Willingness of MGA Entertainment, Inc and of the other major shareholders to provide additional capital has been instrumental in reaching the agreements

Zapf Creation AG, Europe's leading manufacturer of play and functional dolls, today announced that it has reached agreements with an international syndicate of banks and the major shareholders of Zapf Creation AG, MGA Entertainment, Inc and its CEO Mr. Isaac Larian, Mr. Nicolas Mathys and Mr. Gustavo Perez regarding the long-term follow-up financing for the company.

The new financing plan calls for a new, long-term syndicated loan of EUR 65 million. This loan is based on the condition precedent that an equity contribution of EUR 30 million is made by October 31, 2007 in a way to be determined by the shareholders. The major shareholders will make the equity contribution possible. They have already assured the company in writing that they will support the equity contribution in the amount of EUR 30 million.

The previous syndicate of banks of Zapf Creation AG has agreed to allow repayment of the credit lines used in the amount of approx. EUR 45 million, which has been due since June 30, 2007, to be deferred until October 31, 2007. To finance peak capital needs in the course of the company's operations, the lead manager of the new syndicate of banks has also agreed to providing interim financing of up to EUR 20 million until October 31, 2007. These funds can be utilized as defined and depending on the equity contributions made at such a time.

All agreements are subject to the provision that there is no material adverse change to the economic situation of the Zapf Creation Group until October 31, 2007. Furthermore, they are subject to signature of the final documents.

The Company underlines that this positive solution would not have been possible without the extraordinary support of MGA Entertainment, Inc and its CEO Mr. Isaac Larian and of the other major shareholders who have all assumed additional risks in connection with the now planned capital increase of Zapf Creation.

Jens U. Keil, Chief Financial Officer of Zapf Creation AG, commented: "This is good news for Zapf Creation. With the new financing model, we managed to establish a sustainable, long-term capital base for the Group after intense negotiations. The willingness of MGA Entertainment, Inc and of the other major shareholders to provide additional capital has been instrumental in reaching the agreements. Based on the secure financing, we can now focus on further pushing ahead with the development of the operational business of the Zapf Creation Group.”