Employment Agreement - Mattel Inc. and Kevin M. Farr


              AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT dated as of March
28, 2000 (the "Agreement") is between Mattel, Inc., a Delaware corporation
("Mattel"), and Kevin M. Farr (the "Executive").

     WHEREAS, Mattel and the Executive have previously entered into that certain
Employment Agreement (the "Employment Agreement"), dated as of May 30, 1999; and

     WHEREAS, Mattel and the Executive each have determined that it would be to
the advantage and best interest of Mattel and the Executive to enter into the
Agreement and modify certain of the Executive's and Mattel's obligations and
responsibilities under the Employment Agreement;

     WHEREAS, the Agreement amends and restates the Employment Agreement in its
entirety and shall supersede the Employment Agreement in all respects.

     NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto do hereby agree as
follows:


     1.  Employment Period.  Mattel hereby agrees to employ and continue in its
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employ the Executive, and the Executive hereby accepts such employment and
agrees to remain in the employ of Mattel, for the period commencing on the date
of this Agreement and ending on the third anniversary of such date, subject to
earlier termination as provided herein (the "Employment Period"); provided that
commencing on the first day of the month next following the effective date
hereof, and on the first day of each month thereafter (the most recent of such
dates is hereinafter referred to as the "Renewal Date"), the Employment Period
shall be automatically extended so as to terminate three years from such Renewal
Date, unless at least 60 days prior to any Renewal Date Mattel or the Executive
shall give notice to the other that the Employment Period shall not be so
extended.

     2.  Duties.
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         (a)  Executive's Position and Duties.  During the Employment Period, 
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the Executive's position and title shall be Chief Financial Officer of Mattel,
reporting directly to the Chief Executive Officer of Mattel, with overall
responsibility, authority and accountability for financial matters relating to
the business of Mattel and any of its subsidiaries with such additions and
modifications, and consistent with responsibilities generally assigned to the
Chief Financial Officer of Mattel as the Chief Executive Officer of Mattel may
in her discretion and acting in good faith from time to time assign to the
Executive. The Executive's services shall be

 
performed in the general area in which the Executive was employed on the date of
this Agreement.

         (b)  Full Time.  The Executive agrees to devote his full business time
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to the business and affairs of Mattel and to use his best efforts to perform
faithfully and efficiently the responsibilities assigned to him hereunder to the
extent necessary to discharge such responsibilities, except for (i) services on
corporate, civic or charitable boards or committees not significantly
interfering with the performance of such responsibilities which services have
been approved by the Chief Executive Officer; (ii) periods of vacation and sick
leave to which he is entitled; and (iii) the management of personal investments
and affairs. The Executive will not engage in any outside business activity (as
distinguished from personal investment activity and affairs), including, but not
limited to, activity as a consultant, agent, partner or officer, director or
provide business services of any nature directly or indirectly to a corporation
or other business enterprise, except as otherwise set forth in this subsection
(b).

     3.  Compensation and Benefits.
         ------------------------- 

         (a)  Base Salary.  During the Employment Period, the Executive shall 
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receive a base salary ("Base Salary") at a bi-weekly rate at least equal to the
bi-weekly salary paid to Executive by Mattel on the date of this Agreement. The
Base Salary shall be reviewed at least every 18 months, and may be increased at
any time and from time to time by action of the Board of Directors of Mattel or
the Compensation/Options Committee thereof or any individual having authority to
take such action in accordance with Mattel's regular practices.

         (b)  Bonus Programs. In addition to the Base Salary, the Executive 
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shall be eligible to participate throughout the Employment Period in such cash,
deferred bonus, annual bonus and long term bonus plans and programs ("Bonus
Programs"), such as Mattel's Management Incentive Plan (the "MIP") and Long Term
Incentive Plan (the "LTIP"), as may be in effect from time to time in accordance
with Mattel's compensation practices and the terms and provisions of any such
plans or programs as in effect from time to time.

          (c) Incentive Plans.  In addition to the Base Salary and participation
              ---------------     
in the Bonus Programs, during the Employment Period the Executive, shall be
eligible to participate, subject to the terms and conditions thereof, in all
incentive plans and programs, including, but not limited to, stock option plans
and other equity based incentive plans, as may be in effect from time to time.

          (d) Pension and Welfare Benefit Plans.  During the Employment Period,
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the Executive and/or his dependents, as the case may be, shall be eligible to
participate in, subject to the terms and conditions thereof, all pension, profit
sharing, medical, dental, disability, group life, accidental death and travel
accident insurance plans and programs of Mattel as in effect from time to time.

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         (e)  Expenses.  During the Employment Period, the Executive shall be
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entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the policies and practices of Mattel as in
effect from time to time.

         (f)  Fringe Benefits.  During the Employment Period, the Executive 
              ---------------  
shall be entitled to fringe benefits (including automobile benefits, financial
counseling, and membership in one city or country club and related expenses) in
accordance with the policies of Mattel as in effect from time to time.

         (g)  Vacation.  During the Employment Period, the Executive shall be 
              --------       
entitled to paid vacation in accordance with the policies and practices of
Mattel as in effect from time to time

         (h)  Stock Options.  During the Employment Period, the Executive shall
              -------------       
be entitled to participate in Mattel's stock option plans in accordance with the
policies and practices of Mattel as in effect from time to time.

         (i)  Certain Amendments.  Nothing herein shall be construed to prevent
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Mattel from amending, altering, eliminating or reducing any plans, benefits or
programs set forth in Sections 3(a) through (h), so long as such actions do not
result in a material diminution in the aggregate value of such compensation and
benefits, except for across-the-board compensation and benefit reductions which
affect all similarly situated executives of Mattel.
 
     4.  Termination.
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         (a)  Death or Disability. This Agreement shall terminate automatically 
              -------------------    
upon the Executive's death; provided that the Executive's Base Salary will be
continued and paid for a period of six months thereafter. Mattel may terminate
this Agreement, after having established the Executive's Disability, by giving
to the Executive written notice of its intention to terminate his employment,
and his employment with Mattel shall terminate effective on the 90th day after
receipt of such notice (the "Disability Effective Date"). For purposes of this
Agreement, the Executive's Disability shall occur and shall be deemed to have
occurred only when the Executive becomes entitled to receive disability benefits
under the Mattel Long-Term Disability Plan for exempt employees, as revised from
time to time, but in no event shall such revision or modification to the Mattel
Long-Term Disability Plan provide the Executive with a definition of
"Disability" which is less favorable in the aggregate than that in effect as of
the date hereof.

         (b)  Cause.  Mattel may terminate the Executive's employment for 
              ----- 
"Cause" upon a determination of the Chief Executive Officer of Mattel that
"Cause" exists. For purposes of this Agreement, "Cause" means (i) an act or acts
of dishonesty on the Executive's part which are intended to result in his
substantial personal enrichment at the expense of Mattel; (ii) repeated

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violations by the Executive of his obligations under Section 2 of this Agreement
which are demonstrably willful and deliberate on the Executive's part and which
resulted in material injury to Mattel; (iii) conduct of a factually
substantiated criminal nature (commonly defined as a "felony" in criminal
statutes) which has or which is more likely than not to have a material adverse
effect on Mattel's reputation or standing in the community or on its continuing
relationships with its customers or those who purchase or use its products; or
(iv) factually substantiated fraudulent conduct in connection with the business
or affairs of Mattel, regardless of whether said conduct is designed to defraud
Mattel or others; provided that, in each case, the Executive has received
written notice of the described activity, has been afforded a reasonable
opportunity to cure or correct the activity described in the notice, and has
failed to substantially cure, correct or cease the activity, as appropriate.

         (c)  Good Reason.  The Executive may terminate his employment at any 
              -----------       
time for Good Reason. For purposes of this Agreement, "Good Reason" means the
good faith determination by the Executive that any one or more of the following
have occurred:

              (i)   without the express written consent of the Executive, any
change(s) in any of the duties, authority, reporting structure or
responsibilities of the Executive which is (are) inconsistent in any substantial
respect with the position, authority, duties, reporting structure or
responsibilities of Mattel executives as contemplated by Section 2 of this
Agreement;

              (ii)  any failure by Mattel to comply with any of the provisions
of Section 3 of this Agreement, other than an insubstantial and inadvertent
failure remedied by Mattel promptly after receipt of notice thereof given by the
Executive;

              (iii) any proposed termination by Mattel of the Executive's
employment other than as permitted by this Agreement;

              (iv)  any failure by Mattel to obtain the assumption and agreement
to perform this Agreement by a successor as contemplated by Section 11(b); or

              (v)   transferring the Executive outside of the greater Los
Angeles, California area without the Executive's express written consent.

         (d)  Change of Control.  "Change of Control" means:
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              (i)   the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of Mattel,
including the shares of common stock of Mattel issuable upon an exchange of
Softkey Exchangeable Shares that are not owned by Mattel or any corporation

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controlled by Mattel (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of Mattel
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (i), the following shall not constitute a Change of Control: (a) any
acquisition directly from Mattel, (b) any acquisition by Mattel or any
corporation controlled by Mattel, (c) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by Mattel or any corporation
controlled by Mattel, (d) any acquisition by a Person of 20% of either the
Outstanding Company Common Stock or the Outstanding Company Voting Securities as
a result of an acquisition of common stock of Mattel by Mattel or of Softkey
Exchangeable Shares by Softkey which, by reducing the number of shares of common
stock of Mattel or Softkey Exchangeable Shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 20% or more
of either the Outstanding Company Common Stock or the Outstanding Company Voting
Securities; provided, however, that if a Person shall become the beneficial
owner of 20% or more of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities by reason of a share acquisition by Mattel
or by Softkey as described above and shall, after such share acquisition by
Mattel or Softkey, become the beneficial owner of any additional shares of
common stock of Mattel, then such acquisition shall constitute a Change of
Control or (e) any acquisition pursuant to a transaction which complies with
clauses (a), (b) and (c) of subsection (iii) of this Section 4(d); provided,
further, however, that for purposes of this subsection (i), any Investing Person
(as such term is defined in the Rights Agreement) shall be deemed not to be a
beneficial owner of any Investment Shares (as such term is defined in the Rights
Agreement) and the holder of the Mattel Special Voting Preferred Share (as such
term is defined in the Rights Agreement) shall be deemed not to be a beneficial
owner of such Mattel Special Voting Preferred Share; or

              (ii)  individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
Mattel's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as through
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

              (iii) consummation by Mattel of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of Mattel or the acquisition of assets of another entity (a "Business
Combination"), in each case, unless, following such Business Combination, (a)
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common 

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stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns Mattel or
all or substantially all of Mattel's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (b) no
Person (excluding any employee benefit plan (or related trust) of Mattel or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding share
of common stock of the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (c) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or

              (iv)  approval by the shareholders of Mattel of a complete
liquidation or dissolution of Mattel.

              For the purposes of this Section 4(d), (a) "Rights Agreement"
means the Rights Agreement, dated as of February 7, 1992, as amended by an
amendment dated as of May 13, 1999 and an amendment dated as of November 4, 1999
by and between Mattel and BankBoston N.A., a national banking association,
formerly, The First National Bank of Boston, and not giving effect to any
amendments subsequent to November 4, 1999, (b) "Softkey" means Softkey Software
Products Inc., an Ontario corporation, and (c) "Softkey Exchangeable Shares"
means the Exchangeable Shares in the capital stock of Softkey."

              As soon as practicable after a Change of Control, Mattel shall
notify the Executive that a Change of Control has occurred.

         (e)  Notice of Termination.  Any termination of the Executive's 
              ---------------------        
employment by Mattel for Cause or following a Change of Control or by the
Executive for Good Reason shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 15(b). Any termination by
Mattel due to Disability shall be given in accordance with Section 4(a). For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon; (ii) except in the event of a termination following a Change of Control,
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated; and (iii) specifies the Date of Termination (defined below).

         (f)  Date of Termination.  "Date of Termination" means the date of 
              -------------------      
actual receipt of the Notice of Termination or any later date specified therein
(but not more than fifteen 

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(15) days after the giving of the Notice of Termination), as the case may be;
provided that (i) if the Executive's employment is terminated by Mattel for any
reason other than Cause or Disability, the Date of Termination is the date on
which Mattel notifies the Executive of such termination; (ii) if the Executive's
employment is terminated due to Disability, the Date of Termination is the
Disability Effective Date; and (iii) if the Executive's employment is terminated
due to the Executive's death, the Date of Termination shall be the date of
death.

     5.  Obligations of Mattel upon Termination.  Other than as specifically set
         --------------------------------------                                 
forth or referenced in this Agreement, the Executive shall not be entitled to
any benefits on or after the Date of Termination.

         (a)  Death.  If the Executive's employment is terminated by reason of 
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the Executive's death, this Agreement shall terminate without further
obligations by Mattel to the Executive's legal representatives under this
Agreement other than those obligations accrued hereunder or under the terms of
the applicable Mattel plan or program which takes effect at the date of his
death or as otherwise provided in Section 4(a) or this Section 5(a). As of the
Date of Termination, the Executive's family shall be entitled to healthcare
coverage and financial counseling benefits until the third anniversary of the
Date of Termination.

         (b)  Disability.  If the Executive's employment is terminated by 
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reason of the Executive's Disability, the Executive shall be entitled to receive
after the Disability Effective Date (i) disability benefits, if any, at least
equal to those then provided by Mattel to disabled executives and/or their
families and (ii) until the earlier of the third anniversary of the Date of
Termination or the date the Executive accepts other employment, those other
benefits on the terms described in Section 5(d)(v).

         (c)  Cause.  If the Executive's employment is terminated for Cause or 
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if the Executive terminates his employment without Good Reason, Mattel shall pay
the Executive his full Base Salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given, and Mattel shall have no
further obligations to the Executive under this Agreement.

         (d)  Good Reason; Other Than for Cause or Disability. If Mattel 
              -----------------------------------------------      
terminates the Executive's employment other than for Cause or Disability, or the
Executive terminates his employment for Good Reason (in each case, other than
within 18 months following a Change of Control as provided in Section 5(e)):

              (i)   Mattel shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:

                    (A)  if not theretofore paid, the Executive's Base Salary
through the Date of Termination at the rate in effect at the time of Notice of
Termination was given;

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                    (B)  a current year bonus under the Management Incentive
Plan ("MIP") equal to the average of the two highest annual MIP bonuses received
by the Executive in the three years prior to the Date of Termination, including
any years in which the Executive was paid no bonus (the "Average Annual Bonus")
and prorated to reflect the total number of full months the Executive is
employed on an active and full time basis in the year in which termination
occurs;

                    (C)  three times the sum of (x) the Executive's annual Base
Salary at the rate in effect at the time the Notice of Termination is given and
(y) the Average Annual Bonus defined in Section 5(d)(i)(B), but without
proration (and, in each such case, without regard to any contributions by Mattel
for the Executive's benefit to any retirement or other investment plans).

              (ii)  Mattel shall pay the Executive a portion of any long-term
incentive compensation that Executive would have received under the Mattel Long
Term Incentive Plan (the "LTIP") with respect to any performance period which
pending as of the Executive's Date of Termination as if he had remained employed
for the entire performance period, pro rated based on the number of full months
of Executive's employment during the performance period over the total number of
months in the performance period, which amount shall be payable at the end of
the period in accordance with the terms of the LTIP and shall be net of any
interim payments previously made to the Executive.

              (iii) Any options granted to the Executive under Mattel's stock
option plans (the "Stock Option Plans"), shall become immediately exercisable
and the Executive shall have a period of two (2) years following the Date of
Termination (but in no event past the expiration of the term of the option
grant) to exercise all options granted under the Stock Option Plans then
exercisable or which become exercis able pursuant to this clause (iii).

              (iv)  Mattel shall, promptly upon submission by the Executive of
supporting documentation, pay or reimburse to the Executive any costs and
expenses paid or incurred by the Executive which would have been payable under
Section 3(e) if his employment had not terminated.

              (v)   Until the earlier of (x) the third anniversary of the Date
of Termination or (y) the date the Executive accepts other employment, Mattel
shall provide to the Executive at Mattel's expense:

                    (I)   coverage under Mattel's medical, dental, prescription
drug and vision care group insurance as in effect from time to time on the same
terms and conditions as such insurance is available to active employees of
Mattel (the last 18 months of the Executive's 

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coverage under such insurance shall be deemed to be participation under an
election to continue such benefits under the Consolidated Omnibus Budget
Reconciliation Act at Mattel's expense);

                    (II)  outplacement services at the expense of Mattel
commensurate with those provided to terminated executives of comparable level
and made available through and at the facilities of a reputable and experienced
vendor;

                    (III) financial counseling services through the vendor
engaged and paid for by Mattel; and

                    (IV)  automobile benefits; provided however, that if such
automobile is leased by Mattel, such benefits shall expire upon expiration of
such lease. Upon expiration of the automobile benefits, at which time the
Executive may purchase the car for either $100, if the automobile benefits
terminate at the end of the lease term, or Mattel's book value, if the
automobile benefits terminate on either the third anniversary of the Date of
Termination or the date on which the Executive accepts other employment. As of
the Date of Termination, all expenses related to such automobile, including but
not limited to insurance, repairs, maintenance, gasoline, and car phone and
associated expenses, shall be the sole responsibility of the Executive.

                    (V)   membership in one city or country club and related
expenses. Mattel shall cause the membership to be transferred to the Executive
at no cost to the Executive.

              (vi)  If the Executive is a participant in the Mattel Supplemental
Executive Retirement Plan (the "SERP"), the Mattel Deferred Compensation Plan or
the Mattel Retiree Medical Plan, the Executive shall be given credit for three
years of service (in addition to actual service) and for three years of attained
age to be added to the Executive's actual age for purposes of computing any
service and age-related benefits for which the Executive is eligible under such
plans. Further with regard to computing the Executive's benefit under the SERP,
the formula described in Section 5(d)(i)(B) shall be utilized in calculating the
maximum benefit, namely: the formula shall be 25% of the average of the final
three years of annual Base Salary (including the calendar year in which the Date
of Termination occurs), plus the average of the greatest two out of the three
most recent annual MIP bonuses received by the Executive.

         (e)  Change of Control.  If, within 18 months following a Change of 
              -----------------    
Control, the Executive terminates his employment for Good Reason or Mattel or
the surviving entity terminates the Executive's employment other than for Cause
or Disability or within the 30 day period immediately following the six (6)
month anniversary of a Change of Control the Executive terminates the
Executive's employment for any reason:

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              (i)   Mattel shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:

                    (A)   if not theretofore paid, the Executive's Base Salary
through the Date of Termination at the rate in effect at the time of Notice of
Termination was given;

                    (B)   a current year MIP bonus (the "Bonus Amount") equal to
the greater of the Average Annual Bonus or the annual bonus that would have been
payable to executives of Mattel in the same bonus category as the Executive,
assuming that the maximum amount of any targets were achieved for the year;

                    (C)   three times the sum of (x) the Executive's annual Base
Salary at the rate in effect at the time the Notice of Termination is given and
(y) the Bonus Amount defined in Section 5(e)(i)(B), but without proration (and,
in each such case, without regard to any contributions by Mattel for the
Executive's benefit to any retirement or other investment plans).

              (ii)  Any options granted to the Executive under Mattel's Stock
Option Plans shall become immediately exercisable and the Executive shall have a
period of two (2) years following the Date of Termination (but in no event past
the expiration of the term of the option grant) to exercise all options granted
under the Stock Option Plans then exercisable or which become exercisable
pursuant to this clause (ii).

              (iii) Mattel shall, promptly upon submission by the Executive of
supporting documentation, pay or reimburse to the Executive any costs and
expenses paid or incurred by the Executive which would have been payable under
Section 3(e) if his employment had not terminated.

              (iv)  Until the earlier of (x) the third anniversary of the Date
of Termination or (y) the date the Executive accepts other employment, Mattel
shall provide to the Executive at Mattel's expense:

                    (I)   coverage under Mattel's medical, dental, prescription
drug and vision care group insurance as in effect from time to time on the same
terms and conditions as such insurance is available to active employees of
Mattel (the last 18 months of the Executive's coverage under such insurance
shall be deemed to be participation under an election to continue such benefits
under the Consolidated Omnibus Budget Reconciliation Act at Mattel's expense);

                    (II)  outplacement services at the expense of Mattel
commensurate with those provided to terminated executives of comparable level
and made available through and at the facilities of a reputable and experienced
vendor;

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                    (III) financial counseling services through the vendor
engaged and paid for by Mattel;

                    (IV)  automobile benefits; provided however, that if such
automobile is leased by Mattel, such benefits shall expire upon expiration of
such lease. Upon expiration of the automobile benefits, at which time the
Executive may purchase the car for either $100, if the automobile benefits
terminate at the end of the lease term, or Mattel's book value, if the
automobile benefits terminate on either the third anniversary of the Date of
Termination or the date on which the Executive accepts other employment. As of
the Date of Termination, all expenses related to such automobile, including but
not limited to insurance, repairs, maintenance, gasoline, and car phone and
associated expenses, shall be the sole responsibility of the Executive; and

                    (V)   membership in one city or country club and related
expenses. Mattel shall cause the membership to be transferred to the Executive
at no cost to the Executive.

              (vi)  If the Executive is a participant in the Mattel Supplemental
Executive Retirement Plan, the Mattel Deferred Compensation Plan or the Mattel
Retiree Medical Plan, the Executive shall be given credit for three years of
service (in addition to actual service) and for three years of attained age to
be added to the Executive's actual age for purposes of computing any service and
age-related benefits for which the Executive is eligible under such plans.
Further with regard to computing the Executive's benefit under the SERP, the
formula described in Section 5(d)(i)(B) shall be utilized in calculating the
maximum benefit, namely: the formula shall be 25% of the average of the final
three years of annual Base Salary (including the calendar year in which the Date
of Termination occurs), plus the average of the greatest two out of the three
most recent annual MIP bonuses received by the Executive.

     6.  Non-exclusivity of Rights.  Nothing in this Agreement shall prevent or
         -------------------------                                             
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by Mattel and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any stock option or other agreement with
Mattel or any of its affiliated companies. Except as otherwise provided herein,
amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan or program of Mattel at or subsequent to the Date of
Termination shall be payable in accordance with such plan or program.

     7.  No Set Off, Payment of Fees.  Except as provided herein, Mattel's
         ---------------------------                                      
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any circumstances,
including without limitation any set-off, counterclaim, recoupment, defense or
other right which Mattel may have against the Executive or others.  Mattel
agrees to pay, to the full extent permitted by law, all legal fees and expenses

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which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by Mattel or others of the validity or enforceability
of, or liability under, any provision of this Agreement other than expenses
relating to a claim by the Executive that he terminated for Good Reason or that
the termination for Cause was improper, in which case such fees and expenses
shall be paid only if the Executive prevails in whole or in part.  In the event
that the Executive shall in good faith give a Notice of Termination for Good
Reason and it shall thereafter be determined that Good Reason did not exist, the
employment of the Executive shall, unless Mattel and the Executive shall
otherwise mutually agree, be deemed to have terminated at the Date of
Termination specified in such purported Notice of Termination by mutual consent
of Mattel and the Executive and thereupon, the Executive shall be entitled to
receive only those payments and benefits which he would have been entitled to
receive at such date.

     8.  Arbitration of Disputes.
         ----------------------- 

         (a)  The parties agree that any disputes, controversies or claims which
arise out of or relate to this Agreement, the Executive's employment or the
termination of his employment, including, but not limited to, any claim relating
to the purported validity, interpretation, enforceability or breach of this
Agreement, and/or any other claim or controversy arising out of the relationship
between the Executive and Mattel (or the nature of the relationship) or the
continuation or termination of that relationship, including, but not limited to,
claims that a termination was for Cause, or for Good Reason, claims for breach
of covenant, breach of an implied covenant of good faith and fair dealing,
wrongful termination, breach of contract, or intentional infliction of emotional
distress, defamation, breach of right of privacy, interference with advantageous
or contractual relations, fraud, conspiracy or other tort or property claims of
any kind, which are not settled by agreement between the parties, shall be
settled by arbitration under the labor arbitration rules of the American
Arbitration Association before a board of three arbitrators, as selected
thereunder.

         One arbitrator shall be selected by the Executive, one by Mattel and
the third by the two persons so selected, all in accordance with the labor
arbitration rules of the American Arbitration Association then in effect. In the
event that the arbitrator selected by the Executive and the arbitrator selected
by Mattel are unable to agree upon a third arbitrator, then the third arbitrator
shall be selected from a list of seven provided by the office of the American
Arbitration Association nearest to the Executive's residence with the parties
striking names in order and the party striking first to be determined by the
flip of a coin. The arbitration shall be held in a location to be mutually
agreed upon by the parties. In the absence of agreement, the Chairman of the
Board of Mattel shall determine the location.

         (b)  In consideration of the parties' agreement to submit to
arbitration all disputes with regard to this Agreement and/or with regard to any
alleged contract, or any other claim arising out of their conduct, the
relationship existing hereunder or the continuation or termination of that
relationship, and in further consideration of the anticipated expedition and the

                                       12

 
minimizing of expense resulting from this arbitration remedy, the arbitration
provisions of this Agreement shall provide the exclusive remedy, and each party
expressly waives any right he or it may have to seek redress in any other forum.

         (c)  Any claim which either party has against the other party which
could be submitted for resolution pursuant to this Section 8 must be presented
in writing by the claiming party to the other within one year of the date the
claiming party knew or should have known of the facts giving rise to the claim,
except that claims arising out of or related to the termination of the
Executive's employment must be presented by him within one year after the Date
of Termination. Unless the party against whom any claim is asserted waives the
time limits set forth above, any claim not brought within the time periods
specified shall be waived and forever barred.

         (d)  Mattel will pay all costs and expenses of the arbitration.

         (e)  Any decision and award or order of a majority of the arbitrators
shall be binding upon the parties hereto and judgment thereon may be entered in
the Superior Court of the State of California or any other court having
jurisdiction.

         (f)  Each of the above terms and conditions of this Section 8 shall
have separate validity and the invalidity of any part thereof shall not affect
the remaining parts.

         (g)  Any decision and award or order of a majority of the arbitrators
shall be final and binding between the parties as to all claims which were
raised in connection with the dispute to the full extent permitted by law. In
all other cases, the parties agree that a decision of a majority of arbitrators
shall be a condition precedent to the institution or maintenance of any legal,
equitable, administrative, or other formal proceeding by the Executive in
connection with the dispute, and that the decision and opinion of the board of
arbitrators may be presented in any other forum on the merits of the dispute.

     9.  General Release.  The Executive acknowledges and agrees that this
         ---------------                                                  
Agreement and that certain letter by Mattel offering employment to the
Executive, dated concurrently herewith (the "Offer Letter"), includes the entire
agreement and understanding between the parties with regard to the Executive's
employment, the termination thereof during the Employment Period, and all
amounts to which the Executive shall be entitled whether during the term of
employment or upon termination thereof.  The Executive also acknowledges and
agrees that the Executive's right to receive severance pay and other benefits
pursuant to subsections (b), (d) and (e) of Section 5 of this Agreement is
contingent upon the Executive's execution and acceptance of the terms and
conditions of, and the effectiveness of the General Release of All Claims (the
"Release") attached hereto as Exhibit "A."  If the Executive fails to execute
the Release within twenty-one (21) days of receipt of such Release, then the
Executive shall not be 

                                       13

 
entitled to any severance payments or other benefits to which the Executive
would otherwise be entitled under subsections (b), (d) and (e) of Section 5 of
this Agreement.

     10. The Executive's Covenants.
         ------------------------- 

         (a)  The Executive acknowledges that in the Executive's capacity in
management, the Executive has had a great deal of exposure and access to a broad
variety of commercially valuable proprietary information which is vital to the
success of Mattel's business including, by way of illustration, past, current
and future products and product concepts, marketing strategies, research and
plans and information regarding employees. The Executive acknowledges that as a
result of the Executive's knowledge of the above information and in
consideration for the benefits offered by Mattel under this Agreement, the
Executive hereby agrees to reaffirm and recognize the Executive's continuing
obligations with respect to the use and disclosure of confidential and
proprietary information of Mattel pursuant to the Mattel's policies as set forth
in Mattel's form Executive Patent and Confidence Agreement and by this reference
made a part hereof. Pursuant thereto, the Executive acknowledges and agrees that
Mattel shall be entitled to injunctive relief to prevent a threatened
misappropriation of one or more of the Mattel's trade secrets or to halt an
actual misappropriation of such trade secrets. The Executive shall hold in a
fiduciary capacity for the benefit of Mattel all secret or confidential
information, knowledge or data relating to Mattel or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by Mattel or any of its
affiliated companies and which shall not be public knowledge. After termination
of the Executive's employment with Mattel, the Executive shall not, without the
prior written consent of Mattel, communicate or divulge any such information,
knowledge or data to anyone other than Mattel and those designated by it. The
foregoing shall not apply to any information which Mattel discloses to the
public. The Executive further represents and agrees that, unless otherwise
required by law, the Executive will keep the terms, amount and fact of this
Agreement completely confidential, and that the Executive will not hereafter
disclose any information concerning this Agreement to anyone other than the
Executive's immediate family and professional representatives who will be
informed of and bound by this confidentiality clause.

         (b)  If the termination of the Executive's employment occurs prior to a
Change of Control, the Executive agrees that eligibility for severance payments
and other benefits under this Agreement are contingent upon the Executive's
agreement and compliance with Mattel's requirement that the Executive does not
accept employment nor an engagement as a consultant with a competitor whereupon
such position is comparable to the position the Executive held with Mattel and
where the Executive can not reasonably satisfy Mattel that the new employer is
prepared to and/or does take adequate steps to preclude and to prevent
inevitable disclosure of trade secrets, as prohibited under the Mattel's
policies with respect to the use and disclosure of confidential and proprietary
information, as set forth in Mattel's form Executive Patent and Confidence
Agreement and by this reference made a part hereof. If the termination of the

                                       14

 
Executive's employment occurs prior to a Change of Control and if the Executive
accepts employment or a consulting relationship with a competitor and such
position is comparable to the position the Executive held with Mattel and where
the Executive can not reasonably satisfy Mattel that the new employer is
prepared to and/or does take adequate steps to preclude and to prevent
inevitable disclosure of trade secrets, as prohibited under the Mattel's
policies with respect to the use and disclosure of confidential and proprietary
information, as set forth in Mattel's form Executive Patent and Confidence
Agreement and by this reference made a part hereof, then no further payments nor
eligibility for benefits continuation will be available to the Executive as of
the date the Executive commences such employment/consulting. It is a specific
condition of this Agreement that so long as the Executive is receiving any
payments or benefits under this Agreement with respect to a termination of the
Executive's employment prior to a Change of Control, the Executive is obligated
to immediately notify Mattel as to the specifics of the new position that the
Executive is planing to commence as an employee or consultant for any company
which is a competitor of Mattel.

         (c)  The Executive agrees that so long as the Executive is receiving
any payments or benefits under this Agreement and for a period of 12 months
thereafter, the Executive will not participate in recruiting any of Mattel's
employees or in the solicitation of Mattel's employees other than the
Executive's assistant on the Date of Termination, and the Executive will not
communicate to any other person or entity, about the nature, quality or quantity
of work, or any special knowledge or personal characteristics of any person
employed by Mattel. If the Executive should wish to discuss possible employment
with any then-current Mattel employee other than the Executive's assistant on
the Date of Termination during the 12-month period set forth above, the
Executive may request written permission to do so from the senior human
resources officer of Mattel who may, in his/her discretion, grant a written
exception to the no solicitation agreement set forth above, provided, however,
the Executive agrees that the Executive will not discuss any such employment
possibility with such employees prior to securing Mattel's permission. If Mattel
should decline to grant such permission, the Executive agrees that the Executive
will not at any time, either during or after the non-solicitation period set
forth above, advise the employee concerned that he/she was the subject of a
request under this paragraph or that Mattel refused to grant the Executive the
right to discuss an employment possibility with him/her.

     11. Successors.
         ---------- 

         (a)  This Agreement is personal to the Executive and without the prior
written consent of Mattel shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's legal representatives.

         (b)  This Agreement shall inure to the benefit of and be binding upon
Mattel and its successors. Mattel shall require any successor to all or
substantially all of the business and/or assets of Mattel, whether direct or
indirect, by purchase, merger, consolidation, 

                                       15

 
acquisition of stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as Mattel would be required
to perform if no such succession had taken place.

     12. Amendment; Waiver.  This Agreement and the Offer Letter contain the
         ---------  ------                                                  
entire agreement between the parties with respect to the subject matter hereof
and may be amended, modified or changed only by a written instrument executed by
the Executive and Mattel.  No provision of this Agreement or the Offer Letter
may be waived except by a writing executed and delivered by the party sought to
be charged.  Any such written waiver will be effective only with respect to the
event or circumstance described therein and not with respect to any other event
or circumstance, unless such waiver expressly provides to the contrary.

     13. Long Term Incentive Compensation Plan Payments After a Change of 
         ---------------------------------------------------------------- 
         Control.
         -------

         (a)  In the event of a Change of Control during the Employment Period,
Mattel shall pay the Executive a cash payment as provided under the provisions
of the LTIP, as in effect immediately prior to the Change of Control.

         (b)  In addition, in the event of a Change of Control during the
Employment Period, within thirty (30) days after the date of such Change of
Control, Mattel shall pay the Executive any unpaid amounts to which the
Executive is entitled with respect to any performance period under the LTIP, or
any other successor long-term incentive compensation plan of Mattel, that has
been completed as of the date of the Change of Control.

     14. Certain Additional Payments by Mattel.
         ------------------------------------- 

         (a)  Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any Payment
(as defined below) would be subject to the Excise Tax (as defined below), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 14(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Parachute Value of Payments (as defined below)
does not exceed 110% of the Safe Harbor Amount (as defined below), then no 
Gross-Up Payment shall be made to the Executive and the Agreement Payments (as
defined below), in the aggregate, shall be reduced to (but not below zero) such
that the Parachute Value of all Payments equals the Safe Harbor Amount,
determined in such a manner as to maximize the Value of all Payments (as defined
below) actually made to the Executive.

                                       16

 
         (b)  Subject to the provisions of Section 14(c), all determinations
required to be made under this Section 14, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by
PricewaterhouseCooper LLP or such other nationally recognized certified public
accounting firm as may be designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations both to Mattel and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by Mattel.
All fees and expenses of the Accounting Firm shall be borne solely by Mattel.
Subject to Section 14(e) below, any Gross-Up Payment, as determined pursuant to
this Section 14, shall be paid by Mattel to the Executive within five days of
the receipt of the Accounting Firm's determination.  Any determination by the
Accounting Firm shall be binding upon Mattel and the Executive.  As a result of
the uncertainty in the application of Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by Mattel should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder.  In the event that Mattel
exhausts its remedies pursuant to Section 14(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by Mattel to or for the benefit of the
Executive.

         (c)  The Executive shall notify Mattel in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
Mattel of the Gross-Up Payment.  Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise Mattel of the nature of such claim
and the date on which such claim is requested to be paid.  The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to Mattel (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due).  If
Mattel notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:

              (i)   give Mattel any information reasonably requested by Mattel
relating to such claim,

              (ii)  take such action in connection with contesting such claim as
Mattel shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by Mattel,

              (iii) cooperate with Mattel in good faith in order effectively
to contest such claim, and

              (iv)  permit Mattel to participate in any proceedings relating to
such claim;

                                       17

 
provided, however, that Mattel shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses.  Without limitation on the foregoing provisions
of this Section 14(c), Mattel shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as Mattel shall determine;
provided, however, that if Mattel directs the Executive to pay such claim and
sue for a refund, Mattel shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, Mattel's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.

         (d)  If, after the receipt by the Executive of an amount advanced by
Mattel pursuant to Section 14(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to Mattel's
complying with the requirements of Section 14(c)) promptly pay to Mattel the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto).  If, after the receipt by the Executive of an amount
advanced by Mattel pursuant to Section 14(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and
Mattel does not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.

         (e)  Notwithstanding any other provision of this Section 14, Mattel may
withhold and pay over to the Internal Revenue Service for the benefit of the
Executive all or any portion of the Gross-Up Payment that it determines in good
faith that it is or may be in the future required to withhold, and the Executive
hereby consents to such withholding.

         (f)  Definitions.  The following terms shall have the following
              -----------                                               
meanings for purposes of this Section 14.

                                       18

 
              (i)   An "Agreement Payment" shall mean a Payment paid or payable
pursuant to this Agreement (disregarding this Section 14) and any payment
relating to the Loan Agreement.

              (ii)  "Excise Tax" shall mean the excise tax imposed by Section
4999 of the Code, together with any interest or penalties imposed with respect
to such excise tax.

              (iii) The "Net After-Tax Amount" of a Payment shall mean the Value
of a Payment net of all taxes imposed on the Executive with respect thereto
under Sections 1 and 4999 of the Code and applicable state and local law,
determined by applying the highest marginal rates that are expected to apply to
the Executive's taxable income for the taxable year in which the Payment is
made.

              (iv)  "Parachute Value" of a Payment shall mean the present value
as of the date of the change of control for purposes of Section 280G of the Code
of the portion of such Payment that constitutes a "parachute payment" under
Section 280G(b)(2), as determined by the Accounting Firm for purposes of
determining whether and to what extent the Excise Tax will apply to such
Payment.

              (v)   A "Payment" shall mean any payment or distribution in the
nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to
or for the benefit of the Executive, whether paid or payable pursuant to this
Agreement or otherwise.

              (vi)  The "Safe Harbor Amount" means the maximum Parachute Value
of all Payments that the Executive can receive without any Payments being
subject to the Excise Tax.

              (vii) "Value" of a Payment shall mean the economic present value
of a Payment as of the date of the change of control for purposes of Section
280G of the Code, as determined by the Accounting Firm using the discount rate
required by Section 280G(d)(4) of the Code.

     15. Miscellaneous.
         ------------- 

         (a)  This Agreement shall be governed by and construed in accordance
with the laws of the State of California, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.

         (b)  All notices and other communications hereunder shall be in
writing; shall be delivered by hand delivery to the other party or mailed by
registered or certified mail, return receipt requested, postage prepaid; shall
be deemed delivered upon actual receipt; and shall be addressed as follows:

                                       19

 
         If to Mattel:
         ------------ 

                          MATTEL, INC.
                          333 Continental Blvd.
                          El Segundo, CA 90245

         If to Executive:
         --------------- 

                          Mr. Kevin M. Farr
                          MATTEL, INC.
                          333 Continental Blvd.
                          El Segundo, CA 90245

or to such other address as either party shall have furnished to the other in
writing in accordance herewith.

         (c)  Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction.

         (d)  Mattel may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.

                                       20

 
     IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first set forth above.


EXECUTIVE:                               KEVIN M. FARR

                                         /s/ Kevin M. Farr
                                         ___________________________________ 


MATTEL:                                  MATTEL, INC.,
                                         a Delaware corporation


                                         By: /s/ Alan Kaye
                                             -------------------------------
                                         Its: SVP HR
                                              ------------------------------


ATTEST:


/s/ Christopher O'Brien
_________________________
Assistant Secretary

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