<PAGE>   1 


EXHIBIT 10.3

SEVERANCE AND CHANGE IN CONTROL AGREEMENT




        AGREEMENT effective as of November 17, 1997 between GALOOB TOYS, 
INC. (the "Corporation") and MARK D. GOLDMAN (the "Executive").

        WHEREAS, the Executive is currently employed by the Corporation in 
an executive or key management position capacity and is currently 
serving as President and Chief Executive Officer, as a member of the 
Board of Directors and as a member of the Executive Committee of the 
Board of Directors; and

        WHEREAS, the Executive is willing to enter into this Agreement 
upon the terms and conditions herein set forth;

        NOW, THEREFORE, in consideration of the mutual promises and 
covenants herein contained, the Corporation and Executives agree as 
follows:

        1.      Term of Agreement.  The term of the Agreement shall be 
deemed to have commenced as of November 17, 1997 and shall continue 
indefinitely  unless terminated by either the Executive or the 
Corporation subject to the conditions set forth in Section 3 hereto.

        2.      Position.  During the term hereof, the Executive shall 
continue to serve as an officer or key management employee of the 
Corporation with the office or position, duties and responsibilities as 
follows:  President and Chief Executive Officer of the Corporation 
responsible for managing, planning and directing the performance, 
operation and all other aspects of the Corporation; member of the Board 
of Directors; and member of the Executive Committee or any other 
committee, regardless of name, having authority similar to or greater 
than that currently vested in the Executive Committee.

        3.      Termination of Employment.  The termination of the 
employment of the Executive during the period of this Agreement may 
occur, under this Agreement, in one of the following ways:

                a.      By the Corporation.     The Corporation may terminate 
the employment of the Executive with "cause."  Termination shall be 
defined to be for "cause" only if:

                        (1)     The Executive knowingly and willfully breaches 
or habitually   neglects material duties and responsibilities within 
the course and scope of his authority   as Chief Executive Officer and 
President of the Corporation; provided, however, the Board of 
Directors shall have given the Executive written notice specifying the 
conduct alleged to have constituted such cause and the Executive has 
failed to cure such conduct, if curable, within thirty (30) days 
following receipt of such notice.


                      (2)     The Executive knowingly and willfully commits an
act of  dishonesty, fraud, or misrepresentation which is monetarily 
materially adverse to the Corporation.

                b.      By the Executive.  The Executive may terminate his 
employment at any time during the period of this Agreement:

                        (1)     For any reason, including retirement; or 

                        (2)     For "good reason."  Termination shall be deemed
for "good reason" if:

                                (a)     the Corporation makes, or the 
stockholders make, a material change in the Executive's 
duties, responsibilities or authority, without his express 
written consent, or any change which would cause the 
Executive's position with the Corporation to become of less 
dignity, responsibility, importance or scope from the 
position and attributes therefor described in Section 
2;

                                (b)     the Corporation reduces the Executive's
base annual salary or annual cash incentive compensation bonus formula; or 

                                (c)     any of the following events shall occur
(each such event shall be referred to hereinafter as a 
"Change in Control" of the Corporation and shall be 
deemed to occur as of the first date on which any of the following 
events occur):

                                (i)     A Person shall, in a transaction to 
which the Corporation is not a party, become the direct or 
indirect Beneficial Owner of securities of the Corporation 
representing twenty five percent (25%) or more of the 
combined voting power of the issued and outstanding common 
stock voting securities of the Corporation ("Significant 
Owner").  For purposes of this Agreement, the terms "Person" 
and "Beneficial Owner" shall be given the definitions 
contained in Rule 13d-3 under the Securities Exchange Act of 
1934, as amended from time to time.

                                (ii)    (A)     Directors who constituted the
Board of Directors on January 1, 1997, and any other 
individual(s) who becomes a director subsequent to the date 
of this Agreement whose election as a director was initially 
approved by at least a majority of directors who comprised 
the Board of Directors as of the date of such election or 
nomination ("incumbent Directors"), comprise two-thirds 
(2/3) or less of the Board of Directors; or (B) the 
Corporation or the Board of Directors elects or appoints 
anyone other than the Executive as Chairman of the Board; or 
(C) notwithstanding anything else in this Agreement, 
including approval by the majority of Incumbent Directors, 
if the Corporation is a party to a transaction resulting in 
a Person becoming the direct or indirect Beneficial Owner of 
the securities of the Corporation representing twenty-five 
percent (25%) or more of the combined voting power of the 
issued and outstanding common stock voting securities of the 
Corporation, and, in conjunction with the transaction or in 
a period twelve (12) months from the date of that 
transaction, one-third (1/3) or more of the Board of 
Directors is composed of directors who were not Incumbent 
Directors prior to such transaction, or during the period 
commencing twenty-four (24) months from the date of such 
transaction, one-half (1/2) or more of the Board of 
Directors is composed of directors who were not Incumbent 
Directors prior to such transaction.

                        (iii)   The Corporation's common stock, par 
value $.01 per share, shall cease to be publicly traded.

                       (iv)    A sale of all or substantially all 
of the assets of the Corporation.

                       (v)     The Board of Directors shall approve 
any merger,   consolidation, or like business 
combination or reorganization of the Corporation, the 
consummation of which would result in the occurrence of any event 
described in clause (ii) or (iii) above, and such 
transaction shall have been consummated.

                c.      By Death or Disability.  This Agreement shall 
terminate upon the death of the Executive.  In addition, if the 
Executive shall be prevented during the term of this Agreement from 
properly performing services hereunder by reason of a disability, this 
Agreement may be terminated as hereinafter provided.  "Disability" shall 
mean that, as a result of the Executive's incapacity due to physical or 
mental illness or injury, the Executive has been absent from the full-
time performance of  his duties with the Corporation for six (6) 
consecutive months and within thirty (30) days after written notice of 
termination due to a Disability is given to the Executive by the 
Corporation, he has not returned to the full-time performance of his 
duties for a period of at least 14 consecutive days, whereupon this 
Agreement and Executive's employment will be terminated.  Any question 
as to the existence of Disability shall be determined by a qualified 
independent physician selected by the Executive (or, if he is unable to 
make such selection, such selection shall be made by any adult member of 
the Executive's family) and approved by the Corporation.  The written 
determination of such physician shall be final and conclusive for 
purposes of this Agreement.

        4.      Consequences of Termination.  The termination of the 
employment of the Executive will cause the following results:

                a.      If the termination is by the Corporation for cause or 
is by the Executive for any reason other than for good reason, the 
Corporation will pay the Executive within five (5) days after the date 
of termination any unpaid compensation for services performed prior to 
the date of termination and the amount of any accrued but unused FTO or 
vacation time to which the Executive may be entitled to under the 
Corporation's vacation plan and any amounts to be paid to the Executive 
pursuant to any deferred compensation plan.  Except as provided in the 
preceding sentence, and except for other payments routinely owed to the 
Executive by the Corporation for such items as travel and expense 
reimbursement, the Corporation shall have no further obligations to the 
Executive under this Agreement or otherwise; or 

                b.      If the termination is by the Corporation for other 
than  cause prior to a Change in Control, or by the Executive for good 
reason prior to a Change in Control, the Corporation shall pay the 
Executive within five (5) days after the date of termination, a lump sum 
payment equal to three times the Executive's annualized current base 
compensation and:

                        (1)     pay three times an amount equal to the largest 
dollar bonus paid (including, for this purpose, any bonus amount 
that was deferred by Executive) in the last five years, including 
the year in which the Executive's termination of employment 
occurs.  The term "bonus" herein shall include regular annual 
bonus payments, any annual super performance bonus payments, and 
any other designated annual (as opposed to long term) bonus 
payments.  The amount determined pursuant to the first sentence of 
this paragraph 4.b.(1) above shall be hereinafter referred to as 
the "Owed Bonus"; and

                (2)     pay a lump sum amount equal to three times the 
annual car allowance in effect for the Executive at the time of 
termination and a lump sum amount equal to three times the annual 
insurance, maintenance, and gasoline costs incurred for the 
Executive's vehicle during the Executive's last full year of 
employment with the Corporation; and

(3)     the corporation shall continue all medical, 
health and welfare and insurance benefits that were in effect and 
in which the Executive participated as of the date of termination 
for a period of thirty-six (36) months from the date of 
termination; the provisions and conditions covering the foregoing 
benefits, including the amount of any contributions to be made by 
the Executive on a monthly or other periodic basis, will be 
governed by the various benefit plans as they are in effect from 
time to time.

                c.      If the termination is by the Corporation for other 
than cause within the twenty-four (24) months following a Change in 
Control, or by the Executive for good reason within twenty-four (24) 
months following a Change in Control, the Corporation shall pay to the 
Executive within five (5) days after the date of termination, a lump sum 
payment equal to three times the Executive's annualized current base 
compensation and three times the Owed Bonus; and

(1)     pay a lump sum amount equal to $948,400 
("Special Payment") plus the Corporation shall make a payment to 
the Executive ("Make-Whole Payment") in such an amount as to pay 
any income taxes and employment taxes on the Special Payment; any 
income taxes and employment taxes on the Make-Whole Payment; and 
the value of the lost tax benefit caused by the loss of any tax 
deduction resulting from the receipt of the Special Payment and/or 
the Make-Whole Payment;
(2)     pay a lump sum amount equal to three times the 
annual car allowance in effect for the Executive at the time of 
termination and a lump sum amount equal to three times the annual 
insurance, maintenance, and gasoline costs incurred for the 
Executive's vehicle during the Executive's last full year of 
employment with the Corporation;

                        (3)     the Corporation shall continue all medical, 
health and welfare and insurance benefits that were in effect and 
in which the Executive participated as of the date of termination  
for a period of thirty-six (36) months from the date of 
termination; the provisions and conditions covering the foregoing 
benefits, including the amount of any contributions to be made by 
the Executive on a monthly or other periodic basis, will be 
governed by the various benefit plans as they are in effect from 
time to time; and

                        (4)     if the Amended and Restated Promissory Note - 
Balloon Payment, dated November 17, 1997, between the Corporation, 
as the Lender, and the Executive and his spouse, as the Borrower 
(a copy of which is attached hereto and made a part hereof as 
Exhibit A) (the "Note") is forgiven and released in accordance 
with the provisions of paragraph 3(c)(iii) of the Note, then as 
between the Corporation and the Executive it will be deemed that 
the forgiveness and release of the Note would subject the 
Executive and the Borrower to taxes on the total amount that is 
forgiven and released ("Taxable Amount") and, therefore, the 
Corporation shall make a payment to the Executive within five (5) 
days after the effective date of such forgiveness and release 
("Other Make-Whole Payment") in such an amount as to pay any 
income taxes and employment taxes on the Taxable Amount; any 
income taxes and employment taxes on the Other Make-Whole Payment; 
and the value of the lost tax benefit caused by the loss of any 
tax deduction resulting from the receipt of the Taxable Amount 
and/or the Other Make-Whole Payment.  

                        (5)     Appendix 1 to this Agreement, attached hereto 
and made a part hereof, presents the computation of the Make-Whole 
Payment and the Other Make-Whole Payment pursuant to Sections 
4c(1) and (4) above, respectively.  Appendix 1 is intended to set 
forth the amount of the Make-Whole Payment and the Other Make-
Whole Payment, as the case may be, under current law, and it is 
intended that any pertinent changes in the law that impact the 
methodology used to compute these Payments would require the 
Corporation and the Executive to agree on the appropriate 
modification(s) to Appendix 1.

                d.      Nothing in this Agreement shall prevent the Executive 
from receiving any benefits to which the Executive may be entitled under 
any plan or program of the Corporation, except any severance pay 
benefits for which the Executive may otherwise be eligible under any 
plan, program or policy of the Corporation other than this Agreement. 

e.      (1)     Notwithstanding anything to the contrary 
contained herein, in the event it shall be determined that any payment 
or distribution by the Corporation to or for the benefit of the 
Executive including the value of the Taxable Amount in Section 4(c)(4) 
above, (whether paid or payable or distributed or distributable pursuant 
to the terms of this Agreement, or by operation of other agreements or 
undertakings (including option agreements)), but determined without 
regard to any additional payments required under this Section 4.e. (a 
"Payment"), would be subject to the excise tax imposed by Section 4999 
of the Internal Revenue Code of 1986 as amended (the "Code"), or any 
comparable Federal, state or local excise tax (such excise tax, together 
with any interest and penalties, are hereinafter collectively referred 
to as the "Excise Tax"), then the Executive shall be entitled to receive 
an additional payment (a "Gross-Up Payment").  The Gross-Up Payment 
shall be in such amount as to pay the Excise Tax, any excise tax imposed 
by Code Section 4999 on the Gross-Up Payment, any income taxes and 
employment taxes (including, without limitation, penalties and interest) 
on the Gross-Up Payment, and the value of the lost tax benefit caused by 
the loss of any tax deduction resulting from the receipt of the Gross-Up 
Payment.  An example under current law under which Executive could lose 
the benefit of tax deductions to which the Executive might otherwise be 
entitled because of the receipt of a Gross-Up Payment is the overall 
limitation on itemized deductions under Code Section 68.  This example 
of the loss of tax deduction is intended to be illustrative and is not 
intended to be exclusive.  Appendix 2 to this Agreement attached hereto 
and made a part hereof, presents an illustrative example of the 
operation of the Gross-Up Payment.  Appendix 2 is only intended to 
present an illustration of the methodology to use to compute the Gross-
Up Payment under current law and it is intended that changes in the law 
may impact the methodology used to compute the Gross-Up Payment.

                        (2)     All determinations required to be made under 
this Section 4.e., including, without limitation, 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 determinations, shall 
be made by Price Waterhouse or any other nationally recognized 
accounting firm which is the Corporation's outside auditor at the time 
of such determination, which firm must be reasonably acceptable to the 
Executive (the "Accounting Firm").  The Corporation shall cause the 
Accounting Firm to provide detailed supporting calculations to the 
Corporation and the Executive within fifteen (15) business days after a 
notice is given by the Executive to the Corporation that there has been 
a Payment, or such earlier time as is requested by the Corporation.  
Within two (2) business days after said notice is given to the 
Corporation, the Corporation shall instruct the Accounting Firm to 
timely provide the data required by this Section 4.e. to the Executive.  
All fees and expenses of the Accounting Firm shall be borne solely by 
the Corporation.  Any Gross-Up Payment, as determined pursuant to this 
Section 4.e., shall be paid by the Corporation to the Internal Revenue 
Service ("IRS") and/or other appropriate taxing authority on the 
Executive's behalf within five (5) days after receipt of the Accounting 
Firm's determination.  If the Accounting Firm determines that there is 
substantial authority (within the meaning of Section 6662 of the Code) 
that no Excise Tax is payable by the Executive, the Accounting Firm 
shall furnish the Executive with a written opinion that failure to 
disclose or report the Excise Tax on the Executive's Federal income tax 
return will not constitute a substantial understatement of tax or be 
reasonably likely to result in the imposition of a negligence or similar 
penalty.  Any determination by the Accounting Firm shall be binding upon 
the Corporation and the Executive in the absence of material 
mathematical or legal error.  As a result of the uncertainty in the 
application of Section 4999 of the Code at the time of the initial 
determination by the Accounting Firm hereunder, it is possible that 
Gross-Up Payments will not have  been made by the Corporation that 
should have been made ("Underpayment") or that Gross-Up Payments have 
been made that should not have been made ("Overpayment"), in each case, 
consistent with the calculations required to be made hereunder.  In the 
event that the Corporation exhausts its remedies pursuant to Section 
4.e.(3) below and the Executive thereafter is required to make a payment 
of any Excise Tax, the Accounting Firm shall determine the amount of 
Underpayment, if any, that has occurred along with any required interest 
and/or penalties thereon, and any such Underpayment along with any 
required interest and/or penalties thereon, shall be promptly paid by 
the Corporation to the IRS or other appropriate taxing authority on the 
Executive's behalf or, if such Underpayment has been previously paid by 
the Executive, the Corporation shall pay such Underpayment to the 
Executive.  In the event that the Accounting Firm determines that an 
Overpayment has been made, any such Overpayment shall be treated for all 
purposes as a loan to the Executive, effective as of the date the 
Overpayment was made, with interest at the applicable Federal rate 
provided for in Section 7872(r)(2) of the Code, due and payable on the 
later to occur of (i) ninety (90) days after written demand to the 
Executive by the Corporation; (ii) the date such Overpayment has been 
refunded by the IRS to the Executive or (iii) the date such Overpayment 
has been deducted by the Executive from Federal and State income taxes 
and such deduction has reduced the Executive's tax payments by a like 
amount; provided, however, that the Executive shall have no duty or 
obligation whatsoever to repay said loan unless the Executive's receipt 
of the Overpayment, or any portion thereof, is includible in the 
Executive's income and the Executive's repayment of same is deductible 
by the Executive for Federal and state income tax purposes.

                        (3)     The Executive shall notify the Corporation in 
writing of any claim by the IRS or state or local taxing authority that, 
if successful, would result in any Excise Tax or an Underpayment 
("Claim").  Such notice shall be given as soon as practicable but no 
more than sixty (60) business days after the Executive is informed in 
writing of the Claim and shall apprise the Corporation of the nature of 
the Claim, the administrative or judicial appeal period, and the date on 
which any payment of the Claim must be paid.  The Executive shall not 
pay any portion of the Claim prior to the expiration of the thirty (30) 
day period following the date on which the Executive gives such notice 
to the Corporation (or such shorter period ending on the date that any 
amount under the Claim is due).  If the Corporation notifies the 
Executive in writing prior to the expiration of such thirty (30) day 
period that it desires to contest the Claim, the Executive shall:

                                (a)     give the Corporation any information 
reasonably requested by the Corporation relating to the Claim;

                                (b)     take such action in connection with 
contesting the Claim as the Corporation shall reasonably request 
in writing from time to time, including without limitation, 
accepting legal representation concerning the Claim by an attorney 
selected by the Corporation who is reasonably acceptable to the 
Executive; and

                                (c)     cooperate with the Corporation in good 
faith in order  to effectively contest the Claim; provided, 
however, that the Corporation shall bear and pay directly all 
costs and expenses (including, without limitation, additional 
interest and penalties and reasonable attorneys' fees) incurred in 
such contests and shall indemnify and hold the Executive harmless, 
on an after-tax basis, for any Excise Tax or income tax 
(including, without limitation, interest and penalties thereon) 
imposed as a result of such representation.  Without limitation 
upon the foregoing provisions of this Section 4.e., except as 
provided below, the Corporation shall control all proceedings 
concerning such contest and, at its sole option, may pursue or 
forego any and all administrative appeal, proceedings, hearings 
and conferences with the taxing authority pertaining to the Claim.  
At the written request of the Corporation and upon payment to the 
Executive of an amount at least equal to the Claim plus any 
additional amount necessary to obtain the jurisdiction of the 
appropriate tribunal and/or court ("Additional Sum") the Executive 
shall pay same and sue for a refund.  The Executive agrees to 
prosecute any contest of a Claim to a determination before any 
administrative tribunal, in a court of initial jurisdiction and in 
one or more appellate courts, as the Corporation shall determine; 
provided, however, that if the Corporation requests the Executive 
to pay the Claim and sue for  refund, the Corporation 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, without limitation, interest, penalties thereon, or 
lost deductions) imposed on such advance or for any imputed income 
on such advance.  Any extension of the statute of limitation 
relating to assessment of any Excise Tax for the taxable year of 
the Executive which is the subject of the Claim is to be limited 
solely to the Claim.  Furthermore, the Corporation's control of 
the contest shall be limited to issues for which a Gross-Up 
Payment would be payable hereunder.  The Executive shall be 
entitled to settle or contest, as the case may be, any other issue 
raised by the IRS or any other taxing authority.

                        (4)     If, after the receipt by the Executive of any 
amount advanced by the Corporation pursuant to Section 4.e.(3) 
above, the Executive receives any refund of a Claim and/or any 
Additional Sum, the Executive shall promptly pay to the 
Corporation 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 the 
Corporation pursuant to Section 4.e.(3) above, a final 
determination or a non-final determination is made by the taxing 
authority that the Executive shall not be entitled to any refund 
of the Claim (and, in the case of a non-final determination, the 
Corporation does not notify the Executive in writing of its intent 
to contest such denial of refund of a Claim prior to the 
expiration of thirty (30) days after such determination), then the 
portion of such advance attributable to a Claim shall be forgiven 
and shall not be required to be repaid.  The amount of such 
advance attributable to a Claim shall offset, to the extent 
thereof, the amount of the Underpayment required to be paid by the 
Corporation to the Executive.  A "final determination" shall occur 
when a court of appellate jurisdiction shall have finally 
adjudicated a claim or when the period to contest or otherwise 
appeal any decision by an administrative tribunal or court of 
initial jurisdiction has been waived or the time for contention on 
appealing same has expired.

        5.      Income Tax Withholding.  The Corporation may withhold from 
any benefits payable under this Agreement any Federal, state, city or 
other taxes as may be required pursuant to any law, regulation or 
ruling.

        6.      Confidentiality.  Executive covenants and agrees to regard 
and preserve as confidential all proprietary information and trade 
secrets that have been or may be obtained by the Executive in the course 
of his employment with the Corporation.

        7.      Stock Options.  In the event of a Change in Control, unless 
the employment of the Executive is terminated for Cause, (i) all then 
outstanding stock options granted to the Executive under the Amended and 
Restated 1984 Employee Stock Option Plan and the 1994 Senior Management 
Stock Option Plan shall become immediately exercisable without regard to 
any installment or vesting provisions that may have been made part of 
the terms and conditions of such options.  If the Executive terminates 
his employment with the Corporation for good reason within 24 months 
following a Change in Control, or if the Executive is terminated by the 
Corporation within 24 months following a Change in Control other than 
for Cause, any and all then outstanding stock options and stock 
appreciation rights granted to such employee under the 1996 Share 
Incentive Plan shall become immediately exercisable.

        8.      General

                (a)     Subject to the second sentence hereof, the Corporation 
shall pay to the Executive reasonable attorneys' fees that may be 
incurred by the Executive in enforcing the terms of this Agreement.  If 
litigation or an arbitration proceeding ensues, and the Executive 
prevails in such litigation or arbitration, the Corporation shall 
promptly reimburse the Executive for his attorneys' fees and 
disbursements, costs and expenses ("Costs")  incurred in such litigation 
or arbitration proceeding, plus interest on such Costs from the date 
they are incurred by the Executive, and pay prejudgment interest on any 
money judgment obtained by the Executive, such interest on such Costs 
and such prejudgment interest to be calculated at the base rate of 
interest charged from time to time by Citibank, N.A. from the date that 
payment should have been made under this Agreement.

                (b)     The Corporation's obligation to pay the Executive the 
compensation and to make the arrangements provided herein shall be 
absolute and unconditional and shall not be affected by any 
circumstance, including, without limitation, any setoff, counterclaim, 
recoupment, defense or other right which the Corporation may have 
against the Executive or anyone else.  All amounts payable by the 
Corporation hereunder shall be paid without notice or demand.  The 
Executive shall not be required to mitigate the amount of any payment 
provided for in this Agreement by seeking other employment and if 
Executive obtains such other employment, any compensation earned by 
Executive pursuant thereto shall not be applied to mitigate any payment 
made to Executive pursuant to this Agreement except as expressly 
provided herein.

                (c)     The Corporation shall require any successor (whether 
direct or indirect, by purchase, merger, consolidation or otherwise) to 
all or substantially all of the business and/or assets of the 
Corporation, by written agreement to assume expressly and agree to 
perform this Agreement in the same manner and to the same extent that 
the Corporation would be required to perform it if no such succession 
had taken place.  As used in this Agreement, the term "Corporation" 
shall mean the Corporation as hereinbefore defined and any successor to 
its business and/or assets as aforesaid which executes and delivers the 
agreement required by this Section 8(c), or which otherwise becomes 
bound by all terms and provisions of this Agreement by operation of law.

                (d)     This Agreement shall inure to the benefit of and be 
enforceable by the Executive's personal or legal representatives, 
executors, administrators, successors, heirs, distributees, devisees and 
legatees.  If the Executive should die while any amounts would still be 
payable to the Executive hereunder if he had continued to live, all such 
amounts, unless otherwise provided herein, shall be paid in accordance 
with the terms of this Agreement to the Executive's devisee, legatee or 
other designee or, if there be no such designee, to the Executive's 
estate.

                (e)     For the purposes of this Agreement, notices and all 
other communications provided for in the Agreement shall be in writing 
and shall be deemed to have been duly given when delivered or mailed by 
United States registered mail, return receipt requested, postage 
prepaid, addressed as follows:

If to the Executive:

        Mark D. Goldman
        2320 Vallejo Street
        San Francisco, CA  94123

If to the Corporation:

        Galoob Toys, Inc.
        500 Forbes Blvd.
        South San Francisco, California  94080
        Attn:  General Counsel

or to such other address as either party may have furnished to the other 
in writing in accordance herewith, except that notice of change of 
address shall be effective only upon receipt.

                (f)     This Agreement shall constitute the entire agreement 
between the Executive and the Corporation concerning the subject matter 
hereof, and performance of its obligations hereunder by the Corporation 
shall constitute full settlement and release of any claim or cause of 
action, of whatsoever nature, which the Executive might otherwise assert 
or claim against the Corporation or any of its directors, stockholders, 
officers or employees on account of any termination.  This Agreement 
supersedes the severance agreement, dated October 27, 1994, between the 
Corporation and the Executive, and such agreement is hereby terminated 
and of no further force or effect.  No provisions of this Agreement may 
be modified, waived or discharged unless such waiver, modification or 
discharge is agreed to in writing, signed by the Executive and an 
authorized officer of the Corporation.  No waiver by either party hereto 
at any time of any breach by the other party hereto of, or compliance 
with, any condition or provision of this Agreement to be performed by 
such other party shall be deemed a waiver of any similar or dissimilar 
provisions or conditions at the same or at any prior or subsequent time.  
No assurances or representations, oral or otherwise, express or implied, 
with respect to the subject matter hereof have been made by either party 
which are not set forth expressly in this Agreement.  However, this 
Agreement is in addition to and not in lieu of any other plan providing 
for payments to or benefits for the Executive or any agreement now 
existing or which hereafter may be entered into between the Corporation 
and the Executive.  The validity, interpretation, construction and 
performance of this Agreement shall be governed by the laws of the State 
of Delaware without giving effect to the provisions, principles, or 
policies thereof relating to choice or conflict of laws.

                (g)     The invalidity or unenforceability of any provision of 
this Agreement in any circumstance shall not affect the validity or 
enforceability of such provision in any other circumstance or the 
validity or enforceability of any other provision of this Agreement, and 
except to the extent such provision is invalid or unenforceable, this 
Agreement shall remain in full force and effect.  Any provision in this 
Agreement which is prohibited or unenforceable in any jurisdiction 
shall, as to such jurisdiction, be ineffective only to the extent of 
such prohibition or unenforceability without invalidating or affecting 
the remaining provisions hereof in such jurisdiction, and any such 
prohibition or unenforceability in any jurisdiction shall not invalidate 
or render unenforceable such provision in any other jurisdiction.

                (h)     Except as otherwise explicitly provided herein, any 
dispute or controversy arising under or in connection with this 
Agreement shall be settled exclusively by arbitration in accordance with 
the rules of the American Arbitration Association then in effect.  
Judgment may be entered on the arbitrator's award in any court having 
jurisdiction; provided, however, that the Executive shall be entitled to 
seek specific performance in a court of law, of his right to be paid as 
provided in this Agreement in the event of any dispute.  

                (i)     The masculine or neuter gender shall include the 
feminine gender.  This Agreement may be executed in more than one 
counterpart, each of which shall be deemed an original, but all of which 
together shall constitute one and the same instrument.

        IN WITNESS WHEREOF, the parties have executed this Agreement as of 
the day and year first above written.

GALOOB TOYS, INC.                               



By:                                                             
Name:                                                   Mark D. Goldman
Title:


mgsever 

CALCULATION OF GROSS-UP FACTOR                          APPENDIX 2
AND PROOF OF GROSS-UP PAYMENT

ASSUMPTIONS:

FEDERAL INCOME TAX RATE                          39.600%
ADJUSTMENT TO FEDERAL RATE FOR
        ITEMIZED DEDUCTION PHASE OUT              1.188%
GOLDEN PARACHUTE EXCISE TAX RATE                 20.000%
MEDICARE PORTION OF FICA TAX RATE                 1.450%
STATE INCOME TAX RATE                             9.300%
EXCISE TAX LIABILITY BEFORE GROSS UP           $100,000
CALCULATION OF GROSS-UP FACTOR:
FEDERAL INCOME TAX RATE                          39.600%
ADJUSTMENT FOR ITEMIZED DEDUCTION
        PHASE OUT                                 1.188%

GOLDEN PARACHUTE EXCISE TAX RATE                 20.000%
MEDICARE PORTION OF FICA TAX RATE                 1.450%
STATE INCOME TAX RATE   NET OF TAX              
        BENEFIT (9.3% X [1 -  .396])              5.617%  


SUM OF APPLICABLE TAX RATE                       67.855%                      

GROSS-UP FACTOR (1 / [1 - .67855])              3.11092



PROOF:

EXCISE TAX ON EXCESS PARACHUTE PAYMENTS (SEE ABOVE)            $100,000
GROSS-UP FACTOR                                                 3.11092
                                                             -----------
GROSS-UP PAYMENT (EXCISE TAX x GROSS-UP FACTOR)                $311,092

COMPONENTS OF GROSS UP:

FEDERAL INCOME TAX ON GROSS-UP PAYMENT (40.788%)
        (40.788% OF GROSS-UP PAYMENT)                          $126,888

GOLDEN PARACHUTE EXCISE TAX ON EXCESS
        PARACHUTE PAYMENT (20% [SEE ABOVE])                    $100,000
GOLDEN PARACHUTE EXCISE TAX ON GROSS-
        UP PAYMENT (20% OF GROSS-UP PAYMENT)                     62,218
FICA MEDICARE TAX ON GROSS-UP PAYMENT
        (1.45% OF GROSS-UP PAYMENT)                               4,511

STATE INCOME TAX (NET) ON GROSS-UP
        PAYMENT (5.617% OF GROSS-UP PAYMENT                      17,475

TOTAL TAXES GROSSED UP                                         $311,092