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Excel-Based Mergers and Acquisition Valuation and Structuring Model

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Excel-Based Mergers and Acquisition Valuation and Structuring Model Powered By Docstoc
					                  Illustrating the Deal Structuring and Valuation Process

The purpose of this Microsoft Excel spreadsheet model is to provide anan example of how the model
                  outlined in Chapter 8 of Mergers, Acquisitions, and Other Corporate Restructurings
building process outlined in the textbook (Mergers and Acquisitions and Other Corporate
(3rd edition) by Donald DePamphilis can be used to develop the initial offer price and subsequent
counter-offers during deal negotiations. The model is intended to serve as a template or pattern
for constructing M&A financial models.1 As such, the spreadsheet model contained on this diskette
                                                                                     tained
                                                                           model contained on this CD-ROM
should be altered to reflect the unique characteristics of each situation.

The spreadsheet model follows a four-step model building process. Each step contains the number
of worksheets needed to satisfy the requirements of each step. Each worksheet is identified by a self-
explanatory title and the "short name" used in developing the worksheet linkages. Appendices A and
B include the projected timeline, milestones, and individual(s) responsible for each activity required to
complete the transaction.


      Step                         Worksheet Title                                  Short Name
       1         Determine Acquirer and Target Standalone Valuations
                   Acquirer 5-Year Forecast and Standalone Valuation                BP_App_B1
                   Acquirer Historical Data and Ratios                              BP_App_B2
                   Acquirer Debt Repayment Schedules                                BP_App_B3
                   Acquirer Cost of Equity and Capital Calculation                  BP_App_B4
                   Target 5-Year Forecast and Standalone Valuation                  AP_App_B1
                   Target Historical Data and Ratios                                AP_App_B2
                   Target Cost of Equity and Capital Calculation                    AP_App_B3

       2         Value Combined Acquirer and Target Firms Including Synergy
                    Combined Firm's 5-Year Forecast and Valuation                   AP_App_C
                    Synergy Estimation                                              AP_App_D

       3         Determine Initial Offer Price for Target Firm
                   Offer Price Determination                                        AP_App_E
                   Alternative Valuation Summaries                                  AP_App_F

       4         Determine Combined Firm's Ability to Finance Transaction
                   Combined Firm's Financing Capacity                               AP_App_G

  Appendix A     Acquisition Timeline                                               AP_App_A1
  Appendix B     Summary: Milestones and Responsible Individual(s)                  AP_App_A2

Please be aware that a number of worksheets use the "iteration" calculation option of Excel.
This option may have to be turned on for the worksheets to operate correctly. If the program gives
you a "circular reference warning," please go to Tools, Options, Calculation and turn on the
iteration feature. Ten iterations will usually be enough to solve any circular reference; however,
the number may vary with different versions of Excel. Individual model simulations can be most
efficiently generated by making relatively small incremental changes to a few key assumptions
underlying the model. Key assumptions include such variables as sales growth and the cost of
sales as a percent of sales.

The use of Excel's interation capability will accommodate the "circularity or circular references"
inherent in the model. For example, the change in cash and investments impacts interest income,
which in turn affects net income and the change in cash and investments.

1
This illustration was adapted from a Loyola Marymount University MBA paper by Jon Murray,
Christian Klawitter, Kenin McConahey, and Addie Stalk entitled "Mattel Proposes to Buy JAKKS
Pacific," May 2, 2002. The author would like to acknowledge the special contribution Addie Stalk
made to this paper.
                                                                                                                                                                  Appendix B-1

                                                         MATTEL Business Plan 2001-2005                     Financial Forecast
                                                                          Step 1: Acquirer 5-Year Forecast and Standalone Valuation
Forecast Assumptions 2001 - 2005                                                                     2001         2002        2003         2004        2005
Net Sales Growth Rate                                                                                   4.0%         4.0%         4.0%        4.0%        4.0%
Cost of Sales (Variable) / Sales %                                                                     52.5%        51.5%        51.0%       50.5%       50.5%
Depreciation & Amortization / Gross Fixed Assets %                                                      8.3%         8.3%         8.3%        8.3%        8.3%
Selling Expenses / Sales (%)                                                                           14.5%        14.5%        14.5%       14.5%       14.5%
G&A Expenses / Sales (%)                                                                               19.0%        18.5%        18.0%       17.2%       16.4%
Interest on Cash & Marketable Securities                                                                5.0%         5.0%         5.0%        5.0%        5.0%
Interest Rate on New Debt (%)                                                                           8.3%         8.3%         8.3%        8.3%        8.3%
Marginal Tax Rate                                                                                      18.0%        22.0%        25.0%       30.0%       37.0%
Other Current Operations Assets / Sales (%)                                                            35.0%        35.0%        35.0%       35.0%       35.0%
Other Assets / Sales (%)                                                                               35.0%        30.0%        25.0%       20.0%       20.0%
Gross Fixed Assets / Sales (%)                                                                         25.0%        25.0%        25.0%       25.0%       25.0%
Minimum Cash Balance / Sales (%)                                                                        4.5%         4.5%         4.5%        4.5%        4.5%
Current Liabilities / Sales (%)                                                                        30.0%        30.0%        28.0%       26.0%       25.0%
Common Shares Outstanding (Mil)                                                                        426.0        426.0        426.0       426.0       426.0
Cost of Capital: 2001 - 2005 (%)                11.81% 1)
Cost of Capital: Terminal Period (%)            10.31% 1)
Sustainable Cash Flow Growth Rate (%)            4.00%
Market Value of Long-Term Debt                  $1,171 million


                                                           Historical Financials                                       Projected Financials
                                                  1997      1998          1999        2000           2001       2002           2003         2004       2005
Income Statement ($mil)                 1)
Net Sales                                       4,779            4,698      4,596        4,670         4,857       5,051         5,253        5,463      5,682
Less:
  Variable Cost of Sales                        2,315            2,286      2,333        2,415         2,449       2,496         2,570        2,646      2,751
  Depreciation                                    100              103         81           75           101         105           109          113        118
  Total Cost of Sales                           2,415            2,389      2,414        2,490         2,550       2,601         2,679        2,759      2,869
Gross Profit                                    2,364            2,310      2,182        2,180         2,307       2,450         2,574        2,704      2,812
Less:
  Sales Expense                                   761              786        685          681           704         732           762          792        824
  G&A Expense                                     780              863        868          908           923         934           946          940        932
  Amortization of Intangibles                      32               41         52           52            52          52            52           52         52
  Other expense (income), net                       1                5          (5)        (19)          (16)        (16)          (16)         (16)       (16)
  Total Sales and G&A Expense                   1,574            1,695      1,599        1,622         1,663       1,703         1,743        1,768      1,792
Operating Profits (EBIT)                          790              615        583          558           644         747           831          936      1,021
Plus: Interest Income                                              -          -            -              23          41            49           75         98
Less: Interest Expense                             90              111        132          153           139         112            95           96         84
Net Profits Before Taxes                          700              504        451          405           527         676           784          915      1,035
Less: Taxes                                       201              131         62           55            95         149           196          275        383
Net Profits After Taxes                           500              373        390          350           432         527           588          641        652




    Mattel Business Plan                                                                  25 of 44                                                                   3/31/2012
                                                                                                                                                                                  Appendix B-1

                                                        MATTEL Business Plan 2001-2005                          Financial Forecast
                                                          Historical Financials                                              Projected Financials
                                                1997       1998          1999            2000           2001          2002           2003         2004            2005

Balance Sheet (as of 12/31/2000)
Current Assets
   Cash                                          695           213             247           232            219            227           236            246           256
   Other Operating Assets                      1,767         1,845           1,605         1,519          1,700          1,768         1,839          1,912         1,989
Total Current Assets                           2,462         2,058           1,852         1,752          1,918          1,995         2,075          2,158         2,244
Investments                                                                                                 234            585           734          1,259         1,706
Gross Fixed Assets                               939         1,159           1,147         1,121          1,214          1,263         1,313          1,366         1,420
  Less: Accum. Depr. & Amort.                    337           422             422           473            574            679           788            901         1,019
Net Fixed Assets                                 602           737             725           648            640            584           526            465           402
Other Assets                                     852         1,819           2,097         1,914          1,914          1,913         1,913          1,913         1,913
Total Assets                                   3,915         4,613           4,674         4,313          4,707          5,078         5,248          5,794         6,265
Current Liabilities                            1,173         1,317           1,565         1,502          1,457          1,515         1,471          1,420         1,420
Long-Term Debt
  Existing Debt                                  664           984             983         1,242          1,242          1,021           640            589           400
  New Debt                                       -             -               -             -              -              -             -              -             -
Other Liabilities                                144           141             163           166            172            179           186            194           201
Total Liabilities                              1,982         2,442           2,711         2,910          2,872          2,715         2,297          2,203         2,022
   Common Stock                                  728         2,041           1,923         1,836          1,836          1,836         1,836          1,836         1,836
   Retained Earnings                           1,205           130              40          (433)             (1)          526         1,114          1,755         2,407
Shareholders' Equity                           1,933         2,171           1,963         1,403          1,835          2,362         2,951          3,591         4,243
Total Liabilities & Shareholders' Equity       3,915         4,613           4,674         4,314          4,707          5,078         5,248          5,794         6,265
Addendum: Check                                    (0)           1               0             (0)          -              -             -              -                -
Shares Outstanding (millions)                   291.6        390.8           421.6         426.0          426.0          426.0         426.0          426.0         426.0
Effective Tax Rate                             28.6%         26.0%           13.7%         13.6%          18.0%          22.0%         25.0%          30.0%         37.0%
Earnings per Share                         $    1.71 $        0.95 $          0.92 $        0.82 $         1.01 $         1.24 $        1.38 $         1.50 $        1.53
Long-Term Debt/Equity                            37%           48%             53%           93%            71%            46%           24%            18%           11%
Addendum: Working Capital                      1,288           741             287           249            461            480           604            738           824
Free Cash Flow
EBIT (1-t)                                       564           455             503           482            528           583            623            655           643
Plus: Depreciation and Amortization              132           144             133           127            153           157            161            165           170
Less: Gross Capital Expenditures                 201           221             (12)          (26)            93            49             51             53            55
Less: Change in Working Capital                 (200)         (548)           (454)          (37)           212            18            124            133            86
   Free Cash Flow                                695           926           1,102           672            375           672            609            635           672

PV: 2001 - 2005                            $   2,100
PV: Terminal Value                         $   6,342                  Notes:
Total PV (Market Value of the Firm)        $   8,442                  1) The historical financial statements have been adjusted for the discontinued operations.
Less: Market Value of Long-Term Debt       $   1,171                  2) For the long-term, the Acquirer believes its weighted average cost of funds is the appropriate measure
Plus: Excess Cash (Investments)            $     234                    to discount cash flows.
Equity Value                               $   7,506
Equity Value per Share                     $   17.62




    Mattel Business Plan                                                                     26 of 44                                                                                3/31/2012
                               MATTEL Business Plan 2001-2005 Historical Ratios and Explanations of Assumptions                                       Appendix B-2


                                              Step 1 Continued: Acquirer Historical Data and Ratios
Historical Ratios                                                     Historical Financial Ratios
                                                                  1997     1998        1999       2000              Average Minimum Maximum
Net Sales Growth Rate                                    1)                  -1.7%       -2.2%      1.6%               -0.8%   -2.2%    1.6%
Cost of Sales (Variable) / Sales %                       2)      50.5%      50.8%       52.5%      53.3%              51.8%    50.5%  53.3%
Depreciation & Amortization / Gross Fixed Assets %       3)      10.7%        8.9%        7.1%      6.7%                8.3%    6.7%  10.7%
Selling Expenses / Sales (%)                             4)      15.9%      16.7%       14.9%      14.6%              15.5%    14.6%  16.7%
G&A Expenses / Sales (%)                                 5)      16.3%      18.4%       18.9%      19.4%              18.3%    16.3%  19.4%
Interest on Cash & Marketable Securities                 6)       3.0%        3.5%        4.0%      5.0%                3.9%    3.0%    5.0%
Interest Rate on Debt (%)                                7)       6.0%        5.6%        5.5%      6.7%                6.0%    5.5%    6.7%
Tax Rate                                                 8)      28.6%      26.0%       13.7%      13.6%              20.5%    13.6%  28.6%
Other Assets / Sales (%)                                 9)      17.8%      38.7%       45.6%      41.0%              35.8%    17.8%  45.6%
Gross Fixed Assets / Sales (%)                           10)     19.6%      24.7%       25.0%      24.0%              23.3%    19.6%  25.0%
Cash Balance / Sales (%)                                 11)     14.5%        4.5%        5.4%      5.0%                7.4%    4.5%  14.5%
Other Current (Operations) Assets / Sales (%)            12)     37.0%      39.3%       34.9%      32.5%              35.9%    32.5%  39.3%
Current Liabilities / Sales (%)                          13)     24.6%      28.0%       34.1%      32.2%              29.7%    24.6%  34.1%
Debt / Equity                                                    34.4%      45.3%       50.1%      88.5%              54.6%    34.4%  88.5%
Notes:
1) The Acquirer's business plan refocuses the company to capitalize on its core strengths. The firm's traditional markets are mature.
    Annual average market growth of 2% is expected over the next five years. The Acquirer's initiatives are expected to provide an additional 2% by
    gaining market share in the U.S. and expanding into new markets.
2) Bringing down the Cost of Sales to 50.5% over the next four years will be achieved through the following actions:
    - the reduction of excess manufacturing capacity,
    - the termination of a variety of licensing and other contractual arrangements that did not deliver adequate profitability,
    - the elimination of product lines that did not meet required levels of profitability, and
    - the improvement of supply chain performance and economics.
3) Depreciation as percent of Gross Fixed Assets has been estimated at the average ratio over the historical period.
4) The elimination of underperforming product lines will allow the company to spend sales dollars more effectively.
5) Although G&A expense shows an increase in 1999 and 2000, this percentage is expected to decrease over the next
    few years to 16.5% as a result of major efficiency initiatives, including
    - the elimination of approximately 350 positions at the US-based headquarters and in certain other subsidiaries.
    - the closing of certain international offices, and
    - an increase in efficiency in supply chain communication.
6) A blended rate, combining non-interest bearing deposits and marketable securities, is used in the forecast.
7) The interest on Current Debt is calculated based on the existing interest rates on the debt.
    The interest rate on future debt will be estimated at the interest rate on Moody's A rated debt as of December 2000.
8) The tax rate shown is the tax on income after exclusion of non-recurring charges. The actual tax rate was 24.5% for 2000,
     36.3% for 1999 and 28.6% for1998. As of December 31, 2000, the Acquirer had US Net Operating loss carry-forwards totalling $1.1 billion.
    Utilization of these carry-forwards is subject to annual limitations. As a result of the loss carry-forwards, the income tax rate for
    2001-2003 is estimated at 18%, 22% and 25%.The tax rate is estimated to increase to 30% in 2004 and 37% in 2005.
9) Other Assets include $515 million in deferred income taxes. Without this amount the ratio of Other Assets / Sales would have
    been 29%. As losses are used, the percentage of Other Assets will be reduced over the next three years.
10) Elimination of excess capacity will be balanced by increased investment in new equipment. Gross Fixed Assets are
    expected to grow in line with sales during the forecast period.
11) To ensure sufficient liquidity a minimum cash balance of 4.5% is included in the forecast.
12) Working capital has been reduced to below desirable levels over the last few years putting a strain on the funding of current operations.
    To ensure sufficient Current Assets to fund operations a minimum level of 35% for Other Current Operating Assets is included in the forecast.
13) Current Liabilities as a % of Sales are above average in 2000 as a result of severance pay and other charges resulting from the
    provisions for elimination of redundant positions (see item 5). This percentage is expected to be reduced gradually over the forecast period.


Mattel Business Plan                                             b7e7e722-37c4-45ab-b85d-c028201b13ad.xlsBP_App_B2                                       3/31/2012
                                                                            MATTEL Business Plan                                                                       Appendix B-3

                                                                                  2001 - 2005
                                                                 Debt Maturity Schedule and Interest Payments
                                                          Step 1 Continued: Acquirer Debt Repayment Schedules
Maturity Schedule and Interest Rates - Existing Long-Term Debt for Forecast Period
(Amounts in thousands)

Maturity Schedule              Total Debt            2001                  2002                        2003              2004              2005            2006          2007
                                              Maturing   Interest   Maturing Interest           Maturing Interest Maturing Interest Maturing Interest
Debt Category                 12/31/2000      Amount       Rate     Amount      Rate            Amount      Rate  Amount      Rate  Amount      Rate  Amount    %   Amount    %
Long-Term Debt 1)                 690,710                            190,710    5.500%          350,000 5.500%                      150,000 5.500%
Medium-Term Notes                 540,500        30,500      7.500%   30,000    7.500%           30,000 7.500%     50,000 7.500%         -     0.000% 50,000 7.500% 50,000 7.500%
Mortgage Note                      42,380           694     10.150%      767 10.150%                849 10.150%       939 10.150% 39,131 10.150%
 Total Debt 2)                  1,273,590        31,194      7.559%  221,477    5.787%          380,849 5.668%     50,939 7.549% 189,131 6.462% 50,000 7.500% 50,000 7.500%

Remaining Balance               Beg. Bal              2001                2002                        2003            2004              2005
                                               Ending     Interest  Ending    Interest          Ending Interest Ending Interest   Ending Interest
Debt Category                   1/1/2001      Balance       Rate   Balance      Rate            Balance    Rate Balance    Rate   Balance    Rate
Long-Term Debt                     690,710      690,710     5.500%   500,000   5.500%           150,000 5.500% 150,000 5.500%         -     5.500%
Medium-Term Notes                  540,500      510,000     7.500%   480,000   7.500%           450,000 7.500% 400,000 7.500%     400,000 7.500%
Mortgage Note                       42,380       41,686    10.150%    40,919 10.150%             40,070 10.150%  39,131 10.150%       -    10.150%
 Total Debt                      1,273,590    1,242,396     6.477% 1,020,919   6.627%           640,070 7.197% 589,131 7.167%     400,000 7.500%


Interest Payments
                                  2001       2002      2003              2004     2005
Interest Rate                       6.477%    6.627%    7.197%            7.167% 7.500%
Beginning Balance                1,273,590 1,242,396 1,020,919           640,070 589,131
Interest on LT and MT Debt          95,091    65,489    47,072            46,395  31,959
Credit Facility 3)                 700,000   728,000   757,120           787,405 818,901
Interest on Credit Facility         44,380    46,155    48,001            49,921  51,918
Total Interest                     139,471   111,644    95,073            96,317  83,878

Notes:
1) Long-Term Debt consists of:
    - Euro Notes                   190,710
    - Unsecured term loan          200,000
    - Senior Notes - 2003          150,000
    - Senior Notes - 2005          150,000
      Total                        690,710

2) Including short-term portion that matures in 2001 that is included in Current Liabilities.
3) The Acquirer has a $1 billion unsecured committed facility for seasonal financing, as well
   as $400 million in foreign credit line.
   Average usage is                       50%     or              $700 million.
   Interest rate is Commercial Paper rate                        6.34%
   Need for credit lines is assumed to keep pace with sales growth at        4.00%




    Mattel Business Plan                                              b7e7e722-37c4-45ab-b85d-c028201b13ad.xls - BP_App_B3                                                3/31/2012
                                                              MATTEL Business Plan                          Appendix B-3

                                                                    2001 - 2005
                                                   Debt Maturity Schedule and Interest Payments




    2008                 2009           2010

Amount     %     Amount         %   Amount     %

100,000 7.500% 100,000 7.500% 100,000 7.500%

100,000 7.500% 100,000 7.500% 100,000 7.500%




  Mattel Business Plan                               b7e7e722-37c4-45ab-b85d-c028201b13ad.xls - BP_App_B3      3/31/2012
                                                                                                                                                                       Appendix B-4

                                                                      MATTEL Business Plan 2001 - 2005
                                                                        Supplemental Financial Data

                                            Step 1 Continued: Acquirer Cost of Equity and Capital Calculations
Financial Benchmarks as of December 31, 2000
Prime                                     9.50%
10 -Year T-Note                           5.24%
Commercial Paper 3-months                 6.34%
Federal Funds Rate                        6.40%
CD's 6 months                             6.30%
Moody's A                                 8.33%
Industry Long-term Debt/Equity           50.00%


Calculation of Cost of Equity and Capital
Risk-free Rate                                  5.24%
Acquirer's Unlevered Beta                         1.40 1)
Acquirer's Target D/(D+E) Ratio                   50%
Acquirer's Target Tax Rate                        37%
Acquirer's Levered Beta                          1.84
Market Risk Premium                             5.50%
Acquirer's Cost of Debt                         8.33%
Acquirer's Cost of Equity                      15.37%
Acquirer's Weighted Cost of Capital            10.31%
Additional Risk Premium                         1.50% 2)
Adjusted Cost of Capital                       11.81%

Calculation of Market Value of Current Long-Term Debt
Discount Rate - Moody's Aaa                 8.33%
                             2001         2002       2003                    2004              2005     2006    2007                2008    2009    2010     Total
              Int. Rate          7.56%      5.79%      5.67%                       7.55%         6.46%   7.50%   7.50%               7.50%   7.50%   7.50%
              BegBal         1,273,590 1,242,396 1,020,919                       640,070       589,131 400,000 350,000             300,000 200,000 100,000       -
Payments:     Principal         31,194    221,477   380,849                       50,939       189,131  50,000  50,000             100,000 100,000 100,000 1,273,590
              Interest          95,091     65,489     47,072                      46,395        31,959  28,125  24,375              18,750  11,250   3,750
  Total Debt Cash Flow         126,285    286,966   427,921                       97,334       221,090  78,125  74,375             118,750 111,250 103,750
  Discounted Value          $1,170,762


1) If the firm is a public company, the levered beta may be estimated directly. However, if it is a private firm, an unlevered beta associated with a comparable
  company may be adjusted for the leverage of the firm for which the levered beta is to be calculated.
2) The analyst in this instance believes the estimated cost of debt and equity does not adequately account for risk that is specific to the firm. Therefore,
  1.5% is added to the cost of capital to create the adjusted cost of capital. The magnitude of this adjustment is based on what the analyst believes
  to be the cost of capital for firms exhibiting risk comparable to the Acquirer.



Mattel Business Plan                                              b7e7e722-37c4-45ab-b85d-c028201b13ad.xls - BP_App_B4                                                    3/31/2012
                                                                          Acquisition Plan - JAKKS                                                                                  Appendix B-1

                                                             Financial Forecast 2001 - 2005 and Valuation JAKKS

                                                                         Step 1 Continued: Target 5- Year Forecast and Standalone Valuation

Forecast Assumptions 2001 - 2005                                                                           2001          2002           2003            2004          2005
Net Sales Growth Rate                                                                                         15.0%         15.0%          10.0%            8.0%          5.0%
Cost of Sales (Variable) / Sales %                                                                            60.2%         59.7%          59.5%           59.5%         59.5%
Depreciation & Amortization / Gross Fixed Assets %                                                            10.0%         10.0%          10.0%           10.0%         10.0%
Selling Expenses / Sales (%)                                                                                  15.0%         15.0%          15.0%           15.0%         15.0%
G&A Expenses / Sales (%)                                                                                      14.5%         14.5%          14.1%           14.1%         14.1%
Interest on Cash & Marketable Securities 1)                                                                    5.0%          5.0%           5.0%            5.0%          5.0%
Interest Rate on New Debt (%)                                                                                  7.2%          7.2%           7.2%            7.2%          7.2%
Marginal Tax Rate                                                                                             29.0%         29.5%          30.0%           30.5%         31.0%
Other Current Operations Assets / Sales (%)                                                                   30.0%         30.0%          30.0%           30.0%         30.0%
Other Assets / Sales ($5 million decrease per year)                                                            5.00          5.00           5.00            5.00          5.00
Gross Fixed Assets / Sales (%)                                                                                12.0%         12.0%          12.0%           12.0%         12.0%
Minimum Cash Balance / Sales (%)                                                                               6.0%          6.0%           6.0%            6.0%          6.0%
Current Liabilities / Sales (%)                                                                               25.0%         25.0%          25.0%           25.0%         25.0%
Common Shares Outstanding (Mil)                                                                                19.1          19.1           19.1            19.1          19.1
Cost of Capital: 2001 - 2005 (%)                 13.55%
Cost of Capital: Terminal Period (%)             11.50% 3)
Sustainable Cash Flow Growth Rate (%)              4.00%
Market Value of Long-Term Debt                      $1.4 million


                                                            Historical Financials                                                Projected Financials
                                                   1997     1998         1999           2000               2001          2002            2003           2004          2005
Income Statement ($mil)
Net Sales                                            42            85        184               252                290           334          367               396           416
Less:
  Variable Cost of Sales                             25            49        103               141                171           195          214               231           243
  Depreciation                                        1             3          5                 9                  3             4            4                 5             5
  Total Cost of Sales                                26            52        108               150                175           199          218               236           248
Gross Profit                                         16            33         76               102                115           134          149               161           169
Less:
  Sales Expense                                    6.30            13             28           38                 44            50            55               59             62
  G&A Expense                                      5.60            11             24           43                 42            48            52               56             59
  Amortization of Intangibles                       -          -              -                -                  -             -            -                 -             -
  Other expense (income), net 2)                       0            1             (4)          (15)               (16)          (16)         (16)              (16)          (16)
  Total Sales and G&A Expense                         12           25             47             66                 70            83           91                99          105
Operating Profits (EBIT)                               4            9             29             37                 46            52           58                61            63
Plus: Interest Income                               -          -                   2              4                  6             8           10                13            16
Less: Interest Expense                                 0           0          -                -                     0             0            0                 0          -
Net Profits Before Taxes                               3           8              30             40                 51            60           68                74            80
Less: Taxes                                            1           2               8             12                 15            18           20                23            25
Net Profits After Taxes                             2.8            6              22             29                 36            42           48                52            55




Acquisition Plan JAKKS                                                                          31 of 44                                                                               3/31/2012
                                                                                   Acquisition Plan - JAKKS                                                                                                 Appendix B-1

                                                                      Financial Forecast 2001 - 2005 and Valuation JAKKS

                                                                      Historical Financials                                                      Projected Financials
                                                      1997            1998         1999         2000                  2001            2002               2003           2004            2005

Balance Sheet
Current Assets
   Cash                                                     3                12         97              43                    17              20              22                24              25
   Other Operating Assets                                  12                16         61              86                    87             100             110               119             125
Total Current Assets                                       15                29        158             129                   104             120             132               143             150
Investments                                                                                                                   95             136             186               240             300
Gross Fixed Assets                                          4                 6         17              30                    35              40              44                48              50
  Less: Accum. Depr. & Amort.                               1                 2          5              11                    14              18              23                27              32
Net Fixed Assets                                            3                 4         12              19                    21              22              21                20              18
Other Assets                                               26                26         64             101                    96              91              86                81              76
Total Assets                                               44                59        233             249                   317             369             425               484             544
Current Liabilities                                        12                15         44              42                    73              83              92                99             104
Long-Term Debt
  Existing Debt                                            6                  6             0               1                    1               1               1                 0           -
  New Debt                                             -                 -              -              -                     -               -               -                 -               -
Other Liabilities                                       0       0                         1           1                      2               2                  2             2                  2
Total Liabilities                                      18      21                        45          44                     76              86                 94           102                106
   Common Stock                                        22      27                       155         144                   144             144                144            144                144
   Retained Earnings                                    4      11                        32          61                     97            139                187            239                294
Shareholders' Equity                                   26      38                       188         205                   241             283                331            382                437
Total Liabilities & Shareholders' Equity               44      59                       233         249                   317             369                425            484                544
Addendum: Check                                        (0)     (0)                         0         (0)                  -               -                  -              -                      -
Shares Outstanding (millions)                         6.9     8.5                      13.9        19.1                  19.1            19.1               19.1           19.1            19.1
Effective Tax Rate                                  18.8%   22.6%                     27.5%       29.0%                 29.0%           29.5%              30.0%          30.5%           31.0%
Earnings per Share                            $      0.40 $ 0.75 $                     1.58 $      1.50 $                1.91 $          2.20 $             2.50 $         2.70 $          2.88

Addendum: Working Capital                                  3                 14        113                 87                    32              37              40                44                  46

Free Cash Flow
EBIT (1-t)                                                  3                 7          21             26                    33                 37              40                42              44
Plus: Depreciation and Amort.                               1                 3           5              9                     3                  4               4                 5               5
Less: Gross Capital Expenditures                            3                 3          10             13                     5                  5               4                 4               2
Less: Change in Working Capital                            (4)               10          99            (26)                  (55)                 5               4                 3               2
  Free Cash Flow                                            6                (3)        (84)            49                    86                 31              37                40              44

PV: 2001 - 2005                                    $172.4
PV: Terminal Value                                 $324.3        3)
Total PV (Market Value of the Firm)                $496.7
Less: Market Value of Long-Term Debt                 $1.4
Plus: Excess Cash (Investments)                     $95.4
Equity Value                                       $590.7
Equity Value per Share                             $30.99

Notes:
1) Blended rate on interest-bearing cash accounts and short-term money market instruments.
2) The Target receives certain licensing income from a joint venture. In 2000 this licensing income was $15.9 million.
   The Target expects an increase in licensing income but for the valuation this income has been held stable through 2005.
3) The terminal period cost of capital is reduced to 11.5%. The Target's cost of capital will remain higher than that of the Acquirer's because of its low leverage.


Acquisition Plan JAKKS                                                                                     32 of 44                                                                                            3/31/2012
                                                                   Acquisition Plan - JAKKS                                                                             Appendix B-2

                                        Historical Rates and Explanations for Rates Used in Forecast / Valuation JAKKS

                                                                     Step 1 Continued: Target Historical Data and Ratios

Historical Ratios                                                 Historical Financial Ratios
                                                               1997    1998        1999       2000         Average Minimum Maximum
Net Sales Growth Rate                                 1)               103.2%     115.5%       37.3%         85.4%    37.3% 115.5%
Cost of Sales (Variable) / Sales %                    2)      61.7%     61.0%       58.6%      59.4%         60.2%    58.6%  61.7%
Depreciation & Amortization / Gross Fixed Assets %    3)      27.8%     46.2%       27.1%      31.3%         33.1%    27.1%  46.2%
Selling Expenses / Sales (%)                          4)      15.0%     15.0%       15.0%      15.0%         15.0%    15.0%  15.0%
G&A Expenses / Sales (%)                              5)      13.3%     13.2%       12.8%      16.9%         14.1%    12.8%  16.9%
Interest on Cash & Marketable Securities              6)       0.0%       0.0%       1.6%       8.9%          2.6%     0.0%    8.9%
Interest Rate on Debt (%)                             7)       7.0%       7.1%       0.0%       0.0%          3.5%     0.0%    7.1%
Tax Rate                                              8)      18.8%     22.6%       27.5%      29.0%         24.5%    18.8%  29.0%
Other Current Operations Assets / Sales (%)           9)      29.5%     19.0%       33.0%      34.0%         28.9%    19.0%  34.0%
Other Assets / Sales (%)                              10)     61.4%     30.3%       34.7%      40.1%         41.6%    30.3%  61.4%
Gross Fixed Assets / Sales (%)                        11)      9.4%       7.6%       9.2%      11.7%          9.5%     7.6%  11.7%
Cash Balance / Sales (%)                              12)      6.0%     14.6%       52.7%      17.0%         22.6%     6.0%  52.7%
Current Liabilities / Sales (%)                       13)     27.6%     17.5%       24.1%      16.5%         21.4%    16.5%  27.6%
Capital Expenditures / Gross Fixed Assets             14)     74.2%     38.8%       61.7%      43.1%         54.4%    38.8%  74.2%
Debt / Equity                                         15)     23.0%     15.7%        0.0%       0.5%          9.8%     0.0%  23.0%
Notes:
1) During the last few years, the Target has acquired several small companies which have contributed to its large growth in net sales. For purposes of the valuation,
    we assume a higher growth rate than the mature industry (2-4%) in which the Target competes, because the Target derives a large portion of its sales from
    segments whose growth is exceeding the overall market growth rate. We assume 10% growth for the next 2 years, after which we expect growth to decline gradually
    to 5% in 2005. Beyond 2005, the Target's growth is expected to mirror the industry's long-term 4% rate of growth.
2) The Target has realized cost of sales efficiencies in their recent acquisitions. They have reduced licensing and royalty payouts by acquiring technology
    and viable brands with extended life. However, the use of outside manufacturers results in inherently higher manufacturing costs than those of the Acquirer.
3) Depreciation of Gross Fixed Assets has been set at 10% to assume a 10 year depreciation cycle which is standard for most long-lived assets in this industry.
4) Selling expenses will remain flat as a percentage of sales within our model.
5) The Target has experienced some growth in G&A expenses due to acquisition related overhead. In a stable environment we expect overhead to normalize
    at 14.1% by 2003 and continue at that level through 2005.
6) A blended rate, combining non-interest bearing deposits and marketable securities at federal funds rate, is used in the forecast.
7) The interest on Current Debt is calculated based on the existing interest rates on the debt.
    The interest rate on future debt will be calculate at Moody's Aaa rate for debt as of December 31, 2000.
8) The Target's tax rate in 2000 was 29%. The company's overall tax rate is favorably impacted by Hong Kong operations that pay tax at 16.5%.
    The tax rate is assumed to increase slightly during the forecast period.
9) Other Current Operations assets are assumed to be maintained at about the average rate of the past years at 30%.
10) Other Assets include about $70 million in Goodwill resulting from a number of acquisitions during the period from 1997-2000.
    The forecast assumes no acquisitions. As a result of amortization Other Assets will decline by $5 million a year. Note that at the time of this acquisition
    financial accounting standards still required the amortization of acquisition-related goodwill.
11) Fixed assets as a percentage of sales will be increased to 12% to sustain growth of the business. Fixed assets mainly consists of molds and tooling
    and 12% will provide a reasonable replenishment rate of these assets.
12) The Target is producing cash balances in excess of financing needs. Cash balances for the projected years have been forecast at a minimum
    level of 6%. This is slightly higher than the minimum level for the Acquirer (4.5%) because the Target's smaller balance sheet provides
    less flexibility in meeting unanticipated cash needs.
13) Current Liabilities have decreased substantially over the last few year as allowances and reserves for obsolescence have gone down as a percentage of sales.
     In our model we assume 25% to be conservative.
14) Capital Expenditures have been high in the past as the Target has been acquiring fixed assets as part of their recent acquisitions.
    We have projected a decrease in capital expenditures as the forecast does not include projections for acquisitions.

Acquisition Plan JAKKS                                                      b7e7e722-37c4-45ab-b85d-c028201b13ad.xls                                                       3/31/2012
                                                                  Acquisition Plan - JAKKS                              Appendix B-2

                                       Historical Rates and Explanations for Rates Used in Forecast / Valuation JAKKS

15) The target's management is assumed to continue its 1999-2000 trend and keep debt to a minimum through 2005.




Acquisition Plan JAKKS                                                   b7e7e722-37c4-45ab-b85d-c028201b13ad.xls          3/31/2012
                                                      Acquisition Plan - JAKKS                                                        Appendix B-3

                                                  Supplemental Financial Data JAKKS

                                        Step 1 Continued: Target Cost of Equity and Capital Calculation
Financial Benchmarks as of December 31, 2000                                                                       As of 12/31/2000
                                                                                                   Industry
                                                                                                  Average
Prime                                     9.50%                       Key Valuation Indicators        1)       Acquirer         Target
10 -Year T-Note                           5.24%                       P/E                               14.5       17.7              6.1   2)
Commercial Paper 3-months                 6.34%                       P/S                                1.5         1.3             0.7   2)
Federal Funds Rate                        6.40%                       LT Debt/Equity                    50%         89%              1%    2)
CD's 6 months                             6.30%                       ROI - 5 year avg.               12.6%        4.7%           15.1%    1)
Moody's A                                 8.30%                       ROE - 5 year avg.               17.3%        8.1%           16.2%    1)

Supplemental Financial Data                                               Stock Price as of 12/31/2000         $    14.55   $      9.13
Risk-free Rate                                 5.24%                      Current stock price                  $    16.03   $     14.25
Target's Unlevered Beta                          1.51
Market Risk Premium                            5.50%
Target's Cost of Equity                       13.55%
Target's level of D/E                             0%
Target Tax Rate                                  31%
Levered Beta                                    1.51

Market Value of Current Long-Term Debt (in thousands)
Discount Rate - Moody's Aaa                 7.21%
                            2001          2002    2003 2004 2005
              Int. Rate        7.75%        7.75% 7.75% 7.75% 7.75%
              BegBal           1,400        1,000   600   200   -
Payments:     Principal          400          400   400   200   200
              Interest            93           62    31     8   -
  Total Debt Cash Flow           493          462   431   208   200
  Discounted Value            $1,369

Notes:
1) From investment research reports.
2) Based on financial data in statements and year-end stock price.


Acquisition Plan JAKKS                                b7e7e722-37c4-45ab-b85d-c028201b13ad.xls                                             3/31/2012
                                                         Acquisition Plan - JAKKS                                                                             Appendix C

                                        Forecast 2001 -2005 and Valuation of Combined Companies
                                                                    Step 2: Combined Firm's 5-Year Forecast and Valuation
Consolidated Acquirer and Target - including Synergy

Forecast Assumptions 2001 - 2005                                                            2001         2002          2003         2004         2005        Sum
Cost of Sales Synergy                                                                            3.9        10.8          13.8         13.8         14.3       56.5
Selling Expenses Synergy                                                                         1.6          3.3           3.3          3.3          3.3      14.9
G&A Expenses Synergy                                                                             1.6          3.3           3.3          3.3          3.3      14.7
Integration Expenses                                                                            (1.1)         -             -            -            -        (1.1)
Cost of Capital: 2001 - 2005 (%)        11.81% 1)                                                                                                              85.0
Cost of Capital: Terminal Period (%)    10.31% 1)
Sustainable Cash Flow Growth Rate (%)     4.0% 1)
Market Value of Long-Term Debt          $1,172



                                                    Historical Financials                                       Projected Financials
                                          1997       1998          1999        2000         2001         2002           2003         2004        2005
Income Statement ($mil)            1)
Net Sales                                4,821         4,784         4,779       4,922        5,147        5,385          5,620        5,859       6,098
Less:                                                                                           -            -              -            -           -
  Variable Cost of Sales                 2,339         2,335         2,436       2,556        2,620        2,692          2,784        2,877       2,994
  Depreciation                             101           106            86          84          104          109            113          118         123
  Cost of Sales Synergy                                                                           (4)        (11)           (14)         (14)        (14)
  Total Cost of Sales                    2,440         2,441         2,521       2,640        2,721        2,790          2,884        2,981       3,103
Gross Profit                             2,380         2,343         2,258       2,282        2,426        2,595          2,736        2,879       2,995
Less:                                                                                           -            -              -            -           -
  Sales Expense                           767            799           712         719          748          782            817          852         886
  Sales Expense Synergy                                                                           (2)          (3)            (3)          (3)         (3)
  G&A Expense                             785            874           891         951          965          983            997          996         990
  G&A Expense Synergy                                                                             (2)          (3)            (3)          (3)         (3)
  Integration Expenses                                                                             1         -              -            -           -
  Amortization of Intangibles               32            41            52          52           52           52             52           52          52
  Other expense (income), net                2             6            (9)        (34)         (32)         (32)           (32)         (32)        (32)
  Total Sales and G&A Expense            1,586         1,720         1,646       1,688        1,731        1,779          1,828        1,861       1,890
Operating Profits (EBIT)                   794           623           612         594          696          816            909        1,018       1,105
Plus: Interest Income                      -             -               2           4           28           48             59           88         114
Less: Interest Expense                      91           111           132         153          140          112             95           96          84
Net Profits Before Taxes                   704           512           482         445          584          753            873        1,010       1,135
Less: Taxes                                201           133            70          67          110          166            216          297         408
Net Profits After Taxes                    502           379           411         378          475          587            656          713         728




Acquisition Plan JAKKS                                                        36 of 44                                                                          3/31/2012
                                                                   Acquisition Plan - JAKKS                                                                                         Appendix C

                                                  Forecast 2001 -2005 and Valuation of Combined Companies
                                                              Historical Financials                                             Projected Financials
                                                    1997       1998          1999           2000           2001          2002           2003         2004            2005

Balance Sheet
Current Assets
   Cash                                              698            225           344            275           236            247           258            270               281
   Other Operating Assets                          1,779          1,861         1,665          1,605         1,787          1,868         1,949          2,031             2,113
Total Current Assets                               2,477          2,086         2,009          1,880         2,023          2,115         2,207          2,301             2,394
Investments                                          -              -             -              -             336            745           963          1,563             2,092
Gross Fixed Assets                                   942          1,165         1,164          1,150         1,249          1,303         1,357          1,413             1,470
  Less: Accum. Depr. & Amort.                        338            424           427            484           588            697           810            928             1,051
Net Fixed Assets                                     604            741           737            667           661            606           547            485               419
Other Assets                                         877          1,844         2,161          2,015         2,010          2,005         1,999          1,994             1,989
Total Assets                                       3,958          4,672         4,907          4,562         5,029          5,470         5,717          6,342             6,894
Current Liabilities                                1,185          1,332         1,610          1,544         1,530          1,599         1,563          1,520             1,524
Long-Term Debt
  Existing Debt                                      670            989           983          1,243         1,244          1,022           641            589               400
  New Debt                                           -              -             -              -             -              -             -              -                 -
Other Liabilities                                    144            141           164            167           174            181           188            196               204
Total Liabilities                                  1,999          2,463         2,757          2,954         2,947          2,802         2,392          2,305             2,128
   Common Stock                                      750          2,068         2,078          1,980         1,980          1,980         1,980          1,980             1,980
   Retained Earnings                               1,210            141            72           (372)          103            689         1,345          2,058             2,786
Shareholders' Equity                               1,959          2,209         2,150          1,608         2,082          2,669         3,325          4,038             4,765
Total Liabilities & Shareholders' Equity           3,959          4,672         4,907          4,562         5,029          5,470         5,717          6,342             6,894
Addendum: Check                                         0              0             0              0             0              0             0              0                 0
Shares Outstanding (millions)                        299            399           435            445           445            445           445            445               445
Effective Tax Rate                                   29%            26%           15%            15%           19%            22%           25%            29%               36%

Addendum: Working Capital                          1,292            754           400            336           493            517           644            781              870
Free Cash Flow
EBIT (1-t)                                           567            462           523            505           565            636           683            718              708
Plus: Depreciation and Amort.                        133            147           138            136           156            161           165            170              175
Less: Gross Capital Expenditures                     204            223            (2)           (13)           99             54            55             56               57
Less: Change in Working Capital                     (204)          (537)         (355)           (64)          157             23           128            137               88
  Free Cash Flow                                     701            923         1,016            718           465            720           666            696              738

PV: 2001 - 2005                                     $2,336
PV: Terminal Value                                  $6,962
Total PV (Market Value of the Firm)                 $9,298
Less: Market Value of Long-Term Debt                $1,171
Plus: Excess Cash (Investments)                        $336
Equity Value                                        $8,463
Notes:
1) The acquisition will make up a minor part of the Acquirer's total value. The Acquirer's target D/E ratio remains unchanged. Therefore, the Acquirer's cost of capital
   has been used in the valuation of the combined companies. Although the Acquirer expects certain product lines to grow faster than the overall market for a number of
  years, the long-term industry growth is forecast at 4%, because the market is rapidly maturing.




Acquisition Plan JAKKS                                                                     37 of 44                                                                                  3/31/2012
                                                                             Acquisition Plan - JAKKS                                                                         Appendix D

                                                                          Financial Summary of Synergy
                                                                                         Step 2 Continued: Synergy Estimation
Summary of Expected Synergy
Assumes Deal closes on March 31, 2001 and actions take effect July 1, 2001.
                                                                              (In millions)
1) The total annual savings of the closing of the Hong Kong office will be:         2001             2002         2003      2004      2005    Expense Category
   - Rent                                                        250,000                0.13            0.25         0.25      0.25      0.25 50% COS/50% Sales Expense
   - Elimination of 15 back office positions
     at $35,000 each                                             525,000                  0.26             0.53     0.53      0.53      0.53 G&A
   - Elimination of 10 professional positions
     at 90,000 each                                              900,000                  0.45             0.90     0.90      0.90      0.90 50% COS/50% Sales Expense
                                                Total          1,675,000                  0.84             1.68     1.68      1.68      1.68

2) As a result of the closure of the Hong Kong Office the following additional expenses
   will be incurred in 2001: 1)                                                     2001             2002         2003      2004      2005
   - 3 Months Rent                                                 62,500               0.06                                                    50% COS / 50% Sales Expense
   - 1 Month's pay for back office positions                       43,750               0.04                                                    Integration Expense
   - Average 3 months' pay for professional
     positions                                                    225,000               0.23                                                    Integration Expense
                                              Total               331,250               0.33

3)                                                                                  2001             2002         2003      2004      2005
     Termination of 3rd Party manufacturing agreements:2)                                     3.00      9.00        12.00     12.00     12.50 100% COS

                                    3)
4) Termination of rental contracts:                                                 2001             2002         2003      2003      2003
   Malibu Headquarters (CA)                                                             0.50            1.00         1.00      1.00      1.00   50% G&A/25% Sales/25% COS
   Dexter Michigan Office (MI)                                                          0.20            0.40         0.40      0.40      0.40   50% COS/ 50% Sales
   International Toy Center New York (showroom) (NY)                                    0.40            0.80         0.80      0.80      0.80   100% Sales
   Warehouse space in City of Industry (CA)                                             0.75            1.50         1.50      1.50      1.50   100% Sales
   Warehouse space in New Brunswick (NJ)                                                 -               -            -         -         -
                                            Total                                       1.85            3.70         3.70      3.70      3.70


                                     4)
5) Termination of employees in U.S.:
   - 75 employees with average pay of                                                     1.50             3.00     3.00      3.00      3.00 75% G&A/25%COS
     $40,000, including benefits.

                                                5)
6) Severance pay as a result of terminations.                                             0.37                                                  Integration Expense

                                          6)
7) Retention bonuses for key employees                                                    0.50                                                  Integration Expense

                                                            Grand total                       6.0          17.4     20.4      20.4      20.9         85.0




Acquisition Plan JAKKS                                                                          38 of 44                                                                       3/31/2012
                                                                           Acquisition Plan - JAKKS             Appendix D

                                                                        Financial Summary of Synergy
Notes:
1) The rental market is tight in Hong Kong. Although we are contractually allowed
   to sublet the office, we would prefer not to be involved in managing a new tenant.
   We expect the landlord will be pleased to let us out of the rental agreement, because
   he will be able to increase the rent. At most we expect to pay an estimated 3 months of rent as
   compensation for the inconvenience.
2) The Acquirer will terminate 3rd party contracts as soon as possible. This will occur either at the end of
   the contract or earlier if a financially favorable agreement can be reached.
   The Acquirer expects to save approximately 10% of manufacturing costs by manufacturing
   in-house, as a result of using excess manufacturing capacity and economies of scale as
   a result of the Acquirer's buying power.
3) Rental contract for Malibu Headquarters expires in July 2001.
   Rental contract for Showroom in International Toy Center expires December 2001.
   Rental contract for office space in Dexter, Michigan does not expire until 2008. We will
   attempt to come to a financial agreement with landlord or sublet space.
   Rental contract for warehouse in City of Industry expires in 2003. Because the new
   Alameda corridor commercial space is at a premium in the City of Industry, we see no problem
   terminating the agreement or subletting space at a higher rental rate.
   The warehouse in New Brunswick fits well with the Acquirer's distribution organization and will be
   retained.
4) The Target has 155 employees in U.S. None of the employees is represented by a union.
   The 45 employees involved in the design, sales and marketing of toys will be integrated into
   the Acquirer's divisions. The 25 employees working at the New Brunswick warehouse will be retained.
   All other (75) employees, involved in back-office, customer service, distribution
   and warehousing functions will be terminated.
5) Because there is no union contract, the Acquirer has no obligation to provide severance pay; however,
   to prevent disputes, the Acquirer will provide a severance package that includes from 1 to 3 months of pay
   depending on period of employment. Because average seniority is less than 3 years, the Acquirer expects
   to pay an average of 1.5 months of severance pay per employee. (1.5 * $3,300 * 75 = $371,250)
6) Retention bonuses for key creative employees. An estimated 25 employees will be offered average
   retention bonuses of $20,000 to stay on for at least 18 months.




Acquisition Plan JAKKS                                                                    39 of 44               3/31/2012
                                                                               Acquisition Plan - JAKKS                                                                               Appendix E

                                                                           Initial Offer Price Determination
                                                                                Step 3: Offer Price Determination
Offer Price Supporting Data
Acquirer Share Price 1)                                $      16.03
Target Share Price 1)                                  $      14.25
Proposed % of Synergy Shared with Target                        30%
Target Shares Outstanding (Mil)                                 19.1
Acquirer Shares Outstanding (Mil)                              426.0
Cash Portion of Offer Price (%)                                    0
                                                                                        Consolidated Acquirer +
                                                            Standalone Value                    Target                Value of Synergy
                                                                                       Without
                                                                                       Synergy
                                                           Acquirer        Target        (1)     With Synergy (2)         PVNS (1) - (2)
Discounted Cash Flow Valuations ($Mil)                  $     7,506    $        591   $    8,097   $          8,463   $               366
Minimum Offer Price (PVMIN) ($Mil)                      $       272
Maximum Offer Price (PVMAX) ($Mil)                       $      639
Initial Offer Price ($Mil)                               $      382
Initial Offer Price Per Share ($)                        $    20.00
Purchase Price Premium Per Share                                40%
Cash Per Share ($)                                       $       -
Share Exchange Ratio                                            1.25
New Shares Issued by Acquirer                                 23.836
Total Shares Outstanding Acquirer after acquisition          449.836
Ownership Distribution in New Firm
    Acquirer shareholders (%)                                   95%
    Target shareholders (%)                                       5%
                                  EPS at Initial Offer Price                              2001         2002                   2003              2004         2005
                                  Acquirer's Forecast of EPS after     Acquisition    $     1.01   $           1.24   $              1.38   $     1.50   $     1.53
                                  Acquirer's Forecast of EPS after     Acquisition    $     1.06   $           1.30   $              1.46   $     1.58   $     1.62
                                 Weighted Average Valuation Calculation           Value     Weighting Factor          Weighted Value
                                 Discounted Cash Flow Valuation                 $     591               50%           $          295
                                 Comparable Firms - Earnings Valuation 3)       $     427               25%           $          107
                                 Comparable Firms - Sales Valuation 3)          $     413               25%           $          103
                                                                  Weighted Average Valuation                          $          505

                                                                         Offer          Offer                               Resulting Earnings Per Share After Acquisitions4
                                                                         Price           Price        % Shared                     2001       2002       2003       2004       2005
                                                                       Per Share     $-millions        Synergy
                                                                            $20.00           382          30%         $            1.06 $ 1.30 $ 1.46 $ 1.58 $                 1.62
Notes                                                                       $21.92           419          40%         $            1.05 $ 1.30 $ 1.45 $ 1.58 $                 1.61
1) Share prices as of close of business on March 31, 2001..                 $23.84           455          50%         $            1.04 $ 1.29 $ 1.44 $ 1.57 $                 1.60
2) The initial offer price will be based on 30% synergy sharing.            $25.76           492          60%         $            1.04 $ 1.28 $ 1.44 $ 1.56 $                 1.59
3) See "Relative Valuations Summary".                                       $27.68           529          70%         $            1.03 $ 1.28 $ 1.43 $ 1.55 $                 1.59
4) Post-acquisition EPS for different offer prices equals consolidated net income after taxes divided by the sum of acquirer shares outstanding plus new shares issued
  by the acquirer. New shares issued equals the number of target shares outstanding times the share exchange ratio (SER). Consolidated EPS will decline
  as the offer price increases as more shares of acquirer stock must be issued for each share of target stock outstanding.

Acquisition Plan JAKKS                                                                                                                                                                 3/31/2012
                                                      Acquisition Plan - JAKKS                                                      Appendix F

                                                     Relative Valuations Summary


                                                 Step 3 Continued: Alternative Valuation Summaries

                    As of 12/31/00                                           As of 12/31/00
                    PRICE/SALES VALUATION                                    PRICE/ EARNINGS VALUATION


                    COMPARABLE COMPANIES                      PRICE/SALES    COMPARABLE COMPANIES                      P/E
                    Company 1                                          1.3   Company 1                                       14.6
                    Company 2                                          1.5   Company 2                                       11.0
                    Company 3                                          1.4   Company 3                                       12.0
                    Company 4                                          1.5   Company 4                                       10.0
                    Company 5                                          1.4   Company 5                                       11.0
                                     TOTAL                             7.1                    TOTAL                          58.6


                                     AVERAGE                           1.4                    AVERAGE                        11.7


                    TARGET PROJECTED SALES (2001)                    290.1   TARGET PROJECTED EARNINGS (2001)                36.4


                    PROJECTED VALUE OF TARGET (In millions)          412.6   PROJECTED VALUE OF TARGET (In millions)     427.2




Acquisition Plan JAKKS                                                                                                               3/31/2012
                                                               Acquisition Plan - JAKKS                                                                                Appendix G

                                              Consolidated Financial Statements based on Initial Offer Price
                                                    Step 4: Combined Firms' Financing Capacity
                                                      Projected Financials
                                            2001     2002       2003       2004    2005                               Forecast Comments
Income Statement ($Millions)
Net Sales                                  5,147    5,385     5,620     5,859     6,098
Less: Cost of Sales                        2,721    2,790     2,884     2,981     3,103
Gross Profit                               2,426    2,595     2,736     2,879     2,995
Less: Sales, General & Admin. Exp.         1,730    1,779     1,828     1,861     1,890
Integration Expenses                          (1)     -         -         -         -
Operating Profits (EBIT)                     696      816       909     1,018     1,105
Plus: Interest Income                         28       48        59        88       114
Less: Interest Expense                       140      112        95        96        84
Net Profits Before Taxes                     584      753       873     1,010     1,135
Less: Taxes                                  110      166       216       297       408
Net Profits After Taxes                      475      587       656       713       728
Earnings per share ($/Share)             $ 1.06 $    1.30   $ 1.46    $ 1.58    $ 1.62 Based on 426 million existing Acquirer shares and
Balance Sheet (12/31)                                                                   23,836 million new shares (total shares after acquisition 449.836 million).
Current Assets
Cash & Marketable Securities                 572      992     1,221     1,832      2,372
Other Current Assets                       1,787    1,868     1,949     2,031      2,113
    Total Current Assets                   2,359    2,860     3,170     3,863      4,486
Gross Fixed Assets                         1,249    1,303     1,357     1,413      1,470
Less: Accumulated Depreciation               588      697       810       928      1,051
Net Fixed Assets                             661      606       547       485        419
Other Assets                               2,010    2,005     1,999     1,994      1,989
Total Assets                               5,029    5,470     5,717     6,342      6,894
Current Liabilities                        1,530    1,599     1,563     1,520      1,524
Long-term debt
    Exiting Debt                           1,244    1,022       641       589        400                                       Value Creation Summary
    Transaction related debt                 -        -         -         -          -                                                 ($Millions)
    Total Long-term Debt                   1,244    1,022       641       589        400                         Consolidated Value after Acquisition          8,463
Other Liabilities                            174      181       188       196        204                         Pre-acquisition Equity Value
Common Stock                               1,980    1,980     1,980     1,980      1,980                          Acquirer                                     7,506
Retained Earnings                            103      689     1,345     2,058      2,786                          Target                                         591
Shareholders' Equity                       2,082    2,669     3,325     4,038      4,765                                Total                                  8,097
Total Liabilities+Shareholders' Equity     5,029    5,470     5,717     6,342      6,894                         Value Created                                   366
                                             -        -         -         -          -                           Distribution of Value
Addendum:                                                                                                         Acquirer                           95%         347
Long-term debt / Equity                     60%      38%        19%       15%         8%                          Target                              5%          19
                                                                                                                       Total                                     366




Acquisition Plan JAKKS                                                                                                                                                  3/31/2012
                                                                                                                                                                                                                       Appendix A


                                                                                          Appendix A: Acquisition Timeline

                                             January                     February March        April        May               June            July                  August           October
                                                                                                                                                                             September                    D
                                                                                                                                                                                                   November ecember
                                            wk1 wk wk wk wk5 wk1 wk wk wk4 wk1 wk wk wk4 wk1 wk wk wk4 wk1 wk wk wk wk5 wk1 wk wk wk4 wk1 wk wk wk wk5 wk1 wk wk wk4 wk1 wk wk wk4 wk1 wk wk wk wk5 wk1 wk wk wk4 wk1 wk wk wk wk5
                                                2 3 4            2 3           2 3           2 3           2 3 4            2 3           2 3 4            2 3           2 3           2 3 4            2 3           2 3 4
           KEY ACTIVITIES                   31 7 14 21 28 4 11 18 25 4 11 18 25 1 8 15 22 29 6 13 20 27 3 10 17 24 1 8 15 22 29 5 12 19 26 2 9 16 23 30 7 14 21 28 4 11 18 25 2 9 16 23 30

                   Pre-Acquisition
     Search
     Screen
     First Contact
     Negotiation
       Refine Value
       Structure Deal
       Due Diligence
       Financing
       Plan Financial Detail
       DECISION: Proceed/Walk Away
     Implementation Planning
     CLOSING
                   Post-Acquisition
     Office Closures
       Hong Kong Office
     Third Party Manufacturing Agreement Termination
     Termination of Rental Contract
       Malibu Headquarters
       Dexter Office
       City of Industry Warehouse
       New York Showroom
     Reduction of Work Force                                                       Interview                          Initiate Action                  Complete
     Staff Relocation Program                                                      Interview                                                             Complete
                                                                                                                                           Initiate Action
     Communication Program
       Public Relations (ongoing)
       Advertising (ongoing)                                                         Announcement                                                                                           Holiday Ad Campaign
       Corporate Materials                                                           Announcement
       Website                                                                                 Launch                                            Fully Integrated


                                                       Initiate Action                Development/Ongoing         Target Completion Date




Acquisition Plan JAKKS                                                                                                                                                                                                   3/31/2012
  Appendix B: Summary: Milestones and Responsible Individual(s)

           KEY ACTIVITIES               Estimated Time Frame            Manager
                                        Duration   Deadline
              Pre-Acquisition
Search                                 3 weeks           0-Jan       COO/Exec Staff
Screen                                 3 weeks          13-Jan          President

First Contact                          3 weeks          20-Jan          President
Negotiation                                                                CFO

 Refine Value                          11 weeks        24-Mar         President/CFO
 Structure Deal                        9 weeks         24-Mar              CFO

 Due Diligence                         8 weeks         24-Mar             COO
 Financing                             11 weeks        24-Mar           Treasurer

 Plan Financial Detail                 11 weeks        24-Mar           Exec Staff
 DECISION: Proceed/Walk Away           1 week          24-Mar         President/COO

Implementation Planning                11 weeks        24-Mar           Exec Staff
CLOSING                                3 weeks           7-Apr          Exec Staff

              Post-Acquisition
Office Closures                                                           COO
 Hong Kong Office                      18 weeks         30-Jun      Director of Finance

Third Party Manufacturing Agreement Termination
                                       18 weeks         30-Jun            COO
Termination of Rental Contract                                            COO

 Malibu Headquarters                   18 weeks         30-Jun            COO
 Dexter Office                         18 weeks         30-Jun            COO

 City of Industry Warehouse            18 weeks         30-Jun            COO
 New York Showroom                     18 weeks         30-Jun            COO

Reduction of Work Force                24 weeks         4-Aug          Vice Pres HR
Staff Relocation Program               24 weeks                        Vice Pres HR

Communication Program                                            Vice Pres Communications
 Public Relations (ongoing)            weekly          ongoing Vice Pres Communications

 Advertising (ongoing)                 weekly          ongoing       Vice Pres Mrktg
 Corporate Materials                   11 weeks                      Vice Pres Mrktg
 Website                               27 weeks         4-Aug        Vice Pres Mrktg

				
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