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SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT
dated as of December 15, 2006 between 4Kids Entertainment
Licensing, Inc. with offices at 1414 Avenue of the Americas, New
York, New York 10019 (“Employer”) and Alfred R. Kahn,
1414 Avenue of the Americas, New York, New York 10019
(“Employee”).
W I T N E S S E T H :
WHEREAS,
Employer and Employee previously entered into an Employment
Agreement dated as of March 12, 1991 (“Prior
Agreement”), which Prior Agreement was amended from time to
time; and
WHEREAS,
Employer and Employee have previously entered into an Amended and
Restated Employment Agreement dated as of January 1, 2002 (the
“Amended Agreement”); and
WHEREAS,
Employer and Employee wish to further amend and restate the Amended
Agreement by entering into this Second Amended and Restated
Employment Agreement (the “Agreement”) on the terms and
conditions set forth below.
NOW,
THEREFORE, in consideration of the covenants herein contained, the
parties hereto agree as follows:
1.
Employment and Duties .
(a)
Employer hereby employs Employee and Employee hereby agrees to
serve as Chairman of the Board and Chief Executive Officer of
Employer and Employer’s affiliate, 4Kids Entertainment Inc.
(“4Kids”). Employee shall be the chief executive
officer of Employer and 4Kids and, as such, shall have full
supervision and control of its business and affairs subject to the
overall authority of the Board of Directors of 4Kids (“Board
of Directors”). Employee shall have such powers and duties
that are customarily possessed by corporate chief executive
officers. Employee also agrees to perform such other services for
Employer and affiliates consistent with Employee’s position
as shall, from time to time, be assigned to Employee by the Board
of Directors and such services customary to such office as are
necessary to the operations of Employer and affiliates.
(b)
Employee shall use Employee’s best efforts to promote the
interests of Employer and affiliates and shall devote
Employee’s full business time (except as provided below),
energy and skill exclusively to the business and affairs of
Employer and affiliates during the Term set forth below in
Paragraph 2; provided, however, that nothing herein shall prohibit
Employee from spending a limited amount of time on philanthropic or
personal investment activities.
(c)
If requested by Employer and agreed upon by Employee, during the
period when Employee is receiving the Retirement Benefit (as
defined in Paragraph 10 (h) below), Employee shall provide
part-time services to Employer. Such services shall consist of
being available for telephone consultations and assisting Employer
on a limited basis at mutually convenient and agreeable times and
for a mutually agreed number of hours per month. These services may
be provided at the offices of 4Kids or outside of the offices of
4Kids as may be agreed upon by the parties. For the avoidance of
doubt, the providing of part-time services by Employee to Employer
pursuant to this Paragraph 1 (c) shall not be a condition to
Employee’s receipt of the Retirement Benefit (as defined
below in Paragraph 10 (h)) hereunder and Employee shall not be
compensated for such part-time services, except as agreed to by the
parties hereto.
2.
Term of Employment .
(a)
The initial term of Employee’s employment hereunder
(“Initial Term”) shall commence on December 15, 2006
and shall continue until December 31, 2012 unless terminated as
provided in Paragraph 10 of this Agreement.
(b)
Effective upon the expiration of the Initial Term and each
Additional Term (as defined below), Employee’s employment
hereunder shall be deemed to be automatically extended, upon the
same terms and conditions then in effect, for an additional period
of one (1) year (each, an “Additional Term”),
commencing upon the expiration of the Initial Term or the
then-current Additional Term, as the case may be, unless, at least
six (6) months prior to the expiration of the Initial Term or such
Additional Term, either Party hereto shall have notified the other
Party hereto in writing that such extension shall not take effect,
in which case this Agreement and the Employee’s employment
hereunder shall terminate upon the expiration of the then current
Term and Employee shall have only such rights as are provided in
Paragraph 2 (c) hereof. For purposes of this Agreement, the Initial
Term and each Additional Term, if any, are collectively referred to
as the “Term”.
(c)
(i) In the event that, other than for “Cause” (as
defined in Paragraph 10 (c) below), Employer provides Employee with
written notice in accordance with Paragraph 2 (b) hereof of its
intention not to extend this Agreement for an Additional Term, then
following the expiration of the then current Term, Employer shall
pay Employee the Retirement Benefit and shall provide Employee with
all group health benefits that Employee was receiving at the date
of termination, to the maximum extent permissible under such plans
(but subject to Employer’s practice in such years relative to
Employee contributions to the cost of Employer provided health
insurance) and/or applicable law for a period equal to three (3)
years following the expiration of the then current Term. To the
extent permitted by applicable law, any such period of extended
health coverage beyond the date of termination provided hereunder
to Employee shall not be credited against the maximum COBRA
coverage period. Subject to Paragraph 13, such Retirement Benefit
shall be paid by Employer to Employee in thirty-six (36) equal
bi-monthly installments as such installments would normally be paid
pursuant to the payroll policies of Employer had Employee’s
employment continued hereunder for an additional eighteen (18)
month period.
2.
(ii)
In the event that Employee provides notice of his intention not to
extend this Agreement for an Additional Term in accordance with
Paragraph 2 (b) hereof, Employee shall be deemed to have resigned
effective as of the expiration of the then-current Term and shall
be subject to, and receive the benefits set forth in, Paragraph 10
(e) below.
(d)
In the event that Employee and Employer fail to reach agreement on
the terms and conditions of the extension of Employee’s
employment by the Employer for an Additional Term by the expiration
of the then current Term, then either Party may terminate this
Agreement by written notice to the other Party in which case
Employer shall pay Employee the Retirement Benefit and shall
provide Employee with all group health benefits that Employee was
receiving at the date of termination, to the maximum extent
permissible under such plans (but subject to Employer’s
practice in such years relative to Employee contributions to the
cost of Employer provided health insurance) and/or applicable law
for a period equal to three (3) years following the expiration of
the then current Term. To the extent permitted by applicable law,
any such period of extended health coverage beyond the date of
termination provided hereunder to Employee shall not be credited
against the maximum COBRA coverage period. Subject to Paragraph 13,
such Retirement Benefit shall be paid by Employer to Employee in
thirty-six (36) equal bi-monthly installments as such installments
would normally be paid pursuant to the payroll policies of Employer
had Employee’s employment continued hereunder for an
additional eighteen (18) month period.
3.
Compensation .
(a)
Salary . As compensation for Employee’s services
during the Term, Employer shall pay Employee a salary
(“Salary”) at the rate Nine Hundred Thousand Dollars
($900,000) per year. The Compensation Committee of the Board of
Directors of 4Kids (“Compensation Committee”) shall
have the right, but not the obligation, to provide Employee with
Salary increases, from time to time, in the sole discretion of the
Compensation Committee.
3.
(b)
Withholding . (i) All payments of compensation shall be made
in appropriate installments to conform to the regular payroll dates
for salaried personnel of Employer. Employer shall be entitled to
deduct from each Salary payment, all deductions as may be required
by law, including, without limitation, deductions for federal,
state and local income taxes and FICA.
(c)
Fringe Benefits . (i) During the Term, Employee shall be
entitled to participate in all health insurance and other benefits
as now exist, or hereafter may be established by Employer and
affiliates for the benefit of all employees of Employer and
affiliates, subject, however, to the provisions of the various
benefit plans and programs in effect from time to time. Employee
shall also be entitled to such additional benefits as may be made
available to the senior executives of Employer and
affiliates.
(ii)
During the Term, Employer shall pay on behalf of Employee or
reimburse Employee for the cost of a health club
membership.
(iii)
The benefits described in this Paragraph 3(c) (i) and 3 (c) (ii)
are hereinafter referred to as “Fringe
Benefits”.
(d)
Vacation. Employee shall be entitled to vacation at the rate
of four (4) weeks per calendar year during the Term.
(e)
Expenses. Employer shall reimburse Employee, in conformity
with the expense reimbursement practices of Employer, for the
reasonable, ordinary and necessary business expenses incurred by
Employee in the performance of Employee’s duties hereunder.
Employee shall submit all receipts, invoices and other such
documents evidencing such expenses as may be required by the policy
of Employer.
4.
Bonus .
(a)
On execution of the Agreement, Employer shall pay Employee a bonus
equal to the sum of $225,000.
(b)
Commencing with Employer’s 2006 fiscal year, in addition to
the Salary specified in Paragraph 3 (a), Employee shall be eligible
to receive an annual cash bonus (the “Bonus”) for each
full fiscal year or portion of a fiscal year during the Term based
upon such quantitative and qualitative criteria as shall be
established by the Compensation Committee in its sole
discretion.
(c)
Any Bonus awarded to the Employee pursuant to this Paragraph 4
shall be payable no later than ten (10) business days after
completion of the annual audit of the financial statements of 4Kids
and its consolidated subsidiaries for the applicable fiscal year
but in no event later than March 15 th of the year
immediately succeeding the fiscal year to which the Bonus
pertains.
4.
5.
Incentive Compensation .
(a)
Employee shall be eligible to receive additional grants of stock
options as determined in the sole discretion of the Compensation
Committee. The rights and obligations of the Employer and Employee
with respect to any grant of stock options shall be set forth in
the form of Stock Option Agreement to be entered into by Employee
and 4Kids.
(b)
4Kids has adopted a Long Term Incentive Plan (“LTIP”)
pursuant to which the Board of Directors may award stock options,
stock appreciation rights, restricted stock and other forms of Long
Term Incentive compensation to employees of 4Kids and subsidiaries.
Employee shall be eligible to receive grants of incentive
compensation pursuant to the LTIP as determined in the discretion
of the Compensation Committee. Any such grants of incentive
compensation shall subject to the terms and conditions set forth in
the applicable LTIP.
6.
Place of Employment . During the Term, Employee shall be
required to perform Employee’s duties at the principal office
of Employer in the New York City Metropolitan Area. Employee shall
undertake all reasonable travel required by Employer and affiliates
in connection with the performance of Employee’s duties
hereunder.
7.
Non-Competition and Protection of Confidential Information
.
(a)
Employee agrees that his position with Employer places him in a
position of confidence and trust with the clients and employees of
Employer. Employee acknowledges that inasmuch as the business of
Employer is carried on in several states of the United States and
that it is the intention of Employer to continue to expand the
geographic area in which Employer engages in its business and
marketing efforts and accordingly, it is reasonable that the
restrictive covenants set forth below are not limited by specific
geographic area but by the location of Employer’s clients and
potential clients. Employee further acknowledges that the rendering
of services to the clients of Employer necessarily requires the
disclosure to Employee of confidential information and trade
secrets of Employer and its clients (such as without limitation,
marketing and licensing plans and business strategies). Employee
consequently agrees that it is reasonable and necessary for the
protection of the goodwill and business of Employer that Employee
make the covenants contained herein.
Accordingly,
Employee agrees that while he is in Employer’s employ and for
a period equal to the greater of (x) while Employee is receiving
his Retirement Benefit or Special Retirement Benefit, or (y) two
(2) years after the termination or expiration of Employee’s
employment, Employee shall not directly or indirectly:
(i)
own, manage, operate, control, be employed by, render services to,
consult with, advise or participate in the ownership, management,
operation or control of, or be connected in any manner with, any
business of the type and character engaged in and competitive with
that conducted by Employer (as defined below in this Paragraph
7).
5.
(ii)
attempt in any manner to solicit from any client (except on behalf
of Employer) business of the type performed by Employer or to
persuade any client of Employer to cease to do business or to
reduce the amount of business which any such client has customarily
done or contemplates doing with Employer, whether or not the
relationship between Employer and such client was originally
established in whole or in part through Employee’s
efforts;
(iii)
employ or attempt to employ or assist anyone else to employ any
person who is then or at any time during the preceding year was in
Employer’s employ;
(iv)
render any services of the type rendered by Employer to its clients
to or for any client of Employer unless such services are rendered
as an employee or consultant of Employer.
Notwithstanding
anything herein to the contrary, the term “Employer,”
as used in this Paragraph 7, shall mean Employer and affiliates.
The term “client” shall mean (i) anyone who was then a
client of Employer; (ii) anyone who was a client of Employer at any
time during the one (1) year period immediately preceding the date
of termination of employment; and (iii) any prospective client to
whom Employer has made a formal presentation (i.e., the actual
presentation of a marketing plan, licensing strategy and/or media
plan) within a one (1) year period immediately preceding the date
of such termination.
(b)
Employee also agrees that either during the Term or at any other
time thereafter, Employee shall not divulge to anyone (other than
Employer or any persons designated by Employer) any confidential
information relating to the business of Employer or its clients
including, without limitation, all types of trade secrets, business
strategies or marketing, licensing, advertising and/or promotional
plans. Employee further agrees not to disclose, publish or make use
of any such knowledge or information of a confidential nature other
than in the performance of Employee’s duties hereunder
without the prior written consent of Employer. For purposes of this
Paragraph, the term “confidential information” shall
not include information which becomes public knowledge other than
through a breach of this covenant by Employee or any confidential
information that Employee is required to disclose in any judicial
or administrative proceeding pursuant to any subpoena or court
order.
6.
(c)
If Employee commits a breach or is about to commit a breach of any
of the provisions of Paragraph 7(a)
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