{"id":43769,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/tlc-sale-and-purchase-agreement-mattel-inc-alec-e-gores-and.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"tlc-sale-and-purchase-agreement-mattel-inc-alec-e-gores-and","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/planning\/tlc-sale-and-purchase-agreement-mattel-inc-alec-e-gores-and.html","title":{"rendered":"TLC Sale and Purchase Agreement &#8211; Mattel Inc., Alec E. Gores and GTG\/Wizard LLC"},"content":{"rendered":"<pre>                   SALE AND PURCHASE AGREEMENT\n\n                             between\n\n                          MATTEL, INC.\n\n                               and\n\n         ALEC E. GORES, TRUSTEE OF THE REVOCABLE LIVING\n                TRUST AGREEMENT OF ALEC E. GORES,\n\n                               and\n\n                         GTG\/WIZARD, LLC\n\n\n                       ___________________\n\n                 Dated as of September 28, 2000\n\n\n\n                        TABLE OF CONTENTS\n\n                                                             Page\n\nARTICLE I   DEFINITIONS                                        1\n\n\nARTICLE II  PURCHASE AND SALE; THE CLOSING                     8\n\n       2.1. Purchase and Sale                                  8\n       2.2. Closing                                            8\n       2.3  Retention of Books and Records                     8\n       2.4  Fair-Market Value                                  8\n\nARTICLE III REPRESENTATIONS AND WARRANTIES OF MATTEL           9\n\n       3.1  Organization and Qualification                     9\n       3.2  Authorization; Validity and Effect of\n            Agreement                                          9\n       3.3. Capitalization                                     9\n       3.4  Subsidiaries                                      10\n       3.5  Other Interests                                   10\n       3.6  No Conflict; Required Filings and\n            Consents                                          10\n       3.7  Compliance                                        11\n       3.8  Product Liability                                 11\n       3.9  Insurance                                         11\n       3.10 Litigation                                        11\n       3.11 Taxes                                             12\n       3.12 Employee Benefit Plans                            12\n       3.13 Assets                                            13\n       3.14 Material Contracts                                14\n       3.15 Labor Relations                                   15\n       3.16 Intellectual Property                             15\n       3.17 Environmental Matters                             16\n       3.18 Financial Statements                              17\n       3.19 Brokers                                           17\n       3.20 Changes Since August 31, 2000                     17\n\nARTICLE IV  REPRESENTATIONS AND WARRANTIES OF THE\n            COMPANY AND AEG                                   18\n\n       4.1  Corporate Organization                            18\n       4.2  Authorization; Validity and Effect of\n            Agreement                                         18\n       4.3  No Conflict; Required Filings and\n            Consents                                          18\n       4.4. Broker's Fees                                     19\n       4.5. Acquisition of TLC Shares and LLC\n            Interests for Investment; Ability to\n            Evaluate and Bear Risk                            19\n       4.6  Investigation; No Additional\n            Representations and Warranties                    19\n       4.7  Litigation                                        20\n\n\n                              -i-\n\n\n\n       4.8  Available Funds                                   20\n       4.9  Knowledge Regarding Representations;\n            Satisfaction of Conditions                        20\n\nARTICLE V   CERTAIN COVENANTS                                 20\n\n       5.1  Further Assurances                                20\n       5.2  Employees                                         21\n       5.3  D&amp;O Indemnification                               22\n       5.4  Intercompany Relationships; Accounts              23\n       5.5. No Restrictions on Future Operation               23\n       5.6  [Intentionally Omitted.]                          23\n       5.7  Certain Consents                                  23\n       5.8  Excluded Assets                                   24\n       5.9  Certain Obligations                               24\n       5.10 Mattel Name                                       25\n       5.11 AEG Capital Commitment                            25\n       5.12 Best Efforts                                      26\n       5.13 Public Announcements; Confidentiality             26\n       5.14 Organization Documents                            26\n       5.15 Access to Information                             26\n       5.16 Conduct of the Business                           26\n       5.17 Cooperation Concerning Insurance                  27\n\nARTICLE VI  TAX MATTERS                                       27\n\n       6.1  Tax Treatment                                     27\n       6.2  Cooperation and Exchange of Information           28\n       6.3  Tax Sharing Agreements                            29\n       6.4  Timing Differences                                29\n       6.5  Post-Closing Dispositions                         29\n       6.6. Allocation Method                                 30\n       6.7  Definitions                                       30\n       6.8  Refunds; Allocation of Taxes; Payment of\n            Certain Taxes                                     30\n\nARTICLE VII PAYMENT PROVISIONS                                31\n\n       7.1  Liquidity Events                                  31\n       7.2  EBITDA Target Payments                            34\n       7.3  Long-Term Value Payouts                           36\n       7.4  Minimum Payment                                   37\n       7.5  Sale of Company                                   37\n\nARTICLE VIIIFUTURE ACTIONS                                    38\n\n       8.1  Certain Transactions                              38\n       8.2  Fair Dealing                                      39\n       8.3  AEG Control                                       39\n\n\n\n                              -ii-\n\n\n\nARTICLE IX  CONDITIONS TO OBLIGATIONS TO CLOSE                40\n\n       9.1  Conditions to Obligation of Each Party to\n            Close                                             40\n       9.2  Closing Deliveries                                40\n       9.3  Conditions to Obligations of Mattel               40\n\nARTICLE X   TERMINATION                                       41\n\n       10.1 Termination                                       41\n       10.2 Procedure and Effect of Termination               41\n       10.3 Certain Termination                               41\n\nARTICLE XI  INDEMNIFICATION                                   42\n\n       11.1 Indemnification                                   42\n       11.2 Limitations                                       42\n       11.3 Notice to the Indemnitor                          42\n       11.4 Third Party Indemnification                       42\n\nARTICLE XII MISCELLANEOUS                                     43\n\n       12.1 No Survival                                       43\n       12.2 Counterparts                                      43\n       12.3 Governing Law; Jurisdiction and Forum;\n            Waiver of Jury Trial                              43\n       12.4 Entire Agreement                                  44\n       12.5 Expenses                                          44\n       12.6 Notices                                           44\n       12.7 Successors and Assigns                            46\n       12.8 Third Party Beneficiaries                         46\n       12.9 Headings; Definitions                             46\n       12.10 Amendments and Waivers                           46\n       12.11 Interpretation                                   47\n       12.12 No Right of Setoff                               47\n       12.13 Specific Performance                             47\n       12.14 Severability                                     47\n       12.15 Miscellaneous                                    47\n\n\nSchedules\nSchedule A - TLC Business Products\nSchedule B - Mattel Media Excluded Products\nSchedule C - Fair Market Value Consideration\n\nExhibits\nExhibit A - Form of Assumption Agreement\n\n\n                              -iii-\n\n\n                   SALE AND PURCHASE AGREEMENT\n\n          SALE AND PURCHASE AGREEMENT (the \"Agreement\"), dated as\nof September 28, 2000, by and among Alec E. Gores, trustee of the\nRevocable Living Trust Agreement of Alec E. Gores, a trust\norganized under the laws of Michigan (\"AEG\"), GTG\/Wizard, LLC, a\nDelaware limited liability company (the \"Company\") and Mattel,\nInc., a Delaware corporation (\"Mattel\").\n\n                            Recitals\n\n          WHEREAS, Mattel, through its direct and indirect\nsubsidiaries, is engaged in the TLC Business (as defined herein);\n\n          WHEREAS, AEG is the majority member of Wizard Holding\nCompany, a Delaware limited liability company (\"Holdings\");\n\n          WHEREAS, immediately prior hereto, Holdings has formed\nthe Company and is the sole member thereof;\n\n          WHEREAS, Mattel desires to sell and the Company desires\nto purchase the Mattel subsidiaries conducting the TLC Business\nfor the consideration set forth below;\n\n          WHEREAS, AEG has agreed to cause Holdings to capitalize\nthe Company as set forth herein;\n\n          WHEREAS, simultaneously with the closing of the\ntransaction contemplated hereby, Mattel and the Company will\nenter into a transition services agreement (\"Transition Services\nAgreement\"), and a license agreement (\"License Agreement\"), in\neach case on terms to be mutually agreed prior to such closing;\nand\n\n          WHEREAS, Mattel, AEG and the Company desire to make\ncertain representations, warranties, covenants and agreements in\nconnection with the Agreement;\n\n          NOW, THEREFORE, in consideration of the mutual promises\nhereinafter set forth and other good and valuable consideration,\nthe receipt and adequacy of which are hereby acknowledged, the\nparties hereby agree as follows:\n\n                            ARTICLE I\n\n                           DEFINITIONS\n\n          For purposes of this Agreement:\n\n          \"AEG Committed Capital\" shall mean the committed\ncapital contributions described in Section 5.11, up to the\nCapital Contribution Cap, that are actually made by Holdings to\nthe Company.\n\n\n\n\n\n\n\n          \"Affiliate\" shall mean, with respect to any Person, any\nother Person that directly, or through one or more\nintermediaries, controls or is controlled by or is under common\ncontrol with such Person; it being understood that for purposes\nof this definition, any entity controlled by Alec E. Gores shall\nbe deemed an Affiliate of AEG and the Company.\n\n          \"Assumed Debt\" shall mean, in connection with a\nLiquidity Event, the assumption by another Person of debt for\nborrowed money of the Company or any of its Subsidiaries to any\nAffiliate of any of the Company, AEG or any member of the\nCompany.\n\n          \"Benefit Arrangement\" shall mean any employment,\nconsulting, severance, change in control or other similar\ncontract, arrangement or policy and each plan, arrangement\n(written or oral), program, agreement or commitment providing for\ninsurance coverage (including, without limitation, any self-\ninsured arrangements), workers' compensation, disability\nbenefits, life, health, disability or accident benefits\n(including, without limitation, any \"voluntary employees'\nbeneficiary association\" as defined in Section 501(c)(9) of the\nCode providing for the same or other benefits) or for deferred\ncompensation, profit-sharing bonuses, stock options, stock\nappreciation rights, stock purchases or other forms of incentive\ncompensation other than benefits provided by Welfare Plans,\nPension Plans or Multiemployer Plans, in each case with respect\nto which any of the TLC Subsidiaries has or may have any\nliability (accrued, contingent or otherwise), for the benefit of,\nor on behalf of, any U.S. employee of the TLC Subsidiaries.\n\n          \"Business Day\" shall mean any day other than Saturdays,\nSundays and days when commercial banks are authorized to be\nclosed in Los Angeles, California.\n\n          \"CERCLA\" shall mean the Comprehensive Environmental\nResponse, Compensation and Liability Act, 42 U.S.C. 9601, et seq.\n\n          \"Code\" shall mean the Internal Revenue Code of 1986, as\namended.\n\n          \"Consideration\" shall mean Mattel's right to receive\nand the Company's obligation to make the payments required to be\nmade to Mattel pursuant to Article VII hereof.\n\n          \"Contracts\" shall mean contracts, undertakings,\ncommitments or agreements.\n\n          \"Controlled Group Liability\" shall mean any and all\nliabilities (i) under Title IV of ERISA, (ii) under Section 302\nof ERISA, (iii) under Sections 412 and 4971 of the Code or (iv)\nas a result of a failure to comply with the continuation coverage\nrequirements of Section 601 et seq. of ERISA and Section 4980B of\nthe Code.\n\n          \"Domestic Subsidiary\" shall mean a Subsidiary organized\nunder the laws of the United States or a political subdivision\nthereof.\n\n          \"Environmental Laws\" shall mean any foreign, federal,\nstate or local law, statute, ordinance, order, decree, rule or\nregulation relating to releases, discharges, emissions or\ndisposals to air, water, land or groundwater of Hazardous\nMaterials; to the use, handling, transport, release, threatened\nrelease, or disposal of polychlorinated biphenyls, asbestos or\nurea formaldehyde or any other Hazardous Material; to the\ntreatment, storage, disposal or management of Hazardous\nMaterials; to exposure to toxic, hazardous or other controlled,\n\n\n\n                              -2-\n\n\nprohibited or regulated substances; to health or safety in the\nworkplace; and to the protection of the public's health and\nsafety and the environment, including the CERCLA, TSCA, HMTA and\nEPCRA, the Occupational, Safety and Health Act, 29 U.S.C. 651, et\nseq., the Clean Air Act, 42 U.S.C. 7401, et seq., the Federal\nWater Pollution Control Act, 33 U.S.C. 1251, et seq., the Safe\nDrinking Water Act, 42 U.S.C. 300f, et seq., and other comparable\nforeign, state and local laws and all rules, regulations and\nguidance documents promulgated pursuant thereto or published\nthereunder.\n\n          \"EPCRA\" shall mean the Emergency Planning and Community\nRight to Know Act, 42 U.S.C. 11001 et seq.\n\n          \"ERISA\" shall mean the Employee Retirement Income\nSecurity Act of 1974, as amended.\n\n          \"ERISA Affiliate\" shall mean any entity which is a\nmember of a \"controlled group of corporations\" with, under\n\"common control\" with, or a member of an \"affiliated service\ngroup\" with, the TLC Subsidiaries as defined in Section 414(b),\n(c), (m) or (o) of the Code.\n\n          \"Excess Cash Flow\" for any period shall mean net\nincome, adjusted for changes in Working Capital, plus\ndepreciation and amortization, less capital expenditures,\nexcluding non-recurring extraordinary items (including gain or\nloss realized on Liquidity Events) and less principal payments on\nbank debt, in each case computed in accordance with GAAP.  Any\nincrease in Working Capital from the prior period balance sheet\nwill reduce Excess Cash Flow whereas a decrease in Working\nCapital will increase Excess Cash Flow.\n\n          \"Excess Net Proceeds\" shall mean, with respect to any\nLiquidity Event, the excess, if any, of the Net Proceeds of such\nLiquidity Event over the sum of the payments permitted to be made\npursuant to Section 7.1(b) with respect to such Liquidity Event.\n\n          \"Excluded Liability\" shall mean (i) consolidated return\nTaxes for which either Mattel or TLC is the common parent, (ii)\nthe items set forth on Section 1 of the TLC Disclosure Schedule\nand (iii) all liability for Taxes of the TLC Subsidiaries or\narising from the operation of the TLC Business for any taxable\nperiod (or portion thereof) ending on or prior to the Closing\nDate and for the pre-Closing Date portion of a taxable period\nthat includes but does not end on the Closing Date (all such\nperiods and portions, the \"Pre-Closing Period\") limited, in each\ncase, to such liability that results from a Tax Proceeding with\nrespect to the Pre-Closing Period and limited further, in the\ncase of Non-income Taxes, to such Non-income Taxes that exceed in\nthe aggregate $1.5 million but only to the extent of such tax\nliability in excess of $1.5 million (the Taxes covered by clause\n(i) or this clause (iii), the \"Excluded Taxes\").\n\n          \"Funded Capital Commitment\" shall mean, as of any date,\nthe portion of the AEG Committed Capital that has been used to\nfund operating cash flow (as defined by GAAP) of the TLC Business\nas of such date.  In order to ensure that Holdings does not\nreceive excess proceeds from Liquidity Events as a result of\ncontribution of excess or unnecessary Funded Capital Commitment,\nit is understood that Funded Capital Commitment does not include\nany portion of the AEG Committed Capital that at the time of\ncontribution or payment to the Company was not reasonably\nrequired to fund ongoing operating cash flow.  In any event the\ninitial capital\n\n\n                              -3-\n\n\n\ncontribution of $10 million pursuant to Section\n5.11 is deemed to be Funded Capital Commitment.\n\n          \"GAAP\" shall mean generally accepted accounting\nprinciples in the United States, as in effect from time to time.\n\n          \"GGC\" shall mean Golden Gate Private Equity, Inc., a\nDelaware corporation.\n\n          \"Hazardous Materials\" shall mean each and every\nelement, compound, chemical mixture, contaminant, pollutant,\nmaterial, waste or other substance which is defined, determined\nor identified as or has the potential to be hazardous or toxic\nunder Environmental Laws or the release of which is regulated\nunder Environmental Laws.  Without limiting the generality of the\nforegoing, the term includes:  \"hazardous substances\" as defined\nin CERCLA; \"extremely hazardous substances\" as defined in EPCRA;\n\"hazardous waste\" as defined in the Resource Conservation and\nRecovery Act, 42 U.S.C. 6901, et seq.; \"hazardous materials\" as\ndefined in HMTA; \"chemical substance or mixture\" as defined in\nTSCA; crude oil, petroleum products or any fraction thereof;\nradioactive materials including source, byproduct or special\nnuclear materials; asbestos or asbestos-containing materials;\nchlorinated fluorocarbons; and radon.\n\n          \"HMTA\" shall mean the Hazardous Materials\nTransportation Act, 49 U.S.C. 1802 et seq.\n\n          \"Liquidity Event\" shall mean (i) the direct or indirect\ntransfer, in a transaction or series of related transactions, of\nany of the assets of the Company or any of its Subsidiaries or\nany of the membership or other equity interests of any of the\nCompany's Subsidiaries by asset sale (other than ordinary course\nsales of inventory), merger, sale of membership interests, stock\nor other equity interests, recapitalization, reorganization,\nlicenses (other than ordinary course licenses), or other transfer\nfrom the Company or any of its Subsidiaries to any other third\nparty that is not a wholly owned subsidiary of the Company or\n(ii) the liquidation and winding up of the Company.\n\n          \"Multiemployer Plan\" shall mean any \"multiemployer\nplan,\" as defined in Section 4001(a)(3) of ERISA, under which the\nCompany or any ERISA Affiliate has or may have any liability\n(accrued, contingent or otherwise).\n\n          \"Net Proceeds\" shall mean, with respect to any\nLiquidity Event, the proceeds received by the Company or any\nSubsidiary in connection with such Liquidity Event (including\nwithout limitation Assumed Debt), less (x) any payments to third\nparties (that are not Affiliates of the Company, AEG or any\nmember of the Company) in respect of indebtedness of the Company\nthat is required by its terms to be repaid in connection with\nsuch Liquidity Event and is so repaid, and (y) any reasonable\ntransaction expenses paid in connection therewith.\n\n          \"Non-income Taxes\" shall mean Taxes other than Income\nTaxes.\n\n          \"Pension Plan\" shall mean any \"employee pension benefit\nplan\" as defined in Section 3(2) of ERISA (other than a\nMultiemployer Plan) and which any of the TLC Subsidiaries\ncontributes to or is required to contribute to, or under which\nany of the TLC Subsidiaries has or\n\n\n                              -4-\n\n\n\nmay have any liability\n(accrued, contingent or otherwise), for the benefit of, or on\nbehalf of, any U.S. employee of any of the TLC Subsidiaries\nemployed in the United States.\n\n          \"Person\" shall mean a person, corporation, partnership,\nlimited liability company, joint venture, trust or other entity\nor organization.\n\n          \"Subsidiary\" shall mean, with respect to any Person,\nany corporation, entity or other organization, whether\nincorporated or unincorporated, of which (i) such first Person\ndirectly or indirectly owns or controls at least a majority of\nthe securities or other interests having by their terms ordinary\nvoting power to elect a majority of the board of directors or\nothers performing similar functions or (ii) such first Person is,\nin the case of a partnership, a general partner or, in the case\nof a limited liability company, a manager or managing member.\n\n          \"TLC\" shall mean The Learning Company Inc., a Delaware\ncorporation, which was merged with and into Mattel, but shall not\nmean Mattel or any other successor to The Learning Company Inc.\n\n          \"TLC Business\" shall mean the business of developing,\npublishing and marketing consumer software products (including,\nwithout limitation, those listed on Schedule A attached hereto),\nas currently conducted by Mattel through The Learning Company\nbusiness unit of the Mattel Interactive division of Mattel; it\nbeing understood that the \"TLC Business\" does not include the\nMattel Media business unit of the Mattel Interactive division of\nMattel, which owns, develops, publishes or markets certain\nconsumer software products, including, without limitation, those\nlisted on Schedule B attached hereto.\n\n          \"TLC Material Adverse Effect\" shall mean a material\nadverse change in, or effect on, the business, annual results of\noperations or financial condition of the TLC Business taken as a\nwhole; provided, however, that none of the following shall be\ndeemed by itself or by themselves, either alone or in\ncombination, to constitute, and none of the following shall be\ntaken into account in determining whether there has been, could\nbe or will be a TLC Material Adverse Effect:  (i) any failure by\nthe Company or the TLC Business to meet internal projections or\nforecasts or published revenue or earnings predictions for any\nperiod ending (or for which revenues or earnings are released) on\nor after the date of this Agreement; (ii) any earnings (or\nlosses) consistent with the estimates, forecasts or projections\nthat on or prior to the date hereof have been disclosed to AEG or\npublicly by Mattel; (iii) results of the litigation set forth in\nSection 1 of the TLC Disclosure Schedule; (iv) conditions\naffecting the educational, entertainment and\/or productivity\nsoftware industries as a whole; (v) conditions affecting the U.S.\neconomy as a whole or foreign economies in any locations where\nthe TLC Business or any of the TLC Subsidiaries have operations\nor sales (including, without limitation, prevailing interest rate\nlevels); (vi) conditions resulting from or relating to compliance\nwith the terms of, or the taking of any action required by, this\nAgreement; or (vii) any effect arising out of or resulting from\nactions contemplated by the parties in connection with, or which\nis attributable to, the announcement of the disposition by Mattel\nof the TLC Business or the announcement, execution or\nconsummation of this Agreement and the transactions contemplated\nhereby.\n\n          \"TLC Subsidiaries\" shall mean Mattel's Subsidiaries\nthat conduct the TLC Business, which are set forth in Section 3.4\nof the TLC Disclosure Schedule.\n\n\n\n                              -5-\n\n\n\n          \"TSCA\" shall mean the Toxic Substances Control Act, 15\nU.S.C. 2601, et seq.\n\n          \"Welfare Plan\" shall mean any \"employee welfare benefit\nplan\" as defined in Section 3(1) of ERISA under which the Company\nor any Subsidiary of the Company has or may have any liability\n(accrued, contingent or otherwise), for the benefit of, or on\nbehalf of, any U.S. employee of the Company or any Subsidiary\nemployed in the United States.\n\n          \"Working Capital\" shall mean current assets (excluding\ncash) less current liabilities (excluding short-term debt),\ncomputed in accordance with GAAP.\n\n                     ADDITIONAL DEFINITIONS\n                     ----------------------\n\nTerm                                                  Section No.\n----                                                  -----------\nAcceleration Event                                         7.2(b)\nAcquiring Person                                           7.5(a)\nAction                                                       3.10\nAEG                                                      Preamble\nAEG Fees                                                   8.1(a)\nAgreement                                                Preamble\nAllocations                                                6.1(b)\nAppraiser                                                     7.3\nAssumed Employee Liabilities                                  5.9\nAssumed Liabilities                                        5.2(b)\nAssumption Agreement                                   9.2(b)(ii)\nBonus Units                                                7.1(g)\nCapital Contributions Cap                                    5.11\nClaims Notice                                                11.3\nClosing                                                       2.1\nClosing Date                                                  2.2\nCompany                                                  Preamble\nCompany Indemnified Parties                               11.1(b)\nCompany Plan                                               5.2(a)\nConfidentiality Agreement                                    12.4\nConversions                                                   9.3\nDetermination                                              6.1(a)\nEBITDA                                                     7.2(a)\nEBITDA Notice                                             7.2(c)\nEBITDA Payment                                             7.2(a)\nEBITDA Period                                              7.2(a)\nEBITDA Resolution Period                                   7.2(e)\nEnterprise Value Payment Amount                            7.3(a)\nExcess EBITDA                                              7.2(a)\nExcluded Assets                                               5.8\nExcluded Taxes                 Definition of \"Excluded Liability\"\nFifth Year Enterprise Value                                7.3(b)\nGovernmental Entity                                        3.6(b)\n\n\n                              -6-\n\n\n\nHoldings                                                 Recitals\nHSR Act                                                    3.6(b)\nIncome Taxes                                               6.7(a)\nIndemnified Parties                                       11.1(b)\nIndemnitor                                                   11.3\nInterim TLC Balance Sheet                                 3.18(a)\nInterim TLC Balance Sheet                                 3.18(a)\nInterim TLC Financial Statements                          3.18(a)\nIPR                                                       3.16(a)\nLease and Operational Documents                           3.13(c)\nLicense Agreement                                        Recitals\nLiens                                                      3.3(b)\nLiquidity Event Percentage                                 7.1(h)\nLiquidity Resolution Period                                7.1(e)\nLiquidity Statement                                        7.1(d)\nLosses                                                     5.3(b)\nMattel                                                   Preamble\nMattel Consolidated Returns                                6.2(e)\nMattel Group                                               6.7(b)\nMattel Indemnified Parties                                11.1(a)\nMattel Interactive Trademarks and Logos                   5.10(a)\nMattel Level Employees                                     5.2(a)\nMattel Secured Note                                        7.2(b)\nMinimum Payment                                               7.4\nNet Revenue                                                7.2(a)\nNet Sale Proceeds                                          7.5(a)\nNeutral Auditors                                           7.1(e)\nOrder                                                      9.1(a)\nPaid Distributions                                         8.1(b)\nParent-Level Contracts                                        5.7\nParent-Level Contracts                                        5.7\nPermitted Liens                                           3.13(b)\nPortfolio Securities                                          5.8\nPost-Closing Period                                        6.8(a)\nPre-Closing Period             Definition of \"Excluded Liability\"\nPreferred Return Payments                              7.1(b)(ii)\nPrevious Interest Payments                             7.1(b)(ii)\nPrice                                                         2.4\nQuarter End Date                                           7.2(a)\nReturn Amount                                              7.1(f)\nReturns                                                    6.7(g)\nSale of the Company                                        7.5(a)\nSeller Plan                                                5.2(a)\nTax Benefit                                                6.7(c)\nTax Item                                                   6.7(d)\nTax Proceeding                                             6.7(e)\n\n\n                              -7-\n\n\n\nTax Returns                                                  3.11\nTaxes                                                      6.7(g)\nThird Party Claim                                            11.3\nThree Year Enterprise Value                                   7.3\nThreshold Amount                                           7.2(a)\nTLC Contracts                                             3.14(a)\nTLC Disclosure Schedule                               Article III\nTLC Insurance Policies                                        3.9\nTLC Intellectual Property Rights                          3.16(a)\nTLC Leased Property                                       3.13(a)\nTLC Material Products                                 3.14(a)(ii)\nTLC Owned Property                                        3.13(a)\nTLC Shares and LLC Interests                                  2.1\nTransition Services Agreement                            Recitals\n\n\n                           ARTICLE II\n\n                 PURCHASE AND SALE; THE CLOSING\n\n          2.1  Purchase and Sale.  At the closing of the transactions\ncontemplated hereby (the \"Closing\"), Mattel shall sell, transfer,\nconvey, assign and deliver to the Company all of its rights in\nthe outstanding capital stock or limited liability company\ninterests of the TLC Subsidiaries (the \"TLC Shares and LLC\nInterests\") in exchange for the Consideration.\n\n          2.2  Closing.  The Closing shall take place at the offices\nof Irell &amp; Manella LLP, 1800 Avenue of the Stars, Suite 900, Los\nAngeles, CA 90067, or at such other place as may be mutually\nagreed upon by the parties (the date of such Closing, \"Closing\nDate\").\n\n          2.3  Retention of Books and Records.  The Company shall, and\nshall cause the TLC Subsidiaries to, (i) hold all of the books\nand records of the TLC Subsidiaries existing on the Closing Date\nand not destroy or dispose of any thereof for a period of six\nyears from the Closing Date or such longer time as may be\nrequired by law, and thereafter, if it desires to destroy or\ndispose of such books and records, offer first in writing at\nleast 60 days prior to such destruction or disposition to\nsurrender them to Mattel and (ii) from and after the Closing,\nafford Mattel, its accountants and counsel, during normal\nbusiness hours, upon reasonable request, at any time, reasonable\naccess to such books, records and other data and to the employees\nof the Company and any of its Subsidiaries to the extent that\nsuch access may be requested for any legitimate purpose at no\ncost to Mattel (other than for reasonable out-of-pocket\nexpenses).\n\n          2.4  Fair-Market Value.  Mattel and the Company agree that\nthe fair-market value of the Consideration is reasonably\nascertainable and is the amount set forth on Schedule C (the\n\"Price\").\n\n\n\n                              -8-\n\n\n\n                           ARTICLE III\n\n            REPRESENTATIONS AND WARRANTIES OF MATTEL\n\n          Mattel represents and warrants to the Company that the\nstatements contained in this Article III are, to the knowledge of\nMattel, true and correct except as set forth in the disclosure\nschedule delivered by Mattel to the Company or AEG on or before\nthe date of this Agreement (the \"TLC Disclosure Schedule\").  The\nTLC Disclosure Schedule shall be arranged in paragraphs\ncorresponding to the numbered and lettered paragraphs contained\nin this Article III and the disclosure in any paragraph shall\nqualify other paragraphs in this Article III only to the extent\nthat it is reasonably apparent from a reading of such disclosure\nthat it also qualifies or applies to such other paragraphs.\n\n          3.1  Organization and Qualification.  The TLC Subsidiaries\nare duly organized, validly existing and in good standing under\nthe laws of the jurisdiction of their respective organization,\nwith the corporate power and authority to own and operate their\nrespective businesses as presently conducted, except for any\nfailure to be in good standing or to have such power or authority\nthat would not have a TLC Material Adverse Effect.  The TLC\nSubsidiaries are duly qualified as foreign corporations or other\nentities to do business and are in good standing in each\njurisdiction where the character of their respective properties\nowned or held under lease or the nature of their respective\nactivities makes such qualification necessary, except for such\nfailures to be in good standing or so qualified as would not,\nindividually or in the aggregate, have a TLC Material Adverse\nEffect.\n\n          3.2  Authorization; Validity and Effect of Agreement.\nMattel has the requisite corporate power and authority to\nexecute, deliver and perform its obligations under this Agreement\nand to consummate the transactions contemplated hereby.  The\nexecution and delivery of this Agreement by Mattel and the\nperformance by Mattel of its obligations hereunder and the\nconsummation of the transactions contemplated hereby have been\nduly authorized by its Board of Directors and all other necessary\ncorporate action on the part of Mattel and no other corporate\nproceedings on the part of Mattel are necessary to authorize this\nAgreement and the transactions contemplated hereby.  This\nAgreement has been duly and validly executed and delivered by\nMattel and, assuming that it has been duly authorized, executed\nand delivered by the other parties hereto, constitutes a legal,\nvalid and binding obligation of Mattel, enforceable against it in\naccordance with its terms, subject to the effects of bankruptcy,\ninsolvency, fraudulent conveyance, reorganization, moratorium and\nother similar laws relating to or affecting creditors' rights\ngenerally, general equitable principles (whether considered in a\nproceeding in equity or at law) and an implied covenant of good\nfaith and fair dealing.\n\n          3.3  Capitalization.\n\n          (a)    The TLC Shares and LLC Interests represent all of the\noutstanding capital stock or limited liability company interests\nin the TLC Subsidiaries.  All of the TLC Shares and LLC Interests\nare validly issued, fully paid and nonassessable.  Except for the\nTLC Shares and LLC Interests, there are not, and at the Closing\nthere will not be, any capital stock or other equity interests in\nthe TLC Subsidiaries issued or outstanding or any subscriptions,\noptions, warrants, calls, rights, convertible securities or other\nagreements or commitments of any character\n\n\n\n                              -9-\n\n\n\nobligating the TLC\nSubsidiaries to issue, transfer or sell any capital stock or\nother equity interests in the TLC Subsidiaries, or any\nagreements, arrangements, or understandings granting any Person\nany rights in the TLC Subsidiaries similar to capital stock or\nother equity interests, including, without limitation, stock\nappreciation and profit participation rights.\n\n(b)    All of the TLC Shares and LLC Interests are owned of\nrecord and beneficially by Mattel free and clear of all liens,\npledges, charges, claims, security interests, purchase\nagreements, options, title defects, restrictions on transfer or\nother encumbrances and agreements of any nature whatsoever,\nwhether consensual, statutory or otherwise (collectively,\n\"Liens\").\n          3.4  Subsidiaries.  The TLC Subsidiaries are those set forth\nin Section 3.4 of the TLC Disclosure Schedule.\n\n          3.5  Other Interests.  None of the TLC Subsidiaries owns,\ndirectly or indirectly, any interest or investment (whether\nequity or debt) in any Person except for the TLC Subsidiaries,\nother than Portfolio Securities (as defined herein).\n\n          3.6  No Conflict; Required Filings and Consents.\n\n          (a)    Neither the execution and delivery of this Agreement by\nMattel nor the performance by Mattel of its obligations\nhereunder, nor the consummation of the transactions contemplated\nhereby, will:  (i) conflict with Mattel's certificate of\nincorporation or bylaws or the comparable charter or\norganizational documents of any of the material TLC Subsidiaries;\n(ii) assuming satisfaction of the requirements set forth in\nSection 3.6(b) below, violate any statute, law, ordinance, rule\nor regulation, applicable to Mattel or the TLC Subsidiaries or\nany of the properties or assets of the TLC Subsidiaries; or (iii)\nviolate, breach, be in conflict with or constitute a default (or\nan event which, with notice or lapse of time or both, would\nconstitute a default) under, or permit the termination of any\nprovision of, or result in the termination of, the acceleration\nof the maturity of, or the acceleration of the performance of any\nobligation of Mattel or the TLC Subsidiaries under, or result in\nthe creation or imposition of any Lien upon any properties,\nassets or business of the TLC Subsidiaries under, any TLC\nContract or any order, judgment or decree to which any of the TLC\nSubsidiaries is a party or by which any of the TLC Subsidiaries\nor any of their respective assets or properties is bound or\nencumbered except, in the case of clauses (ii) and (iii), for\nsuch violations, breaches, conflicts, defaults or other\noccurrences which, individually or in the aggregate, would not\nhave a TLC Material Adverse Effect.\n\n(b)  Except for the pre-merger notification requirements of\nthe Hart-Scott-Rodino Antitrust Improvements Act of 1976, as\namended, and the rules and regulations thereunder (the \"HSR\nAct\"), no consent, approval or authorization of, permit from, or\ndeclaration, filing or registration with, any court,\nadministrative agency, commission or other governmental\nauthority, body or instrumentality, federal, state, local,\ndomestic or foreign governmental or regulatory authority\n(\"Governmental Entity\"), or any other Person is required to be\nmade or obtained by the TLC Subsidiaries in connection with the\nexecution, delivery and performance of this Agreement and the\nconsummation of the transactions contemplated hereby, except\nwhere the failure to obtain such consent, approval,\nauthorization, permit or declaration or\n\n\n                              -10-\n\n\n\nto make such filing or\nregistration would not, individually or in the aggregate, have a\nTLC Material Adverse Effect.\n\n          3.7  Compliance.  The TLC Subsidiaries are in compliance\nwith all foreign, federal, state and local laws and regulations\nof a Governmental Entity applicable to their respective\noperations or with respect to which compliance is a condition of\nengaging in the business thereof, except to the extent that\nfailure to comply would not, individually or in the aggregate,\nhave a TLC Material Adverse Effect.  Neither Mattel nor the TLC\nSubsidiaries have received any notice asserting a failure, or\npossible failure, to comply with any such law or regulation, the\nsubject of which notice has not been resolved as required thereby\nor otherwise to the satisfaction of the party sending the notice,\nexcept for such failure as would not, individually or in the\naggregate, have a TLC Material Adverse Effect.  The TLC\nSubsidiaries hold all permits, licenses and franchises from\nGovernmental Entities required to conduct their respective\nbusinesses as they are now being conducted, except for such\nfailures to have such permits, licenses and franchises that would\nnot, individually or in the aggregate, have a TLC Material\nAdverse Effect.\n\n          3.8  Product Liability.  There are no claims against Mattel\nor the TLC Subsidiaries for injury to person or property of\nemployees or any third parties suffered as a result of the sale\nof any product or performance of any service by Mattel or the TLC\nSubsidiaries in connection with the TLC Business, including\nclaims arising out of the defective or unsafe nature of its\nproducts or services, which would, individually or in the\naggregate, have a TLC Material Adverse Effect.\n\n          3.9  Insurance.  Mattel has made available to the Company\naccurate and complete copies of all material fire and casualty,\ngeneral liability, business interruption, product liability, and\nsprinkler and water damage insurance policies with respect to the\nTLC Business maintained by Mattel or the TLC Subsidiaries\n(collectively, \"TLC Insurance Policies\").  All TLC Insurance\nPolicies are with reputable insurance carriers, provide full and\nadequate coverage for all normal risks incident to the business\nof the TLC Subsidiaries and their respective properties and\nassets, and are in character and amount at least equivalent to\nthat carried by Persons engaged in similar businesses and\nsubstantially equivalent to that carried by Persons engaged in\nsimilar businesses and subject to the same or similar perils or\nhazards.\n\n          3.10 Litigation.  Except for the matters set forth in\nSection 3.10 of the TLC Disclosure Schedule, (i) there is no\naction, claim, suit, litigation, proceeding, or governmental\ninvestigation (\"Action\") instituted, pending or threatened, in\neach case against Mattel or the TLC Subsidiaries relating to the\nTLC Business, which, individually or in the aggregate, directly\nor indirectly, would reasonably be likely to have a TLC Material\nAdverse Effect, (ii) nor is there any outstanding judgment,\ndecree or injunction, in each case against Mattel or the TLC\nSubsidiaries relating to the TLC Business which, individually or\nin the aggregate, has or would reasonably be likely to have a TLC\nMaterial Adverse Effect.\n\n          3.11 Taxes.  All Tax Returns (as defined below) required to\nbe filed on or prior to the Closing Date by, or with respect to\nany activities of, the TLC Subsidiaries have been filed on a\ntimely basis, and all Taxes (as defined below) shown to be due on\nsuch Tax Returns have been paid, except where the failure to file\nsuch Tax Returns or pay such Taxes would not have a\n\n\n                              -11-\n\n\n\nTLC Material\nAdverse Effect.  All such Tax Returns were correct and complete,\nexcept for failures that would not have a TLC Material Adverse\nEffect.\n\n          3.12 Employee Benefit Plans.\n\n          (a)    Section 3.12 of the TLC Disclosure Schedule contains a\ncomplete list of all material Pension Plans, Welfare Plans and\nBenefit Arrangements (other than those Benefit Arrangements\nconsisting of employment contracts, individual severance\nagreements or individual change in control agreements with\nemployees having annual base compensation of less than $200,000)\nas of the date hereof.  True and complete copies or descriptions\nof the Pension Plans, Welfare Plans and material Benefit\nArrangements (other than those maintained outside the United\nStates), including, without limitation, trust instruments, if\nany, that form a part thereof, and all amendments thereto have\nbeen furnished or made available to the Company and its counsel.\n\n(b)   Except as described in Section 3.12 of the TLC\nDisclosure Schedule or which, individually or in the aggregate,\nwould not be reasonably likely to have a TLC Material Adverse\nEffect, (i) each of the Pension Plans, Welfare Plans and Benefit\nArrangements (other than any Multiemployer Plan) has been\nadministered and is in material compliance with the terms of such\nPension Plan, Welfare Plan and Benefit Arrangement and all\napplicable laws, rules and regulations and each employee benefit\nplan maintained for non-U.S. employees of the TLC Subsidiaries\nemployed outside of the United States has been administered and\nis in material compliance with the terms of such plan and all\napplicable laws, rules and regulations, (ii) no \"reportable\nevent\" (as such term is used in Section 4043 of ERISA) for which\nthe notice requirements to the Pension Benefit Guaranty\nCorporation have not been waived, \"prohibited transaction\" (as\nsuch term is used in Section 406 of ERISA or Section 4975 of the\nCode) for which no exemption exists or \"accumulated funding\ndeficiency\" (as such term is used in Section 412 or 4971 of the\nCode) has heretofore occurred with respect to any Pension Plan\n(other than any Multiemployer Plan), (iii) there is no material\naction, order, writ, injunction, judgment or decree outstanding\nor claim, suit, litigation, proceeding, arbitral action,\ngovernmental audit or investigation relating to or seeking\nbenefits under any Pension Plan, Welfare Plan or Benefit\nArrangement that is pending or threatened against the TLC\nSubsidiaries, or any Pension Plan, Welfare Plan, or Benefit\nArrangement, other than routine claims for benefits, (iv) none of\nthe TLC Subsidiaries or ERISA Affiliates have incurred any\nwithdrawal liability with respect to any Multiemployer Plan under\nTitle IV of ERISA which remains unsatisfied, (v) any termination\nof, or withdrawal from, any Pension Plan or Multiemployer Plan of\nthe TLC Subsidiaries or any ERISA Affiliate, on or prior to the\nClosing Date, will not subject the TLC Subsidiaries to any\nliability under Title IV of ERISA, (vi) neither the execution and\ndelivery of this Agreement nor the consummation of the\ntransactions contemplated hereby will result in the acceleration\nor creation of any rights of any current or former employee of\nany of the TLC Subsidiaries to benefits under any Pension Plan,\nWelfare Plan or Benefit Arrangement (including, without\nlimitation, the acceleration of the vesting or exercisability of\nany stock options, the acceleration of the vesting of any\nrestricted stock, the acceleration of the accrual or vesting of\nany benefits under any Pension Plan or the acceleration or\ncreation of any rights under any severance, parachute or change\nin control agreement), (vii) with respect to the Pension Plans,\nWelfare Plans and Benefit Arrangements, individually and in the\naggregate, there are no funded benefit material obligations for\nwhich material contributions have not been made or properly\naccrued\n\n\n                              -12-\n\n\n\nand there are no unfunded material benefit obligations\nwhich have not been accounted for by reserves, or otherwise\nproperly footnoted in accordance with GAAP, on the financial\nstatements of the TLC Business, and (viii) no ERISA Affiliate has\nincurred or is expected to incur any Controlled Group Liability\nwhich is, or is reasonably expected to become, a liability of the\nCompany.\n\n          3.13 Assets.\n\n          (a)    Section 3.13 of the TLC Disclosure Schedule identifies\nall real property owned by the TLC Subsidiaries (the \"TLC Owned\nProperty\") and all real property leased or operated by the TLC\nSubsidiaries where more than 20 employees are located (the \"TLC\nLeased Property\").\n\n(b)    The TLC Subsidiaries have good and marketable title to\nthe TLC Owned Property, and a valid leasehold interest in the TLC\nLeased Property, sufficient to allow each of the TLC Subsidiaries\nto conduct, and to continue to conduct, their respective\nbusinesses as and where currently conducted, except for such\nmatters that, individually or in the aggregate, are not\nreasonably likely to have a TLC Material Adverse Effect.  Such\ntitle and leasehold interest is free and clear of any and all\nLiens, except for (i) liens for Taxes not yet due and payable or\nwhich are being contested in good faith; (ii) carriers,\nmanagement, mechanics, institutions, repairman or other like\nliens arising in the ordinary course of business and not overdue;\n(iii) easements, rights of way, encroachments, restrictions,\nconditions and other similar encumbrances incurred in the\nordinary course of business; and (iv) other Liens that would not,\nindividually or in the aggregate, result in a TLC Material\nAdverse Effect (\"Permitted Liens\").\n\n(c)    True and correct copies of all of the principal\ndocuments under which the TLC Owned Property and the TLC Leased\nProperty is leased or operated (the \"Lease and Operational\nDocuments\") have been delivered or made available for review to\nthe Company.  The Lease and Operational Documents are unmodified\nand in full force and effect.  None of the Company, its\nSubsidiaries or any other party is in material default under the\nLease and Operational Documents, and no defaults (whether or not\nsubsequently cured) by any of the TLC Subsidiaries or any other\nparty have been alleged thereunder, except for such defaults\nthat, individually, or in the aggregate, are not reasonably\nlikely to have a TLC Material Adverse Effect.\n\n(d)    The TLC Subsidiaries taken as a whole have sufficiently\ngood and valid title to, or an adequate leasehold interest in,\ntheir material tangible personal properties and assets in order\nto allow them to conduct, and continue to conduct, the TLC\nBusiness as and where currently conducted.  Such material\ntangible personal assets and properties are sufficiently free of\nLiens to allow each of the TLC Subsidiaries to conduct, and\ncontinue to conduct, the TLC Business as currently conducted and\nthe consummation of the transactions contemplated hereby will not\nalter or impair such ability in any respect which, individually\nor in the aggregate, would be reasonably likely to have a TLC\nMaterial Adverse Effect.  There are no defects in the physical\ncondition or operability of such material tangible personal\nassets and properties which would impair the use of such assets\nand properties as such assets and properties are currently used,\nexcept for such defects which, individually or in the aggregate,\nwould not be reasonably likely to have a TLC Material Adverse\nEffect.\n\n\n\n                              -13-\n\n\n\n          3.14 Material Contracts.\n\n          (a)    Section 3.14(a) of the TLC Disclosure Schedule contains\na complete and accurate list of all Contracts of the following\ncategories to which any of the TLC Subsidiaries is a party (or,\nin the case of clause (i) below, to which Mattel is a party) or\nby which any of them is bound as of the date of this Agreement:\n\n                (i)  material exclusive distribution agreements not terminable\n     by the TLC Subsidiaries without penalty upon 90 days' or less notice\n     and distribution agreements resulting in an annual payment to the\n     TLC Subsidiaries of $3 million or more;\n\n(ii) license agreements pursuant to which the TLC Business is\nauthorized to use any third party patents, trademarks,\ncopyrights, trade secrets, likeness or other proprietary rights,\nincluding software, that is used in the manufacture of,\nincorporated in, or forms a part of the top fifty selling\nproducts of the TLC Business during the period between July 1,\n1999 and November 1, 2000, as reported by PC Data, Inc. (such\nproducts, the \"TLC Material Products\").\n\n(iii)     promissory notes, loans, agreements, indentures,\nevidences of indebtedness or other instruments relating to the\nlending of money, whether as borrower, lender or guarantor, in\nexcess of $3 million;\n\n(iv) Contracts containing covenants materially limiting the\nfreedom of any of the TLC Subsidiaries to engage in any line of\nbusiness or compete with any Person or operate at any location\nwhich are not terminable by the TLC Subsidiaries without penalty\nupon 90 days' or less notice;\n\n(v)  any material Contract with any federal, state or local\ngovernment other than such Contracts relating to the sales of\ngoods in the ordinary course of business;\n\n(vi) other than license agreements and distribution agreements,\nContracts involving annual expenditures or liabilities in excess\nof $10 million which are not terminable by the TLC Subsidiaries\nwithout penalty upon 90 days' or less notice;\n\n(vii)     the principal documents (excluding escrow agreements,\naffiliate agreements and other ancillary documents) relating to\nany merger, consolidation, business combination, share exchange\nor business acquisition, or for the purchase, acquisition, sale\nor disposition of any material assets of any of the TLC\nSubsidiaries outside the ordinary course of business which (A)(1)\ninvolves consideration to any party in excess of $20 million and\n(2) were entered into after January 1, 1998, or (B) under which\nthe TLC Subsidiaries remain obligated to make \"earnout\" payments\nor other conditional payments of cash or stock based on the\noperating results or other financial performance of the TLC\nBusiness or a portion of its business; and\n\n(viii)    other than as set forth in Section 3.12 of the TLC\nDisclosure Schedule, any other Contract to be performed after the\ndate of this Agreement which would be a material contract of the\nTLC Subsidiaries as a whole (as defined in Item\n\n\n                              -14-\n\n\n\n601(b)(10) of\nRegulation S-K of the SEC, if the TLC Subsidiaries as a whole\nwere the relevant issuer).\n\nTrue copies of the written Contracts identified in Section\n3.14(a) of the TLC Disclosure Schedule (the \"TLC Contracts\"), as\nin effect on the date hereof, have been delivered or made\navailable to the Company.\n\n          (b)    As of the date of this Agreement, (i) each of the TLC\nContracts is valid and binding upon the TLC Subsidiaries in\naccordance with its terms and is in full force and effect and\n(ii) there is no material breach or violation of or default by\nthe TLC Subsidiaries or the other party under any of the TLC\nContracts and no event has occurred with respect to the TLC\nSubsidiaries which, with notice or lapse of time or both, would\nconstitute a material breach, violation or default, or give rise\nto a right of termination, modification, cancellation,\nforeclosure, imposition of a Lien, prepayment or acceleration\nunder any of the TLC Contracts, in each of clauses (i) and (ii),\nother than any such failure to be valid and binding and in full\nforce and effect, breach, violation, default or event, as\napplicable, which, individually or in the aggregate, would not be\nreasonably likely to have a TLC Material Adverse Effect.\n\n          3.15 Labor Relations.  Except as would not be reasonably\nlikely to have a TLC Material Adverse Effect, as of the date of\nthis Agreement (i) there are no activities or proceedings of any\nlabor union to organize any non-unionized employees of the TLC\nSubsidiaries; (ii) there are no unfair labor practice charges\nand\/or complaints pending against the TLC Subsidiaries before the\nNational Labor Relations Board, or any similar foreign labor\nrelations governmental bodies, or any current union\nrepresentation questions involving employees of the TLC\nSubsidiaries; and (iii) there is no strike, slowdown, work\nstoppage or lockout, or threat thereof, by or with respect to any\nemployees of the TLC Subsidiaries.  As of the date of this\nAgreement, the TLC Subsidiaries are not parties to any collective\nbargaining agreements.  There are no controversies pending or\nthreatened between the TLC Subsidiaries and any of their\nrespective employees, except for such controversies that would\nnot be reasonably likely to have a TLC Material Adverse Effect.\n\n          3.16 Intellectual Property.\n\n          (a)    Except for the Mattel Interactive Trademarks and Logos,\nthe TLC Subsidiaries own, or are licensed or otherwise possess,\nlegally enforceable rights to use, make, distribute, display,\nperform, produce and\/or sell all patents, trademarks, trade\nnames, service marks and copyrights, any applications for and\nregistrations of such patents, trademarks, trade names, service\nmarks and copyrights, and all processes, formulae, methods,\nschematics, technology, know-how, computer software programs or\napplications, tangible or intangible proprietary information or\nmaterial, waivers or licenses of publicity or privacy rights or\nany other third party licenses that are necessary to conduct the\nTLC Business as currently conducted (collectively, \"IPR\"), the\nabsence of which would be reasonably likely to have either\nindividually or in the aggregate, a TLC Material Adverse Effect\n(the \"TLC Intellectual Property Rights\").\n\n(b)    The execution and delivery of this Agreement and\nconsummation of the transactions contemplated hereby will not\nresult in the breach of, or create on behalf of any third\n\n\n                              -15-\n\n\n\nparty\nthe right to terminate or modify, any license, sublicense or\nother agreement relating to the TLC Intellectual Property Rights,\nin each case other than a termination, modification or breach\nwhich, individually or in the aggregate, would not be reasonably\nlikely to have a TLC Material Adverse Effect.\n\n(c)    All patents, registered trademarks, service marks and\ncopyrights which are held by the TLC Subsidiaries the loss or\ninvalidity of which would cause a TLC Material Adverse Effect are\nvalid and subsisting.  Section 3.16(c) of the TLC Disclosure\nSchedule sets forth a complete and accurate list of all\nregistered copyrights, registered trademarks, patents and patent\napplications for the TLC Material Products.  Except as disclosed\nin Section 3.16(c) of the TLC Disclosure Schedule or as would not\nreasonably be likely to have a TLC Material Adverse Effect, (i)\nneither Mattel nor the TLC Subsidiaries have been sued in any\nAction or received in writing notice of any claim or notice,\nwhich involves a claim of (x) infringement or violation of any\npatents, trademarks, service marks, copyrights, trade secrets,\nright of privacy or publicity or any other proprietary right of\nany third party or (y) libel or defamation, in each case\ndescribed in this clause (i) in connection with the TLC Business;\nand (ii) the manufacturing, marketing, licensing and\/or sale of\nthe products of the TLC Business does not infringe or violate any\npatent, trademark, service mark, copyright, trade secret, right\nof privacy or publicity, or other proprietary right of any third\nparty.  There are no known infringements of any of the patents,\ntrademarks, servicemarks and\/or copyrights held by Mattel which\nindividually or in the aggregate would be reasonably expected to\nhave a TLC Material Adverse Effect, except as identified in\nSection 3.16(c) or 3.10 of the TLC Disclosure Schedule.\n\n(d)    All Persons employed in the TLC Business, as employees,\ncontractors or otherwise, and who have created and\/or developed\nany IPR which is primarily related to the TLC Business, except\nfor the Excluded Assets, and the absence of which, either\nindividually or in the aggregate, could reasonably be expected to\nhave a TLC Material Adverse Effect, have executed a written\nassignment and\/or agreement to assign all right, title and\ninterest in and to such IPR to Mattel and\/or the TLC\nSubsidiaries, as a work made for hire, free and clear of any\nencumbrance or claim of ownership or interest.\n\n          3.17 Environmental Matters.  Except for such matters that,\nindividually or in the aggregate, are not reasonably likely to\nhave a TLC Material Adverse Effect, Mattel and the TLC\nSubsidiaries:  (i) have obtained all applicable permits, licenses\nand other authorizations which are required to be obtained under\nall applicable Environmental Laws by Mattel and the TLC\nSubsidiaries in connection with the TLC Business; (ii) are in\ncompliance with all terms and conditions of such required\npermits, licenses and authorizations, and also are in compliance\nwith all other limitations, restrictions, conditions, standards,\nprohibitions, requirements, obligations, schedules and timetables\ncontained in or arising from applicable Environmental Laws in\nconnection with the TLC Business; (iii) have not received notice\nof any past or present violations of Environmental Laws in\nconnection with the TLC Business, or of any spill, release,\nevent, incident, condition or action or failure to act in\nconnection with the TLC Business which is reasonably likely to\nprevent continued compliance with such Environmental Laws, or\nwhich would give rise to any common law environmental liability\nor liability under Environmental Laws, or which would otherwise\nform the basis of any Action against Mattel or the TLC\nSubsidiaries based on or resulting from the manufacture,\nprocessing, use, treatment, storage, disposal, transport, or\nhandling, or the emission, discharge or release into the\nenvironment, of\n\n\n                              -16-\n\n\n\n\nany Hazardous Material by any Person in\nconnection with the TLC Business; and (iv) have taken all actions\nrequired under applicable Environmental Laws to register any\nproducts or materials required to be registered by Mattel or the\nTLC Subsidiaries thereunder in connection with the TLC Business.\n\n          3.18 Financial Statements.\n\n          (a)    Mattel has delivered to the Company the unaudited\nconsolidated balance sheet with respect to the TLC Business as of\nAugust 31, 2000 (the \"Interim TLC Balance Sheet\") and the related\nunaudited statement of income for the eight-month period ended on\nsuch date (collectively, with the Interim TLC Balance Sheet, the\n\"Interim TLC Financial Statements\").  The Interim TLC Balance\nSheet presents fairly in all material respects the consolidated\nfinancial condition of the TLC Business as of such date and the\nstatement of income included in the Interim Company Financial\nStatements presents fairly in all material respects the\nconsolidated results of the operations for the eight-month period\nthen ended (subject in each case to normal audit adjustments and\nother adjustments disclosed therein and to other adjustments to\nreceivables previously described to AEG).\n\n(b)    The Interim TLC Financial Statements have been prepared\nin all material respects in accordance with GAAP, consistently\napplied (except (i) as disclosed therein, (ii) as described in\nclause (a) above with respect to receivables and (iii) the\nabsence of footnotes).\n\n          3.19 Brokers.  Except for Credit Suisse First Boston\nCorporation and U.S. Bancorp Piper Jaffray Inc., each of whose\nfees will be paid by Mattel, no broker, finder or investment\nbanker is entitled to any brokerage, finder's or other fee or\ncommission in connection with the transactions contemplated\nhereby based upon arrangements made by or on behalf of the TLC\nSubsidiaries or Mattel.\n\n          3.20 Changes Since August 31, 2000.  Except as set forth on\nthe TLC Disclosure Schedule or as otherwise contemplated by this\nAgreement, since August 31, 2000:\n\n          (a)    No TLC Subsidiary has sold, transferred, disposed of,\nor agreed to sell, transfer or dispose of, any material amount of\nassets other than in the ordinary course of business;\n\n(b)    No TLC Subsidiary has paid any dividends or distributed\nany assets to any equity holder in respect of such equity other\nthan to another TLC Subsidiary;\n\n(c)    No TLC Subsidiary has acquired any material amount of\nassets except in the ordinary course of business, nor acquired or\nmerged with any other business;\n\n(d)    No TLC Subsidiary has waived or amended any material\ncontractual right of such TLC Subsidiary, except in the ordinary\ncourse of business; and\n\n(e)    No TLC Subsidiary has entered into any agreement to\ntake any action described in clauses (a) through (d) above.\n\n\n\n                              -17-\n\n\n\n                           ARTICLE IV\n\n                 REPRESENTATIONS AND WARRANTIES\n                     OF THE COMPANY AND AEG\n\n          Each of the Company and AEG represents and warrants to\nMattel that the statements contained in this Article IV are true\nand correct as to itself.\n\n          4.1  Corporate Organization.  Each of the Company and AEG is\nduly organized, validly existing and in good standing under the\nlaws of the jurisdiction of its organization, with the corporate\nor similar power and authority to own and operate its business as\npresently conducted.  Each of the Company and AEG has previously\nmade available to Mattel true and correct copies of\norganizational and trust documents, including, in the case of the\nCompany, its limited liability company agreement.  As of\nimmediately prior to the Closing, the Company has not engaged in\nany transaction other than its formation.\n\n          4.2  Authorization; Validity and Effect of Agreement.  Each\nof the Company and AEG has the requisite corporate or trust power\nand authority to execute, deliver and perform its obligations\nunder this Agreement and to consummate the transactions\ncontemplated hereby.  The execution and delivery of this\nAgreement by each of the Company and AEG of its obligations\nhereunder and the consummation of the transactions contemplated\nhereby have been duly authorized by its Board of Directors or its\ntrustees, as applicable, and all other necessary corporate or\ntrust action on the part of each of them and no other corporate\nor trust proceedings on the part of each of them are necessary to\nauthorize this Agreement and the transactions contemplated\nhereby.  This Agreement has been duly and validly executed and\ndelivered by each of the Company and AEG and, assuming that it\nhas been duly authorized, executed and delivered by Mattel,\nconstitutes a legal, valid and binding obligation of each of\nthem, enforceable against it in accordance with its terms,\nsubject to the effects of bankruptcy, insolvency, fraudulent\nconveyance, reorganization, moratorium and other similar laws\nrelating to or affecting creditors' rights generally, general\nequitable principles (whether considered in a proceeding in\nequity or at law) and an implied covenant of good faith and fair\ndealing.\n\n          4.3  No Conflict; Required Filings and Consents.\n\n          (a)    Neither the execution and delivery of this Agreement\nnor the performance by each of the Company and AEG of its\nobligations hereunder, nor the consummation of the transactions\ncontemplated hereby, will:  (i) conflict with the provisions of\nthe trust instrument or limited liability company agreement or\nother organizational document; (ii) assuming satisfaction of the\nrequirements set forth in Section 4.3(b) below, violate any\nstatute, law, ordinance, rule or regulation, applicable to it or\nany of its properties or assets; or (iii) violate, breach, be in\nconflict with or constitute a default (or an event which, with\nnotice or lapse of time or both, would constitute a default)\nunder, or permit the termination of any provision of, or result\nin the termination of, the acceleration of the maturity of, or\nthe acceleration of the performance of any of any obligation\nunder, or result in the creation or imposition of any Lien upon\nany properties, assets or business of the Company or AEG, as\napplicable, under, any note, bond, indenture, mortgage, deed of\ntrust, lease, franchise, permit, authorization, license,\ncontract, instrument or other agreement or commitment or any\norder, judgment or decree to which it is a party or by\n\n\n\n                              -18-\n\n\n\nwhich it\nor any of its assets or properties is bound or encumbered except,\nin the case of clauses (ii) and (iii), for such violations,\nbreaches, conflicts, defaults or other occurrences which,\nindividually or in the aggregate, would not have a material\nadverse effect on its obligation to perform its covenants under\nthis Agreement.\n\n(b)    Except for the pre-merger notification requirements of\nthe HSR Act, no consent, approval or authorization of, permit\nfrom, or declaration, filing or registration with, any\nGovernmental Entity or any other Person is required to be made or\nobtained by the Company or AEG in connection with the execution,\ndelivery and performance of this Agreement and the consummation\nof the transactions contemplated hereby, except where the failure\nto obtain such consent, approval, authorization, permit or\ndeclaration or to make such filing or registration would not,\nindividually or in the aggregate, have a material adverse effect\non its obligation to perform its covenants under this Agreement.\n\n          4.4  Broker's Fees.  Except as set forth in Section 8.1(a),\nno broker, finder or investment banker is entitled to any\nbrokerage, finder's or other fee or commission in connection with\nthe transactions contemplated hereby based upon arrangements made\nby or on behalf of the Company or AEG.\n\n          4.5  Acquisition of TLC Shares and LLC Interests for\nInvestment; Ability to Evaluate and Bear Risk.  Each of the\nCompany and AEG agrees that the TLC Shares and LLC Interests may\nnot be, directly or indirectly, sold, transferred, offered for\nsale, pledged, hypothecated or otherwise disposed of without\nregistration under the Securities Act of 1933, except pursuant to\nan exemption from such registration available under such Act, and\nwithout compliance with foreign securities laws, in each case, to\nthe extent applicable.\n\n          4.6  Investigation; No Additional Representations and\nWarranties.\n\n          (a)    Each of the Company and AEG is an informed and\nsophisticated participant in the transactions contemplated hereby\nand has undertaken such investigation, and has been provided with\nand has evaluated such documents and information, as it has\ndeemed necessary in connection with the execution, delivery and\nperformance of this Agreement.\n\n(b)    Notwithstanding anything to the contrary contained in\nthis Agreement, it is the explicit intent of each party hereto\nthat Mattel is making no representation or warranty whatsoever,\nexpress or implied, beyond those expressly given in this\nAgreement, including but not limited to any implied warranty or\nrepresentation as to condition, merchantability or suitability as\nto any of the properties or assets of the business of the TLC\nSubsidiaries and it is understood that the Company takes the\nbusiness of the TLC Subsidiaries AS IS AND WHERE IS.  It is\nunderstood that any cost estimates, projections or other\npredictions contained or referred to in the TLC Disclosure\nSchedule, in the offering materials that have been provided to\nthe Company or AEG or that have otherwise been disclosed to the\nCompany or AEG are not and shall not be deemed to be\nrepresentations or warranties of Mattel hereunder and that none\nof Mattel, the TLC Subsidiaries or any of their respective\ndirectors, officers, shareholders, employees, Affiliates,\ncontrolling persons, agents, advisors or representatives makes or\nhas made any representation or warranty, either express or\nimplied, as to the accuracy or completeness of\n\n\n                              -19-\n\n\n\nany of the\ninformation provided or made available to the Company or AEG or\ntheir respective directors, officers, employees, affiliates,\ncontrolling persons, agents or representatives.\n\n          4.7  Litigation.  There is no Action instituted, pending or,\nto the knowledge of AEG or the Company, threatened, in each case\nagainst AEG or the Company or any of its Subsidiaries, which,\nindividually or in the aggregate, directly or indirectly, would\nreasonably be likely to have a material adverse effect on its\nability to perform its agreements and obligations under this\nAgreement, nor is there any outstanding judgment, decree or\ninjunction, in each case against AEG or the Company or any of its\nSubsidiaries, which has or would reasonably be likely to have,\nindividually or in the aggregate, a material adverse effect on\nits ability to perform its agreements and obligations under this\nAgreement.\n\n          4.8  Available Funds.  AEG currently has sufficient funds to\ncomply with its obligation to make the $10 million capital\ncontribution contemplated hereby and will have immediately prior\nto the Closing, available to it all funds necessary to meet its\nobligations set forth in Section 5.11 and to satisfy any other\nobligations hereunder and in connection with the transaction\ncontemplated hereby on the terms and conditions set forth herein.\n\n          4.9  Knowledge Regarding Representations; Satisfaction of\nConditions.  As of the date of this Agreement, neither the\nCompany nor AEG is aware of any inaccuracy or misstatement in, or\nbreach of, any representation or warranty of Mattel contained\nherein.\n\n                            ARTICLE V\n\n                        CERTAIN COVENANTS\n\n          5.1  Further Assurances.\n\n          (a)    The parties hereto agree that, from time to time,\nwhether before, at or after the Closing Date, each of them will\nexecute and deliver such further instruments of conveyance and\ntransfer and take such other action as may be necessary to carry\nout the purposes and intents of this Agreement.  Except for the\nMattel Interactive Trademarks and Logos, or the Excluded Assets\nas identified in Section 5.8 of the TLC Disclosure Schedule, in\nthe event that, after the date of this Agreement, Mattel or the\nCompany identifies additional IPR or other related rights owned\nby Mattel or its affiliates (other than the TLC Subsidiaries)\nthat are primarily related to the TLC Business, Mattel agrees to\nexecute additional assignment agreements in forms substantially\nsimilar to the relevant assignment agreement delivered at the\nClosing of this Agreement to transfer any and all rights in such\nIPR to the Company.  In the event that, after the date of this\nAgreement, Mattel or the Company identifies IPR or other related\nrights that were transferred to the Company pursuant to this\nAgreement but that are primarily related to the Excluded Assets\nas identified on Section 5.8 of the TLC Disclosure Schedule or\nthe Mattel Interactive Trademarks and Logos or that are otherwise\nnot primarily related to the TLC Business, the Company agrees to\nexecute agreements to retransfer any and all rights in such IPR\nto Mattel.\n\n          (b)    On or before the Closing, Mattel shall deliver to the\nCompany documents sufficient to fully vest in the Company and its\nSubsidiaries all of Mattel's right, title and interest\n\n\n                              -20-\n\n\n\nin the\nU.S. patents, and to perfect and confirm the rights of the\nCompany and its Subsidiaries to the U.S. trademarks and\ncopyrights, that are set forth on the Intellectual Property Annex\nof the TLC Disclosure Schedule, except for those whose absence,\nindividually or in the aggregate, could not reasonably be\nexpected to have a TLC Material Adverse Effect.  Mattel shall use\nall reasonable efforts to deliver to the Company and its\nSubsidiaries before the Closing, and in any case within a\nreasonable period after the Closing, documents sufficient to\nfully vest in the Company and its subsidiaries all of Mattel's\nright, title and interest in the foreign patents, and to perfect\nand confirm the rights of the Company and its Subsidiaries to the\nforeign trademarks and copyrights, that are set forth on the\nIntellectual Property Annex of the TLC Disclosure Schedule,\nexcept for those whose absence, individually or in the aggregate,\ncould not reasonably be expected to have a TLC Material Adverse\nEffect.  Such documents shall include documents for filing with\nthe U.S. Patent and Trademark Office, the U.S. Copyright Office\nand foreign registration agencies.\n\n          5.2  Employees.\n\n          (a)    In the event that any individual who was employed by\nMattel prior to the Closing and who accepts an offer to become an\nemployee of the Company or any TLC Subsidiary on or after the\nClosing (the \"Mattel Level Employees\") receives an \"eligible\nrollover distribution\" (within the meaning of Section 402(c)(4)\nof the Code) from any Pension Plan qualified under Section 401 of\nthe Code (a \"Seller Plan\"), the Company or its Affiliates shall\ncause a defined contribution plan qualified under Section 401(a)\nof the Code and maintained or sponsored by the Company or one of\nits Affiliates (a \"Company Plan\") to accept a direct rollover of\nsuch eligible rollover distribution (including, but not limited\nto, any portion of such eligible rollover distribution comprised\nof the outstanding balance of documented loans from a Seller Plan\nto such Mattel Level Employee).  If, as of the Closing, a Mattel\nLevel Employee cannot receive an \"eligible rollover distribution\"\n(within the meaning of Section 402(c)(4) of the Code) from any\nSeller Plan which contains a cash or deferred arrangement\nqualified under Section 401(k) of the Code because such Mattel\nLevel Employee has not had a \"separation from service\" within the\nmeaning of Section 401(k) of the Code, the Company or its\nAffiliates shall cause a Company Plan to accept a transfer from\nsuch Seller Plan of the account balance of such Mattel Level\nEmployee under Section 414(l) of the Code.\n\n(b)    The term \"Assumed Employee Liabilities\" shall mean the\nliabilities set forth in Section 5.2 of the TLC Disclosure\nSchedule.\n\n(c)    For a period of two years following the Closing Date,\nthe Company shall use its reasonable efforts to include Mattel\nunder any release of liability obtained from terminated employees\nof the TLC Business (including Mattel Level Employees).\n\n(d)    At any time up to and including the Closing Date,\nMattel may amend, or cause any TLC Subsidiary to amend, any stock\noption plan sponsored or maintained by a TLC Subsidiary, or any\nstock option grant or agreement issued under such a Plan, to (i)\nvest all or any portion of the options issued under any such\nplan, grant, or agreement as of the Closing, or (ii) permit the\nexercise of any or all of such options within a specified period\nof time after the Closing.\n\n\n\n                              -21-\n\n\n\n          5.3  D&amp;O Indemnification.\n\n          (a)    The Company agrees that the transactions contemplated\nhereby shall not affect or diminish, and from and after the\nClosing, the Company shall cause each of the TLC Subsidiaries not\nto make any changes to their respective organizational documents\nthat would adversely affect or diminish, any of the TLC\nSubsidiaries' duties and obligations of indemnification existing\nas of the Closing Date in favor of employees, agents, directors\nor officers of the TLC Subsidiaries or, with respect to\nliabilities of or related to the TLC Business, of Mattel, arising\nby virtue of the TLC Subsidiaries' organizational documents in\nthe form in effect at the date of this Agreement or arising by\noperation of law or arising by virtue of any contract, resolution\nor other agreement or document existing at the date of this\nAgreement, and such duties and obligations shall continue in full\nforce and effect and be honored by the Company for so long as\nthey would (but for the transactions hereby) otherwise survive\nand continue in full force and effect.\n\n(b)    In addition to the foregoing, from and after the\nClosing, the Company  shall indemnify, hold harmless and defend\neach person who is a current or former officer or director of any\nof the TLC Subsidiaries or, with respect to liabilities of or\nrelated to the TLC Business, of Mattel, against all losses,\ncosts, obligations, liabilities, settlement payments, awards,\njudgments, fines, penalties, damages, demands, claims, actions,\ncauses of action, assessments, deficiencies and other charges\n(\"Losses\") or expenses (including attorneys' fees) arising out of\nor pertaining to acts or omissions (or alleged acts or omissions)\nby them in their capacities as such, which acts or omissions\noccurred at or prior to the Closing.  To the maximum extent\npermitted by applicable law, the indemnification and related\nrights hereunder shall be mandatory rather than permissive, and\nthe Company shall promptly advance expenses in connection with\nsuch indemnification to the fullest extent permitted under\napplicable law; provided that, to the extent required by law, the\nperson to whom expenses are advanced provides an undertaking to\nrepay such advances if it is ultimately determined that such\nperson is not entitled to indemnification.  At the Closing, the\nCompany shall assume and become liable for all liabilities and\nobligations of the TLC Subsidiaries (and each of their respective\nsuccessors and assigns) contemplated by this Section 5.3.\n\n(c)    The provisions of this Section 5.3, (i) are intended to\nbe for the benefit of, and shall be enforceable by, each person\nentitled to indemnification hereunder, and each such person's\nheirs, representatives, successors or assigns, it being expressly\nagreed that such persons shall be third party beneficiaries of\nthis Section 5.3, and (ii) are in addition to, and not in\nsubstitution for, any other rights to indemnification or\ncontribution that any such person may have by contract or\notherwise.\n\n(d)    This Section 5.3 shall not apply to Excluded\nLiabilities.\n\n          5.4  Intercompany Relationships; Accounts.\n\n          (a)    At or prior to the Closing, Mattel and the Company\nshall enter into the Transition Services Agreement.  Except for\nthe Transition Services Agreement, all agreements and\narrangements between the TLC Subsidiaries on the one hand, and\nMattel and any of its Subsidiaries (other than the TLC\nSubsidiaries) on the other hand (including, without limitation,\n\n\n\n                              -22-\n\n\n\nall data processing, accounting, insurance, banking, personnel,\nlegal, communications), shall terminate at and as of the Closing.\n\n(b)    At or prior to the Closing, all intercompany accounts\nbetween the TLC Subsidiaries, on the one hand, and Mattel and its\nSubsidiaries (other than the TLC Subsidiaries) on the other hand,\nshall be eliminated, without any net payment of funds in\nconnection therewith; provided, however, that the accounts listed\nin Section 5.4(b) of the TLC Disclosure Schedule shall not be\neliminated as a contribution of capital.\n\n          5.5  No Restrictions on Future Operation.  The parties\nhereby acknowledge and agree that neither Mattel nor its\nAffiliates shall be restricted or prohibited by this Agreement or\nthe transactions contemplated hereby from taking any action,\nincluding owning, leasing, licensing, managing or otherwise\noperating any business or assets, that may compete, directly or\nindirectly, with the TLC Business.\n\n          5.6  [Intentionally Omitted.]\n\n          5.7  Certain Consents.  The Company and Mattel shall use\nreasonable efforts (which shall not include the payment of money\nby Mattel) to obtain all consents and approvals required for the\nassignment, effective as of the Closing, to the TLC Subsidiaries\nof the Contracts relating to the TLC Business to which Mattel is\na party that are set forth in Section 5.7 of the TLC Disclosure\nSchedule (\"Parent-Level Contracts\").  From and after the Closing,\nfor so long as such consent or approval cannot be obtained,\nMattel shall, to the extent reasonably practicable, provide the\nCompany or the assignee of the Company in a Liquidity Event (or,\nas applicable, the TLC Subsidiaries) the economic benefit (taking\ninto account costs and benefits with respect to Taxes) of the\nParent-Level Contracts to the same extent as if Mattel had not\nbeen precluded from assigning such agreements to the TLC\nSubsidiaries, and the Company shall or shall cause a TLC\nSubsidiary (or shall cause such assignee) to perform all\nobligations and assume all liabilities and obligations under such\nParent-Level Contracts.  If the Taxes and other costs imposed\nupon Mattel in respect of the performance of such Parent-Level\nContracts exceed the monies received by Mattel in respect\nthereof, the Company shall (or shall cause such assignee to)\npromptly reimburse Mattel for such excess.  Nothing in this\nAgreement shall be construed as an attempt to assign any Parent-\nLevel Contract or any right thereto that by the terms of such\nParent-Level Contract is not assignable without the consent of\nthe other party to such contract or if an assignment or transfer\nor attempt to make such an assignment or transfer without the\nconsent of a third party or a waiver of a third party's rights\nwould constitute a breach or violation thereof or adversely\naffect the rights of Mattel, the Company, or any of the TLC\nSubsidiaries thereunder or thereto.  Any transfer of any Parent-\nLevel Contract described in the preceding sentence shall be made\nsubject to such consent or waiver being obtained.  If and when\nsuch consents and approvals are obtained, the transfer of the\napplicable Parent-Level Contract shall be effected in accordance\nwith the terms of this Agreement.  For U.S. federal income tax\npurposes, the parties shall treat the Parent-Level Contracts as\nowned, from and after the Closing, by the Company or a Subsidiary\nof the Company, except to the extent otherwise required pursuant\nto a Determination.\n\n          5.8  Excluded Assets.  At or prior to the Closing, Mattel\nwill use reasonable efforts to cause the TLC Subsidiaries to\ntransfer to Mattel the following assets that are currently held\nby the TLC Subsidiaries (the \"Excluded Assets\"):  (i) the\nsecurities  listed in Section 5.8 of\n\n\n                              -23-\n\n\n\n\n the TLC Disclosure Schedule\n(the \"Portfolio Securities\"), (ii) customer lists described in\nSection 5.8 of the TLC Disclosure Schedule, (iii) cash and cash\nequivalents and (iv) the other assets set forth in Section 5.8 of\nthe TLC Disclosure Schedule.  Mattel and the Company agree that\nif, at the time of Closing, any such assets have not been\ntransferred to Mattel as contemplated hereby, upon receipt of\nnotice from Mattel, the Company shall promptly use reasonable\nefforts to cause such assets (other than cash or cash equivalents\nin excess of the amount that was held by the Company immediately\nprior to the Closing) to be transferred to Mattel or an Affiliate\ndesignated by Mattel.  For U.S. federal income tax purposes, each\nsuch transfer by a TLC Subsidiary that was the subject of a\nConversion, whether occurring before or after the Closing, shall\nbe treated as a distribution in connection with the complete\nliquidation (to which Sections 332 and 337 of the Code apply) of\nthe TLC Subsidiary that held such Excluded Asset prior to the\nClosing, which liquidation is deemed to occur by reason of the\nConversions.\n\n          5.9  Certain Obligations.  The  Company shall or shall cause\none or more of its Subsidiaries to be substituted in all respects\nfor Mattel, effective as of the Closing, in respect of all\nobligations of Mattel under the agreements to which Mattel is a\nparty that are set forth in Section 5.9(a) of the TLC Disclosure\nSchedule (together with the \"Assumed Employee Liabilities\", the\nMattel-level litigation set forth in Section 5.9(b) of the TLC\nDisclosure Schedule and all liabilities under the Parent-Level\nContracts, the \"Assumed Liabilities\").  The Company shall from\nand after the Closing Date cause the TLC Subsidiaries to perform\nand fulfill all of their respective obligations and commitments\nwhether existing as of the Closing Date or arising or incurred\nthereafter, including without limitation the obligations listed\nin Section 5.9(a) of the TLC Disclosure Schedule.\n\n          5.10 Mattel Name.\n\n          (a)    The parties agree that the Company is not purchasing,\nacquiring or otherwise obtaining any right, title or interest in\nthe name, trade name, trademark, identifying logo or service mark\n\"Mattel Interactive\" or any trade name, trademark, identifying\nlogo or service mark confusingly similar to the name, trade name,\ntrademark, identifying logo or service mark \"Mattel Interactive\"\n(collectively, the \"Mattel Interactive Trademarks and Logos\");\nprovided, however, that the Company may, on a limited, royalty-\nfree basis, use the Mattel Interactive Trademarks and Logos and\nany trade names, trademarks, servicemarks owned or licensed by\nMattel and its affiliates and used in the business conducted by\nthe TLC Subsidiaries, (i) currently existing on stationery,\nshipping materials, business cards, invoices, and other general\noffice materials and brochures and on software-related\ninstruction materials, sales and marketing flyers and brochures\nand software packaging, until such time as such inventory\nexisting on the Closing Date is sold, removed from distribution\nfor sale or destroyed in the ordinary course of business and (ii)\nfor three months from and after the Closing Date, in general\nadvertisements and corporate public relations materials, for the\nexclusive purpose of identifying the TLC Subsidiaries as having\nbeen formerly owned by Mattel.  The Company agrees that, except\nas set forth in this Section 5.10, neither it nor any of its\nAffiliates shall make any use of the Mattel Interactive\nTrademarks and Logos from and after the Closing Date.  The\nCompany  may, on a royalty free basis, use (for the purposes used\nat the Closing Date) the Mattel Interactive Trademarks and Logos\nas such may be contained (as at the Closing Date) in the software\n(including, without limitation, the source code and object code)\nsold, licensed or distributed by the TLC Subsidiaries.  The\nCompany further agrees that from and after the\n\n\n\n                              -24-\n\n\n\n\nClosing it will\nuse its commercially reasonable efforts to terminate as soon as\npracticable its use of the Mattel Interactive Trademarks and\nLogos as such may be contained in software sold by the TLC\nSubsidiaries; provided, however, that in any event any and all\nuse by the Company of Mattel Interactive Trademarks and Logos as\nsuch may be contained in the software sold by the TLC\nSubsidiaries shall terminate eighteen months after the Closing.\nThe Company agrees that Mattel owns all right, title and interest\nin the \"Mattel\" and \"Mattel Interactive\" name, trade name,\ntrademark and service mark and further agrees never to challenge\nthe validity of any of Mattel's rights therein.\n\n(b)    As promptly as possible after the Closing, the Company\nshall terminate the use of the name \"Mattel\" in the names of any\nof its Subsidiaries that contain the name \"Mattel\" as of such\ntime.\n          5.11 AEG Capital Commitment.  At the Closing, AEG will make\nthe following commitment to cause to be contributed to the\ncapital of the Company: (i) as of the Closing, AEG shall cause\nHoldings to contribute $10 million in cash to the Company in the\nform of an equity contribution; (ii) on every monthly anniversary\nof the Closing, AEG shall cause Holdings to make an additional\ncapital contribution to the Company, in form and on terms\nreasonably acceptable to Mattel, in such amount as is reasonably\nrequired to fund the operations of the Company for the following\n30 days.  Notwithstanding anything above, AEG shall not be\nrequired to make or cause to be made capital contributions in\nexcess of $80 million (as may be adjusted below, the \"Capital\nContributions Cap\").  In addition, AEG may arrange for the\nCompany to obtain third-party financing in lieu of its\nobligations in this Section 5.11(ii), on terms reasonably\nsatisfactory to Mattel; provided, that the principal amount of\nsuch financing (or the committed availability thereof), shall be\nregarded as a capital contribution by Holdings for the period\nduring which such funds are available to the Company, but solely\nfor the purpose of determining whether AEG have complied with the\ncovenant set forth in this Section 5.11(ii); it being understood\nthat such third-party financing shall not be regarded as AEG\nCommitted Capital for purposes of Funded Capital Commitment as\nused in Section 7.1.\n\n          5.12 Best Efforts.  Each of Mattel and AEG agrees to use its\nbest efforts to take, or cause to be taken, all actions and to\ndo, or cause to be done, all things necessary, proper or\nadvisable to consummate and make effective as promptly as\npracticable the transactions contemplated hereby and to cooperate\nwith the other in connection with the foregoing, including using\nits best efforts, including, within four days after the date\nhereof, making complete and true filings under the HSR Act\n(provided, however, that in the event of a request for additional\ninformation and documentary materials under the HSR Act, Mattel\nand AEG shall use their best efforts to comply with such request\nas promptly as possible).  The parties hereto further covenant\nand agree, with respect to any threatened or pending preliminary\nor permanent injunction or other order, decree or ruling or\nstatute, rule, regulation or executive order that would adversely\naffect the ability of the parties hereto to consummate the\ntransactions contemplated hereby, to use their respective best\nefforts to prevent the entry, enactment or promulgation thereof,\nas the case may be.\n\n          5.13 Public Announcements; Confidentiality.  Except as\notherwise required by law or if required in order to comply with\nany listing agreement with, or the rules or regulations of, any\nsecurities exchange on which securities of Mattel, AEG, the\nCompany or any of their\n\n\n                              -25-\n\n\n\nrespective Affiliates are listed or\ntraded, each of Mattel, AEG and the Company will consult with the\nother and obtain the consent of the other (which consent shall\nnot be unreasonably withheld) before issuing any press releases\nor any public statements with respect to this Agreement and the\ntransactions contemplated hereby.  Any information provided to\nAEG or its representatives pursuant to this Agreement shall be\nheld by such person in accordance with, and shall be subject to\nthe terms of, the Confidentiality Agreement.  Each of AEG and the\nCompany shall comply with the Confidentiality Agreement as if it\nwere a party thereto.\n\n          5.14 Organization Documents.  Prior to the Closing, Mattel\nshall make available to the Company the certificates of\nincorporation, bylaws and similar organizational documents of the\nTLC Subsidiaries.\n\n          5.15 Access to Information.  From the date hereof through\nthe Closing Date, the Company and its representatives shall have\nreasonable access, upon reasonable prior written notice, during\nnormal business hours to all properties, books and records,\ncontracts, permits and other documents of or relating to the TLC\nSubsidiaries or the TLC Business in order to make such\ninvestigation as they shall reasonably request, provided that no\nsuch access need be granted to privileged information or any\nagreements or documents subject to confidentiality agreements.\n\n          5.16 Conduct of the Business.  Except as contemplated by\nthis Agreement, from the date hereof through the Closing Date,\nMattel shall cause each TLC Subsidiary to use commercially\nreasonable efforts to conduct its business in the ordinary course\nin all material respects, and shall use commercially reasonable\nendeavors to preserve intact its business relationships, keep\navailable the service of its employees and maintain satisfactory\nrelationships with its suppliers and customers.  Without limiting\nthe generality of the foregoing, neither Mattel nor any TLC\nSubsidiary shall, without the prior written consent of the\nCompany, which shall not be unreasonably withheld, take or\nundertake or incur any of the acts, transactions, events or\noccurrences specified in clauses (a) through (d) of Section 3.20,\nexcept as set forth in Sections 3.4 or 3.20 of the TLC Disclosure\nSchedule.\n\n          5.17 Cooperation Concerning Insurance.  The parties\nacknowledge that certain insurance coverage relating to the TLC\nBusiness is currently provided pursuant to policies of insurance\nthat are maintained by Mattel.  Mattel agrees to cooperate\nreasonably with the Company (at the Company's expense) to\ncoordinate the transition, following the Closing, of the coverage\nprovided by such policies to new insurance policies obtained and\nmaintained by the Company (or by one or more of its affiliates),\nsuch cooperation and coordination to include, without limitation,\ncooperating and assisting the Company in purchasing (at the\nCompany's expense) \"tail\" insurance policies, considering in good\nfaith the provision of continued coverage for claims that were\nincurred prior to the Closing that are covered by \"occurrence\nbased\" insurance policies or other insurance policies that may\ncontinue to be available following the Closing (but only to the\nextent that all costs and expenses related thereto are borne by\nthe Company), transitioning the management of self-insured\nclaims, and transferring to the Company any insurance policies\nrelating exclusively to the TLC Subsidiaries (such as pre-paid,\nsingle premium insurance policies covering any TLC Subsidiary or\nits employees) that may be held by Mattel.\n\n\n                              -26-\n\n\n\n\n                           ARTICLE VI\n\n                           TAX MATTERS\n\n          6.1  Tax Treatment.\n\n          (a)    The parties agree to treat (i) the Conversions as\ncomplete liquidations for purposes of the Code qualifying under\nCode Sections 332 and 337, (ii) the sale of the TLC Shares and\nLLC Interests in exchange for the Consideration pursuant to\nArticle II hereof as a closed transaction for purposes of the\nCode, (iii) the Price as Mattel's amount realized in such sale,\n(iv) the Consideration as a purchase money debt obligation, (v)\nthe Allocations (as defined below) as the allocation of the Price\namong the assets sold for purposes of the Code and (vi) each TLC\nSubsidiary that is the subject of a Conversion as a \"disregarded\"\nentity within the meaning of Treasury Regulation Section 301.7701-\n3 from and after the time of the Conversion.  The parties shall\nfile all Tax Returns, make or refrain from making all elections\nnecessary for and (except as otherwise required pursuant to a\n\"determination\" within the meaning of Code Section 1313(a) (a\n\"Determination\")) take no position inconsistent with the\ntreatments set forth above in this paragraph.\n\n(b)    The parties shall agree, reasonably promptly after\nClosing, on an allocation of the Price among the assets deemed to\nhave been sold hereunder (the \"Allocations\").  The Allocations\nshall be reasonable and shall be determined in accordance with\nSection 1060 of the Code and the applicable Treasury Regulations\nthereunder.  The parties shall cooperate in the preparation of\nany forms or reports, including IRS Form 8594, required to be\nfiled pursuant to Code Section 1060.\n\n          6.2  Cooperation and Exchange of Information.\n\n          (a)    Mattel shall prepare and submit to the Company, no\nlater than three months after the Closing Date, Year 2000 blank\nTax Return workpaper packages.  The Company shall, and shall\ncause each of its Subsidiaries to, prepare completely and\naccurately and submit to Mattel, within three months of receipt,\nall information as Mattel shall reasonably request in such Tax\nReturn workpaper packages.\n\n(b)    As soon as practicable, but in any event within 30 days\nafter Mattel's request, from and after the Closing Date, the\nCompany shall provide Mattel with such commercially reasonable\ncooperation and shall deliver to Mattel such commercially\nreasonable information and data concerning the TLC Subsidiaries\nand make available on a commercially reasonable basis such\nknowledgeable employees of the TLC Subsidiaries as Mattel may\nreasonably request, including providing the information and data\nrequired by Mattel's customary Tax and accounting questionnaires,\nin order to enable Mattel to complete and file all Tax Returns\nwhich it may be required to file with respect to the TLC\nSubsidiaries or to respond to audits by any taxing authorities\nwith respect to the TLC Subsidiaries, and to otherwise enable\nMattel to satisfy its accounting, Tax and other legitimate\nrequirements.  The Company shall make its and the TLC\nSubsidiaries' employees and facilities available on a mutually\nconvenient and reasonable basis to provide explanation of any\ndocuments or information provided hereunder.\n\n\n                              -27-\n\n\n\n\n\n(c)    For a period of 10 years after the Closing Date (or\nsuch longer period as is required by Revenue Procedure 98-25),\nthe Company shall, and shall cause the TLC Subsidiaries to,\nretain all Tax Returns, books and records (including computer\nfiles in a manner that satisfies Revenue Procedure 98-25) of, or\nwith respect to the activities of, the TLC Subsidiaries for all\ntaxable periods ending on or prior to the Closing Date.\nThereafter, the Company shall not, and shall cause the TLC\nSubsidiaries not to, dispose of any such Tax Returns, books or\nrecords unless it first offers such Tax Returns, books and\nrecords to Mattel and Mattel fails to accept such offer within 60\ndays of its being made.\n\n(d)    Mattel and the Company shall, and shall cause their\nrespective Subsidiaries to, cooperate in the preparation of all\nTax Returns relating in whole or in part to taxable periods\nending on or before the Closing Date that are required to be\nfiled after such date and all Tax Returns for taxable periods\nbeginning before the Closing Date and ending after the Closing\nDate; provided, that Mattel shall have the sole authority to make\nall determinations with respect to such Tax Returns to the extent\nsuch determinations may affect the amount of Taxes for which\nMattel is liable.\n\n(e)    Notwithstanding any other provision:  (i) Mattel shall\nhave the right to control (and neither the Company, AEG nor any\nof their respective Subsidiaries or Affiliates shall be entitled\nto participate in) any Tax Proceeding with respect to any United\nStates consolidated federal Income Tax Return which includes\nMattel, any United States consolidated federal Income Tax Return\nfor a Pre-Closing Period which includes TLC or any of the TLC\nSubsidiaries, any other consolidated, combined or unitary Tax\nReturn which includes any member of the Mattel Group, or any\nother consolidated, combined or unitary Tax Return for a Pre-\nClosing Period which includes TLC or any of the TLC Subsidiaries\n(all such Returns, the \"Mattel Consolidated Returns\"), nor shall\nthe Company, AEG or any of their respective Subsidiaries or\nAffiliates be entitled to any information regarding any Mattel\nConsolidated Return (or any Return of Mattel), except to the\nextent relating solely to the Company or its Subsidiaries, (ii)\nany Tax Benefit arising on or with respect to any Mattel\nConsolidated Return, whether relating to the TLC Business or\notherwise, and any net operating loss arising on or with respect\nto any Mattel Consolidated Return for a Pre-Closing Period\nrelating in whole or in part to the TLC Business or the TLC\nSubsidiaries and any Tax loss or deduction arising on or with\nrespect to any Mattel Consolidated Return resulting from the sale\ncontemplated by Section 2.1 shall be for the benefit of Mattel\nand shall not reduce or set off any obligation of the Company,\nAEG, or any of the TLC Subsidiaries hereunder and (iii) Mattel\nshall be entitled to prepare and file in such manner as it\ndetermines in its sole discretion any Mattel Consolidated Return.\n\n(f)    If the Company, AEG or any of their respective\nSubsidiaries, as the case may be, fails to provide any\ninformation requested by Mattel in the time specified herein, or\nif no time is specified pursuant to this Article VI, within a\nreasonable period, or otherwise fails to do any act required of\nit under this Article VI, then the Company shall be obligated,\nnotwithstanding any other provision of this Agreement, to\nindemnify Mattel and the Company shall so indemnify Mattel and\nhold Mattel harmless from and against any and all costs, claims\nor damages, including, without limitation, all Taxes or\ndeficiencies thereof, payable as a result of such failure.\n\n          6.3  Tax Sharing Agreements.  Anything in any other\nagreement to the contrary notwithstanding, all liabilities and\nobligations between Mattel on the one hand and the TLC\n\n\n\n                              -28-\n\n\n\nSubsidiaries on the other hand, under any Tax allocation or Tax\nsharing agreement in effect prior to the Closing Date (other than\nthis Agreement) shall cease and terminate as of the Closing Date.\n\n          6.4  Timing Differences.  The Company agrees that if as the\nresult of any audit adjustment (or adjustment in any other Tax\nProceeding) made with respect to any Tax Item, by any taxing\nauthority with respect to the Pre-Closing Period, the Company,\nAEG or any of their respective members or Affiliates, including\nthe TLC Subsidiaries, receives a Tax Benefit, then the Company\nshall pay to Mattel the amount of such Tax Benefit within 15 days\nof the filing of the Tax Return in which such Tax Benefit is\nutilized.  For purposes of determining the amount and timing of\nany Tax Benefit, the recipient of the Tax Benefit shall be deemed\nto pay Tax at the highest marginal rate in effect in the year\nsuch Tax Benefit is utilized.\n\n          6.5  Post-Closing Dispositions.  For the absence of doubt,\nthe covenants of the Company, AEG and the TLC Subsidiaries set\nforth in this Article VI shall apply to the Company, AEG and the\nTLC Subsidiaries regardless of any post-Closing disposition of\nthe TLC Subsidiaries by the Company or any of its Subsidiaries.\n\n          6.6  Allocation Method.  The Company agrees to use the\n\"remedial allocation method\" for purposes of Treasury Regulation\nSection 1.704-3 to the extent available.\n\n          6.7  Definitions.  For purposes of this Agreement, the\nfollowing terms shall have the meanings ascribed to them below:\n\n          (a)    \"Income Taxes\" shall mean U.S. federal, state or local\nnet income or capital gain Taxes (but not any gross income Taxes\nand not any withholding Taxes), together with any interest or\npenalties imposed with respect thereto.\n\n(b)    \"Mattel Group\" shall mean Mattel or any Subsidiary of\nMattel, other than the TLC Subsidiaries.\n\n(c)    \"Tax Benefit\" shall mean the Tax effect of any item of\nloss, deduction or credit or any other item which decreases Taxes\npaid or payable or increases tax basis, including any interest\nwith respect thereto or interest that would have been payable but\nfor such item.\n\n(d)    \"Tax Item\" shall mean any item of income, gain, loss,\ndeduction, credit, recapture of credit or any other item which\nincreases or decreases Taxes paid or payable, including an\nadjustment under Section 481 of the Code resulting from a change\nin accounting method.\n\n(e)    \"Tax Proceeding\" shall mean any Tax audit, contest,\nlitigation, defense or other proceeding with or against any\nGovernmental Entity.\n\n(f)    \"Taxes\" shall mean all federal, state, local or foreign\nincome, gross receipts, windfall profits, value added, severance,\nproperty, production, sales, use, license, excise, franchise,\nemployment, withholding or other taxes of any kind whatsoever\ntogether with any interest, additions or penalties with respect\nthereto and any interest in respect of such additions or\npenalties.\n\n\n                              -29-\n\n\n\n\n\n(g)    \"Tax Returns\" or \"Returns\" shall mean all reports and\nreturns required to be filed with respect to Taxes.\n\n          6.8  Refunds; Allocation of Taxes; Payment of Certain Taxes.\n\n          (a)    Mattel shall be entitled to any refunds of Taxes of the\nTLC Subsidiaries or arising from the operation of the TLC\nBusiness for the Pre-Closing Period.  The Company shall be\nentitled to any refunds of Taxes of the TLC Subsidiaries or\narising from the operation of the TLC Business for any period (or\nportion thereof) beginning after the Closing Date and for the\npost-Closing portion of a taxable period that includes but does\nnot end on the Closing Date (all such periods and portions, the\n\"Post-Closing Period\").\n\n(b)    In the case of Taxes based upon or related to income or\nreceipts, which Taxes are for a taxable period of a TLC\nSubsidiary that includes but does not end on the Closing Date,\nsuch Taxes shall be allocated between the Pre-Closing Period and\nthe Post-Closing Period on the basis of an interim closing of the\nbooks of such TLC Subsidiary as of the end of the Closing Date.\nIn the case of other Taxes of a TLC Subsidiary for a taxable\nperiod that includes but does not end on the Closing Date, the\nportion of such Taxes allocated to the Pre-Closing Period shall\nbe based on the number of calendar days in such taxable period\nending on and including the Closing Date and the portion\nallocated to the Post-Closing Period shall be based on the number\nof calendar days in such taxable period beginning with and\nincluding the day after the Closing Date.\n\n(c)    The Company shall timely pay, or shall cause to be\ntimely paid, any Pre-Closing Period Taxes of the TLC Subsidiaries\nor arising from the operation of the TLC Business, which Taxes\nare shown on a Tax Return (other than a Mattel Consolidated\nReturn) to be due (other than as a result of a Tax Proceeding)\nand are for the Pre-Closing Period but are due after the Closing\nDate.\n\n\n                           ARTICLE VII\n\n                       PAYMENT PROVISIONS\n\n          7.1  Liquidity Events.\n\n          (a)    In the event of a Liquidity Event, the Company shall,\nwhen received, pay to Mattel such portions of the total Excess\nNet Proceeds of such Liquidity Event as are described below;\nprovided, that the Company shall not pay, distribute or otherwise\ntransfer any Net Proceeds from a Liquidity Event to any Person\nuntil any dispute pursuant to this Section 7.1 has been resolved\nin accordance with the procedures set forth in this Section 7.1:\n\n                (i)  If a binding agreement with respect to a Liquidity Event is\n     executed at any time before the first anniversary of the Closing,\n     the Company shall pay 50% of the Excess Net Proceeds to Mattel;\n     provided that if the total Net Proceeds from all such Liquidity\n     Events before the first anniversary of the Closing is in excess\n     of $100 million, the Company shall pay 75% of all Excess Net\n     Proceeds in excess of $100 million to Mattel;\n\n\n\n                              -30-\n\n\n\n\n(ii) If a binding agreement with respect to a Liquidity Event is\nexecuted at any time from the first anniversary of the Closing\nuntil the second anniversary of the Closing, the Company shall\npay 50% of the Excess Net Proceeds to Mattel;\n\n(iii)     If a binding agreement with respect to a Liquidity\nEvent is executed at any time from the second anniversary of the\nClosing until the third anniversary of the Closing, the Company\nshall pay 40% of the Excess Net Proceeds to Mattel; and\n\n(iv) If a binding agreement with respect to a Liquidity Event is\nexecuted at any time from the third anniversary of the Closing\nuntil the fifth anniversary of the Closing, the Company shall pay\n20% of the Excess Net Proceeds to Mattel.\n\n          (b)    In the event of a Liquidity Event, the Company shall be\npermitted to distribute and apply the total Net Proceeds of such\nLiquidity Event as follows; provided, however, that the Company\nshall not pay, distribute or otherwise transfer such proceeds\nuntil any dispute pursuant to this Section 7.1 has been resolved\nin accordance with the procedures set forth in this Section 7.1\n(and provided, further, that no payments with respect to the\nequity portion of Funded Capital Commitment shall be made\npursuant to this Section 7.1.(b) unless and until all the debt\nportion of the Funded Capital Commitment has been fully repaid in\naccordance with this Section 7.1(b)):\n\n                (i)  first, to the return of the principal of the Funded Capital\n     Commitment; provided that Assumed Debt shall be regarded as a\n     return hereunder;\n\n(ii) second, to Holdings, as return on the Funded Capital\nCommitment, until such payments, when added to any AEG Fees, Paid\nDistributions, Previous Interest Payments (as defined below) and\nprevious payments pursuant to this subclause (ii) are equal, in\nthe aggregate, to an 8% compounded annual return on the Funded\nCapital Commitment for the period it is outstanding (such fees,\ndistributions, previous payments and Liquidity Event payments,\ntogether with the advance payments referred to below, the\n\"Preferred Return Payments\"); provided, that if, after making the\nPreferred Payments due in connection with a Liquidity Event, the\naggregate Preferred Return Payments made as of such date are less\nthan $15 million, the Company shall be permitted to distribute\nadditional Net Proceeds, to the extent available from the\nLiquidity Event, to Holdings until such additional amounts (which\nshall be deemed advance Preferred Return Payments with respect to\nfuture Liquidity Events), when taken with the Preferred Return\nPayments paid prior to such date, are equal to $15 million.  For\npurposes of this Agreement, \"Previous Interest Payments\" shall\nmean any payments previously made in satisfaction of interest\nobligations on Funded Capital Commitment that consists of debt or\nother instruments with a guaranteed rate of return; and\n\n(iii)     Third, to payment of Mattel Secured Notes.\n\n          (c)    Any payments permitted to be made pursuant to Section\n7.1(b) shall rank senior in priority to the payments required to\nbe paid to Mattel pursuant to Section 7.1(a).  In the event of a\nLiquidity Event, the Company shall be permitted to distribute to\nHoldings (or other equity holders of the Company) the excess of\nthe Excess Net Proceeds of such Liquidity Event\n\n\n                              -31-\n\n\n\nover the portion\nof such Excess Net Proceeds as is required to be paid to Mattel\npursuant to Section 7.1(a); provided that the Company shall not\ndistribute such proceeds until any dispute pursuant to this\nSection 7.1 has been resolved in accordance with the procedures\nset forth in this Section 7.1.\n\n(d)    As promptly as practicable, but in any event, within\nfive business days following the closing of an agreement with\nrespect to a Liquidity Event, the Company shall deliver to Mattel\na statement (\"Liquidity Statement\") of the Company showing the\ncalculations of such payments, accompanied by a certification\nthereof by the Company's chief financial officer to the accuracy\nof such calculations.  During the preparation of such calculation\nand the period of any dispute within the contemplation of this\nSection 7.1, the Company shall (1) provide Mattel and Mattel's\nauthorized representatives, upon reasonable notice, full access\nduring normal business hours to the books, records, facilities\nand employees of the Company and its Subsidiaries and their\nindependent accountants and their respective workpapers, and any\ndefinitive documentation containing the terms of the Liquidity\nEvent; and (2) cooperate with Mattel and Mattel's authorized\nrepresentatives, including the provision on a timely basis of all\ninformation reasonably requested by Mattel or Mattel's authorized\nrepresentatives and necessary or useful in reviewing the\npreparation of the Liquidity Statement. After receipt of the\nLiquidity Statement, Mattel shall have 30 days to review it and\nunless Mattel delivers written notice to the Company on or prior\nto the 30th day after Mattel's receipt of the Liquidity Statement\na notice specifying in reasonable detail all disputed items and\nthe basis therefor, Mattel shall be deemed to have accepted and\nagreed to the Liquidity Statement (such 30-day period to be\nextended for any period of time during which Mattel shall not\nhave had full access to such books, records, employees,\nworkpapers and documentation as described in the preceding\nsentence).\n\n(e)    If Mattel so notifies the Company of its objection to\nthe Liquidity Notice, Mattel and the Company shall, within 30\ndays following such notice (the \"Liquidity Resolution Period\"),\nattempt to resolve their differences and any resolution by them\nas to any disputed amounts shall be final, binding and\nconclusive.  If at the conclusion of the Liquidity Resolution\nPeriod amounts shall remain in dispute, then all disputes shall\nbe submitted to a firm of nationally recognized independent\npublic accountants (the \"Neutral Auditors\") selected by Mattel\nand the Company within 10 days after the expiration of the\nLiquidity Resolution Period.  If Mattel and the Company are\nunable to agree on the Neutral Auditors, then Mattel and the\nCompany shall each have the right to request the American\nArbitration Association to appoint the Neutral Auditors who shall\nnot have had a material business relationship with Mattel, the\nCompany or any of their respective Affiliates within the past two\nyears.  The parties hereto agree to execute, if requested by the\nNeutral Auditors, a reasonable engagement letter.  All fees and\nexpenses relating to the work, if any, to be performed by the\nNeutral Auditors shall be borne by the Company.  The Neutral\nAuditors shall act as an arbitrator to determine only those\nissues still in dispute.  The Neutral Auditors' determination\nshall be made within 30 days of their selection, shall be set\nforth in a written statement delivered to Mattel and the Company\nand shall be final, binding and conclusive.\n\n(f)    Notwithstanding anything to the contrary in this\nAgreement, if, following the distribution of Net Proceeds with\nrespect to a Liquidity Event, the Company is required to make\npayments to the party that had paid the Net Proceeds to the\nCompany in connection with such Liquidity Event as a result of a\npurchase price adjustment or indemnification obligations\n\n\n\n                              -32-\n\n\n\nassumed\nby the Company (or similar adjustment to the proceeds received by\nthe Company) in connection with such Liquidity Event (the amount\nof such payments, the \"Return Amount\"), then each of Mattel and\nHoldings shall promptly pay or, in the case of Holdings, with\nrespect to other equity holders of the Company, cause to be paid,\nto the Company such amounts as is necessary to put the parties in\nthe same economic position as if the Return Amount had never been\nreceived (including by other equityholders of the Company).\n\n(g)    Notwithstanding anything to the contrary set forth in\nthis Agreement, but subject to the following sentence, the\nCompany may issue bonus units (\"Bonus Units\") of the TLC\nBusiness, which bonus units shall entitle the holders thereof to\nparticipate in Liquidity Events in the manner set forth below,\nbut shall have no other economic rights.  Mattel and AEG agree\nthat the portions of the Excess Net Proceeds that each of Mattel\nand Holdings is entitled to receive (or, in the case of Holdings,\nis permitted, together with other equity holders, to receive)\npursuant to Section 7.1(a) and 7.1(c) (each, a \"Liquidity Event\nPercentage\"), respectively, shall be proportionally (i.e., in the\nsame percentage that they share in Excess Net Proceeds) reduced\nby the portion of the Excess Net Proceeds to which the holders of\nBonus Units are entitled by their terms; provided, however, that\nin no event shall Mattel's Liquidity Event Percentage be reduced\nby more than 8% of Mattel's Liquidity Event Percentage with\nrespect to the Liquidity Event giving rise to such reduction.\n\n          7.2  EBITDA Target Payments.\n\n          (a)    No later than 90 days following the end of each of the\nfiscal years 2001 through 2003 of the Company (the \"EBITDA\nPeriod\"), the Company shall pay to Mattel or an affiliate\ndesignated by Mattel, in the manner set forth below, an amount\nequal to 50% of the excess, if any, of the Company's EBITDA for\nsuch fiscal year over the greater of (i) the Threshold Amount or\n(ii) 10% of the Company's Net Revenues for such Fiscal Year (such\namount, \"Excess EBITDA\") (the \"EBITDA Payment\").  The \"Threshold\nAmount\" shall initially be $30,000,000 and shall, in the event of\na business disposition of Company assets that constitutes a\nLiquidity Event (whether by stock transfer, asset sale, merger,\nor other transfer), be reduced by an amount obtained by\nmultiplying the then-current Threshold Amount by a fraction, the\nnumerator of which is the amount of revenue earned by the\nbusiness so disposed of in the four fiscal quarters ending on the\nlast day of the quarter preceding the date on which the binding\nagreement with respect to such disposition transaction was\nentered into (the \"Quarter End Date\") and the denominator of\nwhich is the amount of revenue earned by the Company in the four\nfiscal quarters ending on the Quarter End Date (adjusted to\naccount for any previous business dispositions during such four\nfiscal quarters that required an adjustment of the Threshold\nAmount).  The intention of this adjustment is to fairly reduce\nthe Threshold Amount and if revenue is not a fair proxy for\nEBITDA, the parties will negotiate in good faith an amendment to\nthis provision.  For purposes of this Agreement, the term\n\"EBITDA\" shall mean consolidated earnings before interest income,\ninterest expense, income Taxes, depreciation and amortization of\nthe Company and excluding proceeds of any Liquidity Event and its\nSubsidiaries for such fiscal year computed in accordance with\nGAAP; provided that to the extent consistent with GAAP, all\naccounting principles (including all practices and valuation and\nestimation methodologies) historically used by the TLC Business,\nshall be used in connection with the determination of EBITDA.\nFor purposes of this Agreement, the term \"Net Revenue\" shall mean\n\n\n                              -33-\n\n\n\n\ngross sales less returns and price adjustments, in accordance\nwith accounting principles historically used by the TLC Business.\n\n(b)    The EBITDA Payment may be made to Mattel or its\ndesignee (i) by wire transfer of immediately available funds or\n(ii) by delivery of a secured promissory note with (A) an initial\naggregate principal amount equal to the EBITDA Payment, or, for\npurposes of Section 7.3, the Enterprise Value Payment Amount, (B)\nan interest rate equal to the lowest Applicable Federal Rate on\nthe date of the distribution, or, for purposes of Section 7.3, on\nthe date of payment referred to therein, compounded annually, (C)\nmandatory annual principal payments equal to 25% of the Excess\nCash Flow (provided, however, that the aggregate of all mandatory\nannual principal payments under all Mattel Secured Notes shall\nnot exceed 50% of Excess Cash Flow), (D) provisions requiring\nimmediate payment of the outstanding aggregate principal amount,\nand any accrued and unpaid interest or fees, upon the occurrence\nof an Acceleration Event, (E) security collateral, to the extent\navailable after the prior rights and security interests of the\nholders of any secured Company indebtedness, reasonably\nsatisfactory to Mattel, and (F) such other terms as are customary\nfor secured promissory notes and otherwise in form reasonably\nsatisfactory to Mattel (a \"Mattel Secured Note\").  For purposes\nof this Agreement, an \"Acceleration Event\" shall mean any of the\nfollowing:  (i) payment of the principal in excess of $5 million\nof any funded indebtedness is accelerated;  (ii) the Company\nshall commence any proceeding relating to bankruptcy, insolvency\nor reorganization or shall have been declared bankrupt or\ninsolvent; or (iii) the Company shall close an initial public\noffering.  In addition, to the extent that the Net Proceeds of a\nLiquidity Event exceed the amounts permitted to be paid pursuant\nto Sections 7.1(b)(i) and 7.1(b)(ii), the Company shall prepay\nthe principal and pay any accrued but unpaid interest on the\nMattel Secured Note in the event of such Liquidity Event, as\npermitted by Section 7.1(b)(iii).\n\n(c)    Within 90 days following the close of each fiscal year\nduring the EBITDA Period, the Company shall deliver to Mattel an\nincome statement of the Company for such fiscal year, accompanied\nby (A) a certification thereof by the Company's Chief Financial\nOfficer to the effect that such income statement (i) has been\nprepared in conformity with generally accepted accounting\nprinciples, applied on a basis consistent with the application of\nsuch principles in the audit of the financial statements, and\n(ii) fairly presents the results of the Company's operations for\nsuch fiscal year, and (B) a notice specifying the Company's\nEBITDA and Net Revenue for such fiscal year (the \"EBIDTA\nNotice\"), showing in reasonable detail the computation thereof to\nbe accompanied by a certification by the Company's Chief\nFinancial Officer that such computation was performed in a manner\nconsistent with the preparation of the financial statements and\nbased on the Company's books and records.\n\n(d)    During the preparation of the EBITDA Notice and the\nperiod of any dispute within the contemplation of this Section\n7.2, the Company shall (1) provide Mattel and Mattel's authorized\nrepresentatives, upon reasonable notice, full access during\nnormal business hours to the books, records, facilities and\nemployees of the Company and its Subsidiaries and their\nindependent accountants and their respective workpapers to review\nof preparation of the EBITDA Notice; and (2) cooperate with\nMattel and Mattel's authorized representatives, including the\nprovision on a timely basis of all information reasonably\nrequested by Mattel or Mattel's authorized representatives and\nnecessary or useful in reviewing the preparation of the EBITDA\nNotice.\n\n\n                              -34-\n\n\n\n\n(e)    After receipt of the EBITDA Notice, Mattel shall have\n30 days to review the EBITDA Notice, together with the workpapers\nused in the preparation thereof.  Unless Mattel delivers written\nnotice to the Company on or prior to the 30th day after Mattel's\nreceipt of the EBITDA Notice specifying in reasonable detail all\ndisputed items and the basis therefor, Mattel shall be deemed to\nhave accepted and agreed to the EBITDA Notice (such 30-day period\nto be extended for any period of time during which Mattel shall\nnot have had full access to such books, records, employees and\nworkpapers as described in the preceding sentence).  If Mattel so\nnotifies the Company of its objection to the EBITDA Notice,\nMattel and the Company shall, within 30 days following such\nnotice (the \"EBITDA Resolution Period\"), attempt to resolve their\ndifferences and any resolution by them as to any disputed amounts\nshall be final, binding and conclusive.  If at the conclusion of\nthe EBITDA Resolution Period amounts shall remain in dispute,\nthen all amounts remaining in dispute and any dispute as to\nexclusions of or additions to revenues and any allocations of\nexpenses contemplated by the definition of \"EBITDA\" or \"Net\nRevenue\", shall be submitted to a firm of Neutral Auditors\nselected by Mattel and the Company within 10 days after the\nexpiration of the EBITDA Resolution Period.  If Mattel and the\nCompany are unable to agree on the Neutral Auditors, then Mattel\nand the Company shall each have the right to request the American\nArbitration Association to appoint the Neutral Auditors who shall\nnot have had a material business relationship with Mattel, the\nCompany or any of their respective Affiliates within the past two\nyears.  The parties hereto agree to execute, if requested by the\nNeutral Auditors, a reasonable engagement letter.  All fees and\nexpenses relating to the work, if any, to be performed by the\nNeutral Auditors shall be borne by the Company.  The Neutral\nAuditors shall act as an arbitrator to determine only those\nissues still in dispute.  The Neutral Auditors' determination\nshall be made within 30 days of their selection, shall be set\nforth in a written statement delivered to Mattel and the Company\nand shall be final, binding and conclusive.\n\n          7.3  Long-Term Value Payouts.\n\n          (a)    If, on the third anniversary of the Closing, Mattel\nreasonably believes that the Company has a stand-alone enterprise\nvalue in excess of the Base Enterprise Value, Mattel shall have\nthe right to seek an appraisal of the enterprise value of the\nCompany (the \"Three Year Enterprise Value\") by a nationally\nrecognized investment banking firm or appraiser (the \"Appraiser\")\nselected by mutual agreement of Mattel and the Company or, if\nMattel and the Company cannot so agree within five business days\nof Mattel proposing an Appraiser, selected by agreement of one\nsuch investment banking firm or Appraiser retained by Mattel and\none such investment banking firm retained by the Company, which\nfirms shall be instructed to reach agreement within five business\ndays of receipt by Mattel or the Company, as the case may be,\nthat the other party has retained such a firm or appraiser for\nsuch purposes.  Failure of any party to take all actions required\nhereby and to select an Appraiser in good faith shall result in\nthe other party being able to select the Appraiser.  If the Three\nYear Enterprise Value is in excess of the Base Enterprise Value,\nthe Company shall promptly make a payment to Mattel equal to 5%\nof the amount by which Three Year Enterprise Value exceeds the\nBase Enterprise Value (the \"Enterprise Value Payment Amount\").\nThe \"Base Enterprise Value\" shall initially be $300,000,000 and\nshall, in the event of a business disposition of Company assets\n(whether by stock transfer, asset sale, merger, or other\ntransfer), be reduced by the amount of the Net Proceeds to be\nreceived by the Company in such business disposition.  The\npayment under this Section 7.3 may be made to Mattel (i) by wire\ntransfer of immediately available funds or (ii) by\n\n\n                              -35-\n\n\n\ndelivery of a\nMattel Secured Note for an initial aggregate principal amount\nequal to the Enterprise Value Payment Amount.\n\n          (b)    In order to reduce the administrative costs and burdens\nof continuing the payments set forth in Section 7.1 beyond the\nfifth anniversary of the Closing, the parties hereto agree to the\nfollowing in order to preserve the benefits of such payments to\nMattel:  On the fifth anniversary of the Closing, Mattel shall\nhave the right to seek an appraisal of the total enterprise value\nof the Company (the \"Fifth Year Enterprise Value\") by an\nAppraiser, in accordance with the procedures set forth in Section\n7.3(c) below.  No later than 30 days after the delivery of the\nappraisal report by the Appraiser, the Company shall pay to\nMattel, by wire transfer of immediately available funds, an\namount equal to 20% of the Fifth Year Enterprise Value.\n\n          (c)    In determining the enterprise values of the Company\nabove, the Appraiser shall use accepted valuation practices\ncustomarily used by independent reputable appraisers, including\nwithout imitation, comparable company trading analysis and\ndiscounted cash flow analysis.\n\n(d)    In connection with the appraisals set forth in this\nSection 7.3, the Company shall (1) provide the Appraiser, upon\nreasonable notice, full access during normal business hours to\nthe books, records, facilities and employees of the Company and\nits Subsidiaries and their independent accountants and their\nrespective workpapers; and (2) cooperate with the Appraiser,\nincluding the provision on a timely basis of all information\nreasonably requested by the Appraiser and necessary or useful in\nreviewing the preparation of the appraisals.\n\n          7.4  Minimum Payment.  On the tenth anniversary of the\nClosing, the Company shall pay to Mattel the Minimum Payment,\nwhich shall be an unconditional obligation of the Company.  For\npurposes of this Agreement, \"Minimum Payment\" shall mean $10\nmillion, reduced, but not below zero, by any payments made to\nMattel by the Company pursuant to Sections 7.1, 7.2 or 7.3.\n\n          7.5  Sale of Company.\n\n          (a)    In the event that all of the outstanding equity\ninterests of the Company are acquired, directly or indirectly, by\nany Person that is not an Affiliate of the Company, AEG or any\nmember of the Company (an \"Acquiring Person\") (whether by merger,\nconsolidation, sale of stock, limited liability company interests\nor other equity interests) or by other direct or indirect\ntransfer or event), such transaction or series of transactions\nshall be referred to as a \"Sale of the Company.\"  In the event of\na Sale of the Company, the aggregate amount paid by the Acquiring\nPerson in connection with its acquisition of interests in the\nCompany, as a result of such Sale of the Company shall be\nreferred to as the \"Net Sale Proceeds.\"\n\n(b)    Prior to consummation of any Sale of the Company, AEG\nshall ensure that the Acquiring Person pays to Mattel a portion\nof the Net Sale Proceeds equal to the amount to which Mattel\nwould have been entitled under Section 7.1 hereof in the event\nthat such Acquiring Person had purchased from the Company assets\nof the Company for an amount of Net Proceeds equal to the amount\nof Net Sale Proceeds.  The applicable amount payable to Mattel\nshall be\n\n\n                              -36-\n\n\n\ndetermined using the procedure set forth in Section\n7.1(d) and (e), except that the Liquidity Statement (or if\nnecessary a preliminary Liquidity Statement) shall be delivered\nto Mattel at least 60 days prior to the expected consummation of\nsuch Sale of the Company.\n\n(c)    Following consummation of a Sale of the Company and\npayment to Mattel referred to above, the obligations of the\nCompany pursuant to Sections 7.1, 7.2, and 7.3 and this Section\n7.5 (other than then-existing obligations) shall terminate.  For\npurposes of Section 7.4, any payment pursuant to Section 7.5(b)\nshall be considered to be a payment pursuant to Section 7.1 or\n7.3.\n\n(d)    This Section 7.5 shall not eliminate, diminish or\notherwise affect Mattel's right under Section 8.2(a) hereof.\n\n                          ARTICLE VIII\n\n                         FUTURE ACTIONS\n\n          8.1  Certain Transactions.  From and after the Closing,\nuntil the fifth anniversary of the Closing, the parties hereto\nagree that, except with the written consent of Mattel:\n\n          (a)    Other than as set forth in Sections 7.1 and 8.1(b)\nbelow, the Company shall not make any payments or distributions\nto AEG, GGC, Holdings, other equity holders of the Company, or\nany of their respective Affiliates, other than (i) a payment of\n$1 million to AEG or Holdings in connection with the Closing and\n(ii) the payment of a management fee of not more than $150,000\nper month to Holdings or an Affiliate to the extent Holdings or\nsuch Affiliate renders actual, bona fide management services to\nthe Company and (iii) the payment of $3 million to GGC in\nconnection with the Closing (collectively with the payments made\nunder subclauses (i), (ii) and (iii), the \"AEG Fees\").\n\n(b)    Other than as permitted by Section 7.1(b) , 7.1(c) or\n8.1(a), the Company shall not make any distributions to its\nmembers or other equity holders of the Company in excess of\n$100,000 per year (any distributions made pursuant to this\nSection 8.1(b), \"Paid Distributions\").\n\n(c)    The Company and its Subsidiaries shall not assume any\nliabilities that are not primarily related to the TLC Business.\n\n(d)    The Company shall obtain financing only on terms\nreasonably satisfactory to Mattel.\n\n(e)    Except as expressly provided in this Agreement and\nexcept for transactions in the ordinary course of business for\npurchases and sales of goods or services on terms no less\nfavorable to the Company than those obtainable with non-\naffiliated parties, the Company shall not become a party to any\ntransaction or agreement with AEG or any of its Affiliates or be\nliquidated or wound up.\n\n\n                              -37-\n\n\n\n(f)    The Company shall not engage in any Liquidity Event for\nconsideration to the Company other than cash; it being understood\nthat for purposes of this Section 8.1(f), cash consideration\nreceived in a Liquidity Event in the form of (i) an earnout, (ii)\nassumption by another Person of debt of the Company or any of its\nSubsidiaries for borrowed money, (iii) escrow, or (iv) note, in\neach case that is ultimately payable only in cash shall be deemed\nto be consideration received in cash.  For purposes of\ndetermining when such consideration is received pursuant to\nSection 7.1, the foregoing consideration shall be deemed received\nby the Company upon actual payment of cash to the Company.\n\n(g)    Following the date of this Agreement, the parties shall\nnegotiate in good faith with the goal of agreeing on parameters\npursuant to which the Company would be permitted to engage in a\nLiquidity Event for consideration to the Company other than cash\nwithout the prior written consent of Mattel.\n\n(h)    The Company shall not issue any additional membership\ninterests or other equity interests in the Company if doing so\nwould (i) result in more than 10% of the Company's equity or\nvoting interests being owned by a competitor of Mattel set forth\nin Section 8.1(h) of the TLC Disclosure Schedule, (ii) result in\nHoldings ceasing to be the managing member or manager of (or AEG\notherwise ceasing to control) the Company or (iii) adversely\nimpact any of Mattel's rights hereunder (including without\nlimitation its right to receive payments pursuant to Section\n7.1); provided, however, that (A) such additional membership\ninterests or other equity interests in the Company shall be\npermitted to share in the distribution of  Excess Net Proceeds\nonly that would otherwise be distributable to Holdings pursuant\nto Section 7.1(c) hereof and shall not be entitled to receive any\ndistributions, payments or other value from the Company or any\nSubsidiary prior to the satisfaction by the Company of its\nobligation to Mattel pursuant to the Agreement and (b)\nnotwithstanding clause (iii) of this Section 8.1(g), the Company\nmay issue the Bonus Units pursuant to and in accordance with\nSection 7.1(g) hereof.\n\n(i)    The Company shall not change the form of its\norganization (as a limited liability company), whether by\nconversion, merger or otherwise.\n\n          8.2  Fair Dealing.  From and after the Closing, until the\nfifth anniversary of the Closing (or, in the case of Section\n8.2(b), until the later of the fifth anniversary of the Closing\nor such time as the Company performs its obligations to Mattel),\nthe parties hereto agree that, except with the written consent of\nMattel:\n\n          (a)    AEG shall not transfer (directly or indirectly) any\nportion of the membership interest in the Company held by it\n(whether directly or indirectly), other than to a wholly-owned\nSubsidiary of AEG, but only if such Subsidiary agrees with Mattel\nto be bound by each commitment and obligation of AEG contained in\nthis Agreement.\n\n(b)    Neither the Company nor AEG shall take any action or\nengage in any transaction or series of related transactions, or\nenter into an agreement to do the same, or permit Holdings to do\nthe same (i) with the intention of depriving Mattel of any of the\nbenefits of or impairing any rights of Mattel under Article VII\nof this Agreement, including, without limitation, changing the\nCompany's accounting policies or practices, artificially timing\nLiquidity Events and engaging in Liquidity Events at less than\nfair market value to the Company or (ii) that is\n\n\n                              -38-\n\n\n\ninconsistent\nwith or would interfere with the performance of the obligations\nor commitments of the Company hereunder; provided, however, that\nthis Section 8.2 is not intended to limit the Company's right to\nmanage and control the TLC Business in good faith or to require\nthe Company to achieve any specific financial or business\nresults.\n\n          8.3  AEG Control.  AEG hereby agrees to cause the Company to\nperform and fulfill all of its obligations and commitments set\nforth in this Agreement and shall not take any actions, including\ndirectly or indirectly authorizing or permitting the amendment of\nthe Company's governing documents, or permit the Company or\nHoldings to take any actions, that are inconsistent with such\nobligation.  AEG shall cause the Company to make payments to\nMattel as provided in Article VII of this Agreement and, to the\nextent that the Company fails to make any such payment that it is\nrequired to make and that it is lawfully capable of making, AEG\nshall (at Mattel's election) either take such action as shall be\nnecessary to cause the Company to make such payment or shall make\nsuch payment to Mattel on the Company's behalf; provided,\nhowever, that in no event shall the aggregate amount of such\npayments that AEG shall be obligated to make to Mattel on the\nCompany's behalf exceed the aggregate amount of distributions and\nother payments received by Holdings (and other equity holders)\nfrom the Company in excess of the amounts permitted to be\ndistributed to Holdings pursuant to Section 7.1(b)(i) and (ii).\n\n\n                           ARTICLE IX\n\n               CONDITIONS TO OBLIGATIONS TO CLOSE\n\n          9.1  Conditions to Obligation of Each Party to Close.  The\nrespective obligations of each party to effect the transactions\ncontemplated hereby shall be subject to the satisfaction or\nwaiver at or prior to the Closing Date of the following\nconditions:\n\n          (a)    no statute, rule, regulation, executive order, decree\nor permanent injunction (\"Order\") shall have become effective\nrestraining, enjoining or otherwise prohibiting or making illegal\nthe consummation of the transactions contemplated hereby; and\n\n(b)    the applicable waiting period under the HSR Act shall\nhave expired or been terminated.\n\n          9.2  Closing Deliveries.  Subject to the terms and\nconditions herein, at the Closing:\n\n          (a)    Mattel will deliver to the Company:\n\n                (i)  assignments and other instruments of transfer and documents\n     as shall be appropriate to effectively transfer the TLC\n     Subsidiaries;\n\n(ii) the Transition Services Agreement and License Agreement,\nduly executed by Mattel.\n\n\n                              -39-\n\n\n\n\n          (b)    The Company will deliver to Mattel:\n\n                (i)  the Transition Services Agreement and License Agreement,\n     duly executed by the Company; and\n\n(ii) an assignment and assumption agreement, duly executed by the\nCompany in the form attached as Exhibit A hereto (the \"Assumption\nAgreement\"), to assume the Assumed Liabilities (as defined\nherein); provided, however, that obligations referred to in\nSection 5.9 that will be assumed by a Subsidiary instead of the\nCompany may be assumed by such Subsidiary signing such an\nAssumption Agreement, so long as all Assumed Liabilities are\nassumed by the Company or one or more of its Subsidiaries.\n\n          9.3  Conditions to Obligations of Mattel.  The obligations\nof Mattel to effect the transactions contemplated hereby shall be\nsubject to the satisfaction or waiver (by Mattel) at or prior to\nthe Closing of the following condition:  (a) prior to the\nClosing, Mattel shall have converted or merged its Domestic\nSubsidiaries (other than Broderbund Software Inc and its\nSubsidiaries and Electromap, Inc.) into limited liability\ncompanies (the \"Conversions\") and (b) at or prior to the Closing,\nHoldings has made the $10 million contribution referred to in\nSection 5.11.\n\n                            ARTICLE X\n\n                           TERMINATION\n\n          10.1 Termination.  This Agreement may be terminated at any\ntime prior to the Closing by:\n\n          (a)    The mutual written consent of the parties hereto;\n\n(b)    Subject to Section 10.3, any of the Parties hereto if\nthe Closing has not occurred by the earlier of (x) the close of\nbusiness on November 5, 2000 or (y) the third business day after\nsatisfaction of the conditions set forth in Section 9.1(b)\n(assuming that the condition set forth in Section 9.1(a) is\nsatisfied on such third business day) and Section 9.3; provided,\nthat in either case such right to terminate shall not be\navailable to any party whose breach of this Agreement has been a\nreason for such failure to close;\n\n(c)    Any of the Parties hereto in the event that any Order\nbecomes effective (and final and nonappealable) permanently\nrestraining, enjoining or otherwise prohibiting or making illegal\nthe consummation of the transactions contemplated hereby;\n\n          10.2 Procedure and Effect of Termination.  In the event of\ntermination of this Agreement by any party hereto pursuant to\nSection 10.1, written notice thereof shall forthwith be given by\nthe terminating party to the other party hereto, and this\nAgreement shall thereupon terminate and become void and have no\neffect, and the transactions contemplated hereby shall be\nabandoned without further action by the parties hereto, except\nthat the provisions of Section 12.5 shall survive the termination\nof this Agreement; provided, however, that such termination shall\nnot relieve any party hereto of any liability for any breach of\nthis Agreement.\n\n\n                              -40-\n\n\n\n\n          10.3 Certain Termination.  Mattel cannot terminate this\nAgreement pursuant to Section 10.1(b) as a result of the failure\nof the condition set forth in Section 9.3 to be satisfied unless\nMattel has reasonably concluded that it will be unable to convert\n(or merge) one or more of the Domestic Subsidiaries into limited\nliability companies and will be unable to achieve a material\nportion of the expected benefits of this transaction or of such\nConversions; provided, that if Mattel terminates this Agreement\nin the manner set forth above in this Section 10.3, it shall,\npromptly after such termination, pay to AEG a fee of $1.5 million\nto reimburse it for lost opportunity.\n\n\n                           ARTICLE XI\n\n                         INDEMNIFICATION\n\n          11.1 Indemnification.\n\n          (a)    From and after the Closing, the Company shall indemnify\nMattel and its officers, directors, employees, assigns,\nsuccessors and Affiliates (collectively, the \"Mattel Indemnified\nParties\") and hold them harmless against and in respect of any\nand all Losses, and the costs and expenses, including reasonable\nattorneys' fees, of enforcing the Company's obligations\nhereunder, to the extent resulting from (i) any Assumed\nLiabilities or (ii) the ownership or conduct of the TLC Business,\nwhether such Loss arises before, on or after the Closing Date,\nother than any Excluded Liability and (iii) any Taxes of the TLC\nSubsidiaries or arising from the operation of the TLC Business,\nother than Excluded Taxes.\n\n(b)    From and after the Closing, Mattel shall indemnify the\nCompany and its officers, directors, employees, assigns,\nsuccessors and Affiliates (collectively, the \"Company Indemnified\nParties\" and together with the Mattel Indemnified Parties, as\napplicable, the \"Indemnified Parties\") and hold them harmless\nagainst and in respect of any and all Losses, and the costs and\nexpenses, including reasonable attorneys' fees, of enforcing\nMattel's obligations hereunder, to the extent resulting from any\nExcluded Liability.\n\n          11.2 Limitations.  No claim for indemnity under this Article\nIX shall be asserted by, and no liability for such indemnity\nshall be enforced against, either party to the extent the\nIndemnified Party has theretofore received indemnification or\notherwise been compensated.  All indemnification rights under\nthis Agreement are without duplication.\n\n          11.3 Notice to the Indemnitor.  Promptly after the assertion\nof any claim by a third party (\"Third Party Claim\") or occurrence\nof any event which may give rise to a claim for indemnification\nfrom the party indemnifying an Indemnified Party (an\n\"Indemnitor\") under this Article IX, the Indemnified Party shall\nnotify the Indemnitor in writing of such claim (the \"Claims\nNotice\").  The Claims Notice shall describe the asserted\nliability in reasonable detail, and shall indicate the amount\n(estimated, if necessary and to the extent feasible) of the Loss\nthat has been or may be suffered by the Indemnified Party.\nFailure by the Indemnified Party to give a Claims Notice to the\nIndemnitor in accordance with the provisions of this Section 11.3\nshall not relieve the Indemnitor of its obligations hereunder\nexcept to the extent that the Indemnitor has been actually\nprejudiced by such failure.\n\n\n                              -41-\n\n\n\n\n          11.4 Third Party Indemnification.\n\n          (a)    The Indemnitor may at its option undertake the defense\nof a Third Party Claim by representatives of its own choosing\nreasonably acceptable to the Indemnified Party.  If the\nIndemnitor assumes such defense, the Indemnified Party shall have\nthe right (but not the duty) to participate in the defense\nthereof and to employ counsel, at its own expense, separate from\nthe counsel employed by the Indemnitor.  If, however, the\nIndemnified Party reasonably determines in the judgment of its\ncounsel that representation by the Indemnitor's counsel of both\nthe Indemnitor and the Indemnified Party would present such\ncounsel with a material conflict of interest, then such\nIndemnified Party may employ separate counsel to represent or\ndefend it in any such claim, action, suit or proceeding and the\nIndemnitor shall pay the reasonable fees and disbursements of\nsuch separate counsel.  If the Indemnitor, within 30 days after\nnotice of any such Third Party Claim, fails to assume the defense\nof such Third Party Claim, the Indemnified Party against whom\nsuch claim has been made will (upon further notice to the\nIndemnitor) have the right to undertake the defense, compromise\nor settlement of such claim on behalf of and for the account and\nrisk, and at the expense, of the Indemnitor, subject to the right\nof the Indemnitor to assume the defense of such Third Party Claim\nat any time prior to settlement, compromise or final\ndetermination thereof.\n\n          (b)    Anything in this Section 11.4 to the contrary\nnotwithstanding, the Indemnitor shall not enter into any\nsettlement or compromise of any action, suit or proceeding or\nconsent to the entry of any judgment (i) which does not include a\nwritten release of the Indemnified Party from all liability in\nrespect of such action, suit or proceeding or (ii) for other than\nmonetary damages to be borne by the Indemnitor, without the prior\nwritten consent of the Indemnified Party.  The Indemnified Party\nwill have no liability to any third party with respect to any\nsettlement or compromise of Third Party Claims effected without\nits consent.\n\n          (c)    The Indemnitor and the Indemnified Party shall\ncooperate fully in all aspects of any investigation, defense, pre-\ntrial activities, trial, compromise, settlement or discharge of\nany claim in respect of which indemnity is sought pursuant to\nthis Article IX, including, but not limited to, by providing the\nother party with reasonable access to employees and officers\n(including as witnesses) and other information.\n\n\n                           ARTICLE XII\n\n                          MISCELLANEOUS\n\n          12.1 No Survival.  None of the covenants, agreements,\nrepresentations and warranties of the parties contained in this\nAgreement shall survive the execution and delivery of this\nAgreement; provided that any covenants and agreements that by\ntheir terms are to be performed after the Closing Date shall\nsurvive until fully discharged.\n\n          12.2 Counterparts.  This Agreement may be executed in one or\nmore counterparts, all of which shall be considered one and the\nsame agreement, and shall become effective when one or more\ncounterparts have been signed by each of the parties and\ndelivered to the other party.\n\n\n                              -42-\n\n\n\n\n\n          12.3 Governing Law; Jurisdiction and Forum; Waiver of Jury\nTrial.\n\n          (a)    This Agreement shall be governed by and construed in\naccordance with the laws of the State of Delaware without\nreference to the choice of law principles thereof.\n\n(b)    Each party hereto irrevocably submits to the\njurisdiction of any Delaware state or federal court in any Action\narising out of or relating to this Agreement, and hereby\nirrevocably agrees that all claims in respect of such action may\nbe heard and determined in such Delaware state or federal court.\nEach party hereto hereby irrevocably waives, to the fullest\nextent it may effectively do so, the defense of an inconvenient\nforum to the maintenance of such action or proceeding.  The\nparties further agree, to the extent permitted by law, that final\nand unappealable judgment against any of them in any action or\nproceeding contemplated above shall be conclusive and may be\nenforced in any other jurisdiction within or outside the United\nStates by suit on the judgment, a certified copy of which shall\nbe conclusive evidence of the fact and amount of such judgment.\n\n(c)    Each party hereto waives, to the fullest extent\npermitted by applicable law, any right it may have to a trial by\njury in respect of any action, suit or proceeding arising out of\nor relating to this Agreement.  Each party hereto certifies that\nit has been induced to enter into this Agreement or instrument\nby, among other things, the mutual waivers and certifications set\nforth above in this Section 12.3.\n\n          12.4 Entire Agreement.  This Agreement (including the\nschedules and exhibits hereto) and the Confidentiality Agreement,\ndated May 18, 2000, by and between Mattel and Gores Technology\nGroup (the \"Confidentiality Agreement\") contain the entire\nagreement between the parties with respect to the subject matter\nhereof and there are no agreements, understandings,\nrepresentations or warranties between the parties other than\nthose set forth or referred to herein.\n\n          12.5 Expenses.  Except as set forth in this Agreement or in\nthat certain letter agreement, dated September 21, 2000, among\nMattel, Gores Technology Group and GGC, whether the transactions\ncontemplated hereby are consummated or not, all legal and other\ncosts and expenses incurred in connection with this Agreement and\nthe transactions contemplated hereby shall be paid by the party\nincurring such costs and expenses unless expressly otherwise\ncontemplated herein.\n\n          12.6 Notices.  All notices and other communications to be\ngiven to any party hereunder shall be sufficiently given for all\npurposes hereunder if in writing and delivered by hand, courier\nor overnight delivery service or three days after being mailed by\ncertified or registered mail, return receipt requested, with\nappropriate postage prepaid, or when received in the form of a\ntelegram or facsimile and shall be directed to the address set\nforth below (or at such other address or facsimile number as such\nparty shall designate by like notice):\n\n\n                              -43-\n\n\n\n\n          (a)    If to Mattel:\n\n               Mattel, Inc.\n               333 Continental Boulevard\n               El Segundo, CA  90245-5012\n               Attention:  Kevin M. Farr, Chief Financial Officer\n               Fax No:\n\n               With a copy to:\n\n               Mattel, Inc.\n               333 Continental Boulevard\n               El Segundo, CA  90245-5012\n               Attention:  Robert Normile, General Counsel\n               Fax No:\n\n               And a copy to:\n\n               Wachtell, Lipton, Rosen &amp; Katz\n               51 West 52nd Street\n               New York, NY  10019\n               Attention:  David M. Silk\n               Fax No:  (212) 403-2000\n\n          (b)    If to the Company:\n\n               GTG\/Wizard, LLC\n               c\/o Gores Technology Group\n               10877 Wilshire Boulevard, Suite 1805\n               Los Angeles, CA  90024\n               Attention:  General Counsel\n\n               Fax No.:  (310) 209-3310\n\n               With a copy to:\n\n               Gores Technology Group\n               6260 Lookout Road\n               Boulder, CO  80301\n               Attention:  Chief Financial Officer\n               Fax No.:  (303) 531-3200\n\n               And a copy to:\n\n               Riordan &amp; McKinzie\n               600 Anton Boulevard\n               Costa Mesa, CA  92626\n               Attention:  James W. Loss, Esq.\n               Fax No.:  (714) 549-3244\n\n\n                              -44-\n\n\n\n          (c)    If to AEG:\n\n               Alec E. Gores, trustee of the\n               Revocable Living Trust Agreement of Alec E. Gores\n               c\/o Gores Technology Group\n               10877 Wilshire Boulevard, Suite 1805\n               Los Angeles, CA  90024\n               Attention:  General Counsel\n               Fax No.:  (310) 209-3310\n\n               With a copy to:\n\n               Gores Technology Group\n               6260 Lookout Road\n               Boulder, CO  80301\n               Attention:  Chief Financial Officer\n               Fax No.:  (303) 531-3200\n\n               And a copy to:\n\n               Riordan &amp; McKinzie\n               600 Anton Boulevard\n               Costa Mesa, CA  92626\n               Attention:  James W. Loss, Esq.\n               Fax No.:  (714) 549-3244\n\n          12.7 Successors and Assigns.  This Agreement shall be\nbinding upon and inure to the benefit of the parties hereto and\ntheir respective successors and assigns.  No party hereto will\nassign its rights or delegate any or all of its obligations under\nthis Agreement without the express prior written consent of the\nother party hereto.\n\n          12.8 Third Party Beneficiaries.  Except for Section 5.3 and\nArticle XI, which are intended to benefit, and to be enforceable\nby, the parties specified therein, this Agreement is not intended\nto confer upon any Person not a party hereto (and their\nsuccessors and assigns) any rights or remedies hereunder.\n\n          12.9 Headings; Definitions.  The section and article\nheadings contained in this Agreement are inserted for convenience\nof reference only and will not affect the meaning or\ninterpretation of this Agreement.  All references to Sections or\nArticles contained herein mean Sections or Articles of this\nAgreement unless otherwise stated.  All capitalized terms defined\nherein are equally applicable to both the singular and plural\nforms of such terms.\n\n          12.10     Amendments and Waivers.  This Agreement may not be\nmodified or amended except by an instrument or instruments in\nwriting signed by the party against whom enforcement of any such\nmodification or amendment is sought.  Either party hereto may,\nonly by an instrument in writing, waive compliance by the other\nparty hereto with any term or provision of this Agreement on the\npart of such other party hereto to be performed or complied with.\nThe\n\n\n                              -45-\n\n\n\nwaiver by any party hereto of a breach of any term or\nprovision of this Agreement shall not be construed as a waiver of\nany subsequent breach.\n\n          12.11     Interpretation.  For the purposes of this\nAgreement, \"to the knowledge of Mattel\" shall mean the actual\nknowledge of the executive officers identified on Section 12.11\nof the TLC Disclosure Schedule.  It is understood and agreed that\nthe specification of any dollar amount in the representations and\nwarranties contained in this Agreement or the inclusion of any\nspecific item in the TLC Disclosure Schedule is not intended to\nimply that such amounts or higher or lower amounts, or the items\nso included or other items, are or are not material, and neither\nparty shall use the fact of the setting of such amounts or the\nfact of the inclusion of any such item in the TLC Disclosure\nSchedule in any dispute or controversy between the parties as to\nwhether any obligation, item or matter not described herein or\nincluded in the TLC Disclosure Schedule is or is not material for\npurposes of this Agreement.  The parties do not intend to create,\nnor shall anything in this Agreement be construed to create, a\npartnership or joint venture between or among any of the parties.\n\n          12.12     No Right of Setoff.  Notwithstanding anything\ncontained herein to the contrary, the Company's obligation to\nmake payments in accordance with this Agreement shall be absolute\nand unconditional and shall not be affected by any circumstance,\nincluding without limitation any set-off, counterclaim,\nrecoupment, defense or other right which the Company may have\nagainst Mattel or any other Person for any reason whatsoever.\n\n          12.13     Specific Performance.  The parties hereto agree\nthat irreparable damage would occur, no adequate remedy at law\nwould exist and damages would be difficult to determine, in the\nevent that any party fails to consummate the transactions\ncontemplated hereby in accordance with the terms of this\nAgreement and that the parties shall be entitled to specific\nperformance in such event, without the necessity of proving the\ninadequacy of money damages as a remedy in addition to any other\nremedy or law or in equity.\n\n          12.14     Severability.  If any provision of this Agreement\nor the application thereof to any Person or circumstances is held\nto be invalid, illegal or unenforceable to any extent, this\nAgreement shall be reformed to render the Agreement valid and\nenforceable while reflecting to the greatest extent permissible\nthe intent of the parties.\n\n          12.15     Miscellaneous.  Notwithstanding anything to the\nContrary set forth in this Agreement, prior to the Closing,\nHoldings may sell a portion of its membership interests, or may\ncause the Company to issue membership interests (which shall not\nbe a Liquidity Event), in each case to GGC, so long as:  (a)\nHoldings continues as managing member or manager of the Company\nand (b) prior to or simultaneous with such transfer or issuance,\nGGC agrees in writing to be bound by this Agreement to the full\nextent as if it were a signatory hereto and every reference\nherein to AEG shall be deemed a reference to AEG and GGC.\n\n\n\n                              -46-\n\n\n\n\n          IN WITNESS WHEREOF, this Agreement has been signed by\nor on behalf of each of the parties as of the day first above\nwritten.\n\n                              MATTEL, INC.\n\n\n\n                              By: \/s\/ Robert A. Eckert\n                                ---------------------------\n                                Name: Robert A. Eckert\n                                Title: Chairman and CEO\n\n\n                              GTG\/WIZARD, LLC\n\n\n\n                              By: \/s\/ Alec E. Gores\n                                ---------------------------\n                                Name: Alec E. Gores\n                                Title: Authorized Signatory\n\n\n\n                              ALEC E. GORES, TRUSTEE OF THE\n                              REVOCABLE LIVING TRUST AGREEMENT OF\n                              ALEC E. GORES\n\n\n\n                              By: \/s\/ Alec E. Gores\n                                ---------------------------\n                                Name: Alec E. Gores\n                                Title: Trustee\n\n<\/pre>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[8145],"corporate_contracts_industries":[9403],"corporate_contracts_types":[9623,9622],"class_list":["post-43769","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-mattel-inc","corporate_contracts_industries-consumer__toys","corporate_contracts_types-planning__asset","corporate_contracts_types-planning"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43769","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43769"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43769"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43769"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43769"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}