so -18-

that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01) such Lender or the ------------ Administrative 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 Administrative Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Administrative Agent. (f) Each Lender that is a "foreign corporation, partnership or trust" within the meaning of the Internal Revenue Code shall deliver to the Administrative Agent, prior to receipt of any payment subject to withholding under the Internal Revenue Code (or after accepting an assignment of an interest herein), two duly signed completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Lender and entitling it to an exemption from, or reduction of, withholding tax on all payments to be made to such Lender by the Company pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Lender by the Company pursuant to this Agreement) or such other evidence satisfactory to the Company and the Administrative Agent that such Lender is entitled to an exemption from U.S. withholding tax. Thereafter and from time to time, each such Lender shall (i) promptly submit to the Administrative Agent such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to the Company and the Administrative Agent of any available exemption from or reduction of, United States withholding taxes in respect of all payments to be made to such Lender by the Company pursuant to this Agreement, (ii) promptly notify the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (iii) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable laws that the Company make any deduction or withholding for taxes from amounts payable to such Lender. If such Lender fails to deliver the above forms or other documentation, then the Administrative Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Internal Revenue Code, without reduction. If any Governmental Person asserts that the Administrative Agent did not properly withhold any tax or other amount from payments made in respect of such Lender, such Lender shall indemnify the Administrative Agent therefor, including all penalties and interest, any taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section, and costs and expenses (including costs and expenses of attorneys to the Administrative Agent) of the Administrative Agent. The obligation of the Lenders under this Section shall survive the payment of all Obligations and the resignation or replacement of the Administrative Agent. (g) The Company will not be required to pay any additional amounts in respect of Taxes pursuant to Section 3.01(d) to any Lender for the account of --------------- any Lending Office of such Lender: (i) if the obligation to pay such additional amounts would not have arisen but for a -19-

failure by such Lender to comply with its obligations under Section 3.01(f) in --------------- respect of such Lending Office; or (ii) if such Lender shall have delivered to the Company the form(s) in respect of such Lending Office pursuant to Section ------- 3.01(f), and such Lender 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(s). (h) If, at any time, the Company requests any Lender to deliver any forms or other documentation pursuant to Section 3.01(f), then the Company shall, on --------------- demand of such Lender through the Administrative Agent, reimburse such Lender for any costs and expenses (including expenses of outside legal counsel and the allocated costs of in-house counsel) reasonably incurred by such Lender in the preparation or delivery of such forms or other documentation. (i) If the Company is required to pay additional amounts to any Lender or the Administrative Agent pursuant to Section 3.01(d), then such Lender 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 Lender is not otherwise disadvantageous to such Lender. (j) The agreements and obligations of the Company contained in this Section ------- 3.01 shall survive the payment in full of all other Obligations. - ---- 3.02 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 lenders 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 Lender hereunder (including 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 Lender or any corporation controlling such Lender (a "Change in Law"), the result of which is to reduce ------------- the rate of return on such Lender's capital as a consequence of such commitments to a level below that which such Lender could have achieved but for such Change in Law, taking into consideration such Lender's policies with respect to capital adequacy, by an amount which such Lender deems to be material, the Lender shall deliver to the Company a statement of the amount necessary to compensate such Lender for the reduction in the rate of return on its capital attributable to such commitments (the "Capital Compensation Amount"). The Lender shall determine --------------------------- the Capital Compensation Amount in good faith, using reasonable attribution and averaging methods. The Lender 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 Lender ten Business Days after such notice is given. As soon as practicable after any Change in Law, each Lender shall submit to the Company estimates of the Capital Compensation Amounts that would be payable as a function of such Lender's commitments hereunder. -20-

3.03 Illegality. (a) If any Lender 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 Lender or its Lending Office to make Eurodollar Rate Loans, then, on notice thereof by the Lender to the Company through the Administrative Agent, the obligation of the Lender to make Eurodollar Rate Loans shall be suspended until the Lender shall have notified the Administrative Agent and the Company that the circumstances giving rise to such determination no longer exists. (b) If a Lender 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 Lender or its Lending Office to maintain any Eurodollar Rate Loan, the Company shall prepay all Eurodollar Rate Loans of the Lender then outstanding, together with interest accrued thereon, or convert all Eurodollar Rate Loans of the Lender then outstanding to Base Rate Loans pursuant to Section 2.04, either on the last ------------ day of the Interest Period thereof if the Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or promptly, if the Lender may not lawfully continue to maintain such Eurodollar Rate Loans, together with any amounts required to be paid in connection therewith pursuant to Section 3.05. ------------ (c) If the obligation of any Lender to make or maintain Eurodollar Rate Loans has been terminated, the Company may elect, by giving notice to the Lender through the Administrative Agent, that all Loans which would otherwise be made by the Lender as Eurodollar Rate Loans shall be instead Base Rate Loans. (d) Before giving any notice to the Administrative Agent pursuant to this Section 3.03, the affected Lender 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 Lender, be illegal or otherwise disadvantageous to the Lender. 3.04 Increased Costs and Reduction of Return. If any Lender 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 Lender 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 Lender (with a copy of such demand to the Administrative Agent), pay to such Lender, additional amounts as are sufficient to compensate such Lender for such increased costs. Each Lender agrees to notify the Company of the occurrence of such an increased cost event promptly after obtaining knowledge thereof. 3.05 Funding Losses. The Company agrees to reimburse each Lender for, and to hold each Lender harmless from, any loss or expense which the Lender may sustain or incur as a consequence of (a) the failure of the Company to make any payment or prepayment of principal -21-

of any Eurodollar Rate Loan (including payments made after any acceleration thereof) when due, (b) the failure of the Company to borrow, continue or convert a Loan on the specified date 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 on the specified date after the Company has given a notice in accordance with Section 2.05 or (d) the prepayment ------------ of a Eurodollar Rate Loan for any reason on a day which is not the last day of the Interest Period with respect thereto; provided that any such loss or expense -------- shall include any 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 Lenders under Sections 3.03(b), 3.04 and 3.05, each Eurodollar Rate Loan made by a ---------------- ---- ---- Lender (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the Euro