EXHIBIT 10

Information contained herein, marked with [**], has been omitted pursuant to a 
request for confidential treatment.  A complete copy of this document has been
supplied to the Securities and Exchange Commission under separate cover.






                              TOY LICENSE AGREEMENT

                     BETWEEN LUCAS LICENSING LTD. AND GALOOB

                          DATED AS OF OCTOBER 14, 1997


<PAGE>
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.




                             TOY LICENSE AGREEMENT

                               TABLE OF CONTENTS

      1.    GRANT OF LICENSE...............................................  1

      2.    TERM AND TERRITORY.............................................  2

      3.    RESTRICTIONS ON LICENSE........................................  3

      4.    OBLIGATIONS OF LICENSEE........................................  7

      5.    LICENSOR APPROVALS............................................. 13

      6.    ARTWORK AND FILM CLIPS/THIRD PARTY APPROVALS................... 15

      7.    ADVANCE/[**]................................................... 16

      8.    ROYALTIES...................................................... 18

      9.    STATEMENTS AND PAYMENTS........................................ 22

      10.   TAXES.......................................................... 25

      11.   RECORDS AND AUDITS............................................. 25

      12.   COPYRIGHT AND TRADEMARK NOTICES................................ 26

      13.   OWNERSHIP...................................................... 26

      14.   PROMOTIONAL VALUE, TRADEMARK RIGHTS AND GOODWILL............... 30

      15.   APPROVAL OF MANUFACTURERS...................................... 30

      16.   CONFIDENTIALITY................................................ 31

      17.   PRODUCT SAMPLES................................................ 33

      18.   INTENTIONALLY DELETED.......................................... 34

      19.   REPRESENTATIONS AND WARRANTIES................................. 34

      20.   INDEMNITIES.................................................... 35



                                     2


NYFS03...:\15\47315\0003\2475\AGRN017P.41A
<PAGE>
      21.   INSURANCE...................................................... 37

      22.   EXPIRATION AND TERMINATION..................................... 38

      23.   RESERVED RIGHTS................................................ 42

      24.   DEFINITIONS.................................................... 42

      25.   GENERAL........................................................ 49






                                     3
<PAGE>
            SCHEDULE I -      PERMITTED LICENSEE AFFILIATES

            SCHEDULE II -     LICENSED PRODUCTS

            SCHEDULE III-     ADVANCES AND MINIMUM SALES LEVELS

            SCHEDULE IV -     DEDICATED RETAIL SPACE

            SCHEDULE V -      EXCLUDED DISTRIBUTION CHANNELS

            SCHEDULE VI -     LICENSOR TRADEMARKS

            EXHIBIT A -       TRADEMARK LICENSE AGREEMENT

            EXHIBIT B -       APPROVAL OF SUBLICENSEE AGREEMENT

            EXHIBIT C -       STANDARD APPROVAL FORM

            EXHIBIT D -       ROYALTY REPORT FORM

            EXHIBIT E -       THIRD PARTY COPYRIGHT ASSIGNMENT

            EXHIBIT F -       APPROVAL OF MANUFACTURER AGREEMENT




                                     4
<PAGE>
                             TOY LICENSE AGREEMENT

This LICENSE AGREEMENT (the "Agreement") is made and entered into as of October
14, 1997, between Lucas Licensing Ltd., a California corporation ("Licensor"),
on the one hand, located at P. O. Box 2009, San Rafael, CA 94912 and Galoob
Toys, Inc., a Delaware corporation, located at 500 Forbes Boulevard, South San
Francisco, CA 94080, and all Permitted Licensee Affiliates (jointly and
severally "Licensee" or "Galoob"), on the other hand.

WHEREAS:

      A. Licensor is a California corporation engaged in the licensing of
entertainment intellectual properties related to the "Pictures" (as hereinafter
defined);

      B. Licensor owns or controls rights in respect of the Licensed Property
(as hereinafter defined);

      C. Licensee is engaged in the manufacture, distribution and sale of
consumer products in the form of toys including, without limitation, toys based
on entertainment intellectual properties licensed from third parties; and

      D. Licensee wishes to be licensed to use the Licensed Property for the
manufacture, distribution and sale of Licensed Products in the Territory and
Licensor has agreed to license rights in the Licensed Property to Licensee,
subject to the terms and conditions of this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:

1.    GRANT OF LICENSE.

      Subject to the terms and conditions of this Agreement, and in
      consideration for all of Licensee's warranties, representations and
      obligations hereunder, including, without limitation, Licensee's agreement
      to pay and actual payment to Licensor of the Royalties and Advances,
      Licensor grants to Licensee a non-transferable, non-assignable license
      during the Term and throughout the Territory:

      1.1. to use the Licensed Property, to develop, design, manufacture, have
      manufactured, distribute, advertise, publicize, market and sell the
      Licensed Products set forth in Schedule II attached hereto, for sale to
      retail Customers through all channels of wholesale and retail distribution
      permitted hereunder; and

      1.2. to reproduce the Licensed Property and to use the Licensor Trademarks
      on containers, packaging, display and promotional material and in
      Advertising and Advertising Materials for the Licensed Products as
      provided in this Agreement. Concurrently with its execution of this
      Agreement, Licensee shall execute a Trademark License Agreement with
      Licensor on



                                     1
<PAGE>
      Licensor's then-current form for such agreements (the "Trademark License
      Agreement"), a current copy of which form is attached hereto and by this
      reference incorporated herein as Exhibit A.

2.    TERM AND TERRITORY.

      2.1. Term. Unless earlier terminated as provided in this Agreement,
      including, without limitation, pursuant to this Subparagraph 2.1, the term
      of Licensee's rights pursuant to this Agreement (the "Term") shall consist
      of the time period commencing as of the date hereof (subject to
      Subparagraph 25.14 hereinbelow) and ending on the final day of the third
      Calendar Year following the Calendar Year in which the initial general
      theatrical release in the United States (the "U.S. Release Date") of
      Episode III occurs (such final day constituting the "Expiration Date").
      Notwithstanding anything to the contrary contained herein or otherwise,
      the Term shall terminate prior to the Expiration Date:

            (a) if the U.S. Release Date of Episode I does not occur on or
            before June 30, 2004 (the "Episode I Outside Date"), then the Term
            shall terminate as of the Episode I Outside Date;

            (b) if the U.S. Release Date of Episode I occurs on or before the
            Episode I Outside Date, but the U.S. Release Date of Episode II does
            not occur prior to the date which is five (5) years following the
            U.S. Release Date of Episode I (the "Episode II Outside Date"), then
            the Term shall terminate as of the Episode II Outside Date; or

            (c) if the U.S. Release Date for Episode I occurs on or before the
            Episode I Outside Date and the U.S. Release Date of Episode II
            occurs on or before the Episode II Outside Date, but the U.S.
            Release Date of Episode III does not occur on or before the date
            which is five (5) years after the U.S. Release Date of Episode II
            (the "Episode III Outside Date"), then the Term shall terminate as
            of the Episode III Outside Date.

      2.2. Territory. The territory of Licensee's rights hereunder (the
      "Territory") consists of the enumerated countries and groupings of
      countries set forth in Column A of Schedule III attached hereto (each such
      enumerated country or grouping of countries a "Sub-Territory" herein);
      provided, however, that the sole activity of manufacturing Licensed
      Products hereunder may take place in a country outside of the Territory if
      the terms and conditions of Paragraph 15 hereinbelow have been first
      satisfied and so long as no Licensed Product manufactured in such country
      is distributed by Licensee (or with Licensee's express or implied
      authority) from such country for the "sale" thereof (as defined in
      Subparagraph 8.2 hereinbelow) to a Customer outside of the Territory.
      Subject to Paragraph 23 hereinbelow, if Licensor elects to license to any
      third party the right to manufacture, distribute and sell during the Term
      of this Agreement any Licensed Product in any country outside of the
      Territory, then Licensor shall notify Licensee of such election in
      writing. Licensee shall thereafter have thirty (30) days from the date of
      such notice to negotiate and enter into a written agreement regarding such
      license which



                                     2
<PAGE>
      agreement shall incorporate all of the terms and conditions of this
      Agreement except for Paragraph 7 (Advance) and Paragraph 4 (Minimum Sales
      Levels) hereinbelow; provided, however, that neither Licensee nor Licensor
      shall be obligated to enter into an agreement with respect to such
      license. For purposes of this Agreement, a country shall be deemed to
      include all territories and possessions thereof.

3.    RESTRICTIONS ON LICENSE.

      3.1.  Distribution.

            (a)   General.  Licensee shall not have the right:

                  (i) to distribute or sell (or authorize any entity to
                  distribute or sell) any Licensed Product other than to a "bona
                  fide and recognized" (as such term is commonly understood in
                  the U.S. toy industry) third party wholesale entity for
                  distribution directly to a Retail Entity or to a bona fide and
                  recognized third party Retail Entity (whether such third party
                  Retail Entity is a third party "traditional retail store" [as
                  that term is commonly understood in the U.S. toy industry] or
                  a third party direct-to-consumer paper-printed catalog
                  company). In particular, but not by way of limitation,
                  Licensee shall not distribute any Licensed Product through any
                  channel, method or outlet of distribution denoted as an
                  Excluded Distribution Channel on Schedule V attached hereto;

                  (ii) to distribute or sell (or authorize any entity to
                  distribute or sell) any Licensed Product to any party if
                  Licensee knows, or in the exercise of its reasonable good
                  faith business judgment should know, that such distribution or
                  sale will result in the distribution for sale or resale of any
                  Licensed Product outside of the Territory;

                  (iii) to conduct or authorize any entity to conduct
                  Advertising primarily intended to be disseminated outside of
                  the Territory for any Licensed Product; or

                  (iv) Except with Licensor's prior written approval, to
                  distribute or sell any Licensed Product to any Closeout Store
                  in any country of the Territory prior to the date eighteen
                  (18) months after the initial "sale" (as such term is defined
                  in Subparagraph 8.2 hereinbelow) of such Licensed Product to a
                  Customer in such country.

            (b) Licensor Channels. Notwithstanding the rights licensed to
            Licensee hereunder, Licensor shall also have the right to distribute
            and/or sell any Licensed Product that has been distributed and/or
            sold hereunder by Licensee, through any Licensor Channel and, in
            this connection, Licensor shall purchase or have the right to
            purchase from Licensee,



                                     3
<PAGE>
            a Manufacturer or a Sublicensee any Licensed Product for which
            Licensee has exclusive rights hereunder and which is to be sold
            through a Licensor Channel, provided, Licensee, such Manufacturer or
            such Sublicensee shall manufacture and supply to Licensor or to
            Licensor's designee those numbers of such Licensed Product as
            Licensor shall request for the applicable Licensor Channel, and
            shall sell such Licensed Product to Licensor or to Licensor's
            designee at the lowest price and on the most favorable terms given
            by Licensee, a Licensee Affiliate or a Sublicensee to a Customer for
            the same or comparable Licensed Product, whether or not such
            Licensed Product is Account Specific Merchandise, F.O.B. Product or
            otherwise.

            (c) Internet/Electronic Retailers. Licensee shall not have the right
            to manufacture, distribute and/or sell (or authorize any entity to
            manufacture, distribute or sell) any Licensed Product:

                  (i) through the Internet (except if such distribution or sale
                  is a Licensor Channel as permitted pursuant to Subparagraph
                  3.1[b] hereinabove) without Licensor's prior written approval
                  in each instance; or

                  (ii) through any Electronic Retailer except that, at
                  Licensor's request, Licensee is hereby licensed to supply to
                  Licensor or to Licensor's designee such specific Licensed
                  Products to such specific Electronic Retailer(s) as Licensor
                  may approve, in advance in writing.

      3.2. Exclusivity. The rights licensed to Licensee hereunder in respect of
           all Licensed Products shall be exclusive.

      3.3.  Sublicenses.

            (a) Approval of Sublicensee Agreement. Licensee shall have no right
            to sublicense to any entity (including to a distributor or to a
            Licensee Affiliate that is not a Permitted Licensee Affiliate) any
            right licensed to it hereunder (other than the right to manufacture
            any Licensed Product, which shall be subject to Paragraph 15
            hereinbelow) or transfer or dispose of any Licensed Property to any
            distributor, including to a Licensee Affiliate that is not a
            Permitted Licensee Affiliate or to any other third party unless and
            until: (i) Licensor has provided Licensee with its prior written
            approval of the proposed sublicensee and the terms and conditions of
            any and all agreements between Licensee and such proposed
            sublicensee (and any modifications thereof, whether oral or written)
            for such sublicense (collectively the "Sublicense Agreement"); (ii)
            such sublicensee shall have executed an Approval of Sublicensee
            Agreement with Licensor on Licensor's then-current form for such
            agreement, as such form may be revised by Licensor in its sole
            reasonable discretion from time to time (any such sublicensee and
            all affiliated and related entities of such sublicensee approved by
            Licensor for which an Approval of Sublicensee Agreement is fully
            executed, a



                                     4
<PAGE>
            "Sublicensee" herein); (iii) such Sublicensee shall agree in the
            Sublicense Agreement to be fully bound at all times by the terms and
            conditions of this Agreement which are applicable to the exercise of
            the rights so sublicensed, including, but not limited to, the
            distribution and/or sale of any Licensed Product governed by such
            Sublicense Agreement; (iv) such Sublicensee shall provide to both
            Licensee and to Licensor, on a monthly basis, a complete written
            list of such Sublicensee's then-current prices for each and every
            Licensed Product SKU in respect of each and every Customer of such
            Sublicensee; (v) such Sublicensee shall execute a Trademark License
            Agreement with Licensor; and (vi) such Sublicensee shall further
            agree in such Approval of Sublicensee Agreement that Licensor shall
            be a third party beneficiary thereof. A copy of Licensor's current
            form for Approval of Sublicensee Agreement is attached hereto as
            Exhibit B. The sublicense by Licensee of any rights licensed to
            Licensee hereunder shall in no manner whatsoever affect Licensee's
            obligations hereunder, and Licensee shall execute, and shall ensure
            that each prospective Sublicensee executes, the Approval of
            Sublicensee Agreement. Any sublicense (in whole or in part) of
            Licensee's rights hereunder in violation of this Subparagraph 3.3
            shall be a material breach of this Agreement.

            (b) Enforcement of Sublicense Agreement. Licensee agrees to include
            and strictly enforce in each Sublicense Agreement all of the terms
            and conditions of this Agreement relevant to the sublicense to
            Sublicensee of any right licensed to Licensee hereunder. Licensee
            shall advise Licensor of any breach thereof by any Sublicensee and
            of any corrective action taken by Licensee as well as the results
            thereof and, at the request of Licensor, shall terminate such
            Sublicense Agreement in the event of any such breach, if such breach
            is not cured within twenty (20) days after Licensee first becomes
            aware of such breach, to the extent such breach is curable. If
            Licensee fails to exercise such termination rights by giving written
            notice to such Sublicensee within ten (10) days after being
            requested to do so in writing by Licensor, notwithstanding anything
            to the contrary contained in the Sublicense Agreement, Licensee
            hereby appoints Licensor its attorney-in-fact to send a notice of
            termination in the name of Licensee to such Sublicensee for the
            purpose of terminating such Sublicense Agreement or any specific
            rights thereunder, which appointment is irrevocable and coupled with
            an interest. In the event of termination of a Sublicense Agreement,
            Licensee shall thereafter have a reasonable period of time (not to
            exceed ninety [90] days after such termination, or one hundred
            twenty [120] days for any Sublicense Agreement for distribution
            rights for a Licensed Product in a Sub-Territory hereinbelow defined
            as Underdeveloped) in which Licensee itself, or a new Sublicensee
            designated by Licensee shall undertake the same responsibilities of
            the terminated Sublicensee, subject to the terms and conditions of
            this Subparagraph 3.3.

      3.4.  (a) No Rights to Products Other Than Licensed Products. Other than
            the products, goods and articles expressly set forth in Schedule II
            as "Licensed Products," all products, goods, items, devices and
            articles of any kind based on or incorporating the



                                     5
<PAGE>
            Licensed Property are expressly excluded from the rights licensed to
            Licensee pursuant to this Agreement and are expressly reserved to
            Licensor.

            (b) No Joint or Cross Distributing, Marketing, Promoting or Selling.
            No Licensed Product shall be jointly or cross distributed, marketed,
            promoted or sold with any other product or service without
            Licensor's prior written consent in each instance.

      3.5. Other Products. Licensee acknowledges and agrees that the fact that a
      Licensed Product is capable (whether or not by means of any electronic
      media or through the use of any electronic feature, mechanical feature,
      sound effect, light feature, mechanism or otherwise) of interacting with
      another product, good, item, device or article that is not a Licensed
      Product (the "Other Product") does not render such Other Product a
      Licensed Product hereunder or confer to Licensee any rights hereunder with
      respect to the use of the Licensed Property in conjunction with such Other
      Product.

      3.6. Licensor Third Party Obligations. Notwithstanding anything to the
      contrary contained in this Agreement or otherwise, but without limitation
      of Licensor's other rights and remedies:

            (a) Licensee acknowledges that Licensor may have heretofore executed
            agreements with third parties which may encompass rights with
            respect to some or all of the Licensed Products and/or which may
            grant to such third parties the right to dispose of, distribute and
            sell Licensed Products during their respective sell-off periods,
            which sell- off periods may occur during the Term, and that such
            sell-off rights shall not violate the terms of this Agreement; and

            (b) Licensor shall have the unrestricted right, prior to the
            expiration or termination of the Term to provide for the disposition
            of any or all of the rights licensed to Licensee hereunder,
            including, without limitation, entering into agreements with any
            third party(ies) which provide for the right for such third
            party(ies) to design, manufacture and/or distribute Licensed
            Products anywhere in the Territory, provided, that such agreement(s)
            shall not by its terms authorize the shipment of Licensed Products
            to retail customers on a date that would allow such Licensed
            Products to be sold to end users at retail prior to the expiration
            or termination of the Term.

      3.7. No Similar Products or Dumping of Licensed Products. Licensee
      recognizes and acknowledges that the Licensed Property, and all elements
      thereof, and the goodwill associated with the same are material and
      substantial business assets of Licensor. In that connection, Licensee
      agrees that, during the Term and throughout the Territory Licensee:

            (a) will not Dump any Licensed Product in any country of the
            Territory during the Term and during any Sell-Off Period, subject to
            applicable law;




                                     6
<PAGE>
            (b) will not manufacture, distribute or sell any merchandise or
            authorize the manufacture, distribution or sale of any merchandise
            bearing any artwork or other representation which is confusingly
            similar to or which disparages the Licensed Property (or any element
            thereof); and

            (c) shall use its best efforts to sell Licensed Products at a price
            which, in its reasonable, good faith business judgment, represents
            the best attainable price from its Customers.

      3.8. No Sales Prior to October 1, 1998. Notwithstanding anything to the
      contrary contained in this Agreement, subject to the final sentence of
      Subparagraph 25.14 hereinbelow, Licensee shall not sell or distribute, or
      authorize the sale or distribution of, any Licensed Product manufactured
      hereunder to a retail or wholesale entity for such entity's receipt
      anywhere in the Territory prior to October 1, 1998; provided, however,
      that the foregoing shall not preclude Licensee, in the exercise of its
      rights licensed pursuant to this Agreement, from showing Licensed Products
      to its Customers, or taking and booking orders for Licensed Products or
      undertaking other similar business activities, prior to October 1, 1998
      subject to Licensor's prior written consent in each instance and to
      Licensor's approval rights pursuant to Paragraph 5 hereinbelow and to the
      provisions of Paragraph 16 hereinbelow.

4.    OBLIGATIONS OF LICENSEE.

      4.1. Marketing Plans. Prior to the manufacture, distribution or sale of
      any Licensed Product hereunder for the applicable time period to which a
      "Marketing Plan" (as hereinafter defined) relates, Licensee shall submit
      Marketing Plans to Licensor for Licensor's written approval in its sole
      discretion, as follows:

            (a) Submissions to Licensor. On or before the applicable due dates
            set forth hereinbelow, Licensee shall prepare and submit to Licensor
            thorough and detailed marketing plans for the manufacture,
            distribution, Advertising, marketing and sale of Licensed Products
            on a Sub-Territory by Sub-Territory basis (each such marketing plan
            a "Marketing Plan" herein). Each Marketing Plan shall contain the
            "Plan Elements" (as hereinafter defined) for each Sub-Territory, but
            Licensor's approval rights will not extend to product pricing or
            discounts provided to any Customer. Licensor's approval of any one
            Marketing Plan or Quarterly Update shall not be deemed to constitute
            Licensor's approval of any other Marketing Plan or Quarterly Update;
            it being the intention of the parties that the Quarterly Updates may
            contain revisions of the Annual Marketing Plans.

                  (i) Initial Marketing Plan: On or before January 1, 1998,
                  Licensee shall submit a Marketing Plan, for Licensor's written
                  approval, for Licensed Products to be manufactured,
                  distributed and sold from and after October 1, 1998 through
                  December 31, 1999 (the "Initial Marketing Plan"); and



                                     7
<PAGE>
                  (ii) Annual Marketing Plan: On or before March 1st of each
                  Calendar Year of the Term, commencing with March 1, 1999,
                  Licensee shall submit a Marketing Plan, for Licensor's written
                  approval, for Licensed Products to be manufactured,
                  distributed and sold for the next succeeding Calendar Year of
                  the Term (each such annual marketing plan an "Annual Marketing
                  Plan"), notwithstanding when such manufacture, distribution or
                  sale occurs; and

                  (iii) Quarterly Updates: On or before the close of each
                  Calendar Quarter of the Term, commencing with the Calendar
                  Quarter ending March 31, 1998, Licensee shall prepare and
                  submit to Licensor, for Licensor's written approval, a
                  modification of the Annual Marketing Plan showing any actual
                  or projected additions, deletions, modifications or changes
                  (the "Quarterly Updates").

            (b) Plan Elements. Each Marketing Plan shall detail for each
            Sub-Territory, at least the following components with respect to the
            applicable time period to be covered thereby (collectively the "Plan
            Elements"):

                  (i) Brand Management Strategy (for Initial Marketing Plan and
                  Annual Marketing Plans only): a detailed overall strategy on
                  the management of the "STAR WARS" brand in the context of the
                  manufacture, distribution, Advertising and sale of Licensed
                  Products, including, but not limited to, Licensee's ongoing
                  staffing requirements for its SW Toy Team.

                  (ii) Licensed Product Specifications and Ship Dates: a
                  detailed product plan on a SKU-by-SKU basis (including,
                  without limitation, quantities to be manufactured and ship
                  dates), a detailed description of the Licensed Products to be
                  manufactured hereunder, the manufacturing schedule and
                  specific tooling plans for the Licensed Products. Included in
                  the foregoing shall be, without limitation, a detailed product
                  plan and description of all Licensed Products to be created
                  exclusively for specific retail accounts ("Account Specific
                  Merchandise") and any product specifically created for sale to
                  a Customer of Licensee, a Licensee Affiliate or a Sublicensee
                  on an F.O.B. or Ex-Works basis ("F.O.B. Product").

                  (iii) Forecasts: separate, detailed forecasts of sales for
                  Licensed Products (the "Sales Projections") by Sub-Territory,
                  by distribution channel, by Customer, by Licensed Product and
                  by SKU.

                  (iv) Product Pricing List: a complete product pricing list by
                  distribution channel, by customer and by SKU, including,
                  without limitation, for all Licensed Products destined for
                  normal retail distribution channels as well as Account
                  Specific Merchandise and F.O.B. Product, as well as any
                  material deviations from the product pricing for any SKUs from
                  the product pricing list



                                     8
<PAGE>
                  submitted for the immediately preceding Quarterly Updates
                  and/or Annual Marketing Plan, as the case may be.

                  (v) Policies and Procedures: a detailed summary of Licensee's
                  policies and procedures with respect to discounts, product
                  pricing, promotions and sales incentive programs as the same
                  relate to the Licensed Products (and any material changes
                  thereto [e.g., deletions, additions or modifications] of which
                  Licensee has not previously apprised Licensor in writing).

                  (vi) Advertising:

                        (A) Ad Plan: a detailed overall strategy for all
                        Advertising campaigns related to the Licensed Products,
                        the proposed advertising agencies to be engaged in
                        connection with such campaigns and the specific
                        strategic and creative criteria to be given to such
                        advertising agencies in the formulation of such
                        campaigns.

                        (B) Advertisements:

                              (1) Television Advertising: specific details,
                              including type of media (e.g., without limitation,
                              national, local spot, etc.), length, demographics,
                              commencement and expiration dates and media value
                              (including GRP's and TRP's set forth on a weekly
                              basis);

                              (2) Radio Advertising: specific details, including
                              type of commercial, market reach, demographics,
                              length, commencement dates, expiration dates and
                              media value;

                              (3) Print Advertising: specific details of the
                              proposed media, commencement dates, expiration
                              dates, demographics, market reach, circulation and
                              media value;

                              (4) Outdoor Advertising: specific details of the
                              proposed outdoor Advertising exhibited anywhere
                              (e.g., without limitation, roadside benches,
                              billboards, public transportation vehicles, stands
                              and walls);

                              (5) Retail Advertising: specific details,
                              including type of media (in-store displays,
                              materials, signage, roto advertisements, product
                              give-aways, etc.);




                                     9
<PAGE>
                              (6) Consumer Promotions: specific details of
                              proposed promotions which may include sweepstakes,
                              free goods offers, offers to purchase or otherwise
                              receive special products, or "cross promotions"
                              with third parties (e.g., with PepsiCo), or other
                              promotions directed to consumers;

                              (7) Public Relations Efforts: specific details,
                              including the type of media targeted, the specific
                              consumer "message" strategy, and the public
                              relations agency, if any, contracted by Licensee;
                              and

                              (8) Other Media Advertising: specific details of
                              proposed Advertising media other than the forms of
                              media Advertising set forth in Subparagraphs
                              4.1(b)(vi)(B)(1)-(7) hereinabove, whether such
                              media is now or hereafter known, devised, invented
                              or developed.

                  (vii) Public Relations: to the extent not included in
                  Subparagraph 4.1(b)(vi)(B) hereinabove, specific details of
                  proposed publicity campaigns, event marketing plans, trade and
                  consumer press articles related to the Licensed Products and
                  (subject to seasonality) featured sections devoted entirely to
                  Licensed Products in trade circulars to Customers.

                  (viii) Trade Support: specific details of Licensee's trade
                  support programs for the five (5) key retail Customers in each
                  Sub-Territory, specific descriptions of the P.O.S. proposed to
                  be designed and manufactured hereunder, the proposed channels
                  of distribution at which such P.O.S. will be displayed and the
                  time schedules proposed for such displays, and specific
                  details of each and every Dedicated Retail Space pursuant to
                  Subparagraph 4.6 hereinbelow.

                  (ix) Consumer Research: Licensee's plans for specific consumer
                  research that will be conducted as required pursuant to
                  Subparagraph 4.7 hereinbelow.

                  (x) Retail Marketing: to the extent not included in
                  Subparagraph 4.1(b)(vi)(B) hereinabove, specific details of
                  inventory management, fulfillment and refilling of retail
                  product assortments, stock balancing and retail presentations.

            (c) Adherence to Marketing Plans: Licensee's timely submission of
            and compliance with each Marketing Plan and each Plan Element
            approved by Licensor is of the essence of this Agreement.




                                     10
<PAGE>
      4.2. Minimum Sales Levels. Licensee shall exercise good faith commercial
      efforts to ensure that Net Sales during each time period for which a
      Marketing Plan is due hereunder will be equal to or exceed the Sales
      Projections set forth in such Marketing Plan as approved by Licensor for
      such time period including the Net Sales outlined in Column D of Schedule
      III for Calendar Years 1999 and 2000 (the "Minimum Sales Levels").

      4.3. Staffing/Overhead. Licensee shall employ a team of individuals whose
      services shall at all times hereunder be dedicated "exclusively" (i.e.,
      one hundred percent [100%] dedicated) or "primarily" (i.e., more than
      fifty percent [50%] but less than one hundred percent [100%] dedicated) as
      hereinbelow denoted as "Exclusively" or "Primarily," respectively, to
      Licensee's activities hereunder (collectively the "SW Toy Team"). The
      number of individuals comprising such SW Toy Team shall be subject to the
      mutual reasonable approval of Licensor and Licensee. All salary, overhead,
      benefits and expenses of the SW Toy Team and of their support staff will
      be Licensee's sole cost, expense and responsibility. The SW Toy Team shall
      consist of at least the following positions, and the individuals occupying
      such positions shall be subject to Licensor's approval:

            (a) Senior Worldwide SW Toy Brand Executive: a senior executive
            position with overall responsibility for managing and overseeing
            Licensee's activities on a worldwide basis in the exercise of
            Licensee's obligations hereunder (the "Senior Worldwide SW Toy Brand
            Executive"). (Exclusively)

            (b) Domestic Marketing Executive: an executive position with overall
            responsibility for the management and oversight of Licensee's
            marketing efforts in the United States for the Licensed Products,
            including, without limitation, the implementation of Licensee's
            specific trade support programs for, and sales relationships with,
            and all distribution of Licensed Products, to all retail and other
            Customer accounts in the United States (the "Domestic Marketing
            Executive").
            (Exclusively)

            (c) International Marketing Executive: an executive position with
            overall responsibility for the management and oversight of
            Licensee's marketing efforts outside of the United States for the
            Licensed Products including, without limitation, the implementation
            of Licensee's specific trade support programs for, and sales
            relationships with, and all distribution of Licensed Products to all
            retail and other Customer accounts in all Sub-Territories outside of
            the United States (the "International Marketing Executive").
            (Primarily)

            (d) Product Development Team: a number of individuals whose services
            are exclusively dedicated to the design and development of Licensed
            Products hereunder (the "Product Development Team"). The Product
            Development Team shall consist of at least a general manager and a
            minimum of ten (10) designers, sculptors and artists.
            (Primarily)



                                     11
<PAGE>
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.



            (e) Retail Marketing Organization: an in-house staff or third party
            organization contracted by Licensee, whose primary function will be
            servicing, throughout each and every Sub-Territory, all retail
            Customers of Licensee in the coordination of inventory management
            and product allocations and in the management of the physical
            presentation of Licensed Products on shelves in retail outlets, as
            well as performing such other functions customarily performed by
            retail marketing organizations in the toy industry; provided,
            however, that for Sub-Territories outside of the U.S. and Canada
            Licensee shall not be responsible to comply with its obligations
            pursuant to this Subparagraph 4.3(e) to the extent that a retail
            Customer prohibits retail marketing representatives from all toy
            distribution companies from performing such functions in such
            Sub-Territory for such retail Customer. (Primarily)

            (f) Research Analyst: a full-time research analyst position
            exclusively dedicated to collating and analyzing all sell-through
            information relating to the Licensed Products in each such
            Sub-Territory designated by Licensor and producing weekly updates
            for Licensor and Licensee of the information so collated and
            analyzed. (Primarily)

      4.4. Licensor Representative. Licensee acknowledges that Licensor intends
      to secure the services of a senior executive who will oversee, on
      Licensor's behalf, Licensee's activities in relation to the exercise of
      the rights licensed to and obligations assumed by Licensee pursuant to
      this Agreement (the "Licensor Representative"). [**]

      4.5. Advertising Commitment. In each and every Calendar Year of the Term
      beginning with Calendar Year 1999, Licensee shall expend in each
      Sub-Territory hereunder not less than such Ad Spend as Licensor shall have
      approved as part of the Marketing Plan and Quarterly Updates for such
      Sub-Territory. The "Ad Spend" shall be defined as the actual, direct,
      out-of-pocket costs (without any overhead and administrative charges) for
      the third party creation and placement of Advertising for the sale of
      Licensed Products, net of all rebates and credits of any kind (however
      calculated or denominated). Within thirty (30) days for the
      Sub-Territories of the U.S. and Canada, and within sixty (60) days for the
      Sub-Territories outside of the U.S. and Canada, following the end of each
      Calendar Year of the Term, beginning with Calendar Year 1999, Licensee
      shall submit to Licensor a true and accurate statement setting forth, Sub-
      Territory-by-Sub-Territory, the actual Ad Spend within each Sub-Territory,
      and Licensee shall concurrently supply to Licensor documentation
      sufficient to evidence Licensee's compliance with the requirements of this
      Subparagraph 4.5. If Licensor requires an English translation of any
      non-English language documentation, the sixty (60) day period for the
      applicable Sub- Territory will be extended accordingly. If Licensee fails
      to expend the full amount of the Ad Spend approved by Licensor for any
      Sub-Territory then, as liquidated damages for such failure by Licensee,
      within fifteen (15) business days following the end of the aforementioned
      thirty (30) or sixty (60) day period, Licensee shall pay to Licensor an
      amount equal to the shortfall between the amount of Ad Spend approved by
      Licensor and the actual amount of Ad Spend expended by Licensee for such
      Sub-Territory.




                                     12
<PAGE>
      4.6. Dedicated Retail Space. On a continuous basis throughout the Term,
      Licensee agrees to use commercially reasonable efforts to secure a retail
      space that is one hundred percent (100%) dedicated to the sale of Licensed
      Products and other toy products based on the Licensed Property (a
      "Dedicated Retail Space") in ninety percent (90%) or more of the stores
      that are owned or controlled by any and all of the top five (5) retail
      Chains in the U.S. Sub-Territory and the top three (3) retail Chains, if
      any, in each Sub-Territory enumerated in Column A of Schedule III. Each
      Dedicated Retail Space shall consist of not less than the number of
      running square feet of space set forth on Schedule IV. Licensee shall
      cooperate with Licensor and with a designated third party licensee of
      Licensor concerning toy products based on the Licensed Property in working
      with retailers to secure such Dedicated Retail Space, and as between
      Licensee and such third party licensee, Licensee shall be responsible for
      an amount equal to a pro-rata portion of the costs of each such Dedicated
      Retail Space in any country of the Territory equal to the ratio that the
      running square feet of such Dedicated Retail Space utilized by Licensee
      bears to the total running square feet of such Dedicated Retail Space
      utilized by both Licensee and such third party licensee.

      4.7. Consumer Research. No less frequently than annually, throughout the
      Term and with respect to each Sub-Territory, Licensee shall generate such
      ongoing qualitative and quantitative consumer research concerning the
      Licensed Products or the Licensed Property as Licensor and Licensee shall
      mutually agree, and Licensee shall provide Licensor with a copy of all
      such research.

5.    LICENSOR APPROVALS.

      5.1. Creative Materials. Subject to Subparagraph 5.3 hereinbelow, Licensor
      will have the right to approve in its sole discretion the following
      material, in accordance with the procedures set forth in Subparagraph 5.2
      hereinbelow:

            (a) the Licensed Products, including, but not limited to, the
            initial concepts, design documents, scripts, copy, alpha version,
            beta version, unpainted sculpts, painted sculpts, prototypes and
            manufacturing samples;

            (b) any and all audio and/or visual materials (including, without
            limitation, artwork, photographs, images and designs) incorporating
            any part of the Licensed Property, including, without limitation,
            initial concepts, preliminary designs and final artwork intended for
            any uses hereunder (the "Designs"); and

            (c) any and all cartons, containers, packaging, instructions, tags,
            labeling and wrapping material for the Licensed Products and any and
            all Advertising and marketing, publicity, promotional and similar
            materials for the Licensed Products (including, by way of
            illustration, but not limitation, catalogs, trade advertisements,
            flyers, sales sheets, labels, package inserts and display materials)
            which are used in connection with the Licensed Products and which
            make use of any of the Licensed Property, as well as



                                     13
<PAGE>
            any trade or other Advertising or similar announcements intended to
            advise potential customers of the rights acquired by Licensee under
            this Agreement, whether or not such materials make use of the
            Licensed Property (collectively the "Advertising Materials").


      All materials submitted in a language other than English will be
      accompanied by a complete and accurate English translation. Licensee shall
      ensure that all Licensed Products, in their finished goods form, shall in
      all material respects reflect and be accurate representations of the
      prototypes for the Licensed Products as approved by Licensor, and
      Licensee's failure to do so shall, at Licensor's sole option, be deemed to
      be a material breach of this Agreement.

      5.2.  Approval Procedure.

            (a)   In General.

                  (i) Marketing Plans: Licensee will submit to Licensor each
                  Marketing Plan (including the Initial Marketing Plan, the
                  Annual Marketing Plans and Quarterly Updates) for Licensor's
                  approval, subject to Subparagraph 25.10 hereinbelow, on or
                  before the dates required pursuant to Subparagraph 4.1 above.
                  If Licensor disapproves all or any part of a Marketing Plan,
                  Licensee shall revise such Marketing Plan (or any Plan Element
                  thereof) and re-submit same to Licensor for its approval again
                  pursuant to this Subparagraph 5.2, until such Marketing Plan
                  (or Plan Element, as the case may be) is approved by Licensor.

                  (ii) Creative Materials: Licensee will submit to Licensor,
                  along with Licensor's Standard Approval Form attached hereto
                  as Exhibit C, the Licensed Products, the Designs, Advertising
                  Materials and Copyright Materials for Licensor's approval,
                  subject to Subparagraph 25.10 hereinbelow, prior to
                  manufacture, printing, production, duplication, distribution,
                  sale or other use by Licensee thereof and each and every
                  modification thereto. If Licensor requires alterations, then
                  such alterations shall be made at Licensee's sole cost and
                  shall be submitted to Licensor for further written approval in
                  accordance with this Subparagraph 5.2. Licensee agrees to
                  strictly adhere to all of Licensor's product approval
                  procedures, and to comply with Licensor's style and legal
                  guides provided to Licensee, and cause all parties with whom
                  Licensee contracts relative to the Licensed Products to do so,
                  and, where necessary, to incorporate changes in compliance
                  therewith. Any modification of any Licensed Product, Design,
                  Advertising Material and/or Copyright Material must be
                  re-submitted in advance for Licensor's written approval as if
                  it were a new Licensed Product, Design, Advertising Material
                  and/or Copyright Material. Licensee agrees not to change the
                  Licensed Product, Design, Advertising Material or Copyright
                  Material, as the case may be, without first submitting to



                                     14
<PAGE>
                  Licensor samples showing such proposed changes and obtaining
                  Licensor's written approval of such samples.

            (b) Licensor's Discretion. Except as otherwise expressly provided in
            this Agreement, approval and disapproval of all matters for which
            Licensor's approval is required pursuant to this Agreement shall be
            at Licensor's discretion, and any product, good or article not so
            approved in writing by Licensor prior to the manufacture thereof or
            for which a Marketing Plan has not been approved by Licensor
            hereunder shall not be a Licensed Product and Licensee shall have no
            right to manufacture, market, distribute, sell or exercise any other
            right licensed to it hereunder with respect to such product, good or
            article. Notwithstanding and without waiver of any other rights or
            remedies available to Licensor, if any product, good or article not
            approved by Licensor is manufactured, distributed or sold by
            Licensee or any third party authorized by Licensee, then Licensor
            shall have the right to terminate this Agreement subject to and
            pursuant to the terms of Subparagraph 22.2(a) hereinbelow.
            Licensor's approval of any Copyright Materials in accordance with
            Subparagraph 5.2 hereinabove with respect to the Licensed Product
            shall not be deemed to be approval for the use of any part of such
            Copyright Materials with respect to another Licensed Product.

            (c) Third Party Sourcing. Licensee shall not have the right to use
            any artwork or other creative material incorporating elements of the
            Licensed Property used in connection with the products, goods or
            articles of third parties (including, without limitation, books,
            comics and trading cards) without first advising Licensor in writing
            of the third party which had used such artwork and without first
            obtaining Licensor's written approval thereof in accordance with
            this Paragraph 5.

      5.3. Pre-Existing Approvals. Licensor hereby acknowledges and affirms the
      written approvals given by it in respect of any Licensed Product
      heretofore approved by Licensor pursuant to that certain agreement between
      Licensor and Licensee dated as of October 30, 1992, as amended (the "Prior
      Agreement") with respect to any materials that would constitute Licensed
      Products, Designs or Advertising Materials hereunder.

6.    ARTWORK AND FILM CLIPS/THIRD PARTY APPROVALS.

      6.1. Artwork and Film Clips. Licensee agrees and acknowledges that,
      notwithstanding the license granted by Licensor under this Agreement, use
      of visual materials, audio representations and audiovisual materials
      relating to the Licensed Property (whether or not supplied by Licensor)
      (collectively, "Artwork and Film Clips") may require license payments to
      third parties independent of and unrelated to Licensee's obligations to
      make payments to Licensor under this Agreement. Examples of such licenses
      and/or payments include, without limitation, payments to talent, trade
      unions and guilds, reuse fees, synchronization licenses and residuals.
      Licensee agrees and acknowledges that Licensee may in addition be required
      under any applicable talent agreements or collective bargaining agreements
      to obtain releases from third



                                     15
<PAGE>
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.


      parties, including performers, artists, talent, unions or guilds, for use
      of Artwork and Film Clips.

      6.2. Third Party Approvals. Licensee shall not have the right to make any
      use of the Licensed Property, including, without limitation, Artwork and
      Film Clips, without first obtaining any required third party
      authorization, release, approval or license, and the prior written
      approval of Licensor. Licensor agrees that it shall use reasonable efforts
      to inform Licensee of any third party license or payment of which Licensor
      has knowledge that is required in connection with any proposed use of the
      Licensed Property or any Artwork or Film Clips hereunder; provided,
      however, that Licensor makes no warranty or representation as to the
      accuracy or completeness of such information and Licensor shall not be
      liable with respect thereto or with respect to any payment that may be
      required. Licensee shall be solely responsible for any and all payments
      required with respect to the use of any Artwork and Film Clips in
      connection with a Licensed Product and the marketing, Advertising, sale,
      distribution and/or promotion thereof. All specific uses of any Artwork
      and Film Clips shall be subject to the prior written approval of Licensor,
      as provided in Paragraph 5 above. Without limitation of Licensor's rights
      and remedies in such event, Licensee's failure to comply with this
      Subparagraph 6.2 shall be deemed to be a material breach of this
      Agreement.

      6.3. Licensor's Costs. Any and all costs and expenses incurred by Licensor
      in producing, copying, and duplicating Artwork and Film Clips for Licensee
      and in shipping, handling and delivering Artwork and Film Clips to
      Licensee shall be reimbursed and paid to Licensor within thirty (30) days
      after Licensee's receipt of an invoice therefor. The foregoing
      reimbursement obligation by Licensee shall apply to any original artwork
      done at Licensee's request by Licensor, or by third parties under contract
      to Licensor.

7.    ADVANCE/[**].

      7.1. Advance. Licensee agrees to pay to Licensor, an advance of One
      Hundred Forty Million Dollars ($140,000,000) payable in the following
      amounts, at the following times:

            (a) Sixty Million Dollars ($60,000,000) thereof, contingent upon the
            occurrence of the initial general theatrical release in the United
            States of Episode I and payable on the U.S. Release Date of Episode
            I;

            (b) Forty Million Dollars ($40,000,000) thereof, contingent upon the
            occurrence of the initial general theatrical release in the United
            States of Episode I and payable on the U.S. Release Date of Episode
            I;

            (c) Twenty Million Dollars ($20,000,000) thereof, contingent upon
            the occurrence of the initial general theatrical release in the
            United States of Episode II and payable on the U.S. Release Date of
            Episode II; and




                                     16
<PAGE>
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.


            (d) Twenty Million Dollars ($20,000,000) thereof, contingent upon
            the occurrence of the initial general theatrical release in the
            United States of Episode III and payable on the U.S. Release Date of
            Episode III.

      The aforementioned advance is apportioned among Sub-Territories as set
      forth in Schedule III. The advance for a Sub-Territory shall be recouped
      only by Royalties payable to Licensor for such Sub-Territory (each such
      advance apportioned for the applicable Sub-Territory is hereinafter
      referred to as an "Advance"). Royalties actually paid to Licensor from
      January 1, 1999 through the U.S. Release Date of Episode I may be credited
      against and in reduction of the Advances otherwise payable to Licensor
      pursuant to Subparagraphs 7(a) and 7(b) hereinabove. Royalties paid to
      Licensor for a Sub-Territory in excess of an Advance for such
      Sub-Territory shall not be used to reduce the amount of a subsequent
      Advance payable on release of an Episode subsequent to Episode I.
      Notwithstanding the above, Licensee shall have the right to delay payment
      of sums due pursuant to Subparagraphs 7.1(b), 7.1(c) and 7.1(d)
      hereinabove for up to four (4) months; provided, however, that any such
      delayed payment shall accrue interest charges from the date due until the
      date of payment to Licensor at a rate equal to three percent (3%) over the
      prime lending rate set by the Bank of America N.T.S.A. and such interest
      shall be payable upon demand; provided, that any such interest paid shall
      not be recoupable by any Royalties or Advances payable hereunder.

      7.2.  Cross-Collateralization.  For the avoidance of doubt,

            (a) Advances for one Sub-Territory shall not be cross-collateralized
            by the recoupment of Royalties in another Sub-Territory; and

            (b) For the purpose of determining recoupment of Advances, a sale
            with respect to a Licensed Product shall be deemed to take place in
            the Sub-Territory into which Licensee, a Licensee Affiliate or a
            Sublicensee ships or delivers (or authorizes the shipment or
            delivery) such Licensed Product to a Customer.

      7.3.  [**]

8.    ROYALTIES.

      8.1.  Royalty Percentage. Licensee will pay to Licensor sums ("Royalties")
      equal to the following applicable percentage of Net Sales ("Royalty
      Percentage") for each unit of a Licensed Product: [**].

      8.2. Net Sales. "Net Sales" shall be equal to one hundred percent (100%)
      of all gross amounts derived by Licensee or a Sublicensee (whether or not
      such Sublicensee is a Licensee Affiliate), as the case may be, from the
      "sale" (as defined in this Subparagraph 8.2) of each and every Licensed
      Product hereunder, less only: (a) any and all reasonable and actual trade
      and promotional discounts and allowances which are shown on an invoice and
      which do not exceed



                                     17
<PAGE>
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.


      in their totality [**] of the total amount shown on the invoice, and (b)
      returns supported by credit memos actually issued to a Customer, provided
      that such returns may not exceed [**] of the total invoiced amount
      (regardless of whether such returns are the result of return policies,
      defective products, product warranties, stock balancing, price protection
      or any other provision or obligation) and further provided that if the Net
      Sales of any such resold return (in excess of the [**] returns cap
      mentioned hereinabove) exceeds the original Net Sales therefor, then in
      addition to the Royalty paid in respect thereof, Licensor shall also be
      entitled to the applicable Royalty on the difference between the original
      Net Sales and the Net Sales upon resale of such return. Net Sales shall
      not be reduced in any other way not specified above in this Subparagraph
      8.2 and [**]. A "sale" shall be defined to occur for a specific Licensed
      Product in any country of the Territory when the first of any of the
      following events occurs: (i) the date of the invoice for such Licensed
      Product actually issued by Licensee, by a Licensee Affiliate or by a
      Sublicensee to a Customer; (ii) the date of the shipment of such Licensed
      Product to a Customer of Licensee, of a Licensee Affiliate or of a
      Sublicensee; or (iii) the date payment is received in respect of such
      Licensed Product by Licensee, by a Licensee Affiliate or by a Sublicensee
      from a Customer.

      8.3. Rebates, Discounts, Deductions. Notwithstanding anything to the
      contrary in Subparagraph 8.2 hereinabove, there shall be no rebates,
      discounts, allowances, deductions from or reductions to the gross amounts
      derived by Licensee, a Licensee Affiliate or a Sublicensee with respect to
      a Licensed Product as a result of the manufacturing, distribution,
      marketing, promotion or sale of a product, good or article that is not a
      Licensed Product, and any rebate, discount, allowance, deduction from or
      reduction to such gross amounts with respect to a Licensed Product shall
      be no higher on a per unit basis than the lowest rebate, discount,
      allowance, deduction or reduction granted to a Customer within the
      previous two (2) Calendar Years for the same volume of any other product,
      good or article similar to such Licensed Product distributed by Licensee,
      a Licensee Affiliate or a Sublicensee to such Customer.

      8.4. F.O.B. or Ex Works. Notwithstanding anything to the contrary
      contained herein or otherwise, with respect to the "sale" (as defined in
      Subparagraph 8.2 hereinabove) of a Licensed Product on a F.O.B., Ex Works
      or similar basis (collectively herein "F.O.B."), the applicable Royalty
      for such Licensed Product shall be as follows:

            (a) In those cases where the Licensed Product is specifically
            designed as and is intended to be sold as an F.O.B. Product, is sold
            directly to retailers on an F.O.B. basis and is not sold by Licensee
            other than on an F.O.B. basis (e.g., the current product line of
            Galoob Direct, Inc.), then the applicable Royalty for such Licensed
            Product shall be the product of the Royalty Percentage in
            Subparagraph 8.1 hereinabove multiplied by one and sixty-seven one
            hundredths (1.67) (such Royalty hereinafter the "F.O.B. Royalty").




                                     18
<PAGE>
            (b) In those cases where the Licensed Product is offered for sale to
            a Customer in a Sub-Territory on other than an F.O.B. basis and the
            same Licensed Product SKU is also sold to the same Customer in the
            same country on an F.O.B. basis and the number of units of the same
            Licensed Product SKU that are sold to a Customer in the country on
            an F.O.B. basis in the applicable Calendar Year do not exceed fifty
            percent [50%] of the aggregate number of units of such Licensed
            Product SKU sold to such Customer in such country in the same
            Calendar Year, then the applicable Royalty for such Licensed Product
            sold on an F.O.B. basis shall be the Royalty that would have been
            payable pursuant to Subparagraph 8.1 hereinabove had such Licensed
            Product been sold to such Customer in such country on other than an
            F.O.B. basis. In those cases where all the conditions of this
            Subparagraph 8.4(b) have been met except that the applicable number
            of units sold on an F.O.B. basis exceed fifty percent (50%) of the
            applicable aggregated number of units sold, then the provisions of
            Subparagraph 8.4(d) shall apply.

            (c) In those cases where the Licensed Product is sold on an F.O.B.
            basis to a Sublicensee for subsequent distribution to a Customer,
            then the following shall apply:

                  (i) for purposes of this Subparagraph 8.4(c) only, the
                  Sublicensee shall be deemed to be a Customer for purposes of
                  determining when the sale has occurred and the applicable Net
                  Sales, and

                  (ii) the applicable Royalty for such Licensed Product shall be
                  the greater of the F.O.B. Royalty or the Royalty that would be
                  payable pursuant to Subparagraph 8.1 hereinabove if such
                  Sublicensee is not deemed a Customer. For purposes of this
                  Subparagraph 8.4(c), the Royalty shall initially be accounted
                  for and paid as if the Sublicensee is deemed to be a Customer;
                  thereafter, at such time as such Sublicensee sells such
                  Licensed Product to a Customer, Licensee shall reconcile the
                  accounting and payment to Licensor in accordance with the
                  terms of this Subparagraph 8.4(c)(ii).

            (d) In those cases where a Licensed Product is sold on an F.O.B.
            basis not described in Subparagraphs 8.4(a)-(c) hereinabove, the
            particular method of sale and the applicable Royalty must be
            approved in writing by Licensor, it being the intention of the
            parties that such Royalty will in all cases be equal to the higher
            of the F.O.B. Royalty or the Royalty that would be payable pursuant
            to Subparagraph 8.1 hereinabove if such sale were made on other than
            an F.O.B. basis.

      8.5. Other Consideration. Notwithstanding anything to the contrary
      contained in this Agreement, if Licensee, a Licensee Affiliate or a
      Sublicensee shall derive any consideration (other than the Net Sales for a
      Licensed Product hereunder) for the right to exercise any of the rights
      licensed to Licensee hereunder, then Licensor shall be entitled to fifty
      percent (50%) of any such consideration, which shall be payable and
      accountable to Licensor in accordance with



                                     19
<PAGE>
      the provisions of this Agreement and when first received by or credited to
      Licensee, a Licensee Affiliate or a Sublicensee, as the case may be.

      8.6. Bundling Royalty. Licensee shall not have the right to distribute,
      market or sell (or authorize a third party to distribute, market or sell)
      any Licensed Product with any other product, good or article (including
      another Licensed Product) in a single package at a single price
      ("Bundling") without Licensor's prior written approval of: (a) whether or
      not such Bundling may occur; (b) the terms and conditions of such
      Bundling; and (c) Licensor's Royalty in such instance.

      8.7. Evaluation Unit. Any shipment by Licensee, a Licensee Affiliate or a
      Sublicensee to a Customer of a promotional or evaluation unit ("Evaluation
      Unit") of a Licensed Product will be deemed Net Sales and shall be
      calculated at an amount equal to the average invoice amount charged for
      such Licensed Product for the applicable distribution channel in the
      applicable Sub- Territory from the time of its initial commercial release
      until the date of such shipment or, if such Licensed Product has not been
      commercially released, at an amount equal to the average invoice amount
      charged for a comparable Licensed Product for the applicable distribution
      channel in the applicable Sub-Territory from the time of its initial
      commercial release until the date of shipment of such Evaluation Unit,
      except to the extent that Licensee has obtained Licensor's prior written
      consent to exempt a Licensed Product SKU from Licensee's Royalty
      obligations hereunder.

      8.8. Value-Added Taxes. Calculation of Net Sales shall not include any
      Value Added Tax ("VAT") or any other tax (except as expressly provided in
      this Agreement) and accordingly Licensee shall not pass along to Licensor
      and Licensor shall not bear any VAT or any other tax charges incurred with
      respect to a Licensed Product.

      8.9. No Waiver. Acceptance of any sums by Licensor by way of Advances,
      Royalties or otherwise shall not prevent Licensor at any time from
      disputing or demanding particulars with reference to the amounts due nor
      shall such acceptance constitute Licensor's waiver of any breach by
      Licensee of any terms hereof.

      8.10. No Carryover. If the parties agree to an extension of the Term and
      if, on the expiration of the Term, any Advance shall not have been
      recouped by the applicable Royalties paid to Licensor, then the shortfall
      will not be carried forward to any extension of the Term.

      8.11. Warrant.

            (a) Concurrently with the execution of this Agreement, Licensee
            shall grant to Licensor a warrant (the "Warrant") for the purchase
            of up to 2,130,000 fully paid and non-assessable shares of the
            common stock of Licensee following exercise of the Warrant at a per
            share exercise price equal to $15, subject to adjustment as provided
            in the Warrant.



                                     20
<PAGE>
            (b) If at any time prior to the termination of the Warrant, Licensee
            grants any Common Stock, Convertible Securities or Options (as
            defined in the Warrant) to any officer, director, employee or
            consultant of Licensee ("EE Stock"), then Licensee shall
            simultaneously therewith grant to Licensor a warrant ("Springing
            Warrant"), on the same terms and conditions as the Warrant (except
            that the exercise price per share of such Springing Warrant shall
            equal the exercise price per, or the amount paid for each, share of
            such EE Stock), to purchase that number of shares of Common Stock
            computed using the following formula:

                  X = .154(B/A)(X+Y)

                  Where:

                  X = The number of shares of Common Stock to be issued to
            Licensor upon exercise of the Springing Warrant

                  Y = The number of shares of Common Stock issued or issuable
            pursuant to the grant of such EE Stock

                  A = The original number of Warrant Shares (as defined in the
            Warrant)

                  B = The number of Warrant Shares owned by Licensor on the date
            of such grant of Additional Stock

9.    STATEMENTS AND PAYMENTS.

      9.1. Payment Terms. Licensee will wire transfer (as immediately available
      funds) to Licensor all sums due to it hereunder for Licensor's receipt
      thereof within thirty (30) days following the end of each calendar month
      based on the Net Sales of Licensed Products in such calendar month. Net
      Sales generated by a Sublicensee (whether or not such Sublicensee is a
      Licensee Affiliate) shall be reported to Licensor in the calendar month in
      which such Net Sales are paid or reported to Licensee, whichever first
      occurs. All payments made to Licensor pursuant to this Agreement will be
      in United States currency. Late payments will accrue interest charges from
      the due date through the date of payment at an interest rate equal to
      three percent (3%) over the prime lending rate set by the Bank of America
      N.T.S.A., or the maximum legal rate, if such maximum legal rate is lower,
      and shall be payable upon demand.

      9.2. Remittance of Funds. All compensation amounts stated in this
      Agreement, including without limitation, Advances and Royalties accrued
      and/or payable to Licensor pursuant to this Agreement shall be computed,
      accrued, paid and remitted to Licensor as follows, and Licensee shall bear
      all costs (including, without limitation, all transactional and transfer
      costs, points and fees), as follows:




                                     21
<PAGE>
            (a) All Royalties due and payable to Licensor hereunder shall be
            converted from the local currency of the source country to U.S.
            Dollars at the rate of exchange published in The Wall Street Journal
            for such local currency which is in effect on the date payment is
            due or, if payment is late, then the rate of exchange published in
            The Wall Street Journal on the date payment is due or the date of
            actual payment, whichever rate yields the higher amount of U.S.
            Dollars.

            (b) It shall be Licensee's sole responsibility and expense to obtain
            the approval of any governmental authorities to take whatever steps
            that may be required and to comply in all respects with all
            applicable laws and regulations in order to remit funds to Licensor.

      9.3. Blocked Funds. Royalties are payable to Licensor hereunder on all Net
      Sales of Licensed Products, regardless of whether monies cannot be
      converted into U.S. Dollars or cannot be promptly remitted to Licensor in
      the United States or because any or all of such monies are otherwise
      restricted due to moratorium, embargo, banking regulations, exchange
      restrictions or other governmentally-imposed restrictions against such
      conversion and remittance (such restricted monies the "Blocked Funds").

      9.4. Payment Reports. Within thirty (30) days after the close of each
      calendar month, Licensee will prepare and deliver to Licensor a Royalty
      report form in the form attached hereto as Exhibit D, as such form shall
      be modified by Licensor from time to time, together with all other
      information required by Licensor hereunder (the "Royalty Report Form").
      Commencing with the month of October, 1998, a Royalty Report Form will be
      due on a calendar monthly basis whether or not Royalties are payable to
      Licensor hereunder.

      9.5.  Report Information.

            (a) Licensee shall furnish to Licensor, concurrently with the
            delivery of the Royalty Report Form pursuant to Subparagraph 9.4
            hereinabove, a full and complete statement, duly certified by an
            officer of Licensee to be true and accurate, providing at least the
            following information:

                  (i) one hundred percent (100%) of all gross amounts derived by
                  Licensee or a Sublicensee (whether or not such Sublicensee is
                  a Licensee Affiliate), as the case may be, from the "sale" (as
                  defined in Subparagraph 8.2 hereinabove) of each and every
                  Licensed Product SKU hereunder, itemized by Licensed Product
                  SKU;

                  (ii) itemization of all allowable deductions, if any, in
                  calculating the Net Sales for each Licensed Product;

                  (iii) the Net Sales for each and every Licensed Product SKU;



                                     22
<PAGE>
                  (iv) the amount of Royalties due to Licensor with respect to
                  such Net Sales;

                  (v) credits for any Advance recoupment or other payments made
                  since the last Royalty Report Form rendered to Licensor
                  hereunder;

                  (vi)  the balance payable;

                  (vii) an itemization of each and every Licensed Product SKU
                  utilizing the name, voice or likeness of such individual
                  previously identified to Licensee by Licensor to whom Licensor
                  has an obligation to pay a participation in proceeds generated
                  by the sale of such Licensed Product and the identification of
                  each and every name, voice or likeness of a character which is
                  embodied in such Licensed Product SKU;

                  (viii) an itemization of all information required by Licensor
                  and previously advised to Licensee for Licensor to calculate
                  any participation referred to in Subparagraph 9.5(a)(vii)
                  hereinabove and/or to render accountings with respect thereto;
                  and

                  (ix) such other pertinent information as Licensor may
                  reasonably request from time to time.

            (b) Each and every item of financial information required to be
            submitted by Licensee pursuant to Subparagraphs 9.5(a)(i) through
            9.5(a)(ix) hereinabove shall be broken down into the following
            categories: the calendar month to which the statement applies;
            cumulative from the inception of the Calendar Year to which such
            statement applies; and cumulative from and after the date of this
            Agreement to the close of the calendar month to which such statement
            applies; and such information shall be aggregated as follows:

                  (i) by Sub-Territory (and in each country within such
                  Sub-Territory, if more than one country exists in a
                  Sub-Territory); and

                  (ii) by all Licensed Products throughout the Territory as a
                  whole.

            (c) All amounts to be reported pursuant to Subparagraph 9.5(a) above
            shall be first stated in the local currency in which the pertinent
            Net Sales occurred. If several currencies are involved in any
            reporting category, that category shall be broken down by each such
            currency. Next to each local currency amount shall be set forth the
            equivalent amount stated in U.S. Dollars, and the rate of exchange
            required to be used hereunder in making the conversion calculation.




                                     23
<PAGE>
            (d) Each such statement and Royalty Report Form shall be provided by
            Licensee, at its sole expense, to Licensor in ASCII format or any
            other electronic media format as Licensor may reasonably request.

            (e) Upon Licensor's written request, Licensee shall also provide to
            Licensor such relevant data and information which Licensor shall
            require to substantiate any Royalty Report Form submitted to
            Licensor, the proper exercise of the rights licensed to Licensee
            hereunder and/or the operation and performance of Licensor's duties
            and obligations hereunder. Such data and information shall be
            included within the definition of "Licensee's Records" set forth in
            Subparagraph 11.1 hereinbelow and shall include, without limitation,
            all sales, manufacturing, distribution and accounting records
            related to the Licensed Products, all information relating to the
            inventory of Licensed Products (including components thereof
            anywhere in the world and "works-in-progress" [as such term is
            commonly understood in the U.S. toy industry]), all production and
            sales orders, invoices and bills of lading related to a Licensed
            Product, and copies of all material contracts and leases between
            Licensee and any third parties (e.g., without limitation, lenders,
            manufacturers, vendors, distributors, co-venturers) related to a
            Licensed Product, to any aspect of Licensor's rights and/or to any
            aspect of Licensee's obligations hereunder in connection with the
            manufacture, distribution, marketing, promotion and/or sale of any
            Licensed Product.

10.   TAXES.

      In addition to any other sums payable hereunder, Licensee agrees that it
      shall immediately and timely pay or reimburse Licensor for the payment of
      all amounts imposed as taxes, however designated, arising from or based
      upon this Agreement or the rights licensed hereunder including, without
      limitation, all sales, use and value-added taxes, local privilege or
      excise tax, tariffs, duties, property taxes or assessments, but excluding
      any taxes based upon Licensor's net income and subject to Subparagraph 8.8
      hereinabove. Except as provided in the remainder of this Paragraph 10, no
      withholding taxes of any kind may be deducted from any Royalties or gross
      amounts derived with respect to the sale of a Licensed Product. If and
      only to the extent that Royalties hereunder remitted directly to Licensor
      are subject to a withholding tax requirement of a country other than the
      United States, then Licensee is authorized by Licensor to deduct and to
      withhold from Royalties generated from such country any withholding tax
      imposed by such country at the local statutory rate or lower income tax
      convention rate, if applicable; provided, however, that the Royalties due
      to Licensor with respect to the "sale" (as defined in Subparagraph 8.2
      hereinabove) of any particular Licensed Product may not be reduced by
      withholding taxes from more than one country, that such tax payments made
      by Licensee on behalf of Licensor may not reduce the amounts payable and
      paid to Licensor under this Agreement by more than the applicable
      withholding taxes of the relevant country and, that Licensee shall
      promptly provide Licensor with notification of and official receipts for
      all tax payments made on Licensor's behalf pursuant to this Agreement. If,
      within forty-five (45) days after each payment is made hereunder Licensor
      has not received either: (a) an



                                     24
<PAGE>
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.



      authenticated withholding tax certificate (stamped by the appropriate tax
      authority); or (b) written evidence by Licensee (in form satisfactory to
      Licensor) that Licensee has filed an application to receive a withholding
      tax certificate from such tax authority, then Licensee shall immediately
      pay to Licensor an amount equal to the amount previously withheld by
      Licensee from such payment, divided by 1 minus the applicable withholding
      tax rate, (e.g.: if the tax withheld was $15, and the withholding tax rate
      was 15%, then Licensee shall remit to Licensor $15 divided by 85%, or
      $17.65).

11.   RECORDS AND AUDITS.

      11.1. Licensee's Records. During the Term and for not less than five (5)
      years following the expiration or termination of this Agreement, Licensee
      will maintain complete and accurate records of all transactions relating
      to this Agreement and/or Licensee's obligations hereunder including, but
      not limited to, the data and information described in Subparagraphs
      9.5(a)-(e) hereinabove (collectively "Licensee Records") and Licensee will
      contractually obligate and cause all Sublicensees and Manufacturers to
      maintain complete and accurate records of all transactions relating to
      this Agreement and the Sublicense Agreement or the Manufacturing
      Agreement, as the case may be, including, but not limited to, the data and
      information described in Subparagraph 9.5(e) hereinabove.

      11.2. Audits. Licensor or any independent certified public accountant
      selected by Licensor may from time to time, but not more frequently than
      two (2) times per Calendar Year, upon reasonable notice and during normal
      business hours, inspect at Licensee's main headquarters located in the
      United States any and all Licensee Records. If, upon performing such
      audit, it is determined that Licensee has underpaid Licensor, Licensee
      will immediately make full payment under Paragraph 8 hereinabove. If the
      amount of underpayment exceeds [**] of the payments due Licensor in the
      period being audited, Licensee will bear all expenses and costs related to
      such audit in addition to its obligation to make full payment under
      Paragraph 8 hereinabove. All underpayments and late payments will be
      subject to interest charges, at the rate specified for late payments in
      Subparagraph 9.1 hereinabove, calculated from the due date to the actual
      payment date. The obligation to maintain records and to grant Licensor and
      Licensor's representatives access to such records shall survive the
      expiration or earlier termination of this Agreement.

12.   COPYRIGHT AND TRADEMARK NOTICES.

      12.1. Copyright and Trademark Notices. Licensee will place the following
      notice on each unit of a Licensed Product and on all Advertising,
      promotional material, packaging and any other material using the Licensed
      Property:

            TM or (R) (if verified in writing by Licensor) & (C) (______) LUCAS.
            In English or local language: All Rights Reserved. Used under
            Authorization.)




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<PAGE>
            (      ) First year of Publication.

      If this notice cannot be used due to space limitations, Licensor will
      supply an alternative notice upon request. Licensee agrees that trademarks
      arising from the Licensed Property will only be displayed in a form and
      manner approved by Licensor. Licensor reserves the right to require
      changes in the required notice if Licensor in its reasonable judgment
      deems changes required by applicable law. Licensor makes no
      representations or warranties with respect to the validity or
      effectiveness of any trademarks in any country of the Territory.

      12.2. First Use. Licensee agrees to provide Licensor with the date of
      first use of each Licensed Product in each country of the Territory,
      together with documentation evidencing the first sale or shipment of such
      Licensed Product. In addition, Licensee shall submit to Licensor at the
      beginning of each Calendar Year, a statement on Licensor's standard form
      describing the Licensed Products that are being offered for sale.

13.   OWNERSHIP.

      13.1. Ownership of Copyright Materials. Licensor represents and warrants
      that it has the right to grant the license granted to Licensee in this
      Agreement. Licensee acknowledges and agrees that, as between Licensor and
      Licensee, the Licensed Property is owned solely and exclusively by
      Licensor, and that Licensee has no rights thereto other than as expressly
      set forth herein. Further, Licensee acknowledges and agrees that if and to
      the extent that any Licensed Products, Designs, Advertising Materials,
      Production Materials or other works are based on derived from the Licensed
      Property or any part thereof (all of the foregoing to such extent being
      individually and collectively the "Copyright Materials"), such Copyright
      Materials will immediately from the inception of creation become the
      property of Licensor and be owned solely and exclusively by Licensor.
      Licensor's ownership rights under this Subparagraph 13.1 will include any
      and all copyrights and any other intellectual property rights in the
      Licensed Property and in any Copyright Materials; provided, however, that
      such Licensor ownership rights will not include any Licensee patent,
      copyright, trademark or other intellectual property that is used by
      Licensee hereunder on or in connection with products sold by Licensee
      owned or controlled by Licensee which patent, copyright, trademark or
      other intellectual property shall be, as between Licensee and Licensor,
      the property of Licensee to the extent that such intellectual property
      does not constitute any Licensed Property. Licensor acknowledges and
      agrees that, as between Licensor and Licensee, Licensee is the owner of
      all tangible rights in and to any physical inventory of Licensed Products
      and, subject to Subparagraph 13.2 hereinbelow, in all Production
      Materials.

      13.2. Ownership of Production Materials. In addition to Licensor's other
      rights and remedies hereunder, if Licensee is in material breach of this
      Agreement or if the Agreement, in whole or in part, is terminated prior to
      the expiration of the Term then, at Licensor's sole option exercisable
      within ninety (90) days of the termination date by written notice to
      Licensee, Licensee shall transfer, assign and deliver to Licensor, and
      shall cause all Sublicensees and



                                     26
<PAGE>
      Manufacturers to transfer and assign to Licensor the full, complete and
      immediate ownership and possession of any and all physical, tangible
      tools, molds and printing plates used in the development or production of
      the Licensed Products created pursuant to this Agreement which reproduce
      any aspect of the Licensed Property (collectively "Production Materials"),
      whether or not developed by or on behalf of Licensee, a Licensee
      Affiliate, a Sublicensee, a Manufacturer or any third party. For any such
      Production Materials to be purchased by Licensor, Licensor shall pay
      Licensee an amount equal to ten percent (10%) of Licensee's then remaining
      net book value of the Production Materials so purchased. Licensee also
      agrees that upon such termination or expiration of this Agreement, at
      Licensor's sole discretion and upon Licensor's request, Licensee shall
      provide to Licensor satisfactory evidence of the destruction of any or all
      Production Materials not otherwise purchased by Licensor pursuant to this
      Paragraph 13.2, and that Licensor shall have the right at any time
      thereafter to enter the premises where the Licensed Products (or their
      components) are stored or manufactured to take inventory of witness the
      destruction of and/or take possession of and remove any inventory and/or
      Production Materials purchased pursuant to this Paragraph 13.2.

      13.3. Assignment of Ownership.

            (a) Assignment by Licensee. Licensee acknowledges that the
            copyrights and all other proprietary rights in and to the Licensed
            Property are exclusively owned by and reserved to Licensor. Licensee
            shall neither acquire nor assert copyright ownership or any other
            intellectual property right in the Licensed Property or in any
            derivation, adaptation, variation or name thereof. Without limiting
            the foregoing, Licensee hereby assigns, and shall contractually
            obligate all entities with whom it contracts relative to a Licensed
            Product or Copyright Material to assign to Licensor, all right,
            title and interest which Licensee or any such other entity may have
            in the Licensed Property, any Licensed Product or any Copyright
            Material heretofore or hereafter created by Licensee, such other
            entity or by any employee of Licensee or such other entity
            including, without limitation, any copyrights and any other
            intellectual property rights therein and the goodwill associated
            therewith. All such new materials shall be included in the
            definition of "Licensed Property" under this Agreement. Licensee
            acknowledges that said assignment includes, without limitation, the
            right on Licensor's part to license such materials outside the
            Territory during the Term and anywhere thereafter and, upon
            Licensor's written request, to deliver such materials and all items
            embodying any Licensed Property used in the manufacture or
            production of such materials when Licensor determines, in its sole
            discretion, that they are no longer needed by Licensee for the
            manufacture, sale or promotion of any Licensed Product.

            (b) Employment for Hire. Licensee acknowledges that the Licensed
            Property is owned solely and exclusively by Licensor. All Copyright
            Materials created or developed by any employee of Licensee shall be
            prepared by such employee as an employee for hire of Licensee under
            Licensee's sole supervision, responsibility and monetary obligation
            and shall be on a "work for hire" basis within the meaning of the



                                     27
<PAGE>
            U.S. Copyright Act of 1978, as amended. Licensee has caused or shall
            cause such Copyright Materials to be "works made for hire" (as that
            term is understood in the U.S. Copyright Law) within the scope of
            such employee's employment for Licensee, and such Copyright
            Materials, and the results and proceeds of such employee's services
            are freely assignable by Licensee hereunder.

            (c) Assignment of Third Parties. Prior to and as a condition of
            retaining any third party who is not an employee of Licensee to
            assist with or contribute to the development or creation of any
            Copyright Materials, or any part thereof, Licensee, at its sole
            expense, will obtain from such third party a complete, executed
            written assignment of all right, title and interest in such
            Copyright Materials in the form attached hereto as Exhibit E.

      13.4. Further Assurances. During and after the Term, Licensee will assist
      and cooperate, and will cause all of its employees and contractors to
      assist and cooperate, with Licensor in all respects, including, without
      limitation, by executing documents (including the form attached hereto as
      Exhibit E), by giving testimony, executing documents and taking such
      further acts reasonably requested by Licensor to acquire, transfer,
      maintain, perfect and enforce copyright, trademark, trade secret, contract
      rights and other legal protection for the Licensed Property, any Copyright
      Materials and/or Production Materials. Further, if Licensee fails to
      comply with any of the obligations set forth above within ten (10)
      business days of Licensor's request, Licensee hereby appoints the officers
      of Licensor as its attorneys-in-fact (which appointment is irrevocable and
      coupled with an interest) to execute documents on behalf of Licensee and
      its employees and contractors for this limited purpose. Licensee shall not
      make any representations or do any act which may be taken to indicate that
      it has any right, title or interest in or to the ownership or use of the
      Licensed Property except under the terms of this Agreement. Nothing
      contained in this Agreement shall give Licensee any right, title or
      interest in or to the Licensed Property except for the rights licensed
      hereunder, subject to the terms and conditions hereof.

      13.5. Moral Rights. Licensee hereby, on behalf of itself, its employees
      and its contractors, irrevocably transfers and assigns to Licensor, and
      waives and agrees never to assert, any and all "Moral Rights" (defined
      hereinbelow) Licensee or its or their respective employees or its
      contractors may have in or with respect to the Licensed Property or in
      Licensed Products and/or any Copyright Materials.

      13.6. Quality Assurance. Licensee shall ensure that the form, quality and
      standard of all materials used in connection with the Licensed Products
      conforms to that of the samples approved by Licensor pursuant to this
      Agreement and complies with all good manufacturing practices relevant to
      the Licensed Products including methods of storage and with all laws and
      regulations relevant to the Licensed Products including any relevant
      regulations concerning the manufacture, sale or promotion or labeling or
      marking of such Licensed Products. Any material modifications by or on
      behalf of Licensee to the Licensed Products previously



                                     28
<PAGE>
      approved above shall be submitted to Licensor for written approval as if
      the same were new and without approval.

      13.7. Right To Inspect. Licensee shall allow Licensor and/or its duly
      authorized representative the right to inspect samples of the Licensed
      Products during normal business hours and on reasonable notice, and on
      similar terms shall afford Licensor every reasonable assistance and allow
      or procure them access to any premises of Licensee or other premises where
      the Licensed Products are being created or held on behalf of Licensee, for
      so long as any use is made of the Licensed Property hereunder by Licensee.

      13.8. Recall Of Product. Licensee shall recall immediately, or take other
      appropriate action, on the written demand of Licensor, that certain
      Licensed Product is defective and harmful when used as intended and
      directed and presents a substantial product hazard under the Federal
      Hazardous Substance Act or the Consumer Product Safety Act or violates any
      applicable law or regulation, Licensee shall cease the manufacture,
      distribution and sale of such Licensed Products until such time as such
      Licensed Products have been corrected to Licensor's reasonable
      satisfaction. Licensee shall have in place appropriate procedures to
      ensure that such recall and cessation can be carried out as promptly as
      practicable.

14.   PROMOTIONAL VALUE, TRADEMARK RIGHTS AND GOODWILL.

      14.1. Promotional Value. Licensee acknowledges that Licensor is entering
      into the Agreement not only in consideration of the Royalties to be paid,
      but also for the promotional value to be secured by Licensor for the
      Pictures as a result of the manufacture, sale and distribution by Licensee
      of Licensed Products and the Advertising and promotion of the Licensed
      Products.

      14.2. Trademark License Agreement. Licensee will execute the Trademark
      License Agreement attached hereto as Exhibit A, and Licensee's use of
      Licensor Trademarks will be subject to the terms and conditions of the
      Trademark License Agreement.

      14.3. Goodwill. Licensee recognizes the great value of the goodwill
      associated with the Licensed Property and acknowledges that such goodwill
      exclusively belongs to Licensor and that the Licensed Property has
      acquired a secondary meaning in the mind of the public. Further, any and
      all goodwill arising from use of the Licensed Property by Licensee, a
      Licensee Affiliate or a Sublicensee and/or a Manufacturer pursuant to this
      Agreement will inure to Licensor's sole benefit.

      14.4. Registrations. Except with the written approval of Licensor,
      Licensee will not register or attempt in any country to register
      copyrights in, or register as a trademark, service mark, design patent or
      industrial design, or business designation, any of the Licensed Property,
      Licensor Trademarks or derivations or adaptations thereof, or any word,
      symbol or design



                                     29
<PAGE>
      which is so similar thereto as to suggest association with or sponsorship
      by Licensor or by any Licensor-Related Entities.

      14.5. Unlicensed Use Of Licensed Property. Licensee agrees to give
      Licensor prompt written notice of any unlicensed use by third parties of
      any Licensed Property including, without limitation, any Licensor
      Trademarks, and Licensee agrees that it will not, without Licensor's
      written approval, bring or cause to be brought any criminal prosecution,
      lawsuit or administrative action for infringement, interference with or
      violation of any rights to the Licensed Property or any Licensor
      Trademarks. Licensee agrees to cooperate with Licensor, and, if necessary,
      to be named by Licensor as a sole complainant or co-complainant in any
      action against an infringer of the Licensed Property or Licensor
      Trademarks in the Territory.

15.   APPROVAL OF MANUFACTURERS.

      15.1. Approval of Manufacturer Agreement. Licensee shall have no right to
      sublicense the right to manufacture any Licensed Product hereunder to any
      entity (including to a Licensee Affiliate that is not a Permitted Licensee
      Affiliate or any other third party) unless and until: (a) Licensor has
      provided Licensee with its prior written approval of the proposed
      manufacturer and the terms and conditions of any and all agreements
      between Licensee and any proposed manufacturer (and any modifications
      thereof), whether oral or written, for the manufacture of Licensed
      Products (individually and collectively, the "Manufacturing Agreement");
      (b) such manufacturer shall have executed an Approval of Manufacturer
      Agreement with Licensor on Licensor's then-current form for such
      agreement, as such form may be revised by Licensor in its sole discretion
      from time to time (any such manufacturer approved by Licensor for which an
      Approval of Manufacturer Agreement is fully executed, a "Manufacturer");
      (c) such Manufacturer shall agree in the Manufacturing Agreement to be
      fully bound at all times by the terms and conditions of this Agreement
      applicable to the manufacture of Licensed Products governed by the
      Manufacturing Agreement; (d) such Manufacturer shall execute a Trademark
      License Agreement with Licensor; and (e) such Manufacturer shall further
      agree in such Manufacturing Agreement that Licensor shall be a third party
      beneficiary thereof. A copy of Licensor's current form of Approval of
      Manufacturer Agreement is attached hereto as Exhibit F. The manufacture of
      Licensed Products by any third party shall in no manner whatsoever affect
      Licensee's obligations hereunder and Licensee shall execute, and ensure
      that each prospective Manufacturer executes, the Approval of Manufacturer
      Agreement. Any manufacture of Licensed Products hereunder in violation of
      this Subparagraph 15.1 shall be a material breach of this Agreement.

      15.2. Enforcement of Manufacturing Agreement. Licensee agrees to include
      and strictly enforce in each Manufacturing Agreement, all of the terms and
      conditions of this Agreement relevant to the manufacture of the Licensed
      Products. Licensee shall advise Licensor of any breach thereof by a
      Manufacturer and of any corrective action taken by Licensee as well as the
      results thereof and, at the request of Licensor, shall terminate such
      Manufacturing Agreement in the event of any such breach, if such breach is
      not cured within twenty (20) days after Licensee



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<PAGE>
      first becomes aware of such breach, if and to the extent such breach is
      curable. If Licensee fails to exercise such termination rights by giving
      written notice to such Manufacturer within ten (10) days after being
      requested to do so in writing by Licensor, notwithstanding anything to the
      contrary contained in the Manufacturing Agreement, Licensee hereby
      appoints Licensor its attorney-in-fact to send a notice of termination in
      the name of Licensee to such Manufacturer for the purpose of terminating
      Manufacturing Agreement or any specific rights thereunder, which
      appointment is irrevocable and coupled with an interest.

16.   CONFIDENTIALITY.

      16.1. Confidential Information. The parties hereto acknowledge and agree
      that (a) the material terms and conditions contained in this Agreement
      and/or in any other agreement between Licensor and Licensee related to the
      Licensed Products; (b) any Marketing Plans, Quarterly Updates and Plan
      Elements; (c) any project, product, good or article pertaining to any
      Licensed Product; and (d) any other proprietary financial, marketing,
      product development, promotional or other information pertaining to the
      business or operations of Licensee or Licensor are confidential
      ("Confidential Information"). Without the prior written consent of the
      party disclosing Confidential Information (the "Disclosing Party"), the
      recipient of any Confidential Information (the "Recipient") shall neither
      disclose to any third party (including a Licensee Affiliate) any
      Confidential Information so disclosed to the Recipient hereunder, nor
      permit any such third party to have access to such Confidential
      Information, except to the Recipient's employees, directors, officers and
      shareholders, attorneys, financial advisors, agents, Sublicensees,
      Manufacturers and Customers and/or accountants in their capacities as
      such, if such disclosure is for the purpose of effectuating the terms and
      conditions of this Agreement, and such individuals or entities are advised
      in writing of the confidentiality of such Confidential Information and to
      restrict the use of such Confidential Information to said purpose. The
      parties' obligations pursuant to this Subparagraph 16.1 shall not apply to
      any Confidential Information which: (i) was previously known to the
      Recipient without obligations of confidentiality; (ii) is obtained after
      the date hereof from a third party which is lawfully in possession of such
      information and not in violation of any contractual or legal obligations
      to a Disclosing Party with respect to such information; (iii) is or
      becomes publicly available or part of public domain through no fault of
      the Recipient or of its employees; or (iv) is the minimum amount required
      to be publicly disclosed in order to comply with any applicable law,
      regulation, stock exchange rule, subpoena or valid order of a court of
      competent jurisdiction.

      16.2. Licensor Information. Notwithstanding, and without limitation of the
      foregoing terms of Subparagraph 16.1 hereinabove, Licensee expressly
      acknowledges and agrees that any and all information and material
      concerning or pertaining to the following are confidential and proprietary
      to Licensor (collectively "Licensor Information"): (a) any script,
      concept, schedule of Licensor or of any Licensor-Related Entity
      (including, without limitation, any pre-production, production or
      post-production schedule or release schedule for any Prequel or for any
      derivative work thereof); (b) any term or condition of any agreement
      between Licensor and any individual or entity relating to any Picture
      (including, without limitation, any talent



                                     31
<PAGE>
      agreement); and (c) any Copyright Material and/or any Production Material
      (including without limitation, any artwork, design or prototype created
      for any Licensed Product or any Copyright Material). Licensee further
      acknowledges and agrees that pursuant to this Agreement, Licensee may have
      access to Licensor Information and that, except as otherwise expressly
      provided in this Subparagraph 16.2, Licensee shall not use, copy or
      disclose, or authorize or permit the use, copy or disclosure of, any
      Licensor Information in whole or in part in any manner or to any person,
      firm, enterprise, organization, corporation or entity unless authorized in
      advance in writing by Licensor. Licensee agrees and acknowledges that
      Licensor's sole purpose in disclosing Licensor Information to Licensee or
      allowing Licensee access to Licensor Information is for the sole purpose
      of aiding Licensee in performing its obligations hereunder. Licensee shall
      receive and hold, and shall contractually obligate and cause all entities
      with whom it contracts relative to the Licensed Products to maintain, all
      Licensor Information and Confidential Information in the strictest
      confidence and Licensee acknowledges, represents, warrants and agrees to
      use its best efforts to protect the confidentiality of all Licensor
      Information and Confidential Information. Furthermore, Licensee will not
      disclose any Licensor Information to any third party for any purpose
      (including the exercise of its rights or performance of its obligations)
      unless Licensor otherwise agrees or such third party has executed a
      written confidentiality agreement in form and substance acceptable to
      Licensor, which confidentiality agreement, inter alia, shall restrict the
      use of any Licensor Information to the minimal extent necessary to
      effectuate the terms and conditions of this Agreement as they apply to
      such third party and requires such third party to use its best efforts to
      maintain all Licensor Information in the strictest confidence. Licensee's
      obligations pursuant to this Subparagraph 16.2 shall not apply to any
      Licensor Information which: (i) is authorized in writing by Licensor to
      become publicly known; (ii) is rightfully received from a third party
      authorized by Licensor to receive such information without restriction and
      without breach of this Agreement; or (iii) is the minimum amount required
      to be publicly disclosed in order to comply with any applicable law,
      regulation, stock exchange rule, subpoena, or valid order of a court of
      competent jurisdiction.

      16.3. Publicity or Announcements. Without limitation of the foregoing and
      notwithstanding anything to the contrary contained in this Agreement or
      otherwise, no announcements, press releases, or publicity about the
      existence or any terms of this agreement, the relationship of the parties
      or about the rights relating to the Licensed Products to be exercised
      hereunder shall be made or authorized to be made by Licensee or a Licensee
      Affiliate without the prior written approval of Licensor in each instance.

      16.4. Rights of Publicity. Except as expressly set forth herein, Licensee
      acquires no right to use and will not use without Licensor's prior written
      approval the characters, artwork, designs, trade names, copyrighted
      materials, trademarks or service marks of Licensor or any Licensor-
      Related Entities in any Advertising, publicity or promotion, to express or
      imply any endorsement by Licensor or any Licensor-Related Entities of
      Licensee's services or products, or in any other manner except as
      expressly authorized in this Agreement. The foregoing provision shall
      survive expiration or termination of this Agreement.



                                     32
<PAGE>
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.



17.   PRODUCT SAMPLES.

      Upon commercial release of each version of a Licensed Product SKU
      (including each language version or modified version) by or for Licensee,
      Licensee will furnish to Licensor [**] the following items:

            (a) one hundred (100) samples of each United States version of a
            Licensed Product SKU and six (6) samples of all versions and
            variations of such SKU created for separate countries, as well as
            all containers, tags, labels and packaging provided that if the
            minimum selling price of such SKU is Twenty-Five U.S. Dollars (U.S.
            $25) or more, the number of samples shall be reduced in half;

            (b) twenty (20) samples of all Advertising, promotional and display
            materials referencing each version of the Licensed Product SKU; and

            (c) five (5) videocassette copies of any film or video Advertising
            Material for each and every Licensed Product SKU.

      If Licensor requests additional items, Licensee will supply to Licensor
      such samples at Licensee's direct out-of-pocket cost of manufacture. For
      the avoidance of doubt, Licensor shall not be entitled to a Royalty
      hereunder in respect of a Licensed Product distributed to Licensor
      pursuant to this Paragraph 17.

18.   INTENTIONALLY DELETED.

19.   REPRESENTATIONS AND WARRANTIES.

      19.1. Licensee.  Licensee represents and warrants that:

            (a) Galoob Toys, Inc. has the full power and authority to enter into
            this Agreement on behalf of itself and all Permitted Licensee
            Affiliates and that Galoob Toys, Inc. and all Permitted Licensee
            Affiliates have the full power and authority to perform all of
            Licensee's obligations pursuant to this Agreement;

            (b) it is and shall remain throughout the term a corporation in good
            standing in the jurisdiction of its incorporation;

            (c) it will not harm or misuse the Licensed Property or bring the
            Licensed Property into disrepute;

            (d) it will not create any expenses chargeable to Licensor without
            the prior written approval of Licensor;




                                     33
<PAGE>
            (e) it will comply in all material respects with all laws and
            regulations relating or pertaining to the manufacture, production,
            distribution, sale, Advertising and use of the Licensed Property,
            the Licensed Products and Copyright Materials, and will maintain the
            highest quality and standards of Licensee as of the date of this
            Agreement;

            (f) it will diligently and continuously at all times throughout the
            Term market and distribute the Licensed Products in each of the
            following Sub-Territories enumerated in Schedule III: 1, 2, 3, 4, 5,
            6, 7, 8, 9, 10, 11, 12, 20, 21, 22, 23, 24, 25, 26, 28, 29, 30 and
            35;

            (g) each Licensed Product will be of good quality in design,
            material and workmanship and will be suitable for their intended
            purpose and that no injurious, deleterious, or toxic substances will
            be used in or on any Licensed Product;

            (h) the Licensed Products will not cause harm when used as
            instructed and with ordinary care for their intended purpose; and
            that the Licensed Products will be manufactured, sold, and
            distributed in compliance with all applicable laws and regulations;
            and

            (i) each and every Permitted Licensee Affiliate set forth in
            Schedule I meets the definition of a Licensee Affiliate in
            Subparagraph 24.44 hereinbelow.

20.   INDEMNITIES.

      20.1. By Licensor. Subject to Subparagraph 20.3 hereinbelow, Licensor
      shall indemnify and hold harmless Licensee from any and all loss,
      liability, damage, cost or expense (including reasonable counsel fees and
      costs, whether or not in connection with litigation) to the extent arising
      out of any claims or suits brought or made against Licensee by reason of
      the warranty made by Licensor in the first sentence of Subparagraph 13.1
      above. Licensor's indemnity obligation shall be conditioned upon
      Licensee's prompt written notice, cooperation and assistance to Licensor
      relative to any such claim or suit. Licensor shall have the option to
      undertake and conduct the defense of any suit so brought. If Licensor
      undertakes such defense and Licensee nevertheless retains its own counsel
      to monitor such defense, Licensee shall be solely responsible for the fees
      and any other expenses related to such counsel. Licensee shall not,
      however, be entitled to recover for lost profits.

      20.2. By Licensee. Except for Licensor's obligations under Subparagraph
      20.1 above, Licensee shall indemnify and hold harmless Licensor and all
      "Licensor-Related Entities" (as hereinafter defined) from any and all
      loss, liability, damage, cost or expense (including reasonable counsel
      fees and costs, whether or not in connection with litigation) arising out
      of any claims or suits brought or made against Licensor or any
      Licensor-Related Entities arising out of or in connection with:




                                     34
<PAGE>
            (a) any activities of Licensee related to this Agreement or to any
            of the matters herein contained;

            (b) any alleged defects or inherent dangers in the Licensed
            Products;

            (c) any breach or alleged breach by Licensee of any warranty,
            covenant or obligation contained in this Agreement;

            (d) any infringement or violation of any copyrights, patents,
            trademarks, trade secrets or other intellectual property or
            proprietary rights of any third party in connection with the
            Licensed Products, Designs, Advertising Materials or any other
            materials based on or derived from the Licensed Property;

            (e) libel, slander, or other forms of defamation arising out of or
            connected with any activities of Licensee, a Licensee Affiliate or a
            Sublicensee related to this Agreement;

            (f) plagiarism, piracy or unfair competition resulting from the
            alleged unauthorized use of titles, formats, ideas, characters,
            plots, performers, or other material arising out of or connected
            with any activities of Licensee, a Licensee Affiliate or a
            Sublicensee related to this Agreement; and/or

            (g) breach of contract, implied in fact or in law, resulting from
            the alleged submission, acquisition or use of program, musical or
            literary material used by Licensee.

      Licensee's indemnity obligation shall be conditioned upon Licensor's
      prompt written notice, cooperation and assistance to Licensee relative to
      any such claim or suit. Subject to Licensor's prior written approval,
      Licensee shall have the option to undertake and conduct the defense of any
      suit so brought, provided that, in addition, Licensee's selection of
      counsel shall be subject to Licensor's prior approval, and further,
      provided, that Licensee regularly consults with Licensor regarding such
      defense. Licensee will not enter into any settlement of any claims or
      suits without the prior written approval of Licensor. If Licensee
      undertakes such defense and Licensor nevertheless retains its own counsel
      to monitor such defense, Licensor shall be solely responsible for the fees
      and any other expenses related to such counsel. Licensee shall not at any
      time defend on its own behalf any action arising directly or indirectly
      from any claim that the Licensed Property (or any element of it) infringes
      or otherwise violates any rights of any third party. This agreement to
      indemnify shall survive the expiration or earlier termination of this
      Agreement.

      20.3. Trademarks and Copyrights. Notwithstanding anything to the contrary
      contained in this Agreement or otherwise, no warranty or indemnity,
      express or implied, is given by Licensor with respect to any liability or
      expense arising from any claim that use of the Licensed Property or any
      Licensor Trademark or copyright on or used in connection with the Licensed
      Products



                                     35
<PAGE>
      hereunder or any packaging, Advertising or promotional material is
      registered, registrable, or infringes on any trademark or other
      intellectual property right of any third party or otherwise constitutes
      unfair competition. Without limitation of the foregoing, title, character
      and place names may or may not be registered trademarks or trademarks in
      the United States and other countries in the classes covering Licensed
      Products and Licensor makes no representations with respect thereto. It is
      expressly agreed that it is Licensee's sole responsibility to carry out
      such investigations as Licensee may deem appropriate to establish that
      Licensed Products, Copyright Materials, packaging, promotional and
      Advertising Material which are manufactured or created hereunder,
      including any uses made of any Licensed Property, do not infringe such
      right of any third party and Licensor shall not be liable to Licensee if
      such infringement occurs.

      20.4. Notification. Licensee and Licensor agree to give each other prompt
      written notice of any claim or suit which may arise under the indemnity
      provisions set forth above. Without limiting the foregoing, Licensee
      agrees to give Licensor written notice of any product liability claim made
      with respect to any Licensed Product within seven (7) days of Licensee's
      receipt of the claim.

      20.5. Intellectual Property Protections. Licensee shall assist Licensor
      (subject to Licensee's indemnity hereunder), to the extent reasonably
      necessary, in protecting any of Licensor's rights to the Licensed
      Property. Licensor may commence or prosecute any claims or suits in its
      own name or (with the approval of Licensee, which approval will not be
      unreasonably withheld) in the name of Licensee or may join Licensee as a
      party thereto. In the event Licensee becomes aware of an apparent
      infringement of the Licensed Property by any third party, Licensee shall
      notify Licensor within ten (10) days of receiving such information.
      Licensor and Licensee will discuss the appropriate enforcement steps and
      which steps are taken shall be determined by Licensor in its sole
      discretion. If Licensor declines to participate in or otherwise pursue any
      enforcement, Licensee may take steps to do so, provided that Licensee
      first obtains Licensor's prior written approval. Licensee in such
      circumstances agrees to provide current reports regarding the status of
      any action or negotiations concerning such alleged infringing activity,
      and shall proceed in consultation with Licensor and Licensor's counsel.
      Licensee's choice of counsel in any such proceeding shall be subject to
      Licensor's prior written approval. Licensee shall not settle or compromise
      any claim without Licensor's prior written approval. Should Licensee
      recover any sums from the alleged infringer, it shall be entitled to
      retain the proceeds of any such actions to the extent of Licensee's
      out-of-pocket expenses for the proceeding, and the remainder will be
      shared equally between Licensee and Licensor. If Licensor takes any action
      in protection of any rights licensed to Licensee hereunder, then Licensee
      shall reimburse Licensor fifty percent (50%) of any and all costs and
      expenses related to any such action (including, without limitation,
      attorneys' fees and costs, whether or not in connection with litigation)
      within thirty (30) days following its receipt of invoices for such
      payments due. Late payments will accrue interest charges from the due date
      through the date of payment at an interest rate equal to three percent
      (3%) over the prime lending rate set by the Bank of America N.T.S.A., or
      the maximum legal rate, if such maximum legal rate is lower, and shall be
      payable upon demand. In the event any monies are recovered from any such
      action which are in



                                     36
<PAGE>
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.



      excess of Licensor's costs and expenses, then such monetary recoveries
      shall be shared equally between Licensor and Licensee.

21.   INSURANCE.

      21.1. Insurance. Licensee will, commencing October 1, 1998 and continuing
      throughout the Term and for a period no less than three (3) years
      following the expiration or termination of this Agreement, maintain
      insurance obtained from a reputable carrier with a Best's rating of "A" or
      better naming Licensor and George W. Lucas, Jr. and all other
      Licensor-Related Entities as additional insureds in the amounts, for the
      purposes set forth in and in accordance with this Paragraph 21, covering
      any and all claims brought anywhere in the world relating to the Licensed
      Products, as follows:

            (a) Product Liability and Advertising Injury Liability. Licensee
            will carry Product Liability and Advertising Injury Liability
            Insurance covering any and all claims, demands and causes of action
            for personal injury or property damage arising out of or purporting
            to arise out of any defects in or failure to perform by any Licensed
            Product or arising out of or purporting to arise out of any
            Advertising Material and/or any physical or intangible material used
            in connection therewith in a minimum amount of [**] combined single
            limit for each occurrence for personal injury and property damage.

            (b) Standard Error and Omissions. Licensee will carry coverage
            commonly known as Standard Errors and Omissions which will include
            but not be limited to claims arising out of:

                  (i) invasion or infringement of or interference with the right
                  of privacy or publicity, whether under common law or statutory
                  law;

                  (ii) infringement of copyright or trademark, whether under
                  statutory or common law;

                  (iii) libel, slander or other forms of defamation;

                  (iv) plagiarism, piracy or unfair competition resulting from
                  the alleged unauthorized use of titles, formats, ideas,
                  characters, plots, performers, or other material; or

                  (v) breach of contract, implied in fact or in law, resulting
                  from the alleged submission, acquisition or use of program,
                  musical or literary material used by Licensee.




                                     37
<PAGE>
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.



      The amount of coverage under the Standard Errors and Omissions policy
      shall be a minimum of [**].

      21.2. Notification. Each policy shall provide for prompt written notice
      (not to exceed thirty [30] days) to Licensor from the insurer by
      registered mail, return receipt requested, in the event of any material
      modification, cancellation or termination of such policy. Licensee will
      furnish to Licensor within thirty (30) business days after the date of
      execution of this Agreement a Certificate of Insurance naming Licensor and
      George W. Lucas, Jr. and all other Licensor- Related Entities as
      additional insureds on each of the above named policies. Licensee's
      compliance with this Subparagraph 21.2 in no way limits Licensee's
      indemnity obligations, except to the extent that Licensee's insurance
      company actually pays Licensor amounts which Licensee would otherwise be
      obligated to pay Licensor.

22.   EXPIRATION AND TERMINATION.

      22.1. Term. This Agreement will continue in full force and effect during
      the Term, unless terminated earlier in accordance with the provisions of
      this Agreement, except with respect to those matters which by the terms of
      this Agreement or by their nature survive termination or expiration.

      22.2. Events of Termination. Without prejudice to any other right or
      remedy available to Licensor, Licensor will have the right to terminate
      this Agreement immediately upon written notice to Licensee:

            (a) if Licensee materially breaches any of the terms of this
            Agreement and, if such breach is curable, such breach is not
            corrected within twenty (20) days after Licensor sends Licensee
            written notice thereof (or, in the event of a curable breach which
            cannot be corrected within twenty [20] days, if Licensee fails to
            commence such correction within twenty [20] days and thereafter
            diligently prosecutes it to completion);

            (b) if Licensee becomes insolvent or generally fails to pay, or
            admits in writing its inability to pay its debts as they become due,
            or makes any assignment for the benefit of creditors, or files a
            petition in bankruptcy, or is adjudged bankrupt, or is placed in the
            hands of a receiver, or if the equivalent of any such proceedings or
            acts occurs, though known by some other name or term; provided,
            however, that if Licensee becomes the subject of a voluntary or
            involuntary petition in bankruptcy or any involuntary proceeding
            relating to insolvency, receivership, liquidation or composition for
            the benefit of creditors, then only if such petition or proceeding
            is not dismissed within sixty (60) days of filing;

            (c) if Licensee is not permitted or is unable to operate Licensee's
            business in the usual manner, or is not permitted or is unable to
            provide Licensor with assurance reasonably satisfactory to Licensor
            that Licensee will so operate Licensee's business, as



                                     38
<PAGE>
            debtor in possession or its equivalent, or is not permitted or is
            unable to otherwise meet any of Licensee's obligations under this
            Agreement or to provide Licensor with assurance satisfactory to
            Licensor that Licensee will meet such obligations; or

            (d) if Licensee attacks the title of Licensor in and to any Licensed
            Property (including, without limitation, any copyright or trademark
            pertaining thereto) or Licensee attacks the validity of any license
            granted hereunder.

      22.3. Effect of Expiration or Termination.

            (a) Cessation and Delivery. Upon the expiration or earlier
            termination of this Agreement, subject to Subparagraph 22.3(c)
            hereinbelow:

                  (i)   Licensee shall:

                        (A) immediately cease and cause the cessation of all of
                        its activities hereunder respecting the Licensed
                        Property including, without limitation, the design,
                        development, manufacture, sale, Advertising, marketing
                        and distribution of Licensed Products and, within thirty
                        (30) days after such expiration or termination, send
                        Licensor a complete inventory report of Licensed
                        Products; and

                        (B) comply with the provisions of Subparagraph 13.2
                        hereinabove.

                  Licensee shall have no further right to exercise any of the
                  rights licensed hereunder or otherwise acquired in relation to
                  this Agreement. Licensee agrees that its failure to stop in
                  all respects the manufacture, sale and/or distribution upon
                  the termination of this Agreement will result in immediate
                  irreparable damage to Licensor for which there is not adequate
                  remedy at law, and in the event of such failure by Licensee,
                  Licensor shall be entitled to injunctive relief in addition to
                  its other rights and remedies in such event. Licensor shall be
                  entitled to recover from Licensee, in addition to any other
                  remedies in the event of default, reasonable attorneys' fees,
                  costs and expenses, including collection agency fees incurred
                  by Licensor in the enforcement of any provision hereof.
                  Licensor's exercise of any of the foregoing remedies shall not
                  operate as a waiver of any other rights or remedies which
                  Licensor may have.

                  (ii) Licensee shall immediately cancel or terminate all
                  contracts, orders and requests for the manufacture, sale,
                  distribution or supply of any goods or services which involve
                  or may lead to any use, application or exploitation of the any
                  Licensed Product or the rights herein licensed or any part
                  thereof.




                                     39
<PAGE>
            (b) Reversion of Rights. Upon the expiration or earlier termination
            of this Agreement, subject to Subparagraph 22.3(c) hereinbelow, all
            rights licensed to Licensee hereunder will immediately revert to
            Licensor, Licensor may exploit such license rights itself or grant
            such rights to any third party.

            (c) Limited Sell-Off Rights. Licensee shall have the non-exclusive
            right, for a period of ninety (90) days after expiration or earlier
            termination of this Agreement (the "Sell-Off Period") to dispose of
            its inventory of Licensed Products "in hand" (as such term is
            commonly understood in the U.S. toy industry), which Licensed
            Products are manufactured during the Term pursuant to orders
            actually received by Licensee from its retail Customers prior to the
            close of the Sell-Off Period (the "Final Orders"); provided,
            however, that:

                  (i) this Agreement has not been terminated for Licensee's
                  breach or any other reason set forth in Subparagraph 22.2
                  hereinabove;

                  (ii) Licensee shall not manufacture (or authorize or permit
                  the manufacture of) Licensed Products after the expiration of
                  the Term;

                  (iii) Licensee shall not distribute or sell (or authorize or
                  permit the distribution or sale of) Licensed Products after
                  the expiration of the Sell-Off Period;

                  (iv) Licensee shall only distribute and sell Licensed Products
                  in amounts necessary to fulfill such Final Orders;

                  (v) Licensee shall not manufacture (or authorize or permit the
                  manufacture of) Licensed Products in excess of amounts set
                  forth in the Marketing Plan approved by Licensor for the
                  applicable time period hereunder;

                  (vi) Licensor has the right to pre-approve the amounts of each
                  and every Licensed Product SKU manufactured hereunder and to
                  be distributed during the Sell-Off Period; and

                  (vii) Royalties are paid and statements are furnished to
                  Licensor hereunder with respect to such Sell-Off Period.

            (d) Return of Confidential Information and Licensor Information.
            Upon termination or expiration of this Agreement, each party will
            immediately return all Confidential Information (and, in the case of
            Licensee all Licensor Information) received from the other party
            that is in such party's possession or control, and an officer of
            such party will certify to the other party in writing that such
            party has done so.



                                     40
<PAGE>
            (e) Payments. Upon termination of this Agreement or upon expiration
            of the Sell- Off Period, all monies owed Licensor will become
            immediately due and payable by Licensee to Licensor.

      22.4. No Damages for Termination. Licensor will not be liable to Licensee
      for damages of any kind, including incidental or consequential damages, on
      account of the expiration or rightful termination of this Agreement in
      accordance with the terms and conditions of this Agreement. Licensee
      waives any right it may have to receive any compensation or reparations on
      account of expiration or rightful termination of this Agreement by
      Licensor in accordance with the terms and conditions of this Agreement,
      other than as expressly provided in this Agreement. Without limiting the
      generality of this Subparagraph 22.4, Licensor will not be liable to
      Licensee, on account of such termination or expiration, for reimbursement
      or damages for the loss of goodwill, prospective profits or anticipated
      income, or on account of any expenditures, investments, leases or
      commitments made by either party or for any other reason whatsoever based
      upon or growing out of such termination or expiration.

23.   RESERVED RIGHTS.

      Notwithstanding anything to the contrary contained in this Agreement,
      Licensor retains all rights not expressly licensed to Licensee pursuant to
      this Agreement, including, without limitation, the exclusive right to
      license to Licensee or to any third party the right to manufacture,
      market, conduct Advertising, distribute or sell any Licensed Product in
      connection with any Premiums, giveaways, promotional arrangements and, in
      this connection, if Licensee is selected by Licensor or by its designee to
      manufacture, market, distributed or sell Licensed Products as part of such
      arrangement, then Licensee shall supply such Licensed Product or to
      Licensor or its designee at an amount equal to the lowest price given by
      Licensee or any Sublicensee to any Customer for the same or comparable
      Licensed Product.

24.   DEFINITIONS.

      24.1. "Account Specific Merchandise" has the meaning set forth in 
      Subparagraph 4.1(b)(ii) hereinabove.

      24.2. "Ad Spend" has the meaning set forth in Subparagraph 4.5
      hereinabove.

      24.3. "Advance" has the meaning set forth in Paragraph 7 hereinabove.

      24.4. "Advertising" means the solicitation and/or commercial enticement
      for the sale of any product, good or article by means of television,
      radio, print media, outdoor, Internet or by any other means, whether now
      or hereafter known, devised, invented or developed.

      24.5. "Advertising Materials" has the meaning set forth in Subparagraph
      5.1(c) hereinabove.




                                     41
<PAGE>
      24.6. "Annual Marketing Plan" has the meaning set forth in Subparagraph
      4.1(a)(ii) hereinabove.

      24.7. "Artwork and Film Clips" has the meaning set forth in Subparagraph
      6.1 hereinabove.

      24.8. "Blocked Funds" has the meaning set forth in Subparagraph 9.3
      hereinabove.

      24.9. "Bundling" has the meaning set forth in Subparagraph 8.6
      hereinabove.

      24.10. "Calendar Quarter" means any of the following applicable
      consecutive successive three (3) month period during a Calendar Year:
      January 1 through and including March 31, April 1 through and including
      June 30; July 1 through and including September 30; and October 1 through
      and including December 31.

      24.11. "Calendar Year" means the time period from January 1 through and
      including December 31 of the same successive consecutive twelve (12) month
      period, except with respect to 1998 for which "Calendar Year" means the
      time period from October 1, 1998 through and including December 31, 1998.

      24.12."Chain" means a group of twenty (20) or more retail store outlets.

      24.13."Classic Trilogy" has the meaning set forth in Subparagraph
      24.43(a)(i) hereinbelow.

      24.14. "Closeout Stores" means Retail Entities that offer for sale a
      majority of their inventory initially on a so-called "closeout" basis (as
      such terms are customarily understood in the U.S. toy industry). For
      purposes of this Agreement, KayBee Toys, as it practices business as of
      the date of this Agreement, does not constitute a Closeout Store.

      24.15. "Confidential Information" has the meaning set forth in
      Subparagraph 16.1 hereinabove.

      24.16."Copyright Materials" has the meaning set forth in Subparagraph 13.1
      hereinabove.

      24.17. "Customer" means an entity that is not a Licensee, a Licensee
      Affiliate (including any Permitted Licensee Affiliate) or a Sublicensee,
      except as provided in Subparagraph 8.4(c) hereinabove.

      24.18."Dedicated Retail Space" has the meaning set forth in Subparagraph
      4.6 hereinabove.

      24.19."Designs" has the meaning set forth in Subparagraph 5.1(b)
      hereinabove.

      24.20."Disclosing Party" has the meaning set forth in Subparagraph 16.1
      hereinabove.




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Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.



      24.21. "Dump" means to distribute a Licensed Product in a manner which
      disparages the Licensed Property, and/or materially diminishes the value
      of Licensor's goodwill, business opportunities, trademark or tradename
      rights pursuant to any applicable laws in the relevant country of the
      Territory.

      24.22. "Electronic Retailers" means retailers that market and sell
      products to consumers primarily through electronic media, including,
      without limitation, by means of television (such as, without limitation,
      QVC, HSN) or Internet.

      24.23. INTENTIONALLY OMITTED.

      24.24."Episode I" has the meaning set forth in Subparagraph 24.43(a)(ii)
      hereinbelow.

      24.25. "Episode I Outside Date" has the meaning set forth in Subparagraph
      2.1(a) hereinabove.

      24.26."Episode II" has the meaning set forth in Subparagraph 24(a)(ii)
      hereinbelow.

      24.27. "Episode II Outside Date" has the meaning set forth in Subparagraph
      2.1(b) hereinabove.

      24.28."Episode III" has the meaning set forth in Subparagraph 24(a)(ii)
      hereinbelow.

      24.29. "Episode III Outside Date" has the meaning set forth in
      Subparagraph 2.1(c) hereinabove.

      24.30."Evaluation Unit" has the meaning set forth in Subparagraph 8.5
      hereinabove.

      24.31. "Event Window" means a minimum four (4) week period associated with
      the theatrical release of a Picture, the video release of a Picture, the
      Christmas Holiday, or other key promotional event.

      24.32."Excluded Distribution Channels" has the meaning set forth in
      Schedule V hereinbelow.

      24.33."Final Orders" has the meaning set forth in Subparagraph 22.3
      hereinabove.

      24.34."F.O.B. Product" has the meaning set forth in Subparagraph
      4.1(b)(ii) hereinabove.

      24.35."F.O.B. Royalty" has the meaning set forth in Subparagraph 8.4(a)
      hereinabove.

      24.36. [**]




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<PAGE>
      24.37. "Highly Developed" means the following Sub-Territories: U.S.,
      Canada, U.K., France, Germany, and Japan.

      24.38."Initial Marketing Plan" has the meaning set forth in Subparagraph
      4.1(a)(i) hereinabove.

      24.39."Intermediate Vehicles" has the meaning set forth in Schedule II
      hereinbelow.

      24.40. "International Marketing Executive" has the meaning set forth in
      Subparagraph 4.3(c) hereinabove.

      24.41. "Internet" means the computer-generated, computer-mediated or
      computer-assisted transmission, reception, recordation or display arising
      from any network or other connection of instruments or devices now known
      or hereafter invented capable of transmission, reception, recordation
      and/or display (such instruments or devices to include, without
      limitation, computers, laptops, cellular or PCS telephones, pagers, PDAs,
      wireless transmitters or receivers, modems, radios, televisions, satellite
      receivers, cable networks, smart cards and set- top boxes).

      24.42. "Licensed Products" means those products, goods and articles,
      within the enumerated categories set forth in Schedule II attached hereto,
      and which are based on or incorporating elements of the Licensed Property.

      24.43. "Licensed Property" means, subject to the terms, conditions and
      restrictions contained in Licensor's or any Licensor Related Entity's
      agreements with persons, firms or entities rendering services or granting
      rights,

            (a) the original titles, designs, character names and likenesses,
            dialogue, music and sound effects, words, symbols, logographics and
            the footage, photographs, artwork, visual representations of the
            props, costumes, sets, special effects and any other original
            creative elements) which appear in, have become directly associated
            with, and as are depicted in, the following motion pictures:

                  (i) those certain previously released theatrical motion
                  pictures (and the special editions thereof released
                  theatrically in 1997) entitled "STAR WARS: EPISODE IV - A NEW
                  HOPE," "STAR WARS: EPISODE V - THE EMPIRE STRIKES BACK" and
                  "STAR WARS: EPISODE VI - RETURN OF THE JEDI" (the "Classic
                  Trilogy"); and/or

                  (ii) each of the first three succeeding prequel theatrical
                  motion pictures to the Classic Trilogy tentatively entitled
                  "Episode I," "Episode II" and "Episode III," respectively
                  (each such prequel theatrical motion picture a "Prequel"
                  herein).



                                     44
<PAGE>
            (Classic Trilogy and the Prequels are jointly, severally and
            collectively referred to as the "Picture[s]");

            (b) such original titles, designs, character names and likenesses,
            dialogue, music and sound effects, words, symbols, logographics,
            photographs, artwork, visual representation of the props, costumes,
            sets, special effects, and any other original creative elements
            which do not exist in the Pictures but which are embodied in games,
            novels, comics, videogames, television programs or series (whether
            live or animated) based on and derived from the Pictures, to the
            extent of Licensor's right to grant the rights licensed to Licensee
            pursuant to Paragraph 1 hereinabove (collectively "Spin-Off
            Properties"); and

            (c) such original trademarks, tradenames, servicemarks and
            servicenames owned by Licensor and arising out of and which have
            become directly associated with the Pictures, to the extent of
            Licensor's rights in each applicable country of the Territory under
            such country's applicable trademark laws, including, but not limited
            to, those specified in Schedule VI (the "Licensor Trademarks").

      24.44. "Licensee Affiliate" means any entity other than Licensor that is
      directly or indirectly controlled by, under common control with or that
      controls Licensee (including, without limitation, any Permitted Licensee
      Affiliate). For purposes of this definition of "Licensee Affiliate," an
      entity will control another entity, or be deemed to control another
      entity, if such entity: (a) has the ability to elect a majority of the
      directors, trustees (or other managers) of such other entity; (b) is a
      general partner or joint venturer of such other entity; (c) directly or
      indirectly holds (or has power to vote) twenty percent (20%) or more of
      the economic interests of such other entity; or (d) directly or indirectly
      holds (or has power to vote) five percent (5%) or more of the voting
      equity interests of such other entity (except for an investment fund which
      holds such voting equity interests).

      24.45. "Licensee's Records" has the meaning set forth in Subparagraphs
      9.5(e) and 11.1 hereinabove.

      24.46. "Licensor Channel" means an outlet and/or method of distribution or
      delivery of any products, goods or articles (including, without
      limitation, through catalogs, direct mail, Internet and/or fan clubs),
      which outlet and/or method of distribution or delivery is owned or
      controlled (in whole or in part) or licensed by Licensor or by any
      Licensor-Related Entity.

      24.47."Licensor Information" has the meaning set forth in Subparagraph
      16.2 hereinabove.

      24.48. "Licensor-Related Entities" means George W. Lucas, Jr. and all of
      Licensor's present and future affiliated, related and/or subsidiary
      entities, including, without limitation, Lucasfilm Ltd., LucasArts
      Entertainment Company LLC, Lucas Digital Ltd. LLC and/or Lucas Learning



                                     45
<PAGE>
      Ltd. and their respective divisions, subsidiaries, directors, employees,
      officers, successors, assigns, agents and joint venturers.

      24.49. "Licensor Trademarks" has the meaning set forth in Subparagraph
      24.43(c) hereinabove.

      24.50. "Manufacturer" has the meaning set forth in Subparagraph 15.1
      hereinabove.

      24.51. "Manufacturing Agreement" has the meaning set forth in Subparagraph
      15.1 hereinabove.

      24.52."Marketing Plan" has the meaning set forth in Subparagraph 4.1(a)
      hereinabove.

      24.53."Micro Figures" has the meaning set forth in Schedule II
      hereinbelow.

      24.54."Micro Playsets" has the meaning set forth in Schedule II
      hereinbelow.

      24.55."Micro Vehicles" has the meaning set forth in Schedule II
      hereinbelow.

      24.56. "Mid-Level" means the following Sub-Territories: Spain/Portugal,
      Italy, Australia/New Zealand, Scandinavia, Benelux, Far East/Asia (All
      Countries), Mexico, Latin America, and Austria/Switzerland.

      24.57."Minimum Sales Levels" has the meaning set forth in Subparagraph 4.2
      hereinabove.

      24.58. "Moral Rights" means any rights to claim authorship of a work, to
      object to or prevent the modification of a work, or to withdraw from
      circulation or control the publication or distribution of a work, and any
      similar right, existing under the law of any country in the world or under
      any treaty.

      24.59."Net Sales" has the meaning set forth in Subparagraph 8.2
      hereinabove.

      24.60."Other Product" has the meaning set forth in Subparagraph 3.5
      hereinabove.

      24.61. "Permitted Licensee Affiliates" means those Licensee Affiliates set
      forth in Schedule I and such additional Licensee Affiliates as Licensor
      shall approve, if at all, in writing.

      24.62."Pictures" has the meaning set forth in Subparagraph 24.43(a)
      hereinabove.

      24.63."Plan Elements" has the meaning set forth in Subparagraph 4.1(b)
      hereinabove.

      24.64. "P.O.S." means all "point of sale" items, including, without
      limitation, endcaps, shelf- talkers, electronic cart "smart ads,"
      dedicated retail aisles, pamphlets, leaflets, standees,



                                     46
<PAGE>
      displays and other "point of sale" items which prominently and exclusively
      feature elements of or based on the Licensed Property.

      24.65. "Premium" means a product, good or article based on or
      incorporating the Licensed Property that is used in connection with
      promotional activities intended to augment or enhance the sale or other
      exploitation of products other than Licensed Products, whether or not as
      part of in purchase-with-purchase promotions, self-liquidator programs,
      joint merchandising programs, giveaways, sales incentive programs, fan
      club programs, fund-raisers or entries in sweepstakes or to customers for
      resale by direct mail or other direct marketing methods.

      24.66."Prequel" has the meaning set forth in Subparagraph 24.43(a)(ii)
      hereinabove.

      24.67."Prior Agreement" has the meaning set forth in Subparagraph 5.3
      hereinabove.

      24.68. "Product Development Team" has the meaning set forth in
      Subparagraph 4.3(d) hereinabove.

      24.69."Production Materials" has the meaning set forth in Subparagraph
      13.2 hereinabove.

      24.70."Quarterly Update" has the meaning set forth in Subparagraph
      4.1(a)(iii) hereinabove.

      24.71."Recipient" has the meaning set forth in Subparagraph 16.1
      hereinabove.

      24.72. "Retail Entity" means a Customer which is ordinarily in the
      business of selling goods and products directly to a public (non-business)
      consumer.

      24.73. "Royalties" means the applicable "Royalty Percentage" of "Net
      Sales," as such terms are defined and set forth in Subparagraphs 8.1, 8.2
      and 8.4 hereinabove.

      24.74."Royalty Percentage" has the meaning set forth in Subparagraph 8.1
      hereinabove.

      24.75."Royalty Report Form" has the meaning set forth in Subparagraph 9.4
      hereinabove.

      24.76."Sales Projections" has the meaning set forth in Subparagraph
      4.1(b)(iii) hereinabove.

      24.77."Sell-Off Period" has the meaning set forth in Subparagraph 22.3(c)
      hereinabove.

      24.78. "Senior Worldwide SW Toy Brand Executive" has the meaning set forth
      in Subparagraph 4.3(a) hereinabove.

      24.79."Spin-Off Properties" has the meaning set forth in Subparagraph
      24.43(b) hereinabove.




                                     47
<PAGE>
      24.80. "Standard Dedicated Retail Space" means the Dedicated Retail Space
      at all times other than during an Event Window.

      24.81."Sublicense Agreement" has the meaning set forth in Subparagraph 3.3
      hereinabove.

      24.82."Sublicensee" has the meaning set forth in Subparagraph 3.3
      hereinabove.

      24.83."Sub-Territory" has the meaning set forth Subparagraph 2.2
      hereinabove.

      24.84."SW Toy Team" has the meaning set forth in Subparagraph 4.3
      hereinabove.

      24.85."Term" has the meaning set forth in Subparagraph 2.1 hereinabove.

      24.86."Territory" has the meaning set forth in Subparagraph 2.2
      hereinabove.

      24.87. "Trademark License Agreement" has the meaning set forth in
      Subparagraph 1.2 hereinabove.

      24.88. "Underdeveloped" means the following Sub-Territories: Greece,
      Turkey, Israel, Eastern Europe, Middle East & Africa, Brazil and all
      Sub-Territories other than Highly Developed and Mid-Level.

      24.89."U.S. Release Date" has the meaning set forth in Subparagraph 2.1
      hereinabove.

      24.90."VAT" has the meaning set forth in Subparagraph 8.8 hereinabove.

25.   GENERAL.

      25.1. Assignment. Subject to the other terms and conditions of this
      Subparagraph 25.1, this Agreement will bind and inure to the benefit of
      each party and to their respective successors and assigns. Licensee shall
      not voluntarily or by operation of law assign, sub-license, transfer,
      encumber or otherwise dispose of all or part of any right or privilege
      licensed to Licensee in this Agreement, including to a Licensee Affiliate,
      without Licensor's prior written approval. For purposes of this
      Subparagraph 25.1, any change in control of Licensee, whether through
      merger, acquisition, reorganization, liquidation, foreclosure, involuntary
      sale in bankruptcy, or the purchase of substantially all of Licensee's
      assets or otherwise, shall be deemed a purported assignment subject to
      Licensor's prior written approval. Any attempted assignment, sublicense,
      transfer, encumbrance or other disposal without such approval will be null
      and void and constitute a material default and material breach of this
      Agreement.

      25.2. Governing Law. This Agreement will be governed by and construed in
      accordance with the laws of the federal laws of the United States and the
      laws of the State of California applicable to agreements entered into, and
      to be performed entirely, within California between



                                     48
<PAGE>
      California residents (and excluding the United Nations Convention on
      Contracts for the International Sale of Goods) without regard to choice of
      law provisions and regardless of the place or places of its actual
      execution or performance. Any suit, action or proceeding between or among
      any of the parties hereto arising out of or related to this Agreement will
      be brought solely in the federal or state courts in the Northern District
      of California, and Licensee hereby submits to the personal jurisdiction
      thereof and agrees to such courts as the appropriate venue.
      Notwithstanding the foregoing, Licensee agrees that, for purposes of
      collecting monies due pursuant to this Agreement, Licensee, at Licensor's
      election, may be subject to whatever local laws and courts have
      jurisdiction in any country of the Territory over Licensee. Process in any
      action or proceeding referenced to in this Subparagraph 25.2 may be served
      on Licensee at the address for notices set forth in Subparagraph 25.5
      hereinbelow.

      25.3. Attorneys' Fees. In the event of any legal proceeding between the
      parties arising out of or related to this Agreement, the prevailing party
      shall be entitled to recover, in addition to any other relief awarded or
      granted, its costs and expenses (whether or not in connection with
      litigation and including, without limitation, attorneys' fees and costs)
      incurred in connection with any such proceeding.

      25.4. Equitable Relief. Licensee recognizes and acknowledges that a
      material breach by Licensee of any covenants, agreements or undertakings
      made or assumed by it will cause Licensor irreparable damage, which cannot
      be readily remedied in damages in an action at law, and may, in addition
      thereto, constitute an infringement of Licensor's intellectual property
      and other rights in the Licensed Property, thereby entitling Licensor to
      equitable remedies (including, without limitation, injunctive relief),
      costs (including, without limitation, whether or not in connection with
      litigation) and reasonable attorney's fees. For purposes of this
      Subparagraph 25.4, Licensee acknowledges that (by way of example and not
      limitation) infringement of Licensor's intellectual property rights
      include any use of the Licensed Property by Licensee other than those
      licensed under this Agreement, failure to obtain approvals required under
      this Agreement, use or release of any Licensed Product or Confidential
      Information in violation of this Agreement, and failure to secure
      permissions and transfers of rights from third parties as required
      pursuant to this Agreement.

      25.5. Notices. Any notice to be given or served under this Agreement shall
      be in writing and shall be delivered to the parties addressed as set forth
      below, or to such other address as either party shall notify the other
      party of in writing, as follows: personally or sent by cable, telegram or
      telemessage or by facsimile, telex, telecopy or other print out
      communication mechanism or by first class, prepaid, registered or
      certified mail (if available) post (air mail if posted to another country)
      to the party to be served at the address set forth below in this
      Subparagraph 25.5 or to such other address as either party may from time
      to time notify in writing to the other. Such notice shall be deemed to
      have been served: (a) immediately in the case of personal delivery; (b) in
      the case of a cable, telegram or telemessage, on the first business day
      after the receipt by the relevant service of the order therefor; (c) in
      the case of facsimile, telex, telecopy or other print out mechanism, on
      the expiration of four (4) hours from the time of



                                     49
<PAGE>
      transmission subject in the case of telex or facsimile to proof by the
      sender that he/she holds an acknowledgment (whether in mechanical form
      other otherwise) confirming its receipt at its destination and subject in
      the case of facsimile or other print out transmission in the absence of an
      acknowledgment to the original notice being sent by post or by personal
      delivery in accordance with this Subparagraph 25.5 not later than the next
      business day after such transmission; and (d) in the case of postal
      delivery, on the second business day following the date of posting (the
      fifth business day if posted to another country) or on acknowledgment of
      receipt if earlier.

            If to Licensor:

            For notices to Licensor: P. O. Box 2009, San Rafael, CA  94912,
            Attention: Vice President; with a copy to: General Counsel.

            For all approvals by Licensor pursuant to Paragraph 5 above: P. O.
            Box 2009, San Rafael, CA 94912, Attention: Approvals Coordinator

            For all other approvals by Licensor including, without limitation,
            pursuant to Paragraph 4 above: P.O. Box 2009, San Rafael, CA 94912,

            Attention: Vice President

            For statements and payments to Licensor: P. O. Box 2009, San Rafael,
            CA 94912, Attention: Cashier

            For wire transfers: pursuant to Licensor's written wire transfer
            instructions

            For deliveries requiring Licensor's street address: 5858 Lucas
            Valley Road, Nicasio, CA 94946

            If to Licensee:

            Galoob Toys, Inc.
            500 Forbes Blvd.
            South San Francisco, CA 94080
            Attn:  Gary Niles, Executive Vice President
            cc:  William Catron, Executive Vice President

      25.6. No Waiver. No action taken by either party pursuant to this
      Agreement, and no waiver by either party, whether express or implied, of
      any provision or right in this Agreement or any breach thereof, and no
      failure of either party to exercise or enforce any of its rights under
      this Agreement, will constitute a continuing waiver with respect to such
      provision or right or as a breach or waiver or any other provision or
      right, whether or not similar.



                                     50
<PAGE>
      25.7. Independent Contractors. The parties to this Agreement are and shall
      remain independent contractors. There is no relationship of partnership,
      employer, employee, principal, agent, joint venture, employment, franchise
      or agency between the parties. Except as expressly provided in this
      Agreement, neither party will have the power to bind the other or incur
      obligations on the other's behalf without the other's prior written
      approval and shall not represent that it has such right.

      25.8. Nonexclusive Remedy. The exercise by either party of any remedy
      under this Agreement will be without prejudice to its other remedies under
      this Agreement or otherwise.

      25.9. Severability. This Agreement is severable. If any provision of this
      Agreement is found invalid or unenforceable in any jurisdiction, that
      provision, as to that jurisdiction, will be ineffective to the extent of
      such invalidity or unenforceability without rendering invalid or
      unenforceable the other remaining provisions of this Agreement, which
      other remaining provisions will not be affected and shall remain in force,
      to the maximum extent permissible.

      25.10. Approvals. Except as otherwise expressly stated herein, any and all
      Licensor approvals pursuant to this Agreement may be given or withheld in
      Licensor's sole discretion for any reason or for no reason. Failure by
      Licensor to give written approval within fourteen (14) days from the date
      of receipt of any submission for approval will be deemed to be Licensor's
      disapproval thereof; provided, however, if Licensee thereafter notifies
      Licensor in writing that it has not received a response from Licensor, and
      Licensor does not respond within forty-eight (48) hours of receipt of such
      notice, then the submission will be deemed approved. A delivery to and an
      approval made by an authorized representative of Galoob Toys, Inc. shall
      be deemed to constitute a delivery to and an approval made by Galoob Toys,
      Inc. and all Permitted Licensee Affiliates.

      25.11. Headings, Captions and Names. The name of this Agreement, and all
      headings and captions herein contained, are for reference and convenience
      only and do not define, limit or expand the scope or intent of any
      provision hereof and shall not be relied upon in or in connection with the
      construction or interpretation of this Agreement. The words "herein,"
      "hereunder," "hereof" and similar terms refer to this entire Agreement and
      shall not be limited to the specific paragraphs or subparagraphs in which
      they are used.

      25.12. Counterparts. This Agreement may be executed in one or more
      counterparts, and by telefacsimile transmission, each copy of which shall
      be deemed an original and all of which, when taken together, shall
      constitute one and the same instrument, but this Agreement shall not be
      binding upon the parties until it has been signed by both parties. The
      parties hereto agree that facsimile signatures on a copy of this Agreement
      shall be effective and enforceable as if they were original signatures.

      25.13. Further Instruments. Except as otherwise expressly provided in this
      Agreement, each party shall furnish to the other (and shall deliver and
      cause to be executed, acknowledged and



                                     51
<PAGE>
      delivered to the other) any further instruments, which such other party
      may reasonably require or deem necessary from time to time to evidence,
      establish, protect, enforce, defend or secure to such other party any or
      all of its rights hereunder or to more effectuate or carry out the
      purposes, provisions or intent of this Agreement.

      25.14. Conditioned Effectiveness of License. Notwithstanding anything in
      this Agreement to the contrary, this Agreement will not be deemed
      effective until the expiration or early termination of the waiting period
      applicable to the transactions contemplated hereby under the
      Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Upon
      such expiration or early termination, this Agreement will be deemed
      effective, without any further action of Licensor or Licensee.

      25.15. Entire Agreement. This Agreement (including all Exhibits and
      Schedules attached hereto, which Exhibits and Schedules are incorporated
      herein by this reference) constitute the complete and entire agreement
      between the parties with respect to the subject matter hereof, superseding
      and replacing the Prior Agreement and any and all prior agreements,
      negotiations, communications, and understandings (both written and oral)
      regarding such subject matter. This Agreement may only be modified, or any
      rights under it waived, by a written document executed by both parties.
      Subject to the foregoing, the "Royalty" (set forth and defined in the
      Prior Agreement) shall be applicable to the "Licensed Products" (set forth
      and defined in the Prior Agreement) in the "Territories" (set forth and
      defined in the Prior Agreement) for Net Sales occurring up to and
      including December 31, 1998, and the parties agree that Licensee shall no
      longer have the right to the "Sell-Off Period" (set forth and defined in
      the Prior Agreement).



LUCAS LICENSING LTD. ("LICENSOR")         GALOOB TOYS, INC. ON BEHALF OF
                                          ITSELF AND ALL PERMITTED LICENSEE
                                          AFFILIATES (JOINTLY AND SEVERALLY
                                          ("LICENSEE")

By: /s/ Gordon Radley                     By: /s/ Mark Goldman
    --------------------------------          ---------------------------------

Title:                                    Title: President and CEO
       -----------------------------             ------------------------------




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