10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                         

Commission File Number 001-05647

MATTEL, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-1567322
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

333 Continental Blvd.

El Segundo, CA 90245-5012

(Address of principal executive offices)

(310) 252-2000

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $1.00 par value	The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  x    No  ¨

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K.  ¨

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨    Smaller reporting company  ¨

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  ¨    No  x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant calculated using the market price as of the close of business June 30, 2009 was $5,766,693,594.

Number of shares outstanding of registrant’s common stock, $1.00 par value, as of February 22, 2010:

363,657,823 shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Mattel, Inc. 2009 Notice of Annual Meeting of Stockholders and Proxy Statement, to be filed with the Securities and Exchange Commission (“SEC”) within 120 days after the close of the registrant’s fiscal year (incorporated into Part III).

MATTEL, INC. AND SUBSIDIARIES

		Page
	PART I
Item 1.	Business	3
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	20
Item 3.	Legal Proceedings	21
Item 4.	Submission of Matters to a Vote of Security Holders	21
	PART II
Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6.	Selected Financial Data	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 8.	Financial Statements and Supplementary Data	53
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	102
Item 9A.	Controls and Procedures	102
Item 9B.	Other Information	102
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	103
Item 11.	Executive Compensation	103
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	103
Item 13.	Certain Relationships and Related Transactions, and Director Independence	103
Item 14.	Principal Accountant Fees and Services	103
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	104
	Signature	113

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PART I

Item 1. Business.

Mattel, Inc. (“Mattel”) designs, manufactures, and markets a broad variety of toy products worldwide through sales to its customers and directly to consumers. Mattel’s vision is to provide “the world’s premier toy brands—today and tomorrow.” Management has set six key company strategies: (i) improve execution of the existing toy business; (ii) globalize the brands; (iii) extend the brands into new areas; (iv) catch new trends, create new brands, and enter new categories; (v) develop people; and (vi) improve productivity, simplify processes, and maintain customer service levels.

Mattel believes its products are among the most widely recognized toy products in the world. Mattel’s portfolio of brands and products are grouped in the following categories:

Mattel Girls & Boys Brands—including Barbie^® fashion dolls and accessories (“Barbie^®”), Polly Pocket^®, Little Mommy^®, Disney Classics^®, and High School Musical^® (collectively “Other Girls Brands”), Hot Wheels^®, Matchbox^® , Battle Force 5™, Speed Racer^®, and Tyco R/C^® vehicles and play sets (collectively “Wheels”), and CARS™, Radica^®, Toy Story^®, Max Steel^®, Speed Racer^®, Batman^®, and Kung Fu Panda^® products, and games and puzzles (collectively “Entertainment”).

Fisher-Price Brands—including Fisher-Price^®, Little People^®, BabyGear™, and View-Master^® (collectively “Core Fisher-Price^®”), Sesame Street^® , Dora the Explorer^®, Go Diego Go! ^®, and See ‘N Say^® (collectively “Fisher-Price^® Friends”), and Power Wheels^®.

American Girl Brands—including Just Like You^®, the historical collection, and Bitty Baby^®. American Girl Brands products are sold directly to consumers via its catalogue, website, and proprietary retail stores. Its children’s publications are also sold to certain retailers.

Mattel was incorporated in California in 1948 and reincorporated in Delaware in 1968. Its executive offices are located at 333 Continental Blvd., El Segundo, California 90245-5012, telephone number (310) 252-2000.

Business Segments

“Mattel” refers to Mattel, Inc. and its subsidiaries as a whole, unless the context requires otherwise. This narrative discussion applies to all segments except where otherwise stated. Mattel’s reportable segments are separately managed business units and are divided on a geographic basis between domestic and international. The Domestic segment is further divided into Mattel Girls & Boys Brands US, Fisher-Price Brands US, and American Girl Brands.

For additional information on Mattel’s operating segment reporting, including revenues, segment income, and assets, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Operating Segment Results” and Item 8 “Financial Statements and Supplementary Data—Note 15 to the Consolidated Financial Statements—Segment Information.” For additional information regarding geographic areas, see Item 8 “Financial Statements and Supplementary Data—Note 15 to the Consolidated Financial Statements—Segment Information.” For a discussion of the risks inherent in the foreign operations of Mattel, which affect each segment, see Item 1A “Risk Factors—Factors That May Affect Future Results.”

Domestic Segment

The Domestic segment develops toys that it markets and sells through the Mattel Girls & Boys Brands US, Fisher-Price Brands US, and American Girl Brands segments.

In the Mattel Girls & Boys Brands US segment, Barbie^® includes brands such as Barbie^® fashion dolls and accessories, and Polly Pocket^®, Little Mommy^®, Disney Classics^®, and High School Musical^® are included

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within Other Girls Brands. Wheels includes Hot Wheels^®, Matchbox^®, Battle Force 5™, Speed Racer^®, and Tyco R/C^® vehicles and play sets. Entertainment includes CARS™, Radica^®, Toy Story^®, Speed Racer^®, Batman^®, and Kung Fu Panda^® products, as well as games and puzzles.

In 2010, Mattel expects to introduce new products, as well as continue to leverage content within its core brands. For Mattel Girls Brands, Barbie^® will be celebrating her aspirational career heritage with the introduction of twenty new careers, including Barbie^®’s 125^th career. Barbie^® will be expanding the Fashionistas line and will continue to build the collector business with new introductions to the tween market. New Barbie^® product introductions will support the full-length animated launches of Barbie in a Mermaid Tale™ in spring 2010 and Barbie^® A Fashion Fairytale in fall 2010. Polly Pocket^® will expand in 2010 with new styles, new characters, and new ways to play. Additionally, Disney Princess™ will feature new products based on a computer-animated feature film.

Also in 2010, Hot Wheels^® will introduce extensions to its TrickTracks^® and Color Shifters™ product lines, as well as new product lines such as Custom Motors. Hot Wheels^® Battle Force 5™ will continue as an animated TV series on the Cartoon Network^® and will be supported by a new product line. Matchbox^® will follow up on its successful 2009 introduction of Rocky The Robot Truck™ with a new range of Big Rig Buddies™ products. The Entertainment business will expand in 2010 to include new products based on WWE^® Wrestling, and Mattel will release new products based on Disney/Pixar’s upcoming Toy Story^® 3 movie in 2010 and will continue to market new product extensions of Disney/Pixar’s successful CARS™ franchise. Mattel will also continue to release products based on the popular DC Comics line, including the Batman^®: The Brave and the Bold^® animated TV series. For games and puzzles, Mattel will continue to support extensions of its popular UNO^®, Apples to Apples^®, and Blokus^® brands. Mattel will also continue to offer innovative ways to play, including the Mindflex™ game.

The Fisher-Price Brands US segment includes Fisher-Price^®, Little People^®, BabyGear™, View-Master^®, Dora the Explorer^®, Go Diego Go!^®, Mickey Mouse^® Clubhouse, Handy Manny^®, See ‘N Say^®, Ni Hao, Kai-lan^®, and Power Wheels^®. New product introductions for 2010 are expected to include the Laugh & Learn^™ Learn & Move Music Station, IXL^® Learning System, Lil’ Zoomers^™ Spinnin’ Sounds Speedway, Little People^® Wheelies Stand ‘n Play Rampway, Imaginext^™ Bigfoot the Monster, Trio^® Batcave™, Newborn Rock ‘n Play Sleeper, iGlide^™, Dance Star Mickey^®, We Did It Dora, Dora All-Seasons Dollhouse, Thomas the Tank Engine and Friends™, and the Thomas and Friends^® Zip, Zoom & Logging Adventure™.

The American Girl Brands segment is a direct marketer, children’s publisher, and retailer best known for its flagship line of historical dolls, books, and accessories, as well as the Just Like You^® and Bitty Baby^® brands. American Girl Brands also publishes best-selling Advice & Activity books and the award-winning American Girl^® magazine. In January 2010, American Girl^® introduced Lanie™, the newest Girl of the Year^® doll. American Girl Brands products are sold only in the US and Canada.

International Segment

Products marketed by the International segment are generally the same as those developed and marketed by the Domestic segment, with the exception of American Girl Brands, although some are developed or adapted for particular international markets. Mattel’s products are sold directly to retailers and wholesalers in most European, Latin American, and Asian countries, and in Australia, Canada, and New Zealand, and through agents and distributors in those countries where Mattel has no direct presence.

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Mattel’s International segment revenue represented 46% of worldwide consolidated gross sales in 2009. Within the International segment, Mattel operates in four regional groups that generated the following gross sales during 2009:

	Amount		Percentage of International Gross Sales
	(In millions, except percentage information)
Europe	$	1,442.5	52	%
Latin America		860.5	31
Asia Pacific		267.4	10
Other		187.9	7
	$	2,758.3	100	%

No individual country within the International segment exceeded 5% of worldwide consolidated gross sales during 2009.

The strength of the US dollar relative to other currencies can significantly affect the revenues and profitability of Mattel’s international operations. Mattel enters into foreign currency forward exchange contracts, primarily to hedge its purchase and sale of inventory, and other intercompany transactions denominated in foreign currencies, to limit the effect of exchange rate fluctuations on its results of operations and cash flows. See Item 7A “Quantitative and Qualitative Disclosures About Market Risk” and Item 8 “Financial Statements and Supplementary Data—Note 11 to the Consolidated Financial Statements—Derivative Instruments.” For financial information by geographic area, see Item 8 “Financial Statements and Supplementary Data—Note 15 to the Consolidated Financial Statements—Segment Information.”

Manufacturing and Materials

Mattel manufactures toy products for all segments in both company-owned facilities and through third-party manufacturers. Products are also purchased from unrelated entities that design, develop, and manufacture those products. To provide greater flexibility in the manufacture and delivery of its products, and as part of a continuing effort to reduce manufacturing costs, Mattel has concentrated production of most of its core products in company-owned facilities and generally uses third-party manufacturers for the production of non-core products.

Mattel’s principal manufacturing facilities are located in China, Indonesia, Thailand, Malaysia, and Mexico. To help avoid disruption of its product supply due to political instability, civil unrest, economic instability, changes in government policies, and other risks, Mattel produces its products in multiple facilities in multiple countries. Mattel believes that the existing production capacity at its own and its third-party manufacturers’ facilities is sufficient to handle expected volume in the foreseeable future. See Item 1A “Risk Factors—Factors That May Affect Future Results.”

Mattel bases its production schedules for toy products on customer orders and forecasts, taking into account historical trends, results of market research, and current market information. Actual shipments of products ordered and order cancellation rates are affected by consumer acceptance of product lines, strength of competing products, marketing strategies of retailers, changes in buying patterns of both retailers and consumers, and overall economic conditions. Unexpected changes in these factors could result in a lack of product availability or excess inventory in a particular product line.

The foreign countries in which most of Mattel’s products are manufactured (principally China, Indonesia, Thailand, Malaysia, and Mexico) all enjoy permanent “normal trade relations” (“NTR”) status under US tariff laws, which provides a favorable category of US import duties. China’s NTR status became permanent in 2002,

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following enactment of a bill authorizing such status upon the country’s accession to the World Trade Organization (“WTO”), which occurred in 2001. Membership in the WTO substantially reduces the possibility of China losing its NTR status, which would result in increased costs for Mattel and others in the toy industry.

All US duties on toys were completely eliminated upon implementation of the Uruguay Round WTO agreement in 1995. The European Union, Japan, and Canada eliminated their tariffs on most toy categories through staged reductions that were completed by January 1, 2004. The primary toy tariffs still maintained by these countries are a European Union tariff of 4.7% on dolls, play sets, most plastic toys, and die cast metal toy vehicles, a Japanese tariff on dolls of 3.9%, and a Canadian tariff of 8.0% on ride on toys, doll carriages, and wagons.

The majority of Mattel’s raw materials are available from numerous suppliers, but may be subject to fluctuations in price.

Competition and Industry Background

Competition in the manufacture, marketing, and sale of toys is based primarily on quality, play value, and price. Mattel offers a diverse range of products for children of all ages and families that include, among others, toys for infants and preschoolers, girls’ toys, boys’ toys, youth electronics, hand-held and other games, puzzles, educational toys, media-driven products, and fashion-related toys. The Mattel Girls & Boys Brands US and Fisher-Price Brands US segments compete with several large toy companies, including Bandai, Hasbro, Jakks Pacific, Leap Frog, Lego, MGA Entertainment, and VTech, many smaller toy companies, and several manufacturers of video games and consumer electronics. American Girl Brands competes with companies that manufacture girls’ toys and with children’s book publishers and retailers. Mattel’s International segment competes with global toy companies including Bandai, Hasbro, Lego, Tomy, and MGA Entertainment, and other national and regional toy companies and manufacturers of video games and consumer electronics. Foreign regions may include competitors that are strong in a particular toy line or geographical area, but do not compete with Mattel or other international toy companies worldwide.

Competition among the above companies is intensifying due to recent trends towards shorter life cycles for individual toy products, the phenomenon of children outgrowing toys at younger ages, and an increasing use of high technology in toys. In addition, a small number of retailers account for a large portion of all toy sales, control the shelf space from which toys are viewed, and have direct contact with parents and children through in-store purchases, coupons, and print advertisements. Such retailers can and do promote their own private-label toys, facilitate the sale of competitors’ toys, and allocate shelf space to one type of toys over another.

Seasonality

Mattel’s business is highly seasonal, with consumers making a large percentage of all toy purchases during the traditional holiday season. A significant portion of Mattel’s customers’ purchasing occurs in the third and fourth quarters of Mattel’s fiscal year in anticipation of such holiday buying. These seasonal purchasing patterns and requisite production lead times cause risk to Mattel’s business associated with the underproduction of popular toys and the overproduction of less popular toys that do not match consumer demand. Retailers are also attempting to manage their inventories more tightly in recent years, requiring Mattel to ship products closer to the time the retailers expect to sell the products to consumers. These factors increase the risk that Mattel may not be able to meet demand for certain products at peak demand times, or that Mattel’s own inventory levels may be adversely impacted by the need to pre-build products before orders are placed. Additionally, as retailers manage their inventories, Mattel experiences cyclical ordering patterns for products and product lines that may cause its sales to vary significantly from period to period.

In anticipation of retail sales in the traditional holiday season, Mattel significantly increases its production in advance of the peak selling period, resulting in a corresponding build-up of inventory levels in the first three

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quarters of its fiscal year. Seasonal shipping patterns result in significant peaks in the third and fourth quarters in the respective levels of inventories and accounts receivable, which result in seasonal working capital financing requirements. See “Seasonal Financing.”

Product Design and Development

Through its product design and development group, Mattel regularly refreshes, redesigns, and extends existing toy product lines and develops innovative new toy product lines for all segments. Mattel believes its success is dependent on its ability to continue this activity effectively. See Item 1A “Risk Factors—Factors That May Affect Future Results.” Product design and development activities are principally conducted by a group of professional designers and engineers employed by Mattel. During 2009, 2008, and 2007, Mattel incurred expenses of $171.3 million, $190.2 million, and $189.4 million, respectively, in connection with the design and development of products, exclusive of royalty payments. See Item 8 “Financial Statements and Supplementary Data—Note 16 to the Consolidated Financial Statements—Supplemental Financial Information.”

Additionally, independent toy designers and developers bring concepts and products to Mattel and are generally paid a royalty on the net selling price of products licensed to Mattel. These independent toy designers may also create different products for other toy companies.

Advertising and Marketing

Mattel supports its product lines with extensive advertising and consumer promotions. Advertising takes place at varying levels throughout the year and peaks during the traditional holiday season. Advertising includes television and radio commercials, and magazine, newspaper, and internet advertisements. Promotions include in-store displays, sweepstakes, merchandising materials, and major events focusing on products and tie-ins with various consumer products companies.

During 2009, 2008, and 2007, Mattel incurred expenses of $609.8 million (11.2% of net sales), $719.2 million (12.2% of net sales), and $708.8 million (11.9% of net sales), respectively, for advertising and promotion.

Sales

Mattel’s products are sold throughout the world. Products within the Domestic segment are sold directly to retailers, including discount and free-standing toy stores, chain stores, department stores, other retail outlets, and, to a limited extent, wholesalers by Mattel Girls & Boys Brands US and Fisher-Price Brands US. Mattel also operates several small retail outlets, generally near or at its corporate headquarters and distribution centers as a service to its employees and as an outlet for its products. American Girl Brands products are sold directly to consumers and its children’s publications are also sold to certain retailers. Mattel has seven retail stores, American Girl Place^® in Chicago, Illinois, New York, New York, and Los Angeles, California, and American Girl Boutique and Bistro^® in Atlanta, Georgia, Dallas, Texas, Natick, Massachusetts, and Bloomington, Minnesota, each of which features children’s products from the American Girl Brands segment. American Girl Brands also has a retail outlet in Oshkosh, Wisconsin that serves as an outlet for its products. Products within the International segment are sold directly to retailers and wholesalers in most European, Latin American, and Asian countries, and in Australia, Canada, and New Zealand, and through agents and distributors in those countries where Mattel has no direct presence. Mattel also has retail outlets in Latin America and Europe that serve as outlets for its products. Additionally, Mattel sells certain of its products online through its website.

During 2009, Mattel’s three largest customers (Wal-Mart at $1.0 billion, Toys “R” Us at $0.7 billion, and Target at $0.5 billion) accounted for approximately 40% of worldwide consolidated net sales in the aggregate. Within countries in the International segment, there is also a concentration of sales to certain large customers that do not operate in the US. The customers and the degree of concentration vary depending upon the region or

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nation. See Item 1A “Risk Factors—Factors That May Affect Future Results” and Item 8 “Financial Statements and Supplementary Data—Note 15 to the Consolidated Financial Statements—Segment Information.”

Licenses and Distribution Agreements

Mattel has license agreements with third parties that permit Mattel to utilize the trademark, characters, or inventions of the licensor in products that Mattel sells. A number of these licenses relate to product lines that are significant to Mattel’s business and operations.

Mattel has entered into agreements to license entertainment properties from, among others, Disney Enterprises, Inc. (including Disney^® characters such as Disney Princess™, CARS™ and Toy Story^® from Pixar, High School Musical^®, Winnie the Pooh^®, and all Disney^® films and television properties for use in Mattel’s games), Viacom International, Inc. relating to its Nickelodeon^® properties (including Dora the Explorer^®, Go Diego Go!^®, and SpongeBob SquarePants^®), Warner Bros. Consumer Products (including Batman^®, Superman^®, Justice League^®, and Speed Racer^®), Sesame Workshop^® (relating to its Sesame Street^® properties including Elmo™), WWE^® Wrestling, and HIT Entertainment™ relating to its Thomas and Friends^® properties.

Royalty expense during 2009, 2008, and 2007 was $188.5 million, $241.2 million, and $243.3 million, respectively. See “Product Design and Development” and Item 8 “Financial Statements and Supplementary Data—Note 14 to the Consolidated Financial Statements—Commitments and Contingencies.”

Mattel also licenses a number of its trademarks, characters, and other property rights to others for use in connection with the sale of non-toy products that do not compete with Mattel’s products. Mattel distributes some third-party finished products that are independently designed and manufactured.

Trademarks, Copyrights and Patents

Most of Mattel’s products are sold under trademarks, trade names, and copyrights, and a number of those products incorporate patented devices or designs. Trade names and trademarks are significant assets of Mattel in that they provide product recognition and acceptance worldwide.

Mattel customarily seeks patent, trademark, or copyright protection covering its products, and it owns or has applications pending for US and foreign patents covering many of its products. A number of these trademarks and copyrights relate to product lines that are significant to Mattel’s business and operations. Mattel believes its rights to these properties are adequately protected, but there can be no assurance that its rights can be successfully asserted in the future or will not be invalidated, circumvented, or challenged.

Commitments

In the normal course of business, Mattel enters into contractual arrangements for future purchases of goods and services to ensure availability and timely delivery, and to obtain and protect Mattel’s right to create and market certain products. Certain of these commitments routinely contain provisions for guarantees or minimum expenditures during the term of the contracts. Current and future commitments for guaranteed payments reflect Mattel’s focus on expanding its product lines through alliances with businesses in other industries.

As of December 31, 2009, Mattel had approximately $267 million of outstanding commitments for purchases of inventory, other assets, and services in fiscal year 2010. Licensing and similar agreements with terms extending through 2014 and beyond contain provisions for future guaranteed minimum payments aggregating approximately $241 million. See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Commitments” and Item 8 “Financial Statements and Supplementary Data—Note 14 to the Consolidated Financial Statements—Commitments and Contingencies.”

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Backlog

Mattel ships products in accordance with delivery schedules specified by its customers, which usually request delivery within three months. In the toy industry, orders are subject to cancellation or change at any time prior to shipment. In recent years, a trend toward just-in-time inventory practices in the toy industry has resulted in fewer advance orders and therefore less backlog of orders. Mattel believes that the amount of backlog orders at any given time may not accurately indicate future sales.

Financial Instruments

Currency exchange rate fluctuations may impact Mattel’s results of operations and cash flows. Mattel seeks to mitigate its exposure to market risk by monitoring its foreign currency transaction exposure for the year and partially hedging such exposure using foreign currency forward exchange contracts primarily to hedge its purchase and sale of inventory, and other intercompany transactions denominated in foreign currencies. These contracts generally have maturity dates of up to 18 months. In addition, Mattel manages its exposure to currency exchange rate fluctuations through the selection of currencies used for international borrowings. Mattel does not trade in financial instruments for speculative purposes.

For additional information regarding foreign currency contracts, see “International Segment” above, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” and Item 8 “Financial Statements and Supplementary Data—Note 11 to the Consolidated Financial Statements—Derivative Instruments.”

Seasonal Financing

See Item 8 “Financial Statements and Supplementary Data—Note 8 to the Consolidated Financial Statements—Seasonal Financing and Debt.”

Government Regulations and Environmental Quality

Mattel’s toy products sold in the US are subject to the provisions of the Consumer Product Safety Act, the Federal Hazardous Substances Act, and the Consumer Product Safety Improvement Act of 2008, and may also be subject to the requirements of the Flammable Fabrics Act or the Food, Drug, and Cosmetics Act, and the regulations promulgated pursuant to such statutes. These statutes ban from the market consumer products that fail to comply with applicable product safety regulations. The Consumer Product Safety Commission (“CPSC”) may require the recall, repurchase, replacement, or repair of any such banned products or products that otherwise create a substantial risk of injury and may seek penalties for regulatory noncompliance under certain circumstances. Similar laws exist in some states and in many international markets.

Mattel maintains a quality control program to help ensure compliance with various US federal, state, and applicable foreign product safety requirements. Nonetheless, Mattel has experienced, and may in the future experience, issues in products that result in recalls, withdrawals, or replacements of products. A product recall could have a material adverse effect on Mattel’s results of operations and financial condition, depending on the product affected by the recall and the extent of the recall efforts required. A product recall could also negatively affect Mattel’s reputation and the sales of other Mattel products. See Item 1A “Risk Factors—Factors That May Affect Future Results” and Item 8 “Financial Statements and Supplementary Data—Note 4 to the Consolidated Financial Statements—Product Recalls and Withdrawals.”

Mattel’s advertising is subject to the Federal Trade Commission Act, The Children’s Television Act of 1990, the rules and regulations promulgated by the Federal Trade Commission, and the Federal Communications Commission, as well as laws of certain countries that regulate advertising and advertising to children. In addition, Mattel’s websites that are directed towards children are subject to The Children’s Online Privacy Protection Act of 1998. Mattel is subject to various other federal, state, local and international laws and regulations applicable to its business. Mattel believes that it is in substantial compliance with these laws and regulations.

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Mattel’s world wide operations are subject to the requirements of various environmental laws and regulations in the jurisdictions where those operations are located. Mattel believes that it is in substantial compliance with those laws and regulations. Mattel’s operations are from time to time the subject of investigations, conferences, discussions, and negotiations with various federal, state and local environmental agencies within and outside the United States with respect to the discharge or cleanup of hazardous waste. We are not aware of any material cleanup liabilities.

Employees

The total number of persons employed by Mattel and its subsidiaries at any one time varies because of the seasonal nature of its manufacturing operations. At December 31, 2009, Mattel’s total number of employees was approximately 27,000.

Executive Officers of the Registrant

The current executive officers of Mattel, all of whom are appointed annually by and serve at the pleasure of the Board of Directors, are as follows:

Name	Age	Position	Executive Officer Since
Robert A. Eckert	55	Chairman of the Board and Chief Executive Officer	2000
Ellen L. Brothers	54	Executive Vice President of Mattel and President, American Girl	2003
Thomas A. Debrowski	59	Executive Vice President, Worldwide Operations	2000
Kevin M. Farr	52	Chief Financial Officer	1996
Neil B. Friedman	62	President, Mattel Brands	1999
Alan Kaye	56	Senior Vice President, Human Resources	2000
Geoff Massingberd	52	Senior Vice President, Corporate Responsibility	2007
Robert Normile	50	Senior Vice President, General Counsel and Secretary	1999
Bryan Stockton	56	President, International	2000
Dianne Douglas	53	Senior Vice President, Investor Relations and Treasurer	2008
H. Scott Topham	49	Senior Vice President and Corporate Controller	2004

Mr. Eckert has been Chairman of the Board and Chief Executive Officer since May 2000. He was formerly President and Chief Executive Officer of Kraft Foods, Inc., the largest packaged food company in North America, from October 1997 until May 2000. From 1995 to 1997, Mr. Eckert was Group Vice President of Kraft Foods, Inc. From 1993 to 1995, Mr. Eckert was President of the Oscar Mayer foods division of Kraft Foods, Inc. Mr. Eckert worked for Kraft Foods, Inc. for 23 years prior to joining Mattel.

Ms. Brothers has been Executive Vice President of Mattel and President, American Girl since July 2000. From November 1998 to July 2000, she was Senior Vice President of Operations, Pleasant Company (which merged with and into Mattel on December 31, 2003, followed immediately on January 1, 2004, by an asset transfer to Mattel’s subsidiary American Girl). From January 1997 to November 1998, she was Vice President of the Catalogue Division, Pleasant Company. She joined Pleasant Company in 1995, prior to its acquisition by Mattel in July 1998, as Vice President of Catalogue Marketing.

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Mr. Debrowski has been Executive Vice President, Worldwide Operations since November 2000. From February 1992 until November 2000, he was Senior Vice President-Operations and a director of The Pillsbury Company. From September 1991 until February 1992, he was Vice President of Operations for the Baked Goods Division of The Pillsbury Company. Prior to that, he served as Vice President and Director of Grocery Operations for Kraft U.S.A.

Mr. Farr has been Chief Financial Officer since February 2000. From September 1996 to February 2000, he was Senior Vice President and Corporate Controller. From June 1993 to September 1996, he served as Vice President, Tax. Prior to that, he served as Senior Director, Tax from August 1992 to June 1993.

Mr. Friedman has been President, Mattel Brands (which includes Mattel Girls & Boys Brands US and Fisher-Price Brands US) since October 2005. From March 1999 to October 2005, he was President, Fisher-Price Brands. From August 1995 to March 1999, he was President, Tyco Preschool. For more than five years prior to that time, he was President of MCA/Universal Merchandising, Senior Vice President-Sales, Marketing and Design of Just Toys, Vice President and General Manager of Baby Care for Gerber Products, Executive Vice President and Chief Operating Officer of Lionel Leisure, Inc., and President of Aviva/Hasbro.

Mr. Kaye has been Senior Vice President of Human Resources since July 1997. Prior to joining Mattel, he worked as head of Human Resources at two other Fortune 500 companies in the banking industry and construction industry, serving as a line executive for the latter. Earlier in his career, he worked with the Hay Group, a compensation consulting firm, and for 12 years with IBM in various human resources positions.

Mr. Massingberd has been Senior Vice President, Corporate Responsibility since September 2007. From February 1998 to August 2007, he served as Senior Vice President and General Manager of Mattel’s International divisions in Canada, Australia, New Zealand, Asia, and Latin America and from August 1997 to February 1998, he was Vice President, Sales for Mattel Canada. Prior to joining Mattel, Mr. Massingberd spent 18 years with Nestle S.A. and served in various roles, including Vice President, Sales and head of Nestle Canada’s Confectionery division.

Mr. Normile has been Senior Vice President, General Counsel and Secretary since March 1999. He served as Vice President, Associate General Counsel and Secretary from August 1994 to March 1999. From June 1992 to August 1994, he served as Assistant General Counsel. Prior to that, he was associated with the law firms of Latham & Watkins LLP and Sullivan & Cromwell LLP.

Mr. Stockton has been President, International since November 2007. He served as Executive Vice President, International from February 2003 to November 2007. He served as Executive Vice President, Business Planning and Development from November 2000 until February 2003. From April 1998 until November 2000, he was President and Chief Executive Officer of Basic Vegetable Products, the largest manufacturer of vegetable ingredients in the world. For more than 20 years prior to that, he was employed by Kraft Foods, Inc., the largest packaged food company in North America, and was President of Kraft North American Food Service from August 1996 to March 1998.

Ms. Douglas has been Senior Vice President, Investor Relations and Treasurer since September 2008. She served as Senior Vice President and Chief Information Officer from July 2005 to September 2008. From November 2003 until July 2005, she served as Senior Vice President of External Affairs, which included oversight of Investor Relations, Corporate Communications, Consumer Relations, Government Affairs, and Philanthropy. Prior to that, she served from March 2001 to October 2003 as Vice President, Investor Relations. Prior to joining Mattel, Ms. Douglas spent 17 years with Associates First Capital Corporation, most recently as Senior Vice President, Investor Relations.

Mr. Topham has been Senior Vice President and Corporate Controller since September 2005. He served as Senior Vice President and Treasurer from March 2005 to August 2005 and as Vice President and Treasurer from

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March 2004 to March 2005. Prior to that, he served as Vice President and Assistant Controller from May 2001 to March 2004. From August 2000 to May 2001, he served as Vice President and Treasurer of Premier Practice Management, Inc. From June 1999 to August 2000, he served as Division Vice President of Dataworks, Inc., a specialized publishing company. Prior to that, he spent eight years with Total Petroleum (North America) Ltd., most recently as Vice President of Human Resources.

Available Information

Mattel files its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) with the SEC. The public may read and copy any materials that Mattel files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet website that contains reports, proxy and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

Mattel’s Internet website address is http://www.mattel.com. Mattel makes available on its Internet website, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such materials are electronically filed with, or furnished to, the SEC.

Item 1A. Risk Factors.

Factors That May Affect Future Results

(Cautionary Statement Under the Private Securities Litigation Reform Act of 1995)

Mattel is including this Cautionary Statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”) for forward-looking statements. This Annual Report on Form 10-K includes forward-looking statements within the meaning of the Act. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “seeks” or words of similar meaning, or future or conditional verbs, such as “will,” “should,” “could,” “may,” “aims,” “intends,” or “projects.” A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Investors should not place undue reliance on the forward-looking statements, which speak only as of the date of this Form 10-K. These forward-looking statements are all based on currently available operating, financial, economic and competitive information and are subject to various risks and uncertainties. The Company’s actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed below.

If the current global economic conditions continue to deteriorate, Mattel’s business and financial results may continue to be adversely affected.

The global economic conditions adversely impacted Mattel’s business and financial results in 2009. Mattel designs, manufactures, and markets a wide variety of toy products worldwide through sales to customers and directly to consumers. Our performance is impacted by the level of discretionary consumer spending, which has deteriorated sharply in the United States and in many countries around the world in which Mattel does business. Consumers’ discretionary purchases of toy products may be impacted by job losses, foreclosures, bankruptcies, reduced access to credit, significantly falling home prices, lower consumer confidence and other macroeconomic factors that affect consumer spending behavior. If our customers encounter liquidity problems due to weak retail sales or their inability to raise sufficient capital due to credit constraints, we may not be able to collect the accounts receivable from the affected customers. Finally, many of the effects and consequences of the current

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global economic conditions are not yet known; any one or all of them could potentially have a material adverse effect on Mattel’s liquidity and capital resources, including increasing our cost of capital or our ability to raise additional capital if needed, or otherwise negatively impact Mattel’s business and financial results.

If Mattel does not successfully identify or satisfy consumer preferences, its results of operations may be adversely affected.

Mattel’s business and operating results depend largely upon the appeal of its toy products. Consumer preferences, particularly among end users of Mattel’s products–children–are continuously changing. Significant, sudden shifts in demand are caused by “hit” toys and trends, which are often unpredictable. Mattel offers a diverse range of products for children of all ages and families that includes, among others, toys for infants and preschoolers, girls’ toys, boys’ toys, youth electronics, digital media, hand-held and other games, puzzles, educational toys, media-driven products, and fashion-related toys. Mattel competes domestically and internationally with a wide range of large and small manufacturers, marketers and sellers of toys, video games, consumer electronics and other play products, as well as retailers, which means that Mattel’s market position is always at risk. Mattel’s ability to maintain its current product sales, and increase its product sales or establish product sales with new, innovative toys, will depend on Mattel’s ability to satisfy play preferences, enhance existing products, develop and introduce new products, and achieve market acceptance of these products. Competition for access to entertainment properties could lessen our ability to secure, maintain, and renew popular licenses to entertainment products or require us to pay licensors higher royalties and higher minimum guaranteed payments in order to obtain or retain these licenses. Competition is intensifying due to recent trends towards shorter life cycles for individual toy products, the phenomenon of children outgrowing toys at younger ages, and an increasing use of more sophisticated technology in toys. If Mattel does not successfully meet the challenges outlined above in a timely and cost-effective manner, demand for its products could decrease, and Mattel’s revenues, profitability and results of operations may be adversely affected.

Inaccurately anticipating changes and trends in popular culture, media and movies, fashion, or technology can negatively affect Mattel’s sales.

Successful movies and characters in children’s literature affect play preferences, and many toys depend on media-based intellectual property licenses. Media-based licenses can cause a line of toys to gain immediate success among children, parents, or families. Trends in media, movies, and children’s characters change swiftly and contribute to the transience and uncertainty of play preferences. In addition, certain developments in the entertainment industry, including labor strikes, could cause delay or interruption in the release of new movies and television programs and could adversely affect the sales of Mattel’s toys based on such movies and television programs. Mattel responds to such trends and developments by modifying, refreshing, extending, and expanding its product offerings on an annual basis. If Mattel does not accurately anticipate trends in popular culture, movies, media, fashion, or technology, its products may not be accepted by children, parents, or families and Mattel’s revenues, profitability, and results of operations may be adversely affected.

Mattel’s business is highly seasonal and its operating results depend, in large part, on sales during the relatively brief traditional holiday season. Any events that disrupt our business during our peak demand times could significantly, adversely and disproportionately affect Mattel’s business.

Mattel’s business is subject to risks associated with the underproduction of popular toys and the overproduction of toys that do not match consumer demand. Sales of toy products at retail are highly seasonal, with a majority of retail sales occurring during the period from September through December. As a result, Mattel’s operating results depend, in large part, on sales during the relatively brief traditional holiday season. Retailers attempt to manage their inventories tightly, which requires Mattel to ship products closer to the time the retailers expect to sell the products to consumers. This in turn results in shorter lead times for production. Management believes that the increase in “last minute” shopping during the holiday season and the popularity of gift cards (which often shift purchases to after the holiday season) may negatively impact customer re-orders

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during the holiday season. These factors may decrease sales or increase the risks that Mattel may not be able to meet demand for certain products at peak demand times or that Mattel’s own inventory levels may be adversely impacted by the need to pre-build products before orders are placed.

In addition, as a result of the seasonal nature of our business, Mattel may be significantly and adversely affected, in a manner disproportionate to the impact on a company with sales spread more evenly throughout the year, by unforeseen events, such as terrorist attacks, economic shocks, earthquakes or other catastrophic events, that harm the retail environment or consumer buying patterns during our key selling season, or by events, such as strikes, disruptions in transportation or port delays, that interfere with the manufacture or shipment of goods during the critical months leading up to the holiday purchasing season.

Mattel has significant customer concentration, so that economic difficulties or changes in the purchasing policies or patterns of its major customers could have a significant impact on Mattel’s business and operating results.

A small number of customers account for a large share of Mattel’s net sales. In 2009, Mattel’s three largest customers, Wal-Mart, Toys “R” Us and Target, in the aggregate, accounted for approximately 40% of net sales, and its ten largest customers, in the aggregate, accounted for approximately 50% of net sales. The concentration of Mattel’s business with a relatively small number of customers may expose Mattel to a material adverse effect if one or more of Mattel’s large customers were to significantly reduce purchases for any reason, favor competitors or new entrants, or increase their direct competition with Mattel by expanding their private-label business. Customers make no binding long-term commitments to Mattel regarding purchase volumes and make all purchases by delivering one-time purchase orders. Any customer could reduce its overall purchases of Mattel’s products, reduce the number and variety of Mattel’s products that it carries and the shelf space allotted for Mattel’s products, or otherwise seek to materially change the terms of the business relationship at any time. Any such change could significantly harm Mattel’s business and operating results.

Significant increases in the price of commodities, transportation or labor, if not offset by declines in other input costs, or a reduction or interruption in the delivery of raw materials, components and finished products from Mattel’s vendors could negatively impact Mattel’s financial results.

Cost increases, whether resulting from rising costs of materials, compliance with existing or future regulatory requirements, transportation, services and labor could impact the profit margins realized by Mattel on the sale of its products. Because of market conditions, timing of pricing decisions, and other factors, there can be no assurance that Mattel will be able to offset any of these increased costs by adjusting the prices of its products. Increases in prices of Mattel’s products could result in lower sales. Mattel’s ability to meet customer demand depends, in part, on its ability to obtain timely and adequate delivery of materials, parts and components from its suppliers and internal manufacturing capacity. Mattel has experienced shortages in the past, including shortages of raw materials and components. Although Mattel works closely with suppliers to avoid these types of shortages, there can be no assurance that Mattel will not encounter these problems in the future. A reduction or interruption in supplies or in the delivery of finished products, whether resulting from more stringent regulatory requirements, suppliers, disruptions in transportation, port delays, labor strikes, lockouts, or otherwise, or a significant increase in the price of one or more supplies, such as fuel or resin (which is an oil-based product), could negatively impact Mattel’s financial results.

Significant changes in currency exchange rates or the ability to transfer capital across borders could have a significant adverse effect on Mattel’s business and results of operations.

Mattel’s net investment in its foreign subsidiaries and its results of operations and cash flows are subject to changes in currency exchange rates and regulations. Mattel seeks to mitigate the exposure of its results of operations to fluctuations in currency exchange rates by partially hedging this exposure using foreign currency forward exchange contracts. These contracts are primarily used to hedge Mattel’s purchase and sale of inventory,

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and other intercompany transactions denominated in foreign currencies. Government action may restrict Mattel’s ability to transfer capital across borders and may also impact the fluctuation of currencies in the countries where Mattel conducts business or has invested capital. Significant changes in currency exchange rates, reductions in Mattel’s ability to transfer its capital across borders, and changes in government-fixed currency exchange rates, including the Chinese yuan and Venezuelan bolivar fuerte, could have a significant adverse effect on Mattel’s business and results of operations.

Failure to successfully implement new initiatives could have a significant adverse effect on Mattel’s business, financial condition and results of operations.

Mattel has announced, and in the future may announce, initiatives to reduce its costs, increase its efficiency, improve the execution of its core business, globalize and extend Mattel’s brands, catch new trends, create new brands, and offer new innovative products, enhance product safety, develop people, improve productivity, simplify processes, maintain customer service levels, as well as initiatives designed to drive sales growth, capitalize on Mattel’s scale advantage, and improve its supply chain. These initiatives involve investment of capital and complex decision-making as well as extensive and intensive execution, and the success of these initiatives is not assured. Failure to successfully implement any of these initiatives, or the failure of any of these initiatives to produce the results anticipated by management, could have a significant adverse effect on Mattel’s business, financial condition, and results of operations.

Mattel’s business depends in large part on the success of its vendors and outsourcers, and Mattel’s brands and reputation may be harmed by actions taken by third-parties that are outside Mattel’s control. In addition, any material failure, inadequacy or interruption resulting from such vendors or outsourcings could harm Mattel’s ability to effectively operate its business.

As a part of our efforts to cut costs, achieve better efficiencies and increase productivity and service quality, Mattel relies significantly on vendor and outsourcing relationships with third parties for services and systems including manufacturing, transportation, logistics and information technology. Any shortcoming of a Mattel vendor or outsourcer, particularly an issue affecting the quality of these services or systems, may be attributed by customers to Mattel, thus damaging Mattel’s reputation, brand value and potentially affecting the results of operations. In addition, problems with transitioning these services and systems or operating failures with these vendors and outsourcers could cause delays in product sales, reduce efficiency of Mattel’s operations, and significant capital investments could be required to remediate the problem.

Increases in interest rates, reduction of Mattel’s credit ratings, contraction of credit availability or the inability of Mattel to meet the debt covenant requirements in its credit facilities could negatively impact Mattel’s ability to conduct its operations.

Increases in interest rates, both domestically and internationally, could negatively affect Mattel’s cost of financing its operations. Any reduction in Mattel’s credit ratings could increase the cost of obtaining financing. Mattel may be hindered from obtaining, or incur additional costs to obtain, additional credit in light of the current tight credit market environment. Additionally, Mattel’s ability to issue long-term debt and obtain seasonal financing could be adversely affected by factors such as market conditions and an inability to meet its debt covenant requirements, which include maintaining certain financial ratios. Mattel’s ability to conduct its operations could be negatively impacted should these or other adverse conditions affect its primary sources of liquidity.

Liquidity problems or bankruptcy of Mattel’s key customers could have a significant adverse effect on Mattel’s business, financial condition and results of operations.

Many of Mattel’s key customers are mass-market retailers. In the past, the mass-market retail channel in the US has experienced significant shifts in market share among competitors, causing some large retailers to

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experience liquidity problems. Certain of Mattel’s customers filed for bankruptcy in 2008 and 2009 and the current global economic conditions have adversely affected the financial condition of most retailers. Mattel’s sales to customers are typically made on credit without collateral. There is a risk that customers will not pay, or that payment may be delayed, because of bankruptcy, contraction of credit availability to such customers or other factors beyond the control of Mattel, which could increase Mattel’s exposure to losses from bad debts. In addition, if these or other customers were to cease doing business as a result of bankruptcy or significantly reduce the number of stores operated, it could have a significant adverse effect on Mattel’s business, financial condition, and results of operations.

If Mattel is not able to adequately protect its proprietary intellectual property and information, its results of operations could be adversely affected.

The value of Mattel’s business depends on its ability to protect its intellectual property and information, including its trademarks, trade names, copyrights, patents and trade secrets, in the US and around the world, as well as its customer, employee, and consumer data. If Mattel fails to protect its proprietary intellectual property and information, including any successful challenge to Mattel’s ownership of its intellectual property or material infringements of its intellectual property, could have a significant adverse effect on Mattel’s business, financial condition, and results of operations.

Unfavorable resolution of pending and future litigation matters, and disputes, including those arising from recalls, withdrawals, or replacements of Mattel products, could have a significant adverse effect on Mattel’s financial condition.

Mattel is involved in a number of litigation and regulatory matters, including those arising from recalls, withdrawals, or replacements of Mattel products. An unfavorable resolution of these pending matters could have a significant adverse effect on Mattel’s financial condition and its operations. Regardless of its outcome, litigation may result in substantial costs and expenses, and significantly divert the attention of management. There can be no assurance that Mattel will be able to prevail in, or achieve a favorable settlement of, pending matters. In addition to the pending matters, future litigation, government proceedings, labor disputes, or environmental matters could lead to increased costs or interruption of Mattel’s normal business operations.

Mattel is subject to various laws and government regulations, violation of which could subject it to sanctions. In addition, changes in such laws or regulations may lead to increased costs, changes in Mattel’s effective tax rate, or the interruption of normal business operations that would negatively impact Mattel’s financial condition and results of operations.

Mattel operates in a highly regulated environment in the US and international markets. US federal, state and local governmental entities, and foreign governments regulate many aspects of Mattel’s business, including its products and the importation and exportation of its products. These regulations may include accounting standards, taxation requirements (including changes in applicable income tax rates, new tax laws and revised tax law interpretations), product safety and other safety standards, trade restrictions, regulations regarding financial matters, environmental regulations, advertising directed toward children, product content, and other administrative and regulatory restrictions. While Mattel takes all the steps it believes are necessary to comply with these laws and regulations, there can be no assurance that Mattel will be in compliance in the future. Failure to comply could result in monetary liabilities and other sanctions which could have a negative impact on Mattel’s business, financial condition and results of operations.

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In addition, changes in laws or regulations may lead to increased costs, changes in Mattel’s effective tax rate, or the interruption of normal business operations that would negatively impact its financial condition and results of operations.

Product recalls, product liability claims, absence or cost of insurance, and associated costs could increase governmental scrutiny, divert resources, reduce sales and increase costs and could have a significant adverse effect on Mattel’s financial condition.

Mattel has experienced, and may in the future experience, issues in products that result in recalls, withdrawals, or replacements of products. Testing implemented by Mattel, as well as scrutiny by retailers, consumers, and other parties, may reveal issues in Mattel products that may lead to recalls, withdrawals, replacement of products, or regulatory actions by governmental authorities. In addition, individuals have asserted claims, and may in the future assert claims, that they have sustained injuries from Mattel’s products, and Mattel is and may be subject to lawsuits relating to these claims. There is a risk that these claims or liabilities may exceed, or fall outside of the scope of, Mattel’s insurance coverage. Moreover, Mattel may be unable to obtain adequate liability insurance in the future. Any of the issues mentioned above could result in increased governmental scrutiny, diversion of development and management resources, and reduced sales and increased costs, any of which could significantly and adversely affect Mattel’s financial condition.

Product recalls may harm Mattel’s reputation and acceptance of Mattel’s products by consumers, licensors and Mattel’s retailer customers, which may significantly and adversely affect its business operations, decrease sales and increase costs. Recalls may also increase competitive pressures from other toy manufacturers.

Product recalls, withdrawals, or replacements have resulted in coverage critical of Mattel in the press and media. While Mattel believes that it has acted responsibly and in the interests of safety, product recalls, withdrawals, or replacements may harm Mattel’s reputation and the acceptance of its products by consumers, licensors, and retailers. Mattel’s ability to enter into licensing agreements for products on competitive terms may be adversely affected if licensors believe that products sold by Mattel will be less favorably received in the market. Mattel’s retailer customers may be less willing to purchase Mattel products or to provide marketing support for those products, such as shelf space, promotions, and advertising, or have imposed or may impose additional requirements or product changes that would adversely affect Mattel’s business operations, decrease sales, and increase costs. Product recalls, withdrawals, or replacements may also increase the amount of competition that Mattel confronts from other manufacturers. Some competitors may attempt to differentiate themselves from Mattel by claiming that their products are produced in a manner or geographic area that is insulated from the issues that preceded recalls, withdrawals, or replacements of Mattel products. To the extent that competitive manufacturers choose not to implement enhanced safety and testing protocols comparable to those that Mattel has adopted, those competitors could enjoy a cost advantage that will enable them to offer products at lower prices than those charged by Mattel.

Mattel’s current and future safety procedures may increase costs, significantly and adversely affect its relationship with vendors and make it more difficult for Mattel to produce, purchase and deliver products on a timely basis to meet market demands. Future conditions may require Mattel to adopt further changes that may increase its costs and further affect its relationship with vendors.

Mattel’s current operating procedures and requirements, including testing requirements and standards, have imposed costs on both Mattel and the vendors from which it purchases products. Changes in business conditions, including those resulting from new legislative and regulatory requirements, will cause further revisions in Mattel’s operating procedures and requirements. Changes in Mattel’s operating procedures and requirements may delay delivery of products and increase costs. Mattel’s relationship with its existing vendors may be adversely affected as a result of these changes, making Mattel more dependent on a smaller number of vendors. Some vendors may choose not to continue to do business with Mattel or not to accommodate Mattel’s needs to

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the extent that they have done in the past. In addition, rising production costs, contraction of credit availability and labor shortages have caused a substantial contraction in the number of toy manufacturers in China, decreasing the number of potential vendors to manufacture Mattel’s products. Because of the seasonal nature of Mattel’s business and the demands of its customers for deliveries with short lead times, Mattel depends upon the cooperation of its vendors to meet market demand for its products in a timely manner. There can be no assurance that existing and future events will not require Mattel to adopt additional requirements and incur additional costs, and impose those requirements and costs on its vendors, which may adversely affect its relationship with those vendors and Mattel’s ability to meet market demand in a timely manner.

Political developments, including trade relations, and the threat or occurrence of war or terrorist activities could adversely impact Mattel, its personnel and facilities, its customers and suppliers, retail and financial markets, and general economic conditions.

Mattel’s business is worldwide in scope, including operations in 43 countries and territories. The deterioration of the political situation in a country in which Mattel has significant sales or operations, or the breakdown of trade relations between the US and a foreign country in which Mattel has significant manufacturing facilities or other operations, could adversely affect Mattel’s business, financial condition, and results of operations. For example, a change in trade status for China could result in a substantial increase in the import duty of toys manufactured in China and imported into the US. In addition, the occurrence of war or hostilities between countries or threat of terrorist activities, and the responses to and results of these activities, could adversely impact Mattel, its personnel and facilities, its customers and suppliers, retail and financial markets, and general economic conditions.

Disruptions in Mattel’s manufacturing operations due to political instability, civil unrest, or disease could negatively impact Mattel’s business, financial position and results of operations.

Mattel owns, operates and manages manufacturing facilities and utilizes third-party manufacturers throughout Asia, primarily in China, Indonesia, Malaysia and Thailand. The risk of political instability and civil unrest exists in certain of these countries, which could temporarily or permanently damage Mattel’s manufacturing operations located there. In the past, outbreaks of SARS have been significantly concentrated in Asia, particularly in Hong Kong, and in the Guangdong province of China, where many of Mattel’s manufacturing facilities and third-party manufacturers are located. The design, development and manufacture of Mattel’s products could suffer if a significant number of Mattel’s employees or the employees of its third-party manufacturers or their suppliers contract SARS, avian flu or other communicable diseases, or otherwise are unable to fulfill their responsibilities. Mattel has developed contingency plans designed to help mitigate the impact of disruptions in its manufacturing operations. Mattel’s business, financial position, and results of operations could be negatively impacted by a significant disruption to its manufacturing operations or suppliers.

Earthquakes or other catastrophic events out of our control may damage Mattel’s facilities or those of its contractors and harm Mattel’s results of operations.

Mattel has significant operations near major earthquake faults, including its corporate headquarters in Southern California. A catastrophic event where Mattel has important operations, such as an earthquake, tsunami, flood, typhoon, fire, or other natural or manmade disaster, could disrupt Mattel’s operations or those of its contractors and impair production or distribution of its products, damage inventory, interrupt critical functions, or otherwise affect its business negatively, harming Mattel’s results of operations.

The production and sale of private-label toys by Mattel’s retail customers may result in lower purchases of Mattel-branded products by those retail customers.

In recent years, consumer goods companies generally, including those in the toy business, have experienced the phenomenon of retail customers developing their own private-label products that directly compete with the

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products of traditional manufacturers. Some retail chains that are customers of Mattel sell private-label toys designed, manufactured and branded by the retailers themselves. These toys may be sold at prices lower than comparable toys sold by Mattel and may result in lower purchases of Mattel-branded products by these retailers. In some cases, retailers who sell these private-label toys are larger than Mattel and may have substantially more resources than Mattel.

Mattel’s failure to successfully market or advertise its products could have an adverse effect on Mattel’s business, financial condition and results of operations.

Mattel’s products are marketed worldwide through a diverse spectrum of advertising and promotional programs. Mattel’s ability to sell products is dependent in part upon the success of these programs. If Mattel does not successfully market its products or if media or other advertising or promotional costs increase, these factors could have an adverse effect on Mattel’s business, financial condition, and results of operations.

Mattel depends on key personnel and may not be able to hire, retain and integrate sufficient qualified personnel to maintain and expand its business.

Mattel’s future success depends partly on the continued contribution of key executives, designers, technical, sales, marketing, manufacturing, and administrative personnel. The loss of services of any of Mattel’s key personnel could harm Mattel’s business. Recruiting and retaining skilled personnel is costly and highly competitive. If Mattel fails to retain, hire, train, and integrate qualified employees and contractors, Mattel may not be able to maintain and expand its business.

Mattel may engage in acquisitions, mergers or dispositions, which may affect the profit, revenues, profit margins, debt-to-capital ratio, capital expenditures or other aspects of Mattel’s business. In addition, Mattel has certain anti-takeover provisions in its by-laws that may make it more difficult for a third party to acquire Mattel without its consent, which may adversely affect Mattel’s stock price.

Mattel may engage in acquisitions, mergers or dispositions, which may affect the profit, revenues, profit margins, debt-to-capital ratio, capital expenditures, or other aspects of Mattel’s business. There can be no assurance that Mattel will be able to identify suitable acquisition targets or merger partners or that, if identified, it will be able to acquire these targets on acceptable terms or agree to terms with merger partners. There can also be no assurance that Mattel will be successful in integrating any acquired company into its overall operations, or that any such acquired company will operate profitably or will not otherwise adversely impact Mattel’s results of operations. Further, Mattel cannot be certain that key talented individuals at these acquired companies will continue to work for Mattel after the acquisition or that they will continue to develop popular and profitable products or services. In addition, Mattel has certain anti-takeover provisions in its bylaws that may make it more difficult for a third party to acquire Mattel without its consent, which may adversely affect Mattel’s stock price.

The level of returns on pension plan assets and the actuarial assumptions used for valuation purposes could affect our earnings in future periods. Changes in standards and government regulations could also affect our pension plan expense and funding requirements.

Assumptions used in determining projected benefit obligations and the fair value of plan assets for our pension plan are evaluated by us in consultation with outside actuaries. In the event that we determine that changes are warranted in the assumptions used, such as the discount rate, expected long term rate of return, or health care costs, our future pension benefit expenses could increase or decrease. Due to changing market conditions or changes in the participant population, the actuarial assumptions that we use may differ from actual results, which could have a significant impact on our pension and postretirement liability and related costs. Funding obligations are determined based on the value of assets and liabilities on a specific date as required under relevant government regulations for each plan. Future pension funding requirements, and the timing of funding payments, could be affected by legislation enacted by the relevant governmental authorities.

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* * * * * * * * * * * * * * * * *

If any of the risks and uncertainties described in the cautionary factors listed above actually occurs, Mattel’s business, financial condition and results of operations could be significantly and adversely affected. The factors listed above are not exhaustive. Other sections of this Annual Report on Form 10-K include additional factors that could materially and adversely impact Mattel’s business, financial condition and results of operations. Moreover, Mattel operates in a very competitive and rapidly changing environment. New factors emerge from time to time, and it is not possible for management to predict the impact of all of these factors on Mattel’s business, financial condition or results of operations, or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in this Annual Report on Form 10-K and any other public statement made by Mattel or its representatives may turn out to be wrong. Mattel expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Mattel owns its corporate headquarters in El Segundo, California, consisting of approximately 335,000 square feet, and an adjacent office building consisting of approximately 55,000 square feet. Mattel also leases buildings in El Segundo consisting of approximately 327,000 square feet. All segments use these facilities. Mattel’s Fisher-Price^® subsidiary owns its headquarters facilities in East Aurora, New York, consisting of approximately 535,000 square feet, which is used by the Fisher-Price Brands US segment and for corporate support functions. American Girl Brands owns its headquarters facilities in Middleton, Wisconsin, consisting of approximately 180,000 square feet, a warehouse in Middleton, consisting of approximately 215,000 square feet, and distribution facilities in Middleton, DeForest and Wilmot, Wisconsin, consisting of a total of approximately 948,000 square feet, all of which are used by the American Girl Brands segment.

Mattel maintains leased sales offices in California, Illinois, Minnesota, New York, and Arkansas, and leased warehouse and distribution facilities in California, New Jersey, and Texas, all of which are used by the Domestic segment. Mattel has leased retail and related office space in Chicago, Illinois, New York, New York, and Los Angeles, California for its American Girl Place^® stores, Dallas, Texas, Atlanta, Georgia, Natick, Massachusetts, Bloomington, Minnesota, and Denver, Colorado for its American Girl Boutique and Bistro^® and leased retail space in Oshkosh, Wisconsin, which are used by the American Girl Brands segment, and Pomona, California, which is used by Mattel Brands. Mattel also has leased office space in Florida, which is used by the International segment. Mattel leases a computer facility in Phoenix, Arizona used by all segments. Internationally, Mattel has offices and/or warehouse space in Argentina, Australia, Austria, Belgium, Bermuda, Brazil, Canada, Chile, China, Colombia, Costa Rica, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Italy, Japan, Macau, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Peru, Poland, Portugal, Puerto Rico, South Korea, Spain, Switzerland, Taiwan, Turkey, the United Kingdom, and Venezuela, which are leased (with the exception of office and warehouse space in Chile and certain warehouse space in France that is owned by Mattel) and used by the International segment. Mattel also has leased retail and related office space in China. Mattel’s principal manufacturing facilities are located in China, Indonesia, Thailand, Malaysia, and Mexico. See Item 1 “Business—Manufacturing and Materials.”

For leases that are scheduled to expire during the next twelve months, Mattel may negotiate new lease agreements, renew existing lease agreements, or utilize alternate facilities. See Item 8 “Financial Statements and Supplementary Data—Note 14 to the Consolidated Financial Statements—Commitments and Contingencies.” Mattel believes that its owned and leased facilities, in general, are suitable and adequate for its present and currently foreseeable needs.

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Item 3. Legal Proceedings.

See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Litigation” and Item 8 “Financial Statements and Supplementary Data—Note 14 to the Consolidated Financial Statements—Commitments and Contingencies.”

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

For information regarding the markets in which Mattel’s common stock, par value $1.00 per share, is traded, see the cover page hereof. For information regarding the high and low closing prices of Mattel’s common stock for the last two calendar years, see Item 8 “Financial Statements and Supplementary Data—Note 17 to the Consolidated Financial Statements—Quarterly Financial Information.”

Holders of Record

As of February 22, 2010, Mattel had approximately 36,000 holders of record of its common stock.

Dividends

In 2009, 2008, and 2007, Mattel paid a dividend per share of $0.75 to holders of its common stock. The Board of Directors declared the dividends in November, and Mattel paid the dividends in December of each year. The payment of dividends on common stock is at the discretion of the Board of Directors and is subject to customary limitations.

Recent Sales of Unregistered Securities

During the fourth quarter of 2009, Mattel did not sell any unregistered securities.

Issuer Purchases of Equity Securities

During 2009, Mattel did not repurchase any shares of its common stock. During 2008, Mattel repurchased 4.9 million shares at a cost of $90.6 million. During 2007, Mattel repurchased 35.9 million shares at a cost of $806.3 million. During 2008 and 2007, the Board of Directors authorized Mattel to increase its share repurchase program by $500.0 million and $750.0 million, respectively. At December 31, 2009, share repurchase authorizations of $410.3 million had not been executed. Repurchases will take place from time to time, depending on market conditions. Mattel’s share repurchase program has no expiration date.

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This table provides certain information with respect to Mattel’s purchases of its common stock during the fourth quarter of 2009:

Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
October 1 – 31
Repurchase program (1)	—		—	—	$	410,324,916
Employee transactions (2)	2,130	$	19.19	N/A		N/A
November 1 – 30
Repurchase program (1)	—		—	—	$	410,324,916
Employee transactions (2)	2,209	$	19.56	N/A		N/A
December 1 – 31
Repurchase program (1)	—		—	—	$	410,324,916
Employee transactions (2)	129	$	19.98	N/A		N/A
Total
Repurchase program (1)	—		—	—	$	410,324,916
Employee transactions (2)	4,468	$	19.40	N/A		N/A

(1) During the fourth quarter, Mattel did not repurchase any shares of its common stock in the open market. Repurchases will take place from time to time, depending on market conditions. Mattel’s share repurchase program has no expiration date.

(2) Includes the sale of restricted shares for employee tax withholding obligations that occur upon vesting.

N/A Not applicable.

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Performance Graph

The following graph compares the performance of Mattel common stock with that of the S&P 500 Index and the S&P 500 Consumer Staples Index. The Cumulative Total Return listed below assumes an initial investment of $100 on December 31, 2004 and reinvestment of dividends.

Comparison of Five Year Cumulative Total Return

Mattel, Inc., S&P 500, and S&P 500 Consumer Staples Index

Cumulative Total Return	2005		2006		2007		2008		2009
Mattel, Inc.	$	83.74	$	123.38	$	107.75	$	94.79	$	122.82
S&P 500		104.83		121.20		127.85		81.12		102.15
S&P 500 Consumer Staples		103.55		118.45		135.23		114.65		131.20

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Item 6. Selected Financial Data.

	For the Year Ended December 31,
	2009			2008			2007			2006			2005
	(In thousands, except per share and percentage information)
Operating Results:
Net sales	$	5,430,846		$	5,918,002		$	5,970,090		$	5,650,156		$	5,179,016
Gross profit		2,714,697			2,684,406			2,777,300			2,611,793			2,372,868
% of net sales		50.0	%		45.4	%		46.5	%		46.2	%		45.8	%
Operating income		731,168			541,792			730,078			728,818			664,529
% of net sales		13.5	%		9.2	%		12.2	%		12.9	%		12.8	%
Income before income taxes		660,047			487,964			703,398			683,756			652,049
Provision for income taxes (a)		131,343			108,328			103,405			90,829			235,030
Net income	$	528,704		$	379,636		$	599,993		$	592,927		$	417,019
Net income per common share—basic	$	1.45		$	1.04		$	1.55		$	1.54		$	1.02
Net income per common share—diluted	$	1.45		$	1.04		$	1.53		$	1.53		$	1.01
Dividends declared per common share	$	0.75		$	0.75		$	0.75		$	0.65		$	0.50

	December 31,
	2009		2008		2007		2006		2005
	(In thousands)
Financial Position:
Total assets	$	4,780,555	$	4,675,039	$	4,805,455	$	4,955,884	$	4,372,313
Noncurrent liabilities		1,188,692		1,297,930		928,284		940,390		807,395
Stockholders’ equity		2,530,989		2,117,135		2,306,742		2,432,974		2,101,733

(a) The provision for income taxes in 2009 was positively impacted by net tax benefits of $28.8 million related to reassessments of prior years’ tax exposures based on the status of current audits in various jurisdictions around the world, settlements, and enacted tax law changes. The provision for income taxes in 2007 was positively impacted by net tax benefits of $42.0 million related to reassessments of prior years’ tax exposures based on the status of audits in various jurisdictions around the world, including settlements, partially offset by enacted tax law changes. The provision for income taxes in 2006 was positively impacted by the Tax Increase Prevention and Reconciliation Act passed in May 2006, and tax benefits of $63.0 million related to tax settlements and refunds as a result of ongoing audits with foreign and state tax authorities. The provision for income taxes in 2005 was negatively impacted by incremental tax expense of $107.0 million, resulting from Mattel’s decision to repatriate $2.4 billion in previously unremitted foreign earnings under the American Jobs Creation Act, partially offset by $38.6 million of tax benefits primarily relating to tax settlements reached with various tax authorities and reassessments of tax exposures based on the status of audits in various jurisdictions around the world.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the consolidated financial statements and the related notes. See Item 8 “Financial Statements and Supplementary Data.”

Overview

Mattel’s objective is to continue to create long-term stockholder value by generating strong cash flow and deploying it in a disciplined and opportunistic manner as outlined in Mattel’s capital and investment framework. To achieve this objective, management has established three overarching goals.

The first goal is to grow core brands by continuing to develop popular toys that are innovative and responsive to current play patterns and other trends. Additionally, Mattel plans to pursue additional licensing arrangements and strategic partnerships to extend its portfolio of brands into areas outside of traditional toys.

The second goal is to improve execution in areas including manufacturing, distribution, and selling. Mattel continues to focus on improving the efficiency of its supply chain using Lean supply chain initiatives. The objective of the Lean program is to improve the flow of processes, do more with less, and focus on the value chain from beginning to end.

The third goal is to further capitalize on Mattel’s scale advantage. For example, as the world’s largest toy company, Mattel believes it can realize cost savings when making purchasing decisions based on a One Mattel philosophy.

2009 Overview

During 2009, Mattel improved execution across its supply chain and throughout the company by realigning its infrastructure, controlling costs and expenses, tightly managing working capital, especially inventories, and reducing capital spending by doing only business-critical projects. This resulted in improved profitability, a stronger balance sheet, and improved cash flow, which Mattel used to lower debt, increase cash balances, and continue to reward stockholders through its strong annual dividend. More specifically:

• Gross profit as a percentage of net sales increased from 45.4% in 2008 to 50.0% in 2009, primarily due to price increases and net cost savings related to Mattel’s Global Cost Leadership program, partially offset by unfavorable changes in foreign currency exchange rates.

• Operating income increased from $541.8 million in 2008 to $731.2 million in 2009, primarily due to higher gross profit, lower advertising and promotion expenses, and lower other selling and administrative expenses, partially offset by lower sales.

• The Global Cost Leadership program generated gross costs savings before severance charges of approximately $164 million during 2009 (or approximately $132 million net of 2009 severance charges of approximately $32 million).

• Cash flows from operations increased from $436.3 million in 2008 to $945.0 million in 2009.

• Capital expenditures decreased from $198.8 million in 2008 to $120.5 million in 2009.

2010 and Beyond

Mattel’s focus for 2010 is to build on its progress towards its long-term profitability goals, in light of what it expects to be a challenging cost environment and a continuation of a difficult economic environment. Over the long-term, Mattel’s goals are to achieve gross margin of approximately 50%, advertising expense of approximately 11% to 13%, and other selling and administrative expenses of approximately 20%, which should result in operating margins of approximately 15% to 20%. Mattel will continue to manage its business based on

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realistic revenue assumptions, but is more optimistic about its revenue in 2010 based on the momentum of its core brands from 2009, strong partnerships for licensed brands in 2010, including WWE^® Wrestling, Disney/Pixar’s Toy Story^®, and HIT Entertainment™’s Thomas and Friends^®, and its evergreen licensed properties. In addition to its revenue generating activities, Mattel will also continue to take actions intended to improve profitability, including:

• Continuing to execute its Global Cost Leadership program;

• Continuing its other cost and manufacturing efficiency programs; and

• Pricing products consistent with its long-term operating margin goals given likely cost pressures, such as commodities and labor rates in China.

Results of Operations

2009 Compared to 2008

Consolidated Results

Net sales for 2009 were $5.43 billion, an 8% decrease as compared to $5.92 billion in 2008, including unfavorable changes in currency exchange rates of 2 percentage points. Net income for 2009 was $528.7 million, or $1.45 per diluted share as compared to net income of $379.6 million, or $1.04 per diluted share, for 2008. Net income for 2009 was positively impacted by net tax benefits of $28.8 million related to reassessments of prior years’ tax exposures based on the status of current audits in various jurisdictions around the world, settlements, and enacted tax law changes.

Gross profit as a percentage of net sales increased to 50.0% in 2009 from 45.4% in 2008. The increase in gross profit as a percentage of net sales was primarily due to price increases and net cost savings related to the Global Cost Leadership program, partially offset by unfavorable changes in foreign exchange rates.

Income before income taxes as a percentage of net sales increased to 12.2% in 2009 from 8.2% in 2008. Contributing to this increase were higher gross profit and lower advertising and promotion expenses, partially offset by higher other selling and administrative expenses.

The following table provides a summary of Mattel’s consolidated results for 2009 and 2008 (in millions, except percentage and basis point information):

	For the Year										Year/Year Change
	2009					2008
	Amount			% of Net Sales		Amount			% of Net Sales		%		Basis Points of Net Sales
Net sales	$	5,430.8		100.0	%	$	5,918.0		100.0	%	–8	%
Gross profit	$	2,714.7		50.0	%	$	2,684.4		45.4	%	1	%	460
Advertising and promotion expenses		609.8		11.2			719.2		12.2		–15	%	(100	)
Other selling and administrative expenses		1,373.7		25.3			1,423.4		24.1		–3	%	120
Operating income		731.2		13.5			541.8		9.2		35	%	430
Interest expense		71.8		1.3			81.9		1.4		–12	%	(10	)
Interest (income)		(8.1	)	–0.1			(25.0	)	–0.4		–68	%	30
Other non-operating expense (income), net		7.5					(3.1	)
Income before income taxes	$	660.0		12.2	%	$	488.0		8.2	%	35	%	400

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Sales

Net sales for 2009 were $5.43 billion, an 8% decrease as compared to $5.92 billion in 2008, including unfavorable changes in currency exchange rates of 2 percentage points. Gross sales within the US decreased 4% from 2008, and accounted for 54% and 51% of consolidated gross sales in 2009 and 2008, respectively. Gross sales in international markets decreased 13% as compared to 2008, including unfavorable changes in currency exchange rates of 4 percentage points.

Worldwide gross sales of Mattel Girls & Boys Brands decreased 10% to $3.29 billion in 2009 as compared to 2008, including unfavorable changes in currency exchange rates of 3 percentage points. Domestic gross sales of Mattel Girls & Boys Brands decreased 2% and international gross sales of Mattel Girls & Boys Brands decreased 15%, including unfavorable changes in currency exchange rates of 4 percentage points. Worldwide gross sales of Barbie^® decreased 3%, including unfavorable changes in currency exchange rates of 3 percentage points. Domestic gross sales of Barbie^® increased 4% and international gross sales of Barbie^® decreased 6%, including unfavorable changes in currency exchange rates of 4 percentage points. Worldwide gross sales of Other Girls Brands decreased 20%, including unfavorable changes in currency exchange rates of 2 percentage points, driven primarily by sales declines in High School Musical^® products. Worldwide gross sales of Wheels products decreased 7%, including unfavorable changes in currency exchange rates of 3 percentage points, primarily due to sales declines in Speed Racer^® and Tyco R/C^® products, partially offset by higher sales of Core Hot Wheels^® and Matchbox^® products. Worldwide gross sales of Entertainment products decreased by 14%, including unfavorable changes in currency exchange rates of 2 percentage points, driven primarily by sales declines in Radica^® products and products tied to last year’s three key summer movie properties: Batman^®, Speed Racer^®, and Kung Fu Panda^®, partially offset by sales of products tied to Toy Story^® and Toy Story^® 2, and higher sales of CARS™ products domestically.

Worldwide gross sales of Fisher-Price Brands decreased 8% to $2.17 billion in 2009 as compared to 2008, including unfavorable changes in currency exchange rates of 1 percentage point. Domestic gross sales of Fisher-Price Brands decreased 8% and international gross sales decreased 9%, including unfavorable changes in currency exchange rates of 4 percentage points. Worldwide gross sales of Core Fisher-Price^® decreased 6%, including unfavorable changes in currency exchange rates of 1 percentage point. Domestic gross sales of Core Fisher-Price^® decreased 4% and international gross sales decreased 9%, including unfavorable changes in currency exchange rates of 4 percentage points. Worldwide gross sales of Fisher-Price^® Friends decreased 13%, with no impact from changes in currency exchange rates. Domestic gross sales of Fisher-Price^® Friends decreased 18% and international gross sales decreased 5%, with no impact from changes in currency exchange rates.

American Girl Brands gross sales were flat during 2009 as compared to 2008, driven primarily by the November 2008 openings of the American Girl Boutique and Bistro^® in Boston and Minneapolis, offset by softness resulting primarily from a difficult comparison to strong entertainment-related sales in 2008.

Cost of Sales

Cost of sales decreased by $517.4 million, or 16%, from $3.23 billion in 2008 to $2.72 billion in 2009 as compared to an 8% decrease in net sales. On an overall basis, cost of sales decreased from 2008 primarily due to lower sales volume, cost savings from Mattel’s Global Cost Leadership program, and lower input costs. Within cost of sales, product costs decreased by $366.5 million, or 14%, from $2.60 billion in 2008 to $2.23 billion in 2009; freight and logistics expenses decreased by $98.2 million, or 25%, which included net cost savings from the Global Cost Leadership program, from $394.1 million in 2008 to $295.9 million in 2009; and royalty expense decreased $52.7 million, or 22%, from $241.2 million in 2008 to $188.5 million in 2009.

Gross Profit

Gross profit as a percentage of net sales increased from 45.4% in 2008 to 50.0% in 2009. The increase in gross profit as a percentage of net sales was primarily driven by price increases and net cost savings related to the Global Cost Leadership program, partially offset by unfavorable changes in currency exchange rates.

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Advertising and Promotion Expenses

Advertising and promotion expenses decreased to 11.2% of net sales in 2009, from 12.2% of net sales in 2008, due primarily to lower than expected sales volume in 2008 and savings of approximately $14 million related to Mattel’s Global Cost Leadership program.

Other Selling and Administrative Expenses

Other selling and administrative expenses were $1.37 billion in 2009, or 25.3% of net sales in 2009 as compared to $1.42 billion in 2008, or 24.1% of net sales. The dollar decrease in other selling and administrative expenses was primarily due to incremental year-over-year savings related to the Global Cost Leadership program (approximately $88 million in gross savings along with approximately $3 million of lower severance in 2009), the impact of foreign currency exchange benefits, and lower litigation and legal settlement-related costs of approximately $27 million, partially offset by higher incentive compensation expense of approximately $81 million and higher equity compensation expense of approximately $14 million.

Non-Operating Items

Interest expense was $71.8 million in 2009 as compared to $81.9 million in 2008, due primarily to lower average borrowings and lower average interest rates. Interest income decreased from $25.0 million in 2008 to $8.1 million in 2009 due to lower average interest rates on lower average cash balances. Other non-operating expense was $7.4 million in 2009 as compared to other non-operating income of $3.1 million in 2008. The change in other non-operating income/expense relates primarily to foreign currency exchange gains and losses, largely caused by revaluations of US dollar cash balances held by Mattel’s Venezuelan subsidiary.

Provision for Income Taxes

Mattel’s effective tax rate on income before income taxes in 2009 was 19.9% as compared to 22.2% in 2008. The 2009 income tax provision includes net tax benefits of $28.8 million related to reassessments of prior years’ tax exposures based on the status of current audits in various jurisdictions around the world, settlements, and enacted law changes.

Operating Segment Results

Mattel’s operating segments are separately managed business units and are divided on a geographic basis between domestic and international. The Domestic segment is further divided into Mattel Girls & Boys Brands US, Fisher-Price Brands US and American Girl Brands. Operating segment results should be read in conjunction with Item 8 “Financial Statements and Supplementary Data—Note 15 to the Consolidated Financial Statements—Segment Information.”

Domestic Segment

Mattel Girls & Boys Brands US gross sales decreased 2% in 2009 as compared to 2008. Within this segment, gross sales of Barbie^® increased 4% and gross sales of Other Girls Brands decreased 11%, primarily driven by lower sales of High School Musical^® products. Gross sales of Wheels products increased 1%, primarily due to higher sales of Core Hot Wheels^® and Matchbox^® products, partially offset by sales declines in Speed Racer^® and Tyco R/C^® products. Gross sales of Entertainment products decreased 7%, primarily driven by lower sales of Radica^® products and products tied to last year’s three key summer movie properties: Batman^®, Speed Racer^®, and Kung Fu Panda^®, partially offset by sales of products tied to Toy Story^® and Toy Story^® 2 and higher sales of CARS™ products. Mattel Girls & Boys Brands US segment income increased 85% to $293.4 million in 2009 from $158.2 million in 2008, primarily driven by higher gross profit and lower other selling and administrative expenses.

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Fisher-Price Brands US gross sales decreased 8% in 2009 as compared to 2008. Within this segment, gross sales of Core Fisher-Price^® products decreased 4% and gross sales of Fisher-Price^® Friends products decreased 18%. Fisher-Price Brands US segment income increased 44% to $231.9 million in 2009 from $161.0 million in 2008, primarily driven by higher gross profit, lower other selling and administrative expenses, and lower advertising and promotion expenses, partially offset by lower sales volume.

American Girl Brands gross sales were flat during 2009 as compared to 2008, driven primarily by the November 2008 openings of the American Girl Boutique and Bistro^® in Boston and Minneapolis, offset by softness resulting primarily from a difficult comparison to strong entertainment-related sales in 2008. American Girl Brands segment operating income increased 19% to $103.4 million in 2009 from $86.6 million in 2008, primarily driven by higher gross profit, lower other selling and administrative expenses, and lower advertising and promotion expenses.

International Segment

The following table provides a summary of percentage changes in gross sales within the International segment in 2009 versus 2008:

Non-US Regions:	% Change in Gross Sales	Impact of Change in Currency Rates (in % pts)
Total International	–13	–4
Europe	–15	–4
Latin America	–12	–6
Asia Pacific	–7	–2
Other	–11	–1

International gross sales decreased 13% in 2009 as compared to 2008, including unfavorable changes in currency exchange rates of 4 percentage points. Gross sales of Mattel Girls & Boys Brands decreased 15%, including unfavorable change in currency exchange rates of 4 percentage points. Gross sales of Barbie^® decreased 6%, including unfavorable changes in currency exchange rates of 4 percentage points. Gross sales of Other Girls Brands decreased 26%, including unfavorable changes in currency exchange rates of 3 percentage points, driven primarily by sales declines in High School Musical^® products. Gross sales of Wheels products decreased 13%, including unfavorable changes in currency exchange rates of 5 percentage points driven primarily by sales declines in Speed Racer^® and Tyco R/C^® products. Gross sales of Entertainment products decreased by 19%, including unfavorable changes in currency exchange rates of 4 percentage points, driven primarily by lower sales of products tied to last year’s three key summer movie properties: Batman^®, Speed Racer^®, and Kung Fu Panda^®, along with CARS™ products, and Radica^® products, partially offset by sales of products tied to Toy Story^® and Toy Story^® 2. Fisher-Price Brands gross sales decreased 9%, including unfavorable changes in currency exchange rates of 4 percentage points. Gross sales of Core Fisher-Price^® products decreased 9%, including unfavorable change in currency exchange rates of 4 percentage points and gross sales of Fisher-Price^® Friends products decreased 5%, with no impact from changes in currency exchange rates. International segment income increased 18% to $422.5 million in 2009 from $357.6 million in 2008, primarily driven by higher gross margin, lower advertising and promotion expenses, and lower other selling and administrative expenses, partially offset by lower sales volume.

2008 Compared to 2007

Consolidated Results

Net sales for 2008 were $5.92 billion, a 1% decrease as compared to $5.97 billion in 2007, with no impact from changes in currency exchange rates. Net income for 2008 was $379.6 million, or $1.04 per diluted share, as compared to net income of $600.0 million, or $1.53 per diluted share, for 2007. Net income for 2007 was

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positively impacted by net tax benefits of $42.0 million as a result of reassessments of tax exposures based on the status of current audits in various jurisdictions around the world, including settlements, partially offset by enacted tax law changes.

Gross profit, as a percentage of net sales, decreased to 45.4% in 2008 from 46.5% in 2007. The decrease in gross profit was primarily due to higher product costs driven by higher commodities, labor, and product testing costs, along with appreciating Asian currencies (collectively, “input costs”), higher costs of distribution, and mix, partially offset by the benefit of price increases, favorable changes in currency exchange rates, and lower product recall costs as compared to 2007.

Income before income taxes as a percentage of net sales declined to 8.2% in 2008 from 11.8% in 2007. Contributing to this decline were lower gross margins, higher advertising and promotion expenses, and higher other selling and administrative expenses, which were all impacted by lower sales. The increase in other selling and administrative expense in 2008 was primarily due to incremental legal and settlement related costs of approximately $52 million, the impact of foreign exchange rates, and higher bad debt expense. Additionally, interest expense increased in 2008 due to higher average borrowings, partially offset by lower average interest rates and interest income decreased in 2008 due to lower average interest rates, partially offset by higher average invested cash balances.

The following table provides a summary of Mattel’s consolidated results for 2008 and 2007 (in millions, except percentage and basis point information):

	For the Year
	2008					2007					Year/Year Change
	Amount			% of Net Sales		Amount			% of Net Sales		%		Basis Points of Net Sales
Net sales	$	5,918.0		100.0	%	$	5,970.1		100.0	%	–1	%
Gross profit	$	2,684.4		45.4	%	$	2,777.3		46.5	%	–3	%	(110	)
Advertising and promotion expenses		719.2		12.2			708.8		11.9		1	%	30
Other selling and administrative expenses		1,423.4		24.1			1,338.4		22.4		6	%	170
Operating income		541.8		9.2			730.1		12.2		–26	%	(300	)
Interest expense		81.9		1.4			71.0		1.2		15	%	20
Interest (income)		(25.0	)	–0.4			(33.3	)	–0.6		–25	%	20
Other non-operating (income), net		(3.1	)				(11.0	)
Income before income taxes	$	488.0		8.2	%	$	703.4		11.8	%	–31	%	(360	)

Sales

Net sales for 2008 were $5.92 billion, a 1% decrease as compared to $5.97 billion in 2007, with no impact from changes in currency exchange rates. Gross sales within the US decreased 2% from 2007, and accounted for 51% of consolidated gross sales in both 2008 and 2007. Gross sales in international markets decreased 1% as compared to 2007, including a 1 percentage point benefit from changes in currency exchange rates.

Worldwide gross sales of Mattel Girls & Boys Brands decreased 2% to $3.64 billion in 2008 as compared to 2007, with no impact from changes in currency exchange rates. Domestic gross sales of Mattel Girls & Boys Brands decreased 1% and international gross sales of Mattel Girls & Boys Brands decreased 2%, including a 2 percentage point benefit from changes in currency exchange rates. Worldwide gross sales of Barbie^® decreased 9%, with no impact from changes in currency exchange rates. Domestic gross sales of Barbie^® decreased 7%, primarily driven by sales declines in Barbie Girls^® MP3 Player and Barbie^® Collector products, partially offset by increased sales in Barbie^® Fantasy products. International gross sales of Barbie^® decreased 9%, including a 2 percentage point benefit from changes in currency exchange rates, primarily driven by sales declines of Barbie^®

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Fantasy, Barbie Girls^® MP3 Player, and My Scene^® products. Lower sales in Barbie^® Fantasy products in international markets were driven by the underperformance of toys associated with the 2008 Barbie^® entertainment property, Barbie & the Diamond Castle^®, as compared to the 2007 entertainment property, Barbie as the Island Princess^®. Worldwide gross sales of Other Girls Brands increased 11% from 2007, including a 1 percentage point benefit from changes in currency exchange rates, primarily driven by higher sales of High School Musical^®, Little Mommy^®, and Hannah Montana^® internationally, partially offset by sales declines for Pixel Chix^® and Polly Pocket^®. Worldwide gross sales of Wheels products increased 4% as compared to 2007, including a 1 percentage point benefit from changes in currency exchange rates, primarily due to Speed Racer^® sales. Worldwide gross sales of Entertainment products, which includes games and puzzles and Radica^®, decreased by 4% as compared to 2007, including a 1 percentage point benefit from changes in currency exchange rates, primarily driven by sales declines in CARS™, interactive games, and Radica^® products, partially offset by increased sales of products tied to the Batman^®: The Dark Knight^® movie property.

Worldwide gross sales of Fisher-Price Brands decreased 3% to $2.36 billion in 2008, as compared to 2007, including a 1 percentage point benefit from changes in currency exchange rates. Worldwide gross sales of Fisher-Price^® Friends decreased 16% as compared to 2007, including a 1 percentage point unfavorable change in currency exchange rates, primarily driven by sales declines in Dora the Explorer^® and Sesame Street^® products as compared to strong levels in the prior year, partially offset by growth in sales of Disney^® products. Worldwide gross sales of Core Fisher-Price^® increased 1% as compared to 2007, including a 1 percentage point benefit from changes in currency exchange rates.

Gross sales of American Girl Brands increased 7% to $463.1 million in 2008 as compared to 2007, primarily driven by strong sales of products tied to the Kit Kittredge^® movie and increased sales in the retail channel.

Cost of Sales

Cost of sales increased by $40.8 million, or 1%, from $3.19 billion in 2007 to $3.23 billion in 2008 as compared to a 1% decrease in net sales. On an overall basis, cost of sales increased primarily due to higher input costs and higher costs of distribution, partially offset by foreign currency exchanges benefits and lower product recall costs as compared to 2007. Within cost of sales, product costs increased by $27.8 million, or 1%, from $2.57 billion in 2007 to $2.60 billion in 2008. Royalty expense decreased by $2.1 million, or 1%, from $243.3 million in 2007 to $241.2 million in 2008. Freight and logistics expenses increased by $15.1 million, or 4%, from $379.0 million in 2007 to $394.1 million in 2008.

Gross Profit

Gross profit, as a percentage of net sales, decreased to 45.4% in 2008 from 46.5% in 2007. The decrease in gross profit was primarily driven by higher input costs, higher costs of distribution, and mix, partially offset by the benefit of price increases, favorable changes in currency exchange rates, and lower product recall costs as compared to 2007.

Advertising and Promotion Expenses

Advertising and promotion expenses increased to 12.2% of net sales in 2008, from 11.9% in 2007 due primarily to lower than expected sales volume.

Other Selling and Administrative Expenses

Other selling and administrative expenses were $1.42 billion in 2008, or 24.1% of net sales, as compared to $1.34 billion in 2007, or 22.4% of net sales. The increase in other selling and administrative expense in 2008 was primarily due to incremental legal and settlement related costs of approximately $52 million, the impact of

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foreign exchange rates, and higher bad debt expense. Compensation expense related to stock options and restricted stock units (“RSUs”) totaled $35.7 million in 2008, as compared to $22.2 million in 2007.

Non-Operating Items

Interest expense was $81.9 million in 2008, as compared to $71.0 million in 2007, due to higher average borrowings, partially offset by lower average interest rates. Interest income decreased from $33.3 million in 2007 to $25.0 million in 2008 due to lower average interest rates, partially offset by higher average invested cash balances. Other non-operating income was $3.1 million in 2008 and primarily related to foreign currency exchange gains caused by local currency revaluation of US dollar cash balances held by a Latin American subsidiary, partially offset by a $4.0 million investment impairment charge recorded during the third quarter of 2008. Other non-operating income was $11.0 million in 2007 and primarily related to foreign currency exchange gains caused by local currency revaluations of the US dollar cash balances held by a Latin American subsidiary.

Provision for Income Taxes

Mattel’s effective tax rate on income before income taxes in 2008 was 22.2% as compared to 14.7% in 2007. The 2007 income tax provision includes net benefits of $42.0 million related to reassessments of prior years’ tax exposures based on the status of audits in various jurisdictions around the world, including settlements, partially offset by enacted tax law changes.

Operating Segment Results

Mattel’s operating segments are separately managed business units and are divided on a geographic basis between domestic and international. The Domestic segment is further divided into Mattel Girls & Boys Brands US, Fisher-Price Brands US and American Girl Brands. Operating segment results should be read in conjunction with Item 8 “Financial Statements and Supplementary Data—Note 15 to the Consolidated Financial Statements—Segment Information.”

Domestic Segment

Mattel Girls & Boys Brands US gross sales decreased 1% in 2008 as compared to 2007. Within this segment, gross sales of Barbie^® decreased 7%, primarily driven by sales declines of Barbie Girls^® MP3 Player and Barbie^® Collector products, partially offset by increased sales of Barbie^® Fantasy products. Gross sales of Other Girls Brands increased 13%, primarily driven by higher sales of High School Musical^®, partially offset by sales declines for Polly Pocket^® and Pixel Chix^®. Gross sales of Wheels products increased 11%, primarily due to Speed Racer^® sales. Gross sales in Entertainment products, which include games and puzzles and Radica^® , decreased 10%, primarily driven by sale declines in CARS™, Radica^®, and interactive games products, partially offset by increased sales of products tied to the Batman^®: The Dark Knight^® movie property. Mattel Girls & Boys Brands US segment income decreased 25% to $158.2 million in 2008, primarily due to lower gross profit driven by higher input costs, higher costs of distribution, and mix, partially offset by the benefit of price increases and lower product recall costs as compared to 2007.

Fisher-Price Brands US gross sales decreased 6%, reflecting sales declines of Fisher-Price^® Friends, primarily driven by lower sales of Dora the Explorer^® and Sesame Street^® as compared to strong levels in the prior year, partially offset by growth in sales of Disney^® products, and Core Fisher-Price^® products. Fisher-Price Brands US segment income decreased 29% to $161.0 million in 2008, primarily due to lower gross profit driven by higher input costs, higher costs of distribution, and mix, partially offset by the benefit of price increases and lower product recall costs as compared to 2007, and higher advertising and promotion expenses due primarily to lower than expected sales volumes.

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American Girl Brands gross sales increased 7% from the prior year, primarily driven by strong sales of products tied to the Kit Kittredge^® movie and increased sales in the retail channel. American Girl Brands segment operating income decreased 12% to $86.6 million in 2008, primarily due to higher other selling and administrative expenses related to retail pre-opening costs, partially offset by higher sales volume.

International Segment

The following table provides a summary of percentage changes in gross sales within the International segment in 2008 versus 2007:

Non-US Regions:	% Change in Gross Sales	Impact of Change in Currency Rates (in % pts)
Total International	–1	1
Europe	–6	2
Latin America	7	2
Asia Pacific	4	0
Other	–4	–3

International gross sales decreased 1% in 2008 as compared to 2007, including a 1 percentage point benefit from changes in currency exchange rates. Gross sales of Barbie^® decreased 9%, including a 2 percentage point benefit from changes in currency exchange rates, primarily driven by sales declines in Barbie^® Fantasy, Barbie Girls^® MP3 Player, and My Scene^® products. Lower sales in Barbie^® Fantasy products was driven by the underperformance of toys associated with the 2008 Barbie^® entertainment property, Barbie & the Diamond Castle^®, as compared to the 2007 entertainment property, Barbie as the Island Princess^®. Gross sales of Other Girls Brands increased 10%, including a 1 percentage point benefit from changes in currency exchange rates, primarily due to sales of High School Musical^® and Hanna Montana^® products and higher sales of Little Mommy^® , partially offset by sales declines for Pixel Chix^® and Polly Pocket^®. Gross sales of Wheels products decreased 2%, including a 2 percentage point benefit from changes in currency exchange rates. Gross sales of Entertainment products increased by 1%, including a 1 percentage point benefit from changes in currency exchange rates, primarily driven by sales of products tied to the Batman^®: The Dark Knight^®, Speed Racer^®, and Kung Fu Panda^® movie properties. Fisher-Price Brands gross sales increased 1%, with no impact from changes in currency exchange rates, primarily driven by strong sales of Core Fisher-Price^® products, partially offset by sales declines of Fisher-Price^® Friends products. International segment income decreased 15% to $357.6 million in 2008, primarily due to lower gross profit driven by higher input costs, higher costs of distribution, and mix, partially offset by the benefit of price increases, favorable changes in currency exchange rates, and lower product recall costs as compared to 2007, and higher other selling and administrative expenses.

Global Cost Leadership Program

During the middle of 2008, Mattel initiated its Global Cost Leadership program, which is designed to improve operating efficiencies and leverage Mattel’s global scale to improve profitability and operating cash flows. The major initiatives within Mattel’s Global Cost Leadership program include:

• A global reduction in Mattel’s professional workforce of approximately 1,000 employees that was initiated in November 2008, and an additional reduction in Mattel’s professional workforce initiated in the third quarter of 2009.

• A coordinated efficiency strategic plan that includes structural changes designed to lower costs and improve efficiencies; for example, offshoring and outsourcing certain back office functions, and more clustering of management in international markets.

• Additional procurement initiatives designed to fully leverage Mattel’s global scale in areas such as creative agency partnerships, legal services, and distribution, including ocean carriers and over-the-road freight vendors.

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Mattel’s Global Cost Leadership program is intended to generate approximately $180 million to $200 million of cumulative net cost savings by the end of 2010. Mattel exceeded its 2009 goal of generating approximately $90 million to $100 million of net cost savings by realizing approximately $164 million of gross cost savings before severance charges of approximately $32 million (or $132 million in net cost savings). Of the gross cost savings in 2009, approximately $88 million is reflected within other selling and administrative expenses, approximately $62 million within gross profit, and approximately $14 million within advertising and promotion expenses. During 2008, Mattel recorded severance and other termination-related charges of approximately $34 million. Mattel expects to meet its 2010 goal of approximately $180 million to $200 million of cumulative net cost savings.

Income Taxes

Mattel’s effective tax rate on income before income taxes in 2009 was 19.9% as compared to 22.2% in 2008. The 2009 income tax provision includes net benefits of $28.8 million related to reassessments of prior years’ tax exposures based on the status of current audits in various jurisdictions around the world, settlements, and enacted tax law changes.

Mattel’s effective tax rate on income before income taxes in 2008 was 22.2% as compared to 14.7% in 2007. The 2007 income tax provision includes net benefits of $42.0 million related to reassessments of prior years’ tax exposures based on the status of audits in various jurisdictions around the world, including settlements, partially offset by enacted tax law changes.

Liquidity and Capital Resources

Mattel’s primary sources of liquidity are its cash and equivalents balances, access to short-term borrowing facilities, including its $1.08 billion domestic unsecured committed revolving credit facility, and issuances of long-term debt securities. Cash flows from operating activities could be negatively impacted by decreased demand for Mattel’s products, which could result from factors such as adverse economic conditions and changes in public and consumer preferences, or by increased costs associated with manufacturing and distribution of products or shortages in raw materials or component parts. Additionally, Mattel’s ability to issue long-term debt and obtain seasonal financing could be adversely affected by factors such as the current global economic crisis and tight credit environment, an inability to meet its debt covenant requirements, which include maintaining consolidated debt-to-earnings before interest, taxes, depreciation, and amortization and interest coverage ratios, or a deterioration of Mattel’s credit ratings. Mattel’s ability to conduct its operations could be negatively impacted should these or other adverse conditions affect its primary sources of liquidity.

Current Market Conditions

Mattel is exposed to financial market risk resulting from changes in interest and foreign currency rates, and recent developments in the financial markets have increased Mattel’s exposure to the possible liquidity and credit risks of its counterparties. Mattel believes that it has ample liquidity to fund its business needs, including beginning of the year cash and equivalents, cash flows from operations, and access to its $1.08 billion domestic unsecured committed revolving credit facility, which it uses for seasonal working capital requirements. Mattel’s domestic credit facility was amended and restated effective March 23, 2009 and expires on March 23, 2012, as more fully described in Item 8 “Financial Statements Supplementary Data—Note 8 to the Consolidated Financial Statements—Seasonal Financing and Debt.” As of December 31, 2009, Mattel had available incremental borrowing resources totaling approximately $780 million under this unsecured committed revolving credit facility, and Mattel has not experienced any limitations on its ability to access this source of liquidity. Market conditions could affect certain terms of other debt instruments that Mattel enters into from time to time.

Mattel monitors the third-party depository institutions that hold the company’s cash and equivalents. Mattel’s emphasis is primarily on safety and liquidity of principal and secondarily on maximizing the yield on

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those funds. Mattel diversifies its cash and equivalents among counterparties and securities to minimize exposure. As of December 31, 2009 and 2008, Mattel had a money market investment fund with an original cost basis of $85.3 million, which was classified within other current assets as a result of the money market investment fund halting redemption requests during 2008. During 2009 and 2008, Mattel recorded impairment charges of approximately $1 million and $4 million, respectively, associated with this investment. Additionally, during 2009, Mattel received cash proceeds of approximately $73 million related to this investment, and expects to receive the remaining proceeds, net of the impairment charges, during 2010. As of December 31, 2009, 2008, and 2007, Mattel had additional long-term investments of $35.0 million.

Mattel is subject to credit risks relating to the ability of counterparties of hedging transactions to meet their contractual payment obligations. The risks related to creditworthiness and nonperformance have been considered in the fair value measurements of Mattel’s foreign currency forward exchange contracts. Mattel continues to closely monitor its counterparties and will take action, as appropriate, to further manage its counterparty credit risk.

Mattel expects that some of its customers and vendors may experience difficulty in obtaining the liquidity required to buy inventory or raw materials. Mattel monitors its customers’ financial condition and their liquidity in order to mitigate Mattel’s accounts receivable collectibility risks and customer terms and credit limits are adjusted, if necessary. Additionally, Mattel uses a variety of financial arrangements to ensure collectibility of accounts receivable of customers deemed to be a credit risk, including requiring letters of credit, factoring or purchasing various forms of credit insurance with unrelated third parties, or requiring cash in advance of shipment.

Mattel sponsors defined benefit pension plans and postretirement benefit plans for employees of the company. Actual returns below the expected rate of return, along with changes in interest rates that affect the measurement of the liability, would impact the amount and timing of Mattel’s future contributions to these plans.

Capital and Investment Framework

To guide future capital deployment decisions, with a goal of maximizing stockholder value, Mattel’s Board of Directors in 2003 established the following capital and investment framework:

• To maintain approximately $800 million to $1 billion in year-end cash available to fund a substantial portion of seasonal working capital;

• To maintain a year-end debt-to-capital ratio of about 25%;

• To invest approximately $180 million to $200 million in capital expenditures annually to maintain and grow the business;

• To make strategic acquisitions consistent with Mattel’s vision of providing “the world’s premier toy brands—today and tomorrow”; and

• To return excess funds to stockholders through dividends and share repurchases.

Over the long term, assuming cash flows from operating activities remain strong, Mattel plans to use its free cash flows to invest in strategic acquisitions and to return funds to stockholders through cash dividends and share repurchases. Mattel’s share repurchase program has no expiration date and repurchases will take place from time to time, depending on market conditions. The ability to successfully implement the capital deployment plan is directly dependent on Mattel’s ability to generate strong cash flows from operating activities. There is no assurance that Mattel will continue to generate strong cash flows from operating activities or achieve its targeted goals for investing activities.

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Operating Activities

Cash flows generated from operating activities were $945.0 million during 2009 as compared to $436.3 million in 2008, and $560.5 million in 2007. The increase in cash flows from operating activities in 2009 from 2008 was primarily the result of higher profitability and lower working capital requirements, mainly due to lower levels of accounts receivable and inventories. The decrease in cash flows from operating activities in 2008 from 2007 was primarily the result of lower profitability, partially offset by lower working capital requirements, mainly due to lower usage of cash to reduce levels of accounts payable and accrued expenses.

Investing Activities

Cash flows used for investing activities were $33.5 million during 2009, primarily due to the purchase of tools, dies, and molds and property, plant, and equipment, partially offset by proceeds received from the sale of investments. Cash flows used for investing activities were lower in 2009 as compared to 2008 mainly due to lower purchases of property, plant, and equipment, an increase in other investments in 2008, of which the proceeds of the investments were received in 2009, and lower payments for businesses acquired. Cash flows used for investing activities were higher in 2008 as compared to 2007 mainly due to an increase in other investments and higher purchases of property, plant, and equipment and tools, dies, and molds, partially offset by lower payments for businesses acquired.

Financing Activities

Cash flows used for financing activities decreased to $376.1 million in 2009 from $395.7 million in 2008 primarily as a result of lower share repurchases, tax benefits from share-based payment arrangements, and higher proceeds from the exercise of stock options, partially offset by higher net payments of borrowings. Cash flows used for financing activities decreased to $395.7 million in 2008 from $587.8 million in 2007 as a result of lower share repurchases, partially offset by lower net borrowings and lower proceeds from the exercise of stock options.

During 2009, Mattel did not repurchase any shares of its common stock. During 2008, Mattel repurchased 4.9 million shares at a cost of $90.6 million. During 2007, Mattel repurchased 35.9 million shares at a cost of $806.3 million. During 2008 and 2007, the Board of Directors authorized Mattel to increase its share repurchase program by $500.0 million and $750.0 million, respectively. At December 31, 2009, share repurchase authorizations of $410.3 million had not been executed. Repurchases will take place from time to time, depending on market conditions. Mattel’s share repurchase program has no expiration date.

In 2009, 2008, and 2007, Mattel paid a dividend per share of $0.75 to holders of its common stock. The Board of Directors declared the dividends in November, and Mattel paid the dividends in December of each year. The dividend payments were $271.4 million, $268.9 million, and $272.3 million in 2009, 2008, and 2007, respectively.

Seasonal Financing

See Item 8 “Financial Statements and Supplementary Data—Note 8 to the Consolidated Financial Statements—Seasonal Financing and Debt.”

Financial Position

Mattel’s cash and equivalents were $1.12 billion at December 31, 2009, an increase of $499.3 million from 2008. The increase was primarily driven by cash flows generated from operating activities of $945.0 million, primarily due to higher profitability and lower working capital requirements, proceeds received from the sale of investments of $73.1 million, and proceeds from the exercise of stock options of $30.9 million, partially offset by dividend payments of $271.4 million, net repayments of $148.7 million of borrowings, and $120.5 million of purchases of tools, dies, and molds, and other property, plant, and equipment.

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Accounts receivable decreased $124.2 million from December 31, 2008 to $749.3 million at December 31, 2009, reflecting higher factored receivables and improved days of sales outstanding.

Inventories decreased $130.3 million from December 31, 2008 to $355.7 million at December 31, 2009, primarily driven by tight inventory management within the current economic environment and lower costs of producing inventory in 2009.

Accounts payable and accrued liabilities decreased $102.6 million from December 31, 2008 to $968.6 million at December 31, 2009, primarily due to the timing and amount of payments of accounts payable and various accrued liability balances, including receivable collections due bank related to the domestic receivable facility, freight, and royalty obligations, partially offset by an increase in accrued incentive compensation.

At December 31, 2009 and 2008, Mattel’s total short-term borrowings totaled $2.0 million and $0, respectively. The current portion of long-term debt decreased $100.0 million to $50.0 million at December 31, 2009 as compared to December 31, 2008 due to the repayments of $100.0 million of the 2006 Senior Notes and $50.0 million of Medium-term notes, partially offset by the reclassification of $50 million of Medium-term notes to current.

A summary of Mattel’s capitalization is as follows:

	December 31,
	2009				2008
	(In millions, except percentage information)
Medium-term notes	$	150.0	4	%	$	200.0	6	%
2006 Senior Notes		200.0	5			200.0	6
2008 Senior Notes		350.0	10			350.0	10
Total noncurrent long-term debt		700.0	19			750.0	22
Other noncurrent liabilities		488.7	13			547.9	16
Stockholders’ equity		2,531.0	68			2,117.1	62
	$	3,719.7	100	%	$	3,415.0	100	%

Total noncurrent long-term debt decreased $50.0 million at December 31, 2009 as compared to December 31, 2008, due to the reclassification of $50.0 million of Medium-term notes to current. Mattel expects to satisfy its future long-term capital needs through the generation of corporate earnings and issuance of long-term debt instruments, as needed. Other noncurrent liabilities decreased $59.2 million at December 31, 2009, as compared to December 31, 2008, due primarily to decreases in long-term defined benefit pension plan obligations and income taxes payable. Stockholders’ equity of $2.53 billion at December 31, 2009 increased by $413.9 million from December 31, 2008, primarily as a result of net income and favorable currency translation adjustments, partially offset by payment of the annual dividend on common stock in the fourth quarter of 2009.

Mattel’s debt-to-capital ratio, including short-term borrowings and the current portion of long-term debt, decreased to 22.9% at December 31, 2009 from 29.8% at December 31, 2008, due to the aforementioned increase in stockholders’ equity and decrease in debt. Mattel’s objective is to maintain a year-end debt-to-capital ratio of approximately 25%.

Off-Balance Sheet Arrangements

Mattel has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

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Commitments

In the normal course of business, Mattel enters into debt agreements, contractual arrangements to obtain and protect Mattel’s right to create and market certain products, and for future purchases of goods and services to ensure availability and timely delivery. These arrangements include commitments for future inventory purchases and royalty payments pursuant to licensing agreements. Certain of these commitments routinely contain provisions for guarantees or minimum expenditures during the term of the contracts.

	Total		2010		2011		2012		2013		2014		Thereafter
	(In millions)
Long-term debt	$	750.0	$	50.0	$	250.0	$	50.0	$	400.0	$	—	$	—
Interest on long-term debt		117.9		44.5		35.0		25.3		13.1		—		—
Capital leases*		3.0		0.3		0.3		0.3		0.3		0.3		1.5
Operating leases		522.0		94.0		79.0		64.0		44.0		36.0		205.0
Purchases of inventory, other assets, and services		267.0		267.0		—		—		—		—		—
Licensing minimum guarantees		241.0		43.0		84.0		45.0		31.0		19.0		19.0
Defined benefit and postretirement benefit plans		349.8		44.7		44.5		28.6		29.5		30.3		172.2
Total	$	2,250.7	$	543.5	$	492.8	$	213.2	$	517.9	$	85.6	$	397.7

* Represents total obligation, including imputed interest of $0.9 million.

Liabilities for uncertain tax positions for which a cash tax payment is not expected to be made in the next twelve months are classified as other noncurrent liabilities. Due to the uncertainty about the periods in which examinations will be completed and limited information related to current audits, Mattel is not able to make reasonably reliable estimates of the periods in which cash settlements will occur with taxing authorities for the noncurrent liabilities.

Litigation

The content of Note 14 (“Commitments and Contingencies—Litigation”) to the Consolidated Financial Statements of Mattel in this Annual Report on Form 10-K is hereby incorporated by reference in its entirety in this Item 7.

Derivative Litigation

A consolidated stockholder derivative action was filed in Los Angeles County Superior Court in California, captioned In re Mattel, Inc. Derivative Litigation, consolidating three derivative actions filed in September 2007 (the “Superior Court Action”), asserting claims ostensibly on behalf and for the benefit of Mattel. A second consolidated derivative action in US District Court, Central District of California, captioned In re Mattel, Inc. Derivative Litigation, consolidating three federal derivative actions filed in October 2007, asserting claims ostensibly on behalf and for the benefit of Mattel, was dismissed with prejudice by the federal court in August 2008.

The Superior Court Action alleged that past and present members of Mattel’s Board of Directors breached their fiduciary duties in connection with product safety and reporting practices allegedly related to Mattel’s product recalls during August and September 2007. Plaintiffs also sued certain executive officers of Mattel, and alleged that officers and current and former directors who sold stock during the first half of 2007 breached their fiduciary duties by selling while allegedly in possession of non-public information relating to alleged product defects. Defendants filed a demurrer to the complaint, which was sustained with leave to amend on December 22, 2008. Plaintiffs filed a First Amended Consolidated Complaint, to which Defendants again filed a

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demurrer. The Court sustained the demurrer without leave to amend, and entered an order of dismissal of the action with prejudice on July 7, 2009. Plaintiffs filed a notice of appeal on September 1, 2009. Pursuant to an agreement resolving the appeal, the appeal was dismissed on December 29, 2009. All stockholder derivative suits stemming from the 2007 product recalls are now resolved.

Effects of Inflation

Inflation rates in the US and in major foreign countries where Mattel does business have not had a significant impact on its results of operations or financial position during 2009, 2008, or 2007. Mattel receives some protection from the impact of inflation from high turnover of inventories and its ability, under certain circumstances and at certain times, to pass on higher prices to its customers.

Employee Savings Plan

Mattel sponsors a 401(k) savings plan, the Mattel, Inc. Personal Investment Plan (the “Plan”), for its domestic employees. Contributions to the Plan include voluntary contributions by eligible employees and employer automatic and matching contributions by Mattel. The Plan allows employees to allocate both their voluntary contributions and their employer automatic and matching contributions to a variety of investment funds, including a fund that is fully invested in Mattel common stock (the “Mattel Stock Fund”). Employees are not required to allocate any of their Plan account balance to the Mattel Stock Fund, which allows employees to limit or eliminate their exposure to market changes in Mattel’s stock price. Furthermore, the Plan limits the percentage of the employee’s total account balance that may be allocated to the Mattel Stock Fund to 25%. Employees may generally reallocate their account balances on a daily basis. However, pursuant to Mattel’s insider trading policy, employees classified as insiders and restricted personnel under Mattel’s insider trading policy are limited to certain periods in which they may make allocations into or out of the Mattel Stock Fund.

Application of Critical Accounting Policies and Estimates

Mattel makes certain estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses. The accounting policies and estimates described below are those Mattel considers most critical in preparing its consolidated financial statements. Management has discussed the development and selection of these critical accounting policies and estimates with the Audit Committee of its Board of Directors, and the Audit Committee has reviewed the disclosures included below. The following is a review of the accounting policies and estimates that include significant judgments made by management using information available at the time the estimates are made. As described below, however, these estimates could change materially if different information or assumptions were used instead.

Note 1 to the consolidated financial statements includes a summary of Mattel’s significant accounting policies, estimates, and methods used in the preparation of Mattel’s consolidated financial statements. In most instances, Mattel must use an accounting policy or method because it is the only policy or method permitted under accounting principles generally accepted in the United States of America. See Item 8 “Financial Statements and Supplementary Data—Note 1 to the Consolidated Financial Statements—Summary of Significant Accounting Policies.”

Accounts Receivable—Allowance for Doubtful Accounts

The allowance for doubtful accounts represents adjustments to customer trade accounts receivable for amounts deemed partially or entirely uncollectible. Management believes the accounting estimate related to the allowance for doubtful accounts is a “critical accounting estimate” because significant changes in the assumptions used to develop the estimate could materially affect key financial measures, including other selling and administrative expenses, net income, and accounts receivable. In addition, the allowance requires a high degree of judgment since it involves estimation of the impact of both current and future economic factors in relation to its customers’ ability to pay amounts owed to Mattel.

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Mattel’s products are sold throughout the world. Products within the Domestic segment are sold directly to retailers, including discount and free-standing toy stores, chain stores, department stores, other retail outlets and, to a limited extent, wholesalers, and directly to consumers. Products within the International segment are sold directly to retailers and wholesalers in most European, Latin American, and Asian countries, and in Australia, Canada, and New Zealand, and through agents and distributors in those countries where Mattel has no direct presence.

In recent years, the mass-market retail channel has experienced significant shifts in market share among competitors, causing some large retailers to experience liquidity problems. In addition, many of Mattel’s customers have been negatively impacted by worsening economic conditions. Certain of Mattel’s customers filed for bankruptcy in 2008, including KB Toys in the US and Woolworth’s in the UK, and the recent global economic crisis has adversely affected the financial position of other retailers. Mattel’s sales to customers are typically made on credit without collateral and are highly concentrated in the third and fourth quarters due to the cyclical nature of toy sales, which results in a substantial portion of trade receivables being collected during the latter half of the year and the first quarter of the following year. There is a risk that customers will not pay, or that payment may be delayed, because of bankruptcy or other factors beyond the control of Mattel. This could increase Mattel’s exposure to losses from bad debts.

A small number of customers account for a large share of Mattel’s net sales and accounts receivable. In 2009, Mattel’s three largest customers, Wal-Mart, Toys “R” Us, and Target, in the aggregate, accounted for approximately 40% of net sales, and its ten largest customers, in the aggregate, accounted for approximately 50% of net sales. As of December 31, 2009, Mattel’s three largest customers accounted for approximately 31% of net accounts receivable, and its ten largest customers accounted for approximately 44% of net accounts receivable. The concentration of Mattel’s business with a relatively small number of customers may expose Mattel to a material adverse effect if one or more of Mattel’s large customers were to experience financial difficulty.

Mattel has procedures to mitigate its risk of exposure to losses from bad debts. Revenue is recognized upon shipment or upon receipt of products by the customer, depending on the terms, provided that: there are no uncertainties regarding customer acceptance; persuasive evidence of an agreement exists documenting the specific terms of the transaction; the sales price is fixed or determinable; and collectibility is reasonably assured. Credit limits and payment terms are established based on the underlying criteria that collectibility must be reasonably assured at the levels set for each customer. Extensive evaluations are performed on an ongoing basis throughout the fiscal year of each customer’s financial performance, cash generation, financing availability and liquidity status. Customers are reviewed at least annually, with more frequent reviews being performed, if necessary, based on the customer’s financial condition and the level of credit being extended. For customers who are experiencing financial difficulties, management performs additional financial analyses prior to shipping to those customers on credit. Customer terms and credit limits are adjusted, if necessary, to reflect the results of the review. Mattel uses a variety of financial arrangements to ensure collectibility of accounts receivable of customers deemed to be a credit risk, including requiring letters of credit, factoring or purchasing various forms of credit insurance with unrelated third parties, or requiring cash in advance of shipment.

The following table summarizes Mattel’s allowance for doubtful accounts at December 31:

	2009			2008			2007
	(In millions, except percentage information)
Allowance for doubtful accounts	$	24.5		$	25.9		$	21.5
As a percentage of total accounts receivable		3.2	%		2.9	%		2.1	%

Mattel’s allowance for doubtful accounts is based on management’s assessment of the business environment, customers’ financial condition, historical collection experience, accounts receivable aging, and customer disputes. Changes in the allowance for doubtful accounts reflect management’s assessment of the factors noted above, including past due accounts, disputed balances with customers, and the financial condition of customers. The allowance for doubtful accounts is also affected by the time at which uncollectible accounts receivable balances are actually written off.

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Mattel believes that its allowance for doubtful accounts at December 31, 2009 is adequate and proper. However, as described above, Mattel’s business is greatly dependent on a small number of customers. Should one or more of Mattel’s major customers experience liquidity problems, then the allowance for doubtful accounts may not be sufficient to cover such losses. Any incremental bad debt charges would negatively affect the results of operations of one or more of Mattel’s business segments.

Inventories—Allowance for Obsolescence

Inventories, net of an allowance for excess quantities and obsolescence, are stated at the lower of cost or market. Inventory obsolescence reserves are recorded for damaged, obsolete, excess and slow-moving inventory. Management believes that the accounting estimate related to the allowance for obsolescence is a “critical accounting estimate” because changes in the assumptions used to develop the estimate could materially affect key financial measures, including gross profit, net income, and inventories. As more fully described below, valuation of Mattel’s inventory could be impacted by changes in public and consumer preferences, demand for product, or changes in the buying patterns of both retailers and consumers and inventory management of customers.

In the toy industry, orders are subject to cancellation or change at any time prior to shipment since actual shipments of products ordered and order cancellation rates are affected by consumer acceptance of product lines, strength of competing products, marketing strategies of retailers, changes in buying patterns of both retailers and consumers and overall economic conditions. Unexpected changes in these factors could result in excess inventory in a particular product line, which would require management to record a valuation allowance on such inventory.

Mattel bases its production schedules for toy products on customer orders and forecasts, taking into account historical trends, results of market research and current market information. Mattel ships products in accordance with delivery schedules specified by its customers, who usually request delivery within three months. In anticipation of retail sales in the traditional holiday season, Mattel significantly increases its production in advance of the peak selling period, resulting in a corresponding build-up of inventory levels in the first three quarters of its fiscal year. These seasonal purchasing patterns and requisite production lead times cause risk to Mattel’s business associated with the underproduction of popular toys and the overproduction of toys that do not match consumer demand. Retailers are also attempting to manage their inventories more tightly, requiring Mattel to ship products closer to the time the retailers expect to sell the products to consumers. These factors increase inventory valuation risk since Mattel’s inventory levels may be adversely impacted by the need to pre-build products before orders are placed.

Additionally, current conditions in the domestic and global economies are uncertain. As a result, it is difficult to estimate the level of growth or contraction for the economy as a whole. It is even more difficult to estimate growth or contraction in various parts of the economy, including the economies in which Mattel participates. Because all components of Mattel’s budgeting and forecasting are dependent upon estimates of growth or contraction in the markets it serves and demand for its products, the prevailing economic uncertainties make estimates of future demand for product more difficult. Such economic changes may affect the sales of Mattel’s products and its corresponding inventory levels, which could potentially impact the valuation of its inventory.

At the end of each quarter, management within each business segment, Mattel Girls & Boys Brands US, Fisher-Price Brands US, American Girl Brands, and International, performs a detailed review of its inventory on an item-by-item basis and identifies products that are believed to be impaired. Management assesses the need for, and the amount of, an obsolescence reserve based on the following factors:

• Customer and/or consumer demand for the item;

• Overall inventory positions of Mattel’s customers;

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• Strength of competing products in the market;

• Quantity on hand of the item;

• Standard retail price of the item;

• Mattel’s cost for the item; and

• Length of time the item has been in inventory.

The time frame between when an estimate is made and the time of disposal depends on the above factors and may vary significantly. Generally, slow-moving inventory is liquidated during the next annual selling cycle.

The following table summarizes Mattel’s obsolescence reserve at December 31:

	2009			2008			2007
	(In millions, except percentage information)
Allowance for obsolescence	$	40.8		$	59.1		$	51.7
As a percentage of total inventory		10.3	%		10.8	%		10.8	%

The decrease in the allowance for obsolescence from 2008 to 2009 was mainly due to lower levels of excess inventory in 2009. Management believes that its allowance for obsolescence at December 31, 2009 is adequate and proper. However, the impact resulting from the aforementioned factors could cause actual results to vary. Any incremental obsolescence charges would negatively affect the results of operations of one or more of Mattel’s business segments.

Recoverability of Goodwill and Intangible Assets

Mattel tests goodwill and nonamortizable intangible assets for impairment annually, or more often if an event or circumstance indicates that an impairment may have occurred. Management believes that the accounting estimate related to the recoverability of its goodwill and nonamortizable intangible assets is a “critical accounting estimate” because significant changes in the assumptions used to develop the estimates could materially affect key financial measures, including net income, goodwill, and other intangible assets.

The recoverability of goodwill involves a high degree of judgment since the first step of the required impairment test consists of a comparison of the fair value of a reporting unit with its book value. Based on the assumptions underlying the valuation, impairment is determined by estimating the fair value of a reporting unit and comparing that value to the reporting unit’s book value. If the fair value is more than the book value of the reporting unit, an impairment loss is not recognized. If an impairment exists, the fair value of the reporting unit is allocated to all of its assets and liabilities excluding goodwill, with the excess amount representing the fair value of goodwill. An impairment loss is measured as the amount by which the book value of the reporting unit’s goodwill exceeds the estimated fair value of that goodwill.

For purposes of evaluating whether goodwill is impaired, goodwill is allocated to various reporting units, which are either at the operating segment level or one reporting level below the operating segment. Mattel’s reporting units are: Mattel Girls Brands US, Mattel Boys Brands US, Fisher-Price Brands US, American Girl Brands, and International. Goodwill is allocated to Mattel’s reporting units based on an allocation of brand-specific goodwill to the reporting units selling those brands. Mattel utilizes the fair value based upon the discounted cash flows that the business can be expected to generate in the future (the “Income Approach”) when evaluating goodwill for impairment. The Income Approach valuation method requires Mattel to make projections of revenue, operating costs and working capital investment for the reporting unit over a multi-year period. Additionally, management must make an estimate of a weighted average cost of capital that a market participant would use as a discount rate. Changes in these projections or estimates could result in a reporting unit either passing or failing the first step of the impairment model, which could significantly change the amount of any

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impairment ultimately recorded. As of September 30, 2009, Mattel performed the annual impairment test for goodwill as required and determined that its goodwill was not impaired since, for each of the reporting units, the fair value of the reporting unit substantially exceeded its carrying amount. Mattel also considered events and circumstances subsequent to the annual impairment tests in concluding there was no impairment at December 31, 2009.

Testing nonamortizable intangible assets for impairment also involves a high degree of judgment due to the assumptions that underlie the valuation. Mattel evaluates nonamortizable intangible assets, including trademarks and trade names, for impairment by comparing the estimated fair values with the carrying values. The fair value is measured using a multi-period royalty savings method, which reflects the savings realized by owning the trademarks and trade names, and thus not having to pay a royalty fee to a third party. As of September 30, 2009, Mattel performed the annual impairment test for nonamortizable intangible assets and determined that the fair value of certain of its nonamortizable intangible assets was below its carrying value. Mattel also tested its amortizable intangible assets for impairment during 2009. As a result of these impairment tests, Mattel recorded impairment charges of approximately $10 million, which are reflected within other selling and administrative expenses. Mattel also considered events and circumstances subsequent to these impairment tests in concluding there was no additional impairment at December 31, 2009.

Sales Adjustments

Mattel routinely enters into arrangements with its customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise. Such programs are based primarily on customer purchases, customer performance of specified promotional activities, and other specified factors such as sales to consumers. Accruals for these programs are recorded as sales adjustments that reduce gross revenue in the period the related revenue is recognized. Sales adjustments for such programs totaled $503.5 million, $568.0 million, and $622.8 million during 2009, 2008, and 2007, respectively.

The above-described programs primarily involve fixed amounts or percentages of sales to customers. Accruals for such programs are calculated based on an assessment of customers’ purchases and performance under the programs and any other specified factors. While the majority of sales adjustment amounts are readily determinable at period end and do not require estimates, certain of the sales adjustments require management to make estimates. In making these estimates, management considers all available information, including the overall business environment, historical trends and information from customers. Management believes that the accruals recorded for customer programs at December 31, 2009 are adequate and proper.

Product Recalls and Withdrawals

During 2007, Mattel recalled products with high-powered magnets that may become dislodged and other products, some of which were produced using non-approved paint containing lead in excess of applicable regulatory and Mattel standards. During the second half of 2007, additional products were recalled, withdrawn from retail stores, or replaced at the request of consumers as a result of safety or quality issues (collectively, the “2007 Product Recalls”). In the second quarter of 2008, Mattel determined that certain products had been shipped into foreign markets in which the products did not meet all applicable regulatory standards for those markets. None of these deficiencies related to lead or magnets. Mattel withdrew these products from retail stores in these markets and, although not required to do so, also withdrew the products from the US and other markets because they did not meet Mattel’s internal standards (the “2008 Product Withdrawal”).

Mattel establishes a reserve for product recalls and withdrawals on a product-specific basis when circumstances giving rise to the recall or withdrawal become known. Facts and circumstances related to the recall or withdrawal, including where the product affected by the recall or withdrawal is located (e.g., with consumers, in customers’ inventory, or in Mattel’s inventory), cost estimates for shipping and handling for returns, whether the product is repairable, cost estimates for communicating the recall or withdrawal to consumers and customers,

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and cost estimates for parts and labor if the recalled or withdrawn product is deemed to be repairable, are considered when establishing a product recall or withdrawal reserve. These factors are updated and reevaluated each period and the related reserves are adjusted when these factors indicate that the recall or withdrawal reserve is either not sufficient to cover or exceeds the estimated product recall or withdrawal expenses.

Significant changes in the assumptions used to develop estimates for product recall or withdrawal reserves could affect key financial measures, including accounts receivable, inventory, net sales, cost of sales, other selling and administrative expenses, and net income. In addition, estimating product recall or withdrawal reserves requires a high degree of judgment in areas such as estimating the portion of recalled or withdrawn products sold to end consumers and the portion held by retailers, return rates, shipping and handling for returns, the way in which affected products held by consumers may be remediated (e.g., through redeemable vouchers, or a repair kit being provided), and the costs of meeting regulatory requirements in various countries (e.g., public notification).

The following table summarizes Mattel’s reserves and reserve activity for the 2007 Product Recalls and the 2008 Product Withdrawal (in thousands):

	Impairment of Inventory on Hand			Product Returns/ Redemptions			Other			Total
2007 Product Recall charges	$	3,849		$	60,887		$	3,712		$	68,448
Reserves used		(3,849	)		(48,275	)		(1,352	)		(53,476	)
Balance at December 31, 2007		—			12,612			2,360			14,972
2008 Product Withdrawal charges		3,571			5,230			329			9,130
Reserves used		(3,571	)		(15,961	)		(2,013	)		(21,545	)
Changes in estimates		—			1,962			728			2,690
Impact of currency exchange rate changes		—			(238	)		(66	)		(304	)
Balance at December 31, 2008		—			3,605			1,338			4,943
Reserves used		—			(1,297	)		(311	)		(1,608	)
Changes in estimates		—			(2,370	)		707			(1,663	)
Impact of currency exchange rate changes		—			77			(26	)		51
Balance at December 31, 2009	$	—		$	15		$	1,708		$	1,723

Mattel believes that its reserves for the 2007 Product Recalls and 2008 Product Withdrawal at December 31, 2009 are adequate and proper.

Benefit Plan Assumptions

Mattel and certain of its subsidiaries have retirement and other postretirement benefit plans covering substantially all employees of these companies. See Item 8 “Financial Statements and Supplementary Data—Note 7 to the Consolidated Financial Statements—Employee Benefit Plans.”

Actuarial valuations are used in determining amounts recognized in the financial statements for retirement and other postretirement benefit plans. These valuations incorporate the following significant assumptions:

• Weighted average discount rate to be used to measure future plan obligations and interest cost component of plan income or expense;

• Rate of future compensation increases (for defined benefit pension plans);

• Expected long-term rate of return on plan assets (for funded plans); and

• Health care cost trend rates (for other postretirement benefit plans).

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Management believes that these assumptions are “critical accounting estimates” because significant changes in these assumptions could impact Mattel’s results of operations and financial position. Management believes that the assumptions utilized to record its obligations under its plans are reasonable based on the plans’ experience and advice received from its outside actuaries. Mattel reviews its benefit plan assumptions annually and modifies its assumptions based on current rates and trends as appropriate. The effects of such changes in assumptions are amortized as part of plan income or expense in future periods.

At the end of each fiscal year, Mattel determines the weighted average discount rate used to calculate the projected benefit obligation. The discount rate is an estimate of the current interest rate at which the benefit plan liabilities could be effectively settled at the end of the year. The discount rate also impacts the interest cost component of plan income or expense. At December 31, 2009, Mattel determined the discount rate for its domestic benefit plans used in determining the projected and accumulated benefit obligations to be 5.6%, as compared to 5.4% and 6.2% for December 31, 2008 and 2007, respectively. In estimating this rate, Mattel reviews rates of return on high-quality, corporate bond indices, which approximate the timing and amount of benefit payments. Assuming all other benefit plan assumptions remain constant, the increase in the discount rate from 5.4% to 5.6% will result in a decrease in benefit plan expense during 2010 of approximately $0.8 million.

The rate of future compensation increases used by Mattel for the benefit obligation of its domestic defined benefit pension plans averaged 3.8% for 2009, 2008, and 2007, based on plan demographics. The rate of future compensation increases used by Mattel for the net periodic pension cost of its domestic defined benefit pension plans averaged 3.8% for 2009 and 2008, and 4.0% for 2007, based on plan demographics. These assumptions are reviewed annually based on historical salary increases for participants in the defined benefit pension plans. This assumption impacts the service and interest cost components of plan income or expense.

The long-term rate of return on plan assets is based on management’s expectation of earnings on the assets that secure Mattel’s funded defined benefit pension plans, taking into account the mix of invested assets, the arithmetic average of past returns, economic and stock market conditions and future expectations and the long-term nature of the projected benefit obligation to which these investments relate. The long-term rate of return is used to calculate the expected return on plan assets that is used in calculating pension income or expense. The difference between this expected return and the actual return on plan assets is deferred, net of tax, and is included in accumulated other comprehensive loss. The net deferral of past asset gains or losses affects the calculated value of plan assets and, ultimately, future pension income or expense. Mattel’s long-term rate of return for its domestic defined benefit pension plans was 8.0% in 2009, 2008 and 2007. Assuming all other benefit plan assumptions remain constant, a one percentage point decrease in the expected return on plan assets would result in an increase in benefit plan expense during 2010 of approximately $2.5 million.

The health care cost trend rates used by Mattel for its other postretirement benefit plans reflect management’s best estimate of expected claim costs over the next ten years. These trend rates impact the service and interest cost components of plan expense. Rates ranging from 7% in 2009 to 5% in 2011, with rates assumed to stabilize in 2011 and thereafter, were used in determining plan expense for 2009. These rates are reviewed annually and are estimated based on historical costs for participants in the other postretirement benefit plans as well as estimates based on current economic conditions. As of December 31, 2009, Mattel adjusted the health care cost trend rates for its other postretirement benefit plan obligation to range from 6% in 2009 reducing to 5% in 2011, with rates assumed to stabilize in 2011 and thereafter. Assuming all other postretirement benefit plan assumptions remain constant, a one percentage point increase in the assumed health care cost trend rates would increase benefit plan expense during 2010 by approximately $0.1 million.

A one percentage point increase/(decrease) in the assumed health care cost trend rate for each future year would impact the postretirement benefit obligation as of December 31, 2009 by approximately $4.5 million and $(4.0) million, respectively, while a one percentage point increase/(decrease) would impact the service and interest cost recognized for 2009 by approximately $0.3 million and $(0.2) million, respectively.

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Share-Based Payments

Mattel recognizes the cost of employee share-based payment awards on a straight-line attribution basis over the requisite employee service period, net of estimated forfeitures. In determining when additional tax benefits associated with share-based payment exercises are recognized, Mattel follows the ordering of deductions under the tax law, which allows deductions for share-based payment exercises to be utilized before previously existing net operating loss carryforwards. In computing dilutive shares under the treasury stock method, Mattel does not reduce the tax benefit amount within the calculation for the amount of deferred tax assets that would have been recognized had Mattel previously expensed all share-based payment awards.

Determining the fair value of share-based awards at the measurement date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise, the associated volatility, and the expected dividends. The fair value of options granted has been estimated using the Black-Scholes valuation model. The expected life of the options used in this calculation is the period of time the options are expected to be outstanding and has been determined based on historical exercise experience. Expected stock price volatility is based on the historical volatility of Mattel’s stock for a period approximating the expected life, the expected dividend yield is based on Mattel’s most recent actual annual dividend payout, and the risk-free interest rate is based on the implied yield available on US Treasury zero-coupon issues approximating the expected life. Judgment is also required in estimating the amount of share-based awards that will be forfeited prior to vesting. Management believes that these assumptions are “critical accounting estimates” because significant changes in the assumptions used to develop the estimates could materially affect key financial measures, including net income.

The following weighted average assumptions were used in determining the fair value of options granted:

	2009			2008			2007
Expected life (in years)		4.9			4.8			4.7
Risk-free interest rate		2.5	%		3.2	%		4.6	%
Volatility factor		33.6	%		25.6	%		22.8	%
Dividend yield		4.3	%		3.7	%		2.8	%
Weighted average fair value per granted option	$	3.71		$	3.67		$	4.76

The following table summarizes the sensitivity of valuation assumptions within the calculation of stock option fair values, if all other assumptions are held constant:

	Increase in Assumption Factor		Increase (Decrease) in Fair Value (in % pts)
Expected life (in years)	1 year		3.8
Risk-free interest rate	1	%	6.5
Volatility factor	1	%	3.2
Dividend yield	1	%	(10.8	)
	(Decrease) in Assumption Factor		Increase (Decrease) in Fair Value (in % pts)
Expected life (in years)	(1) year		(5.7	)
Risk-free interest rate	(1	)%	(6.5	)
Volatility factor	(1	)%	(3.5	)
Dividend yield	(1	)%	11.9

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Mattel recognized compensation expense of $13.0 million, $9.5 million, and $7.4 million for stock options during 2009, 2008, and 2007, respectively, which is included within other selling and administrative expenses. Compensation expense recognized related to RSUs was $37.0 million, $26.2 million, and $14.8 million in 2009, 2008, and 2007, respectively, and is also included within other selling and administrative expenses. As of December 31, 2009, total unrecognized compensation cost related to unvested share-based payments totaled $69.8 million and is expected to be recognized over a weighted-average period of 2.0 years.

Income Taxes

Mattel’s income tax provision and related income tax assets and liabilities are based on actual and expected future income, US and foreign statutory income tax rates, and tax regulations and planning opportunities in the various jurisdictions in which Mattel operates. Management believes that the accounting estimate related to income taxes is a “critical accounting estimate” because significant judgment is required in interpreting tax regulations in the US and in foreign jurisdictions, evaluating Mattel’s worldwide uncertain tax positions, and assessing the likelihood of realizing certain tax benefits. Actual results could differ materially from those judgments, and changes in judgments could materially affect Mattel’s consolidated financial statements.

Certain income and expense items are accounted for differently for financial reporting and income tax purposes. As a result, the tax expense reflected in Mattel’s consolidated statements of operations is different than that reported in Mattel’s tax returns filed with the taxing authorities. Some of these differences are permanent, such as expenses that are not deductible in Mattel’s tax return, and some differences reverse over time, such as depreciation expense. These timing differences create deferred income tax assets and liabilities. Deferred income tax assets generally represent items that can be used as a tax deduction or credit in Mattel’s tax returns in future years for which Mattel has already recorded a tax benefit in its consolidated statement of operations. Mattel records a valuation allowance to reduce its deferred income tax assets if, based on the weight of available evidence, management believes expected future taxable income is not likely to support the use of a deduction or credit in that jurisdiction. Management evaluates the level of Mattel’s valuation allowances at least annually, and more frequently if actual operating results differ significantly from forecasted results.

Mattel records unrecognized tax benefits for US federal, state, local, and foreign tax positions related primarily to transfer pricing, tax credits claimed, tax nexus and apportionment. For each reporting period, management applies a consistent methodology to measure unrecognized tax benefits and all unrecognized tax benefits are reviewed periodically and adjusted as circumstances warrant. Mattel’s measurement of its unrecognized tax benefits is based on management’s assessment of all relevant information, including prior audit experience, the status of current audits, conclusions of tax audits, lapsing of applicable statutes of limitations, identification of new issues, and any administrative guidance or developments. Mattel recognizes unrecognized tax benefits in the first financial reporting period in which information becomes available indicating that such benefits will more-likely-than-not be realized.

The 2009 income tax provision includes net tax benefits of $28.8 million related to reassessments of prior years’ tax exposures based on the status of current audits in various jurisdictions around the world, settlements, and enacted tax law changes. The 2007 income tax provision includes net tax benefits of $42.0 million related to reassessments of prior years’ tax exposures based on the status of audits in various jurisdictions around the world, including settlements, partially offset by enacted tax law changes.

In the normal course of business, Mattel is regularly audited by federal, state, local, and foreign tax authorities. The ultimate settlement of any particular issue with the applicable taxing authority could have a material impact on Mattel’s consolidated financial statements.

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New Accounting Pronouncements

See Item 8 “Financial Statements and Supplementary Data—Note 1 to the Consolidated Financial Statements—Summary of Significant Accounting Policies.”

Non-GAAP Financial Measure

In this Annual Report on Form 10-K, Mattel includes a non-GAAP financial measure, gross sales, which it uses to analyze its operations and to monitor, assess and identify meaningful trends in its operating and financial performance. Net sales, as reported in the consolidated statements of operations, include the impact of sales adjustments such as trade discounts and other allowances. Gross sales represent sales to customers, excluding the impact of sales adjustments, the 2007 Product Recalls, and the 2008 Product Withdrawal. Consistent with its segment reporting, Mattel presents changes in gross sales as a metric for comparing its aggregate, business unit, brand and geographic results to highlight significant trends in Mattel’s business. Changes in gross sales are discussed because, while Mattel records the detail of such sales adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally not associated with individual products, making net sales less meaningful.

A reconciliation of gross sales to the most directly comparable GAAP financial measure, net sales, is as follows:

	For the Year
	2009			2008			2007
	(In thousands)
Revenues
Domestic:
Mattel Girls & Boys Brands US	$	1,402,224		$	1,437,933		$	1,445,028
Fisher-Price Brands US		1,310,886			1,418,213			1,511,055
American Girl Brands		462,899			463,056			431,510
Total Domestic		3,176,009			3,319,202			3,387,593
International		2,758,315			3,166,820			3,205,341
Gross sales		5,934,324			6,486,022			6,592,934
Sales adjustments		(503,478	)		(568,020	)		(622,844	)
Net sales	$	5,430,846		$	5,918,002		$	5,970,090

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Exchange Rate Risk

Currency exchange rate fluctuations may impact Mattel’s results of operations and cash flows. Inventory purchase transactions denominated in the Euro, British pound sterling, Canadian dollar, Mexican peso, Hong Kong dollar, and Indonesian rupiah were the primary transactions that caused currency transaction exposure for Mattel during 2009, 2008, and 2007. Mattel seeks to mitigate its exposure to market risk by monitoring its currency transaction exposure for the year and partially hedging such exposure using foreign currency forward exchange contracts primarily to hedge its purchase and sale of inventory, and other intercompany transactions denominated in foreign currencies. These contracts generally have maturity dates of up to 18 months. For those intercompany receivables and payables that are not hedged along with US dollar cash balances held by certain international subsidiaries, the transaction gains or losses are recorded in the consolidated statement of operations in the period in which the exchange rate changes as part of operating income or other non-operating income, net based on the nature of the underlying transaction. Transaction gains or losses on hedged intercompany inventory transactions are recorded in the consolidated statement of operations in the period in which the inventory is sold to customers. In addition, Mattel manages its exposure to currency exchange rate fluctuations through the selection of currencies used for international borrowings. Mattel does not trade in financial instruments for speculative purposes.

Mattel’s financial position is also impacted by currency exchange rate fluctuations on translation of its net investment in subsidiaries with non-US dollar functional currencies. Assets and liabilities of subsidiaries with non-US dollar functional currencies are translated into US dollars at fiscal year-end exchange rates. Income, expense, and cash flow items are translated at weighted average exchange rates prevailing during the fiscal year. The resulting currency translation adjustments are recorded as a component of accumulated other comprehensive loss within stockholders’ equity. Mattel’s primary currency translation exposures during 2009 were related to its net investment in entities having functional currencies denominated in the Euro, Mexican peso, Indonesian rupiah, British pound sterling, and Brazilian real.

There are numerous factors impacting the amount by which Mattel’s financial results are affected by foreign currency translation and transaction gains and losses resulting from changes in currency exchange rates, including but not limited to the level of foreign currency forward exchange contracts in place at a given time and the volume of foreign currency denominated transactions in a given period. However, assuming that such factors were held constant, Mattel estimates that a 1 percent change in the US dollar Trade-Weighted Index would impact Mattel’s net sales by approximately 0.5% and its full year earnings per share by approximately $0.01 to $0.02.

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Mattel’s foreign currency forward exchange contracts that were used to hedge firm foreign currency commitments as of December 31, 2009 are shown in the following table. All contracts are against the US dollar and are maintained by reporting units with a US dollar functional currency, with the exception of the Indonesian rupiah contracts, which are maintained by entities with a rupiah functional currency.

	Buy						Sell
	Contract Amount		Weighted Average Contract Rate	Fair Value			Contract Amount		Weighted Average Contract Rate	Fair Value
	(In thousands of US dollars)
Euro*	$	296,827	1.43	$	845		$	320,163	1.38	$	(10,233	)
Canadian dollar*		4,161	0.87		569			37,246	0.87		662
British pound sterling*		—	—		—			16,779	1.61		(108	)
Japanese yen		9,896	89.74		(344	)		19,868	89.88		680
Australian dollar*		32,575	0.88		607			24,364	1.30		(3,480	)
Swiss franc		18,900	1.04		164			—	—		—
Mexican peso		51,277	12.87		(797	)		1,500	14.44		(132	)
Indonesian rupiah		39,040	9,883		1,850			3,020	11,882		(629	)
New Zealand dollar*		9,178	0.71		224			1,769	1.73		(416	)
Czech koruna		5,597	18.35		(17	)		—	—		—
Taiwan dollar		—	—		—			10,233	0.03		(197	)
Singapore dollar		—	—		—			1,019	0.72		8
Hungarian forint		2,879	192.86		73			—	—		—
Polish zloty		9,997	2.93		344			—	—		—
New Turkish lira		—	—		—			5,798	0.65		(79	)
	$	480,327		$	3,518		$	441,759		$	(13,924	)

* The weighted average contract rate for these contracts is quoted in US dollar per local currency.

For the purchase of foreign currencies, fair value reflects the amount, based on dealer quotes, that Mattel would pay at maturity for contracts involving the same currencies and maturity dates, if they had been entered into as of December 31, 2009. For the sale of foreign currencies, fair value reflects the amount, based on dealer quotes, that Mattel would receive at maturity for contracts involving the same currencies and maturity dates, if they had been entered into as of December 31, 2009. The differences between the market forward amounts and the contract amounts are expected to be fully offset by currency transaction gains and losses on the underlying hedged transactions.

In addition to the contracts involving the US dollar detailed in the above table, Mattel also had contracts to sell British pound sterling for the purchase of Euro. As of December 31, 2009, these contracts had a contract amount of $40.8 million and a fair value of $0.5 million.

Had Mattel not entered into hedges to limit the effect of currency exchange rate fluctuations on its results of operations and cash flows, its income before income taxes would have decreased by approximately $13 million in 2009, decreased by approximately $16 million in 2008, and increased by approximately $7 million in 2007.

Venezuelan Operations

Mattel’s pricing decisions in Venezuela are intended to mitigate the risks of government imposed currency controls and significant inflation by aligning Mattel’s prices with its expectations of the local currency cost of acquiring inventory and distributing earnings in US dollars. Mattel applies to the Venezuelan government’s Foreign Exchange Administrative Commission, CADIVI, for the conversion of local currency to US dollars at the official exchange rate. The official exchange rate had been fixed at 2.15 Venezuelan bolivar fuertes to the US

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dollar through December 31, 2009. For US dollar needs exceeding conversions obtained through CADIVI, the parallel exchange market, with rates substantially less favorable than the official exchange rate, may be used to obtain US dollars without approval from CADIVI.

Effective December 31, 2009, Mattel changed the rate it uses to translate its Venezuelan subsidiary’s transactions and balances from the official exchange rate to the parallel exchange rate, which was quoted at 5.97 Venezuelan bolivar fuertes to the US dollar on December 31, 2009. The resulting foreign currency translation adjustment of approximately $15 million increased accumulated other comprehensive loss within stockholders’ equity as of December 31, 2009. Mattel’s considerations for changing the rate included recent indications that the Venezuelan government is not likely to continue to provide substantial currency exchange at the official rate for companies importing discretionary products, such as toys, recent difficulties in obtaining approval for the conversion of local currency to US dollars at the official exchange rate (for imported products and dividends), delays in previously obtained approvals being honored by CADIVI, and Mattel’s 2009 repatriation of dividends from its Venezuelan subsidiary at the parallel exchange rate. During 2009, Mattel’s Venezuelan subsidiary generated approximately $142 million of net sales and approximately $11 million of net income, which was translated at the official exchange rate. Had Mattel reported results of its Venezuelan operations for 2009 using the simple average of historical parallel exchange rates during 2009 of 6.13 Venezuelan bolivar fuertes to the US dollar instead of the official exchange rate, net sales would have been approximately $95 million lower and net income would have been approximately $7 million lower. Assuming that all else is equal, a 1% increase/(decrease) in the average historical parallel exchange rate would have further decreased/(increased) Mattel’s 2009 net sales and net income by approximately $500 thousand and $100 thousand, respectively.

Effective January 1, 2010, and as required by US GAAP, Mattel will account for Venezuela as a highly inflationary economy as the three-year cumulative inflation rate for Venezuela using the blended Consumer Price Index (which is associated with the city of Caracas) and the National Consumer Price Index (developed commencing in 2008 and covering the entire country of Venezuela) exceeded 100%. Accordingly, Mattel’s Venezuelan subsidiary will use the US dollar as its functional currency effective January 1, 2010. As of December 31, 2009, Mattel’s Venezuelan subsidiary had approximately $20 million of net monetary assets denominated in bolivar fuertes. As a result of the change to a US dollar functional currency, monetary assets and liabilities denominated in bolivar fuertes will generate income or expense in 2010 for changes in value associated with parallel exchange rate fluctuations against the US dollar. For every $10 million of net monetary assets denominated in bolivar fuertes, a 1% increase/(decrease) in the parallel rate would decrease/(increase) Mattel’s pre-tax income by approximately $100 thousand. While Mattel’s level of net monetary assets denominated in bolivar fuertes will vary from one period to another based on operating cycles and seasonality, Mattel does not expect the remeasurement adjustments to be material to Mattel’s consolidated financial statements.

On January 11, 2010, the Venezuelan government devalued the Venezuelan bolivar fuerte and changed to a two-tier exchange structure. The official exchange rate moved from 2.15 bolivar fuerte per US dollar to 2.60 for essential goods and 4.30 for non-essential goods and services, with Mattel’s products falling into the non-essential category. Due to the limited approvals obtained in 2009 for conversion of local currency to US dollars at the official exchange rate, this devaluation did not have a material impact on Mattel’s consolidated financial statements during 2009, and is not expected to materially impact Mattel’s 2010 consolidated financial statements. For any US dollars that Mattel obtains at the official rate, the benefits associated with the favorable exchange rate will be reflected within cost of sales.

52

Item 8. Financial Statements and Supplementary Data.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Mattel’s management, including Robert A. Eckert, its principal executive officer, and Kevin M. Farr, its principal financial officer, evaluated the effectiveness of Mattel’s internal control over financial reporting using the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that Mattel’s internal control over financial reporting was effective as of December 31, 2009. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

53

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Mattel, Inc.

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Mattel, Inc. and its subsidiaries at December 31, 2009 and December 31, 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 8. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

February 24, 2010

54

MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31, 2009			December 31, 2008
	(In thousands, except share data)
ASSETS
Current Assets
Cash and equivalents	$	1,116,997		$	617,694
Accounts receivable, less allowance of $24.5 million and $25.9 million in 2009 and 2008, respectively		749,335			873,542
Inventories		355,663			485,925
Prepaid expenses and other current assets		332,624			409,689
Total current assets		2,554,619			2,386,850
Property, plant, and equipment, net		504,808			536,162
Goodwill		828,468			815,803
Other noncurrent assets		892,660			936,224
Total Assets	$	4,780,555		$	4,675,039
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Short-term borrowings	$	1,950		$	—
Current portion of long-term debt		50,000			150,000
Accounts payable		350,675			421,736
Accrued liabilities		617,881			649,383
Income taxes payable		40,368			38,855
Total current liabilities		1,060,874			1,259,974
Noncurrent Liabilities
Long-term debt		700,000			750,000
Other noncurrent liabilities		488,692			547,930
Total noncurrent liabilities		1,188,692			1,297,930
Commitments and Contingencies (See Note 14)
Stockholders’ Equity
Common stock $1.00 par value, 1.0 billion shares authorized; 441.4 million shares issued		441,369			441,369
Additional paid-in capital		1,684,694			1,642,092
Treasury stock at cost; 79.5 million shares and 82.9 million shares in 2009 and 2008, respectively		(1,555,046	)		(1,621,264	)
Retained earnings		2,339,506			2,085,573
Accumulated other comprehensive loss		(379,534	)		(430,635	)
Total stockholders’ equity		2,530,989			2,117,135
Total Liabilities and Stockholders’ Equity	$	4,780,555		$	4,675,039

The accompanying notes are an integral part of these statements.

55

MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Year
	2009			2008			2007
	(In thousands, except per share amounts)
Net Sales	$	5,430,846		$	5,918,002		$	5,970,090
Cost of sales		2,716,149			3,233,596			3,192,790
Gross Profit		2,714,697			2,684,406			2,777,300
Advertising and promotion expenses		609,753			719,159			708,768
Other selling and administrative expenses		1,373,776			1,423,455			1,338,454
Operating Income		731,168			541,792			730,078
Interest expense		71,843			81,944			70,974
Interest (income)		(8,083	)		(25,043	)		(33,305	)
Other non-operating expense (income), net		7,361			(3,073	)		(10,989	)
Income Before Income Taxes		660,047			487,964			703,398
Provision for income taxes		131,343			108,328			103,405
Net Income	$	528,704		$	379,636		$	599,993
Net Income Per Common Share—Basic	$	1.45		$	1.04		$	1.55
Weighted average number of common shares		360,085			360,757			384,450
Net Income Per Common Share—Diluted	$	1.45		$	1.04		$	1.53
Weighted average number of common and potential common shares		361,510			362,211			388,955
Dividends Declared Per Common Share	$	0.75		$	0.75		$	0.75

The accompanying notes are an integral part of these statements.

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MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Year
	2009			2008			2007
	(In thousands)
Cash Flows From Operating Activities:
Net income	$	528,704		$	379,636		$	599,993
Adjustments to reconcile net income to net cash flows from operating activities:
Net loss on sale of other property, plant, and equipment		1,491			6,831			2,790
Depreciation		152,065			160,048			160,790
Amortization		17,765			12,047			11,290
Asset impairments		11,146			4,000			—
Deferred income taxes		(21,971	)		(13,535	)		23,034
Tax benefits from share-based payment arrangements		(36,726	)		2,303			(5,706	)
Share-based compensation		49,962			35,757			22,163
Increase (decrease) from changes in assets and liabilities:
Accounts receivable, net		154,909			(20,159	)		15,510
Inventories		137,072			(96,645	)		(17,218	)
Prepaid expenses and other current assets		(5,350	)		(24,064	)		41,859
Accounts payable, accrued liabilities, and income taxes payable		(10,472	)		(10,341	)		(306,235	)
Other, net		(33,554	)		460			12,262
Net cash flows from operating activities		945,041			436,338			560,532
Cash Flows From Investing Activities:
Purchases of tools, dies, and molds		(76,994	)		(84,012	)		(68,275	)
Purchases of other property, plant, and equipment		(43,493	)		(114,796	)		(78,358	)
Payments for businesses acquired		(3,299	)		(58,396	)		(104,484	)
Increase in investments		—			(85,300	)		(35,000	)
Proceeds from sale of investments		73,132			—			—
Proceeds from sale of other property, plant, and equipment		1,351			7,199			827
Proceeds from foreign currency forward exchange contracts		15,774			23,633			—
Net cash flows used for investing activities		(33,529	)		(311,672	)		(285,290	)
Cash Flows From Financing Activities:
Payments of short-term borrowings		(451,815	)		(976,266	)		(43,665	)
Proceeds from short-term borrowings		453,090			633,410			389,926
Payments of long-term borrowings		(150,000	)		(50,000	)		(100,000	)
Proceeds from long-term borrowings		—			347,183			—
Payment of credit facility renewal costs		(11,452	)		—			—
Share repurchases		—			(90,570	)		(806,349	)
Payment of dividends on common stock		(271,353	)		(268,854	)		(272,343	)
Proceeds from exercise of stock options		30,896			18,303			222,561
Tax benefits from share-based payment arrangements		36,726			(2,303	)		5,706
Other, net		(12,182	)		(6,598	)		16,399
Net cash flows used for financing activities		(376,090	)		(395,695	)		(587,765	)
Effect of Currency Exchange Rate Changes on Cash		(36,119	)		(12,425	)		8,119
Increase (Decrease) in Cash and Equivalents		499,303			(283,454	)		(304,404	)
Cash and Equivalents at Beginning of Year		617,694			901,148			1,205,552
Cash and Equivalents at End of Year	$	1,116,997		$	617,694		$	901,148
Supplemental Cash Flow Information:
Cash paid during the year for:
Income taxes, gross	$	131,333		$	118,347		$	173,617
Interest		69,503			77,466			70,195

The accompanying notes are an integral part of these statements.

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MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Total Stockholders’ Equity
	(In thousands)
Balance, December 31, 2006	$	441,369	$	1,613,307		$	(996,981	)	$	1,652,140		$	(276,861	)	$	2,432,974
Comprehensive income:
Net income										599,993						599,993
Change in net unrealized (loss) on derivative instruments													(13,918	)		(13,918	)
Defined benefit pension plans, net prior service cost, and net actuarial loss													28,316			28,316
Currency translation adjustments													86,653			86,653
Comprehensive income										599,993			101,051			701,044
Purchase of treasury stock							(806,349	)								(806,349	)
Issuance of treasury stock for stock option exercises				(5,395	)		225,467									220,072
Other issuance of treasury stock				25			40									65
Restricted stock units				(275	)		266									(9	)
Deferred compensation							6,046									6,046
Share-based compensation				21,870												21,870
Tax benefits from share-based payment arrangements				5,706												5,706
Dividend equivalents for restricted stock units										(2,334	)					(2,334	)
Dividends										(272,343	)					(272,343	)
Balance, December 31, 2007		441,369		1,635,238			(1,571,511	)		1,977,456			(175,810	)		2,306,742
Comprehensive income:
Net income										379,636						379,636
Change in net unrealized gain on derivative instruments													25,388			25,388
Defined benefit pension plans, net prior service cost, and net actuarial loss													(87,636	)		(87,636	)
Currency translation adjustments													(192,577	)		(192,577	)
Comprehensive income										379,636			(254,825	)		124,811
Purchase of treasury stock							(90,570	)								(90,570	)
Issuance of treasury stock for stock option exercises				(10,334	)		28,453									18,119
Other issuance of treasury stock				(1	)		151									150
Restricted stock units				(16,147	)		10,799									(5,348	)
Deferred compensation							1,414									1,414
Share-based compensation				35,639												35,639
Tax benefits from share-based payment arrangements				(2,303	)											(2,303	)
Dividend equivalents for restricted stock units										(2,665	)					(2,665	)
Dividends										(268,854	)					(268,854	)
Balance, December 31, 2008		441,369		1,642,092			(1,621,264	)		2,085,573			(430,635	)		2,117,135
Comprehensive income:
Net income										528,704						528,704
Change in net unrealized (loss) on derivative instruments													(19,805	)		(19,805	)
Defined benefit pension plans, net prior service cost, and net actuarial loss													18,696			18,696
Currency translation adjustments													52,210			52,210
Comprehensive income										528,704			51,101			579,805
Issuance of treasury stock for stock option exercises				(17,219	)		48,115									30,896
Other issuance of treasury stock				(209	)		209									0
Restricted stock units				(26,658	)		18,566									(8,092	)
Deferred compensation							(672	)		(323	)					(995	)
Share-based compensation				49,962												49,962
Tax benefits from share-based payment arrangements				36,726												36,726
Dividend equivalents for restricted stock units										(3,095	)					(3,095	)
Dividends										(271,353	)					(271,353	)
Balance, December 31, 2009	$	441,369	$	1,684,694		$	(1,555,046	)	$	2,339,506		$	(379,534	)	$	2,530,989

The accompanying notes are an integral part of these statements.

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MATTEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Preparation

The consolidated financial statements include the accounts of Mattel, Inc. and its subsidiaries (“Mattel”). All majority-owned subsidiaries are consolidated and included in Mattel’s consolidated financial statements. Mattel does not have any minority stock ownership interests in which it has a controlling financial interest that would require consolidation. All significant intercompany accounts and transactions have been eliminated in consolidation. In preparing these financial statements, Mattel evaluated the events and transactions that occurred between December 31, 2009 and February 24, 2010, the date these financial statements were issued.

On July 1, 2009, Mattel adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10 (formerly Statement of Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards Codification and Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162). ASC 105-10 establishes the FASB ASC as the source of authoritative accounting principles recognized by the FASB to be applied in preparation of financial statements in conformity with generally accepted accounting principles in the United States of America. The adoption of this standard had no impact on Mattel’s consolidated financial statements.

Use of Estimates

Preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could ultimately differ from those estimates.

Cash and Equivalents

Cash and equivalents include short-term investments, which are highly liquid investments with maturities of three months or less when purchased. Such investments are stated at cost, which approximates market value.

Accounts Receivable and Allowance for Doubtful Accounts

Credit is granted to customers on an unsecured basis. Credit limits and payment terms are established based on extensive evaluations made on an ongoing basis throughout the fiscal year of the financial performance, cash generation, financing availability, and liquidity status of each customer. Customers are reviewed at least annually, with more frequent reviews performed as necessary, based on the customer’s financial condition and the level of credit being extended. For customers who are experiencing financial difficulties, management performs additional financial analyses before shipping to those customers on credit. Mattel uses a variety of financial arrangements to ensure collectibility of accounts receivable of customers deemed to be a credit risk, including requiring letters of credit, factoring or purchasing various forms of credit insurance with unrelated third parties, or requiring cash in advance of shipment.

Mattel records an allowance for doubtful accounts based on management’s assessment of the business environment, customers’ financial condition, historical collection experience, accounts receivable aging, and customer disputes.

Inventories

Inventories, net of an allowance for excess quantities and obsolescence, are stated at the lower of cost or market. Cost is determined by the first-in, first-out method.

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Property, Plant, and Equipment

Property, plant, and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over estimated useful lives of 10 to 40 years for buildings, 3 to 10 years for machinery and equipment, and 10 to 20 years, not to exceed the lease term, for leasehold improvements. Tools, dies, and molds are amortized using the straight-line method over 3 years. Estimated useful lives are periodically reviewed and, where appropriate, changes are made prospectively. The carrying value of property, plant, and equipment is reviewed when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Any potential impairment identified is assessed by evaluating the operating performance and future undiscounted cash flows of the underlying assets. When property is sold or retired, the cost of the property and the related accumulated depreciation are removed from the consolidated balance sheet and any resulting gain or loss is included in the results of operations.

Goodwill and Nonamortizable Intangible Assets

Goodwill is allocated to various reporting units, which are either at the operating segment level or one reporting level below the operating segment, for purposes of evaluating whether goodwill is impaired. Mattel’s reporting units are: Mattel Girls Brands US, Mattel Boys Brands US, Fisher-Price Brands US, American Girl Brands, and International. Mattel tests goodwill for impairment annually in the third quarter, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable, which is based on the fair value of the cash flows that the reporting units are expected to generate in the future.

Mattel also tests its nonamortizable intangible assets, including trademarks and trade names, for impairment by comparing the estimated fair values of the nonamortizable intangible assets with the carrying values. Mattel tests nonamortizable intangible assets annually in the third quarter, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The fair value of trademark and trade name intangibles is measured using a multi-period royalty savings method, which reflects the savings realized by owning the trademarks and trade names, and thus not having to pay a royalty fee to a third party.

Foreign Currency Translation Exposure

Mattel’s reporting currency is the US dollar. The translation of its net investment in subsidiaries with non-US dollar functional currencies subjects Mattel to currency exchange rate fluctuations in its results of operations and financial position. Assets and liabilities of subsidiaries with non-US dollar functional currencies are translated into US dollars at year-end exchange rates. Income, expense, and cash flow items are translated at weighted average exchange rates prevailing during the year. The resulting currency translation adjustments are recorded as a component of accumulated other comprehensive loss within stockholders’ equity. Mattel’s primary currency translation exposures in 2009 were related to its net investment in entities having functional currencies denominated in the Euro, Mexican peso, Indonesian rupiah, British pound sterling, and Brazilian real.

Foreign Currency Transaction Exposure

Currency exchange rate fluctuations may impact Mattel’s results of operations and cash flows. Mattel’s currency transaction exposures include gains and losses realized on unhedged inventory purchases and unhedged receivables and payables balances that are denominated in a currency other than the applicable functional currency. Gains and losses on unhedged inventory purchases and other transactions associated with operating activities are recorded in the components of operating income in the consolidated statement of operations. Gains and losses on unhedged intercompany loans and advances are recorded as a component of other non-operating expense (income), net in the consolidated statements of operations in the period in which the currency exchange rate changes. Inventory purchase transactions denominated in the Euro, British pound sterling, Canadian dollar, Mexican peso, Hong Kong dollar, and Indonesian rupiah were the primary transactions that cause foreign currency transaction exposure for Mattel in 2009.

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Venezuelan Operations

Mattel applies to the Venezuelan government’s Foreign Exchange Administrative Commission, CADIVI, for the conversion of local currency to US dollars at the official exchange rate. The official exchange rate had been fixed at 2.15 Venezuelan bolivar fuertes to the US dollar through December 31, 2009. For US dollar needs exceeding conversions obtained through CADIVI, the parallel exchange market, with rates substantially less favorable than the official exchange rate, may be used to obtain US dollars without approval from CADIVI.

Effective December 31, 2009, Mattel changed the rate it uses to translate its Venezuelan subsidiary’s transactions and balances from the official exchange rate to the parallel exchange rate, which was quoted at 5.97 Venezuelan bolivar fuertes to the US dollar on December 31, 2009. The resulting foreign currency translation adjustment of approximately $15 million increased accumulated other comprehensive loss within stockholders’ equity as of December 31, 2009. Mattel’s considerations for changing the rate included recent indicators that the Venezuelan government is not likely to continue to provide substantial currency exchange at the official rate for companies importing discretionary products, such as toys, recent difficulties in obtaining approval for the conversion of local currency to US dollars at the official exchange rate (for imported products and dividends), delays in previously obtained approvals being honored by CADIVI, and Mattel’s 2009 repatriation of dividends generated by its Venezuelan subsidiary at the parallel exchange rate.

Effective January 1, 2010, and as required by US GAAP, Mattel will account for Venezuela as a highly inflationary economy as the three-year cumulative inflation rate for Venezuela using the blended Consumer Price Index (which is associated with the city of Caracas) and the National Consumer Price Index (developed commencing in 2008 and covering the entire country of Venezuela) exceeded 100%. Accordingly, Mattel’s Venezuelan subsidiary will use the US dollar as its functional currency effective January 1, 2010.

On January 11, 2010, the Venezuelan government devalued the Venezuelan bolivar fuerte and changed to a two-tier exchange structure. The official exchange rate moved from 2.15 bolivar fuerte per US dollar to 2.60 for essential goods and 4.30 for non-essential goods and services, with Mattel’s products falling into the non-essential category.

Derivative Instruments

Mattel uses foreign currency forward exchange contracts as cash flow hedges primarily to hedge its purchases and sales of inventory denominated in foreign currencies. At the inception of the contracts, Mattel designates these derivatives as cash flow hedges and documents the relationship of the hedge to the underlying transaction. Hedge effectiveness is assessed at inception and throughout the life of the hedge to ensure the hedge qualifies for hedge accounting. Changes in fair value associated with hedge ineffectiveness, if any, are recorded in the results of operations. Changes in fair value of the cash flow hedge derivatives are deferred and recorded as part of accumulated other comprehensive income in stockholders’ equity until the underlying transaction affects earnings. In the event that an anticipated transaction is no longer likely to occur, Mattel recognizes the change in fair value of the derivative in its results of operations in the period the determination is made.

Additionally, Mattel uses foreign currency forward exchange contracts to hedge intercompany loans and advances denominated in foreign currencies. Due to the short-term nature of the contracts involved, Mattel does not use hedge accounting for these contracts, and as such, changes in fair value are recorded in the period of change in the consolidated statements of operations.

Revenue Recognition and Sales Adjustments

Revenue is recognized upon shipment or upon receipt of products by the customer, depending on terms, provided that: there are no uncertainties regarding customer acceptance; persuasive evidence of an agreement exists documenting the specific terms of the transaction; the sales price is fixed or determinable; and collectibility is reasonably assured. Management assesses the business environment, the customer’s financial

61

condition, historical collection experience, accounts receivable aging, and customer disputes to determine whether collectibility is reasonably assured. If collectibility is not considered reasonably assured at the time of sale, Mattel does not recognize revenue until collection occurs. Mattel routinely enters into arrangements with its customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise. Such programs are based primarily on customer purchases, customer performance of specified promotional activities, and other specified factors such as sales to consumers. The costs of these programs are recorded as sales adjustments that reduce gross revenue in the period the related revenue is recognized.

Advertising and Promotion Costs

Costs of media advertising are expensed the first time the advertising takes place, except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits. Direct-response advertising consists primarily of catalog production and mailing costs that are generally amortized within three months from the date the catalogs are mailed.

Product Recalls and Withdrawals

Mattel establishes a reserve for product recalls and withdrawals on a product-specific basis when circumstances giving rise to the recall or withdrawal become known. Facts and circumstances related to the recall or withdrawal, including where the product affected by the recall or withdrawal is located (e.g., with consumers, in customers’ inventory, or in Mattel’s inventory), cost estimates for shipping and handling for returns, whether the product is repairable, cost estimates for communicating the recall or withdrawal to consumers and customers, and cost estimates for parts and labor if the recalled or withdrawn product is deemed to be repairable, are considered when establishing a product recall or withdrawal reserve. These factors are updated and reevaluated each period and the related reserves are adjusted when these factors indicate that the recall or withdrawal reserve is either not sufficient to cover or exceeds the estimated product recall or withdrawal expenses (see “Note 4 to the Consolidated Financial Statements—Product Recalls and Withdrawals”).

Design and Development Costs

Product design and development costs are charged to the results of operations as incurred.

Employee Benefit Plans

Mattel and certain of its subsidiaries have retirement and other postretirement benefit plans covering substantially all employees of these companies. Actuarial valuations are used in determining amounts recognized in the financial statements for retirement and other postretirement benefit plans (see “Note 7 to the Consolidated Financial Statements—Employee Benefit Plans”).

Share-Based Payments

Mattel recognizes the cost of employee share-based payment awards on a straight-line attribution basis over the requisite employee service period, net of estimated forfeitures. In determining when additional tax benefits associated with share-based payment exercises are recognized, Mattel follows the ordering of deductions under the tax law, which allows deductions for share-based payment exercises to be utilized before previously existing net operating loss carryforwards. In computing dilutive shares under the treasury stock method, Mattel does not reduce the tax benefit amount within the calculation for the amount of deferred tax assets that would have been recognized had Mattel previously expensed all share-based payment awards.

Determining the fair value of share-based awards at the measurement date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise, the associated volatility, and

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the expected dividends. Mattel estimates the fair value of options granted using the Black-Scholes valuation model. The expected life of the options used in this calculation is the period of time the options are expected to be outstanding and has been determined based on historical exercise experience. Expected stock price volatility is based on the historical volatility of Mattel’s stock for a period approximating the expected life, the expected dividend yield is based on Mattel’s most recent actual annual dividend payout, and the risk-free interest rate is based on the implied yield available on US Treasury zero-coupon issues approximating the expected life. Judgment is also required in estimating the amount of share-based awards that will be forfeited prior to vesting.

Assumptions used in determining the fair value of options granted, and the resulting fair value, were as follows:

	2009			2008			2007
Expected life (in years)		4.9			4.8			4.7
Risk-free interest rate		2.5	%		3.2	%		4.6	%
Volatility factor		33.6	%		25.6	%		22.8	%
Dividend yield		4.3	%		3.7	%		2.8	%
Weighted average fair value per granted option	$	3.71		$	3.67		$	4.76

Mattel recognized compensation expense of $13.0 million, $9.5 million, and $7.4 million for stock options during 2009, 2008, and 2007, respectively, which is included within other selling and administrative expenses. Compensation expense recognized related to employee service based restricted stock units (“RSUs”) was $37.0 million, $26.2 million, and $14.8 million in 2009, 2008, and 2007, respectively, and is also included within other selling and administrative expenses. Additionally, the 2009 and 2008 compensation expense includes $5.3 million and $1.5 million, respectively, of compensation expense associated with performance RSUs granted under Mattel’s January 1, 2008—December 31, 2010 Long-Term Incentive Program, as more fully described in “Note 7 to the Consolidated Financial Statements—Employee Benefit Plans.” As of December 31, 2009, total unrecognized compensation expense related to unvested share-based payments totaled $69.8 million and is expected to be recognized over a weighted-average period of 2.0 years.

Income Taxes

Certain income and expense items are accounted for differently for financial reporting and income tax purposes. Deferred income tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, applying enacted statutory income tax rates in effect for the year in which the differences are expected to reverse.

In the normal course of business, Mattel is regularly audited by federal, state, local, and foreign tax authorities. The ultimate settlement of any particular issue with the applicable taxing authority could have a material impact on Mattel’s consolidated financial statements.

New Accounting Pronouncements

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140. SFAS No. 166 amends SFAS No. 140, Accounting for the Transfers and Servicing of Financial Assets and the Extinguishments of Liabilities, which seeks to improve the relevance and comparability of the information that a reporting entity provides in its financial statements about transfers of financial assets; the effects of the transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. SFAS No. 166 eliminates the concept of a qualifying special-purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferor’s interest in transferred financial assets. SFAS No. 166 is effective for interim and annual reporting periods beginning after November 15, 2009. Mattel does not expect the adoption of SFAS No. 166 to have a material impact on its consolidated financial statements.

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In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R). SFAS No. 167 amends FASB Interpretation No. (“FIN”) 46, Consolidation of Variable Interest Entities (revised December 2003)—an interpretation of ARB No. 51, which requires an enterprise to determine whether its variable interest or interests give it a controlling financial interest in a variable interest entity. The primary beneficiary of a variable interest entity is the enterprise that has both (i) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and (ii) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. SFAS No. 167 also amends FIN 46(R) to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS No. 167 is effective for interim and annual reporting periods beginning after November 15, 2009. Mattel does not expect the adoption of SFAS No. 167 to have a material impact on its consolidated financial statements.

Note 2—Goodwill and Other Intangibles

The change in the carrying amount of goodwill by reporting unit for 2009 and 2008 is shown below. Brand-specific goodwill held by foreign subsidiaries is allocated to the US reporting units selling those brands, thereby causing foreign currency translation impact to the US reporting units.

	Mattel Girls Brands US Division			Mattel Boys Brands US Division			Fisher- Price Brands US			American Girl Brands		International			Total
	(In thousands)
Balance at December 31, 2007	$	38,751		$	124,469		$	217,383		$	207,571	$	257,475		$	845,649
Additions/Adjustments		—			7,165			—			—		8,105			15,270
Impact of currency exchange rate changes		(9,527	)		(751	)		(1,863	)		—		(32,975	)		(45,116	)
Balance at December 31, 2008		29,224			130,883			215,520			207,571		232,605			815,803
Impact of currency exchange rate changes		2,858			(146	)		560			—		9,393			12,665
Balance at December 31, 2009	$	32,082		$	130,737		$	216,080		$	207,571	$	241,998		$	828,468

In 2009, Mattel performed the annually required impairment tests and determined that its goodwill was not impaired. Mattel has not recorded any goodwill impairment subsequent to its initial adoption of ASC 350-20 (formerly SFAS No. 142, Goodwill and Other Intangible Assets), which was on January 1, 2002.

Identifiable intangibles include the following:

	December 31,
	2009		2008
	(In thousands)
Identifiable intangibles (net of amortization of $69.5 million and $61.8 million in 2009 and 2008, respectively)	$	93,546	$	107,447
Nonamortizable identifiable intangibles		122,223		128,382
	$	215,769	$	235,829

In 2009, Mattel performed the annual impairment test and determined that certain of its nonamortizable intangible assets was impaired. Mattel also tested its amortizable intangible assets for impairment during 2009. As a result of these impairment tests, Mattel recorded impairment charges of approximately $10 million, which are reflected within other selling and administrative expenses. Nonamortizable and amortizable intangible assets were determined to not be impaired in 2008 and 2007.

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In October 2008, Mattel acquired Sekkoia SAS, which owns the Blokus^® trademark and trade name rights, for $35.1 million, including acquisition costs. In connection with the acquisition, Mattel recorded goodwill and amortizable identifiable intangible assets totaling $18.1 million and $22.9 million, respectively.

In August 2008, Mattel acquired the intellectual property rights related to Whac-a-Mole^® for $23.5 million, including acquisition costs, which is included within amortizable identifiable intangibles.

Note 3—Income Taxes

Consolidated pre-tax income consists of the following:

	For the Year
	2009		2008			2007
	(In thousands)
US operations	$	107,593	$	(37,808	)	$	14,745
Foreign operations		552,454		525,772			688,653
	$	660,047	$	487,964		$	703,398

The provision (benefit) for current and deferred income taxes consists of the following:

	For the Year
	2009			2008			2007
	(In thousands)
Current
Federal	$	9,251		$	2,230		$	(36,626	)
State		9,975			(1,790	)		(1,143	)
Foreign		134,088			121,423			118,140
		153,314			121,863			80,371
Deferred
Federal		564			(15,043	)		3,055
State		(8,828	)		151			11,039
Foreign		(13,707	)		1,357			8,940
		(21,971	)		(13,535	)		23,034
Provision for income taxes	$	131,343		$	108,328		$	103,405

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Deferred income taxes are provided principally for tax credit carryforwards, research and development expenses, net operating loss carryforwards, employee compensation-related expenses and certain other reserves that are recognized in different years for financial statement and income tax reporting purposes. Mattel’s deferred income tax assets (liabilities) are composed of the following:

	December 31,
	2009			2008
	(In thousands)
Tax credit carryforwards	$	209,173		$	258,671
Research and development expenses		187,010			190,615
Loss carryforwards		56,228			92,153
Allowances and reserves		122,219			84,777
Deferred compensation		111,237			73,522
Postretirement benefits		66,220			81,092
Other		37,122			24,270
Gross deferred income tax assets		789,209			805,100
Intangible assets		(100,839	)		(83,245	)
Other		(9,255	)		(16,360	)
Gross deferred income tax liabilities		(110,094	)		(99,605	)
Deferred income tax asset valuation allowances		(112,048	)		(150,963	)
Net deferred income tax assets	$	567,067		$	554,532

Net deferred income tax assets are reported in the consolidated balance sheets as follows:

	December 31,
	2009			2008
	(In thousands)
Prepaid expenses and other current assets	$	131,402		$	78,531
Other noncurrent assets		481,240			524,451
Accrued liabilities		(775	)		(850	)
Other noncurrent liabilities		(44,800	)		(47,600	)
	$	567,067		$	554,532

As of December 31, 2009, Mattel has federal and foreign loss carryforwards totaling $143.8 million and tax credit carryforwards of $209.2 million, which does not include carryforwards that do not meet the threshold for recognition in the financial statements. Utilization of these loss and tax credit carryforwards is subject to annual limitations. Mattel’s loss and tax credit carryforwards expire in the following periods:

	Loss Carryforwards		Tax Credit Carryforwards
	(In thousands)
2010 – 2014	$	55,885	$	69,471
Thereafter		6,606		130,258
No expiration date		81,276		9,443
Total	$	143,767	$	209,172

Management considered all available evidence under existing tax law and anticipated expiration of tax statutes and determined that a valuation allowance of $112.0 million was required as of December 31, 2009 for those loss and tax credit carryforwards that are not expected to provide future tax benefits. Changes in the valuation allowance for 2009 include increases in the valuation allowance for 2009 foreign losses without

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benefits, and decreases in the valuation allowance for utilization and expiration of tax loss and tax credit carryforwards. Management believes it is more-likely-than-not that Mattel will generate sufficient taxable income in the appropriate future periods to realize the benefit of the remaining net deferred income tax assets of $567.1 million. Changes in enacted tax laws could negatively impact Mattel’s ability to fully realize all of the benefits of its remaining net deferred tax assets.

Differences between the provision for income taxes at the US federal statutory income tax rate and the provision in the consolidated statements of operations are as follows:

	For the Year
	2009			2008			2007
	(In thousands)
Provision at US federal statutory rates	$	231,016		$	170,787		$	246,189
(Decrease) increase resulting from:
Foreign earnings taxed at different rates, including withholding taxes		(82,029	)		(70,399	)		(122,916	)
Foreign losses without income tax benefit		6,148			10,985			15,581
State and local taxes, net of US federal benefit		5,486			(1,065	)		3,263
Adjustments to previously accrued taxes		(28,840	)		—			(42,008	)
Other		(438	)		(1,980	)		3,296
Provision for income taxes	$	131,343		$	108,328		$	103,405

In assessing whether uncertain tax positions should be recognized in its financial statements, Mattel first determines whether it is more-likely-than-not (a greater than 50 percent likelihood) that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, Mattel presumes that the position will be examined by the appropriate taxing authority that would have full knowledge of all relevant information. For tax positions that meet the more-likely-than-not recognition threshold, Mattel measures the amount of benefit recognized in the financial statements at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Mattel recognizes unrecognized tax benefits in the first financial reporting period in which information becomes available indicating that such benefits will more-likely-than-not be realized.

Mattel records unrecognized tax benefits for US federal, state, local, and foreign tax positions related primarily to transfer pricing, tax credits claimed, tax nexus, and apportionment. For each reporting period, management applies a consistent methodology to measure unrecognized tax benefits and all unrecognized tax benefits are reviewed periodically and adjusted as circumstances warrant. Mattel’s measurement of its unrecognized tax benefits is based on management’s assessment of all relevant information, including prior audit experience, the status of current audits, conclusions of tax audits, lapsing of applicable statutes of limitations, and any administrative guidance or developments.

A reconciliation of unrecognized tax benefits is as follows:

	2009			2008			2007
	(In millions)
Unrecognized tax benefits at January 1	$	80.3		$	76.0		$	122.0
Increases for positions taken in current year		9.4			14.4			17.4
Increases for positions taken in a prior year		194.3			1.8			9.6
Decreases for positions taken in a prior year		(30.2	)		(6.4	)		(44.1	)
Decreases for settlements with taxing authorities		(23.0	)		(4.5	)		(27.1	)
Decreases for lapses in the applicable statute of limitations		(0.8	)		(1.0	)		(1.8	)
Unrecognized tax benefits at December 31	$	230.0		$	80.3		$	76.0

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Of the $230.0 million of unrecognized tax benefits as of December 31, 2009, $223.0 million would impact the effective tax rate if recognized. However, a valuation allowance would likely be required for a substantial portion of this amount, thereby offsetting the effective tax rate benefit.

During 2009, Mattel recognized $1.0 million of interest and penalties related to unrecognized tax benefits. As of December 31, 2009, Mattel had accrued $14.9 million in interest and penalties related to unrecognized tax benefits. Of this balance, $14.3 million would impact the effective tax rate if recognized.

During 2009, Mattel finalized tax positions related to the recognition of a capital loss from the liquidation of certain Canadian subsidiaries acquired as part of The Learning Company acquisition, as well as capitalization of certain costs that had been previously deducted on its tax returns. These tax positions had no impact on Mattel’s consolidated financial statements. In the event the unrecognized tax benefit related to the capital loss tax position were to later meet the financial statement recognition requirements, it is uncertain as to whether there would be any benefit to Mattel’s provision for income taxes as projected capital gain income in the carryforward period to utilize this capital loss may not be sufficient and a valuation allowance, up to the full amount, would likely be required. These tax positions are reported in the table above as a $191.8 million increase in unrecognized tax benefits for positions taken in a prior year and a $21.4 million decrease in unrecognized tax benefits for settlements with taxing authorities.

In the normal course of business, Mattel is regularly audited by federal, state, local, and foreign tax authorities. The US Internal Revenue Service (“IRS”) is currently auditing Mattel’s 2006 and 2007 federal income tax returns. Mattel files multiple state and local income tax returns and remains subject to examination in various of these jurisdictions, including California for the 2005 through 2009 tax years, New York for the 2004 through 2009 tax years and Wisconsin for the 2007 through 2009 tax years. Mattel files multiple foreign income tax returns and remains subject to examination in major foreign jurisdictions, including Hong Kong and Venezuela for the 2003 through 2009 tax years, and Brazil, Mexico, and the Netherlands for the 2004 through 2009 tax years. Significant changes in unrecognized tax benefits are not expected during the next twelve months. The ultimate settlement of any particular issue with the applicable taxing authority could have a material impact on Mattel’s consolidated financial statements.

In 2009, net income was positively impacted by net tax benefits of $28.8 million related to reassessments of prior years’ tax exposures based on the status of current audits in various jurisdictions around the world, settlements, and enacted tax law changes. In 2007, net income was positively impacted by net tax benefits of $42.0 million related to reassessments of prior years’ tax exposures based on the status of audits in various jurisdictions around the world, including settlements, partially offset by enacted tax law changes.

The cumulative amount of undistributed earnings of foreign subsidiaries that Mattel intends to indefinitely reinvest and for which no deferred US income taxes have been provided is approximately $3.5 billion as of December 31, 2009. Management periodically reviews the undistributed earnings of its foreign subsidiaries and reassesses its intent to indefinitely reinvest such earnings.

The additional US income tax on unremitted foreign earnings, if repatriated, would be offset in whole or in part by foreign tax credits. The extent of this offset would depend on many factors, including the method of distribution, and specific earnings distributed.

Accounting principles generally accepted in the United States of America require that tax benefits related to the exercise of nonqualified stock options and stock warrants be credited to additional paid-in-capital in the period in which such amounts reduce current taxes payable. The exercise of nonqualified stock options and vesting of other stock compensation awards resulted in increases/(decreases) to additional paid-in-capital for related income tax benefits totaling $36.7 million, ($2.3) million, and $5.7 million, in 2009, 2008, and 2007, respectively.

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Note 4—Product Recalls and Withdrawals

During 2007, Mattel recalled products with high-powered magnets that may become dislodged and other products, some of which were produced using non-approved paint containing lead in excess of applicable regulatory and Mattel standards. During the second half of 2007, additional products were recalled, withdrawn from retail stores, or replaced at the request of consumers as a result of safety or quality issues (collectively, the “2007 Product Recalls”). In the second quarter of 2008, Mattel determined that certain products had been shipped into foreign markets in which the products did not meet all applicable regulatory standards for those markets. None of these deficiencies related to lead or magnets. Mattel withdrew these products from retail stores in these markets and, although not required to do so, also withdrew the products from the US and other markets because they did not meet Mattel’s internal standards (the “2008 Product Withdrawal”).

The following table summarizes Mattel’s reserves and reserve activity for the 2007 Product Recalls and the 2008 Product Withdrawal (in thousands):

	Impairment of Inventory on Hand			Product Returns/ Redemptions			Other			Total
2007 Product Recall charges	$	3,849		$	60,887		$	3,712		$	68,448
Reserves used		(3,849	)		(48,275	)		(1,352	)		(53,476	)
Balance at December 31, 2007		—			12,612			2,360			14,972
2008 Product Withdrawal charges		3,571			5,230			329			9,130
Reserves used		(3,571	)		(15,961	)		(2,013	)		(21,545	)
Changes in estimates		—			1,962			728			2,690
Impact of currency exchange rate changes		—			(238	)		(66	)		(304	)
Balance at December 31, 2008		—			3,605			1,338			4,943
Reserves used		—			(1,297	)		(311	)		(1,608	)
Changes in estimates		—			(2,370	)		707			(1,663	)
Impact of currency exchange rate changes		—			77			(26	)		51
Balance at December 31, 2009	$	—		$	15		$	1,708		$	1,723

Following the announcement of the 2007 Product Recalls, a number of lawsuits were filed against Mattel with respect to the recalled products, which are more fully described in “Note 14 to the Consolidated Financial Statements—Commitments and Contingencies.” During 2009, Mattel recorded charges of $27.4 million, which are included in other selling and administrative expenses, to reserve for the settlement of a portion of the above-described product liability-related litigation. Additionally, during 2009, Mattel recorded a $6.0 million benefit associated with an insurance recovery for product liability-related litigation.

Although management is not aware of any additional quality or safety issues that are likely to result in material recalls or withdrawals, there can be no assurance that additional issues will not be identified in the future.

Note 5—Restructuring Charges

During the second quarter of 2008, Mattel initiated its Global Cost Leadership program, which is designed to improve operating efficiencies and leverage Mattel’s global scale to improve profitability and operating cash flows. The major initiatives within Mattel’s Global Cost Leadership program include:

• A global reduction in Mattel’s professional workforce of approximately 1,000 employees that was initiated in November 2008, and an additional reduction in Mattel’s professional workforce initiated in the third quarter of 2009.

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• A coordinated efficiency strategic plan that includes structural changes designed to lower costs and improve efficiencies; for example, offshoring and outsourcing certain back office functions, and more clustering of management in international markets.

• Additional procurement initiatives designed to fully leverage Mattel’s global scale in areas such as creative agency partnerships, legal services, and distribution, including ocean carriers and over-the-road freight vendors.

In connection with the Global Cost Leadership program, during 2008 and 2009, Mattel recorded severance and other termination-related charges of $34.4 million and $31.5 million, respectively, which are included in other selling and administrative expenses. The following table summarizes Mattel’s severance and other termination costs activity for 2008 and 2009 (in thousands):

	Severance			Other termination costs			Total
Charges	$	32,771		$	1,656		$	34,427
Payments		(15,656	)		(775	)		(16,431	)
Balance at December 31, 2008		17,115			881			17,996
Charges		31,176			324			31,500
Payments		(29,508	)		(980	)		(30,488	)
Balance at December 31, 2009	$	18,783		$	225		$	19,008

Note 6— Earnings Per Share

Effective January 1, 2009, Mattel adopted ASC 260-10 (formerly FASB Staff Position (“FSP”) Emerging Issues Task Force No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities). Under ASC 260-10, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. Certain of Mattel’s RSUs are considered participating securities because they contain nonforfeitable rights to dividend equivalents. The retrospective application of this standard reduced previously reported basic and diluted earnings per share by $0.01 for 2008 and 2007.

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Under the two-class method, net income is reduced by the amount of dividends declared in the period for each class of common stock and participating securities. The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net income for the period had been distributed. Basic earnings per common share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing net income allocable to common shares by the weighted average number of common shares for the period, as adjusted for the potential dilutive effect of non-participating share-based awards. The following table reconciles earnings per common share:

	For the Year
Basic:	2009			2008			2007
	(In thousands, except per share amounts)
Net income	$	528,704		$	379,636		$	599,993
Less net income allocable to participating RSUs		(5,992	)		(3,731	)		(4,280	)
Net income available for basic common shares	$	522,712		$	375,905		$	595,713
Weighted average common shares outstanding		360,085			360,757			384,450
Basic net income per common share	$	1.45		$	1.04		$	1.55
Diluted:
Net income	$	528,704		$	379,636		$	599,993
Less net income allocable to participating RSUs		(5,981	)		(3,726	)		(4,258	)
Net income available for diluted common shares	$	522,723		$	375,910		$	595,735
Weighted average common shares outstanding		360,085			360,757			384,450
Weighted average common equivalent shares arising from:
Dilutive stock options and non-participating RSUs		1,425			1,454			4,505
Weighted average number of common and potential common shares		361,510			362,211			388,955
Diluted net income per common share	$	1.45		$	1.04		$	1.53

The calculation of potential common shares assumes the exercise of dilutive stock options and vesting of non-participating RSUs, net of assumed treasury share repurchases at average market prices. Nonqualified stock options and non-participating RSUs totaling 19.0 million shares, 17.8 million shares, and 3.2 million shares were excluded from the calculation of diluted net income per common share for 2009, 2008, and 2007, respectively, because they were antidilutive.

Note 7—Employee Benefit Plans

Mattel and certain of its subsidiaries have qualified and nonqualified retirement plans covering substantially all employees of these companies. These plans include defined benefit pension plans, defined contribution retirement plans, postretirement benefit plans, and deferred compensation and excess benefit plans. In addition, Mattel makes contributions to government-mandated retirement plans in countries outside the US where its employees work.

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A summary of retirement plan expense is as follows:

	For the Year
	2009		2008			2007
	(In millions)
Defined contribution retirement plans	$	33.4	$	35.8		$	34.5
Defined benefit pension plans		27.7		19.6			22.2
Deferred compensation and excess benefit plans		6.0		(6.7	)		3.6
Postretirement benefit plans		2.6		3.4			3.8
	$	69.7	$	52.1		$	64.1

Defined Benefit Pension and Postretirement Benefit Plans

Mattel provides defined benefit pension plans for eligible domestic employees, which are intended to comply with the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”). Some of Mattel’s foreign subsidiaries have defined benefit pension plans covering substantially all of their eligible employees. Mattel funds these plans in accordance with the terms of the plans and local statutory requirements, which differ for each of the countries in which the subsidiaries are located. Mattel also has unfunded postretirement health insurance plans covering certain eligible domestic employees.

A summary of the components of Mattel’s net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31 are as follows:

	Defined Benefit Pension Plans									Postretirement Benefit Plans
	2009			2008			2007			2009			2008		2007
	(In thousands)
Net periodic benefit cost:
Service cost	$	11,153		$	11,989		$	12,305		$	82		$	100	$	99
Interest cost		26,606			26,299			25,327			2,263			2,797		2,832
Expected return on plan assets		(24,330	)		(26,396	)		(25,539	)		—			—		—
Amortization of prior service cost		1,815			1,865			1,919			—			—		—
Recognized actuarial loss		12,502			5,828			8,139			237			513		846
Net periodic benefit cost	$	27,746		$	19,585		$	22,151		$	2,582		$	3,410	$	3,777
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net (gain) loss	$	(26,705	)	$	139,637		$	(40,274	)	$	(3,609	)	$	2,531	$	(2,704	)
Prior service credit		347			(39	)		(124	)		—			—		—
Amortization of prior service cost		(1,815	)		(1,865	)		(1,919	)		—			—		—
Total recognized in other comprehensive income (a)	$	(28,173	)	$	137,733		$	(42,317	)	$	(3,609	)	$	2,531	$	(2,704	)
Total recognized in net periodic benefit cost and other comprehensive income	$	(427	)	$	157,318		$	(20,166	)	$	(1,027	)	$	5,941	$	1,073

(a) Amounts exclude related tax expense (benefit) of $13.1 million, $(52.6) million, and $16.7 million during 2009, 2008, and 2007, respectively, which are also included in other comprehensive income.

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Net periodic benefit cost for Mattel’s domestic defined benefit pension and postretirement benefit plans was calculated on January 1 of each year using the following assumptions:

	For the Year
	2009	2008	2007
Defined benefit pension plans:
Discount rate	5.4%	6.2%	5.7%
Weighted average rate of future compensation increases	3.8%	3.8%	4.0%
Long-term rate of return on plan assets	8.0%	8.0%	8.0%
Postretirement benefit plans:
Discount rate	5.4%	6.2%	5.7%
Annual increase in Medicare Part B premium	6.0%	6.0%	6.0%
Health care cost trend rate:
Pre-65	7.0%	8.0%	9.0%
Post-65	9.0%	10.0%	11.0%
Ultimate cost trend rate (pre- and post-65)	5.0%	5.0%	5.0%
Year that the rate reaches the ultimate cost trend rate:
Pre-65	2011	2011	2011
Post-65	2013	2013	2013

Discount rates, weighted average rates of future compensation increases, and long-term rates of return on plan assets for Mattel’s foreign defined benefit pension plans differ from the assumptions used for Mattel’s domestic defined benefit pension plans due to differences in local economic conditions in which the non-US plans are based. The rates shown in the preceding table are indicative of the weighted average rates of all Mattel’s defined benefit pension plans given the relative insignificance of the foreign plans to the consolidated total.

The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year is $15.7 million. The estimated net loss for the other defined benefit postretirement plans that will be amortized from accumulated other comprehensive loss into net period benefit cost over the next fiscal year is $0.2 million.

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Mattel used a measurement date of December 31, 2009 for its defined benefit pension plans and postretirement benefit plans. A summary of the changes in benefit obligation and plans assets is as follows:

	Defined Benefit Pension Plans						Postretirement Benefit Plans
	2009			2008			2009			2008
	(In thousands)
Change in Benefit Obligation:
Benefit obligation, beginning of year	$	478,703		$	441,985		$	50,985		$	48,167
Service cost		11,153			11,989			82			100
Interest cost		26,606			26,299			2,263			2,797
Participant contributions		47			56			—			—
Plan amendments		394			—			—			—
Impact of currency exchange rate changes		7,561			(20,541	)		—			—
Actuarial loss (gain)		13,792			44,286			(3,364	)		3,044
Benefits paid		(24,949	)		(25,371	)		(3,494	)		(3,123	)
Benefit obligation, end of year	$	513,307		$	478,703		$	46,472		$	50,985
Change in Plan Assets:
Plan assets at fair value, beginning of year	$	233,939		$	330,363		$	—		$	—
Actual return on plan assets		52,701			(71,323	)		—			—
Employer contributions		30,388			15,279			3,494			3,123
Participant contributions		47			56			—			—
Impact of currency exchange rate changes		4,702			(15,065	)		—			—
Benefits paid		(24,949	)		(25,371	)		(3,494	)		(3,123	)
Plan assets at fair value, end of year	$	296,828		$	233,939		$	—		$	—
Net Amount Recognized in Consolidated Balance Sheets:
Funded status, end of year	$	(216,479	)	$	(244,764	)	$	(46,472	)	$	(50,985	)
Current accrued benefit liability		(4,517	)		(5,792	)		(3,200	)		(3,400	)
Noncurrent accrued benefit liability		(211,962	)		(238,972	)		(43,272	)		(47,585	)
Total accrued benefit liability	$	(216,479	)	$	(244,764	)	$	(46,472	)	$	(50,985	)
Amounts recognized in Accumulated Other Comprehensive Loss (a):
Net loss	$	210,522		$	237,227		$	9,645		$	13,254
Prior service cost		5,040			6,508			—			—
	$	215,562		$	243,735		$	9,645		$	13,254

(a) Amounts exclude related tax benefits of $83.2 million and $96.3 million for December 31, 2009 and 2008, respectively, which are also included in accumulated other comprehensive loss.

The accumulated benefit obligation differs from the projected benefit obligation in that it assumes future compensation levels will remain unchanged. Mattel’s accumulated benefit obligation for its defined benefit pension plans as of December 31, 2009 and 2008 totaled $476.1 million and $446.2 million, respectively. Mattel does not have any defined benefit pension plans for which the plan assets exceed the accumulated benefit obligation.

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The assumptions used in determining the projected and accumulated benefit obligations of Mattel’s domestic defined benefit pension and postretirement benefit plans are as follows:

	December 31,
	2009		2008
Defined benefit pension plans:
Discount rate	5.6	%	5.4	%
Weighted average rate of future compensation increases	3.8	%	3.8	%
Postretirement benefit plans:
Discount rate	5.6	%	5.4	%
Annual increase in Medicare Part B premium	6.0	%	6.0	%
Health care cost trend rate:
Pre-65	6.0	%	7.0	%
Post-65	8.0	%	9.0	%
Ultimate cost trend rate (pre- and post-65)	5.0	%	5.0	%
Year that the rate reaches the ultimate cost trend rate:
Pre-65	2011		2011
Post-65	2013		2013

A one percentage point increase/(decrease) in the assumed health care cost trend rate for each future year would impact the postretirement benefit obligation as of December 31, 2009 by approximately $4.5 million and $(4.0) million, respectively, while a one percentage point increase/(decrease) would impact the service and interest cost recognized for 2009 by approximately $0.3 million and $(0.2) million, respectively.

The estimated future benefit payments for Mattel’s defined benefit pension and postretirement benefit plans are as follows:

	Defined Benefit Pension Plans		Postretirement Benefit Plans Before Subsidy		Benefit of Medicare Part D Subsidy
	(In thousands)
2010	$	23,482	$	3,500	$	(300	)
2011		24,205		3,600		(300	)
2012		25,269		3,600		(300	)
2013		26,204		3,600		(300	)
2014		27,135		3,500		(300	)
2015 - 2019		157,079		16,400		(1,300	)

Mattel expects to make cash contributions totaling approximately $18 million to its defined benefit pension and postretirement benefit plans in 2010, which includes approximately $9 million for benefit payments for its unfunded plans.

Mattel periodically commissions a study of the plans’ assets and liabilities to determine an asset allocation that would best match expected cash flows from the plans’ assets to expected benefit payments. Mattel monitors the returns earned by the plans’ assets and reallocates investments as needed. Mattel’s overall investment strategy is to achieve an adequately diversified asset allocation mix of investments that provides for both near-term benefit payments as well as long-term growth. The assets are invested in a combination of indexed and actively managed funds. The target allocations for Mattel’s domestic plan assets, which comprise 81% of Mattel’s total plan assets, are 35% in US equities, 35% in non-US equities, 20% in US long-term bonds, and 10% in US Treasury inflation protected securities. The US equities are benchmarked against the S&P 500, and the non-US equities are benchmarked against a combination of developed and emerging markets indexes. Fixed income securities are long-duration bonds intended to more closely match the duration of the liabilities and include US government treasuries and agencies, corporate bonds from various industries, and mortgage-backed securities.

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As of December 31, 2009, Mattel’s plan assets are measured and reported in the financial statements at fair value using Level 2 inputs (as more fully described in “Note 12 to the Consolidated Financial Statements—Fair Value Measurements”) and are composed of the following (in thousands):

Collective trust funds	$	220,467
US Government and US Government agency securities		36,625
Corporate debt instruments		23,588
Mutual funds		4,850
Other		11,298
Total	$	296,828

The fair value of collective trust funds and mutual funds shares are determined based on the net asset value of shares held at year-end. The fair value of US Government, US Government agency securities, and corporate debt instruments are determined based on quoted market prices.

Mattel’s defined benefit pension plan assets are not directly invested in Mattel common stock. Mattel believes that the long-term rate of return on plan assets of 8.0% as of December 31, 2009 is reasonable based on historical returns.

During 1999, Mattel amended the Fisher-Price Pension Plan to convert it from a career-average plan to a cash balance plan and applied for a determination letter from the IRS. In 2003, Mattel amended the Fisher-Price Pension Plan to reflect recent changes in regulations and court cases associated with cash balance plans and submitted a new application for a determination letter to the IRS. Mattel plans to convert the Fisher-Price Pension Plan to a cash balance plan upon receipt of a determination letter.

Defined Contribution Retirement Plans

Domestic employees are eligible to participate in a 401(k) savings plan, the Mattel, Inc. Personal Investment Plan (the “Plan”), sponsored by Mattel, which is a funded defined contribution plan intended to comply with ERISA’s requirements. Contributions to the Plan include voluntary contributions by eligible employees and employer automatic and matching contributions by Mattel. The Plan allows employees to allocate both their voluntary contributions and their employer automatic and matching contributions to a variety of investment funds, including a fund that is fully invested in Mattel common stock (the “Mattel Stock Fund”). Employees are not required to allocate any of their Plan account balance to the Mattel Stock Fund, which allows employees to limit or eliminate their exposure to market changes in Mattel’s stock price. Furthermore, the Plan limits the percentage of the employee’s total account balance that may be allocated to the Mattel Stock Fund to 25%. Employees may generally reallocate their account balances on a daily basis. However, pursuant to Mattel’s insider trading policy, employees classified as insiders and restricted personnel under Mattel’s insider trading policy are limited to certain periods in which they may make allocations into or out of the Mattel Stock Fund.

Certain non-US employees participate in other defined contribution retirement plans with varying vesting and contribution provisions.

Deferred Compensation and Excess Benefit Plans

Mattel maintains a deferred compensation plan that permits certain officers and key employees to elect to defer portions of their compensation. The deferred compensation plan, together with certain contributions made by Mattel and participating employees to an excess benefit plan, earns various rates of return. The liability for these plans as of December 31, 2009 and 2008 was $45.6 million and $42.7 million, respectively, and is included in other noncurrent liabilities in the consolidated balance sheets. Changes in the market value of the participant selected investment options are recorded as retirement plan expense within other selling and administrative

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expenses. Separately, Mattel has purchased group trust-owned life insurance contracts designed to assist in funding these programs. The cash surrender value of these policies, valued at $60.4 million and $55.3 million as of December 31, 2009 and 2008, respectively, are held in an irrevocable grantor trust, the assets of which are subject to the claims of Mattel’s creditors and are included in other noncurrent assets in the consolidated balance sheets.

Incentive Compensation Plans

Mattel has annual incentive compensation plans under which officers and key employees may earn incentive compensation based on Mattel’s performance and subject to certain approvals of the Compensation Committee of the Board of Directors. For 2009, 2008, and 2007, $96.6 million, $15.4 million, and $73.5 million, respectively, was charged to expense for awards under these plans.

The Mattel 2003 Long-Term Incentive Plan was approved by Mattel’s stockholders in May 2003 and expired in 2008. This plan was intended to motivate and retain key executives of Mattel who regularly and directly make or influence decisions that affect the medium- and long-term success of Mattel. This plan became effective as of January 1, 2003 and replaced a prior long-term incentive plan that was approved in June 1999.

Mattel has had two long-term incentive program (“LTIP”) performance cycles in place for some portion of the time period between 2007 and 2009: (i) a January 1, 2005—December 31, 2007 performance cycle, which was established by the Compensation Committee of Mattel’s Board of Directors in March 2005, and (ii) a January 1, 2008—December 31, 2010 performance cycle, which was established by the Compensation Committee of Mattel’s Board of Directors in March 2008.

For the January 1, 2005—December 31, 2007 LTIP performance cycle, cumulative financial performance was measured against annually escalating operating result targets that used a net operating profit after taxes less capital charge calculation. Because the performance targets escalate each year, reaching the cumulative targets became increasingly difficult when the performance targets were not met in the earlier periods. Awards were based upon the financial performance of Mattel during the specified performance period and were settled in cash when the required financial performance was met. During 2006, considering Mattel’s actual cumulative performance during 2005 and 2006 and expectations for 2007, Mattel determined that the likelihood of payments being made was probable, and $14.8 million was charged to expense. During 2007, an additional $10.1 million was charged to expense for a cumulative total of $24.9 million relating to the January 1, 2005—December 31, 2007 LTIP performance cycle, which was subsequently paid in cash during 2008.

For the January 1, 2008—December 31, 2010 LTIP performance cycle, during 2009 and 2008, Mattel granted performance RSUs under the Mattel, Inc. 2005 Equity Compensation Plan to officers and certain employees providing services to Mattel. Performance RSUs are units that may become payable in shares of Mattel’s common stock at the end of the three-year performance period, beginning January 1, 2008 and ending December 31, 2010 (“the performance period”). Performance RSUs are earned based on an initial target number with the final number of performance RSUs payable being determined based on the product of the initial target number of performance RSUs multiplied by a performance factor based on measurements of Mattel’s performance with respect to: (i) annual operating result targets for each year in the performance period using a net operating profit after taxes less capital charge calculation (“the performance-related component”), and (ii) Mattel’s total stockholder return (“TSR”) for the three-year performance period relative to the TSR realized by companies comprising the S&P 500 as of January 1, 2008 (“the market-related component”). For the performance-related component, the range of possible outcomes is that between zero and 0.7 million shares are earned for each of the three years during the three-year performance period. For the market-related component, possible outcomes range from an upward adjustment of 0.7 million shares to a downward adjustment of 0.7 million shares to the results of the performance-related component over the three-year performance period.

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For the January 1, 2008—December 31, 2010 LTIP performance cycle, the weighted average grant date fair value of the performance-related and market-related components of the performance RSUs were $10.36 and $3.99 per share, respectively, for 2009, and $18.14 and $3.99 per share, respectively, for 2008. The fair value of the performance-related component was based on the closing stock price of Mattel’s common stock on the date of grant, reduced by the present value of estimated dividends to be paid during the performance period as the awards are not credited with dividend equivalents for actual dividends paid on Mattel’s common stock. The fair value of the market-related component was estimated at the grant date using a Monte Carlo valuation methodology. Share-based compensation is recognized as expense over the performance period using a straight-line expense attribution approach reduced for estimated forfeitures. During 2009, $3.4 million was charged to expense relating to the performance-related component as the 2009 actual results exceeded the 2009 performance threshold. During 2008, $0 was charged to expense relating to the performance-related component as the 2008 actual results were below the 2008 performance threshold at the minimum award level and no shares were earned. Additionally, during 2009 and 2008, Mattel recognized share-based compensation expense of $1.9 million and $1.5 million, respectively, for the market-related component.

Note 8—Seasonal Financing and Debt

Seasonal Financing

Mattel maintains and periodically amends or replaces its domestic unsecured committed revolving credit facility with a commercial bank group that is used as the primary source of financing for the seasonal working capital requirements of its domestic subsidiaries. The agreement in effect was amended and restated on March 23, 2009 to, among other things, (i) extend the maturity date of the credit facility to March 23, 2012, (ii) reduce aggregate commitments under the credit facility from $1.3 billion to $880.0 million, with an “accordion feature,” which would allow Mattel to increase the availability under the credit facility to $1.08 billion under certain circumstances, (iii) add an interest rate floor equal to 30-day US Dollar London Interbank Offered Rate (“LIBOR”) plus 1.00% for base rate loans under the credit facility, (iv) increase the applicable interest rate margins to a range of 2.00% to 3.00% above the applicable base rate for base rate loans, and 2.5% to 3.5% above the applicable LIBOR rate for Eurodollar rate loans, depending on Mattel’s senior unsecured long-term debt rating, (v) increase commitment fees to a range of 0.25% to 0.75% of the unused commitments under the credit facility, and (vi) replace the consolidated debt-to-capital ratio with a consolidated debt-to-earnings before interest, taxes, depreciation, and amortization (“EBITDA”) ratio. During 2009, Mattel utilized the accordion feature of the credit facility to increase the aggregate commitments under the credit facility from $880.0 million to $1.08 billion, which is the maximum aggregate commitment available under the credit facility. Mattel is required to meet financial covenants at the end of each fiscal quarter and fiscal year, using the formulae specified in the credit agreement to calculate the ratios. Mattel was in compliance with such covenants at the end of each fiscal quarter and fiscal year in 2009. As of December 31, 2009, Mattel’s consolidated debt-to-EBITDA ratio, as calculated per the terms of the credit agreement, was 1.2 to 1 (compared to a maximum allowed of 3.0 to 1) and Mattel’s interest coverage ratio was 12.6 to 1 (compared to a minimum required of 3.50 to 1).

The domestic unsecured committed revolving credit facility is a material agreement and failure to comply with the financial covenant ratios may result in an event of default under the terms of the facility. If Mattel defaulted under the terms of the domestic unsecured committed revolving credit facility, its ability to meet its seasonal financing requirements could be adversely affected.

To finance seasonal working capital requirements of certain foreign subsidiaries, Mattel avails itself of individual short-term credit lines with a number of banks. As of December 31, 2009, foreign credit lines totaled approximately $155 million, a portion of which are used to support letters of credit. Mattel expects to extend the majority of these credit lines throughout 2010.

In June 2006, Mattel issued $100.0 million of unsecured floating rate senior notes (“Floating Rate Senior Notes”) due June 15, 2009 and $200.0 million of unsecured 6.125% senior notes (“6.125% Senior Notes”) due June 15, 2011 (collectively “2006 Senior Notes”). Interest on the Floating Rate Senior Notes is based on the

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three-month US Dollar London Interbank Offered Rate (“LIBOR”) plus 40 basis points with interest payable quarterly beginning September 15, 2006. Interest on the 6.125% Senior Notes is payable semi-annually beginning December 15, 2006. The 6.125% Senior Notes may be redeemed at any time at the option of Mattel at a redemption price equal to the greater of (i) the principal amount of the notes being redeemed plus accrued interest to the redemption date, or (ii) a “make whole” amount based on the yield of a comparable US Treasury security plus 20 basis points.

In June 2006, Mattel entered into two interest rate swap agreements on the $100.0 million Floating Rate Senior Notes, each in a notional amount of $50.0 million, for the purpose of hedging the variability of cash flows in the interest payments due to fluctuations of the LIBOR benchmark interest rate. These cash flow hedges were reported in Mattel’s consolidated balance sheets at fair value, with changes in the fair value of the hedges reflected in accumulated other comprehensive income. Under the terms of the agreements, Mattel received quarterly interest payments from the swap counterparties based on the three-month LIBOR plus 40 basis points and made semi-annual interest payments to the swap counterparties based on a fixed rate of 5.87125%. The three-month LIBOR used to determine interest payments under the interest rate swap agreements reset every three months, matching the variable interest on the Floating Rate Senior Notes. The agreements expired in June 2009, which corresponded with the maturity of the Floating Rate Senior Notes.

In March 2008, Mattel issued $350.0 million of unsecured 5.625% Senior Notes (“2008 Senior Notes”) due March 15, 2013. Interest on the 2008 Senior Notes is payable semi-annually on March 15 and September 15 of each year, beginning September 15, 2008. Mattel may redeem all or part of the 2008 Senior Notes at any time or from time to time at its option at a redemption price equal to the greater of (i) 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest to the redemption date, or (ii) a “make-whole” amount based on the yield of a comparable US Treasury security plus 50 basis points.

In September 2007, a major credit rating agency reaffirmed Mattel’s long-term credit rating at BBB-, but changed the outlook from positive to stable. In August 2007, another major credit rating agency maintained its long-term credit rating at BBB, but changed its outlook to positive. In May 2007, an additional credit rating agency maintained its long-term rating for Mattel at Baa2, but changed its long-term outlook from negative to stable. Management does not expect these actions to have a significant impact on Mattel’s ability to obtain financing or to have a significant negative impact on Mattel’s liquidity or results of operations.

Mattel believes its cash on hand, amounts available under its domestic unsecured committed revolving credit facility, and its foreign credit lines will be adequate to meet its seasonal financing requirements in 2010.

Mattel has a $300.0 million domestic receivables sales facility that was also amended in connection with the amendment of the credit facility. The amendment to the receivables sales facility, among other things, (i) extended the maturity date of the receivables sales facility to March 23, 2012, and (ii) incorporated the credit facility’s increased applicable interest rate margins described above. The outstanding amount of receivables sold under the domestic receivables facility may not exceed $300.0 million at any given time, and the amount available to be borrowed under the credit facility is reduced to the extent of any such outstanding receivables sold. Under the domestic receivables facility, certain trade receivables are sold to a group of banks, which currently include, among others, Bank of America, N.A., as administrative agent, Citicorp USA, Inc. and Barclays Bank PLC, as co-syndication agents, and Societe Generale and BNP Paribas, as co-documentation agents. Pursuant to the domestic receivables facility, Mattel Sales Corp., Fisher-Price, Inc., and Mattel Direct Import, Inc. (which are wholly owned subsidiaries of Mattel) can sell eligible trade receivables from Wal-Mart and Target to Mattel Factoring, Inc. (“Mattel Factoring”), a Delaware corporation and wholly owned, consolidated subsidiary of Mattel. Mattel Factoring is a special purpose entity whose activities are limited to purchasing and selling receivables under this facility. Pursuant to the terms of the domestic receivables facility and simultaneous with each receivables purchase, Mattel Factoring sells those receivables to the bank group. Mattel records the transaction, reflecting cash proceeds and sale of accounts receivable in its consolidated balance sheet, at the time of the sale of the receivables to the bank group.

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Sales of receivables pursuant to the domestic receivables sales facility occur periodically, generally quarterly. The receivables are sold by Mattel Sales Corp., Fisher-Price, Inc., and Mattel Direct Import, Inc. to Mattel Factoring, who then sells such receivables to the bank group at a slight discount, and Mattel acts as a servicer for such receivables. Mattel has designated Mattel Sales Corp. and Fisher-Price, Inc. as sub-servicers, as permitted by the facility. Mattel’s appointment as a servicer is subject to termination events that are customary for such transactions. The domestic receivables sales facility is also subject to conditions to funding, representations and warranties, undertakings and early termination events that are customary for transactions of this nature. Mattel retains a servicing interest in the receivables sold under this facility. The fair value of the net servicing asset is based on an estimate of interest Mattel earns on cash collections prior to remitting the funds to the bank group, partially offset by an estimate of the cost of servicing the trade receivables sold. The fair value of the net servicing asset totaled $0.1 million and $0.2 million as of December 31, 2009 and 2008, respectively.

Mattel’s aggregate losses on receivables sold under the domestic and other trade receivables facilities were $7.4 million, $5.4 million, and $9.3 million during 2009, 2008, and 2007, respectively.

The outstanding amounts of accounts receivable that have been sold under these facilities and other factoring arrangements, net of collections from customers, have been excluded from Mattel’s consolidated balance sheets and are summarized as follows:

	December 31,
	2009		2008
	(In thousands)
Receivables sold pursuant to the:
Domestic receivables facility	$	299,688	$	217,755
Other factoring arrangements		33,393		35,581
	$	333,081	$	253,336

Short-Term Borrowings

As of December 31, 2009 and 2008, Mattel had foreign short-term bank loans outstanding of $2.0 million and $0, respectively. As of December 31, 2009 and 2008, Mattel had no borrowings outstanding under the domestic unsecured committed credit facilities.

During 2009 and 2008, Mattel had average borrowings of $6.9 million and $9.1 million, respectively, under its foreign short-term bank loans, and $323.7 million and $559.7 million, respectively, under its domestic unsecured committed credit facilities and other short-term borrowings, to help finance its seasonal working capital requirements. The weighted average interest rate during 2009 and 2008 was 12.4% and 15.3%, respectively, on foreign short-term bank loans and 2.3% and 3.6%, respectively, on domestic unsecured committed credit facilities and other short-term borrowings.

Long-Term Debt

Mattel’s long-term debt consists of the following:

	December 31,
	2009			2008
	(In thousands)
Medium-term notes due May 2010 to November 2013	$	200,000		$	250,000
2006 Senior Notes due June 2011		200,000			300,000
2008 Senior Notes due March 2013		350,000			350,000
		750,000			900,000
Less: current portion		(50,000	)		(150,000	)
Total long-term debt	$	700,000		$	750,000

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Mattel’s medium-term notes bear interest at fixed rates ranging from 6.50% to 7.40%, with a weighted average interest rate of 7.06% and 7.12% as of December 31, 2009 and 2008, respectively. During 2009, Mattel repaid $50.0 million of medium-term notes in connection with their maturities.

During 2009, Mattel repaid $100.0 million of the Floating Rate Senior Notes in connection with their maturity.

The aggregate amount of long-term debt maturing in the next five years is as follows:

	Medium- Term Notes		2006 Senior Notes		2008 Senior Notes		Total
	(In thousands)
2010	$	50,000	$	—	$	—	$	50,000
2011		50,000		200,000		—		250,000
2012		50,000		—		—		50,000
2013		50,000		—		350,000		400,000
	$	200,000	$	200,000	$	350,000	$	750,000

Note 9—Stockholders’ Equity

Preference Stock

Mattel is authorized to issue up to 20.0 million shares of $0.01 par value preference stock, of which none is currently outstanding.

Preferred Stock

Mattel is authorized to issue up to 3.0 million shares of $1.00 par value preferred stock, of which none is currently outstanding.

Common Stock Repurchase Program

During 2009, Mattel did not repurchase any shares of its common stock. During 2008, Mattel repurchased 4.9 million shares at a cost of $90.6 million. During 2007, Mattel repurchased 35.9 million shares at a cost of $806.3 million. During 2008 and 2007, the Board of Directors authorized Mattel to increase its share repurchase program by $500.0 million and $750.0 million, respectively. At December 31, 2009, share repurchase authorizations of $410.3 million had not been executed. Repurchases will take place from time to time, depending on market conditions. Mattel’s share repurchase program has no expiration date.

Dividends

In 2009, 2008, and 2007, Mattel paid a dividend per share of $0.75 to holders of its common stock. The Board of Directors declared the dividends in November of each year, and Mattel paid the dividends in December of each year. The payment of dividends on common stock is at the discretion of the Board of Directors and is subject to customary limitations.

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Comprehensive Income

The changes in the components of comprehensive income, net of tax, are as follows:

	For the Year
	2009			2008			2007
	(In thousands)
Net income	$	528,704		$	379,636		$	599,993
Currency translation adjustments		52,210			(192,577	)		86,653
Defined benefit pension plans, net prior service cost and net actuarial loss		18,696			(87,636	)		28,316
Net unrealized (loss) gain on derivative instruments:
Unrealized holding (losses) gains		(29,602	)		17,616			(38,057	)
Reclassification adjustment for realized losses included in net income		9,797			7,772			24,139
		51,101			(254,825	)		101,051
	$	579,805		$	124,811		$	701,044

For 2009, currency translation adjustments resulted in a net gain of $52.2 million, with gains from the strengthening of the Brazilian real, Euro, Chilean peso, and British pound sterling against the US dollar. For 2008, currency translation adjustments resulted in a net loss of $192.6 million, with losses from the weakening of the British pound sterling, Mexican Peso, Brazilian real, Euro, and Chilean peso against the US dollar. For 2007, currency translation adjustments resulted in a net gain of $86.7 million, with gains from the strengthening of the Euro, Brazilian real, Australian dollar, and British pound sterling against the US dollar, partially offset by the weakening of the Indonesian rupiah and Mexican peso against the US dollar.

The components of accumulated other comprehensive loss are as follows:

	December 31,
	2009			2008
	(In thousands)
Currency translation adjustments	$	(222,641	)	$	(274,851	)
Defined benefit pension and other postretirement plans, net of tax		(142,017	)		(160,713	)
Net unrealized (loss) gain on derivative instruments, net of tax		(14,876	)		4,929
	$	(379,534	)	$	(430,635	)

Note 10—Share-Based Payments

Mattel Stock Option Plans

In May 2005, Mattel’s stockholders approved the Mattel, Inc. 2005 Equity Compensation Plan (the “2005 Plan”). Upon approval of the 2005 Plan, Mattel terminated its Amended and Restated 1996 Stock Option Plan (the “1996 Plan”) and its 1999 Stock Option Plan (the “1999 Plan”), except with respect to grants then outstanding under the 1996 Plan and the 1999 Plan. Restricted stock awards made under the 1996 Plan continue to vest pursuant to the terms of their respective grant agreements. Outstanding stock option grants under plans that have expired or have been terminated continue to be exercisable under the terms of their respective grant agreements. All such stock options expire no later than ten years from the date of grant and generally provide for vesting over a period of three years from the date of grant. Stock options generally were granted with exercise prices equal to the fair market value of Mattel’s common stock on the date of grant, although there are some outstanding stock options that were granted with an exercise price in excess of the fair market value of Mattel’s common stock on the date of grant, as to which vesting was dependent upon Mattel’s common stock achieving a specified fair market value during a specified time period. Options were granted to non-employee members of Mattel’s Board of Directors under the 1996 Plan with exercise prices equal to the fair market value of Mattel’s common stock on the date of grant; such options expire no later than ten years from the date of grant and vest over a period of four years from the date of grant.

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Under the 2005 Plan, Mattel has the ability to grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, dividend equivalent rights, and shares of common stock to officers, employees, and other persons providing services to Mattel. Generally, options vest and become exercisable contingent upon the grantees’ continued employment or service with Mattel. Nonqualified stock options are granted at not less than 100% of the fair market value of Mattel’s common stock on the date of grant, expire no later than ten years from the date of grant, and vest on a schedule determined by the Compensation Committee of the Board of Directors, generally during a period of three years from the date of grant. In the event of a retirement of an employee aged 55 years or greater with 5 or more years of service that occurs at least 6 months after the grant date, nonqualified stock options become fully vested. With regard to grants of stock options in the 2007 annual grant and later, death and disability at least 6 months after the grant date also result in accelerated vesting. With regard to grants of stock options before the 2007 annual grant, there is no accelerated vesting for death or disability. Similar provisions exist for non-employee directors. RSUs granted under the 2005 Plan are generally accompanied by dividend equivalent rights and generally vest over a period of three years from the date of grant. In the event of the involuntary termination of an employee aged 55 years or greater with 5 or more years of service, or the death or disability of an employee, that occurs at least 6 months after the grant date, RSUs receive accelerated vesting as to some or all of the RSUs. The 2005 Plan also contains provisions regarding grants of equity compensation to the non-employee members of the Board of Directors. The 2005 Plan expires on May 18, 2015, except as to any grants then outstanding.

The number of shares of common stock available for grant under the 2005 Plan is subject to an aggregate limit of 50 million shares and is further subject to share-counting rules as provided in the 2005 Plan. As a result of such share-counting rules, full-value grants such as grants of restricted stock or RSUs count against shares remaining available for grant at a higher rate than grants of stock options and stock appreciation rights. Each stock option or stock appreciation right grant is treated as using one available share for each share actually subject to such grant, whereas each full-value grant is treated as using three available shares for each share actually subject to such full-value grant. The 2005 Plan contains detailed provisions with regard to share-counting. At December 31, 2009, there were approximately 8 million shares of common stock available for grant remaining under the 2005 Plan.

As of December 31, 2009, total unrecognized compensation cost related to unvested share-based payments totaled $69.8 million and is expected to be recognized over a weighted-average period of 2.0 years.

Stock Options

Mattel recognized compensation expense of $13.0 million, $9.5 million, and $7.4 million for stock options during 2009, 2008, and 2007, respectively, which is included within other selling and administrative expenses. Income tax benefits related to stock option compensation expense recognized in the consolidated statements of operations during 2009, 2008, and 2007 totaled $4.4 million, $3.2 million, and $2.5 million, respectively.

The fair value of options granted has been estimated using the Black-Scholes valuation model. The expected life of the options used in this calculation is the period of time the options are expected to be outstanding, and has been determined based on historical exercise experience. Expected stock price volatility is based on the historical volatility of Mattel’s stock for a period approximating the expected life, the expected dividend yield is based on Mattel’s most recent actual annual dividend payout, and the risk-free interest rate is based on the implied yield available on US Treasury zero-coupon issues approximating the expected life. The following weighted average assumptions were used in determining the fair value of options granted:

	2009		2008		2007
Options granted at market price
Expected life (in years)	4.9		4.8		4.7
Risk-free interest rate	2.5	%	3.2	%	4.6	%
Volatility factor	33.6	%	25.6	%	22.8	%
Dividend yield	4.3	%	3.7	%	2.8	%

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The following is a summary of stock option information and weighted average exercise prices for Mattel’s stock options (amounts in thousands, except weighted average exercise price):

	2009				2008				2007
	Number		Weighted Average Exercise Price		Number		Weighted Average Exercise Price		Number		Weighted Average Exercise Price
Outstanding at January 1	25,400		$	18.15	24,735		$	18.73	38,507		$	18.50
Granted	3,708			17.57	4,017			20.46	1,927			23.70
Exercised	(2,450	)		12.61	(1,444	)		12.55	(12,935	)		17.01
Forfeited	(181	)		20.11	(378	)		20.81	(87	)		18.96
Canceled	(1,192	)		21.18	(1,530	)		38.17	(2,677	)		27.22
Outstanding at December 31	25,285		$	18.45	25,400		$	18.15	24,735		$	18.73
Exercisable at December 31	18,601		$	18.20	19,716		$	17.40	21,048		$	18.35

The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of an option. The total intrinsic value of options exercised during 2009, 2008, and 2007 was $12.4 million, $12.5 million, and $119.3 million, respectively. At December 31, 2009, options outstanding had an intrinsic value of $47.3 million, with a weighted average remaining life of 5.5 years. At December 31, 2009, options exercisable had an intrinsic value of $38.5 million, with a weighted average remaining life of 4.4 years. The weighted average grant date fair value of options granted during 2009, 2008, and 2007, was $3.71, $3.67, and $4.76, respectively. At December 31, 2009, total stock options vested or expected to vest totaled 24.9 million shares, with a total intrinsic value of $46.8 million, weighted average exercise price of $18.45, and weighted average remaining life of 5.6 years. During 2009, 3.2 million stock options vested. The total grant date fair value of stock options vested during 2009, 2008, and 2007 totaled $12.7 million, $7.5 million, and $5.3 million, respectively.

Mattel uses treasury shares purchased under its share repurchase program to satisfy stock option exercises. Cash received from stock options exercised during 2009, 2008, and 2007 was $30.9 million, $18.3 million, and $222.6 million, respectively.

Restricted Stock and Restricted Stock Units

RSUs are valued at the market value on the date of grant and the expense is evenly attributed to the periods in which the restrictions lapse, which is three years from the date of grant.

Compensation expense recognized related to grants of RSUs was $31.7 million, $24.7 million, and $14.8 million in 2009, 2008, and 2007, respectively, and is included within other selling and administrative expenses. Income tax benefits related to RSU compensation expense recognized in the consolidated statements of operations during 2009, 2008, and 2007 totaled $9.5 million, $7.9 million, and $4.6 million, respectively.

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The following table summarizes the number and weighted average grant date fair value of Mattel’s unvested RSUs during the year (amounts in thousands, except weighted average grant date fair value):

	2009				2008				2007
	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Unvested at January 1	3,927		$	21.03	3,452		$	20.38	1,811		$	17.28
Granted	2,113			17.41	1,873			20.09	1,744			23.60
Vested	(1,408	)		20.96	(990	)		16.91	(15	)		28.10
Forfeited	(183	)		20.53	(408	)		21.16	(88	)		19.27
Unvested at December 31	4,449		$	19.36	3,927		$	21.03	3,452		$	20.38

At December 31, 2009, total RSUs expected to vest totaled 4.1 million shares, with a weighted average grant date fair value of $19.42. The total grant date fair value of RSUs vested during 2009, 2008, and 2007 totaled $29.5 million, $16.7 million, and $0.4 million, respectively.

In addition to the expense and share amounts described above, Mattel recognized compensation expense of $5.3 million and $1.5 million, during 2009 and 2008, respectively, for performance RSUs granted in connection with its January 1, 2008–December 31, 2010 Long-Term Incentive Program, as more fully described in “Note 7 to the Consolidated Financial Statements—Employee Benefit Plans.”

Note 11—Derivative Instruments

Effective January 1, 2009, Mattel adopted ASC 815-10 (formerly SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133). ASC 815-10 amends and expands the current disclosure requirements to provide users of financial statements with an enhanced understanding of (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for, and (iii) how derivative instruments and related hedged items affect an entity’s financial position, results of operations, and cash flows. The adoption of this standard had no impact on Mattel’s financial statements.

Mattel seeks to mitigate its exposure to foreign currency transaction risk by monitoring its foreign currency transaction exposure for the year and partially hedging such exposure using foreign currency forward exchange contracts. Mattel uses foreign currency forward exchange contracts as cash flow hedges primarily to hedge its purchases and sales of inventory denominated in foreign currencies. These contracts generally have maturity dates up to 18 months. These derivative instruments have been designated as effective cash flow hedges, whereby the unsettled hedges are reported in Mattel’s consolidated balance sheets at fair value, with changes in the fair value of the hedges reflected in other comprehensive income (“OCI”). Realized gains and losses for these contracts are recorded in the consolidated statements of operations in the period in which the inventory is sold to customers. Additionally, Mattel uses foreign currency forward exchange contracts to hedge intercompany loans and advances denominated in foreign currencies. Due to the short-term nature of the contracts involved, Mattel does not use hedge accounting for these contracts, and as such, changes in fair value are recorded in the period of change in the consolidated statements of operations. As of December 31, 2009 and 2008, Mattel held foreign currency forward exchange contracts with notional amounts of $962.9 million and $888.1 million, respectively, which was equal to the exposure hedged.

In connection with the issuance of its $100.0 million of Floating Rate Senior Notes, Mattel entered into two interest rate swap agreements, each in a notional amount of $50.0 million, for the purpose of hedging the variability of cash flows in the interest payments due to fluctuations of the LIBOR benchmark interest rate. The two interest rate swap agreements expired in June 2009, which corresponded with the maturity of the Floating

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Rate Senior Notes. These derivative instruments were designated as effective cash flow hedges, whereby the hedges were reported in Mattel’s consolidated balance sheets at fair value, with changes in the fair value of the hedges reflected in OCI. Under the terms of the agreements, Mattel received quarterly interest payments from the swap counterparties based on the three-month LIBOR plus 40 basis points and made semi-annual interest payments to the swap counterparties based on a fixed rate of 5.871%. The three-month LIBOR used to determine interest payments under the interest rate swap agreements had reset every three months, matching the variable interest on the Floating Rate Senior Notes.

The following table presents Mattel’s derivative assets and liabilities at December 31, 2009 (in thousands):

	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts	Prepaid expenses and other current assets	$	7,008	Accrued liabilities	$	21,032
Foreign currency forward exchange contracts	Other noncurrent assets		962	Other noncurrent liabilities		19
Total derivatives designated as hedging instruments		$	7,970		$	21,051
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	Prepaid expenses and other current assets	$	2,222		$	—
Total derivatives		$	10,192		$	21,051

The following tables present the location and amount of gains and losses, net of taxes, from derivatives reported in the consolidated statements of operations in 2009:

	Amount of Loss Recognized in OCI			Amount of Loss Reclassified from Accumulated OCI to Statements of Operations			Statements of Operations Location
	(In thousands)
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts	$	(29,253	)	$	(8,247	)	Cost of sales
Interest rate swaps		(349	)		(1,550	)	Interest expense
Total	$	(29,602	)	$	(9,797	)

The net loss of $9.8 million reclassified from accumulated OCI to the consolidated statements of operations during 2009, are offset by the changes in cash flows associated with the underlying hedged transactions.

	Amount of Gain Recognized in Statements of Operations		Statements of Operations Location
	(In thousands)
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	$	16,633	Non-operating (income) expense
Foreign currency forward exchange contracts		4,160	Cost of sales
Total	$	20,793

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The net gains of $20.8 million recognized in the consolidated statements of operations during 2009 are offset by foreign currency transaction losses on the related hedged balances.

Note 12—Fair Value Measurements

The following table presents information about Mattel’s assets and liabilities measured and reported in the financial statements at fair value on a recurring basis as of December 31, 2009 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. The three levels of the fair value hierarchy are as follows:

• Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

• Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

• Level 3 – Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Mattel does not have any significant financial assets or liabilities measured at fair value using Level 1 or Level 3 inputs as of December 31, 2009 or December 31, 2008. Mattel’s financial assets and liabilities measured using Level 2 inputs include the following:

	December 31, 2009		December 31, 2008
	(In thousands)
Assets:
Foreign currency forward exchange contracts (a)	$	10,192	$	24,714
Liabilities:
Foreign currency forward exchange contracts (a)	$	21,051	$	12,326
Interest rate swaps (b)		—		1,934
Total liabilities	$	21,051	$	14,260

(a) The fair value of the foreign currency forward exchange contracts is based on dealer quotes of market forward rates and reflects the amount that Mattel would receive or pay at their maturity dates for contracts involving the same currencies and maturity dates.

(b) The fair value of the interest rate swaps is based on dealer quotes using cash flows discounted at relevant market interest rates.

Note 13—Financial Instruments

Mattel’s financial instruments include cash and equivalents, investments, accounts receivable and payable, short-term borrowings, and accrued liabilities. The carrying amount of these instruments approximates fair value because of their short-term nature.

The estimated fair value of Mattel’s long-term debt, including the current portion, is $794.7 million (compared to a carrying amount of $750.0 million) as of December 31, 2009 and $853.5 million (compared to a carrying amount of $900.0 million) as of December 31, 2008. The estimated fair value has been calculated based on broker quotes or rates for the same or similar instruments.

The fair value related disclosures for Mattel’s derivative financial instruments are included in “Note 11 to the Consolidated Financial Statements—Derivative Instruments” and “Note 12 to the Consolidated Financial Statements—Fair Value Measurements.”

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Note 14—Commitments and Contingencies

Leases

Mattel routinely enters into noncancelable lease agreements for premises and equipment used in the normal course of business. Certain of these leases include escalation clauses that adjust rental expense to reflect changes in price indices, as well as renewal options. In addition to minimum rental payments, certain of Mattel’s leases require additional payments to reimburse the lessors for operating expenses such as real estate taxes, maintenance, utilities, and insurance. Rental expense is recorded on a straight-line basis, including escalating minimum payments. The American Girl Place^® leases in Chicago, Illinois, New York, New York, and Los Angeles, California and American Girl Boutique and Bistro^® leases in Dallas, Texas, Atlanta, Georgia, Natick, Massachusetts, Bloomington, Minnesota, and Denver, Colorado also contain provisions for additional rental payments based on a percentage of the sales of each store after reaching certain sales benchmarks. Contingent rental expense is recorded in the period in which the contingent event becomes probable. The following table shows the future minimum obligations under lease commitments in effect at December 31, 2009:

	Capitalized Leases			Operating Leases
	(In thousands)
2010	$	300		$	94,000
2011		300			79,000
2012		300			64,000
2013		300			44,000
2014		300			36,000
Thereafter		1,500			205,000
	$	3,000	(a)	$	522,000

(a) Includes $0.9 million of imputed interest.

Rental expense under operating leases amounted to $121.9 million, $105.3 million, and $93.0 million for 2009, 2008, and 2007, respectively, net of sublease income of $0.1 million, $0.7 million, and $1.0 million in 2009, 2008, and 2007, respectively.

Commitments

In the normal course of business, Mattel enters into contractual arrangements to obtain and protect Mattel’s right to create and market certain products, and for future purchases of goods and services to ensure availability and timely delivery. Such arrangements include royalty payments pursuant to licensing agreements and commitments for future inventory purchases. Certain of these commitments routinely contain provisions for guarantees or minimum expenditures during the term of the contracts. Current and future commitments for guaranteed payments reflect Mattel’s focus on expanding its product lines through alliances with businesses in other industries.

Licensing and similar agreements provide for terms extending from 2010 through 2014 and thereafter and contain provisions for future minimum payments as shown in the following table:

	Minimum Payments
	(In thousands)
2010	$	43,000
2011		84,000
2012		45,000
2013		31,000
2014		19,000
Thereafter		19,000
	$	241,000

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Royalty expense for 2009, 2008, and 2007 was $188.5 million, $241.2 million, and $243.3 million, respectively.

As of December 31, 2009, Mattel had approximately $267 million of outstanding commitments for purchases of inventory, other assets, and services in fiscal year 2009.

Insurance

Mattel has a wholly owned subsidiary, Far West Insurance Company, Ltd. (“Far West”), that was established to insure Mattel’s workers’ compensation, general, automobile, and product liability risks. Far West insures the first $1.0 million per occurrence of Mattel’s workers’ compensation, the first $0.5 million for general and automobile liability risks, and the first $2.0 million per occurrence of product liability risks. Various insurance companies, that have an “A” or better AM Best rating at the time the policies are purchased, reinsure Mattel’s risk in excess of the amounts insured by Far West. Mattel’s liability for reported and incurred but not reported claims at December 31, 2009 and 2008 totaled $17.4 million and $18.3 million, respectively, and is included in other noncurrent liabilities. Loss reserves are accrued based on Mattel’s estimate of the aggregate liability for claims incurred.

Litigation

With regard to the claims against Mattel described below, Mattel intends to defend itself vigorously. Except as more fully described in “Note 4 to the Consolidated Financial Statements—Product Recalls and Withdrawals,” management cannot reasonably determine the scope or amount of possible liabilities that could result from an unfavorable settlement or resolution of these claims, and no reserves for these claims have been established as of December 31, 2009. However, it is possible that an unfavorable resolution of these claims could have a material adverse effect on Mattel’s financial condition and results of operations, and there can be no assurance that Mattel will be able to achieve a favorable settlement or resolution of these claims.

Litigation Related to Carter Bryant and MGA Entertainment, Inc.

In April 2004, Mattel filed a lawsuit in Los Angeles County Superior Court against Carter Bryant (“Bryant”), a former Mattel design employee. The suit alleges that Bryant aided and assisted a Mattel competitor, MGA Entertainment, Inc. (“MGA”), during the time he was employed by Mattel, in violation of his contractual and other duties to Mattel. In September 2004, Bryant asserted counterclaims against Mattel, including counterclaims in which Bryant sought, as a putative class action representative, to invalidate Mattel’s Confidential Information and Proprietary Inventions Agreements with its employees. Bryant also removed Mattel’s suit to the United States District Court for the Central District of California. In December 2004, MGA intervened as a party-defendant in Mattel’s action against Bryant, asserting that its rights to Bratz properties are at stake in the litigation.

Separately, in November 2004, Bryant filed an action against Mattel in the United States District Court for the Central District of California. The action sought a judicial declaration that Bryant’s purported conveyance of rights in Bratz was proper and that he did not misappropriate Mattel property in creating Bratz.

In April 2005, MGA filed suit against Mattel in the United States District Court for the Central District of California. MGA’s action alleges claims of trade dress infringement, trade dress dilution, false designation of origin, unfair competition, and unjust enrichment. The suit alleges, among other things, that certain products, themes, packaging, and/or television commercials in various Mattel product lines have infringed upon products, themes, packaging, and/or television commercials for various MGA product lines, including Bratz. The complaint also asserts that various alleged Mattel acts with respect to unidentified retailers, distributors, and licensees have damaged MGA and that various alleged acts by industry organizations, purportedly induced by Mattel, have damaged MGA. MGA’s suit alleges that MGA has been damaged in an amount “believed to reach or exceed tens of millions of dollars” and further seeks punitive damages, disgorgement of Mattel’s profits and injunctive relief.

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In June 2006, the three cases were consolidated in the United States District Court for the Central District of California. On July 17, 2006, the Court issued an order dismissing all claims that Bryant had asserted against Mattel, including Bryant’s purported counterclaims to invalidate Mattel’s Confidential Information and Proprietary Inventions Agreements with its employees, and Bryant’s claims for declaratory relief. Mattel believes the remaining MGA claims against it are without merit and intends to continue to vigorously defend against them.

In November 2006, Mattel asked the Court for leave to file an Amended Complaint that included not only additional claims against Bryant, but also included claims for copyright infringement, RICO violations, misappropriation of trade secrets, intentional interference with contract, aiding and abetting breach of fiduciary duty and breach of duty of loyalty, and unfair competition, among others, against MGA, its CEO Isaac Larian, certain MGA affiliates and an MGA employee. The bases for the Amended Complaint included the MGA defendants’ infringement of Mattel’s copyrights and their pattern of misappropriation of trade secrets and unfair competition in violation of the applicable statutes. On January 12, 2007, the Court granted Mattel leave to file these claims as counterclaims in the consolidated cases, which Mattel did that same day.

In February 2007, the Court decided that the consolidated cases would be tried in two phases, with the first trial to determine claims and defenses related to Mattel’s ownership of Bratz works and whether MGA infringed those works. The second trial, which has not yet been scheduled, will consider both Mattel’s separate claims for misappropriation of trade secrets and violations of the RICO statute, among other things, and MGA’s various claims for unfair competition. In May 2009, Mattel obtained leave to file a Third Amended Answer and Counterclaims in the litigation in connection with the claims to be tried as part of the second phase.

On May 19, 2008, Bryant reached a settlement agreement with Mattel and is no longer a defendant in the litigation. In the public stipulation entered by Mattel and Bryant in connection with the resolution, Bryant agreed that he was and would continue to be bound by all prior and future Court Orders relating to Bratz ownership and infringement, including the Court’s summary judgment rulings.

The first phase of the first trial, which began on May 27, 2008, resulted in a unanimous jury verdict on July 17, 2008 in favor of Mattel, finding that almost all of the Bratz design drawings and other works in question were created by Bryant while he was employed at Mattel. Among other things, the jury determined that MGA and Isaac Larian intentionally interfered with the contractual duties owed by Bryant to Mattel, aided and abetted Bryant’s breaches of his duty of loyalty to Mattel, aided and abetted Bryant’s breaches of the fiduciary duties he owed to Mattel, and converted Mattel property for their own use.

In the second phase of the first trial, which began on July 23, 2008, the same jury determined the amount of damages to award to Mattel for MGA’s and Isaac Larian’s conversion, intentional interference with Bryant’s contractual duties, and aiding and abetting Bryant’s breaches of his fiduciary duties and duty of loyalty to Mattel. In addition, the jury determined if Bratz dolls and related products infringe on the Bratz drawings and other works owned by Mattel, what damages to assess for such infringement, and whether certain defenses asserted by MGA have merit. The jury was instructed that if it found infringement, it was to determine the amount of damages to be awarded to Mattel due to the infringement. On August 26, 2008, the jury rendered a unanimous verdict for Mattel in the second phase of the trial. The jury found that defendants MGA, Larian, and MGA Entertainment (HK) Limited infringed Mattel’s copyrights in the Bratz design drawings and other Bratz works. The jury awarded Mattel total damages of approximately $100 million against the defendants for the copyright infringement claim and the claims that the defendants intentionally interfered with Bryant’s contract, aided and abetted Bryant’s breach of his fiduciary duty and duty of loyalty to Mattel, and converted Mattel’s property for their own use.

Post-trial, Mattel moved the Court to enjoin MGA from producing infringing products in the future. Mattel also asked the Court to award to Mattel certain rights in the term “Bratz”, which the jury found Bryant had conceived and created while a Mattel employee. Mattel also moved the Court to enter declaratory relief

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confirming, among other things, Mattel’s rights in the Bratz works found by the jury to have been created by Bryant during his Mattel employment. MGA filed motions as well, including a motion that asserted the Court should rule for MGA on equitable affirmative defenses such as laches, waiver and estoppel against Mattel’s claims. On December 3, 2008, the Court issued a series of orders rejecting MGA’s equitable defenses and granting Mattel’s motions, including an order enjoining the MGA party defendants from manufacturing, marketing, or selling certain Bratz fashion dolls or from using the “Bratz” name. The Court stayed the effect of the December 3, 2008 injunctive orders until further order of the Court and entered a further specified stay of the injunctive orders on January 7, 2009.

The parties filed and argued additional motions for post-trial relief, including a request by MGA to enter judgment as a matter of law on Mattel’s claims in MGA’s favor and to reduce the jury’s damages award to Mattel. Mattel additionally moved for the appointment of a receiver. On April 27, 2009, the Court entered an order confirming that Bratz works found by the jury to have been created by Bryant during his Mattel employment are and were Mattel’s property and that hundreds of Bratz female fashion dolls infringe Mattel’s copyrights. The Court also upheld the jury’s award of damages in the amount of $100 million and ordered an accounting of post-trial Bratz sales. The Court further vacated the stay of the December 3, 2008 orders, except to the extent specified by the Court’s January 7, 2009 modification. Finally, the Court appointed a temporary receiver with powers to manage, supervise and oversee the Bratz brand and assets of the MGA entities. The temporary receivership was subsequently terminated, and the Court appointed a monitor in lieu of a receiver to facilitate implementation and enforcement of the injunctive orders.

MGA appealed the Court’s equitable orders to the Court of Appeals for the Ninth Circuit. In May 2009, MGA also sought an immediate stay of the equitable orders from the Ninth Circuit pending appeal. The Ninth Circuit denied that stay request. On December 9, 2009, the Ninth Circuit heard oral argument on MGA’s appeal and issued an order staying the District Court’s equitable orders pending a further order to be issued by the Ninth Circuit. The Ninth Circuit has not yet issued an order on the merits of the appeal. On December 14, 2009, the District Court stayed the appointment of the monitor charged with facilitating implementation and enforcement of the injunctive orders.

Product Liability Litigation Related to Product Recalls and Withdrawals

Litigation Related to Product Recalls and Withdrawals in the United States

Twenty-two lawsuits have been filed in the United States asserting claims arising out of the August 2, August 14, September 4, and/or October 25, 2007 voluntary product recalls by Mattel and Fisher-Price, as well as the withdrawal of red and green toy blood pressure cuffs from retail stores or their replacement at the request of consumers.

Eighteen of those cases were commenced in the following United States District Courts: ten in the Central District of California (Mayhew v. Mattel, filed August 7, 2007; White v. Mattel, filed August 16, 2007; Luttenberger v. Mattel, filed August 23, 2007; Puerzer v. Mattel, filed August 29, 2007; Shah v. Fisher-Price, filed September 13, 2007; Rusterholtz v. Mattel, filed September 27, 2007; Jimenez v. Mattel, filed October 12, 2007; Probst v. Mattel, filed November 5, 2007; Entsminger v. Mattel, filed November 9, 2007; and White v. Mattel, filed November 26, 2007, hereinafter, “White II”); three in the Southern District of New York (Shoukry v. Fisher-Price, filed August 10, 2007; Goldman v. Fisher-Price, filed August 31, 2007; and Allen v. Fisher-Price, filed November 16, 2007); two in the Eastern District of Pennsylvania (Monroe v. Mattel, filed August 17, 2007, and Chow v. Mattel, filed September 7, 2007); one in the Southern District of Indiana (Sarjent v. Fisher-Price, filed August 16, 2007); one in the District of South Carolina (Hughey v. Fisher-Price, filed August 24, 2007); and one in the Eastern District of Louisiana (Sanders v. Mattel, filed November 14, 2007). Two other actions originally filed in Los Angeles County Superior Court were removed to federal court in the Central District of California (Healy v. Mattel, filed August 21, 2007, and Powell v. Mattel, filed August 20, 2007). Another lawsuit commenced in San Francisco County Superior Court was removed to the federal court in

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the Northern District of California (Harrington v. Mattel, filed August 20, 2007). One other action was commenced in District of Columbia Superior Court and removed to the United States District Court for the District of Columbia (DiGiacinto v. Mattel, filed August 29, 2007). Mattel was named as a defendant in all of the actions, while Fisher-Price was named as a defendant in nineteen of the cases.

Multidistrict Litigation (MDL) in the United States

On September 5, 2007, Mattel and Fisher-Price filed a motion before the Judicial Panel on Multidistrict Litigation (“JPML”) asking that all federal actions related to the recalls be coordinated and transferred to the Central District of California (In re Mattel Inc. Toy Lead Paint Products Liability Litigation). On December 18, 2007, the JPML issued a transfer order, transferring six actions pending outside the Central District of California (Sarjent, Shoukry, Goldman, Monroe, Chow and Hughey) to the Central District of California for coordinated or consolidated pretrial proceedings with five actions pending in the Central District (Mayhew, White, Luttenberger, Puerzer and Shah). The remaining cases (Healy, Powell, Rusterholtz, Jiminez, Probst, Harrington, DiGiacinto, Allen, Sanders, Entsminger, and White II ), so-called “potential tag-along actions,” are either already pending in the Central District of California or have been transferred there pursuant to January 3 and January 17, 2008 conditional transfer orders issued by the JPML. These matters are all currently pending in In re Mattel, Inc. Toy Lead Paint Products Liability Litigation, No. 2:07-ML-01897-DSF-AJW, MDL 1897 (C. D. Ca.) (the “MDL proceeding”).

On March 31, 2008, plaintiffs filed a Consolidated Amended Class Action Complaint in the MDL proceeding, which was followed with a Second Consolidated Amended Complaint (the “Consolidated Complaint”), filed on May 16, 2008. Plaintiffs seek certification of a class of all persons who, from May 2003 through the present, purchased and/or acquired certain allegedly hazardous toys. The Consolidated Complaint defines hazardous toys as those toys recalled between August 2, 2007 and October 25, 2007, due to the presence of lead in excess of applicable standards in the paint on some parts of some of the toys; those toys recalled on November 21, 2006 and August 14, 2007, related to magnets; and the red and green toy blood pressure cuffs voluntarily withdrawn from retail stores or replaced at the request of consumers. Defendants named in the Consolidated Complaint are Mattel, Fisher-Price, Target Corporation, Toys “R” Us, Inc., Wal-Mart Stores, Inc., KB Toys, Inc., and Kmart Corporation. Mattel has assumed the defense of Target Corporation, Toys “R” Us, Inc., KB Toys, Inc., and Kmart Corporation, and agreed to indemnify all of the retailer defendants, for the specific claims raised in the Consolidated Complaint, which claims relate to the sale of Mattel and Fisher-Price toys.

In the Consolidated Complaint, plaintiffs assert claims for breach of implied and express warranties, negligence, strict liability, violation of the United States Consumer Product Safety Act (“CPSA”) and related Consumer Product Safety Rules, various California consumer protection statutes, and unjust enrichment. Plaintiffs seek (i) declaratory and injunctive relief enjoining defendants from continuing the allegedly unlawful practices raised in the Consolidated Complaint; (ii) restitution and disgorgement of monies acquired by defendants from the allegedly unlawful practices; (iii) costs of initial diagnostic blood lead level testing to detect possible injury to plaintiffs and members of the class; (iv) costs of treatment for those who test positive to the initial diagnostic blood lead level testing; (v) reimbursement of the purchase price for the allegedly hazardous toys; and (vi) costs and attorneys’ fees. On June 24, 2008, defendants filed motions to dismiss the Consolidated Complaint. On November 24, 2008, the Court granted defendants’ motion with respect to plaintiffs’ claims under the CPSA related to the magnet toys and the toy blood pressure cuffs and denied defendants’ motions in all other respects.

On October 13, 2009, plaintiffs and Mattel filed a joint motion with the Court seeking preliminary approval of a class action settlement of the MDL proceeding, which the Court granted on October 23, 2009. Pursuant to the Court’s order of preliminary approval, the parties have implemented the settlement, and will seek final approval from the Court on March 15, 2010. Upon such final approval, Mattel and the other defendants in the MDL proceeding will be released from all claims arising out of the lead- and magnet-related recalls (except for

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any individual personal injury claims). Under the settlement, Mattel has agreed, among other things, to provide various categories of economic relief for members of the settlement class, maintain a quality assurance system and make a charitable contribution to fund child safety programs. In addition, Mattel has agreed not to object to plaintiffs’ counsel’s application to the Court for attorneys’ fees and expenses up to a specified amount.

Litigation Related to Product Recalls and Withdrawals in Canada

Since September 26, 2007, eight proposed class actions have been filed in the provincial superior courts of the following Canadian provinces: British Columbia (Trainor v. Fisher-Price, filed September 26, 2007); Alberta (Cairns v. Fisher-Price, filed September 26, 2007); Saskatchewan (Sharp v. Mattel Canada, filed September 26, 2007); Quebec (El-Mousfi v. Mattel Canada, filed September 27, 2007, and Fortier v. Mattel Canada, filed October 10, 2007); Ontario (Wiggins v. Mattel Canada, filed September 28, 2007); New Brunswick (Travis v. Fisher-Price, filed September 28, 2007); and Manitoba (Close v. Fisher-Price, filed October 3, 2007). Mattel, Fisher-Price, and Mattel Canada are defendants in all of the actions, and Fisher-Price Canada is a defendant in two of the actions (El-Mousfi and Wiggins). All but one of the cases seek certification of both a class of residents of that province and a class of all other residents of Canada outside the province where the action was filed. The classes are generally defined similarly in all of the actions to include both purchasers of the toys recalled by Mattel and Fisher-Price in August and September 2007 and children, either directly or through their parents as “next friends,” who have had contact with those toys.

The actions in Canada generally allege that defendants were negligent in allowing their products to be manufactured and sold with lead paint on the toys and negligent in the design of the toys with small magnets, which led to the sale of defective products. The cases typically state claims in four categories: (i) production of a defective product; (ii) misrepresentations; (iii) negligence; and (iv) violations of consumer protection statutes. Plaintiffs generally seek general and special damages, damages in the amount of monies paid for testing of children based on alleged exposure to lead, restitution of any amount of monies paid for replacing recalled toys, disgorgement of benefits resulting from recalled toys, aggravated and punitive damages, pre-judgment and post-judgment interest, and an award of litigation costs and attorneys’ fees. Plaintiffs in all of the actions except one do not specify the amount of damages sought. In the Ontario action (Wiggins), plaintiff demands general damages of Canadian dollar $75 million and special damages of Canadian dollar $150 million, in addition to the other remedies. In November 2007, the class action suit commenced by Mr. Fortier was voluntarily discontinued.

After the discontinuance of his class action suit, Mr. Fortier filed an individual action in Quebec (Fortier v. Mattel Canada, Inc., filed on November 22, 2007). In his individual action, Mr. Fortier alleges that he purchased recalled toys and, as a result, suffered damages, including consequential and incidental damages such as worry, concern, and costs of the products and replacement products, medicines, diagnosis, and treatment. Mr. Fortier alleges damages of Canadian dollar $5 million. Mattel moved to stay Mr. Fortier’s individual action pending resolution of the request to proceed as a class action filed in the El-Mousfi action also pending in Quebec, and that motion to stay was denied. In December 2009, the Quebec court granted plaintiff’s request in the El-Mousfi action to discontinue that proceeding.

All of the actions in Canada are at a preliminary stage.

Litigation Related to Product Recalls in Brazil

Three consumer protection associations and agencies have filed claims against Mattel’s subsidiary Mattel do Brasil Ltda. in the following courts in Brazil: (a) the Public Treasury Court in the State of Santa Catarina (Associacao Catarinense de Defesa dos Cidadaos, dos Consumidores e dos Contribuintes (“ACC/SC”)—ACC/SC v. Mattel do Brasil Ltda., filed on February 2, 2007); (b) the Second Commercial Court in the State of Rio de Janeiro (Consumer Protection Committee of the Rio de Janeiro State Legislative Body (“CPLeg/ RJ”)—CPLeg/RJ v. Mattel do Brasil Ltda., filed on August 17, 2007); and (c) the Sixth Civil Court of the

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Federal District (Brazilian Institute for the Study and Defense of Consumer Relationships (“IBEDEC”)—IBEDEC v. Mattel do Brasil Ltda., filed on September 13, 2007). The ACC/SC case is related to the recall of magnetic products in November 2006; the CPLeg/RJ case is related to the August 2007 recall of magnetic products; and the IBEDEC case is related to the August and September 2007 recalls of magnetic products and products with non-approved paint containing lead exceeding the limits established by applicable regulations and Mattel standards. The cases generally state claims in four categories: (i) production of a defective product; (ii) misrepresentations; (iii) negligence; and (iv) violations of consumer protection statutes. Plaintiffs generally seek general and special damages; restitution of monies paid by consumers to replace recalled toys; disgorgement of benefits resulting from recalled toys; aggravated and punitive damages; pre-judgment and post-judgment interest; injunctive relief; and litigation costs and attorneys’ fees. The amount of damages sought by plaintiffs is not generally specified, except that in the Public Treasury Court in the State of Santa Catarina action, ACC/SC demands general damages of approximately $1 million, in addition to other remedies, and in the Sixth Civil Court of the Federal District action, IBEDEC estimated the amount of approximately $21 million, as a basis for calculating court fees, in addition to requesting other remedies.

On June 18, 2008, the court held that the action brought by IBEDEC was without merit, and on July 1, 2008, IBEDEC filed an appeal. On July 23, 2008, Mattel do Brasil submitted its appellate brief. On September 15, 2008, the Public Prosecutor’s Office submitted its opinion to the court, which supported upholding the original decision, given that no reason had been cited for ordering the company to pay pain and suffering damages. Moreover, just as the judge had done, the Public Prosecutor’s Office determined that the mere recall of products does not trigger any obligation to indemnify any party. On November 4, 2008, the panel of three appellate judges unanimously upheld the lower court’s decision. On November 18, 2008, IBEDEC filed a special appeal and on January 5, 2009 Mattel do Brasil filed its response. On February 2, 2009, the special appeal lodged by IBEDEC was rejected. In February, 2009, IBEDEC filed a new interlocutory appeal, and on March 16, 2009, Mattel do Brasil presented its counter arguments to the IBEDEC interlocutory appeal. On December 7, 2009, the Federal Superior Court (STJ) published a decision denying IBEDEC’s appeal. Currently Mattel do Brasil is awaiting IBEDEC to file a motion seeking to have some issue in the decision clarified.

On July 9, 2008, the court also rendered a decision concerning the action brought by CPLeg/RJ. The judge rejected the claim for general damages, but Mattel do Brasil was ordered to provide product-exchange outlets in certain locations for replacement of the recalled products, to publish in newspapers the provisions of the court decision, and to make available on its website the addresses of the outlets for replacement of recalled products and the provisions of the court’s decision. The decision also allowed the consumers who were affected by the recall to submit information to the court, so that the applicability of pecuniary damages can be analyzed

later, on a case by case basis. It finally ordered Mattel do Brasil to pay attorneys’ fees in an amount equal to 10% of the value placed on the claim (with a value placed on the claim of approximately $12,500). Mattel do Brasil filed a motion seeking to resolve apparent discrepancies in the court’s decision, but the judge sustained the decision, as rendered, and Mattel do Brasil filed its appeal of such decision. On September 19, 2008, the appeals court accepted Mattel’s appeal for purposes of remand, only, and not to stay the proceedings. Seeking to prevent execution on the judgment, Mattel do Brasil filed an interlocutory appeal and requested the court grant a preliminary injunction. On October 14, 2008 the injunction was granted. On February 5, 2009, the court heard the interlocutory appeal and confirmed the injunction. On September 1, 2009, the appeals court in Rio de Janeiro unanimously reversed the judgment issued by the lower court. Therefore, Mattel do Brasil is not required to establish outlets in each city of the State of Rio de Janeiro for purposes of further conducting the magnet and lead recalls. Mattel do Brasil expects Codecon to present a special appeal.

Since August 20, 2007, the Department of Consumer Protection and Defense (“DPDC”), the Consumer Protection Office (“PROCON”) of São Paulo, Mato Grosso and Rio de Janeiro, and public prosecutors from the States of Pernambuco, Rio Grande do Norte, and Rio de Janeiro have brought eight administrative proceedings against Mattel do Brasil, alleging that the company offered products whose risks to consumers’ health and safety should have been known by Mattel. The proceedings have been filed with the following administrative courts:

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(a) DPDC (DPDC v. Mattel do Brasil Ltda., filed on August 20, 2007, and DPDC v. Mattel do Brasil Ltda., filed on September 14, 2007); (b) PROCON (PROCON/MT v. Mattel do Brasil, filed on August 29, 2007, PROCON/SP v. Mattel do Brasil, filed on September 4, 2007, and PROCON/RJ v. Mattel do Brasil, filed on August 27, 2007); and (c) the Public Prosecutor’s Office (MP/RJ v. Mattel do Brasil, filed on September 27, 2007, MP/PE v. Mattel do Brasil, filed on September 28, 2007, and MP/RN v. Mattel do Brasil, filed on October 10, 2007). The administrative proceedings generally state claims based on the alleged negligence of Mattel do Brasil regarding recalled products. In the PROCON/SP proceeding, plaintiff estimated a fine equivalent to approximately $400,000. None of the other administrative proceedings listed above specify the amount of the penalties that could be applied if the claims against Mattel do Brasil are successful. On December 21, 2007, PROCON/SP rendered a decision and decided to impose a fine on Mattel do Brasil in the approximate amount of $200,000. On January 9, 2008, Mattel do Brasil filed an administrative appeal regarding the decision of December 21, 2007. On January 29, 2009, the administrative appeal was not granted and as a consequence Mattel do Brasil decided to pursue further adjudication of this matter in the Brazilian courts.

All of the actions in Brazil are progressing and are at various stages of adjudication as described above.

Licensee Drop-Side Crib Litigation in Canada

In late November 2009, five proposed class actions were filed in provincial superior courts in five different Canadian provinces against Fisher-Price, Inc. and Fisher-Price Canada Inc. alleging claims based on alleged manufacturing defects in drop-side cribs manufactured by Stork Craft Manufacturing Inc. (“Stork Craft”) between 1993 and 2009, including Fisher-Price branded drop-side cribs manufactured and sold by Stork Craft pursuant to a License Agreement with Fisher-Price, Inc. These claims follow product recalls of Stork Craft-manufactured drop-side cribs in the United States and Canada. Stork Craft and the corporate entities of a number of retailers, including Wal-Mart, Sears, The Bay and Toys R’ Us, also have been named as defendants in the proposed class actions. The five proposed class actions are: Cedar Dodd v. Stork Craft Manufacturing Inc. et al., filed in the Supreme Court of British Columbia on November 24, 2009, Victoria Registry, Action No. 09 5327; Amy St. Pierre et al. v. Fisher-Price Canada Inc., et al., filed in the Court of Queen’s Bench of Alberta on November 24, 2009, Judicial District of Calgary, Action No. 0901-17700; Kim Riel v. Stork Craft Manufacturing Inc. et al., filed in the Court of Queen’s Bench of Saskatchewan, on November 25, 2009, Judicial Centre of Regina, Q.B. No. 1794 of 2009; Tara Russell v. Stork Craft Manufacturing Inc. et al., filed in the Court of Queen’s Bench of Manitoba, on November 25, 2009, Winnipeg Centre, File No. C1 09-01-63980; and David Duong et al. v. Stork Craft Manufacturing Inc. et al., filed in the Ontario Superior Court of Justice on November 25, 2009, in Ottawa, Court File No. 09-46962.

The five proposed class actions are all brought by the same plaintiff’s law firm and the allegations are essentially the same. Each of the proposed class actions is based on allegation that the drop-side mechanisms used in the Stork Craft cribs are dangerously defective in that they create a risk that infants will be injured as result falling from or becoming entrapped in the crib. The claims are based in negligence, waiver of tort and breach of provincial sale of goods and consumer protection legislation. The claims seek damages for personal injury and economic loss, including recovery of the purchase price paid for the cribs, as well as an accounting, disgorgement or restitution of revenue earned by the defendants from selling the cribs. The claims further seek exemplary, aggravated and punitive damages. No amount of damages is specified in any of the claims, except the Ontario claim which seeks Canadian dollar $1 million in general damages and Canadian dollar $1 million in special damages. Each of the proposed class actions seeks certification on behalf of a class consisting of all persons (except defendants) that owned or purchased the drop-side cribs in question. No motion for certification has yet been filed in any of the actions.

The License Agreement between Fisher-Price and Stork Craft includes an indemnity clause whereby Stork Craft agreed to indemnify Fisher-Price in respect of claims against Fisher-Price relating to Stork Craft manufactured products. While Mattel intends for Fisher-Price to seek indemnity from Stork Craft to cover all costs related to these claims, there can be no assurance that Fisher-Price ultimately would be successful in obtaining full indemnity from Stork Craft.

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None of the claims in the five proposed class actions has been served on Fisher-Price and all of the proposed class actions are at a preliminary stage.

Note 15—Segment Information

Description of Segments

Mattel’s operating segments are separately managed business units and are divided on a geographic basis between domestic and international. Mattel’s domestic operating segments include:

Mattel Girls & Boys Brands—including Barbie^® fashion dolls and accessories (“Barbie^®”), Polly Pocket^®, Little Mommy^®, Disney Classics^®, and High School Musical^® (collectively “Other Girls Brands”), Hot Wheels^®, Matchbox^®, Battle Force 5™, Speed Racer^®, and Tyco R/C^® vehicles and play sets (collectively “Wheels”), and CARS™, Radica^®, Toy Story^®, Max Steel^®, Speed Racer^®, Batman^®, and Kung Fu Panda^® products, and games and puzzles (collectively “Entertainment”).

Fisher-Price Brands—including Fisher-Price^®, Little People^®, BabyGear™, and View-Master^® (collectively “Core Fisher-Price^®”), Sesame Street^® , Dora the Explorer^®, Go Diego Go!^®, and See ‘N Say^® (collectively “Fisher-Price^® Friends”), and Power Wheels^® .

American Girl Brands—including Just Like You^®, the historical collection, and Bitty Baby^®. American Girl Brands products are sold directly to consumers via its catalogue, website, and proprietary retail stores. Its children’s publications are also sold to certain retailers.

Additionally, the International segment sells products in all toy categories, except American Girl Brands.

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Segment Data

The following tables present information about revenues, income, and assets by segment. Mattel does not include sales adjustments such as trade discounts and other allowances in the calculation of segment revenues (referred to as “gross sales”). Mattel records these adjustments in its financial accounting systems at the time of sale to each customer, but the adjustments are not allocated to individual products. For this reason, Mattel’s chief operating decision maker uses gross sales by segment as one of the metrics to measure segment performance. Such sales adjustments are included in the determination of segment income from operations based on the adjustments recorded in the financial accounting systems. Segment income from operations represents operating income, while consolidated income from operations represents income from operations before income taxes as reported in the consolidated statements of operations. The corporate and other category includes costs not allocated to individual segments, including charges related to incentive compensation, share-based payments, and corporate headquarters functions managed on a worldwide basis, and the impact of changes in foreign currency rates on intercompany transactions.

	For the Year
	2009			2008			2007
	(In thousands)
Revenues
Domestic:
Mattel Girls & Boys Brands US	$	1,402,224		$	1,437,933		$	1,445,028
Fisher-Price Brands US		1,310,886			1,418,213			1,511,055
American Girl Brands		462,899			463,056			431,510
Total Domestic		3,176,009			3,319,202			3,387,593
International		2,758,315			3,166,820			3,205,341
Gross sales		5,934,324			6,486,022			6,592,934
Sales adjustments		(503,478	)		(568,020	)		(622,844	)
Net sales	$	5,430,846		$	5,918,002		$	5,970,090
Segment Income
Domestic:
Mattel Girls & Boys Brands US	$	293,366		$	158,170		$	212,181
Fisher-Price Brands US		231,855			161,025			225,533
American Girl Brands		103,446			86,581			98,519
Total Domestic		628,667			405,776			536,233
International		422,505			357,628			420,898
		1,051,172			763,404			957,131
Corporate and other expense (a)		320,004			221,612			227,053
Operating income		731,168			541,792			730,078
Interest expense		71,843			81,944			70,974
Interest (income)		(8,083	)		(25,043	)		(33,305	)
Other non-operating expense (income), net		7,361			(3,073	)		(10,989	)
Income before income taxes	$	660,047		$	487,964		$	703,398

(a) Corporate and other expense includes (i) incentive compensation expense of $96.6 million, $15.4 million, and $83.6 million for 2009, 2008, and 2007, respectively, (ii) $31.5 million, $34.4 million, and $3.0 million of charges related to severance for 2009, 2008, and 2007, respectively, (iii) share-based compensation expense of $50.0 million, $35.8 million, and $22.2 million for 2009, 2008, and 2007, respectively, (iv) charges for legal settlements of product liability-related claims amounting to $21.4 million and $15.3 million for 2009 and 2008, respectively, and (v) legal fees associated with the product recall-related litigation and MGA litigation matters.

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	For the Year
	2009		2008		2007
	(In thousands)
Depreciation/Amortization
Domestic:
Mattel Girls & Boys Brands US	$	38,804	$	42,848	$	47,202
Fisher-Price Brands US		27,632		31,899		33,998
American Girl Brands		13,032		17,507		12,599
Total Domestic		79,468		92,254		93,799
International		64,908		54,685		54,393
		144,376		146,939		148,192
Corporate and other		25,454		25,156		23,888
Depreciation and amortization	$	169,830	$	172,095	$	172,080

Segment assets are comprised of accounts receivable and inventories, net of applicable reserves and allowances.

	December 31,
	2009		2008
	(In thousands)
Assets
Domestic:
Mattel Girls & Boys Brands US	$	178,822	$	249,013
Fisher-Price Brands US		145,771		198,241
American Girl Brands		59,466		62,718
Total Domestic		384,059		509,972
International		681,868		755,735
		1,065,927		1,265,707
Corporate and other		39,071		93,760
Accounts receivable and inventories, net	$	1,104,998	$	1,359,467

Mattel sells a broad variety of toy products, which are grouped into three major categories: Mattel Girls & Boys Brands, Fisher-Price Brands, and American Girl Brands. The table below presents worldwide revenues by category:

	For the Year
	2009			2008			2007
	(In thousands)
Worldwide Revenues
Mattel Girls & Boys Brands	$	3,286,335		$	3,642,834		$	3,699,997
Fisher-Price Brands		2,168,161			2,356,570			2,441,760
American Girl Brands		462,899			463,056			431,271
Other		16,929			23,562			19,906
Gross sales		5,934,324			6,486,022			6,592,934
Sales adjustments		(503,478	)		(568,020	)		(622,844	)
Net sales	$	5,430,846		$	5,918,002		$	5,970,090

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Geographic Information

The tables below present information by geographic area. Revenues are attributed to countries based on location of customer. Long-lived assets principally include goodwill, property, plant, and equipment, net, and identifiable intangibles, net.

	For the Year
	2009			2008			2007
	(In thousands)
Revenues
United States	$	3,176,009		$	3,319,202		$	3,387,593
International:
Europe		1,442,473			1,689,728			1,797,278
Latin America		860,492			978,828			912,088
Asia Pacific		267,392			286,049			275,123
Other		187,958			212,215			220,852
Total International		2,758,315			3,166,820			3,205,341
Gross sales		5,934,324			6,486,022			6,592,934
Sales adjustments		(503,478	)		(568,020	)		(622,844	)
Net sales	$	5,430,846		$	5,918,002		$	5,970,090

	December 31,
	2009		2008
	(In thousands)
Long-Lived Assets
United States	$	1,038,418	$	1,079,720
International		706,278		684,018
Consolidated total	$	1,744,696	$	1,763,738

Major Customers

Sales to Mattel’s three largest customers accounted for 40%, 38%, and 41% of worldwide consolidated net sales for 2009, 2008, and 2007, respectively, as follows:

	For the Year
	2009		2008		2007
	(In billions)
Wal-Mart	$	1.0	$	1.1	$	1.1
Toys “R” Us		0.7		0.7		0.7
Target		0.5		0.5		0.6

The Mattel Girls & Boys Brands US and Fisher-Price Brands US segments sell products to each of Mattel’s three largest customers. The International segment sells products to Wal-Mart and Toys “R” Us. The American Girl Brands segment sells its children’s publications to Wal-Mart and Target.

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Note 16—Supplemental Financial Information

	December 31,
	2009			2008
	(In thousands)
Inventories include the following:
Raw materials and work in process	$	47,991		$	57,311
Finished goods		307,672			428,614
	$	355,663		$	485,925
Property, plant, and equipment, net include the following:
Land	$	26,664		$	26,499
Buildings		242,360			237,561
Machinery and equipment		775,129			758,656
Tools, dies, and molds		577,418			544,789
Capital leases		23,271			23,271
Leasehold improvements		178,218			162,288
		1,823,060			1,753,064
Less: accumulated depreciation		(1,318,252	)		(1,216,902	)
	$	504,808		$	536,162
Other noncurrent assets include the following:
Deferred income taxes	$	481,240		$	524,451
Identifiable intangibles (net of amortization of $69.5 million and $61.8 million in 2009 and 2008, respectively)		93,546			107,447
Nonamortizable identifiable intangibles		122,223			128,382
Other		195,651			175,944
	$	892,660		$	936,224
Accrued liabilities include the following:
Incentive compensation	$	100,200		$	15,442
Royalties		73,467			86,152
Taxes other than income taxes		70,817			39,770
Advertising and promotion		47,913			56,941
Receivable collections due bank		2,748			82,245
Other		322,736			368,833
	$	617,881		$	649,383
Other noncurrent liabilities include the following:
Benefit plan liabilities	$	255,234		$	286,557
Noncurrent tax liabilities		108,600			132,744
Other		124,858			128,629
	$	488,692		$	547,930

	For the Year
	2009			2008			2007
	(In thousands)
Currency transaction (gains)/losses included in:
Operating income	$	(78,732	)	$	(123,972	)	$	(95,921	)
Other non-operating expense (income), net		4,828			(7,736	)		(12,875	)
Net transaction (gains)	$	(73,904	)	$	(131,708	)	$	(108,796	)
Other selling and administrative expenses include the following:
Design and development	$	171,279		$	190,248		$	189,407
Bad debt expense		21,483			19,680			6,203
Identifiable intangible asset amortization		13,027			9,827			9,331

100

Note 17—Quarterly Financial Information (Unaudited)

	First Quarter			Second Quarter		Third Quarter		Fourth Quarter
	(In thousands, except per share amounts)
Year Ended December 31, 2009:
Net sales	$	785,646		$	898,197	$	1,791,875	$	1,955,128
Gross profit		345,872			406,060		918,615		1,044,150
Advertising and promotion expenses		84,064			89,820		197,106		238,763
Other selling and administrative expenses		317,017			283,727		385,055		387,977
Operating (loss) income		(55,209	)		32,513		336,454		417,410
(Loss) income before income taxes		(65,450	)		23,817		304,633		397,047
Net (loss) income (a)		(50,986	)		21,469		229,842		328,379
Net (loss) income per common share—basic	$	(0.14	)	$	0.06	$	0.63	$	0.90
Weighted average number of common shares		358,891			358,824		360,843		361,840
Net (loss) income per common share—diluted	$	(0.14	)	$	0.06	$	0.63	$	0.90
Weighted average number of common and potential common shares		358,891			360,881		361,925		364,565
Dividends declared per common share	$	—		$	—	$	—	$	0.75
Common stock market price:
High	$	16.65		$	16.52	$	19.11	$	20.67
Low		10.45			11.92		15.19		17.95
Year Ended December 31, 2008:
Net sales	$	919,299		$	1,112,431	$	1,946,315	$	1,939,957
Gross profit		396,836			495,334		900,070		892,166
Advertising and promotion expenses		102,961			116,805		223,826		275,567
Other selling and administrative expenses		330,410			347,921		360,895		384,229
Operating (loss) income		(36,535	)		30,608		315,349		232,370
(Loss) income before income taxes		(59,802	)		14,933		307,108		225,725
Net (loss) income (a)		(46,646	)		11,783		238,098		176,401
Net (loss) income per common share—basic	$	(0.13	)	$	0.03	$	0.65	$	0.49
Weighted average number of common shares		361,751			361,262		360,881		358,779
Net (loss) income per common share—diluted	$	(0.13	)	$	0.03	$	0.65	$	0.49
Weighted average number of common and potential common shares		361,751			363,919		361,742		359,490
Dividends declared per common share	$	—		$	—	$	—	$	0.75
Common stock market price:
High	$	21.89		$	21.80	$	21.79	$	18.14
Low		16.65			17.12		16.98		11.42

(a) Net income for the fourth quarter of 2009 included income tax benefits of $28.5 million related to the reassessments of prior years’ tax exposures based on the status of current audits in various jurisdictions around the world and settlements.

101

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of December 31, 2009, Mattel’s disclosure controls and procedures were evaluated to provide reasonable assurance that information required to be disclosed by Mattel in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to management, as appropriate, in a timely manner that would alert them to material information relating to Mattel that would be required to be included in Mattel’s periodic reports and to provide reasonable assurance that such information was recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Based on this evaluation, Robert A. Eckert, Mattel’s principal executive officer, and Kevin M. Farr, Mattel’s principal financial officer, concluded that these disclosure controls and procedures were effective as of December 31, 2009.

Management’s Report on Internal Control over Financial Reporting

The report called for by Item 308(a) of Regulation S-K is incorporated by reference to Management’s Report on Internal Control over Financial Reporting, included in Part II, Item 8. “Financial Statements and Supplementary Data” of this report.

Report of Independent Registered Public Accounting Firm

The report called for by Item 308(b) of Regulation S-K is incorporated by reference to Report of Independent Registered Public Accounting Firm, included in Part II, “Item 8. Financial Statements and Supplementary Data” of this report.

Changes in Internal Control Over Financial Reporting

Mattel continues to implement a conversion to new and upgraded financial and human resources information technology systems that began in the fourth quarter of 2002. Mattel has evaluated the effect on its internal control over financial reporting of this conversion for the three months ended December 31, 2009, and determined that this conversion has not materially affected, and is not reasonably likely to materially affect, Mattel’s internal control over financial reporting. Mattel has not made any significant changes to its internal control over financial reporting or in other factors that could significantly affect these controls subsequent to December 31, 2009.

Item 9B. Other Information.

None.

102

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required under this Item is incorporated herein by reference to sections entitled “Proposal 1 —Election of Directors”; “Section 16(a) Beneficial Ownership Reporting Compliance”; “The Board of Directors and Corporate Governance—Board Committees—Audit Committee”; and “Report of the Audit Committee” in the Mattel 2010 Notice of Annual Meeting of Stockholders and Proxy Statement to be filed with the SEC within 120 days after December 31, 2009 (the “Proxy Statement”). Information with respect to the executive officers of Mattel appears under the heading “Executive Officers of the Registrant” in Part I herein. Mattel has adopted the Mattel Code of Conduct (the “Code of Conduct”), which satisfies the listing rules of the NASDAQ Stock Market (“NASDAQ”) regarding “code of business conduct and ethics” and satisfies the SEC rules regarding disclosure of a “code of ethics” for the Chief Executive Officer, Chief Financial Officer and Controller. The Code of Conduct is publicly available on Mattel’s corporate website at http://www.mattel.com, and the text of the Code of Conduct will be updated on the website to reflect any amendment. A copy may also be obtained free of charge by mailing a request in writing to: Secretary, Mail Stop M1-1516, Mattel, Inc., 333 Continental Blvd., El Segundo, CA 90245-5012. If Mattel grants any waiver from a provision of the Code of Conduct for any executive officer or director, or makes any substantive amendment to the SEC-mandated “code of ethics” that applies to the Chief Executive Officer, Chief Financial Officer or Corporate Controller, Mattel will make disclosures to the extent required by applicable laws, regulations and stock exchange listing standards on its corporate website or in a Current Report on Form 8-K. Mattel has posted the Board of Directors’ corporate governance guidelines and the charters of its Audit, Compensation and Governance and Social Responsibility Committees of the Board of Directors on its corporate website at http://www.mattel.com. Copies of the corporate governance guidelines and committee charters may be obtained free of charge by mailing a request to the address noted above.

Mattel has filed the Sarbanes-Oxley Act Section 302 certifications of its Chief Executive Officer and Chief Financial Officer with the Securities and Exchange Commission, which are attached hereto as Exhibit 31.0 and Exhibit 31.1, respectively.

Item 11. Executive Compensation.

The information required under this Item is incorporated herein by reference to sections entitled “Compensation Disclosures”; “The Board of Directors and Corporate Governance: (1) Board Committees—Compensation Committee”; and (2) “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required under this Item is incorporated herein by reference to sections entitled “Principal Stockholders”; “Security Ownership of Management”; and “Compensation Disclosure” in the Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required under this Item is incorporated herein by reference to sections entitled “Certain Transactions with Related Persons”; and “The Board of Directors and Corporate Governance—Director Independence” in the Proxy Statement.

Item 14. Principal Accountant Fees and Services.

The information required under this Item is incorporated herein by reference to the section entitled “Proposal 3—Ratification of Selection of Independent Registered Public Accounting Firm” in the Proxy Statement.

103

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) The following documents are filed as part of this report:

1. Financial Statements

The following financial statements are filed as part of this report under Item 8 “Financial Statements and Supplementary Data.”

	Page
Management’s Report on Internal Control over Financial Reporting	53
Report of Independent Registered Public Accounting Firm	54
Consolidated Balance Sheets as of December 31, 2009 and 2008	55
Consolidated Statements of Operations for the years ended December 31, 2009, 2008, and 2007	56
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008, and 2007	57
Consolidated Statements of Stockholders’ Equity for the years ended December  31, 2009, 2008, and 2007	58
Notes to Consolidated Financial Statements	59

2. Financial Statement Schedules for the years ended December 31, 2009, 2008 and 2007

Schedule II—Valuation and Qualifying Accounts and Allowances

All other Financial Statement Schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. See Item 8 “Financial Statements and Supplementary Data.”

3. Exhibits (Listed by numbers corresponding to Item 601 of Regulation S-K)

		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit(s)	Filing Date
3.0	Restated Certificate of Incorporation of Mattel	8-K	001-05647	99.0	May 21, 2007
3.1	Amended and Restated Bylaws of Mattel	8-K	001-05647	99.1	May 21, 2007
4.0	Specimen Stock Certificate with respect to Mattel’s Common Stock	10-Q	001-05647	4.0	August 3, 2007
4.1	Indenture, dated as of February 15, 1996, between Mattel and Chase Manhattan Bank and Trust Company, National Association, formerly Chemical Trust Company of California, as Trustee	10-K	001-05647	4.1	March 28, 2002
4.2	Indenture, dated as of February 15, 1996, between Mattel and Chemical Trust Company of California (now known as J. P. Morgan Trust Company, National Association) relating to Senior Debt Securities	S-3ASR	333-134740	4.1	June 5, 2006
4.3	Form of Indenture between Mattel and J. P. Morgan Trust Company, National Association, relating to Subordinated Debt Securities	S-3ASR	333-134740	4.2	June 5, 2006

104

		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit(s)	Filing Date
4.4	Form of 6.125% Notes due June 15, 2011	8-K	001-05647	4.2	June 12, 2006
4.5	Form of Supplemental Indenture between Mattel and The Bank of New York Trust Company, N.A.	8-K	001-05647	1.2	March 7, 2008
4.6	Form of 5.625% Notes due March 15, 2013	8-K	001-05647	1.2	March 7, 2008
10.0	Fourth Amended and Restated Credit Agreement dated as of March 23, 2009, by and among Mattel, Inc., as Borrower, Bank of America, N.A., as Administrative Agent, Banc of America Securities LLC, as Sole Lead Arranger and Sole Book Manager, The Royal Bank of Scotland, Plc, Wells Fargo Bank, N.A. and Société Générale, as Co-Syndication agents, Citicorp USA, Inc., Mizuho Corporate Bank, Ltd. and Merchants & Traders Trust Company, as Co-Managing Agents, and the other financial institutions party thereto	8-K	001-05647	10.1	March 27, 2009
10.1	First Amended and Restated Receivables Purchase Agreement dated as of March 20, 2002 among Mattel Factoring, Inc., as Transferor, Mattel, Inc., as Servicer, Bank of America, N.A., as Administrative Agent, and the financial institutions party thereto	10-K	001-05647	10.1	March 28, 2002
10.2	Amendment No. 1 to First Amended and Restated Receivables Purchase Agreement dated as of March 19, 2004, among Mattel Factoring, Inc., as Transferor, Mattel, Inc., as Servicer, Bank of America, N.A., as Administrative Agent, and the financial institutions party thereto	10-Q	001-05647	99.1	May 7, 2004
10.3	Amendment No. 2 to First Amended and Restated Receivables Purchase Agreement dated as of March 23, 2005, among Mattel Factoring, Inc., as Transferor, Mattel, Inc., as Servicer, Bank of America, N.A., as Administrative Agent, and the financial institutions party thereto	8-K	001-05647	99.1	March 29, 2005
10.4	Amendment No. 3 to First Amended and Restated Receivables Purchase Agreement dated as of March 23, 2009, by and among Mattel Factoring, Inc., as Transferor, Mattel, Inc., as Servicer, Bank of America, N.A., as Administrative Agent, and the financial institutions party thereto	10-Q	001-05647	10.4	April 29, 2009
10.5	Form of Indemnity Agreement between Mattel and certain of its directors	10-K	001-05647	10.9	March 28, 2001
10.6	Executive Employment Agreement dated October 18, 2000 between Mattel and Robert A. Eckert	10-K	001-05647	10.10	March 28, 2001

105

		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit(s)	Filing Date
10.7	Amendment to Executive Employment Agreement between Mattel and Robert A. Eckert dated March 8, 2005	8-K	001-05647	99.7	March 18, 2005
10.8	Letter Agreement between Mattel and Robert A. Eckert entered into on April 4, 2005 regarding the Mattel, Inc. 2005 Supplemental Executive Retirement Plan	8-K	001-05647	99.1	April 8, 2005
10.9	Amendment to Executive Employment Agreement between Mattel and Robert A. Eckert, effective as of December 31, 2008	10-K	001-05647	10.11	February 26, 2009
10.10	Executive Employment Agreement dated January 31, 2000 between Mattel and Neil B. Friedman	10-K	001-05647	10.12	March 10, 2000
10.11	Amendment to Employment Agreement dated November 14, 2000 between Mattel and Neil B. Friedman	10-K	001-05647	10.29	March 28, 2001
10.12	Amendment to Employment Agreement and Stock Option Grant Agreements between Mattel and Neil B. Friedman dated February 10, 2000	10-K	001-05647	10.14	March 10, 2000
10.13	Letter agreement between Mattel and Neil B. Friedman entered into on April 4, 2005 regarding the Mattel, Inc. 2005 Supplemental Executive Retirement Plan	8-K	001-05647	99.5	April 8, 2005
10.14	Consent of Neil B. Friedman to Transfer of Principal Place of Employment Pursuant to Executive Employment Agreement	8-K	001-05647	99.3	March 30, 2007
10.15	Letter agreement between Mattel and Neil B. Friedman dated September 27, 2008 regarding the Mattel, Inc. 2005 Supplemental Executive Retirement Plan	10-K	001-05647	10.17	February 26, 2009
10.16	Amendment to Amended and Restated Executive Employment Agreement between Mattel and Neil B. Friedman, effective as of December 31, 2008	10-K	001-05647	10.18	February 26, 2009
10.17	Notice to Neil B. Friedman dated June 30, 2009 regarding non-renewal of employment agreement	8-K	001-05647	10.2	July 2, 2009
10.18	Amended and Restated Executive Employment Agreement dated March 28, 2000 between Mattel and Kevin M. Farr	10-K	001-05647	10.33	March 28, 2001
10.19	Amendment to Employment Agreement and Stock Option Grant Agreements dated July 20, 2000 between Mattel and Kevin M. Farr	10-K	001-05647	10.34	March 28, 2001
10.20	Amendment to Employment Agreement dated March 6, 2002 between Mattel and Kevin M. Farr	10-K	001-05647	10.30	March 28, 2002

106

		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit(s)	Filing Date
10.21	Letter agreement between Mattel and Kevin M. Farr entered into on April 4, 2005 regarding the Mattel, Inc. 2005 Supplemental Executive Retirement Plan	8-K	001-05647	99.4	April 8, 2005
10.22	Amendment to Amended and Restated Executive Employment Agreement between Mattel and Kevin M. Farr, effective as of December 31, 2008	10-K	001-05647	10.23	February 26, 2009
10.23	Notice to Kevin M. Farr dated June 30, 2009 regarding non-renewal of employment agreement	8-K	001-05647	10.1	July 2, 2009
10.24	Letter agreement between Mattel and Kevin M. Farr dated June 30, 2009 regarding Mr. Farr’s participation in the Mattel, Inc. Executive Severance Plan	8-K	001-05647	10.5	July 2, 2009
10.25	Executive Employment Agreement dated November 13, 2000 between Mattel and Thomas A. Debrowski	10-K	001-05647	10.24	March 8, 2005
10.26	Letter agreement between Mattel and Thomas A. Debrowski entered into on April 4, 2005 regarding the Mattel, Inc. 2005 Supplemental Executive Retirement Plan	8-K	001-05647	99.3	April 8, 2005
10.27	Letter agreement between Mattel and Thomas A. Debrowski dated October 11, 2005, entered into October 12, 2005, amending Mr. Debrowski’s employment agreement	8-K	001-05647	99.2	October 14, 2005
10.28	Amendment to Amended and Restated Executive Employment Agreement between Mattel and Thomas A. Debrowski, effective as of December 31, 2008	10-K	001-05647	10.27	February 26, 2009
10.29	Notice to Thomas A. Debrowski dated June 30, 2009 regarding non-renewal of employment agreement	8-K	001-05647	10.3	July 2, 2009
10.30	Letter agreement between Mattel and Thomas A. Debrowski dated June 30, 2009 regarding Mr. Debrowski’s participation in the Mattel, Inc. Executive Severance Plan	8-K	001-05647	10.6	July 2, 2009
10.31	Employment letter dated August 22, 2000 between Mattel and Bryan G. Stockton	10-K	001-05647	10.25	March 12, 2004
10.32	Letter agreement between Mattel and Bryan G. Stockton entered into on March 28, 2005, regarding the Mattel, Inc. 2005 Supplemental Executive Retirement Plan	10-K	001-05647	10.31	February 27, 2006
10.33	Amendment to Employment Letter, dated December 16, 2008, between Mattel and Bryan G. Stockton	10-K	001-05647	10.30	February 26, 2009

107

			Incorporated by Reference
Exhibit No.		Exhibit Description	Form	File No.	Exhibit(s)	Filing Date
10.34		Letter agreement between Mattel and Bryan G. Stockton dated June 30, 2009 regarding Mr. Stockton’s participation in the Mattel, Inc. Executive Severance Plan	8-K	001-05647	10.7	July 2, 2009
10.35		Mattel Incentive Plan	DEF 14A	001-05647	Appendix E	April 12, 2007
10.36		Amendment No. 1 to the Mattel Incentive Plan	10-K	001-05647	10.32	February 26, 2009
10.37		Mattel, Inc. Deferred Compensation and PIP Excess Plan	S-8	333-89458	4.1	May 31, 2002
10.38		Mattel, Inc. Deferred Compensation and PIP Excess Plan (Post-2004)	10-Q	001-05647	10.1	October 24, 2008
10.39		Mattel, Inc. Deferred Compensation Plan for Non-Employee Directors (as amended and restated effective January 1, 2009)	10-K	001-05647	10.35	February 26, 2009
10.40		Mattel, Inc. 2005 Supplemental Executive Retirement Plan (as amended and restated effective January 1, 2009)	10-K	001-05647	10.36	February 26, 2009
10.41		Mattel, Inc. Executive Severance Plan	8-K	001-05647	10.4	July 2, 2009
10.42		The Fisher-Price Section 415 Excess Benefit Plan	10-K	001-05647	10.42	February 26, 2008
10.43		The Fisher-Price Excess Benefit Plan, as amended and restated effective January 1, 2009	10-K	001-05647	10.46	February 26, 2009
10.44		Mattel, Inc. Personal Investment Plan, January 1, 2006 Restatement	10-K	001-05647	10.50	February 26, 2007
10.45		Mattel, Inc. Personal Investment Plan, First Amendment to the January 1, 2006 Restatement	10-K	001-05647	10.48	February 26, 2009
10.46	*	Mattel, Inc. Hourly Personal Investment Plan, as amended and restated effective January 1, 2006 (the “HPIP”)
10.47	*	HPIP First Amendment to the January 1, 2006 Restatement
10.48	*	HPIP Remedial Amendment to the January 1, 2006 Restatement
10.49	*	HPIP Second Amendment to the January 1, 2006 Restatement
10.50	*	HPIP Third Amendment to the January 1, 2006 Restatement
10.51		Amended and Restated Mattel, Inc. 1996 Stock Option Plan (the “1996 Plan”)	10-K	001-05647	10.58	March 28, 2002

108

		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit(s)	Filing Date
10.52	Amendment to the 1996 Plan	S-8	333-75145	4.2	March 26, 1999
10.53	Amendment No. 2 to the 1996 Plan	10-K	001-05647	10.42	March 10, 2000
10.54	Amendment No. 3 to the 1996 Plan	10-Q	001-05647	99.1	May 3, 2000
10.55	Amendment No. 4 to the 1996 Plan	10-K	001-05647	10.68	March 28, 2001
10.56	Amendment No. 5 to the 1996 Plan	10-Q	001-05647	99.1	October 26, 2001
10.57	Amendment to the 1996 Plan	10-K	001-05647	10.64	March 28, 2002
10.58	Amendment No. 6 to the 1996 Plan	10-Q	001-05647	99.0	August 9, 2002
10.59	Amendment No. 7 to the 1996 Plan	10-Q	001-05647	99.0	November 12, 2002
10.60	Form of Option Grant Agreement for Outside Directors (Initial Grant) under the 1996 Plan, as amended	10-Q	001-05647	99.1	August 14, 2003
10.61	Form of Option Grant Agreement for Outside Directors (Annual Grant) under the 1996 Plan, as amended	10-Q	001-05647	99.2	August 14, 2003
10.62	Form of Option Grant Agreement (Three Year Vesting) under the 1996 Plan, as amended	10-Q	001-05647	99.3	August 14, 2003
10.63	Mattel, Inc. 1997 Premium Price Stock Option Plan (the “1997 Plan”)	DEF 14A	001-05647	A	March 26, 1998
10.64	First Amendment to the 1997 Plan	10-Q	001-05647	10.00	July 21, 1998
10.65	Second Amendment to the 1997 Plan	10-K	001-05647	10.26	March 31, 1999
10.66	Amendment No. 3 to the 1997 Plan	10-K	001-05647	10.48	March 10, 2000
10.67	Amendment No. 4 to the 1997 Plan	10-K	001-05647	10.75	March 28, 2001
10.68	Amendment No. 5 to the 1997 Plan	10-Q	001-05647	99.1	August 9, 2002
10.69	Form of Option and TLSAR Agreement under the 1997 Plan (25% Premium Grant), as amended	10-Q	001-05647	10.1	July 21, 1998
10.70	Form of Option and TLSAR Agreement under the 1997 Plan (33 1/ 3% Premium Grant), as amended	10-Q	001-05647	10.2	July 21, 1998
10.71	Mattel 1999 Stock Option Plan (the “1999 Plan”)	10-K	001-05647	10.51	March 10, 2000
10.72	Amendment No. 1 to the 1999 Plan	10-Q	001-05647	99.2	May 3, 2000
10.73	Amendment No. 2 to the 1999 Plan	10-K	001-05647	10.80	March 28, 2001
10.74	Amendment No. 3 to the 1999 Plan	10-Q	001-05647	99.2	August 9, 2002
10.75	Form of Option Grant Agreement (Three Year Vesting) under the 1999 Plan, as amended	10-K	001-05647	10.77	March 12, 2004
10.76	Mattel, Inc. 2005 Equity Compensation Plan (the “2005 Plan”)	DEF 14A	001-05647	Appendix C	April 13, 2005
10.77	Amendment No. 1 to the 2005 Plan	10-K	001-05647	10.76	February 26, 2009
10.78	Amendment No. 2 to the 2005 Plan	10-Q	001-05647	10.1	April 29, 2009

109

		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit(s)	Filing Date
10.79	Form of Grant Agreement as of August 1, 2005 for grants to employees of Non-Qualified Stock Options (“NQSOs”) under the 2005 Plan	8-K	001-05647	99.1	August 5, 2005
10.80	Form of Grant Agreement as of August 1, 2006 for grants to employees of NQSOs under the 2005 Plan	8-K	001-05647	99.0	August 4, 2006
10.81	Form of Grant Agreement as of May 17, 2007 for grants to employees of NQSOs under the 2005 Plan	8-K	001-05647	99.0	May 18, 2007
10.82	Form of Grant Agreement as of May 17, 2007 for grants to employees of RSUs under the 2005 Plan	8-K	001-05647	99.1	May 18, 2007
10.83	Form of Grant Agreement for Long-Term Incentive Program Performance-Based Restricted Stock Units for Senior Executives under the Mattel, Inc. 2005 Equity Compensation Plan – for Messrs. Eckert, Debrowski, Farr, Friedman, and certain other LTIP award recipients with employment agreements	10-Q	001-05647	10.1	April 25, 2008
10.84	Form of Grant Agreement for Long-Term Incentive Program Performance-Based Restricted Stock Units for Senior Executives under the Mattel, Inc. 2005 Equity Compensation Plan – for Mr. Stockton and other LTIP award recipients	10-Q	001-05647	10.2	April 25, 2008
10.85	Form of Grant Agreement for August 1, 2005 grant to Robert A. Eckert of NQSOs under the 2005 Plan	8-K	001-05647	99.2	August 5, 2005
10.86	Form of Grant Agreement for August 1, 2006 and August 1, 2007 grants to Robert A. Eckert of NQSOs under the 2005 Plan	8-K	001-05647	99.1	August 4, 2006
10.87	Form of Grant Agreement for August 1, 2007 grant to Robert A. Eckert of RSUs under the 2005 Plan	8-K	001-05647	99.5	May 18, 2007
10.88	Form of Grant Agreement for August 1, 2005 grant to Thomas A. Debrowski of NQSOs under the 2005 Plan	8-K	001-05647	99.4	August 5, 2005
10.89	Form of Grant Agreement for August 1, 2006 grant to Thomas A. Debrowski of NQSOs under the 2005 Plan	8-K	001-05647	99.2	August 4, 2006
10.90	Form of Grant Agreement for August 1, 2007 grant to Thomas A. Debrowski of NQSOs under the 2005 Plan	8-K	001-05647	99.4	May 18, 2007
10.91	Form of Grant Agreement for August 1, 2005 grant to Kevin M. Farr of NQSOs under the 2005 Plan	8-K	001-05647	99.5	August 5, 2005
10.92	Form of Grant Agreement for August 1, 2006 grant to Kevin M. Farr of NQSOs under the 2005 Plan	8-K	001-05647	99.3	August 4, 2006
10.93	Form of Grant Agreement for August 1, 2007 grant to Kevin M. Farr of NQSOs under the 2005 Plan	8-K	001-05647	99.3	May 18, 2007
10.94	Form of Grant Agreement for August 1, 2005 grant to Neil B. Friedman of NQSOs under the 2005 Plan	8-K	001-05647	99.6	August 5, 2005

110

			Incorporated by Reference
Exhibit No.		Exhibit Description	Form	File No.	Exhibit(s)	Filing Date
10.95		Form of Grant Agreement for August 1, 2006 grant to Neil B. Friedman of NQSOs under the 2005 Plan	8-K	001-05647	99.4	August 4, 2006
10.96		Form of Grant Agreement for August 1, 2007 grant to Neil B. Friedman of NQSOs under the 2005 Plan	8-K	001-05647	99.2	May 18, 2007
10.97		Form of Grant Agreement as of March 16, 2006 for Initial Grant to Outside Director of NQSOs under the 2005 Plan	8-K	001-05647	99.1	March 17, 2006
10.98		Form of Grant Agreement as of May 17, 2007 for Initial Grant to Outside Director of NQSOs under the 2005 Plan	8-K	001-05647	99.6	May 18, 2007
10.99		Form of Grant Agreement as of May 17, 2007 for Initial Grant to Outside Director of RSUs under the 2005 Plan	8-K	001-05647	99.7	May 18, 2007
10.100		Form of Grant Agreement for May 19, 2005 Annual Grants to Outside Directors of NQSOs under the 2005 Plan	10-Q	001-05647	99.0	August 3, 2005
10.101		Form of Grant Agreement for May 11, 2006 Annual Grants to Outside Directors of NQSOs under the 2005 Plan	8-K	001-05647	99.1	May 12, 2006
10.102		Form of Grant Agreement for May 18, 2007 Annual Grants to Outside Directors of NQSOs under the 2005 Plan	8-K	001-05647	99.8	May 18, 2007
10.103		Form of Grant Agreement for May 18, 2007 Annual Grants to Outside Directors of RSUs under the 2005 Plan	8-K	001-05647	99.9	May 18, 2007
10.104		Form of Grant Agreement for May 13, 2009 Annual Grants to Outside Directors of RSUs under the 2005 Plan	10-Q	001-05647	10.2	April 29, 2009
10.105		Form of Grant Agreement for Special Retention Award of RSUs under the 2005 Plan	10-Q	001-05647	10.1	October 28, 2009
10.106		Mattel, Inc. Key Executive Life Insurance Plan (for Robert A. Eckert)	10-K	001-05647	10.109	February 26, 2007
10.107	*	Mattel, Inc. Summary of Compensation of the Non-Employee Members of the Board of Directors
11.0	*	Computation of Income per Common and Potential Common Share
12.0	*	Computation of Earnings to Fixed Charges
21.0	*	Subsidiaries of the Registrant as of December 31, 2009

111

			Incorporated by Reference
Exhibit No.		Exhibit Description	Form	File No.	Exhibit(s)	Filing Date
23.0	*	Consent of Independent Registered Public Accounting Firm
24.0	*	Power of Attorney (on page 113 of Form 10-K)
31.0	*	Certification of Principal Executive Officer dated February 24, 2010 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.1	*	Certification of Principal Financial Officer dated February 24, 2010 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.0	**	Certification of Principal Executive Officer and Principal Financial Officer dated February 24, 2010, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
101.0	**	The following materials from Mattel, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2009, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Stockholders’ Equity, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text

* Filed herewith.

** Furnished herewith.

(1) This exhibit should not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.

Mattel has not filed certain long-term debt instruments under which the principal amount of securities authorized to be issued does not exceed 10% of its total assets. Copies of such agreements will be provided to the SEC upon request.

(b) Exhibits Required by Item 601 of Regulation S-K

See Item (3) above.

(c) Financial Statement Schedule

See Item (2) above.

Copies of this Annual Report on Form 10-K (including Exhibit 24.0) and Exhibits 11.0, 12.0, 21.0, 23.0, 31.0, 31.1 and 32.0 are available to stockholders of Mattel without charge. Copies of other exhibits can be obtained by stockholders of Mattel upon payment of twelve cents per page for such exhibits. Written requests should be sent to: Secretary, Mail Stop M1-1516, Mattel, Inc., 333 Continental Blvd., El Segundo, California 90245-5012.

112

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MATTEL, INC. Registrant
By:	/s/    KEVIN M. FARR
	Kevin M. Farr Chief Financial Officer

Date: February 24, 2010

POWER OF ATTORNEY

We, the undersigned directors and officers of Mattel, Inc. do hereby severally constitute and appoint Robert A. Eckert, Robert Normile, Andrew Paalborg, and Tully M. Friedman, and each of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or any of them, may deem necessary or advisable to enable said Corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically, but without limitation, power and authority to sign for us or any of us, in our names in the capacities indicated below, any and all amendments hereto; and we do each hereby ratify and confirm all that said attorneys and agents, or any one of them, shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/    ROBERT A. ECKERT         Robert A. Eckert	Chairman of the Board and Chief Executive Officer (principal executive officer)	February 24, 2010
/s/    KEVIN M. FARR         Kevin M. Farr	Chief Financial Officer (principal financial officer)	February 24, 2010
/s/    H. SCOTT TOPHAM         H. Scott Topham	Senior Vice President and Corporate Controller (principal accounting officer)	February 24, 2010
/s/    MICHAEL J. DOLAN         Michael J. Dolan	Director	February 24, 2010
/s/    DR. FRANCES D. FERGUSSON         Dr. Frances D. Fergusson	Director	February 24, 2010

113

Signature	Title	Date
/s/    TULLY M. FRIEDMAN         Tully M. Friedman	Director	February 24, 2010
/s/    DOMINIC NG         Dominic Ng	Director	February 24, 2010
/s/    VASANT M. PRABHU         Vasant M. Prabhu	Director	February 24, 2010
/s/    ANDREA L. RICH         Andrea L. Rich	Director	February 24, 2010
/s/    RONALD L. SARGENT         Ronald L. Sargent	Director	February 24, 2010
/s/    DEAN A. SCARBOROUGH         Dean A. Scarborough	Director	February 24, 2010
/s/    CHRISTOPHER A. SINCLAIR         Christopher A. Sinclair	Director	February 24, 2010
/s/    G. CRAIG SULLIVAN         G. Craig Sullivan	Director	February 24, 2010
/s/    KATHY BRITTAIN WHITE         Kathy Brittain White	Director	February 24, 2010

114

SCHEDULE II

MATTEL, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES

	Balance at Beginning of Year		Additions Charged to Operations		Net Deductions			Balance at End of Year
	(In thousands)
Allowance for Doubtful Accounts:
Year ended December 31, 2009	$	25,894	$	21,483	$	(22,847	)(a)	$	24,530
Year ended December 31, 2008		21,464		19,680		(15,250	)(a)		25,894
Year ended December 31, 2007		19,402		6,203		(4,141	)(a)		21,464
Allowance for Inventory Obsolescence:
Year ended December 31, 2009	$	59,124	$	22,579	$	(40,887	)(b)	$	40,816
Year ended December 31, 2008		51,701		52,512		(45,089	)(b)		59,124
Year ended December 31, 2007		43,263		35,327		(26,889	)(b)		51,701
Income Tax Valuation Allowances:
Year ended December 31, 2009	$	150,963	$	280	$	(39,195	)(c)	$	112,048
Year ended December 31, 2008		164,553		848		(14,438	)(c)		150,963
Year ended December 31, 2007		185,459		11,815		(32,721	)(c)		164,553

(a) Includes write-offs, recoveries of previous write-offs, and currency translation adjustments.

(b) Primarily represents relief of previously established reserves resulting from the disposal of related inventory, raw materials, write-downs and currency translation adjustments.

(c) Primarily represents expiration of foreign tax credits and the utilization and write-offs of loss carryforwards.

EX-10.46

Exhibit 10.46

MATTEL, INC.

HOURLY EMPLOYEE PERSONAL INVESTMENT PLAN

Amended and restated effective as of January 1, 2006

TABLE OF CONTENTS

		Page
ARTICLE I GENERAL		1
1.1	Plan Name	1
1.2	Plan Purpose	1
1.3	Effective Date	1
ARTICLE II DEFINITIONS		1
2.1	Accounts	1
2.2	Affiliated Company	2
2.3	After-Tax Contributions	3
2.4	Applicable Appendix	3
2.5	Basic Participant Contributions	3
2.6	Before-Tax Contributions	3
2.7	Beneficiary	3
2.8	Board of Directors	3
2.9	Code	3
2.10	Committee	4
2.11	Company	4
2.12	Company Contributions	4
2.13	Company Matching Contributions	4
2.14	Company Stock	4
2.15	Compensation	4
2.16	Covered Group	5
2.17	Deferral Limitation	6
2.18	Distributable Benefit	6
2.19	Effective Date	6
2.20	Eligible Employee	6
2.21	Employee	7
2.22	Employment Commencement Date	8
2.23	Entry Date	8
2.24	ERISA	8
2.25	Governance Committee	8
2.26	Highly Compensated Employee	8
2.27	Hour of Service	11
2.28	Investment Manager	12
2.29	Leased Employee	12
2.30	Normal Retirement	12
2.31	Normal Retirement Date	12
2.32	Participant	12
2.33	Participation Commencement Date	12
2.34	Participating Company	13
2.35	Period of Severance	13

i

2.36	Plan	13
2.37	Plan Administrator	13
2.38	Plan Year	13
2.39	Severance Date	13
2.40	Supplemental Participant Contributions	14
2.41	Total and Permanent Disability	14
2.42	Trust and Trust Fund	14
2.43	Trustee	14
2.44	Valuation Date	14
2.45	Year of Service	14
ARTICLE III ELIGIBILITY AND PARTICIPATION		15
3.1	Eligibility to Participate	15
3.2	Commencement of Participation	16
3.3	Rehired Employees	16
ARTICLE IV TRUST FUND		17
4.1	Trust Fund	17
ARTICLE V EMPLOYEE CONTRIBUTIONS		17
5.1	Employee Contributions	17
5.2	Amount Subject to Election	18
5.3	Termination of, Change in Rate of, or Resumption of Deferrals	19
5.4	Limitation on Before-Tax Contributions by Highly Compensated Employees	19
5.5	Provisions for Disposition of Excess Before-Tax Contributions by Highly Compensated Employees	22
5.6	Provisions for Return of Annual Before-Tax Contributions in Excess of the Deferral Limitation	24
5.7	Character of Amounts Contributed as Before-Tax Contributions	26
5.8	Rollover Contributions	26
ARTICLE VI COMPANY CONTRIBUTIONS		27
6.1	General	27
6.2	Requirement for Net Profits	28
6.3	Special Limitations on After-Tax Contributions and Company Matching Contributions	28
6.4	Provision for Return of Excess After-Tax Contributions and Company Matching Contributions on Behalf of Highly Compensated Employees	31
6.5	Forfeiture of Company Matching Contributions Attributable to Excess Deferrals or Contributions	33
6.6	Investment and Application of Plan Contributions	33
6.7	Irrevocability	35

ii

6.8	Company, Committee and Trustee Not Responsible for Adequacy of Trust Fund	35
ARTICLE VII PARTICIPANT ACCOUNTS AND ALLOCATIONS		36
7.1	General	36
7.2	Participants’ Accounts	36
7.3	Revaluation of Participants’ Accounts	36
7.4	Treatment of Accounts Following Termination of Employment	36
7.5	Accounting Procedures	37
ARTICLE VIII VESTING; PAYMENT OF PLAN BENEFITS		37
8.1	Vesting	37
8.2	Distribution Upon Retirement	39
8.3	Distribution Upon Death Prior to Termination of Employment	40
8.4	Death After Termination of Employment	41
8.5	Termination of Employment	41
8.6	Withdrawals	43
8.7	Form of Distribution	47
8.8	Election for Direct Rollover of Distributable Benefit to Eligible Retirement Plan	48
8.9	Designation of Beneficiary	50
8.10	Facility of Payment	51
8.11	Requirement of Spousal Consent	51
8.12	Additional Documents	51
8.13	Company Stock Distribution	52
8.14	Valuation of Accounts	52
8.15	Forfeitures; Repayment	54
8.16	Loans	54
8.17	Special Rule for Disabled Employees	56
8.18	Provision for Small Benefits	57
ARTICLE IX OPERATION AND ADMINISTRATION OF THE PLAN		57
9.1	Plan Administration	57
9.2	Committee Powers	58
9.3	Investment Manager	61
9.4	Periodic Review	61
9.5	Committee Procedure	61
9.6	Compensation of Committee	62
9.7	Resignation and Removal of Members	62
9.8	Appointment of Successors	62
9.9	Records	62
9.10	Reliance Upon Documents and Opinions	63
9.11	Requirement of Proof	63
9.12	Reliance on Committee Memorandum	64

iii

9.13	Multiple Fiduciary Capacity	64
9.14	Limitation on Liability	64
9.15	Indemnification	64
9.16	Allocation of Fiduciary Responsibility	65
9.17	Bonding	65
9.18	Prohibition Against Certain Actions	65
9.19	Plan Expenses	66
ARTICLE X SPECIAL PROVISIONS CONCERNING COMPANY STOCK		66
10.1	Securities Transactions	66
10.2	Valuation of Company Securities	67
10.3	Allocation of Stock Dividends and Splits	67
10.4	Reinvestment of Dividends	68
10.5	Voting of Company Stock	68
10.6	Confidentiality Procedures	69
10.7	Securities Law Limitation	69
ARTICLE XI MERGER OF COMPANY; MERGER OF PLAN		69
11.1	Effect of Reorganization or Transfer of Assets	69
11.2	Merger Restriction	69
ARTICLE XII PLAN TERMINATION AND DISCONTINUANCE OF CONTRIBUTIONS		70
12.1	Plan Termination	70
12.2	Discontinuance of Contributions	70
12.3	Rights of Participants	71
12.4	Trustee’s Duties on Termination	71
12.5	Partial Termination	72
12.6	Failure to Contribute	72
ARTICLE XIII APPLICATION FOR BENEFITS		73
13.1	Application for Benefits	73
13.2	Action on Application	73
13.3	Appeals	74
ARTICLE XIV LIMITATIONS ON CONTRIBUTIONS		74
14.1	General Rule	74
14.2	Annual Additions	75
14.3	Other Defined Contribution Plans	75
14.4	Adjustments for Excess Annual Additions	75
14.5	Disposition of Excess Amounts	77
14.6	Affiliated Company	77
ARTICLE XV RESTRICTION ON ALIENATION		77

iv

15.1	General Restrictions Against Alienation	77
15.2	Nonconforming Distributions Under Court Order	78
ARTICLE XVI PLAN AMENDMENTS		79
16.1	Amendments	79
16.2	Retroactive Amendments	80
16.3	Amendment of Vesting Provisions	80
ARTICLE XVII TOP-HEAVY PROVISIONS		81
17.1	Minimum Company Contributions	81
17.2	Top-Heavy Determination	81
17.3	Aggregation	83
ARTICLE XVIII MISCELLANEOUS		84
18.1	No Enlargement of Employee Rights	84
18.2	Mailing of Payments; Lapsed Benefits	84
18.3	Addresses	86
18.4	Notices and Communications	86
18.5	Reporting and Disclosure	86
18.6	Governing Law	86
18.7	Interpretation	87
18.8	Certain Securities Laws Rules	87
18.9	Withholding for Taxes	87
18.10	Limitation on Company: Committee and Trustee Liability	87
18.11	Successors and Assigns	87
18.12	Counterparts	88
18.13	Military Service	88

v

HOURLY EMPLOYEE PERSONAL INVESTMENT PLAN

ARTICLE I

GENERAL

1.1 Plan Name.

This instrument evidences the terms of a tax-qualified retirement plan for the Eligible Employees of Mattel, Inc. and its participating affiliates to be known as the “Mattel, Inc. Hourly Employee Personal Investment Plan” (“Plan”).

1.2 Plan Purpose.

This Plan is intended to qualify under Code Section 401(a) as a profit sharing plan, although contributions may be made to the Plan without regard to profits, and with respect to the portion hereof intended to qualify as a Qualified Cash or Deferred Arrangement, to satisfy the requirements of Code Section 401(k).

The Plan provisions contained in Articles I through XVIII uniformly apply to all covered employees and groups within the Plan. The Appendices specify the applicable individual Plan provisions for each Covered Group which may differ as to eligibility requirements, contribution levels, benefit levels and other unique features attributable to each Covered Group.

1.3 Effective Date.

The original effective date of this Plan is July 1, 1995. This amendment and restatement of the Plan reflects the provisions of the Plan in effect as of January 1, 2006, except as otherwise expressly provided herein.

ARTICLE II

DEFINITIONS

2.1 Accounts.

“Accounts” or “Participant’s Accounts” means the following Plan accounts maintained by the Committee for each Participant as required by Article VII:

(a) “Before-Tax Contributions Account” shall mean the account established and maintained for each Participant under Article VII for purposes of holding

and accounting for amounts held in the Trust Fund which are attributable to Participant Before-Tax Contributions, and any earnings thereon, in accordance with Article V.

(b) “After-Tax Contributions Account” shall mean the account established and maintained for each Participant under Article VII to reflect amounts held in the Trust Fund on behalf of such Participant which are attributable to Participant After-Tax Contributions and any earnings thereon, in accordance with Article V.

(c) “Company Matching Account” shall mean the account established and maintained for each Participant under Article VII for purposes of holding and accounting for amounts held in the Trust Fund which are attributable to Company Matching Contributions, and any earnings thereon, pursuant to Section 6.1(c).

(d) “Company Contributions Account” shall mean the account established and maintained for each Participant under Article VII for purposes of holding and accounting for amounts held in the Trust Fund which are attributable to Company Contributions, and any earnings thereon, pursuant to Section 6.1(a).

(e) “Transfer/Rollover Account” shall mean the account established and maintained for each Participant under Article VII for purposes of holding and accounting for amounts held in the Trust Fund which are attributable to amounts distributed to the Participant from any other plan qualified under Code Section 401(a), or from an Individual Retirement Account attributable to employer contributions under another plan qualified under Code Section 401(a), and any earnings on such amounts, as provided in Section 5.8.

2.2 Affiliated Company.

“Affiliated Company” shall mean:

(a) Any corporation that is included in a controlled group of corporations, within the meaning of Section 414(b) of the Code, that includes the Company,

(b) Any trade or business that is under common control with the Company within the meaning of Section 414(c) of the Code,

(c) Any member of an affiliated service group, within the meaning of Section 414(m) of the Code, that includes the Company, and

2

(d) Any other entity required to be aggregated with the Company pursuant to regulations under Section 414(o) of the Code.

2.3 After-Tax Contributions.

“After-Tax Contributions” shall mean those contributions by a Participant to the Trust Fund in accordance with Article V which do not qualify as Before-Tax Contributions.

2.4 Applicable Appendix.

“Applicable Appendix” shall mean the unique provisions which apply to a specific Covered Group outlined in the Appendices attached hereto and incorporated as part of the Plan.

2.5 Basic Participant Contributions.

“Basic Participant Contributions” shall mean those amounts which a Participant elects to contribute to the Plan in accordance with Article V at the rate of from one percent (1%) to six percent (6%) of the Participant’s Compensation.

2.6 Before-Tax Contributions.

“Before-Tax Contributions” shall mean those amounts contributed to the Plan as a result of a salary or wage reduction election made by the Participant in accordance with Article V, to the extent such contributions qualify for treatment as contributions made under a “qualified cash or deferred arrangement” within the meaning of Section 401(k) of the Code.

2.7 Beneficiary.

“Beneficiary” or “Beneficiaries” shall mean the person or persons last designated by a Participant as set forth in Section 8.9 or, if there is no designated Beneficiary or surviving Beneficiary, the person or persons designated in Section 8.9 to receive the interest of a deceased Participant in such event.

2.8 Board of Directors.

“Board of Directors” shall mean the Board of Directors (or its delegate) of Mattel, Inc. as it may from time to time be constituted.

2.9 Code.

“Code” shall mean the Internal Revenue Code of 1986, as in effect on the date of execution of this Plan document and as thereafter amended from time to time.

3

2.10 Committee.

“Committee” shall mean the Administrative Committee described in Article IX hereof.

2.11 Company.

“Company” shall mean Mattel, Inc., or any successor thereof, if its successor shall adopt this Plan.

2.12 Company Contributions.

“Company Contributions” shall mean amounts paid by a Participating Company into the Trust Fund in accordance with Section 6.1(a).

2.13 Company Matching Contributions.

“Company Matching Contributions” shall mean amounts paid by a Participating Company into the Trust Fund in accordance with Section 6.1(c).

2.14 Company Stock.

“Company Stock” shall mean whichever of the following is applicable:

(a) So long as the Company has only one class of stock, that class of stock.

(b) In the event the Company at any time has more than one class of stock, the class (or classes) of the Company’s stock constituting “employer securities” as that term is defined in Section 409A(l) of the Code.

2.15 Compensation.

(a) “Compensation” shall mean the full salary and wages (including overtime, shift differential, tips and holiday, vacation and sick pay) and other compensation paid by a Participating Company during a Plan Year by reason of services performed by an Employee, including amounts deducted pursuant to authorization by an Employee or pursuant to requirements of law (including amounts of salary or wages deferred in accordance with the provisions of Section 5.1 and which qualify for treatment under Code Section 401(k) or amounts deducted pursuant to Code Section 125, 129 or 132(f)(4)) except as specifically provided to the contrary elsewhere in this Plan. Compensation shall not include any of the following:

(i) Fringe benefits and contributions by the Participating Company to, and benefits under, any employee benefit plan;

4

(ii) Amounts paid or payable by reason of services performed during any period in which an Employee is not a Participant under the Plan;

(iii) Amounts deferred by the Employee pursuant to non-qualified deferred compensation plans, regardless of whether such amounts are includable in the Employee’s gross income for his current taxable year;

(iv) Amounts included in any Employee’s gross income with respect to life insurance as provided by Code Section 79; and

(v) Amounts paid to Employees as “bonuses.”

(b) The term “Compensation,” for purposes of Article XIV of this Plan, shall mean wages as defined in Section 3401(a) and all other payments of compensation to an Employee by the Company (in the course of the Company’s trade or business) for which the Company is required to furnish the Employee a written statement under Code Sections 6041(d), 6051(a)(3) and 6052. Compensation for purposes of this Subsection (b) shall be determined without regard to any rules under Code Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401(a)(2)). The term “Compensation” for purposes of Article XIV of this Plan, shall include any elective deferral (as defined in Code Section 402(g)) and any amount which is contributed or deferred by a Participating Company at the election of the Employee and which is not includible in the gross income of the Employee by reason of Code Section 125 or 132(f)(4).

(c) In the event that this Plan is deemed a Top-Heavy Plan as set forth in Article XVII, the term “Compensation” shall not include amounts excluded by reason of and to the extent provided by any provisions of Article XXII.

(d) Effective for Plan Years commencing on and after January 1, 2002, the “Compensation” of any Employee taken into account under the Plan for any Plan Year shall not exceed $200,000 (or such adjusted amount as may be prescribed for such Plan Year pursuant to Section 401(a)(17) of the Code).

2.16 Covered Group.

“Covered Group” shall mean a specific group of employees identified in an Applicable Appendix as covered under the Plan.

5

2.17 Deferral Limitation.

“Deferral Limitation” shall mean the dollar limitation on the exclusion of elective deferrals from a Participant’s gross income under Section 402(g) of the Code, as in effect with respect to the taxable year of the Participant, or such greater limitation on the exclusion of elective deferrals permitted under Section 5.2(d) and Section 414(v) of the Code, if applicable.

2.18 Distributable Benefit.

“Distributable Benefit” shall mean the vested interest of a Participant in this Plan which is determined and distributable in accordance with the provisions of Article VIII following the termination of the Participant’s employment.

2.19 Effective Date.

“Effective Date” shall mean the commencement date of coverage of the Plan’s provisions with respect to each Covered Group contained in each Applicable Appendix to the Plan.

2.20 Eligible Employee.

“Eligible Employee” shall mean any individual who is a member of a Covered Group and is an Employee employed by a Participating Company, except

(a) any Employee who is covered by a collective bargaining agreement to which a Participating Company is a party if there is evidence that retirement benefits were the subject of good faith bargaining between the Participating Company and the collective bargaining representative, unless the collective bargaining agreement provides for coverage under this Plan,

(b) any Employee who is a Leased Employee;

(c) any Employee who is an intern, toy tester, department aide, associate retail services representative or in the following pay groups: AFL or MAG;

(d) any Employee who is employed outside the United States who has been transferred to the United States for a period of less than twelve (12) months, or

(e) any person who is classified by a Participating Company as being in one or more of the following ineligible categories, even if the Participating Company’s classification is incorrect or the person is otherwise determined to be a common law employee of the Participating Company:

6

(i) Project Employees - persons who the Participating Company classifies as employed to work on discrete projects or creative matters, or the equivalent (such as students or interns), except to the extent the Participating Company, by written notice, elects to extend Plan participation to them;

(ii) Persons Waiving Participation - persons to whom the Participating Company did not extend the opportunity of participating in this Plan, and who, as determined by the Participating Company, agreed to such nonparticipation status;

(iii) Persons Not Classified As Employees for Tax Purposes - persons who the Participating Company does not classify as Employees for federal tax purposes, as evidenced by its failure to withhold employment and income taxes from their compensation, including, without limitation, independent contractors, consultants, persons working for a nonparticipating employer that provides goods or services (including temporary employee services) to the Participating Company, and persons working for an entity for whom the Participating Company provides goods or services;

(iv) Non-Employees Taken into Account for Discrimination Testing or Other Statutory Purposes - persons who are not classified by the Participating Company as its Employees, but who must be taken into account in testing this Plan for discrimination or for other statutory purposes; or

(v) Employees on Terminal Leave - persons who the Participating Company has determined to have permanently ceased to render active services but who it continues to treat as employees for certain purposes, except to the extent the Participating Company, by written notice, elects to extend Plan participation to them.

2.21 Employee.

(a) “Employee” shall mean each person currently employed in any capacity by the Company or Affiliated Company any portion of whose income is subject to withholding of income tax and/or for whom Social Security contributions are made by the Company. The term “Employee” also includes a Leased Employee to the extent required by Code Section 414(n).

(b) Although Eligible Employees are the only class of Employees eligible to participate in this Plan, the term “Employee” is used to refer to persons employed in a non-Eligible Employee capacity as well as Eligible Employee category.

7

Thus, those provisions of this Plan that are not limited to Eligible Employees, such as those relating to Hours of Service, apply to both Eligible and non-Eligible Employees.

2.22 Employment Commencement Date.

“Employment Commencement Date” shall mean each of the following:

(a) The date on which an Employee first performs an Hour of Service in any capacity for the Company or an Affiliated Company with respect to which the Employee is compensated or is entitled to compensation by the Company or the Affiliated Company.

(b) In the case of an Employee who has a one-year Period of Severance and who is subsequently reemployed by the Company or an Affiliated Company, the term “Employment Commencement Date” shall also mean the first day following such one-year Period of Severance on which the Employee performs an Hour of Service for the Company or an Affiliated Company with respect to which he is compensated or entitled to compensation by the Company or Affiliated Company.

2.23 Entry Date.

“Entry Date” shall mean the first day of each month.

2.24 ERISA.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

2.25 Governance Committee. “Governance Committee” means the Governance and Social Responsibility Committee of the Board of Directors.

2.26 Highly Compensated Employee.

(a) “Highly Compensated Employee” shall mean any Employee who performs services for the Company or an Affiliated Company during the Determination Year and who:

(i) was at any time during the Determination Year or the Look Back Year a 5% owner; or

(ii) for the Look Back Year:

(A) received Compensation from the Company or an Affiliated Company in excess of eighty thousand dollars ($80,000)

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(adjusted for any cost-of-living increase as permitted by Section 414(q) of the Code); and

(B) was in the “top paid group.”

The determination of which Employees are Highly Compensated Employees shall be made in accordance with the provisions of Section 414(q) of the Code.

(b) Determination of a Highly Compensated Employee shall be in accordance with the following definitions and special rules:

(i) “Determination Year” means the Plan Year for which the determination of Highly Compensated Employee is being made.

(ii) “Look Back Year” is the twelve (12) month period preceding the Determination Year.

(iii) An Employee shall be treated as a 5% owner for any Determination Year or Look Back Year if at any time during such Year such Employee was a 5% owner (as defined in Section 17.2).

(iv) An Employee is in the “top-paid group” of Employees for any Determination Year or Look Back Year if such Employee is in the group consisting of the top twenty percent (20%) of the Employees when ranked on the basis of Compensation paid during such Year.

(v) In determining whether an Employee is a Highly Compensated Employee for the Plan Year beginning January 1, 1997, this Section 2.26 (as amended effective January 1, 1997) shall be treated as having been in effect for the Plan Year beginning January 1, 1996.

(vi) For purposes of this Section the term “Compensation” means Compensation as defined in Code Section 415(c)(3), as set forth in Section 2.15(b), without regard to the limitations of Section 2.15(d); provided, however, the determination under this Paragraph (vii) shall be made without regard to Code Sections 125, 132(f)(4), 402(a)(8), and 401(h)(1)(B), and in the case of Participant contributions made pursuant to a salary reduction agreement, without regard to Code Section 403(b).

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(vii) For purposes of determining the number of Employees in the “top-paid” group under this Section, the following Employees shall be excluded:

(A) Employees who have not completed six (6) months of service,

(B) Employees who normally work less than 17-1/2 hours per week,

(C) Employees who normally work not more than six (6) months during any Plan Year, and

(D) Employees who have not attained age 21,

(E) Except to the extent provided in Treasury Regulations, Employees who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between Employee representatives and the Company, and

(F) Employees who are nonresident aliens and who receive no earned income (within the meaning of Code Section 911(d)(2) from the Company which constitutes income from sources within the United States (within the meaning of Code Section 861(a)(3)).

The Company may elect to apply Subparagraphs (A) through (D) above by substituting a shorter period of service, smaller number of hours or months, or lower age for the period of service, number of hours or months, or (as the case may be) than as specified in such Subparagraphs.

(viii) A former Employee shall be treated as a Highly Compensated Employee if

(A) such Employee was a Highly Compensated Employee when such Employee incurred a severance, or

(B) such Employee was a Highly Compensated Employee at any time after attaining age fifty-five (55).

(ix) Code Sections 414(b), (c), (m), and (o) shall be applied before the application of this Section. Also, the term “Employee” shall include

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Leased Employees unless such Leased Employee is covered under a “safe harbor” plan of the leasing organization and not covered under a qualified plan of the Affiliated Company.

(c) To the extent permissible under Code Section 414(q), the Committee may determine which Employees shall be categorized as Highly Compensated Employees by applying a simplified method and calendar year election prescribed by the Internal Revenue Service.

2.27 Hour of Service.

(a) “Hour of Service” of an Employee shall mean the following:

(i) Each hour for which the Employee is paid by the Company or an Affiliated Company or entitled to payment for the performance of services as an Employee.

(ii) Each hour in or attributable to a period of time during which the Employee performs no duties (irrespective of whether he has terminated his Employment) due to a vacation, holiday, illness, incapacity (including pregnancy or disability), layoff, jury duty, military duty or a Leave of Absence, for which he is so paid or so entitled to payment, whether direct or indirect. However, no such hours shall be credited to an Employee if such Employee is directly or indirectly paid or entitled to payment for such hours and if such payment or entitlement is made or due under a plan maintained solely for the purpose of complying with applicable workmen’s compensation, unemployment compensation or disability insurance laws or is a payment which solely reimburses the Employee for medical or medically related expenses incurred by him.

(iii) Each hour for which he is entitled to back pay, irrespective of mitigation of damages, whether awarded or agreed to by the Company or an Affiliated Company, provided that such Employee has not previously been credited with an Hour of Service with respect to such hour under paragraphs (i) or (ii) above.

(b) Hours of Service under Subsections (a) (ii) and (a) (iii) shall be calculated in accordance with Department of Labor Regulation 29 C.F.R. § 2530.200b-

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2(b). Hours of Service shall be credited to the appropriate computation period according to the Department of Labor Regulation § 2530.200b-2(c). However, an Employee will not be considered as being entitled to payment until the date when the Company or the Affiliated Company would normally make payment to the Employee for such Hour of Service.

2.28 Investment Manager.

“Investment Manager” means the one or more Investment Managers, if any, that are appointed pursuant to Section 9.3.

2.29 Leased Employee.

“Leased Employee” means any individual who is not an employee of any Affiliated Company but who performs services for an Affiliated Company, where:

(a) such services are provided pursuant to an agreement between the member and any other person (the “leasing organization”);

(b) the individual has performed such services for the Affiliated Company, or for the Affiliated Company and any “related persons” determined under Section 414(n)(6) of the Code, on a substantially full-time basis for a period of at least one (1) year; and

(c) such services are performed under the primary direction or control of the recipient.

2.30 Normal Retirement.

“Normal Retirement” shall mean a Participant’s termination of employment on or after attaining the Plan’s Normal Retirement Date.

2.31 Normal Retirement Date.

“Normal Retirement Date” shall be the Participant’s sixty-fifth birthday.

2.32 Participant.

“Participant” shall mean any Eligible Employee who has satisfied the participation eligibility requirements set forth in Section 3.1 and has begun participation in this Plan in accordance with the provisions of Section 3.2.

2.33 Participation Commencement Date.

“Participation Commencement Date” shall mean the day on which an Employee’s participation in this Plan may commence in accordance with the provisions of Article III.

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2.34 Participating Company.

“Participating Company” shall mean Mattel, Inc., Mattel Sales, Inc., Fisher-Price, Inc., Tyco Toys, Inc., PrintPaks, Inc., American Girl, Inc. and any other Affiliated Company (or similar entity) that has been granted permission by the Board of Directors to participate in this Plan, provided that contributions are being made hereunder for the Employees of such Participating Company. Permission to become a Participating Company shall be granted under such conditions and upon such conditions as the Board of Directors deems appropriate.

2.35 Period of Severance.

“Period of Severance” shall mean the period of time commencing on the Participant’s Severance Date and continuing until the first day, if any, on which the Participant completes one or more Hours of Service following such Severance Date.

2.36 Plan.

“Plan” shall mean the Mattel, Inc. Hourly Employee Personal Investment Plan herein set forth, and as it may be amended from time to time.

2.37 Plan Administrator.

“Plan Administrator” shall mean the administrator of the Plan, within the meaning of Section 3(16)(A) of ERISA. The Plan Administrator shall be Mattel, Inc.

2.38 Plan Year.

“Plan Year” shall mean the fiscal year of the Company which is the twelve consecutive month period ending each December 31.

2.39 Severance Date.

“Severance Date” shall mean the earlier of (a) the date on which an Employee quits, retires, is discharged, or dies; or (b) the first anniversary of the first date of a period in which an Employee remains absent from service (with or without pay) with the Company or an Affiliated Company for any reason other than quit, retirement, discharge or death (such as vacation, holiday, sickness, disability, leave of absence or layoff).

In the case of an Employee who has a maternity or paternity absence described in Code Sections 410(a)(5)(E) and 411(a)(6)(E), the Employee’s Period of Severance will begin on the second anniversary of the date the Employee is first absent for a maternity or paternity leave, provided the Employee does not perform an Hour of Service during such period. The first one-year period of the absence will be included in the Employee’s period of service and the second

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one-year period is neither part of the period of service nor part of the Period of Severance. The Committee may require that the Employee furnish such timely information as the Committee may reasonably require to establish that the absence from work is for such a maternity or paternity absence, and the number of days for which there was such an absence.

2.40 Supplemental Participant Contributions.

“Supplemental Participant Contributions” shall mean those amounts which a Participant elects to contribute to the Plan in accordance with Article V in excess of the Participant’s Basic Participant Contributions.

2.41 Total and Permanent Disability.

An individual shall be considered to be suffering from a Total and Permanent Disability if he has been unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which has lasted for a continuous period of at least 12 months. An individual’s disabled status shall be determined by the Committee, based on such evidence as the Committee determines to be sufficient. The rules of this Section shall be applied by the Committee in accordance with Treasury Regulations, if any, promulgated under Code Section 415 or Code Section 37(e)(3).

2.42 Trust and Trust Fund.

“Trust” or “Trust Fund” shall mean the one or more trusts created for funding purposes under the Plan.

2.43 Trustee.

“Trustee” shall mean the corporation appointed by the Company to act as Trustee of the Trust Fund, or any successor or other corporation acting as a trustee of the Trust Fund.

2.44 Valuation Date.

“Valuation Date” shall mean each day on which the United States financial markets are open for the normal transactions of business.

2.45 Year of Service.

“Year of Service” means three hundred sixty five (365) days included in a period of service recognized under this Section 2.45.

(a) Subject to the succeeding provisions of this Section 2.45, a Participant shall be credited with a period of service equal to the elapsed time between his Employment Commencement Date and his subsequent Severance Date.

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(b) A Participant additionally shall receive credit for a Period of Severance in computing his service hereunder if such Participant completes an Hour of Service prior to the first anniversary of his Severance Date. Except as provided in this Section 2.45(b), a Period of Severance shall not be included in a Participant’s period of service hereunder.

(c) If a Participant who does not have any vested interest in his accounts under the Plan has five (5) consecutive one-year Periods of Severance, any prior period of service shall be disregarded for all purposes of the Plan. Periods of service credited under this Section 2.45 before such five (5) consecutive one-year Periods of Severance shall not include any period or periods of service that are not required to be taken into account under this Section 2.45(c) by reason of any prior Periods of Severance.

(d) The number of a Participant’s Years of Service for vesting shall be determined by reference to each three hundred sixty five day period of service recognized under this Section 2.45, whether or not consecutive.

(e) Notwithstanding any other provision of this Plan, service performed by Employees for employers other than the Company or Affiliated Companies may be taken into account in computing service for any purpose of this Plan to the extent and in the manner determined by resolution of the Administrative Committee in its sole discretion.

(f) Notwithstanding any other provision of this Plan, service performed for an Affiliated Company prior to such entity becoming an Affiliated Company may be taken into account for purposes of computing service for any purpose of this Plan to the extent and in the manner determined by resolution of the Board of Directors of the Company in its sole discretion.

ARTICLE III

ELIGIBILITY AND PARTICIPATION

3.1 Eligibility to Participate.

(a) Each Eligible Employee shall be eligible to become a Participant in the Plan on the later of: (i) the Entry Date coinciding with or next following such Eligible

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Employee’s satisfaction of the age and service requirements specified in the Applicable Appendix; or (ii) the Effective Date specified in the Applicable Appendix.

(b) An Employee who did not become a Participant on the Entry Date coincident with or next following the date on which he satisfied the age and service requirements specified in the Applicable Appendix because he was not then an Eligible Employee shall become a Participant as of the first day on which he or she again becomes an Eligible Employee.

(c) Notwithstanding the preceding rules of this Section 3.1, the actual date upon which an Employee will commence participation will be determined pursuant to the rules of Section 3.2.

3.2 Commencement of Participation.

(a) Each Eligible Employee who had become a Participant in the Plan prior to the Effective Date of this restatement shall participate in the Plan from and after such date to the extent provided in the Plan.

(b) Each Eligible Employee shall be entitled to commence participation in this Plan with respect to Company Contributions, Before-Tax Contributions, Company Matching Contributions and After-Tax Contributions as of the date he becomes an Eligible Employee.

(c) The Committee may prescribe such rules as it deems necessary or appropriate regarding times and procedures for Participants to make elections to contribute a portion of Compensation as provided in Section 5.1.

3.3 Rehired Employees.

(a) A Participant who has a termination of employment after satisfying the age and service requirements specified in the Applicable Appendix and has no vested interest in his Accounts and subsequently becomes an Eligible Employee, shall thereupon be eligible to become a Participant, unless his or her Period of Severance is five years or longer in which case he or she shall be treated as a new Employee.

(b) A Participant who has a termination of employment and has a vested interest in his Accounts and subsequently becomes an Eligible Employee shall thereupon be eligible to become a Participant.

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ARTICLE IV

TRUST FUND

4.1 Trust Fund.

(a) The Company has entered into a Trust Agreement for the establishment of a Trust to hold the assets of the Plan. Simultaneously with the establishment of this Plan the Company shall pay to the Trustee a specified sum of money as its initial contribution to the Trust Fund. The Trustee shall acknowledge receipt of this contribution and shall agree to hold and administer this contribution together with such additional funds and assets that may be subsequently deposited with the Trustee pursuant to the terms of this Plan.

(b) The Trust Fund is authorized to invest in either Company Stock or such other assets as the Committee or the Investment Manager (if applicable) may direct. Participants may direct the investment of the assets in their Accounts in the Trust Fund from among the acceptable investment alternatives which the Committee may from time to time make available. The Committee shall provide Participants with such alternative investment election options and such information regarding the investment alternatives available under the Plan as shall be necessary to comply with the regulations issued by the Department of Labor pursuant to ERISA Section 404(c).

(c) The Committee shall not be required to engage in any transaction, including without limitation, directing the purchase or sale of Company Stock, which it determines in its sole discretion, might tend to subject itself, its members, the Plan, the Company, or any Participant to liability under federal or state securities law.

ARTICLE V

EMPLOYEE CONTRIBUTIONS

5.1 Employee Contributions.

In accordance with rules which the Committee shall prescribe from time to time, each Participant shall be given an opportunity to elect to have a percentage of his or her Compensation contributed to the Plan. A contribution election by a Participant shall remain in

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effect from year to year (notwithstanding salary or wage rate changes) until changed by the Participant. At the election of the Participant, contributions shall be made as Before-Tax Contributions, After-Tax Contributions or a combination thereof.

5.2 Amount Subject to Election.

(a) Subject to the limitations of this Article V, the amount of an individual’s Compensation that may be contributed subject to the election provided in Section 5.1 shall be a whole percentage of the individual’s Compensation, which percentage is not less than one percent (1%) nor more than the percentage specified in the Applicable Appendix.

(b) No Participant shall be permitted to make Before-Tax Contributions in excess of the Deferral Limitation. Any election by a Participant to make Before-Tax Contributions shall be deemed to include an election to automatically substitute After-Tax Contributions for such Before-Tax Contributions, effective for the period starting on the date immediately following the date the Participant’s Before-Tax Contributions for a calendar year equal the Deferral Limitation and ending on the immediately following December 31. In the event a Participant’s Before-Tax Contributions exceed the Deferral Limitation, excess contributions shall be subject to the provisions of Section 5.6.

(c) For purposes of satisfying one of the tests described under Section 5.4 and Section 6.3, the Committee may prescribe such rules as it deems necessary or appropriate regarding the maximum amount that a Participant may elect to contribute and the timing of such an election. These rules may prescribe a maximum percentage of Compensation that may be contributed, or may provide that the maximum percentage of Compensation that a Participant may contribute will be a lower percentage of his Compensation above a certain dollar amount of Compensation than the maximum deferral percentage below that dollar amount of Compensation. These rules shall apply to all individuals eligible to make the election described in Section 5.1, except to the extent that the Committee prescribes special or more stringent rules applicable only to Highly Compensated Employees.

(d) Notwithstanding the foregoing, all Participants who are eligible to make Before-Tax Contributions under this Plan and who have attained age fifty (50)

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before the close of a Plan Year shall be eligible to make catch-up contributions during such Plan Year in accordance with, and subject to the limitations of, Code Section 414(v). Such catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Section 402(g) and 415 of the Code. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Section 401(k)(3), 401(k)(11), 401(k)(12), 410(b) or 416 of the Code, as applicable, by reason of the making of such catch-up contributions.

5.3 Termination of, Change in Rate of, or Resumption of Deferrals.

(a) A Participant may at any time submit a request to the Committee to terminate his contributions made pursuant to this Article V.

(b) A Participant may at any time (but not more frequently than once every two weeks) submit a request to the Committee to alter the rate of, or resume his contributions made pursuant to this Article V.

(c) A request for termination, alteration, or resumption or alteration of the rate of contributions shall be in form satisfactory to the Committee and will be effective as soon as administratively possible. The Committee may require at least thirty (30) days notice prior to commencement of the payroll period for which such change is to be effective.

5.4 Limitation on Before-Tax Contributions by Highly Compensated Employees.

With respect to each Plan Year, Participant Before-Tax Contributions under the Plan for the Plan Year shall not exceed the limitations on contributions on behalf of Highly Compensated Employees under Section 401(k) of the Code, as provided in this Section. In the event that Before-Tax Contributions under this Plan on behalf of Highly Compensated Employees for any Plan Year exceed the limitations of this Section for any reason, such excess contributions and any income allocable thereto shall be returned to the Participant or recharacterized as Participant After-Tax Contributions, as provided in Section 5.5.

(a) The Before-Tax Contributions by a Participant for a Plan Year shall satisfy the Average Deferral Percentage test set forth in (i)(A) below, or the alternative Average Deferral Percentage test set forth in (i)(B) below. To the extent required by regulations under Code Section 401(m), the Before-Tax Contributions by a

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Participant for any Plan Year ending prior to January 1, 2002 also shall satisfy the test identified in (ii) below.

(i) (A) The “Actual Deferral Percentage” for Eligible Employees who are Highly Compensated Employees for a Plan Year shall not be more than the “Actual Deferral Percentage” of all other Eligible Employees for the “Comparison Year” (as hereinafter defined) multiplied by 1.25, or

(i) (B) The excess of the “Actual Deferral Percentage” for Eligible Employees who are Highly Compensated Employees for a Plan Year over the “Actual Deferral Percentage” for all other Eligible Employees for the Comparison Year shall not be more than two (2) percentage points, and the “Actual Deferral Percentage” for Eligible Employees who are Highly Compensated Employees for a Plan Year shall not be more than the “Actual Deferral Percentage” of all other Eligible Employees for the Comparison Year multiplied by 2.00.

(ii) The Average Contribution Percentage for any Plan Year ending prior to January 1, 2002 for Highly Compensated Employees eligible to participate in this Plan and a plan of the Company or an Affiliated Company that is subject to the limitations of Section 401(m) of the Code including, if applicable, this Plan, shall be reduced in accordance with Section 6.4, to the extent necessary to satisfy the requirements of Treasury Regulations Section 1.401(m)-2. The multiple use test described in Treasury Regulations Section 1.401(m)-2 shall not apply for Plan Years beginning after December 31, 2001.

The “Comparison Year” is the Plan Year being tested.

(b) For the purposes of the limitations of this Section 5.4, the following definitions shall apply:

(i) “Actual Deferral Percentage” means, with respect to Eligible Employees who are Highly Compensated Employees and all other Eligible Employees for a Plan Year, the average of the ratios, calculated separately for each Eligible Employee in such group, of the amount of Before-Tax Contributions under the Plan allocated to each Eligible Employee for such Plan Year to such Employee’s “Compensation” for such Plan Year. An Eligible

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Employee’s Before-Tax Contributions may be taken into account for purposes of determining his Actual Deferral Percentage for a particular Plan Year only if such Before-Tax Contributions relate to Compensation that either would have been received by the Eligible Employee in the Plan Year (but for the deferral election), or is attributable to services performed in the Plan Year and would have been received by the Eligible Employee within two and one-half (2 1/2) months after the close of the Plan Year (but for the deferral election), and such Before-Tax Contributions are allocated to the Eligible Employee as of a date within that Plan Year. For purposes of this rule, an Eligible Employee’s Before-Tax Contributions shall be considered allocated as of a date within a Plan Year only if (A) the allocation is not contingent upon the Eligible Employee’s participation in the Plan or performance of services on any date subsequent to that date, and (B) the Before-Tax Contribution is actually paid to the Trust no later than the end of the twelve month period immediately following the Plan Year to which the contribution relates. To the extent determined by the Committee and in accordance with regulations issued by the Secretary of the Treasury, contributions on behalf of an Eligible Employee that satisfy the requirements of Code Section 401(k)(3)(C) (ii) may also be taken into account for the purpose of determining the Actual Deferral Percentage of such Eligible Employee.

(ii) “Compensation” means Compensation determined by the Committee in accordance with the requirements of Section 414(s) of the Code, including, to the extent elected by the Committee, amounts deducted from an Employee’s wages or salary that are excludable from income under Sections 125, 129, 132(f)(4) or 402(e)(3) of the Code.

(c) In the event that as of the last day of a Plan Year this Plan satisfies the requirements of Section 401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans which include arrangements under Code Section 401(k), then this Section 5.4 shall be applied by determining the Actual Deferral Percentages of Eligible Employees as if all such plans were a single plan, in accordance with regulations prescribed by the Secretary of the Treasury under Section 401(k) of the Code.

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(d) For the purposes of this Section, the Actual Deferral Percentage for any Highly Compensated Employee who is a participant under two or more Code Section 401(k) arrangements of the Company or an Affiliated Company shall be determined by taking into account the Highly Compensated Employee’s Compensation under each such arrangement and contributions under each such arrangement which qualify for treatment under Code Section 401(k), in accordance with regulations prescribed by the Secretary of the Treasury under Section 401(k) of the Code.

(e) For purposes of this Section, the amount of Before-Tax Contributions by a Participant who is not a Highly Compensated Employee for a Plan Year shall be reduced by any Before-Tax Contributions in excess of the Deferral Limitation which have been distributed to the Participant under Section 5.6, in accordance with regulations prescribed by the Secretary of the Treasury under Section 401(k) of the Code.

(f) The determination of the Actual Deferral Percentage of any Participant shall be made after applying the provisions of Section 14.5 relating to certain limits on Annual Additions under Section 415 of the Code.

(g) The determination and treatment of Before-Tax Contributions and the Actual Deferral Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury.

(h) The Committee shall keep or cause to have kept such records as are necessary to demonstrate that the Plan satisfies the requirements of Code Section 401(k) and the regulations thereunder, in accordance with regulations prescribed by the Secretary of the Treasury.

5.5 Provisions for Disposition of Excess Before-Tax Contributions by Highly Compensated Employees.

(a) The Committee shall determine, as soon as is reasonably possible following the close of each Plan Year, the extent, if any, to which deferral treatment under Code Section 401(k) may not be available for Before-Tax Contributions by Highly Compensated Employees. If, pursuant to the determination by the Committee, any or all of a Participant’s Before-Tax Contributions are not eligible for tax-deferral treatment, then any excess Before-Tax Contributions and any income for that Plan Year (and to the

22

extent required by the Code, gains and income for the Plan Year in which distributed) allocable thereto shall be disposed of in accordance with (i) or (ii) below.

(i) To the extent permissible under Section 6.3, excess Before-Tax Contributions by the Highly Compensated Employee in a Plan Year may be recharacterized as After-Tax Contributions for the Plan Year not later than two and one-half (2-1/2) months following the close of the Plan Year. Any recharacterization shall be effective retroactive to the date of the Highly Compensated Employee’s earliest Before-Tax Contributions during the Plan Year in which the excess Before-Tax Contributions were made. To the extent required by Treas. Reg. Section 1-401(k)-l(f)(3), Before-Tax Contributions recharacterized as After-Tax Contributions shall continue to be treated as Before-Tax Contributions for purposes of Article VIII.

(ii) To the extent a Participant’s Before-Tax Contributions cannot be recharacterized in accordance with (i) above, any excess Before-Tax Contributions in a Plan Year shall, if administratively feasible, be distributed to the Participant not later than two and one-half (2-1/2) months following the close of the Plan Year in which such excess Before-Tax Contributions were made, but in any event no later than the close of the first Plan Year following the Plan Year in which such excess Before-Tax Contributions were made (after withholding any applicable income taxes due on such amounts).

(b) For purposes of this Section, the amount of excess Before-Tax Contributions to be distributed to a Participant for a Plan Year or recharacterized shall be reduced by the amount of any Before-Tax Contributions in excess of the Deferral Limitation (for the Participant’s taxable year that ends with or within the Plan Year) which have been distributed to the Participant under Section 5.6, in accordance with regulations prescribed by the Secretary of the Treasury under Section 401(k) of the Code.

(c) The Committee shall determine the aggregate amount of any excess Before-Tax Contributions by Highly Compensated Employees for a Plan Year by application of the leveling method set forth in Treasury Regulation Section 1.401(k)-l(f)(2) under which the Deferral Percentage of the Highly Compensated Employee who has the highest Deferral Percentage for such Plan Year is reduced to the extent required

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(i) to enable the Plan to satisfy the Actual Deferral Percentage test, or (ii) to cause such Highly Compensated Employee’s Deferral Percentage to equal the Deferral Percentage of the Highly Compensated Employee with the next highest Deferral Percentage. The recharacterization or distribution (as the case may be) of any excess Before-Tax Contributions shall be made on the basis of the dollar amounts (rather than the individual Deferral Percentages) of the Before-Tax Contributions by Highly Compensated Employees, beginning with the highest such amount.

(d) For purposes of satisfying the Actual Deferral Percentage test, income allocable to a Participant’s excess Before-Tax Contributions, as determined under (b) above, shall be determined in accordance with any reasonable method used by the Plan for allocating income to Participant Accounts, provided such method does not discriminate in favor of Highly Compensated Employees and is consistently applied to all Participants for all corrective distributions or recharacterizations under the Plan for a Plan Year. The Committee shall not be liable to any Participant (or his Beneficiary, if applicable) for any losses caused by misestimating the amount of any Before-Tax Contributions in excess of the limitations of this Article V and any income allocable to such excess.

(e) To the extent required by regulations under Section 401(k) or 415 of the Code, any excess Before-Tax Contributions with respect to a Highly Compensated Employee shall be treated as Annual Additions under Article XIV for the Plan Year for which the excess Before-Tax Contributions were made, notwithstanding the distribution or recharacterization of such excess in accordance with the provisions of this Section.

5.6 Provisions for Return of Annual Before-Tax Contributions in Excess of the Deferral Limitation.

(a) In the event that due to error or otherwise, a Participant’s Before-Tax Contributions under this Plan exceed the Deferral Limitation for any calendar year (but without regard to amounts of compensation deferred under any other plan), the excess Before-Tax Contributions for the Plan Year, if any, together with income allocable to such amount shall be distributed to the Participant on or before the first April 15 following the close of the calendar year in which such excess contribution is made. The amount of excess Before-Tax Contributions that may be distributed to a Participant under

24

this Section for any taxable year shall be reduced by any excess Before-Tax Contributions previously distributed or recharacterized in accordance with Section 5.5 for the Plan Year beginning with or within such taxable year.

(i) Income on Before-Tax Contributions in excess of the Deferral Limitation shall be calculated in accordance with Section 5.5(b), except calculations of allocable income shall be made with reference to the calendar year (if the Plan Year is not the calendar year).

(ii) The Committee shall not be liable to any Participant (or his Beneficiary, if applicable) for any losses caused by misestimating the amount of any Before-Tax Contributions in excess of the limitations of this Article V and any income allocable to such excess.

(b) If in any calendar year a Participant makes Before-Tax Contributions under this Plan and additional elective deferrals, within the meaning of Code Section 402(g)(3), under any other plan maintained by the Company or an Affiliated Company, and the total amount of the Participant’s elective deferrals under this Plan and all such other plans exceed the Deferral Limitation, the Company and each Affiliated Company maintaining a plan under which the Participant made any elective deferrals shall notify the affected plans in writing, and corrective distributions of the excess elective deferrals, and any income allocable thereto, shall be made from one or more such plans, to the extent determined by the Company and each Affiliated Company. The determination of the amount of a Participant’s elective deferrals for any calendar year shall be made after applying the provisions of Section 14.5 relating to certain limits on Annual Additions under Section 415 of the Code. All corrective distributions of excess elective deferrals shall be made on or before the first April 15 following the close of the calendar year in which the excess elective deferrals were made.

(c) In accordance with rules and procedures as may be established by the Committee, a Participant may submit a claim to the Committee in which he certifies in writing the specific amount of his Before-Tax Contributions for the preceding calendar year which, when added to amounts deferred for such calendar year under any other plans or arrangements described in Section 401(k), 408(k) or 403(b) of the Code (other than a plan maintained by the Company or an Affiliated Company), will cause the Participant to

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exceed the Deferral Limitation for the calendar year in which the deferral occurred. Any such claim must be submitted to the Committee no later than the March 1 of the calendar year following the calendar year of deferral. To the extent the amount specified by the Participant does not exceed the amount of the Participant’s Before-Tax Contributions under the Plan for the applicable calendar year, the Committee shall treat the amount specified by the Participant in his claim as a Before-Tax Contribution in excess of the Deferral Limitation for such calendar year and return such excess and any income allocable thereto to the Participant, as provided in (a) above. In the event that for any reason such Participant’s Before-Tax Contributions in excess of the Deferral Limitation for any calendar year are not distributed to the Participant by the time prescribed in (a) above, such excess shall be held in the Participant’s Before-Tax Contribution Account until distribution can be made in accordance with the provisions of this Plan.

(d) To the extent required by regulations under Section 402(g) or 415 of the Code, Before-Tax Contributions with respect to a Participant in excess of the Deferral Limitation shall be treated as Annual Additions under Article XIV for the Plan Year for which the excess contributions were made, notwithstanding the distribution of such excess in accordance with the provisions of this Section.

5.7 Character of Amounts Contributed as Before-Tax Contributions.

Unless otherwise specifically provided to the contrary in this Plan, amounts deferred pursuant to a Participant’s election to make Before-Tax Contributions in accordance with Section 5.1 (and which qualify for treatment under Code Section 401(k) and are contributed to the Trust Fund pursuant to Article VI) shall be treated, for federal and state income tax purposes, as Participating Employer contributions.

5.8 Rollover Contributions.

Effective as of an Eligible Employee’s Employment Commencement Date, or such later date as may be determined by the Committee, amounts, if any, distributed to such Eligible Employee or payable to such Eligible Employee from another plan that satisfies the requirements of Code Section 401(a), or held in an individual retirement account which is attributable solely to a rollover contribution within the meaning of Code Section 408(d)(3), may be transferred to this Plan, including by direct rollover from another plan that satisfies the requirements of Code Section 401(a), and credited to the Participant’s Transfer/Rollover

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Account in accordance with Code Section 402 and rules which the Committee shall prescribe from time to time; provided, however, the Committee determines that the continued qualification of this Plan under Code Section 401(a) or 401(k) would not be adversely affected by such transfer, or would cause this Plan to become a “transferee plan,” within the meaning of Code Section 401(a)(11). Effective January 1, 2002, amounts, if any, distributed to such Eligible Employee or payable to such Eligible Employee from (i) a qualified plan described in Section 401(a) or 403(a) of the Code (including after-tax employee contributions), (ii) an annuity contract described in Section 403(b) of the Code (excluding after-tax employee contributions), (iii) an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state, and (iv) an individual retirement account or annuity described in Section 408(a) or 408(b) of the Code that is eligible to be rolled over and would otherwise be includible in gross income, may be transferred to this Plan and credited to the Participant’s Transfer/Rollover Account in accordance with Code Section 402 and rules which the Committee shall prescribe from time to time. Any amounts transferred in accordance with this Section 5.8, which shall be in cash, shall not be subject to distribution to the Participant except as expressly provided under the terms of this Plan.

ARTICLE VI

COMPANY CONTRIBUTIONS

6.1 General.

Subject to the requirements and restrictions of this Article VI and Article XIV, and subject also to the amendment or termination of the Plan or the suspension or discontinuance of contributions as provided herein, a Participating Company shall contribute for each Participant who is an Employee of such Participating Company, as follows:

(a) An amount to the Participant’s Company Contributions Account equal to the amount specified in the Applicable Appendix.

(b) An amount to the Participant’s Before-Tax Contributions Account which is equal to the amount of the Participant’s Before-Tax Contributions pursuant to Section 5.1 and which qualify for tax treatment under Code Section 401(k).

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(c) An amount to the Participant’s Company Matching Account equal to the amount specified in the Applicable Appendix.

6.2 Requirement for Net Profits.

Contributions by a Participating Employer shall be made without regard to current or accumulated profits for the year; provided, however, that the Plan is intended to be designed to qualify as a profit sharing plan for purposes of Sections 401(a) et seq. of the Code.

6.3 Special Limitations on After-Tax Contributions and Company Matching Contributions.

With respect to each Plan Year, After-Tax Contributions and Company Matching Contributions under the Plan for the Plan Year shall not exceed the limitations on contributions on behalf of Highly Compensated Employees under Section 401(m) of the Code, as provided in this Section. For purposes of this Section, excess Before-Tax Contributions recharacterized as After-Tax Contributions after the close of a Plan Year shall be treated as After-Tax Contributions in a Plan Year as provided in Section 5.5(a)(i). In the event that After-Tax Contributions and Company Matching Contributions under this Plan on behalf of Highly Compensated Employees for any Plan Year exceed the limitations of this Section for any reason, such excess contributions and any income allocable thereto shall be disposed of in accordance with Section 6.4. For purposes of this Section 6.3, the meaning of the term “Compensation” shall be as defined in Section 5.4(b).

(a) After-Tax Contributions and Company Matching Contributions on behalf of Participants under Section 6.1(c) for a Plan Year shall satisfy the Average Contribution Percentage test set forth in (i)(A) below, or the Average Contribution Percentage test set forth in (i)(B) below:

(i) (A) The “Average Contribution Percentage” for Eligible Employees who are Highly Compensated Employees for a Plan Year shall not be more than the “Average Contribution Percentage” of all other Eligible Employees for the Comparison Year multiplied by 1.25, or

(i) (B) The excess of the “Average Contribution Percentage” for Eligible Employees who are Highly Compensated Employees for a Plan Year over the “Average Contribution Percentage” for all other Eligible Employees for the Comparison Year shall not be more than two (2) percentage

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points, and the “Average Contribution Percentage” for Eligible Employees who are Highly Compensated Employees for a Plan Year shall not be more than the “Average Contribution Percentage” of all other Eligible Employees for the Comparison Year multiplied by 2.00.

The “Comparison Year” is the Plan Year being tested.

(ii) The Average Contribution Percentage for any Plan Year ending prior to January 1, 2002 for Highly Compensated Employees eligible to participate in this Plan and a plan of the Company or an Affiliated Company that satisfies the requirements of Section 401(k) of the Code, including, if applicable, this Plan, shall be reduced to the extent necessary to satisfy the requirements of Treasury Regulations Section 1.401(m)-2 or such similar rule. The multiple use test described in Treasury Regulations Section 1.401(m)-2 shall not apply for Plan Years beginning after December 31, 2001.

(b) For purposes of this Section, “Average Contribution Percentage” means, with respect to a group of Eligible Employees for a Plan Year, the average of the “Contribution Percentage,” calculated separately for each Eligible Employee in such group. The “Contribution Percentage” for any Eligible Employee is determined by dividing the sum of After-Tax Contributions during the Plan Year and Company Matching Contributions under the Plan on behalf of each Eligible Employee for such Plan Year, by such Eligible Employee’s Compensation for such Plan Year. “Company Matching Contributions” for purposes of the Average Contribution Percentage test shall include a Company Matching Contribution only if it is allocated to the Participant’s Company Matching Contributions Account during the Plan Year and is paid to the Trust Fund by the end of the twelfth month following the close of the Plan Year. To the extent determined by the Committee and in accordance with regulations issued by the Secretary of the Treasury under Code Section 401(m)(3), the Before-Tax Contributions on behalf of an Eligible Employee and any “qualified nonelective contributions,” within the meaning of Code Section 401(m)(4)(c), on behalf of an Eligible Employee may also be taken into account for purposes of calculating the Contribution Percentage of such Eligible Employee, but shall not otherwise be taken into account. However, any Company Matching Contributions taken into account for purposes of determining the

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Actual Deferral Percentage of an Eligible Employee under Section 5.4(a) shall not be taken into account under this Section 6.3.

(c) In the event that as of the last day of a Plan Year this Plan satisfies the requirements of Section 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of Section 410(b) of the Code only if aggregated with this Plan, then this Section 6.3 shall be applied by determining the Contribution Percentages of Eligible Employees as if all such plans were a single plan, in accordance with regulations prescribed by the Secretary of the Treasury under Section 401(m) of the Code.

(d) For the purposes of this Section, the Contribution Percentage for any Eligible Employee who is a Highly Compensated Employee under two or more Code Section 401(a) plans of the Company or an Affiliated Company to the extent required by Code Section 401(m), shall be determined in a manner taking into account the participant contributions and matching contributions for such Eligible Employee under each of such plans.

(e) The determination of the Contribution Percentage of any Participant shall be made after first applying the provisions of Section 14.5 relating to certain limits on Annual Additions under Section 415 of the Code, then applying the provisions of Section 5.6 relating to the return of Before-Tax Contributions in excess of the Deferral Limitation, then applying the provisions of Section 5.5 relating to certain limits under Section 401(k) of the Code imposed on Pre-Tax Contributions of Highly Compensated Employees, and last, applying the provisions of Section 6.5 relating to the forfeiture of Company Matching Contributions attributable to excess Before-Tax or After-Tax Contributions.

(f) The determination and treatment of the Contribution Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury.

(g) The Committee shall keep or cause to have kept such records as are necessary to demonstrate that the Plan satisfies the requirements of Code Section 401(m) and the regulations thereunder, in accordance with regulations prescribed by the Secretary of the Treasury.

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6.4 Provision for Return of Excess After-Tax Contributions and Company Matching Contributions on Behalf of Highly Compensated Employees.

(a) The Committee shall determine, as soon as is reasonably possible following the close of the Plan Year, the extent (if any) to which After-Tax and Company Matching Contributions on behalf of Highly Compensated Employees may cause the Plan to exceed the limitations of Section 6.3 for such Plan Year. If, pursuant to the determination by the Committee, After-Tax and Company Matching Contributions on behalf of a Highly Compensated Employee may cause the Plan to exceed such limitations, then the Committee shall take the following steps:

(i) First, any excess After-Tax Contributions that were not matched by Company Matching Contributions, and any income allocable thereto, shall be distributed to the Highly Compensated Employee (after withholding any applicable income taxes on such amounts).

(ii) Second, if any excess remains after the provisions of (i) above are applied, to the extent necessary to eliminate the excess, Company Matching Contributions on behalf of the Highly Compensated Employee, and any income allocable thereto, shall be forfeited, to the extent forfeitable under the Plan, or distributed to the Highly Compensated Employee, to the extent non-forfeitable under the Plan (after withholding any applicable income taxes on such amounts). Any corresponding After-Tax Contributions, and any income allocable thereto, shall be distributed to the Highly Compensated Employee (after withholding any applicable income taxes on such amounts).

(iii) If administratively feasible, excess After-Tax Contributions and Company Matching Contributions which are nonforfeitable under the Plan, including any income allocable thereto, shall be distributed to Highly Compensated Employees, or, to the extent forfeitable, forfeited, within two and one-half (2-1/2) months following the close of the Plan Year for which the excess Contributions were made, but in any event no later than the end of the first Plan Year following the Plan Year for which the excess Contributions were made, notwithstanding any other provision in this Plan. Amounts of excess Company Matching Contributions forfeited by Highly Compensated Employees under this

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Section, including any income allocable thereto, shall be applied, to the maximum extent practicable, to reduce Company Matching Contributions for the Plan Year for which such excess Contributions were made and thereafter shall be applied as soon as possible to reduce Company Matching Contributions for succeeding Plan Years.

(b) The Committee shall determine the amount of any excess After-Tax Contributions and Company Matching Contributions made by or on behalf of Highly Compensated Employees for a Plan Year by application of the leveling method set forth in Treasury Regulation Section 1.401(m)-l(e)(2) under which the Contribution Percentage of the Highly Compensated Employee who has the highest Contribution Percentage for such Plan Year is reduced, to the extent required (i) to enable the Plan to satisfy the Average Contribution Percentage test, or (ii) to cause such Highly Compensated Employee’s Contribution Percentage to equal the Contribution Percentage of the Highly Compensated Employee with the next highest Contribution Percentage. The distribution or forfeiture (as the case may be) of any excess After-Tax Contributions or Company Matching Contributions shall be made on the basis of dollar amounts (rather than the individual Contribution Percentages) of the After-Tax Contributions and Company Matching Contributions by Highly Compensated Employees beginning with the highest such amounts.

(c) For purposes of satisfying the Average Contribution Percentage test, income allocable to a Participant’s excess After-Tax Contributions or Company Matching Contributions, as determined under (b) above, shall be determined by applying procedures comparable to those provided under Section 5.5.

(d) To the extent required by regulations under Section 414(m) or 415 of the Code, any excess After-Tax Contributions or matching Company Contribution forfeited by or distributed to a Highly Compensated Employee in accordance with this Section shall be treated as an Annual Addition under Article XIV for the Plan Year for which the excess contribution was made, notwithstanding such forfeiture or distribution.

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6.5 Forfeiture of Company Matching Contributions Attributable to Excess Deferrals or Contributions.

To the extent any Company Matching Contributions allocated to a Participant’s Company Matching Contributions Account are attributable to excess Before-Tax Contributions required to be distributed to the Participant in accordance with Section 5.5 or 5.6, or excess After-Tax Contributions required to be distributed to the Participant in accordance with Section 6.10, such Company Matching Contributions, including any income allocable thereto, shall be forfeited, notwithstanding that such Company Matching Contributions may otherwise be nonforfeitable under the terms of the Plan. Any Company Matching Contributions forfeited by a Participant in accordance with this Section 6.5 shall be applied to reduce Company Matching Contributions.

6.6 Investment and Application of Plan Contributions.

(a) Subject to the provisions of Section 4.1(b), all contributions to the Trust Fund under Section 6.1 (including Before-Tax Contributions) and Participant After-Tax Contributions under Section 5.1 shall be invested as provided in this Section 6.6, subject to such rules as the Committee may adopt, in its sole discretion, to implement the provisions of this Section 6.6. The Committee may establish a choice of investment alternatives for Accounts from which each Participant may select in determining the manner in which his Account will be invested. In its sole discretion, the Committee may establish an investment alternative consisting of Company Stock. If investment alternatives are established in accordance with this Section 6.6, the following provisions of this Section 6.6 shall apply, including, in the event the Committee establishes a Company Stock alternative, the limitations of (iv) below and the provisions of Article X relating to investments in Company Stock.

(i) A Participant may elect at any time to change an investment election with respect to the allocation of future contributions made by him or on his behalf (such election to apply to all such contributions without regard to any distinction between Company contributions or Participant contributions) among the investment alternatives. The Committee may require at least thirty (30) days notice prior to the commencement of the payroll period for

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which such change is to be effective. Any such election shall be made in any whole percentage, subject to the provisions of Subsection (iv) below.

(ii) Separate Trust Fund Subaccounts shall be established for each investment alternative selected by a Participant, and each such Subaccount shall be valued separately.

(iii) A Participant may elect at any time to change the investment of his Accounts and reallocate such Accounts among the investment alternatives in any whole percentage, subject to the limitations of this paragraph and (iv) below. Subject to such rules as the Committee may prescribe, any such election to change shall be effective as soon as practical following receipt of the Participant’s election. Any such change shall be implemented by the Committee in accordance with practices and procedures established by the Committee to provide for the orderly liquidation and/or purchase of investments. Notwithstanding the foregoing, the Company may restrict the frequency or timing of trades in or out of one or more investment alternatives by a Participant, to the extent the Committee deems necessary or appropriate.

(iv) If a Company Stock alternative is established by the Committee, each Participant may elect to invest up to a maximum of twenty-five percent (25%) (fifty percent (50%) prior to April 3, 2006) of contributions made by him or on his behalf (such limitation to apply to all contributions without regard to any distinction between Company contributions and Participant contributions) in the Company Stock alternative in accordance with this Section 6.6. Such a Participant may also elect to transfer amounts from his Accounts held in other investment alternatives to the Company Stock alternative in accordance with this Section 6.6, provided, however, that no such transfer shall be implemented to the extent that such transfer would result in the value of the Participant’s interest in the Company Stock Fund exceeding twenty-five percent (25%) (fifty percent (50%) prior to April 3, 2006) of the value of his interest in all investment alternatives held under the Plan. Notwithstanding the preceding sentence, neither the Company nor the Committee, nor any representative of the Company, the Committee or of the Plan shall have any obligation to monitor the

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value of a Participant’s interest in the Company Stock Fund, or to manage said fund, and no person shall or shall have any authority to dispose of any Participant’s interest in the Company Stock Fund except in accordance with a Participant’s valid election or otherwise in accordance with express provisions of this Plan.

(v) In the case of a Participant who fails to make an effective election, for any reason whatsoever, as to how all or any portion of his interest therein shall be invested, the Committee shall prescribe rules which shall require that the Accounts of such Participant be invested in the fixed income fund.

6.7 Irrevocability.

A Participating Company shall have no right or title to, nor interest in, the contributions made to the Trust Fund, and no part of the Trust Fund shall revert to the Participating Company except that on and after the Effective Date funds may be returned to a Participating Company as follows:

(a) In the case of a Participating Company contribution which is made by a mistake of fact, that contribution may be returned to the Participating Company within one (1) year after it is made.

(b) All contributions to the Trust Fund are conditioned on deductibility under Code Section 404. In the event deduction is disallowed for any such contribution, such contribution may be returned to the Participating Company.

6.8 Company, Committee and Trustee Not Responsible for Adequacy of Trust Fund.

The Company, Committee and Trustee shall not be liable or responsible for the adequacy of the Trust Fund to meet and discharge any or all payments and liabilities hereunder. All Plan benefits will be paid only from the Trust assets, and neither the Company, the Committee nor the Trustee shall have any duty or liability to furnish the Trust with any funds, securities or other assets except as expressly provided in the Plan. Except as required under the Plan or Trust or under Part 4 of Title I of ERISA, the Company shall not be responsible for any decision, act or omission of the Trustee, the Committee, or the Investment Manager (if applicable), and shall not be responsible for the application of any moneys, securities, investments or other property paid or delivered to the Trustee.

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ARTICLE VII

PARTICIPANT ACCOUNTS AND ALLOCATIONS

7.1 General.

(a) All contributions under this Plan shall be held in the Trust Fund.

(b) All gains, losses, dividends and other property acquisitions and/or transfers that occur with respect to the Trust Fund shall be held, charged, credited, debited or otherwise accounted for under said fund on an unallocated basis until allocated to Participants’ Accounts as of a Valuation Date as Provided under this Plan or otherwise used or applied in accordance with the provisions of this Plan.

7.2 Participants’ Accounts.

In order to account for the allocated interest of each Participant in the Trust Fund, there shall be established and maintained the Accounts described in Section 2.1.

7.3 Revaluation of Participants’ Accounts.

As of each Valuation Date, the Accounts of each Participant shall be revalued so as to reflect a proportionate share in any increase or decrease in the fair market value of the assets in the Trust Fund as of that date as compared with the value of the assets in the Trust Fund as of the immediately preceding Valuation Date. The valuation and allocation provisions of this Section 7.3 shall be applied and implemented in accordance with the following rules:

(a) As of each Valuation Date the Accounts holding such assets shall be revalued so as to reflect to each such Account a proportionate share in the net income or loss of the assets since the immediately preceding Valuation Date.

(b) The Company, Committee and Trustee do not in any manner or to any extent whatsoever warrant, guarantee or represent that the value of a Participant’s Accounts shall at any time equal or exceed the amount previously contributed thereto.

7.4 Treatment of Accounts Following Termination of Employment.

Following a Participant’s termination of employment, pending distribution of the Participant’s Distributable Benefit pursuant to the provisions of Article VIII below, the Participant’s Plan Accounts shall continue to be maintained and accounted for in accordance with all applicable provisions of this Plan.

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7.5 Accounting Procedures.

The Committee and the Trustee shall establish accounting procedures for the purpose of making the allocations, valuations and adjustments to Participants’ Accounts provided for in this Article VII. From time to time the Committee and Trustee may modify such accounting procedures for the purpose of achieving equitable, nondiscriminatory, and administratively feasible allocations among the Accounts of Participants in accordance with the general concepts of the Plan and the provisions of this Article VII.

ARTICLE VIII

VESTING; PAYMENT OF PLAN BENEFITS

8.1 Vesting.

Each Participant’s vested interest in his Accounts shall be determined as follows:

(a) Each Participant shall at all times be one hundred percent (100%) vested in his Before-Tax Contributions Account, his After-Tax Contributions Account and his Transfer/Rollover Account under the Plan.

(b) Except as provided in (e) and (f) below, each Participant shall become vested in his Company Matching Account and his Company Contributions Account according to the applicable table set forth below:

Except as provided in the next paragraph, the applicable table is as follows (the “3-Year Vesting Schedule”):

Number of Years of Service	Vesting Percentage
Less than 3	0	%
3 or more	100	%

provided, however, if the Participant was eligible to participate in the Plan before April 1, 2000 and has two (2) Years of Service as of April 1, 2000, the 3-Year Vesting Schedule shall be modified as follows:

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Number of Years of Service	Vesting Percentage
Less than 2	0	%
2	25	%
3 or more	100	%

Notwithstanding the foregoing, if the Participant participated in the Plan before April 1, 2000 and is not an Employee on April 1, 2000, the Participant’s vested interest (if any) in his Company Matching Account and his Company Contributions Account shall be determined under the following table (the “5-Year Vesting Schedule”):

Number of Years of Service	Vesting Percentage
Less than 2	0	%
2	25	%
3	50	%
4	75	%
5 or more	100	%

The 3-Year Vesting Schedule shall not apply to such Participant until such Participant resumes employment as an Employee after April 1, 2000, in which event:

(i) The 3-Year Vesting Schedule shall apply to the portion of his Company Matching Account and his Company Contributions Account that is attributable to his post-March 31, 2000 participation in the Plan (if any); and

(ii) The 3-Year Vesting Schedule shall apply to the remainder of his Company Matching Account and his Company Contributions Account only (A) if the 5-Year Vesting Schedule had not been applied to forfeit any of his Company Matching Account or his Company Contributions Account prior to his resumption of employment or (B) if the 5-Year Vesting Schedule had been so applied, there has been a restoration of the resulting forfeited amount pursuant to Section 8.15(b) following his resumption of employment.

(c) Additionally a Participant shall become one hundred percent (100%) vested in his Company Matching Account and his Company Contributions Account upon attainment of Normal Retirement Date while an Employee, or in the event of death or Total and Permanent Disability while an Employee.

(d) Additionally, each Participant (i) who was employed at the Mattel-Customer Care Center, Phoenix, Arizona division of the Company on March 27, 2001 or

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(ii) was employed at the Mattel-Hebron, Kentucky division of the Company on April 24, 2001 shall at all times be one hundred percent (100%) vested in his Company Matching Account and his Company Contributions Account.

(e) Additionally, each Participant who was employed by the Pleasant Company between July 9, 1998 and September 30, 2001 shall at all times be one hundred percent (100%) vested in his Company Matching Account.

(f) Additionally, each Participant who was employed at the Eau Claire, Wisconsin facility of American Girl, Inc. on January 1, 2004 shall at all times be one hundred percent (100%) vested in his Company Matching Account and his Company Contributions Account.

8.2 Distribution Upon Retirement.

(a) A Participant may retire from the employment of the Company on his Normal Retirement Date. Subject to the required distribution rules under (b) below, if the Participant continues in the service of the Company beyond his Normal Retirement Date, he shall continue to participate in the Plan in the same manner as Participants who have not reached their Normal Retirement Dates. At the subsequent termination of the Participant’s employment on his late retirement date, his Distributable Benefit shall be based upon the value of his Accounts as of the applicable Valuation Date determined with reference to the date of distribution. After a Participant has reached his Normal Retirement Date, any termination of the Participant’s employment (other than by reason of death or disability) shall be deemed a Normal Retirement.

(b) Upon Normal Retirement a Participant shall be entitled to a distribution of his Distributable Benefit in the Trust Fund. Subject to the provisions of Section 8.18 (regarding the cash out of small amounts), such distribution shall be made or commence to be made as soon as practicable following the date specified by the Participant in a written election filed with the Plan Administrator; provided that, in no event shall distribution be delayed beyond the time specified in Section 8.5 in accordance with the requirements of Code Section 401(a)(9).

(c) During the Participant’s lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:

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(i) the quotient obtained by dividing the Participant’s account balance by the distribution period in the Uniform Lifetime Table set forth in U.S. Treasury Regulations section 1.401(a)(9)-9, using the Participant’s age as of the Participant’s birthday in the first distribution calendar year; or

(ii) if the Participant’s sole designated Beneficiary for the distribution calendar year is the Participant’s spouse, the quotient obtained by dividing the Participant’s account balance by the number in the Joint and Last Survivor Table set forth in U.S. Treasury Regulations section 1.401(a)(9)-9, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the first distribution year.

Required minimum distributions will be determined under this Section 8.2(c) beginning with the first distribution calendar year and continue through the end of the distribution calendar year that includes the Participant’s date of death; provided that life expectancies shall not be recalculated each year but shall be determined by taking the life expectancy in the first distribution calendar year reduced by one for each subsequent year.

8.3 Distribution Upon Death Prior to Termination of Employment.

(a) Upon the death of a Participant during his employment, the Committee shall direct the Trustee to make a distribution of the Participant’s Distributable Benefit in the Trust Fund in a single lump sum to the Beneficiary designated by the deceased Participant, or as otherwise determined under Section 8.9.

(b) If the Participant’s Beneficiary is not the Participant’s surviving spouse, such death benefits shall be distributed to the non-spouse Beneficiary as soon as administratively feasible following the Participant’s death. If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, such death benefits shall be distributed to the surviving spouse Beneficiary at such time as the Beneficiary elects, but not later than December 31 of the calendar year immediately following the calendar year in which the Participant died, or if later, December 31 of the calendar year in which the Participant would have attained age 70 ¹/2.

If there is no designated Beneficiary of a deceased Participant as of September 30 of the year following the year of the Participant’s death, all death benefits payable with

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respect to the deceased Participant shall be distributed no later than December 31 of the calendar year containing the fifth anniversary of the Participant’s death. The “designated Beneficiary” of a Participant for purposes of this Section 8.3 and Section 8.4 shall mean the individual who is designated as the Participant’s Beneficiary under Section 8.9 and who satisfies the requirements to constitute a designated beneficiary under Code Section 401(a)(9) and U.S. Treasury Regulations section 1.401(a)(9)-1, Q&A-4.

8.4 Death After Termination of Employment.

(a) Upon the death of a former Participant after his retirement or other termination of employment, but prior to the distribution of the Participant’s Distributable Benefit in the Trust Fund to which he is entitled, the balance of the Distributable Benefit to which the Participant was entitled shall be distributed to the Participant’s Beneficiary as provided in Section 8.3.

(b) If the Participant dies on or after the date distributions begin, all death benefits calculated in accordance with Section 8.4(a) shall be paid to the designated Beneficiary, or as otherwise determined under Section 8.9, as soon as administratively practicable following the Participant’s death.

8.5 Termination of Employment.

(a) Subject to the provisions of Section 8.5(b) and Section 8.18 (regarding the cash out of small amounts), effective as of January 1, 2006, if a Participant’s employment for the Company and all Affiliated Companies terminates prior to his Normal Retirement Date, his Distributable Benefit in the Trust Fund shall be paid as soon as administratively feasible following any date specified by the Participant in a written election filed with the Plan Administrator ; provided that, distribution shall begin to be made in accordance with Section 8.2(c) to a Participant who is not a “5-percent owner” (within the meaning of Section 401(a)(9) of the Code) no later than April 1 of the calendar year following the later of the calendar year in which the Participant (A) attains age seventy and one-half (70-1/2) or (B) separates from service with the Company or an Affiliated Company. Notwithstanding the foregoing, in the case of a Participant who is a “5-percent owner” (within the meaning of Section 401(a)(9) of the Code) distribution shall be made or commence to be made not later than April 1 following the calendar year in which such

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Participant attains age 70-1/2, whether or not the Participant’s employment has terminated.

(b) If the Participant makes a valid written election in accordance with (c) below, payment of his Distributable Benefit pursuant to this Section 8.5 may be made on any date which is not later than sixty (60) days after the close of the Plan Year in which occurs the later of (i) the Participant’s termination of employment with the Company and all Affiliated Companies, or (ii) a date specified by the Participant in the valid written election filed by the Participant, to the extent administratively feasible. For purposes of Section 72(t) of the Code, any distribution to a Participant in accordance with this Section 8.5 during or following the year in which he attains age fifty-five (55) shall be deemed to be on account of an event enumerated in Code Section 72(t)(2).

(c) Any written election by a Participant to receive payment of his Distributable Benefit shall not be valid unless such election is made both (A) after the Participant receives a written notice advising him of his right to defer payment and (B) within the ninety (90) day period ending on the Participant’s “Benefit Starting Date.” The notice to the Participant advising him of his right to defer payment shall be given no less than thirty (30) nor more than ninety (90) days prior to the Participant’s Benefit Starting Date. For purposes of this Subsection (c), “Benefit Starting Date” shall mean the first day of the first period for which the Participant’s Distributable Benefit is paid. Notwithstanding the foregoing, payment of the Participant’s Distributable Benefit may commence less than thirty (30) days after receipt of the notice, provided that the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least thirty (30) days after receiving the notice to consider the decision of whether or not to elect to receive payment and the Participant, after receiving the notice, affirmatively elects to receive payment.

(d) In the event a Participant is not fully vested in all of his Company Contributions Account or Company Matching Account under the Plan, the portion of such Accounts which is not vested shall be forfeited as of the earlier of the date the vested portion of such Accounts is completely distributed to him or the date he incurs five (5) consecutive one-year Periods of Severance.

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(e) Notwithstanding the foregoing, if a Participant ceases to be an Employee by reason of the disposition by the Company or an Affiliated Company of either (i) substantially all of the assets used by the Company or an Affiliated Company, as the case may be, in a trade or business, or (ii) the interest of the Company or an Affiliated Company, as the case may be, in a subsidiary, such Participant shall be entitled to distribution of his Distributable Benefit as if, for purposes of this Plan only, such event constitutes a termination of employment.

8.6 Withdrawals.

(a) Subject to the succeeding provisions of this Section 8.6, while he is still an Employee, a Participant may withdraw amounts from his Accounts under the Plan; provided, however, a withdrawal must be for at least $200 (or the entire amount available for withdrawal, if less). A withdrawal other than on account of Hardship shall be made from the Participant’s Accounts in the following order, in each case up to the amount available for withdrawal in such Accounts (i) After-Tax Contributions Account; (ii) Transfer/Rollover Account; and (iii) Company Matching Account. Payment of a withdrawal shall be made in cash and shall be allocated pro rata among the Participant’s investment fund subaccounts, including any Company Stock subaccount. In no event may any amount be withdrawn by a Participant after he ceases to be an Employee.

(b) A withdrawal from a Participant’s Transfer/Rollover Account may be made in accordance with rules of uniform application which the Committee may from time to time prescribe; provided, however, that, except in the case of a Participant who is determined to have a Total and Permanent Disability and who is ineligible to make further contributions under Section 5.1, no amount representing Employee contributions made within the preceding six months to the Mattel Investment Plan which were matched by Company matching contributions under said Plan may be withdrawn from such Account; and provided further, that unless the Participant has completed an aggregate of at least sixty (60) months of participation in this Plan and the Mattel Investment Plan as of the date of withdrawal or has attained age 59-1/2 or is determined by the Committee to have a Total and Permanent Disability, the withdrawal shall not include amounts attributable to Company contributions made under the Mattel Investment Plan within the two (2) year period preceding withdrawal.

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(c) A withdrawal from a Participant’s After-Tax Contribution Account may be made in accordance with rules of uniform application which the Committee may from time to time prescribe; provided, however, that except in the case of a Participant who is determined to have a Total and Permanent Disability and who is ineligible to make further contributions under Section 5.1, no amount representing After-Tax Contributions made within the preceding six months to the Plan which were matched by Company Matching Contributions may be withdrawn from such Account.

(d) A withdrawal from a Participant’s Before-Tax Contributions Account may be made in accordance with rules of uniform application which the Committee may from time to time prescribe; provided, however, that no Participant may make a withdrawal from his Before-Tax Contributions Account prior to attaining age 59-1/2, or a determination by the Committee that such Participant has a Total and Permanent Disability or that the withdrawal is necessary to relieve a hardship of the Participant or his family. A Participant may receive a withdrawal due to hardship only if the withdrawal both is made due to an immediate and heavy financial need of the Participant within the meaning of (i) below and is necessary to satisfy such financial need within the meaning of (ii) below.

(i) For purposes of this Section 8.6(d), a withdrawal will be considered to be on account of an immediate and heavy financial need of the Participant only if the withdrawal is for:

(A) Expenses for (or necessary to obtain) medical care that would be deductible under Code Section 213(d) (determined without regard to whether the expenses exceed 7.5% of adjusted gross income);

(B) Costs directly related to the purchase of a principal residence for the Participant (excluding mortgage payments);

(C) Payment of tuition, related educational fees, and room and board expenses for up to the next 12 months of post-secondary education for the Participant, or his Spouse, children, or dependents (as defined Code Section 152 without regard to Section 152(b)(1), (b)(2) and (d)(1)(B);

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(D) Payments necessary to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage on such residence;

(E) Payments for burial or funeral expenses for the Participant’s deceased parent, spouse, children or dependents (as defined in Code Section 152 without regard to Section 152(d)(1)(B);

(F) Expenses for the repair of damage to the Participant’s principal residence that would qualify for the casualty deduction under Code Section 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income; or

(G) Such other deemed immediate and heavy financial needs as are set forth by the Internal Revenue Service through the publication of revenue rulings, notices, and other documents of general applicability.

(ii) For purposes of this Section 8.6(d), a distribution shall be considered to be necessary to satisfy an immediate and heavy financial need of the Participant only if all of the following conditions are satisfied: (A) the distribution is not in excess of the amount of the immediate and heavy financial need of the Participant, which may include amounts necessary to pay federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution; (B) the Participant has obtained all distributions (other than hardship distributions) and all non-taxable loans (at the time of the loan) currently available under all plans maintained by the Company; and (C) the Participant’s Before-Tax Contributions and After-Tax Contributions to the Plan and employee contributions under all qualified and non-qualified plans of deferred compensation maintained by the Company, including a stock option, stock purchase, or similar plan, or a cash-or-deferred arrangement that is part of a cafeteria plan (within the meaning of Code Section 125), will be suspended under the terms of each such plan, or in accordance with the terms of an otherwise legally enforceable agreement, for six (6) months (twelve (12) months prior to January 1, 2002) following the receipt of the hardship distribution.

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Notwithstanding the foregoing, the amount of any hardship withdrawal shall not exceed a Participant’s ‘distributable amount,’ which consists of the total of such Participant’s Before-Tax Contributions as of the date of the hardship withdrawal, including earnings credited thereon before December 31, 1988 (if any), reduced by the amount of any previous hardship withdrawals. The Committee will determine whether a hardship withdrawal satisfies the foregoing standards in a uniform and nondiscriminatory manner consistent with Code Section 401(k) and the regulations promulgated thereunder.

(e) A withdrawal from a Participant’s vested interest in his Company Contributions Account may be made in accordance with rules of uniform application which the Committee may from time to time prescribe; provided, however, that no participant may withdraw from his Company Contributions Account prior to attaining age 59-1/2 or a determination by the Committee that such Participant has a Total and Permanent Disability or that the withdrawal is necessary to relieve a hardship of the Participant or his family within the meaning of Section 8.6(d) of the Plan.

(f) A withdrawal from the vested portion of a Participant’s Company Matching Account may be made in accordance with rules of uniform application which the Committee may from time to time prescribe; provided, however, that unless the Participant has completed an aggregate of at least sixty (60) months of participation in this Plan as of the date of withdrawal or has attained age 59-1/2 or is determined by the Committee to have a Total and Permanent Disability, any withdrawal from such Company Matching Account shall not include amounts attributable to Company contributions made within the two (2) year period preceding withdrawal.

(g) Notwithstanding anything in this Article to the contrary, a Participant can elect to receive all or any portion of his vested Accounts once such Participant attains age 70-1/2.

(h) If a Participant makes an in-service withdrawal from his Company Contributions Account or Company Matching Account at a time when the Participant does not have a one hundred percent (100%) vested interest in the value of such Account, and the Participant may increase his vested interest in the Account:

(i) such account shall be established as a separate Account as of the date of distribution, and

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(ii) at any relevant time the Participant’s vested interest in the value of such separate Account shall be equal to an amount (“X”) determined by the formula:

X = P (AB + D) – D

For purposes of applying the formula above: P is the nonforfeitable percentage at the relevant time, AB is the Account balance at the relevant time, and D is the amount of the withdrawal.

(i) Disbursement of withdrawals shall be as soon as administratively practicable after the submission of a request for withdrawal in form satisfactory to the Committee.

8.7 Form of Distribution.

(a) Unless a Participant makes a written election in accordance with Section 8.7 (c) or 8.8 below, a Participant’s Distributable Benefit shall be payable in the form of a single sum distribution. Except for any portion of such Distributable Benefit that is payable in the form of Company Stock in accordance with Section 8.13, such distribution shall be in cash.

(b) In the case of any cash disbursement from a Participant’s Accounts, such disbursement shall be made ratably from such investment funds or investment vehicles in which such Participant’s Accounts affected by such disbursement are invested.

(c) Subject to Section 8.18 regarding the payment of small Accounts, effective April 1, 1997, a Participant who terminates employment on or after his Normal Retirement Date, Early Retirement Date or by reason of Total and Permanent Disability and, effective January 1, 2007, any Participant whose vested Account at the time of termination of employment exceeds fifty thousand dollars ($50,000), may elect to receive his benefit in installments payable monthly, quarterly or annually for a period of five, ten or fifteen years (but no longer than the Participant’s life expectancy determined as of his Benefit Starting Date). All such installments shall be paid in cash or Company Stock and the installment or installments for the year in which the Participant attains age 70-1/2 and all subsequent years shall be paid to the Participant on or before December 31 of such year.

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8.8 Election for Direct Rollover of Distributable Benefit to Eligible Retirement Plan.

(a) To the extent required by Section 401(a)(31) of the Code, a Participant who is eligible to receive payment of his Distributable Benefit shall be entitled to elect a direct rollover of all or part of his Distributable Benefit. For purposes of this Section, an “eligible retirement plan” shall mean any plan described in Code Section 402(c)(8)(B), including an annuity contract described in Section 403(b) of the Code and an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred to such plan from the Plan, the terms of which permit the acceptance of a direct rollover from a qualified plan. The portion of a Participant’s Distributable Benefit consisting of after-tax contributions which are not includible in income shall be eligible for a direct rollover in accordance with the provisions of this Section. However, such portion may be transferred only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in Section 401(a) or 403(a) of the Code, that agrees to separately account for amounts so transferred, including separately accounting for the portion of such Distributable Benefit which is includible in gross income and the portion of such Distributable Benefit which is not so includible in gross income.

(b) A Participant’s direct rollover election under this Section shall be in writing and shall be made in accordance with rules and procedures established by the Committee. Such election shall specify the dollar or percentage amount of the Distributable Benefit to be rolled over, the name of the eligible retirement plan selected by the Participant, and such additional information as the Committee deems necessary or appropriate in order to implement the election. It shall be the Participant’s responsibility to confirm that the eligible retirement plan designated in his direct rollover election will accept the direct rollover of his Distributable Benefit. The Committee shall be entitled to direct the rollover based on its reasonable reliance on information provided by the Participant, and shall be not required to independently verify such information, unless it is clearly unreasonable not to do so.

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(c) At least thirty (30) days, but not more than ninety (90) days, prior to the date a Participant’s Distributable Benefit becomes payable, the Participant shall be given written notice of any right he may have to elect a direct rollover of the taxable portion of his Distributable Benefit to an eligible retirement plan. Notwithstanding the foregoing, a direct rollover of the Participant’s Distributable Benefit may be made less than thirty (30) days after receipt of the notice, provided that the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least thirty (30) days after receiving the notice to consider the decision of whether or not to elect a direct rollover and the Participant, after receiving the notice, affirmatively elects a direct rollover.

(d) If a Participant whose Distributable Benefit is subject to mandatory distribution without the Participant’s consent in accordance with Section 8.19 fails to file a direct rollover election with the Committee within ninety (90) days after notice is given, or if the Committee cannot effect the direct rollover election within a reasonable time after the election is filed due to the failure of the Participant to take such actions as may be required by the eligible retirement plan before it will accept the direct rollover, the Participant’s Distributable Benefit shall be paid to him after withholding applicable income taxes.

(d) If a Participant has made a direct rollover election with respect to any portion of his Distributable Benefit that is payable in Company Stock, as provided in Section 8.13, unless the eligible retirement plan specified by the Participant will accept a direct rollover of such Stock, the Stock will be distributed to the Participant, notwithstanding the Participant’s direct rollover election.

(e) To the extent required by Section 401(a)(31) of the Code, if all or a portion of a Participant’s Distributable Benefit is payable to the Participant’s surviving Spouse, or to a former Spouse in accordance with a “qualified domestic relations order,” such surviving Spouse or former Spouse shall be entitled to elect a direct rollover of all or a portion of such distribution in accordance with the provisions of this Section.

(f) Notwithstanding the foregoing, a Participant’s direct rollover shall not include any hardship withdrawal described in Section 8.6(d) of the Plan and Code Section 401(k)(2)(B), and the Participant may not elect to have any portion of such a distribution paid directly to an eligible retirement plan.

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8.9 Designation of Beneficiary.

(a) Subject to the provisions of Section 8.11, each Participant shall have the right to designate a Beneficiary or Beneficiaries to receive his interest in the Trust Fund in the event of his death before receipt of his entire interest in the Trust Fund. The designation shall be made on a form prescribed by and delivered to the Committee.

(b) Subject to the provisions of Section 8.11, a Participant shall have the right to change or revoke any such Beneficiary designation by filing a new designation or notice of revocation with the Committee. Subject to the provisions of Section 8.11, no notice to any Beneficiary nor consent by any Beneficiary shall be required to effect any such change or revocation.

(c) If (i) a Participant who is married designates the Participant’s spouse as the Participant’s Beneficiary or (ii) a Participant who is registered as a domestic partner or has obtained a civil union license with another individual (in either event, such individual is hereafter referred to as the Participant’s “Domestic Partner”) designates the Participant’s Domestic Partner as the Participant’s Beneficiary, and subsequent to such designation the Participant and the Participant’s spouse are divorced or the relationship between the Participant and the Participant’s Domestic Partner is legally dissolved, the designation of the Participant’s spouse or Domestic Partner as the Participant’s Beneficiary (as the case may be) shall become void and shall have no further legal force or effect from and after such divorce or dissolution. Should the Participant wish to designate a former spouse or Domestic Partner as his Beneficiary, he must affirmatively do so by completing a new Beneficiary designation form, after the date of his divorce or dissolution, naming his former spouse or Domestic Partner as his Beneficiary.

(d) If a deceased Participant shall have failed to designate a Beneficiary, the Company shall be unable to locate a designated Beneficiary after reasonable efforts have been made, for any reason the designation shall be legally ineffective, or the Participant’s Beneficiary shall have predeceased the Participant, then and in such event, the deceased Participant’s estate shall be the deceased Participant’s Beneficiary.

(e) In the event that the deceased Participant was not a resident of California at the date of his death, the Committee, in its discretion, may require the establishment of ancillary administration in California.

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8.10 Facility of Payment.

If any payee under the Plan is a minor or if the Committee reasonably believes that any payee is legally incapable of giving a valid receipt and discharge for any payment due him, the Committee may have the payment, or any part thereof, made to the person (or persons or institution) whom it reasonably believes is caring for or supporting the payee, unless it has received due notice of claim therefor from a duly appointed guardian or committee of the payee. Any payment shall be a payment from the Accounts of the payee and shall, to the extent thereof, be a complete discharge of any liability under the Plan to the payee.

8.11 Requirement of Spousal Consent.

Notwithstanding any Beneficiary designation submitted by a Participant, any distribution required to be made under the terms of the Plan by reason of the death of the Participant shall be paid in full to the Participant’s surviving spouse, unless there is no surviving spouse or the spouse consents in writing to the beneficiary designation, acknowledging the effect of the election. Any such spousal consent, to be valid, must be witnessed by a plan representative or a notary public. The spousal consent requirement of this Section 8.11 shall be waived and the Participant’s Beneficiary designation shall be made effective if the Participant establishes to the satisfaction of the Committee that the required consent cannot be obtained because there is no spouse or the spouse cannot be located.

8.12 Additional Documents.

(a) The Committee or Trustee, or both, may require the execution and delivery of such documents, papers and receipts as the Committee or Trustee may determine necessary or appropriate in order to establish the fact of death of the deceased Participant and of the right and identity of any Beneficiary or other person or persons claiming any benefits under this Article VIII.

(b) The Committee or the Trustee, or both, may, as a condition precedent to the payment of death benefits hereunder, require an inheritance tax release and/or such security as the Committee or Trustee, or both, may deem appropriate as protection against possible liability for state or federal death taxes attributable to any death benefits.

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8.13 Company Stock Distribution.

Payment of any portion of a Participant’s Distributable Benefit held in his Company Stock subaccount shall be paid in cash, unless the Participant elects in writing in accordance with procedures established by the Committee that payment shall be made in Company Stock in lieu of cash (which election may apply to a payment to the trustee of an “eligible retirement plan” in accordance with Section 8.8 but may not apply with respect to a withdrawal in accordance with Section 8.6). Within a reasonable period of time prior to the date such Participant’s Distributable Benefit is to be paid, the Committee shall notify the Participant of his right to elect to have payment of the value of his Company Stock subaccount made in the form of a Company Stock distribution in lieu of a cash distribution. Upon being so notified, the Participant shall have a reasonable time (at least thirty (30) days) in which to file a written election to have such payment made in Company Stock. Any such election shall be irrevocable. If a Participant fails to file a written election to receive an in kind payment of the value of the portion of his Distributable Benefit attributable to his Company Stock subaccount within thirty (30) days of receiving notification, payment shall be made in cash based on the value of such Company Stock as of the immediately following Valuation Date at the then prevailing purchase price. Neither the Company, the Committee, nor the Trustee shall be required to time the distribution or sale of Company Stock to anticipate fluctuations in the purchase price.

8.14 Valuation of Accounts.

(a) For purposes of determining a Participant’s Distributable Benefit under this Plan, the value of a Participant’s Accounts shall be determined in accordance with rules prescribed by the Committee, subject, however, to the following provisions:

(i) Unless the provisions of (ii) below apply, if a Participant’s employment terminates for any reason other than death, the value of a Participant’s Accounts shall be determined as of the Valuation Date coinciding with or next following the date on which a properly completed application for payment or transfer of the Participant’s Distributable Benefit, and such other forms as may be required by the Committee in order to process the distribution or transfer, are received by the Committee.

(ii) If a Participant’s employment terminates for any reason other than death and the Committee does not receive the Participant’s properly completed

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application for the payment or transfer of the Participant’s Distributable Benefit, and such other forms as may be required by the Committee to process the payment or transfer, and the vested value of such Participant’s Accounts at the applicable Valuation Date does not exceed $1,000, including that portion of the Participant’s Distributable Benefit that is attributable to the Participant’s Transfer/Rollover Account, or, prior to March 28, 2005, such value does not exceed $5,000 excluding that portion of the Participant’s Distributable Benefit that is attributable to the Participant’s Transfer/Rollover Account, then, in either of such events, the applicable Valuation Date shall be the Valuation Date coinciding with or next following the expiration of a reasonable period of time after the Participant is furnished with such application and forms, including any tax notice required under Code Section 402(f).

(ii) In the case of a Participant’s death, the value of a Participant’s Accounts for purposes of determining the Participant’s Distributable Benefit shall be determined as of the Valuation Date coinciding with or next following the date on which the Committee has been furnished with all documents and information (including but not limited to proof of death, facts demonstrating the identity and entitlement of any Beneficiary or other payee, and any and all releases) necessary to distribute such Participant’s Accounts.

(iii) In the case of any withdrawal or loan, the value of a Participant’s Accounts under the Plan shall be determined as of the Valuation Date coinciding with or next following the date on which the Participant submits a request for such withdrawal or loan in a form satisfactory to the Committee and the withdrawal or loan is approved.

(iv) The value of a Participant’s Accounts shall be increased or decreased (as appropriate) by any contributions, forfeitures, or distributions properly allocable under the terms of this Plan to his Accounts that occurred on or after the most recent Valuation Date or for any other reason were not otherwise reflected in the valuation of his Accounts on such Valuation Date.

(b) Neither the Committee, the Company, nor the Trustee shall have any responsibility for any increase or decrease in the value of a Participant’s Accounts as a

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result of any valuation made under the terms of this Plan after the date of his termination of employment and before the date of the distribution of his Accounts to him. Also, neither the Committee, the Company, nor the Trustee shall have any responsibility for failing to make any interim valuation of a Participant’s Accounts between the date of distribution to the Participant of his Accounts and the applicable Valuation Date, even though the Plan assets may have been revalued in that interim for a purpose other than to revalue the Accounts under this Plan.

8.15 Forfeitures; Repayment.

(a) Amounts forfeited in accordance with Section 8.5(d) shall be applied as soon as practicable to reduce future Company contributions.

(b) A Participant who elects to receive a distribution pursuant to Subsection 8.5(b) may, in the case of his reemployment as an Eligible Employee, repay the total amount distributed and shall in such case be fully restored in amounts forfeited in accordance with Section 8.5(d); provided, however, that no such repayment shall be permitted unless such repayment is made prior to the earlier of (i) the date the Participant incurs five (5) consecutive one-year Periods of Severance and (ii) the fifth anniversary of his Employment Commencement Date following the Period of Severance.

8.16 Loans.

(a) From time to time, the Committee may adopt procedures whereby a Participant may borrow from his Accounts under the Plan. In no event may any amount be borrowed by a Participant after he ceases to be an Eligible Employee. In addition to such other requirements as may be imposed by applicable law, any such loan shall bear a reasonable rate of interest, shall be adequately secured by proper collateral, and shall be repaid within a specified period of time according to a written repayment schedule that calls for substantially level amortization over the term of the loan.

(b) In connection with the requirements set forth in Subsection (a) above, the Committee shall establish the applicable interest rate, which shall be reasonably equivalent to interest rates available commercially with respect to similar loans. Without prejudice to the right of any Participant and the Trustee to enter into other appropriate arrangements to secure repayment of a loan pursuant to this Section 8.16, a loan to a Participant hereunder may be secured by an interest in the Participant’s vested interest in

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his Accounts under this Plan. Any loan shall by its terms require repayment within five (5) years in substantially level payments made no less frequently than quarterly, except that the repayment period may be up to a maximum of fifteen (15) years in the case of a loan certified by the Participant to be used to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as a principal residence of the Participant.

(c) In no event shall the principal amount of a loan hereunder, at the time the loan is made, together with the outstanding balance of all other loans to the Participant under this Plan, exceed the lesser of:

(i) fifty percent (50%) of the value of the Participant’s vested interest in his Accounts under this Plan, or

(ii) fifty thousand dollars ($50,000), reduced by the highest outstanding loan balance of the Participant from the Plan during the 1-year period ending on the day before the date on which such loan was made.

No loan less than two thousand dollars ($2,000) will be made. Unless otherwise determined by the Committee, no Participant may have more than one loan outstanding under this Plan on any date.

(d) Each Participant desiring to enter into a loan arrangement pursuant to this Section 8.16 shall apply for a loan by submitting a loan request in form satisfactory to the Committee. The Committee shall notify the Participant within a reasonable time whether the request is approved or denied. Upon approval of the request by the Committee, the Participant shall enter into a loan agreement with the Trustee. Such a Participant shall execute such further written agreements as may be necessary or appropriate to establish a bona fide debtor-creditor relationship between such Participant and the Trustee and to protect against the impairment of any security for said loan.

(e) Any loan made to a Participant shall be secured by a pro rata portion of his vested investment fund subaccounts, including any Company Stock subaccount. Repayments of a loan by a Participant shall be invested among the Participant’s investment fund subaccounts in accordance with the Participant’s investment election then in effect under Section 6.6(a)(i).

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(f) Loans shall be repaid in accordance with the repayment schedule provided under the terms of the loan agreement. Notwithstanding the repayment schedule provided in a loan agreement, however, the amount of any outstanding loan shall be due and payable on the earlier to occur of (a) the date on which distribution is made or commences to be made of the participant’s vested interest under the Plan or (b) the expiration of one hundred eighty (180) days following the date the Participant ceases to be an Employee. Following a Participant’s Severance Date, any outstanding loan amount which has become due and payable under the foregoing rule or otherwise, and which is secured by the Participant’s vested interest in his Accounts, shall be treated as distributed from the Plan to the Participant.

(g) In the event a Participant fails to repay a loan in accordance with the terms of a loan agreement, such loan shall be treated as in default. The date of the enforcement of the security interest due to a loan in default shall be determined by the Committee, provided no loss of principal or income shall result due to any delay in the enforcement of the security interest due to the default. As of the Participant’s Severance Date, the Participant’s Distributable Benefit shall be reduced by the outstanding amount of a loan which is then in default, including any accrued interest thereon, that is secured by the Participant’s vested interest in his Accounts. Any reasonable costs related to collection of a loan made hereunder shall be borne by the Participant.

(h) To the extent required to comply with the requirements of Section 401(a)(4) of the Internal Revenue Code, loans hereunder shall be made in a uniform and non-discriminatory manner.

8.17 Special Rule for Disabled Employees.

(a) Subsection 8.17(b) shall apply to any Participant whose active performance of services for a Participating Company has ceased by reason of disability, and who has not subsequently resumed the active performance of such services.

(b) In the case of a Participant to whom this Section 8.17(b) applies, so long as such Participant continues to receive Compensation from a Participating Company, but in no event for longer than a period of six (6) months commencing with the date of such Participant’s cessation of active service, such Participant may continue to participate in this Plan in the same manner as any other Participant.

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(c) For purposes of this Plan, a Participant shall not be deemed to have terminated employment prior to his ceasing to be eligible for contributions under this Section 8.17, and upon such cessation of eligibility shall be deemed to have terminated employment only if he did not then begin or recommence employment for the Company or an Affiliated Company.

8.18 Provision for Small Benefits.

Notwithstanding anything in this Article to the contrary, a Participant who terminates employment with the Company and all Affiliated Companies shall receive a distribution of his Distributable Benefit in a single lump sum payment no later than sixty (60) days after the close of the Plan Year in which the Participant’s termination of employment occurs to the extent administratively feasible, provided that the value of such Distributable Benefit (including that portion of the Participant’s Distributable Benefit that is attributable to the Participant’s Transfer/Rollover Account) is equal to or less than $1,000, or for distributions made before March 28, 2005, the value of such Distributable Benefit (excluding that portion of the Participant’s Distributable Benefit that is attributable to the Participant’s Transfer/Rollover Account) is equal to or less than $5,000, determined as of the Valuation Date coincident with or immediately preceding his termination of employment. Such distribution shall be made directly to the Participant after withholding applicable income taxes unless the Participant elects a direct rollover to an “eligible retirement plan” as provided in Section 8.8.

ARTICLE IX

OPERATION AND ADMINISTRATION OF THE PLAN

9.1 Plan Administration.

(a) Authority to control and manage the operation and administration of the Plan shall be vested in a committee (“Committee”) as provided in this Article IX.

(b) The members of the Committee shall be appointed by the Governance Committee and shall hold office until resignation, death or removal by the Governance Committee.

(c) For purposes of ERISA Section 402(a), the members of the Committee shall be the named fiduciaries of this Plan.

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(d) The Secretary of the Committee shall cause to be attached to the copy of the Plan maintained in the office of the Committee for the purpose of inspection an accurate schedule listing the names of all persons from time to time serving as the members of the Committee.

(e) Notwithstanding the foregoing, a Trustee with whom Plan assets have been placed in trust or an Investment Manager appointed pursuant to Section 9.3 may be granted exclusive authority and discretion to manage and control all or any portion of the assets of the Plan.

9.2 Committee Powers.

The Committee shall have all powers and discretion necessary to provide overall guidance with respect to the maintenance and administration of the Plan and control its operations. In addition to any powers and authority conferred on the Committee elsewhere in the Plan or by law, the Committee shall have, by way of illustration but not by way of limitation, the following powers and authority:

(a) To allocate fiduciary responsibilities (other than trustee responsibilities) among the Committee members and to designate one or more other persons to carry out fiduciary responsibilities (other than trustee responsibilities). However, no allocation or delegation under this Section 9.2(a) shall be effective until the person or persons to whom the responsibilities have been allocated or delegated agree to assume the responsibilities. The term “trustee responsibilities” as used herein shall have the meaning set forth in Section 405(c) of ERISA. The preceding provisions of this Section 9.2(a) shall not limit the authority of the Committee to appoint one or more Investment Managers in accordance with Section 9.3.

(b) To designate agents to carry out responsibilities relating to the Plan, other than fiduciary responsibilities.

(c) To employ such legal, actuarial, medical, accounting, clerical and other assistance as it may deem appropriate in carrying out the provisions of this Plan, including one or more persons to render advice with regard to any responsibility any members of the Committee or any other fiduciary may have under the Plan.

(d) To review and approve the appointment and removal of the Trustees, Custodians and Investment Managers for the Plan.

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(e) To establish rules and regulations from time to time for the conduct of the Committee’s business and the administration and effectuation of this Plan.

(f) To administer, interpret, construe and apply this Plan in its discretion and to decide all questions which may arise or which may be raised under this Plan by any Employee, Participant, former Participant, Beneficiary or other person whatsoever, including but not limited to all questions relating to eligibility to participate in the Plan, the amount of service of any Participant, and the amount of benefits to which any Participant or his Beneficiary may be entitled by reason of his service prior to or after the Effective Date hereof.

(g) To determine the manner in which the assets of this Plan, or any part thereof, shall be disbursed.

(h) To direct the Trustee, in writing, from time to time, to invest and reinvest the Trust Fund, or any party thereof, or to purchase, exchange, or lease any property, real or personal, which the Committee may designate. This shall include the right to direct the investment of all or any part of the Trust in any one security or any one type of securities permitted hereunder. Among the securities which the Committee may direct the Trustee to purchase are “employer securities” as defined in Code Section 409A(1) or any successor statute thereto.

(i) To take such further action as is necessary to have the Plan comply with Section 414(u) of the Code (regarding the reemployment of military veterans), and in such regard, and notwithstanding any provision of the Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided no less favorably than is required by Section 414(u) of the Code.

(j) To adopt and implement such rules regarding a Participant’s ability to direct the investment, reinvestment and transfer of his Account among the investment alternatives available under the Plan, including but not limited to restricting the frequency or timing of trades in or out of one or more investment alternatives by a Participant, to the extent the Committee deems necessary or appropriate to limit or prevent harm to other Participant Accounts, to comply with the policies and procedures of the investment alternatives, to ensure that the Plan and Participant transactions thereunder are administered in compliance with applicable laws (including insider trading, market

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timing and related rules) or to otherwise provide for the efficient and effective administration of the Plan.

(j) To establish rules and procedures relating to Participant elections under the Plan, including Compensation reduction elections under Article V, distributions elections under Article VIII and investment elections under Article IV, and the Committee in its discretion may employ one or more persons or entities to provide advice or other assistance to Participants in making their said investment elections.

(k) To ensure that contributions (and the allocations thereof) do not exceed the limitations thereon set forth in the Plan.

(l) To authorize all disbursements by the Trustee except for the ordinary expenses of administration of the Trust.

(m) To take such action as it deems necessary and administratively feasible, including the prosecution of lawsuits, to collect from any Participant, Beneficiary or other person or entity (including without limitation the estate or heirs of a deceased Participant) any erroneous benefit payments or other amounts paid by the Plan in excess of the benefits provided for in the Plan.

(n) With respect to any Participant who is or may become subject to the reporting and short-swing profit recovery provisions of Section 16 of the Securities Exchange Act of 1934, to take any action necessary or appropriate to ensure that any transaction with respect to the portion of the Participant’s Accounts invested in Common Stock complies with all applicable conditions of Rule 16b-3 promulgated under Section 16 (or its successor), including modifying or limiting the Participant’s elections under the Plan that directly or indirectly affect Account investments or other transactions in Common Stock.

(o) To modify or supplement any Plan accounting method, practice or procedure, make any adjustments to Accounts, authorize special contributions, or modify or supplement any other aspect of the operation or administration of the Plan in such manner and to such extent consistent with and permitted by the Act and the Code that the Committee deems necessary or appropriate to correct errors and mistakes, to effect proper and equitable Account adjustments or otherwise to ensure the proper and appropriate administration and operations of the Plan.

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Any action taken in good faith by the Committee in the exercise of authority conferred upon it by this Plan shall be conclusive and binding upon the Participants and their Beneficiaries. All discretionary powers conferred upon the Committee shall be absolute.

9.3 Investment Manager.

(a) The Committee, by action reflected in the minutes thereof, may appoint one or more Investment Managers, as defined in Section 3(38) of ERISA, to manage all or a portion of the assets of the Plan.

(b) An Investment Manager shall discharge its duties in accordance with applicable law and in particular in accordance with Section 404(a)(1) of ERISA.

(c) An Investment Manager, when appointed, shall have full power to manage the assets of the Plan for which it has responsibility, and neither the Company nor the Committee Shall thereafter have any responsibility for the management of those assets.

(d) The Committee shall monitor the performance of any Investment Manager.

9.4 Periodic Review.

(a) If deemed appropriate by the Committee, the Committee shall adopt an investment policy statement for the investment and reinvestment of the assets of the Plan.

(b) All actions taken by the Committee with respect to the investment policy of the Plan, including the reasons therefor, shall be fully reflected in the minutes of the Committee.

9.5 Committee Procedure.

(a) A majority of the members of the Committee as constituted at any time shall constitute a quorum, and any action by a majority of the members present at any meeting, or authorized by a majority of the members in writing without a meeting, shall constitute the action of the Committee.

(b) The Committee may designate certain of its members as authorized to execute any document or documents on behalf of the Committee, in which event the Committee shall notify the Trustee of this action and the name or names of the designated members. The Trustee, Company, Participants, Beneficiaries, and any other party

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dealing with the Committee may accept and rely upon any document executed by the designated members as representing action by the Committee until the Committee shall file with the Trustee a written revocation of the authorization of the designated members.

9.6 Compensation of Committee.

(a) Members of the Committee shall serve without compensation unless the Board of Directors shall otherwise determine. However, in no event shall any member of the Committee who is an Employee receive compensation from the Plan for his services as a member of the Committee.

(b) All members shall be reimbursed for any necessary or appropriate expenditures incurred in the discharge of duties as members of the Committee.

(c) The compensation or fees, as the case may be, of all officers, agents, counsel, the Trustee, or other persons retained or employed by the Committee shall be fixed by the Committee.

9.7 Resignation and Removal of Members.

Any member of the Committee may resign at any time by giving written notice to the other members and to the Governance Committee effective as therein stated. Any member of the Committee may, at any time, be removed by the Governance Committee.

9.8 Appointment of Successors.

(a) Upon the death, resignation, or removal of any Committee member, the Governance Committee may appoint a successor.

(b) Notice of appointment of a successor member shall be given in writing to the Trustee and to the members of the Committee.

(c) Upon termination, for any reason, of a Committee member’s status as a member of the Committee, the member’s status as a Named Fiduciary shall concurrently be terminated, and upon the appointment of a successor Committee member the successor shall assume the status of a Named Fiduciary as provided in Section 9.1.

9.9 Records.

(a) The Committee shall keep a record of all its proceedings and shall keep, or cause to be kept, all such books, accounts, records or other data as may be necessary or advisable in its judgment for the administration of the Plan and to properly reflect the affairs thereof.

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(b) However, nothing in this Section 9.9 shall require the Committee or any member thereof to perform any act which, pursuant to law or the provisions of this Plan, is the responsibility of the Plan Administrator, nor shall this Section relieve the Plan Administrator from such responsibility.

9.10 Reliance Upon Documents and Opinions.

(a) The members of the Committee, the Board of Directors, the Governance Committee, the Company and any person delegated under the provisions hereof to carry out any fiduciary responsibilities under the Plan (“delegated fiduciary”), shall be entitled to rely upon any tables, valuations, computations, estimates, certificates and reports furnished by any consultant, or firm or corporation which employs one or more consultants, upon any opinions furnished by legal counsel, and upon any reports furnished by the Trustee. The members of the Committee, the Board of Directors, the Governance Committee, the Company and any delegated fiduciary shall be fully protected and shall not be liable in any manner whatsoever for anything done or action taken or suffered in reliance upon any such consultant or firm or corporation which employs one or more consultants, Trustee, or counsel.

(b) Any and all such things done or actions taken or suffered by the Committee, the Board of Directors, the Governance Committee, the Company and any delegated fiduciary shall be conclusive and binding on all Employees, Participants, Beneficiaries, and any other persons whomsoever, except as otherwise provided by law.

(c) The Committee and any delegated fiduciary may, but are not required to, rely upon all records of the Company with respect to any matter or thing whatsoever, and may likewise treat those records as conclusive with respect to all Employees, Participants, Beneficiaries, and any other persons whomsoever, except as otherwise provided by law.

9.11 Requirement of Proof.

The Committee or the Company may require satisfactory proof of any matter under this Plan from or with respect to any Employee, Participant, or Beneficiary, and no person shall acquire any rights or be entitled to receive any benefits under this Plan until the required proof shall be furnished.

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9.12 Reliance on Committee Memorandum.

Any person dealing with the Committee may rely on and shall be fully protected in relying on a certificate or memorandum in writing signed by any Committee member or other person so authorized, or by the majority of the members of the Committee, as constituted as of the date of the certificate or memorandum, as evidence of any action taken or resolution adopted by the Committee.

9.13 Multiple Fiduciary Capacity.

Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan.

9.14 Limitation on Liability.

(a) Except as provided in Part 4 of Title I of ERISA, no person shall be subject to any liability with respect to his duties under the Plan unless he acts fraudulently or in bad faith.

(b) No person shall be liable for any breach of fiduciary responsibility resulting from the act or omission of any other fiduciary or any person to whom fiduciary responsibilities have been allocated or delegated, except as provided in Part 4 of Title I of ERISA.

(c) No action or responsibility shall be deemed to be a fiduciary action or responsibility except to the extent required by ERISA.

9.15 Indemnification.

(a) To the extent permitted by law, the Company shall indemnify each member of the Board of Directors and the Committee, and any other Employee of the Company with duties under the Plan, against expenses (including any amount paid in settlement) reasonably incurred by him in connection with any claims against him by reason of his conduct in the performance of his duties under the Plan, except in relation to matters as to which he acted fraudulently or in bad faith in the performance of such duties. The preceding right of indemnification shall pass to the estate of such a person.

(b) The preceding right of indemnification shall be in addition to any other right to which the Board member or Committee member or other person may be entitled as a matter of law or otherwise.

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9.16 Allocation of Fiduciary Responsibility.

(a) Part 4 of Title I of ERISA permits the division, allocation and delegation between Plan fiduciaries of the fiduciary responsibilities owed to the Plan Participants. Under this concept, each fiduciary, including a Named Fiduciary, is accountable only for his own functions, except to the extent of his co-fiduciary liability under Section 405 of ERISA.

(b) Under the preceding provisions of this Article IX, the day-to-day operational, administrative and investment aspects of the Plan have been delegated to the Committee. Except to the extent expressly provided to the contrary in the Plan document, the responsibilities delegated to the Committee include, by way of illustration but not by way of limitation, such matters as:

(i) Satisfying accounting and auditing requirements;

(ii) Satisfying insurance and bonding requirements;

(iii) Administering the Plan’s claims procedure; and

(iv) Appointing Investment Managers.

9.17 Bonding.

(a) Except as is prescribed by the Board of Directors, as provided in Section 412 of ERISA, or as may be required under any other applicable law, no bond or other security shall be required by any member of the Committee, or any other fiduciary under this Plan.

(b) Notwithstanding the foregoing, for purposes of satisfying its indemnity obligations under Section 9.15, the Company may (but need not) purchase and pay premiums for one or more policies of insurance. However, this insurance shall not release the Company of its liability under the indemnification provisions.

9.18 Prohibition Against Certain Actions.

(a) To the extent prohibited by law, in administering this Plan the Committee shall not discriminate in favor of any class of Employees and particularly it shall not discriminate in favor of highly compensated Employees, or Employees who are officers or shareholders of the Company.

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(b) The Committee shall not cause the Plan to engage in any transaction that constitutes a nonexempt prohibited transaction under Section 4975(c) of the Code or Section 406(a) of ERISA.

(c) All individuals who are fiduciaries with respect to the Plan (as defined in Section 3(21) of ERISA) shall discharge their fiduciary duties in accordance with applicable law, and in particular, in accordance with the standards of conduct contained in Section 404 of ERISA.

9.19 Plan Expenses.

(a) All expenses incurred in the establishment, administration and operation of the Plan, including but not limited to the expenses incurred by the members of the Committee in exercising their duties, shall be charged to the Trust Fund and allocated to Participants Accounts as determined by the Committee, but shall be paid by the Company if not paid by the Trust Fund.

(b) Notwithstanding the foregoing, the cost of interest and normal brokerage charges which are included in the cost of securities purchased by the Trust Fund (or charged to proceeds in the case of sales) or other charges relating to specific assets of the Plan shall be charged and allocated in a fair and equitable manner to the Accounts to which the securities (or other assets) are allocated.

ARTICLE X

SPECIAL PROVISIONS

CONCERNING COMPANY STOCK

10.1 Securities Transactions.

Subject to the limitations of Section 6.6(a)iv, the Trustee shall acquire Company Stock in the open market or from the Company or any other person, including a party in interest, pursuant to a Participant’s election to invest any Company contributions on his behalf (including Before-Tax Contributions), or Participant After-Tax Contributions, in the Company Stock alternative established by the Committee in accordance with Section 6.6, or to transfer amounts held in other investment alternatives to such Company Stock alternative. No commission will be paid in connection with the Trustee’s acquisition of Company Stock from a party in interest.

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Pending acquisition of Company Stock and pursuant to a Participant’s investment election, elected amounts shall be allocated to the Participant’s Company Stock subaccount in cash and may be invested in any short-term interest fund of the Trustee. Neither the Company, nor the Committee, nor any Trustee have any responsibility or duty to time any transaction involving Company Stock in order to anticipate market conditions or changes in Company Stock value. Neither the Company, nor the Committee nor any Trustee have any responsibility or duty to sell Company Stock held in the Trust Fund in order to maximize return or minimize loss.

10.2 Valuation of Company Securities.

When it is necessary to value Company Stock held by the Plan, the value will be the current fair market value of the Company Stock, determined in accordance with applicable legal requirements.

If the Company Stock is publicly traded, fair market value will be based on the most recent closing price in public trading, as reported in The Wall Street Journal or any other publication of general circulation designated by the Committee, unless another method of valuation is required by the standards applicable to prudent fiduciaries.

If the Company Stock cannot be valued on the basis of its closing price in recent public trading, fair market value will be determined by the Company in good faith based on all relevant factors for determining the fair market value of securities. Relevant factors include an independent appraisal by a person who customarily makes such appraisals, if an appraisal of the fair market value of the Company Stock as of the relevant date was obtained.

In the case of a transaction between the Plan and a party in interest, the fair market value of the Company Stock must be determined as of the date of the transaction rather than as of some other Valuation Date occurring before or after the transaction. In other cases, the fair market value of the Company Stock will be determined as of the most recent Valuation Date.

10.3 Allocation of Stock Dividends and Splits.

Company Stock received by the Trust as a result of a Company Stock split or Company Stock dividend on Company Stock held in Participants’ Accounts will be allocated as of the Valuation Date coincident with or following the date of such split or dividend, to each Participant who has such an Account. The amount allocated will bear substantially the same proportion to the total number of shares received as the number of shares in the Participant’s

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Account bears to the total number of shares allocated to such Accounts of all Participants immediately before the allocation. The shares will be allocated to the nearest thousandth of a share.

10.4 Reinvestment of Dividends.

Upon direction of the Committee, cash dividends may be reinvested as soon as practicable by the Trustee in shares of Company Stock for Participants’ Accounts. Cash dividends may be reinvested in Company Stock purchased as provided in Section 10.1 or purchased from the Accounts of Participants who receive cash distributions of a fractional share or a fractional interest therein.

10.5 Voting of Company Stock.

The Trustee shall have no discretion or authority to vote Company Stock held in the Trust on any matter presented for a vote by the stockholders of the Company except in accordance with timely directions received by the Trustee from Participants, unless otherwise required by applicable law.

(a) Each Participant shall be entitled to direct the Trustee as to the voting of all Company Stock allocated and credited to his Account.

(b) All Participants entitled to direct such voting shall be notified by the Company, pursuant to its normal communications with shareholders, of each occasion for the exercise of such voting rights within a reasonable time before such rights are to be exercised. Such notification shall include all information distributed to shareholders either by the Company or any other party regarding the exercise of such rights. If a Participant shall fail to direct the Trustee as to the exercise of voting rights arising under any Company Stock credited to his Accounts, or if any Company Stock held in the Plan has not been allocated to Participants’ Accounts, the Trustee shall not be required to vote such Company Stock except as otherwise required by applicable law. The Trustee shall maintain confidentiality with respect to the voting directions of all Participants.

(c) Each Participant shall be a Named Fiduciary (as that term is defined in ERISA Section 402(a)(2)) with respect to Company Stock for which he has the right to direct the voting under the Plan but solely for the purpose of exercising voting rights pursuant to this Section 10.5.

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10.6 Confidentiality Procedures.

The Committee shall establish procedures intended to ensure the confidentiality of information relating to Participant transactions involving Company Stock, including the exercise of voting, tender and similar rights. The Committee shall also be responsible for ensuring the adequacy of the confidentiality procedures and monitoring compliance with such procedures. The Committee may, in its sole discretion, appoint an independent fiduciary to carry out any activities that it determines involve a potential for undue Company influence on Participants with respect to the exercise of their rights as shareholders.

10.7 Securities Law Limitation.

Neither the Committee nor the Trustee shall be required to engage in any transaction, including, without limitation, directing the purchase or sale of Company Stock, which it determines in its sole discretion might tend to subject itself, its members, the Plan, the Company, or any Participant or Beneficiary to a liability under federal or state securities laws.

ARTICLE XI

MERGER OF COMPANY; MERGER OF PLAN

11.1 Effect of Reorganization or Transfer of Assets.

In the event of a consolidation, merger, sale, liquidation, or other transfer of the operating assets of the Company to any other company, the ultimate successor or successors to the business of the Company shall automatically be deemed to have elected to continue this Plan in full force and effect, in the same manner as if the Plan had been adopted by resolution of its board of directors, unless the successor(s), by resolution of its board of directors, shall elect not to so continue this Plan in effect, in which case the Plan shall automatically be deemed terminated as of the applicable effective date set forth in the board resolution.

11.2 Merger Restriction.

Notwithstanding any other provision in this Article, this Plan shall not in whole or in part merge or consolidate with, or transfer its assets or liabilities to any other plan unless each affected Participant, in this Plan would receive a benefit immediately after the merger, consolidation, or transfer (if the Plan then terminated) which is equal to or greater than the

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benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had then terminated).

ARTICLE XII

PLAN TERMINATION AND

DISCONTINUANCE OF CONTRIBUTIONS

12.1 Plan Termination.

(a) (i) Subject to the following provisions of this Section 12.1, the Company may terminate the Plan and the Trust Agreements at any time, following authorization from the Board of Directors or any committee delegated such authority by the Board, by an instrument in writing executed in the name of the Company by an officer or officers duly authorized to execute such an instrument, and delivered to the Trustee.

(ii) The Plan and Trust Agreements may terminate if the Company merges into any other corporation, if as the result of the merger the entity of the Company ceases, and the Plan is terminated pursuant to the rules of Section 11.1.

(b) Upon and after the effective date of the termination, the Company shall not make any further contributions under the Plan and no contributions need be made by the Company applicable to the Plan Year in which the termination occurs, except as may otherwise be required by law.

(c) The rights of all affected Participants to benefits accrued to the date of termination of the Plan, to the extent funded as of the date of termination, shall automatically become fully vested as of that date.

12.2 Discontinuance of Contributions.

(a) In the event the Company decides it is impossible or inadvisable for business reasons to continue to make contributions under the Plan, the Company by resolution of the Board of Directors, or any committee delegated such authority by the Board of Directors may discontinue contributions to the Plan. Upon and after the effective date of this discontinuance, no Participating Company or Participant shall make

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any further contributions under the Plan and no contributions need be made by a Participating Company with respect to the Plan Year in which the discontinuance occurs, except as may otherwise be required by law. A Participant shall be released from any salary reduction agreement under the Plan as of the effective date of a discontinuance of contributions.

(b) The discontinuance of contributions on the part of the Company shall not terminate the Plan as to the funds and assets then held by the Trustee, or operate to accelerate any payments of distributions to or for the benefit of Participants or Beneficiaries, and the Trustee shall continue to administer the Trust Fund in accordance with the provisions of the Plan until all of the obligations under the Plan shall have been discharged and satisfied.

(c) However, if this discontinuance of contributions shall cause the Plan to lose its status as a qualified plan under Code Section 401(a), the Plan shall be terminated in accordance with the provisions of this Article XII.

(d) On and after the effective date of a discontinuance of contributions, the rights of all affected Participants to benefits accrued to that date, to the extent funded as of that date, shall automatically become fully vested as of that date.

12.3 Rights of Participants.

In the event of the termination of the Plan, for any cause whatsoever, all assets of the Plan, after payment of expenses, shall be used for the exclusive benefit of Participants and their Beneficiaries and no part thereof shall be returned to the Company, except as provided in Section 6.7 of this Plan.

12.4 Trustee’s Duties on Termination.

(a) On or before the effective date of termination of this Plan, the Trustee shall proceed as soon as possible, but in any event within six months from the effective date, to reduce all of the assets of the Trust Fund to cash and other securities in such proportions as the Committee shall determine (after approval by the Internal Revenue Service, if necessary or desirable, with respect to any portion of the assets of the Trust Fund held in common stock or securities of the Company).

(b) After first deducting the estimated expenses for liquidation and distribution chargeable to the Trust Fund, and after setting aside a reasonable reserve for

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expenses and liabilities (absolute or contingent) of the Trust, the Committee shall make required allocations of items of income and expense to the Accounts.

(c) Following these allocations, the Trustee shall promptly, after receipt of appropriate instructions from the Committee, distribute in accordance with Section 8.7 to each former Participant in Company stock or cash an amount equal to the amount credited to his Accounts as of the date of completion of the liquidation.

(d) The Trustee and the Committee shall continue to function as such for such period of time as may be necessary for the winding up of this Plan and for the making of distributions in accordance with the provisions of this Plan.

(e) Notwithstanding the foregoing, distributions to Participants upon Plan termination in accordance with this Section 12.4 shall only be made if a “successor plan,” within the meaning of regulations under Code Section 401(k)(10), is not established. In the event a “successor plan” is established prior to or subsequent to the termination of the Plan, the Committee shall direct the Trustee to continue to hold any assets of the Trust Fund not payable upon the termination until such assets may, at the direction of the Committee, be transferred to and held in the successor plan until distributable under the terms of that successor plan.

12.5 Partial Termination.

(a) In the event of a partial termination of the Plan within the meaning of Code Section 411(d)(3), the interests of affected Participants in the Trust Fund, as of the date of the partial termination, shall become nonforfeitable as of that date.

(b) That portion of the assets of the Plan affected by the partial termination shall be used exclusively for the benefit of the affected Participants and their Beneficiaries, and no part thereof shall otherwise be applied.

(c) With respect to Plan assets and Participants affected by a partial termination, the Committee and the Trustee shall follow the same procedures and take the same actions prescribed in this Article XII in the case of a total termination of the Plan.

12.6 Failure to Contribute.

The failure of a Participating Company to contribute to the Trust in any year, if contributions are not required under the Plan for that year, shall not constitute a complete discontinuance of contributions to the Plan.

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ARTICLE XIII

APPLICATION FOR BENEFITS

13.1 Application for Benefits.

The Committee may require any person claiming benefits under the Plan to submit an application therefor, together with such documents and information as the Committee may require. In the case of any person suffering from a disability which prevents the claimant from making personal application for benefits, the Committee may, in its discretion, permit another person acting on his behalf to submit the application.

13.2 Action on Application.

(a) Within ninety days following receipt of an application and all necessary documents and information, the Committee’s authorized delegate reviewing the claim shall furnish the claimant with written notice of the decision rendered with respect to the application.

(b) In the case of a denial of the claimant’s application, the written notice shall set forth:

(i) The specific reasons for the denial, with reference to the Plan provisions upon which the denial is based;

(ii) A description of any additional information or material necessary for perfection of the application (together with an explanation why the material or information is necessary); and

(iii) An explanation of the Plan’s claim review procedure and the claimant’s right to bring civil action under federal law following a denial on appeal.

(c) A claimant who wishes to contest the denial of his application for benefits or to contest the amount of benefits payable to him shall follow the procedures for an appeal of benefits as set forth in Section 13.3 below, and shall exhaust such administrative procedures prior to seeking any other form of relief.

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13.3 Appeals.

(a) (i) A claimant who does not agree with the decision rendered with respect to his application may appeal the decision to the Committee.

(ii) The appeal shall be made, in writing, within sixty days after the date of notice of the decision with respect to the application.

(iii) If the application has neither been approved nor denied within the ninety day period provided in Section 13.2 above, then the appeal shall be made within sixty days after the expiration of the ninety day period.

(b) The claimant may request that his application be given full and fair review by the Committee. The claimant may review all pertinent documents and submit issues and comments in writing in connection with the appeal.

(c) The decision of the Committee shall be made promptly, and not later than sixty days after the Committee’s receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than one hundred twenty days after receipt of a request for review.

(d) The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant with specific reference to the pertinent Plan provisions upon which the decision is based and shall include a statement that the claimant is entitled to receive upon request and free of charge, reasonable access to, or copies of, all documents, records or other information relevant to the Committee’s decision and a statement of the claimant’s right to bring civil action.

ARTICLE XIV

LIMITATIONS ON CONTRIBUTIONS

14.1 General Rule.

(a) Except to the extent permitted under Section 5.2(d) of the Plan and Section 414(v) of the Code, the total Annual Additions under this Plan to a Participant’s Plan Accounts shall not exceed the lesser of:

(i) Forty Thousand Dollars ($40,000) (as adjusted for increases in the cost-of-living under Section 415(d) of the Code), or

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(ii) one hundred percent (100%) of the Participant’s total Compensation from the Company and any Affiliated Companies for the year, excluding amounts otherwise treated as Annual Additions under Section 14.2.

The limitation in Section 14.1(a)(ii) shall not apply to any contribution for medical benefits after separation from Service (within the meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition.

(b) For purposes of this Article XIV, the Company has elected a “Limitation Year” corresponding to the Plan Year.

14.2 Annual Additions.

For purposes of Section 14.1, the term “Annual Additions” shall mean, for any Limitation Year, the sum of:

(a) the amount credited to the Participant’s Accounts from Company contributions for such Limitation Year;

(b) any Employee contributions for the Limitation Year; and

(c) any amounts described in Section 415(1)(1) or 419(A)(d)(2) of the Code.

14.3 Other Defined Contribution Plans.

If the Company or an Affiliated Company is contributing to any other defined contribution plan (as defined in Section 415(k) of the Code) for its Employees, some or all of whom may be Participants in this Plan, then contributions to the other plan shall be aggregated with contributions under this Plan for the purposes of applying the limitations of Section 14.1.

14.4 Adjustments for Excess Annual Additions.

In general, the amount of excess for any Limitation Year under this Plan and any other defined contribution plan (as defined in Code Section 414(i)) or defined benefit plan (as defined in Code Section 414(j)) maintained by the Company or an Affiliated Company will be determined so as to avoid Annual Additions in excess of the limitations set forth in Sections 14.1 through 14.3. However, if as a result of an administrative error, the Annual Additions to a Participant’s Accounts under this Plan (after giving effect to the maximum permissible adjustments under the other plans) would exceed the applicable limitations described in Sections 14.1 through 14.3, the excess amount shall be subject to this Section 14.4.

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(a) If the Participant made any after-tax contributions to this or any other defined contribution plan that is maintained by the Company or an Affiliated Company, which after-tax contributions were not matched by matching contributions, within the meaning of Code Section 401(m), such after-tax contributions and any earnings thereon shall be returned to the Participant to the extent of any excess Annual Additions.

(b) If excess Annual Additions remain after the application of the above rule, if the Participant made any Before-Tax Contributions for the Plan Year to this or any other defined contribution plan that is maintained by the Company or an Affiliated Company, which Before-Tax Contributions were not matched by matching contributions, within the meaning of Code Section 401(m), Before-Tax Contributions and any earnings thereon shall be returned to the Participant to the extent of any excess Annual Additions.

(c) If excess Annual Additions remain after the application of the above rule, if the Participant made any after-tax contributions for the Plan Year to this or any other defined contribution plan that is maintained by the Company or an Affiliated Company, which after-tax contributions were matched by matching contributions, within the meaning of Code Section 401(m), any such after-tax contributions and any earnings thereon shall be returned to the Participant and any matching contributions attributable thereto shall be reduced to the extent necessary to eliminate any remaining excess Annual Additions.

(d) If excess Annual Additions remain after the application of the above rule, if the Participant made any Before-Tax Contributions for the Plan Year to this or any other defined contribution plan that is maintained by the Company or an Affiliated Company, which Before-Tax Contributions were matched by matching contributions, within the meaning of Code Section 401(m), any such Before-Tax Contributions and any earnings thereon shall be returned to the Participant and any matching contributions attributable thereto shall be reduced to the extent necessary to eliminate any remaining excess Annual Additions.

(e) If excess Annual Additions remain after the application of the above rule, any other Company contributions for the Plan Year shall be reduced to the extent necessary to eliminate any remaining excess Annual Additions.

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14.5 Disposition of Excess Amounts.

Any excess amounts contributed by a Participating Company on behalf of a Participant for any Plan Year (other than Before-Tax Contributions) shall be held unallocated in a suspense account for the Plan Year and applied, to the extent possible, first to reduce the Participating Company contributions for the Plan Year, and next, to reduce the Participating Company contributions for the succeeding Plan Year, or Years, if necessary. No investment gains or losses shall be allocated to a suspense account.

14.6 Affiliated Company.

For purposes of this Article XIV, the status of an entity as an Affiliated Company shall be determined by reference to the percentage tests set forth in Code Section 415(h).

ARTICLE XV

RESTRICTION ON ALIENATION

15.1 General Restrictions Against Alienation.

(a) The interest of any Participant or Beneficiary in the income, benefits, payments, claims or rights hereunder, or in the Trust Fund shall not in any event be subject to sale, assignment, hypothecation, or transfer. Each Participant and Beneficiary is prohibited from anticipating, encumbering, assigning, or in any manner alienating his or her interest under the Trust Fund, and is without power to do so, except as may otherwise be provided for in the Trust Agreement. The interest of any Participant or Beneficiary shall not be liable or subject to his debts, liabilities, or obligations, now contracted, or which may be subsequently contracted. The interest of any Participant or Beneficiary shall be free from all claims, liabilities, bankruptcy proceedings, or other legal process now or hereafter incurred or arising; and the interest or any part thereof, shall not be subject to any judgment rendered against the Participant or Beneficiary.

(b) In the event any person attempts to take any action contrary to this Article XV, that action shall not be effective, and all Participants and their Beneficiaries, may disregard that action and shall not suffer any liability for any disregard of that action, and shall be reimbursed on demand out of the Trust Fund for the amount of any loss, cost or expense incurred as a result of disregarding or of acting in disregard of that action.

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(c) The preceding provisions of this Section 15.1 shall be interpreted and applied by the Committee in accordance with the requirements of Code Section 401(a)(13) as construed and interpreted by authoritative judicial and administrative rulings and regulations.

(d) The provisions of Subsections 15.1(a) and 15.1(b) are expressly subject to qualified domestic relations orders, as provided in Code Section 401(a)(13)(B).

15.2 Nonconforming Distributions Under Court Order.

(a) In the event that a court with jurisdiction over the Plan and the Trust Fund shall issue an order or render a judgment requiring that all or part of a Participant’s interest under the Plan and in the Trust Fund be paid to a spouse, former spouse and/or children of the Participant by reason of or in connection with the marital dissolution and/or marital separation of the Participant and the spouse, and/or some other similar proceeding involving marital rights and property interests, then notwithstanding the provisions of Section 15.1 the Committee may, in its absolute discretion, direct the applicable Trustee to comply with that court order or judgment and distribute assets of the Trust Fund in accordance therewith. Pending distribution to an alternate payee of any portion of a Participant’s vested interest in the Trust Fund, pursuant to a court order or judgment, such portion shall be segregated and invested in accordance with rules prescribed by the Committee, and neither the Participant nor the alternate payee shall be entitled to make an election with respect to the investment of such segregated portion.

(b) The Committee’s decision with respect to compliance with any such court order or judgment shall be made in its absolute discretion and shall be binding upon the Trustee and all Participants and their Beneficiaries; provided, however, that the Committee in the exercise of its discretion shall not make payments in accordance with the terms of an order which is not a qualified domestic relations order or which the Committee determines would jeopardize the continued qualification of the Plan and Trust under Section 401 of the Code. Notwithstanding the foregoing, the Committee may make a distribution to an alternate payee prior to the date the Participant attains age fifty (50), if such distribution is required by a qualified domestic relations order.

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(c) Neither the Plan, the Company, the Committee nor the Trustee shall be liable in any manner to any person, including any Participant or Beneficiary, for complying with any such court order or judgment.

(d) Nothing in this Section 15.2 shall be interpreted as placing upon the Company, the Committee or any Trustee any duty or obligation to comply with any such court order or judgment. The Committee may, if in its absolute discretion it deems it to be in the best interests of the Plan and the Participants, determine that any such court order or judgment shall be resisted by means of judicial appeal or other available judicial remedy, and in that event the Trustee shall act in accordance with the Committee’s directions.

(e) The Committee shall adopt procedures and provide notifications to a Participant and alternate payees in connection with a qualified domestic relations order, to the extent required under Code Section 414(p).

ARTICLE XVI

PLAN AMENDMENTS

16.1 Amendments.

The Committee may at any time, and from time to time, amend the Plan; provided that, the Board of Directors, or any committee delegated such authority by the Board of Directors, must approve any significant changes in the Plan design and any amendments to the Plan that are likely to result in a significant cost increase to the Company or that will provide supplemental or disproportionately more favorable benefits to officers of the Company. Any amendment shall be documented by an instrument in writing executed in the name of the Company by an officer or officers duly authorized to execute such instrument, and delivered to the applicable Trustee. However, to the extent required by law, no amendment shall be made at any time, the effect of which would be:

(a) To cause any assets of the Trust Fund to be used for or diverted to purposes other than providing benefits to the Participants and their Beneficiaries, and defraying reasonable expenses of administering the Plan, except as provided in Section 6.7;

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(b) To have any retroactive effect so as to deprive any Participant or Beneficiary of any accrued benefit to which he would be entitled under this Plan, in contravention of Code Section 411(d)(6), if his employment were terminated immediately before the amendment;

(c) To eliminate or reduce an optional form of benefit to the extent so doing would contravene Code Section 411(d)(6); or

(d) To increase the responsibilities or liabilities of a Trustee or an Investment Manager without his written consent.

16.2 Retroactive Amendments.

Notwithstanding any provisions of this Article XVI to the contrary, the Plan may be amended prospectively or retroactively (as provided in Section 401(b) of the Code) to make the Plan conform to any provision of ERISA, any Code provisions dealing with tax-qualified employees’ trusts, or any regulation under either.

16.3 Amendment of Vesting Provisions.

Effective January 1, 1989, if the Plan is amended in any way that directly or indirectly affects the computation of a Participant’s vested interest in his Accounts, each Participant who has completed at least three (3) Years of Service may elect, within a reasonable time after the adoption of the amendment, to continue to have his vested interest computed under the Plan without regard to such amendment. The period during which the election may be made shall commence when the date of the amendment is adopted and shall end on the latest of: (i) 60 days after the amendment is adopted; (ii) 60 days after the amendment is effective; or (iii) 60 days after the Participant is issued written notice of the amendment.

In the event that the Plan’s vesting schedule is amended, the nonforfeitable percentage of every Employee who is a Participant on the date the amendment is adopted, or the date the amendment is effective, if later, in his Company Matching Account and/or Company Contributions Account shall be not less than his percentage computed under the Plan without regard to the amendment.

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ARTICLE XVII

TOP-HEAVY PROVISIONS

17.1 Minimum Company Contributions.

In the event that this Plan is deemed a Top-Heavy plan with respect to any Plan Year, each Non-Key Employee who is a Participant shall receive Company contributions that in the aggregate are at least equal to the lesser of three percent (3%) of Compensation or the percentage at which Company contributions are made for the Key Employee (under any plan required to be included in an Aggregation Group) for whom such percentage is the highest for the Plan Year, regardless of whether the Non-Key Employee elected to make Before-Tax Contributions to the Plan for the Plan Year, completed less than 1,000 Hours of Service during such Plan Year, or the Non-Key Employee’s level of Compensation. For purposes of this Section 17.1, (A) Company contributions shall include (i) amounts considered contributed by Key Employees and which qualify for treatment under Code Section 401(k) and (ii) any Company contributions for Key Employees or Non-Key Employees taken into account under Section 401(k)(3) or 401(m) of the Code and (B) Company contributions shall not include amounts considered contributed by Non-Key Employees and which qualify for treatment under Code Section 401(k). Further, in determining the percentage at which Company contributions are made for the Plan Year for the Key Employee for whom such percentage is the highest, the contributions for a Key Employee shall be divided by so much of a Key Employee’s compensation for the Plan Year as does not exceed $200,000, as that amount is adjusted each year by the Secretary of the Treasury.

In the event a Participant is covered by both a defined contribution and a defined benefit plan maintained by the Company, both of which are determined to be Top-Heavy Plans, the defined benefit minimum, offset by the benefits provided under the defined contribution plan, shall be provided under the defined benefit plan.

17.2 Top-Heavy Determination.

This Plan shall be deemed a Top-Heavy Plan with respect to any Plan Year in which, as of the Determination Date: (a) the aggregate of the Accounts of Key Employees under the Plan exceeds 60% of the aggregate of the Accounts of all Employees; or (b) the aggregate of the Accounts of Key Employees under all defined contribution plans and the present value of the

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cumulative accrued benefits for Key Employees under all defined benefit plans includable in an Aggregation Group exceed 60% of a similar sum for all employees in such group. As used above, the term “Aggregation Group” includes all plans of Participating Companies having one or more Key Employees as Participants and any other defined contribution plan of a Participating Company that permits a plan of a Participating Company having one or more Key Employees to meet the qualification requirements of Sections 401(a)(4) or 410 of the Code.

The present value of account balances under a defined contribution plan shall be determined as of the most recent valuation date that falls within or ends on the Determination Date. The present value of accrued benefits under a defined benefit plan shall be determined as of the same valuation date used for computing plan costs for minimum funding. The present value of the cumulative accrued benefits of a Non-Key Employee shall be determined under either:

(i) the method, if any, that uniformly applies for accrual purposes under all plans maintained by affiliated companies, within the meaning of Code Sections 414(b), (c), (m) or (o); or

(ii) if there is no such method, as if such benefit accrued not more rapidly than the lowest accrual rate permitted under the fractional accrual rate of Section 411(b)(1)(C) of the Code.

For purposes of this Article XVII, “Determination Date” shall mean, with respect to any Plan Year, the last day of the preceding Plan Year, or, in the case of the first Plan Year, the last day of such Plan Year.

The term “Key Employee” shall mean for purposes of this Article XVII, any Employee or former Employee (including any deceased Employee) who, at any time during the Plan Year that includes the Determination Date, was

(1) an officer of a Participating Company having annual compensation in excess of $130,000 (as adjusted under Section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002);

(2) a 5% owner of a Participating Company; or

(3) a 1% owner of a Participating Company having annual compensation in excess of $150,000.

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For this purpose, annual compensation means compensation within the meaning of Section 415(c) of the Code.

For purposes of (1) above, no more than 50 Employees (or, if lesser, the greater of 3 or 10% of the Employees) shall be treated as officers.

A 5% (or 1%, if applicable) owner means any person who owns (or is considered as owning within the meaning of Section 318 of the Code) more than 5% (1%) of the outstanding stock of the Participating Company or stock possessing more than 5% (1%) of the total combined voting power of all stock of the Participating Company.

For purposes of applying the constructive ownership rules under Section 318(a)(2) of the Code, subparagraph (C) of such Section shall be applied by substituting “5 percent” for “50 percent.”

For purposes of determining “5% owners” and/or “1% owners,” the aggregating rules of Sections 414(b), (c) and (m) of the Code shall not apply. For purposes of determining whether an Employee has compensation of more than $150,000, however, compensation from each entity required to be aggregated under Sections 414(b), (c) and/or (m) of the Code shall be taken into account.

For purposes of determining the amount of a Participant’s Account for purposes of this Section 17.3, the amount shall include the aggregate distributions under the Plan made to or with respect to the Participant during the one year period ending on the Determination Date. In the case of a distribution made for a reason other than separation from Service, death or disability, this paragraph shall be applied by substituting “five year period” for “one year period.”

The following shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy Plan: (1) any rollover to the Plan that is initiated by a Participant; (2) the account value of any Participant who is not a Key Employee with respect to any Plan Year but was a Key Employee with respect to any prior Plan Year; and (3) the account value of a Participant who has not performed services for any Participating Company during the one year period ending on the Determination Date.

17.3 Aggregation.

Each Plan of a Participating Company required to be included in an “Aggregation Group” shall be treated as a Top-Heavy Plan if such group is a “Top-Heavy Group.”

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For purposes of this Article XVII, an “Aggregation Group” shall mean: (i) each plan of a Participating Company in which a Key Employee is a Participant, and (ii) each other plan of a Participating Company which enables any plan described in (i) above to meet the requirements of Section 401(a)(4) or 410 of the Code.

Any plan of a Participating Company that is not required to be included in an Aggregation Group may be treated as part of such group if such group would continue to meet the requirements of Section 401(a)(4) and 410 of the Code with such plan taken into account.

For purposes of this Section 17.5, a “Top-Heavy Group” means any Aggregation Group if the sum (as of the Determination Date) of the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans included in such group and the aggregate of the accounts of Key Employees under all defined contribution plans included in such group exceed 60% of a similar sum determined for all Employees.

ARTICLE XVIII

MISCELLANEOUS

18.1 No Enlargement of Employee Rights.

(a) This Plan is strictly a voluntary undertaking on the part of the Company and shall not be deemed to constitute a contract between the Company and any Employee, or to be consideration for, or an inducement to, or a condition of, the employment of any Employee.

(b) Nothing contained in this Plan or the Trust shall be deemed to give any Employee the right to be retained in the employ of the Company or to interfere with the right of the Company to discharge or retire any Employee at any time.

(c) No Employee, nor any other person, shall have any right to or interest in any portion of the Trust Fund other than as specifically provided in this Plan.

18.2 Mailing of Payments; Lapsed Benefits.

(a) All payments under the Plan shall be delivered in person or mailed to the last address of the Participant (or, in the case of the death of the Participant, to the last address of any other person entitled to such payments under the terms of the Plan) furnished pursuant to Section 18.3 below.

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(b) In the event that a benefit is payable under this Plan to a Participant or any other person and after reasonable efforts such person cannot be located for the purpose of paying the benefit for a period of three (3) consecutive years, upon the termination of such three (3) year period the Committee in its sole discretion may provide that the benefit be forfeited and as soon thereafter as practicable the benefit shall be applied to reduce future Company Contributions; provided, however, should any person entitled to such benefit thereafter claim such benefit, such benefit shall be restored. Alternatively, benefits that cannot be paid may escheat to the state in accordance with applicable state law.

(c) For purposes of this Section 18.2, the term “Beneficiary” shall include any person entitled under Section 8.9 to receive the interest of a deceased Participant or deceased designated Beneficiary. It is the intention of this provision that the benefit will be distributed to an eligible Beneficiary in a lower priority category under Section 8.9 if no eligible Beneficiary in a higher priority category can be located by the Committee after reasonable efforts have been made.

(d) The Accounts of a Participant shall continue to be maintained until the amounts in the Accounts are paid to the Participant or his Beneficiary. Notwithstanding the foregoing, in the event that the Plan is terminated, the following rules shall apply:

(i) All Participants (including Participants who have not previously claimed their benefits under the Plan) shall be notified of their right to receive a distribution of their interests in the Plan;

(ii) All Participants shall be given a reasonable length of time, which shall be specified in the notice, in which to claim their benefits;

(iii) All Participants (and their Beneficiaries) who do not claim their benefits within the designated time period shall be presumed to be dead. The Accounts of such Participants shall be forfeited at such time. These forfeitures shall be disposed of according to rules prescribed by the Committee, which rules shall be consistent with applicable law.

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(iv) The Committee shall prescribe such rules as it may deem necessary or appropriate with respect to the notice and forfeiture rules stated above.

(e) Should it be determined that the preceding rules relating to forfeiture of benefits upon Plan termination are inconsistent with any of the provisions of the Code and/or ERISA, these provisions shall become inoperative without the need for a Plan amendment and the Committee shall prescribe rules that are consistent with the applicable provisions of the Code and/or ERISA.

18.3 Addresses.

Each Participant shall be responsible for furnishing the Committee with his correct current address and the correct current name and address of his Beneficiary or Beneficiaries.

18.4 Notices and Communications.

(a) All applications, notices, designations, elections, and other communications from Participants shall be in writing, on forms prescribed by the Committee and shall be mailed or delivered to the office designated by the Committee, and shall be deemed to have been given when received by that office.

(b) Each notice, report, remittance, statement and other communication directed to a Participant or Beneficiary shall be in writing and may be delivered in person or by mail. An item shall be deemed to have been delivered and received by the Participant when it is deposited in the United States Mail with postage prepaid, addressed to the Participant or Beneficiary at his last address of record with the Committee.

18.5 Reporting and Disclosure.

The Plan Administrator shall be responsible for the reporting and disclosure of information required to be reported or disclosed by the Plan Administrator pursuant to ERISA or any other applicable law.

18.6 Governing Law.

All legal questions pertaining to the Plan shall be determined in accordance with the provisions of ERISA and the laws of the State of California. All contributions made hereunder shall be deemed to have been made in California.

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18.7 Interpretation.

(a) Article and Section headings are for convenient reference only and shall not be deemed to be part of the substance of this instrument or in any way to enlarge or limit the contents of any Article or Section. Unless the context clearly indicates otherwise, masculine gender shall include the feminine, and the singular shall include the plural and the plural the singular.

(b) The provisions of this Plan shall in all cases be interpreted in a manner that is consistent with this Plan satisfying:

(i) The requirements (of Code Section 401(a) and related statutes) for qualification as a Profit Sharing Plan; and

(ii) The requirements (of Code Section 401(k) and related statutes) for qualification as a Qualified Cash or Deferred Arrangement.

18.8 Certain Securities Laws Rules.

Any election or direction made under this Plan by an individual who is or may become subject to liability under Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), may be conditioned upon such restrictions as are necessary or appropriate to qualify for an applicable exemption under Section 16(b) of the Exchange Act, or any rule promulgated thereunder. To the extent required by Section 401(a)(4) of the Code, the rules under this Section 18.8 shall be administered in a non-discriminatory manner.

18.9 Withholding for Taxes.

Any payments out of the Trust Fund may be subject to withholding for taxes as may be required by any applicable federal or state law.

18.10  Limitation on Company: Committee and Trustee Liability.

Any benefits payable under this Plan shall be paid or provided for solely from the Trust Fund and neither the Company, the Committee nor the Trustee assume any responsibility for the sufficiency of the assets of the Trust to provide the benefits payable hereunder.

18.11  Successors and Assigns.

This Plan and the Trust established hereunder shall inure to the benefit or, and be binding upon, the parties hereto and their successors and assigns.

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18.12  Counterparts.

This Plan document may be executed in any number of identical counterparts, each of which shall be deemed a complete original in itself and may be introduced in evidence or used for any other purpose without the production of any other counterparts.

18.13  Military Service.

Notwithstanding any provision of this Plan to the contrary, the Plan shall provide contributions, benefits and service credit with respect to qualified military service in accordance with Code Section 414(u). Loan repayments shall be suspended under this Plan as permitted under Code Section 414(u).

IN WITNESS WHEREOF, in order to record the adoption of this Plan, Mattel, Inc. has caused this instrument to be executed by its duly authorized officer this 20^th day of December, 2006, effective, however, as of January 1, 2006, except as otherwise expressly provided herein.

MATTEL, INC.
By:	/s/    Alan Kaye

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MATTEL, INC.

HOURLY EMPLOYEE PERSONAL INVESTMENT PLAN

APPENDIX A

COVERED GROUP shall mean employees of the Mattel-Ontario division of Mattel Operations, Inc. who are paid on an hourly basis.

EFFECTIVE DATE shall mean July 1, 1995.

AGE AND SERVICE REQUIREMENTS shall mean attainment of age 18 and completion of six (6) months of service. Effective as of January 1, 2002, AGE AND SERVICE REQUIREMENT shall mean the attainment of age 20.

PARTICIPANT’S CONTRIBUTION PERCENTAGE for purposes of Section 5.2 shall mean twelve percent (12%). Effective as of January 1, 2002, the Participant’s contribution percentage for purposes of Section 5.2 shall mean eighty percent (80%).

COMPANY CONTRIBUTIONS for purposes of Section 6.1(a) shall mean for each month of each Plan Year one percent (1%) of the Participant’s Compensation during such month. Effective as of January 1, 2002, Company Contributions for purposes of Section 6.1(a) shall mean an amount for each month of each Plan Year equal to a percentage of the Participant’s Compensation during such month according to the Participant’s attained age as of the last day of the preceding month, as follows:

Age as of Last Day of Preceding Month	Percentage of Compensation
Under 30	3	%
30 – 39	4	%
40 – 44	5	%
45 – 49	6	%
50 – 54	7	%
55+	8	%

COMPANY MATCHING CONTRIBUTIONS for purposes of Section 6.1(c) shall mean a dollar amount determined in accordance with the following schedule:

A-1

YEARS OF SERVICE	MATCHING CONTRIBUTION
Less than 6 months	0
More than 6 months but less than 5 Years	25% of the Participant’s Basic Participant Contributions as defined in Section 2.3B
More than 5 Years but less than 10 Years	30% of the Participant’s Basic Participant Contributions as defined in Section 2.3B
More than 10 Years.	40% of the Participant’s Basic Participant Contributions as defined in Section 2.3B

No part of a Participant’s Supplemental Participant Contributions (as defined in Section 2.40) shall be eligible for Company Matching Contributions.

Effective as of January 1, 2002, company matching contributions for purposes of Section 6.1(c) shall mean the sum of the amounts in (i) and (ii) below:

(i) A dollar amount equal to the dollar amount of the first two percent (2%) of the Participant’s Basic Participant Contributions as defined in Section 2.3B.

(ii) A dollar amount equal to 50% of the dollar amount of the next four percent (4%) of the Participant’s Basic Participant Contributions as defined in Section 2.3B.

The maximum Company Matching Contribution pursuant to Section 6.1(c) shall be four percent (4%) of the Participant’s Compensation (such Compensation to be determined prior to reduction for Before-Tax Contributions pursuant to Section 5.1).

A-2

MATTEL, INC.

HOURLY EMPLOYEE PERSONAL INVESTMENT PLAN

APPENDIX B

COVERED GROUP shall mean employees of the Mattel-Augusta division of Mattel Operations, Inc. who are paid on an hourly basis.

EFFECTIVE DATE shall mean April 1, 1996.

AGE AND SERVICE REQUIREMENTS shall mean attainment of age 18 and completion of six (6) months of service. Effective as of January 1, 2002, AGE AND SERVICE REQUIREMENT shall mean the attainment of age 20.

PARTICIPANT’S CONTRIBUTION PERCENTAGE for purposes of Section 5.2 shall mean twelve percent (12%). Effective as of January 1, 2002, the Participant’s contribution percentage for purposes of Section 5.2 shall mean eighty percent (80%).

COMPANY CONTRIBUTIONS for purposes of Section 6.l(a) shall mean for each month of each Plan Year one percent (1%) of the Participant’s Compensation during such month. Effective as of January 1, 2002, Company Contributions for purposes of Section 6.1(a) shall mean an amount for each month of each Plan Year equal to a percentage of the Participant’s Compensation during such month according to the Participant’s attained age as of the last day of the preceding month, as follows:

Age as of Last Day of Preceding Month	Percentage of Compensation
Under 30	3	%
30 – 39	4	%
40 – 44	5	%
45 – 49	6	%
50 – 54	7	%
55+	8	%

COMPANY MATCHING CONTRIBUTIONS for purposes of Section 6.1(c) shall mean a dollar amount determined in accordance with the following schedule:

B-1

YEARS OF SERVICE	MATCHING CONTRIBUTION
Less than 6 months	0
More than 6 months but less than 5 Years	25% of the Participant’s Basic Participant Contributions as defined in Section 2.3B
More than 5 Years but less than 10 Years	30% of the Participant’s Basic Participant Contributions as defined in Section 2.3B
More than 10 Years.	40% of the Participant’s Basic Participant Contributions as defined in Section 2.3B

No part of a Participant’s Supplemental Participant Contributions (as defined in Section 2.40) shall be eligible for Company Matching Contributions.

Effective as of January 1, 2002, company matching contributions for purposes of Section 6.1(c) shall mean the sum of the amounts in (i) and (ii) below:

(i) A dollar amount equal to the dollar amount of the first two percent (2%) of the Participant’s Basic Participant Contributions as defined in Section 2.3B.

(ii) A dollar amount equal to 50% of the dollar amount of the next four percent (4%) of the Participant’s Basic Participant Contributions as defined in Section 2.3B.

The maximum Company Matching Contribution pursuant to Section 6.1(c) shall be four percent (4%) of the Participant’s Compensation (such Compensation to be determined prior to reduction for Before-Tax Contributions pursuant to Section 5.1).

B-2

MATTEL, INC.

HOURLY EMPLOYEE PERSONAL INVESTMENT PLAN

APPENDIX C

COVERED GROUP shall mean employees of the Mattel-Chino, California division of the Company who are paid on an hourly basis.

EFFECTIVE DATE shall mean January 1, 1997.

AGE AND SERVICE REQUIREMENTS shall mean attainment of age 18 and completion of six (6) months of service. Effective as of January 1, 2002, AGE AND SERVICE REQUIREMENT shall mean the attainment of age 20.

PARTICIPANT’S CONTRIBUTION PERCENTAGE for purposes of Section 5.2 shall mean twenty percent (20%). Effective as of January 1, 2002, the Participant’s contribution percentage for purposes of Section 5.2 shall mean eighty percent (80%).

COMPANY CONTRIBUTIONS for purposes of Section 6.1(a) shall mean for each month of each Plan Year one percent (1%) of the Participant’s Compensation during such month. Effective as of January 1, 2002, Company Contributions for purposes of Section 6.1(a) shall mean an amount for each month of each Plan Year equal to a percentage of the Participant’s Compensation during such month according to the Participant’s attained age as of the last day of the preceding month, as follows:

Age as of Last Day of Preceding Month	Percentage of Compensation
Under 30	3	%
30 – 39	4	%
40 – 44	5	%
45 – 49	6	%
50 – 54	7	%
55+	8	%

COMPANY MATCHING CONTRIBUTIONS for purposes of Section 6.1(c) shall mean a dollar amount determined in accordance with the following schedule:

C-1

YEARS OF SERVICE	MATCHING CONTRIBUTION
Less than 6 months	0
More than 6 months but less than 5 years	25% of the Participant’s Basic Participant Contributions as defined in Section 2.3B
More than 5 years but less than 10 years	30% of the Participant’s Basic Participant Contributions as defined in Section 2.3B
More than 10 years.	40% of the Participant’s Basic Participant Contributions as defined in Section 2.3B

Effective as of January 1, 2002, company matching contributions for purposes of Section 6.1(c) shall mean the sum of the amounts in (i) and (ii) below:

(i) A dollar amount equal to the dollar amount of the first two percent (2%) of the Participant’s Basic Participant Contributions as defined in Section 2.3B.

(ii) A dollar amount equal to 50% of the dollar amount of the next four percent (4%) of the Participant’s Basic Participant Contributions as defined in Section 2.3B.

The maximum Company Matching Contribution pursuant to Section 6.1(c) shall be four percent (4%) of the Participant’s Compensation (such Compensation to be determined prior to reduction for Before-Tax Contributions pursuant to Section 5.1).

C-2

MATTEL, INC.

HOURLY EMPLOYEE PERSONAL INVESTMENT PLAN

APPENDIX D

COVERED GROUP shall mean employees of the Mattel-Customer Care Center, Phoenix, Arizona division of the Company who are paid on an hourly basis.

EFFECTIVE DATE shall mean August 1, 1998.

AGE AND SERVICE REQUIREMENTS shall mean attainment of age 18. Effective as of January 1, 2002, AGE AND SERVICE REQUIREMENT shall mean the attainment of age 20.

PARTICIPANT’S CONTRIBUTION PERCENTAGE for purposes of Section 5.2 shall mean twenty percent (20%). Effective as of January 1, 2002, the Participant’s contribution percentage for purposes of Section 5.2 shall mean eighty percent (80%).

COMPANY CONTRIBUTIONS for purposes of Section 6.1(a) shall mean for each month of each Plan Year one percent (1%) of the Participant’s Compensation during such month. Effective as of January 1, 2002, Company Contributions for purposes of Section 6.1(a) shall mean an amount for each month of each Plan Year equal to a percentage of the Participant’s Compensation during such month according to the Participant’s attained age as of the last day of the preceding month, as follows:

Age as of Last Day of Preceding Month	Percentage of Compensation
Under 30	3	%
30 – 39	4	%
40 – 44	5	%
45 – 49	6	%
50 – 54	7	%
55+	8	%

COMPANY MATCHING CONTRIBUTIONS for purposes of Section 6.1(c) shall mean a dollar amount determined in accordance with the following schedule:

D-1

YEARS OF SERVICE	MATCHING CONTRIBUTION
Less than 6 months	0
More than 6 months but less than 5 years	25% of the Participant’s Basic Participant Contributions as defined in Section 2.3B
More than 5 years but less than 10 years	30% of the Participant’s Basic Participant Contributions as defined in Section 2.3B
More than 10 years.	40% of the Participant’s Basic Participant Contributions as defined in Section 2.3B

Effective as of January 1, 2002, company matching contributions for purposes of Section 6.1(c) shall mean the sum of the amounts in (i) and (ii) below:

(i) A dollar amount equal to the dollar amount of the first two percent (2%) of the Participant’s Basic Participant Contributions as defined in Section 2.3B.

(ii) A dollar amount equal to 50% of the dollar amount of the next four percent (4%) of the Participant’s Basic Participant Contributions as defined in Section 2.3B.

The maximum Company Matching Contribution pursuant to Section 6.1(c) shall be four percent (4%) of the Participant’s Compensation (such Compensation to be determined prior to reduction for Before-Tax Contributions pursuant to Section 5.1).

D-2

MATTEL, INC.

HOURLY EMPLOYEE PERSONAL INVESTMENT PLAN

APPENDIX E

COVERED GROUP shall mean employees of the Mattel-Hebron, Kentucky division of the Company who are paid on an hourly basis.

EFFECTIVE DATE shall mean January 1, 1999.

AGE AND SERVICE REQUIREMENTS shall mean attainment of age 18 and completion of six (6) months of service. Effective as of January 1, 2002, AGE AND SERVICE REQUIREMENT shall mean the attainment of age 20.

PARTICIPANT’S CONTRIBUTION PERCENTAGE for purposes of Section 5.2 shall mean twenty percent (20%). Effective as of January 1, 2002, the Participant’s contribution percentage for purposes of Section 5.2 shall mean eighty percent (80%).

COMPANY CONTRIBUTIONS for purposes of Section 6.1(a) shall mean for each month of each Plan Year one percent (1%) of the Participant’s Compensation during such month. Effective as of January 1, 2002, Company Contributions for purposes of Section 6.1(a) shall mean an amount for each month of each Plan Year equal to a percentage of the Participant’s Compensation during such month according to the Participant’s attained age as of the last day of the preceding month, as follows:

Age as of Last Day of Preceding Month	Percentage of Compensation
Under 30	3	%
30 – 39	4	%
40 – 44	5	%
45 – 49	6	%
50 – 54	7	%
55+	8	%

MATCHING CONTRIBUTIONS for purposes of Section 6.1(c) shall mean a dollar amount determined in accordance with the following schedule:

E-1

YEARS OF SERVICE	MATCHING CONTRIBUTION
Less than 6 months	0
More than 6 months but less than 5 years	25% of the Participant’s Basic Participant Contributions as defined in Section 2.3B
More than 5 years but less than 10 years	30% of the Participant’s Basic Participant Contributions as defined in Section 2.3B
More than 10 years.	40% of the Participant’s Basic Participant Contributions as defined in Section 2.3B

Effective as of January 1, 2002, company matching contributions for purposes of Section 6.1(c) shall mean the sum of the amounts in (i) and (ii) below:

(i) A dollar amount equal to the dollar amount of the first two percent (2%) of the Participant’s Basic Participant Contributions as defined in Section 2.3B.

(ii) A dollar amount equal to 50% of the dollar amount of the next four percent (4%) of the Participant’s Basic Participant Contributions as defined in Section 2.3B.

The maximum Company Matching Contribution pursuant to Section 6.1(c) shall be four percent (4%) of the Participant’s Compensation (such Compensation to be determined prior to reduction for Before-Tax Contributions pursuant to Section 5.1).

E-2

MATTEL, INC.

HOURLY EMPLOYEE PERSONAL INVESTMENT PLAN

APPENDIX F

COVERED GROUP shall mean employees of American Girl, Inc. (the successor to the assets and business of Pleasant Company) who are paid on an hourly basis.

EFFECTIVE DATE shall mean October 1, 2001.

TRANSFER OF ACCOUNTS. Effective as of October 1, 2001, the account balances of members of this Covered Group who were participants in the Pleasant Company Retirement Savings Plan (the “Pleasant Plan”) have been transferred to corresponding accounts under this Plan as follows:

Pleasant Plan Account	Corresponding Plan Account
Elective Contributions Account	Before-Tax Contributions Account
Employer Nonelective Contributions Account	Pleasant Plan Nonelective Account
Rollover Contributions Account	Transfer/Rollover Account

Each Participant who was a participant in the Pleasant Plan on September 30, 2001 shall at all times be fully vested in his Pleasant Plan Nonelective Account.

AGE AND SERVICE REQUIREMENTS shall mean attainment of age 20 and completion of six (6) months of service. AGE AND SERVICE REQUIREMENTS for any individual who completed an Hour of Service with the Pleasant Company between July 9, 1998 and September 30, 2001 shall mean attainment of age 20. Notwithstanding the foregoing, any individual who was a participant in the Pleasant Plan on September 30, 2001 shall automatically become a Participant in this Plan effective as of October 1, 2001.

PARTICIPANT’S CONTRIBUTION PERCENTAGE for purposes of Section 5.2 shall mean twenty percent (20%). Effective as of January 1, 2002, the Participant’s contribution percentage for purposes of Section 5.2 shall mean eighty percent (80%).

MATCHING CONTRIBUTIONS for purposes of Section 6.1(c) shall mean the sum of the amounts in (i) and (ii) below:

(i) A dollar amount equal to the dollar amount of the first two percent (2%) of the Participant’s Basic Participant Contributions as defined in Section 2.3B.

(ii) A dollar amount equal to 50% of the dollar amount of the next four percent (4%) of the Participant’s Basic Participant Contributions as defined in Section 2.3B.

F-1

The maximum Company Matching Contribution pursuant to Section 6.1(c) shall be four percent (4%) of the Participant’s Compensation (such Compensation to be determined prior to reduction for Before-Tax Contributions pursuant to Section 5.1).

“COMPANY CONTRIBUTIONS. Effective as of July 1, 2003, Company Contributions for purposes of Section 6.1(a) shall mean an amount for each month of each Plan Year equal to a percentage of the Participant’s Compensation during such month according to the Participant’s attained age as of the last day of the preceding month, as follows:

Age as of Last Day of Preceding Month	Percentage of Compensation
Under 30	3	%
30 – 39	4	%
40 – 44	5	%
45 – 49	6	%
50 – 54	7	%
55+	8	%”

F-2

EX-10.47

Exhibit 10.47

MATTEL, INC.

HOURLY EMPLOYEE PERSONAL INVESTMENT PLAN

FIRST AMENDMENT TO THE JANUARY 1, 2006 RESTATEMENT

WHEREAS, Mattel, Inc. (the “Company”) desires to amend the Plan to (i) revise the eligibility provisions for certain employees, (ii) add an automatic enrollment feature, and (iii) make other desired revisions; and

NOW THEREFORE, the Plan is hereby amended effective as of January 1, 2008, as follows:

1. Section 3.1(b) of the Plan is amended to read as follows:

“(b) An Employee who did not become a Participant on the Entry Date coincident with or next following the date on which he satisfied the age and service requirements specified in the Applicable Appendix because he was not then an Eligible Employee shall become a Participant as of the first day of the month following the date on which he or she again becomes an Eligible Employee.”

2. The first paragraph of Section 5.1 is designated paragraph “(a)” and a new Section 5.1(b) is added after Section 5.1(a) to read as follows:

“(b) A Participant (other than a Participant who is designated as an American Girl variable employee) who is first hired or newly rehired on or after January 1, 2008 and who has not elected to have Compensation reduced in accordance with Section 5.1(a) shall be deemed to have elected under Section 5.1(a) to have Compensation reduced by two percent (2%) beginning as soon as administratively practicable following the date the Eligible Employee becomes a Participant. Unless a Participant elects otherwise, such deemed election to have Compensation reduced by two percent (2%) shall be automatically increased by one percent (1%), effective as of the first April 1 after the initial deemed deferral election (provided that the first such automatic increase shall not be before April 1, 2009) and as of each April 1 thereafter until such election has been increased to a deemed deferral election of six percent (6%) of Compensation. Each Participant may elect at any time, in accordance with procedures established by the Committee or its designee, not to have Compensation so reduced, or to have Compensation reduced by a different percentage allowed under Section 5.2, which election shall become effective as soon as administratively practicable following receipt of the Participant election. Before-Tax Contributions made pursuant to this automatic election shall be invested in a default investment fund designated for such purpose by the Committee, unless the Participant elects to have such contributions invested otherwise in accordance with Article IV.”

IN WITNESS WHEREOF, Mattel, Inc. has caused this instrument to be executed by its duly authorized officer this 19^th day of December, 2008, effective as of the dates set forth above.

MATTEL, INC.
By:	/s/    Alan Kaye
Name:	Alan Kaye
Title:	SVP Human Resources

2

EX-10.48

Exhibit 10.48

MATTEL, INC.

HOURLY EMPLOYEE PERSONAL INVESTMENT PLAN

REMEDIAL AMENDMENT TO THE JANUARY 1, 2006 RESTATEMENT

WHEREAS, Mattel, Inc. (the “Company”) sponsors the Mattel, Inc. Hourly Employee Personal Investment Plan; and

WHEREAS the Company currently has pending an application for a determination from the Internal Revenue Service that the Plan is qualified under Section 401(a) of the Code and the Internal Revenue Service has requested certain remedial amendments to the Plan in connection with its review of the application and as a condition for the issuance of a favorable determination with respect to the continued qualified status of the Plan; and

WHEREAS the Company intends to preserve the qualified status of the Plan, and this Amendment sets forth the remedial amendments request by the Internal Revenue Service; and

WHEREAS, in Section 16.1of the Plan, the Company reserved the right to amend the Plan at any time in whole or in part;

NOW THEREFORE, to effect the foregoing, the Company does hereby declare that the Plan be, and hereby is, amended effective as of January 1, 2008, unless otherwise specified herein, as follows:

1. The following sentence is added to the end of Section 2.15(b):

“Effective for Plan Years beginning on and after January 1, 2008, Compensation for purposes of Article XIV of the Plan shall include Compensation paid after the date of the Employee’s severance from employment with the Company, provided such Compensation is paid by the later of (i) 2-1/2 months after the date of the Employee’s severance from employment, or (ii) the last day of the Plan Year that includes such date of severance from employment, to the extent required by Treasury Regulation Section 1.415(c)-2(e)(3).”

2. The following new Section 5.4(i) shall be added to the Plan to read as follows:

“(i) If on account of administrative error or otherwise any limitation of this Section 5.4 may be exceeded, the Committee shall cause to be taken such of the actions permitted by Section 5.5 and Section 5.6 as, and to the extent, it determines necessary so that the limitation shall be satisfied, which actions shall not include the contribution of qualified non-elective contributions.”

3. The following new Section 6.3(h) shall be added to the Plan to read as follows:

“(h) If on account of administrative error or otherwise any limitation of this Section 6.3 may be exceeded, the Committee shall cause to be taken such of the actions permitted by Section 6.4 as, and to the extent, it determines necessary so that the limitation shall be satisfied, which actions shall not include the contribution of qualified non-elective contributions.”

4. Section 14.5 of the Plan shall be deleted in its entirety and replaced with the following:

“14.5 Disposition of Excess Amounts.

Effective for Plan Years beginning before July 1, 2007, in the event the Annual Addition with respect to a Participant for a Limitation Year exceeds the limitation provided in Section 14.1, after application of the provisions of Section 14.4, as a result of the allocation of forfeitures, a reasonable error in estimating a Participant’s annual compensation, or a reasonable error in determining the amount of elective deferrals under Code Section 402(g)(3), any excess amounts contributed by a Participating Company on behalf of such Participant for any Plan Year (other than Before-Tax Contributions) shall be held unallocated in a suspense account for the Plan Year and applied, to the extent possible, first to reduce the Participating Company contributions for the Plan Year, and next, to reduce the Participating Company contributions for the succeeding Plan Year, or Years, if necessary. No investment gains or losses shall be allocated to a suspense account.”

5. Effective as of January 1, 2002, the last sentence of the tenth paragraph of Section 17.2 shall be amended to read as follows:

“In the case of a distribution made for a reason other than severance from employment, death or disability, this paragraph shall be applied by substituting “five year period” for “one year period.”

2

IN WITNESS WHEREOF, Mattel, Inc. has caused this instrument to be executed by its duly authorized officer this 22^nd day of May, 2009, effective as of the dates set forth above.

MATTEL, INC.
By:	/s/    Alan Kaye
Name:	Alan Kaye
Title:	SVP Human Resources

3

EX-10.49

Exhibit 10.49

MATTEL, INC.

HOURLY EMPLOYEE PERSONAL INVESTMENT PLAN

SECOND AMENDMENT TO THE JANUARY 1, 2006 RESTATEMENT

WHEREAS, Mattel, Inc. (the “Company”) desires to amend the Plan to clarify the provisions of the automatic enrollment feature;

NOW THEREFORE, the Plan is hereby amended effective as of January 1, 2008, as follows:

1. Section 5.1(b) is amended and a new Section 5.1(c) and a new Section 5.1(d) are added to read as follows:

“(b) Except as provided in Section 5.1(d), a Participant who is first hired, or newly rehired on or after January 1, 2008 who has not elected to have Compensation reduced in accordance with Section 5.1(a) shall be deemed to have elected under Section 5.1(a) to have Compensation reduced by two percent (2%) beginning as soon as administratively practicable following the date the Eligible Employee becomes a Participant. Effective for Plan Years beginning on and after January 1, 2008, except as provided in Section 5.1(d), a Participant who was not first hired or newly rehired during such Plan Year and who has not elected to have Compensation reduced in accordance with Section 5.1(a) shall be deemed to have elected under Section 5.1(a) to have Compensation reduced by two percent (2%) beginning as soon as administratively practicable on or following April 1 of such Plan Year. Each affected Participant may elect at any time, in accordance with procedures established by the Committee or its designee, not to have Compensation so reduced, or to have Compensation reduced by a different percentage allowed under Section 5.2, which election shall become effective as soon as administratively practicable following receipt of the Participant election. Before-Tax Contributions made pursuant to this automatic election shall be invested in a default investment fund designated for such purpose by the Committee, unless the Participant elects to have such contributions invested otherwise in accordance with Article IV.

(c) Unless a Participant elects otherwise and except as provided in Section 5.1(d), any affirmative election or deemed election to have Compensation reduced by less than six percent (6%) shall be automatically increased by one percent (1%), effective as soon as administratively practicable on or following the first April 1 that is at least 90 days after such initial affirmative or deemed deferral election and as soon as administratively practicable on or following each April 1 thereafter until such election has been increased to a deemed deferral election of six percent (6%) of Compensation.

(d) The Committee may provide that certain divisions, organizational units or classifications of Employees will not be subject to the automatic enrollment provisions of Section 5.1(b) or the automatic escalation provisions of Section 5.1(c)

and shall establish rules and procedures regarding such designations, which rules and related procedures shall be binding upon Participants.”

IN WITNESS WHEREOF, Mattel, Inc. has caused this instrument to be executed by its duly authorized officer this 22^nd day of May, 2009, effective as of the date set forth above.

MATTEL, INC.
By:	/s/    Alan Kaye
Name:	Alan Kaye
Title:	SVP Human Resources

2

EX-10.50

Exhibit 10.50

MATTEL, INC.

HOURLY EMPLOYEE PERSONAL INVESTMENT PLAN

THIRD AMENDMENT TO THE JANUARY 1, 2006 RESTATEMENT

WHEREAS, Mattel, Inc. (the “Company”) desires to amend the Plan to reflect recent regulatory and legislative changes required by the Pension Protection Act of 2006, and the Worker, Retiree and Employer Recovery Act of 2008;

NOW THEREFORE, the Plan is hereby amended effective as of January 1, 2008, unless otherwise specified herein, as follows:

1. The following sentence shall be added to the end of Section 3.1(a):

“For purposes of determining satisfaction of the service requirements, a requirement of six (6) months of service shall be deemed to be a requirement of one hundred eighty (180) days of service.”

2. Section 3.2(b) shall be amended to read as follows:

“(b) Each Eligible Employee shall be entitled to commence participation in this Plan with respect to Company Contributions, Before-Tax Contributions, Company Matching Contributions and After-Tax Contributions as of the date he satisfies the eligibility requirements of Section 3.1.”

3. The first sentence of Section 5.6(a) is amended to read as follows:

“In the event that due to error or otherwise, a Participant’s Before-Tax Contributions under this Plan exceed the Deferral Limitation for any calendar year (but without regard to amounts of compensation deferred under any other plan), the excess Before-Tax Contributions for the Plan Year, if any, together with income allocable to such amount for such Plan Year (and, to the extent required by the Code, income allocable to such amount for the Plan Year in which distributed) shall be distributed to the Participant on or before the first April 15 following the close of the calendar year in which such excess contribution is made.”

4. The first sentence of Section 5.6(b) is amended to read as follows:

“If in any calendar year a Participant makes Before-Tax Contributions under this Plan and additional elective deferrals, within the meaning of Code Section 402(g)(3), under any other plan maintained by the Company or an Affiliated Company, and the total amount of the Participant’s elective deferrals under this Plan and all such other plans exceed the Deferral Limitation, the Company and each Affiliated Company maintaining a plan under which the Participant made any elective deferrals shall notify the affected plans in writing, and corrective distributions of the excess elective deferrals, and any income allocable to such

amount for such Plan Year (and, to the extent required by the Code, income allocable to such amount for the Plan Year in which distributed) shall be made from one or more such plans, to the extent determined by the Company and each Affiliated Company.”

5. The following sentence shall be added to the end of Section 6.4(c):

“Any distribution of an excess contribution pursuant to this Section 6.4 shall include any Trust gains or other income allocable to the distributed contribution while held in the Trust but need not include Trust gains and income for the Plan Year in which distributed except to the extent required by the Code.”

6. Section 6.6(v) shall be amended to read as follows:

“(v) In the case of a Participant who fails to make an effective election, for any reason whatsoever, as to how all or any portion of his interest therein shall be invested, the Committee shall prescribe rules which shall require that the Accounts of such Participant be invested in a default fund selected by the Committee for such purpose.”

7. Effective January 1, 2009, the following new paragraph shall be added to the end of Section 8.5(a):

“Notwithstanding the foregoing, a Participant or Beneficiary who would have been required to receive required minimum distributions for a year as described in this Section 8.5(a) but for the enactment of Code Section 401(a)(9)(H) (“Waived Distributions”), and who would have satisfied that requirement by receiving such Waived Distributions, will not receive those distributions for any calendar year in which such distributions are waived pursuant to Code Section 401(a)(9)(H) unless the Participant or Beneficiary chooses to receive such distributions. Participants and Beneficiaries described in the preceding sentence will be given the opportunity to elect to receive the Waived Distributions. Participants and Beneficiaries may not elect to receive Waived Distributions in a direct rollover as described in Section 8.8.”

8. Section 8.8(a) is amended to read as follows:

“(a) To the extent required by Section 401(a)(31) of the Code, a Participant who is eligible to receive payment of his Distributable Benefit shall be entitled to elect a direct rollover of all or part of his Distributable Benefit to an eligible retirement plan. For purposes of this Section, an “eligible retirement plan” shall mean any plan described in Code Section 402(c)(8)(B), which, effective for distributions on and after December 31, 2007 shall include a Roth IRA described in Code Section 408A(b), the terms of which permit the acceptance of a direct rollover from a qualified plan. The portion of a Participant’s Distributable Benefit consisting of after-tax contributions which are not includible in income shall be eligible for a direct rollover in accordance with this Section;

2

provided that, prior to January 1, 2007, such portion may be transferred only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in Section 401(a) or 403(a) of the Code. Effective on and after December 31, 2006, the portion of a Participant’s Distributable Benefit consisting of after-tax contributions which are not includible in income shall also be eligible for a direct rollover to a defined benefit plan described in Section 401(a) or 403(a) of the Code or to an annuity contract described in Code Section 403(b). Notwithstanding the foregoing, a direct rollover of a Participant’s Distributable Benefit consisting of after-tax contributions which are not includible in income may be made only to an account or plan that agrees to separately account for amounts so transferred, including separately accounting for the portion of such Distributable Benefit which is includible in gross income and the portion of such Distributable Benefit which is not so includible in gross income.”

9. The first sentence of Section 8.8(c) is amended to read as follows:

“At least thirty (30) days, but not more than ninety (90) days, prior to the date a Participant’s Distributable Benefit becomes payable, the Participant shall be given written notice of any right he may have to elect a direct rollover of his Distributable Benefit to an eligible retirement plan.”

10. The subparagraphs of Section 8.8 shall be renumbered to correct the duplicate Section 8.8(d) such that after the first Section 8.8(d) the remaining Sections shall be numbered 8.8(e), 8.8(f) and 8.8(g) respectively.

11. The following new Section 8.8(h) is added to the Plan effective as of January 1, 2007:

“(h) For distributions after December 31, 2006, a non-spouse beneficiary who is a “designated beneficiary” under Code Section 401(a)(9)(E) and the regulations thereunder may elect a direct rollover, of all or any portion of an eligible rollover distribution within the meaning of Code Section 402(c)(4) to such non-spouse beneficiary, to an individual retirement account established for this purpose. Any such distribution made prior to January 1, 2010 is not subject to the direct rollover requirements of Code Section 401(a)(31), including Code Section 401(a)(31)(B), the notice requirements of Code Section 402(f) or the mandatory withholding requirements of Code Section 3405(c). A non-spouse beneficiary who receives a distribution from the Plan is not eligible for a 60-day rollover.”

12. Except as expressly or by necessary implication amended hereby, the Plan shall continue in full force and effect.

3

IN WITNESS WHEREOF, Mattel, Inc. has caused this instrument to be executed by its duly authorized officer this 15^th day of December, 2009, effective as of the date set forth above.

MATTEL, INC.
By:	/s/    Alan Kaye
Name:	Alan Kaye
Title:	SVP Human Resources

4

EX-10.107

Exhibit 10.107

MATTEL, INC.

SUMMARY OF COMPENSATION OF

THE NON-EMPLOYEE MEMBERS OF THE

BOARD OF DIRECTORS

Remuneration

Annual Board Retainer:

Non-employee members of the Board (each, a “Director”) receive a cash retainer of $100,000 per year.

• Retainer payable annually to new and continuing Directors, as of the date of the Annual Meeting of Stockholders (or, in the case of a new Director who joins the Board between the date of the Annual Meeting and the end of the calendar year, as of the date the Director joins the Board).

• Pursuant to the Mattel, Inc. 2005 Equity Compensation Plan (the “2005 Plan”), continuing Directors may elect in advance to receive all or a portion of the annual Board retainer in Mattel common stock.*

• Pursuant to the Mattel, Inc. Deferred Compensation Plan for Non-Employee Directors (“Director Plan”), continuing Directors may also elect in advance to defer all or part of their annual retainer under the Director Plan (see “Deferred Compensation” discussion below).*

• If no elections are made, the Director will receive the entire retainer in cash.

* If a Director elects to receive all or a portion of the annual Board retainer in Mattel common stock or elects to defer all or part of the annual retainer under the Director Plan, the number of shares (or the number of phantom shares in the Director Plan in the event of a deferral election) will be calculated based on the fair market value of Mattel common stock on the date of the Annual Meeting.

If either election is made, it will be irrevocable with respect to the year for which it is made.

1

Mattel, Inc.

Board of Directors—Compensation Summary

Committee Chair Retainer:

Each non-employee Committee Chair receives a cash retainer per year:

• Audit—$20,000

• Compensation—$20,000

• Other Committees—$10,000

• Retainer payable annually to new and continuing Committee Chairs, as of the date of the Annual Meeting of Stockholders (or, in the case of a Director who is appointed as a Committee Chair between the date of the Annual Meeting and the end of the calendar year, as of the date upon which the Director is first appointed as a Committee Chair).

Continuing Directors may elect in advance to defer these fees under the Director Plan (see “Deferred Compensation” discussion that follows).

Audit Committee Retainer:

Each member of the Audit Committee receives a cash retainer of $10,000 per year.

• Retainer payable annually to new and continuing committee members, as of the date of the Annual Meeting of Stockholders (or, in the case of a Director who is appointed to the committee between the date of the Annual Meeting and the end of the calendar year, as of the date upon which the Director is first appointed to the committee).

Continuing Directors may elect in advance to defer these fees under the Director Plan (see “Deferred Compensation” discussion that follows).

Annual Equity Grant:

Pursuant to resolutions adopted by the Compensation Committee, upon the date of each Annual Meeting of Stockholders commencing with the 2009 Annual Meeting (or, in the case of a new Director who joins the Board between the date of the Annual Meeting and the end of the calendar year, as of the date the Director joins the Board), each new and continuing Director will be granted restricted stock units with dividend equivalent rights (“RSUs”), with the amount of RSUs determined as follows: each grant will have a dollar value of $100,000 on the date of grant, and the dollar value will be converted to a number of RSUs by dividing the dollar value by the fair market value of Mattel common stock on the date of grant, with the resulting amount rounded to the nearest number of whole RSUs. The RSUs will vest pro rata on a quarterly basis following the date of grant, but the shares will not be delivered until the earlier of the third anniversary of the date of grant or termination of directorship.

2

Mattel, Inc.

Board of Directors—Compensation Summary

Continuing Directors may elect to further defer their RSU awards under the Director Plan (see “Deferred Compensation” discussion that follows).

DEFERRED COMPENSATION

Directors may elect in advance to defer under the Director Plan:

• all or part of their annual retainer fees, and

• effective as of January 1, 2009, all of their annual RSU awards.

Elections to defer annual retainer fees and/or equity compensation may be made prior to the end of the calendar year immediately preceding the calendar year in which such annual retainer fees and equity compensation will be paid. Each such election will apply only for the upcoming calendar year. Newly-elected Directors may not defer any annual retainer fees or equity compensation received in the year of their election to the Board.

Effective as of January 1, 2009, annual retainer fees deferred under the Director Plan may be allocated to a number of investment options that mirror the investment funds available under the Company’s management deferred compensation plan. RSUs deferred under the Director Plan will be credited to a Mattel stock equivalent account and amounts attributable to such RSU deferrals must be paid in the form of Mattel common stock.

Annual retainer fees and equity compensation deferred with respect to a calendar year (and earnings thereon) may be paid in a lump sum or installments over a period of 10 years commencing after the applicable Director ceases to serve on the Board or achieves a specified age set forth in his or her deferral election (which age cannot exceed 72). If a Director’s plan-year balance is less than $5,000, distribution of such balance will be made in a lump sum. If a Director makes a deferral election with respect to his or her RSU award, the Director will not recognize income upon the vesting in the deferred RSUs.

In 2008, the Company amended the Director Plan to comply with Section 409A of the Internal Revenue Code and IRS regulations and guidance pursuant to Section 409A.

3

Mattel, Inc.

Board of Directors—Compensation Summary

STOCK OWNERSHIP

The Board has, as part of its Guidelines on Corporate Governance, adopted policies regarding (i) director stock ownership, pursuant to which each Director is to achieve a target minimum level of stock ownership, in an amount equal to three times the annual Board retainer, within five years of joining the Board and (ii) director retention of shares obtained in exercises of stock options and upon vesting of RSUs. These policies are set forth in the Mattel, Inc. Board of Directors Amended and Restated Guidelines on Corporate Governance (the “Guidelines”).

In September 2008, the Board provided then-current Directors with up to two additional years to achieve the target stock ownership level, as adjusted to reflect the increased annual retainer. Each Director with less than 5 years of service on the Board as of September 2008 may achieve the adjusted target stock ownership level by the later of (i) five years after the date upon which such Director joined the Board or (ii) two years following the September 2008 Board meeting.

MISCELLANEOUS/OTHER BENEFITS

Expense Reimbursement and Travel:

Mattel will pay all appropriate expenses for Directors’ travel on Board business. In most cases, and based on the Director’s preference, Mattel will handle any travel arrangements, book airline and hotel reservations and cover billings. Directors are permitted to use aircraft leased by Mattel for purposes of travel on Board business. If the Director prefers, Mattel will reimburse appropriate travel expenses for travel on Board business, including ground transportation (such as taxis and airport limousines), first class air travel, the reasonable cost of charter flights, and, if the Director uses a non-Mattel private aircraft to travel on Mattel Board business, the amount reimbursable under applicable Federal Aviation Regulations, which generally would include variable trip-specific costs or direct operating costs of the travel on Mattel Board business, but not fixed costs such as management fees, capital costs or depreciation.

Charitable Gifts:

Directors may recommend that the Mattel children’s foundation make gifts of up to a total of $15,000 each year to one or more non-profit public charities. The foundation also matches up to $5,000 annually for any personal gifts made by the Director.

4

Mattel, Inc.

Board of Directors—Compensation Summary

Liability Insurance/Indemnification:

Directors are provided with liability insurance under a directors, officers and corporate liability insurance policy. Directors are also provided with indemnification in accordance with the Company’s bylaws and Delaware law.

5

EX-11.0

EXHIBIT 11.0

MATTEL, INC. AND SUBSIDIARIES

COMPUTATION OF INCOME PER COMMON AND POTENTIAL COMMON SHARE

	For the Year
BASIC:	2009			2008			2007			2006			2005
	(In thousands, except per share amounts)
Net income	$	528,704		$	379,636		$	599,993		$	592,927		$	417,019
Less net income allocable to participating RSUs		(5,992	)		(3,731	)		(4,280	)		(1,709	)		—
Net income available for basic common shares	$	522,712		$	375,905		$	595,713		$	591,218		$	417,019
Weighted average common shares outstanding		360,085			360,757			384,450			382,921			407,402
Basic net income per common share	$	1.45		$	1.04		$	1.55		$	1.54		$	1.02
DILUTED:
Net income	$	528,704		$	379,636		$	599,993		$	592,927		$	417,019
Less net income allocable to participating RSUs		(5,981	)		(3,726	)		(4,258	)		(1,704	)		—
Net income available for diluted common shares	$	522,723		$	375,910		$	595,735		$	591,223		$	417,019
Weighted average common shares outstanding		360,085			360,757			384,450			382,921			407,402
Weighted average common equivalent shares arising from:
Dilutive stock options and non-participating RSUs		1,425			1,454			4,505			2,782			3,637
Weighted average number of common and potential common shares		361,510			362,211			388,955			385,703			411,039
Diluted net income per common share	$	1.45		$	1.04		$	1.53		$	1.53		$	1.01

EX-12.0

EXHIBIT 12.0

MATTEL, INC. AND SUBSIDIARIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

	For the Year
(Unaudited; in thousands, except ratios)	2009			2008			2007			2006			2005
Earnings Available for Fixed Charges:
Income from continuing operations before income taxes and cumulative effect of changes in accounting principles	$	660,047		$	487,964		$	703,398		$	683,756		$	652,049
Add: Non-controlling interest losses in consolidated subsidiaries		222			262			255			271			142
Add:
Interest expense		71,843			81,944			70,974			79,853			76,490
Appropriate portion of rents (a)		34,439			29,833			28,245			25,724			20,475
Earnings available for fixed charges	$	766,551		$	600,003		$	802,872		$	789,604		$	749,156
Fixed Charges:
Interest expense	$	71,843		$	81,944		$	70,974		$	79,853		$	76,490
Appropriate portion of rents (a)		34,439			29,833			28,245			25,724			20,475
Fixed charges	$	106,282		$	111,777		$	99,219		$	105,577		$	96,965
Ratio of earnings to fixed charges		7.21	X		5.37	X		8.09	X		7.48	X		7.73	X

(a) Portion of rental expenses which is deemed representative of an interest factor, which is one-third of total rental expense.

EX-21.0

EXHIBIT 21.0

SUBSIDIARIES OF MATTEL, INC.

Subsidiaries1	Jurisdiction in Which Organized	Percentage of Voting Securities Owned Directly or Indirectly By Parent2
American Girl Brands, LLC	Delaware	100	%
Mattel Asia Pacific Sourcing Limited	Hong Kong	100	%
Mattel Europa B.V.	The Netherlands	100	%
Mattel Europe Holdings B.V.	The Netherlands	100	%
Mattel Europe Marketing B.V.	The Netherlands	100	%
Mattel Finance, Inc.	Delaware	100	%
Mattel Foreign Holdings Ltd.	Bermuda	100	%
Mattel International Finance B.V.	The Netherlands	100	%
Mattel International Holdings B.V.	The Netherlands	100	%
Mattel Investment, Inc.	Delaware	100	%
Mattel Marketing Holdings Pte. Ltd.	Singapore	100	%
Mattel Overseas Operations Ltd.	Bermuda	100	%
Mattel Overseas, Inc.	California	100	%
Mattel Sales Corp.	California	100	%

¹ All of the subsidiaries listed above are included in the consolidated financial statements. Inactive subsidiaries and subsidiaries that, when considered in the aggregate, do not constitute a significant subsidiary have not been included in the above list.

² Parent refers to Mattel, Inc. (a Delaware corporation) and excludes Directors’ qualifying shares.

EX-23.0

EXHIBIT 23.0

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-134740) and Form S-8 (No. 33-51454, No. 333-01061, No. 333-03385, No. 333-32294, No. 333-47461, No. 333-64984, No. 333-67493, No. 333-79099, No. 333-75145, No. 333-89458, No. 333-101200, No. 333-125059 and No. 333-147472) of Mattel, Inc. and its subsidiaries of our report dated February 24, 2010 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

February 24, 2010

EX-31.0

EXHIBIT 31.0

CERTIFICATION

I, Robert A. Eckert, certify that:

1. I have reviewed this annual report on Form 10-K of Mattel, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  February 24, 2010	By:
		Robert A. Eckert
		Chairman and Chief Executive Officer
		(Principal executive officer)

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Kevin M. Farr, certify that:

1. I have reviewed this annual report on Form 10-K of Mattel, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  February 24, 2010	By:
		Kevin M. Farr
		Chief Financial Officer
		(Principal financial officer)

EX-32.0

EXHIBIT 32.0

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Mattel, Inc. a Delaware corporation (the “Company”), on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission (the “Report”), Robert A. Eckert, Chairman and Chief Executive Officer, and Kevin M. Farr, Chief Financial Officer, of the Company, do each hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350) that, to his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 24, 2010	By:
		Robert A. Eckert
		Chairman and Chief Executive Officer, Mattel, Inc.
		Kevin M. Farr
		Chief Financial Officer, Mattel, Inc.