Exhibit 10.2
 
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

THIS FIRST AMENDMENT (the “Agreement”), dated ___________, 2011 by and between
John a/k/a Jack McGrath, an individual (“Executive”) and JAKKS Pacific, Inc., a
Delaware corporation (“JAKKS” or the “Company”) pursuant to Section 20 of the
Employment Agreement, defined below and as amended hereby.
 
W I T N E S S E T H:

WHEREAS, Executive and the Company entered into an Employment Agreement on March
4, 2010 which was effective January 1, 2010 (the “Employment Agreement”); and
 
WHEREAS, Executive and the Company desire to amend the terms of the Employment
Agreement in certain respects without modifying, changing or otherwise amending
any other provisions of the Employment Agreement.
 
NOW, THEREFORE, in consideration of the mutual promises, representations and
warranties set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
 
1.
Capitalized terms used and not defined herein have the respective meanings
ascribed to them in the Employment Agreement.

 
2.
Section 1(a) of the Employment Agreement is amended in its entirety, and the
following shall be substituted therefor:

 
“(a) JAKKS hereby employs Employee during the Term (as defined below) to serve
as Company's Chief Operating Officer with responsibilities for supervision of
the day to day operations of Company and its Affiliates, including
administrative and supervisory services related to such position and as needed
management of other personnel engaged in such work, and to perform such duties
in connection therewith on behalf of JAKKS as its Board of Directors and Chief
Executive Officer and President, or Chairman, if a person assumes that office,
may from time to time direct that are reasonably related to Employee’s
responsibilities.  Employee hereby accepts such employment and agrees throughout
the Term to faithfully, diligently and to the best of Employee’s ability, in
furtherance of JAKKS’ business, perform the duties so assigned or incidental to
the position assumed by Employee pursuant hereto.  Employee shall (i) devote
full time and attention to JAKKS’ business and affairs and (ii) at all times be
subject to the direction and control of JAKKS’ Board of Directors and Chief
Executive Officer and President, or Chairman, if any, and observe and comply
with such rules, regulations, policies and practices as they may from time to
time establish.”
 
3.
The last sentence of Section 1(b) of the Employment Agreement is amended in its
entirety, and the following shall be substituted therefor:  “The term “Executive
Officers” means any of Company’s Chairman, if any, and Chief Executive Officer
and President.”

 
4.
The text of Section 2 of the Employment Agreement shall be deleted in its
entirety, and the following shall be substituted therefor:

 
“Term. The employment of Executive hereunder shall commence on the Effective
Date and continue until December 31, 2013, subject to earlier termination on the
terms and conditions provided elsewhere in this Agreement (the “Term”).  As used
herein, “Termination Date” means the last day of the Term.”
 
 
 

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5.
The Base Salary is amended to be $600,000.00, subject to increase in each
subsequent calendar year during the Term at an increased annual rate to be
determined by the Compensation Committee of the Company’s Board of Directors
(the “Compensation Committee”) in its sole and absolute discretion, but,
commencing with the calendar year 2012 that is at least $15,000 more than the
annual rate in the immediately preceding calendar year (the “Base Salary”).

 
6.
The following new paragraphs 3(d) through 3(j) are added to the Employment
Agreement:

 
“3(d)  Annual Restricted Stock Awards.
 
 
i)
Subject to the terms (including, without limitation, the availability of shares
reserved for issuance thereunder) of the Company’s 2002 Stock Award and
Incentive Plan (as in effect on the date hereof and as subsequently may be
amended, from time to time, or any successor plan, the “Plan”) and the
applicable restricted stock agreement, which shall be substantially in the form
annexed hereto as Exhibit A (the “Restricted Stock Agreement”), and as
additional consideration for Executive agreeing to this amendment to his
Employment Agreement, on October 1, 2011, January 1, 2012, and January 1, 2013
(each, an “Annual Issuance Date”) the Company shall issue to Executive a number
of shares of restricted common stock of the Company, par value $.001 per share
(the “Restricted Stock”), with a value equal to $75,000 (hereafter, the
Restricted Stock issued under this Section 3(d) shall be referred to as the
“Section 3(d) Restricted Stock”).  The number of shares of Section 3(d)
Restricted Stock to be issued to Executive on each Annual Issuance Date shall be
determined by dividing $75,000 by the closing price of a share of the Company’s
common stock, par value $.001 per share (the “Common Stock”), on the first
trading date immediately preceding the Annual Issuance Date.

 
 
ii)
The first vesting date for each $75,000 award of Section 3(d) Restricted Stock
shall occur effective as of the date in the calendar year immediately following
the calendar year (the “EPS Reference Year”)  in which the Annual Issuance Date
occurs with respect to such award that it is determined that the Company’s
“Earnings Per Share” (defined below) for the EPS Reference Year is at least
equal to the “Minimum Earnings Per Share” (defined below; such Minimum Earnings
Per Share, the “3% Vesting Condition”). Subject to the satisfaction of the 3%
Vesting Condition, subsequent vesting of each tranche of the Section 3(d)
Restricted Stock awarded for an EPS Reference Year shall occur in accordance
with the vesting schedule annexed as Exhibit B.

 
 
iii)
For purposes of this Agreement,

 
 
(1)
the term “Earnings Per Share” shall mean the net income per share of the
Company’s common stock, calculated on a fully-diluted basis as determined by the
Company’s then current auditors in accordance with GAAP, and such determination
by the Auditors, absent manifest error, will be conclusive and binding upon the
Company and Executive;

 
 
(2)
the term “GAAP” means generally accepted accounting principles, applied on a
basis consistent with past periods;

 
 
(3)
the term “Minimum Earnings Per Share” shall mean (X) with respect to Fiscal year
2011, the greater of $1.41 or an amount that is 3% higher than the actual
Earnings Per Share for fiscal year 2011, (Y) with respect to Fiscal year 2012,
the greater of $1.45 or an amount that is 3% higher than the actual Earnings Per
Share for fiscal year 2012, and (Z) with respect to Fiscal year 2013, the
greater of $1.49 or an amount that is 3% higher than the actual Earnings Per
Share for fiscal year 2013; and

 
 
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(4)
the term “Adjusted Earnings Per Share” means the Earnings Per Share, as adjusted
in the sole discretion of the Compensation Committee to take account of
extraordinary or special items, or as otherwise may be permitted by the
Company’s 2002 Stock Award and Incentive Plan, and such determination by the
Auditors, absent manifest error, as adjusted by the Compensation Committee, will
be conclusive and binding upon the Company and Executive.

 
 “3(e) Annual Performance Bonus.
 
 
1)
Bonus Criteria.  In addition to the Base Salary and Section 3(d) Restricted
Stock compensation, Executive shall be eligible to receive as compensation for
performance during fiscal years 2011, 2012, and 2013,  a performance-based bonus
award equal to up to 125% of Executive’s Base Salary for the applicable fiscal
year (hereafter, such bonus for 2011, 2012 and 2013 is referred to as an “Annual
Performance Bonus,” which, together with the Section 3(d) Restricted Stock is
referred to herein collectively as the “Bonus”), as further provided below in
this Section 3(d).

 
The award of the Annual Performance Bonus for fiscal years 2011, 2012 and 2013
shall be determined by criteria (the “Bonus Criteria”) established as provided
in this Agreement. The 2011 Bonus Criteria are set forth on Exhibit D; the 2011
Annual Performance Bonus shall be in the amount of (i) the percentage set forth
on the table annexed at Exhibit C that corresponds to the Company’s 2011
Adjusted EPS multiplied by (ii) Executive’s Base Salary for calendar year
2011.  The Bonus Criteria for fiscal years after 2011 shall be measured by the
level of the Company’s Adjusted Earnings Per Share growth over the preceding
fiscal year and the levels of increase in Adjusted Earnings Per Share for the
fiscal year for which the Bonus Criteria are established and the corresponding
percentage of Base Salary figures (which shall in any event provide for an
Annual Performance Bonus of up to 125% of Executive’s Base Salary), which shall
be established by the Compensation Committee in the exercise of its discretion,
to determine the amount of the Annual Performance Bonus for such fiscal
year.  The Compensation Committee may, but shall have no obligation to, continue
using the same percentage increases in Adjusted Earnings Per Share and
corresponding percentage of salary figures as set forth on Exhibit C in
determining the criteria for Executive’s Annual Performance Bonus for 2012 and
2013.  The Base Salary used to determine the amount of the Annual Performance
Bonus shall be the Base Salary in effect during the fiscal year for which the
Base Annual Performance Bonus is being determined. The Bonus Criteria for any
fiscal year after 2011 shall be established by the Compensation Committee before
the end of the Company’s first fiscal quarter in such fiscal year.
 
 
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2)
Payment of Annual Performance Bonus.  One-half of the Annual Performance Bonus
shall be paid in Restricted Stock, and the balance shall be paid in cash.  The
number of shares of Restricted Stock shall be determined by dividing the
Restricted Stock portion of the Base Annual Performance Bonus by the closing
price of a share of the Common Stock on the first trading date immediately
preceding the date on which the Base Annual Performance Bonus is determined to
have been earned.  The Company shall pay the cash portion and issue the
Restricted Stock portion of the Annual Performance Bonus to Executive, subject
to any required tax withholding, not later than twenty-one (21) business days
following the date on which the Auditors’ final report on the Company’s
financial statements for the fiscal year for which the Annual Performance Bonus
is awarded is issued and delivered to the Company and in any event not later
than April 30 in the calendar year following such fiscal year (the “Annual
Performance Bonus Award Date”).  Such Restricted Stock shall be issued subject
to the Plan (including, without limitation, the availability of shares reserved
for issuance thereunder) and the applicable Restricted Stock Agreement, and
shall vest in equal annual installments, the first installment of which shall
vest on the Annual Performance Bonus Award Date and thereafter on January 1 in
each subsequent year until the final vesting date on January 1, 2014,
notwithstanding that this Agreement shall have earlier expired or terminated,
but subject to Section 3(j) below.

 
 
3)
Right to Voting and Dividends. Executive shall not have the right to vote or
receive dividends (whether in cash, stock or any other form) on shares of
Restricted Stock issued under this Agreement until the date of vesting of such
shares.  The number of shares of Restricted Stock issued to Executive under this
Agreement shall be adjusted to take account of any stock split, change in
capitalization or other similar capital event in which the Company’s
stockholders participate generally in respect of all shares of common stock of
the Company, $.001 per share, from and after the date of issuance of the
Restricted Stock issued under this Agreement, the number and class of shares of
Restricted Stock or other securities that Executive shall be entitled to, and
shall hold, pursuant to this Agreement shall be appropriately adjusted or
changed to reflect such capital event or change in capitalization.

 
 
4)
Obligation to Keep Sufficient Shares.  The Company shall use its reasonable best
efforts to ensure a sufficient number of shares of Common Stock remain available
for issuance under the Plan at all times to satisfy its obligations to issue
Restricted Stock to Executive pursuant to this Agreement. In the event that
there are insufficient shares available under the Plan to permit a specific
issuance of Restricted Stock to Executive, then the Company shall take all
necessary action to amend the Plan or adopt an additional or successor plan
(including, without limitation, seeking stockholder approval with respect
thereto) as promptly as practicable. Immediately following the adoption of such
amendment or additional or successor plan, the Company shall issue to Executive
the number of shares of Restricted Stock to which Executive is entitled and was
not previously issued, and shall pay to Executive, in cash, any amounts which
Executive would have received in respect of such shares of Restricted Stock had
such shares been issued to Executive on the date or dates prescribed herein.

 
 
5)
No Trust Fund.  Nothing contained herein and no action taken in respect of any
Bonus (or otherwise in respect of Sections 3(d) or 3(e)) shall create or be
construed to create a trust of any kind.  All Bonuses under Section 3(e) and all
other compensation to Executive shall be paid from general funds of the Company,
and no special or separate fund shall be established, and no segregation of
assets shall be made, to assure payment of any Bonus hereunder.

 
“3(f) Minimum Stock Ownership Requirements.  As further consideration for the
Company’s agreement to award the Section 3(d) Restricted Stock and provide
Executive the opportunity to earn the Annual Performance Bonus,  Executive
agrees that he shall during the Term not sell or otherwise transfer shares of
Common Stock issued to him pursuant to this Agreement or previously issued to
him by the Company as bonus or other compensation (the “Employment Agreement
Stock”) if the Value (determined in the manner set forth below in this
subparagraph) of all of the shares of Common Stock owned by Executive and any
other trust or other entity over which Executive exercises control (including,
but not limited to, the Employment Agreement Stock) is less than two (2) times
his Base Salary.  The “Value” of the Common Stock at any time shall be
calculated as (x) the number of all shares of Common Stock held by Executive at
such time, multiplied by (y) a price per share of Common Stock, determined on
the most recent date that Executive’s Base Salary increased, calculated as the
weighted average of the closing price (giving effect to changes in the number of
shares of Common Stock outstanding on such dates) of the Common Stock on the
last trading day of each financial quarter in the immediately prior fiscal year
of the Company, which Value shall remain the reference Value until the next
increase in Executive’s Base Salary.  In calculating the Value of the Employment
Agreement Stock, unvested Restricted Stock and unexercised options shall not be
included in the Value.
 
 
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“3(g) Payment of Withholding Tax.  Executive may request that he be permitted to
sell or otherwise dispose of shares of Restricted Stock or other shares of
Common Stock granted as part of any performance based award (collectively, the
“Award Shares”) to the Company (including but not limited to by reducing the
amount of shares of Restricted Stock that vest) for the purpose of satisfying
any withholding or other tax incurred by Executive as a result of the issuance
of Award Shares (“Withholding Tax”), and the Compensation Committee shall
determine in its discretion whether the Company will purchase or accept such
shares.  If and to the extent that the Company declines such request, and
requires that the Withholding Tax be paid in cash, then Executive may sell, free
of the restrictions in Section 3(h) above, that number of Award Shares equal to
the Withholding Tax not satisfied through the sale or disposition of Award
Shares pursuant to the first sentence of this paragraph, determined as of the
date that Executive’s right to such Award Shares is included in Executive’s
income for income tax purposes.
 
“3(h) Adjustments for Subsequent Financial Statement Changes.  To the extent
permitted under applicable law without the imposition of excise taxes, if
following the issuance of any Restricted Stock on account of an Annual
Performance Bonus or payment of any cash or other bonus, an adjustment is
subsequently made to the financial statement or statements of the Company that
would have changed the satisfaction of any condition for the determination of a
bonus payment made to Executive or the issuance or vesting of any such shares of
Restricted Stock or payment of the cash portion of any bonus, the Compensation
Committee shall determine in its reasonable discretion whether any modification
or adjustment is required to said bonus payment previously made, or in the
vesting of the Restricted Stock so affected, and the Company shall promptly give
written notice to Executive of any change proposed to be made, setting forth in
reasonable detail therein the amount of and basis for such change, and if such
Restricted Stock has been sold, whether Executive should be required to pay to
the Company the net proceeds received by Executive from the sale of such
Restricted Stock.  If such change approved by the Compensation Committee
involves an increase to a bonus payment, the Company shall pay such increase to
Executive concurrently with the delivery of such notice; and if such change
approved by the Compensation Committee involves a decrease to any such bonus
payment, Executive shall repay the amount of such decrease to the Company
promptly, and in any event within sixty (60) days after receipt of such notice.
In addition, and notwithstanding any provision in this Agreement to the
contrary, payment and issuance of the cash, stock and any other bonuses received
by Executive under this Agreement, and any other payments and benefits which
Executive receives pursuant to a Company plan or other arrangement, subject to
compliance with all applicable laws, shall be subject to refund and return to
the extent necessary to comply with the requirements of the 2010 Dodd-Frank Wall
Street Reform and Consumer Protection Act or any rule or regulation of the
United States Securities and Exchange Commission.  The provisions of this
paragraph shall survive termination of this Agreement.
 
 
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“3(i) Additional Compensation.  The Compensation Committee may, from time to
time, award such additional compensation to Executive, in cash, shares of stock,
options to acquire shares of stock or other equity-based awards, or in property
and in addition to the Restricted Stock and Bonus compensation set forth in
Section 3(b), Section 3(c) and Section 3(d) of this Agreement, as the
Compensation Committee may determine in its sole discretion to be appropriate
based on business criteria established or determined by the Compensation
Committee, including economic and business conditions affecting the Company and
Executive’s personal performance.  Such additional compensation may be awarded
in accordance with the Plan or as otherwise determined by the Compensation
Committee.
 
“3(j)  Acceleration of Vesting.  If his employment is terminated by the Company
other than as the result of the occurrence of “cause” as defined in Section
12(a), all shares of Restricted Stock issued to Executive that have not yet
fully vested prior to the Termination Date shall immediately vest.”
 
7.
Paragraph 12(c) of the Employment Agreement and any reference to Paragraph 12(c)
in the Employment Agreement is hereby replaced in its entirety by the following:

 
“c. Termination by Company Without Cause. If Executive’s employment is
terminated by the Company other than as a result of the occurrence of “cause” as
defined in Section 12(a), Executive shall be entitled to receive (i) any Base
Salary amounts accrued and unpaid to and including the Termination Date, (ii)
any Bonus amounts earned by Executive in respect of any completed fiscal year
that remain unpaid, (iii) any expense reimbursement due to him pursuant to
Section 4 in respect of his employment prior to the Termination Date, (iv) an
amount, in cash, equal to the amount of Base Salary payable for the balance of
the calendar year from and after the Termination Date that remains unpaid, (v)
continued payment of his Base Salary in effect on the Termination Date through
December 31, 2013, and (vi) continued major medical, hospitalization, and dental
insurance providing coverage at least as favorable to Executive as that in
effect on the Termination Date through December 31, 2013.   The payments
required under clauses (i) through (iv) of this Section 12(c) shall be payable
as provided in Section 13(a) of this Employment Agreement.”
 
8.
The following new Section 21 is added to the Employment Agreement:

 
“21. Indemnification.
 
 
(a)
During the Term and throughout the 10-year period following the Termination
Date, the Company shall indemnify Executive, and hold him harmless from, any
loss, damages, liability, obligation or expense that he may suffer or incur in
connection with any claim made or Proceeding commenced during such period
relating to his service as a director, officer, employee or agent of the Company
(or any subsidiary thereof) to the same extent and in same manner as the Company
shall be obligated so to indemnify Executive immediately prior to the
Termination Date; provided that, if during such 10-year period the Company
adopts or assumes any indemnification policy or practice with respect to its
directors, officers, employees or agents that is more favorable than that in
effect on the Termination Date, Executive shall be entitled to such more
favorable indemnification.

 
 
(b)
During the Term and throughout the 10-year period following the Termination
Date, the Company shall maintain for the benefit of Executive directors’ and
officers’ liability insurance (on a “claims made” basis) providing coverage at
least as favorable to Executive (including with respect to limits of liability,
exclusions, and deductible and retention amounts) as that in effect on the
Termination Date.

 
 
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9.
Compliance with Code Section 409A.

 
 
(a)
Unless otherwise expressly provided in this Employment Agreement, as amended
hereby, any payment of compensation by the Company to Executive, whether
pursuant to this Agreement or otherwise, shall be made within two and one-half
months (2½ months) after the end of the later of the calendar year or the
Company’s fiscal year in which Executive’s right to such payment vests (i.e., is
not subject to a substantial risk of forfeiture for purposes of Code Section
409A (“Code Section 409A”)).  Such amounts shall not be subject to the
requirements of subsection (b) below applicable to “nonqualified deferred
compensation.”

 
 
(b)
All payments of “nonqualified deferred compensation” (within the meaning of Code
Section 409A) are intended to comply with the requirements of Code Section 409A,
and shall be interpreted in accordance therewith.  Neither party individually or
in combination may accelerate, offset or assign any such deferred payment,
except in compliance with Code Section 409A.  No amount shall be paid prior to
the earliest date on which it is permitted to be paid under Code Section 409A
and Executive shall have no discretion with respect to the timing of payments
except as permitted under Code Section 409A. In the event that Executive is
determined to be a “Specified Employee” (as defined in and determined in
accordance with Code Section 409A) of the Company at a time when its stock is
deemed to be publicly traded on an established securities market, payments
determined to be “nonqualified deferred compensation” payable by reason of
“Separation from Service” (as defined in Code Section 409A) shall be paid no
earlier than (i) the first day of the seventh (7th) calendar month commencing
after such termination of employment, or (ii) Executive’s death, consistent with
and to the extent necessary to meet the requirements of Code Section 409A
without the imposition of excise taxes.  Any payment delayed by reason of the
prior sentence shall be paid in a single lump sum on the earliest date permitted
under Code Section 409A in order to catch up to the original payment schedule,
with interest on such delayed amount equal to the short-term federal rate
applicable under Section 7872(f)(2)(A) of the Code for the month in which occurs
Executive’s Separation from Service.  Thereafter, Executive shall receive any
remaining benefits as if there had not been an earlier delay.

 
 
(c)
For purposes of this Agreement, termination of employment shall be deemed to
occur only upon “Separation from Service” as such term is defined in Code
Section 409A.  Each payment and each installment of any bonus or severance
payments provided for under this Agreement shall be treated as a separate
payment for purposes of application of Code Section 409A. Subsection (b) above
shall not apply to that portion of any amounts payable upon termination of
employment which shall qualify as “involuntary severance” under Code Section
409A because such amount (i) does not exceed the lesser of (1) two hundred
percent (200%) of Executive’s annualized compensation from the Company for the
calendar year immediately preceding the calendar year during which the
termination of employment occurs, or (2) two hundred percent (200%) of the
annual limitation amount under Section 401(a)(17) of the Code (the maximum
amount of compensation that may be taken into account for purposes of a
tax-qualified retirement plan) for the calendar year during which termination of
employment occurs, and (ii) is paid no later than the end of the second (2nd)
calendar year commencing after termination of employment.

 
 
(d)
All benefit plans, programs and policies sponsored by the Company are intended
to comply with all requirements of Code Section 409A or to be structured so as
to be exempt from the application of Code Section 409A.  All expense
reimbursement or in-kind benefits subject to Code Section 409A which are
provided under this Agreement or, unless otherwise specified in writing, under
any Company program or policy, shall be subject to the following rules: (i) the
amount of expenses eligible for reimbursement or in-kind benefits provided
during one calendar year may not affect the benefits provided during any other
year; (ii) reimbursements shall be paid no later than the end of the calendar
year following the year in which Executive incurs such expenses, and Executive
shall take all actions necessary to claim all such reimbursements on a timely
basis to permit the Company to make all such reimbursement payments prior to the
end of said period, and (iii) the right to reimbursement or in-kind benefits
shall not be subject to liquidation or exchange for another benefit.

 
 
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10.
Except as expressly set forth herein, all other terms and provisions of the
Employment Agreement as amended shall remain in full force and effect and
unmodified hereby, and Executive shall be entitled to continue to receive all
other benefits provided thereunder.

 
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first written above, intending to be legally bound hereby.
 
 

 
JAKKS PACIFIC, INC.
         
 
By:
/s/       
Name:
      Title:                     John a/k/a Jack McGrath  

 
 
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EXHIBIT A
To
Employment Agreement between
John a/k/a Jack McGrath and JAKKS Pacific, Inc.

Form of Restricted Stock Award Agreement
Under the
JAKKS Pacific, Inc.
2002 Stock Award and Incentive Plan
 
 
This RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”) is entered into on
___________, 201___ by and between John a/k/a Jack McGrath (the "Executive") and
JAKKS Pacific, Inc., a Delaware corporation (the “Company”).

WITNESSETH:

WHEREAS, the Company and the Executive are parties to that certain Employment
Agreement, effective January 1, 2010 and amended by a First Amendment
dated  ________ , 2011 (collectively, the "Employment Agreement"); and

WHEREAS, the terms and conditions of the Employment Agreement call for the
Company to grant the Executive certain shares of Restricted Stock (as defined
below) in consideration for the Executive agreeing to enter into the First
Amendment; and

WHEREAS, pursuant to the Company’s 2002 Stock Award and Incentive Plan (the
“Plan”), the Company’s Board or its Compensation Committee (the “Compensation
Committee”) has approved, in accordance with the terms of the Employment
Agreement, the grant to the Executive of Restricted Stock set forth herein,
subject to the terms and conditions of this Agreement.
AWARD OF RESTRICTED STOCK
 
The Company hereby grants to the Executive an award of __________ shares of
restricted common stock of the Company, par value $.001 per share (the
“Restricted Stock”), subject to, and in accordance with, the restrictions,
terms, and conditions set forth in this Agreement.   The grant date of this
award of Restricted Stock is _________, 201___ (the “Grant Date”).
 
This Agreement shall be construed in accordance with, and subject to, the
provisions of the Plan (the provisions of which are incorporated herein by
reference) and, except as otherwise expressly set forth herein, the capitalized
terms used in this Agreement shall have the same definitions as set forth in the
Plan and the Employment Agreement.
 
RESTRICTIONS
 
Subject to Sections 2.2 and 3.2 below, and provided in all instances that the
Executive’s employment with the Company has not been terminated for cause by the
Company in accordance with the provisions of the Employment Agreement prior to
January 1, ________ (the “Final Vesting Date”, that number of shares of
Restricted Stock set forth below shall vest on each of the dates set forth below
(the “Vesting Date”) such that on each Vesting Date such number of shares of
Restricted Stock shall be fully vested1:
 
Vesting Date                                           Number of Shares that
Vest
 
 

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1 Vesting Schedule to be in accordance with relevant provisions of Section 3 of
First Amendment to the Employment Agreement
 
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None of the Restricted Stock may be sold, assigned, transferred, pledged, or
otherwise encumbered prior to each Vesting Date, and thereafter the Restricted
Stock shall not be sold, assigned transferred, pledged, or otherwise encumbered
except in accordance with the minimum stock holding requirements provided for in
Section 3(h) of the Employment Agreement.
 
[Insert for Shares issued under Section 3(d) of the First Amendment to
Employment Agreement:] Notwithstanding the Vesting Dates set forth in Section
2.1 above, and in order for the Company to preserve the deductibility under
Section 162(m) of the Code of the grant of Restricted Stock provided hereby, as
a condition precedent to the effectiveness of the above-described vesting
schedule, the 3% Vesting Condition (defined in Section 3(b) of the Employment
Agreement) must be satisfied.  In the event the 3% Vesting Condition is not
satisfied, (i) the grant of Restricted Stock pursuant to this Agreement shall be
null and void, (ii) the Executive shall forfeit any right to receive any
Restricted Stock, (iii) any entries on the stock books and ledgers of the
Company with respect to the shares of Restricted Stock shall be cancelled, and
(iv) the Restricted Stock shall become authorized but unissued shares of the
Company's common stock, par value $.001 per share (the "Common Stock").
 
The Restricted Stock may not be sold, assigned, transferred, pledged, or
otherwise encumbered prior to the date, if ever, that the Restricted Stock
becomes vested in accordance with the terms of this Agreement.
 
STOCK; DIVIDENDS; VOTING
 
The stock certificate(s) evidencing the Restricted Stock shall be registered on
the Company's books in the name of the Executive as of the Grant Date. The
Company may issue stock certificates or otherwise evidence the Executive’s
interest by using a book entry account.  The Company may, in its sole
discretion, maintain physical possession or custody of such stock certificates
until such time as the shares of Restricted Stock are free of the restrictions
contained in Article 2.  The Company reserves the right to place a legend on the
stock certificate(s) restricting the transferability of such certificates and
referring to the terms and conditions (including forfeiture) of this Agreement
and the Plan.
 
During the period the Restricted Stock is not vested, Executive shall not have
the right to vote or receive dividends (whether in cash, stock or any other
form) on shares of Restricted Stock issued under this Agreement until the date
of vesting of such shares.
 
In the event of a stock split, change in capitalization or other similar capital
event in which the Company’s stockholders participate generally in respect of
all shares of common stock of the Company, par value $.001 per share, from and
after the date of issuance of the Restricted Stock, the number and class of
shares of Restricted Stock or other securities that the Executive shall be
entitled to, and shall hold, pursuant to this Agreement shall be appropriately
adjusted or changed to reflect such change in capitalization, provided that any
such additional shares of Restricted Stock or different shares or securities
shall remain subject to the restrictions contained in this Agreement.
 
The Executive represents and warrants that he is acquiring the Restricted Stock
for investment purposes only, and not with a view to distribution thereof.  The
Executive is aware that the Restricted Stock may not be registered under the
federal or any state securities laws and that, in addition to the other
restrictions on the shares of Restricted Stock, the Restricted Stock will not be
able to be transferred unless an exemption from registration is available or the
Restricted Stock becomes registered.  By making this award of Restricted Stock,
the Company is not undertaking any obligation to register the Restricted Stock
under any federal or state securities laws.
 
NO RIGHT TO CONTINUED SERVICE AS AN EXECUTIVE
 
Nothing in this Agreement or the Plan shall be interpreted or construed to
confer upon the Executive any right with respect to continuance as an employee
of the Company or any subsidiary of the Company, nor shall this Agreement or the
Plan interfere in any way with the right of the Company or a subsidiary of the
Company or their respective stockholders to terminate the Executive’s service as
a director at any time.
 
 
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TAXES AND WITHHOLDING
 
The Executive shall be responsible for all federal, state, and local income
taxes payable with respect to this award of Restricted Stock.  The Executive
shall have the right to make such elections under the Code as are available in
connection with this award of Restricted Stock.  The Company and the Executive
agree to report the value of the Restricted Stock in a consistent manner for
federal income tax purposes.  The Company shall have the right to retain and
withhold from any payment of Restricted Stock the amount of taxes (if any)
required by any government to be withheld or otherwise deducted and paid with
respect to such payment.  At its discretion, the Company may require the
Executive to reimburse the Company for any such taxes required to be withheld
and may withhold any distribution in whole or in part until the Company is so
reimbursed.  In lieu thereof, the Company shall have the right to withhold from
any other cash amounts due to the Executive an amount equal to such taxes
required to be withheld or withhold and cancel (in whole or in part) a number of
shares of Restricted Stock having a market value not less than the amount of
such taxes.
 
EXECUTIVE BOUND BY THE PLAN
 
The Executive hereby acknowledges receipt of a copy of the Plan and agrees to be
bound by all the terms and provisions thereof.
 
MODIFICATION OF AGREEMENT
 
This Agreement may be modified, amended, suspended, or terminated, or any of the
terms or conditions hereof waived, only by a written instrument executed by the
parties hereto.
 
SEVERABILITY
 
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
 
GOVERNING LAW
 
The validity, interpretation, construction, and performance of this Agreement
shall be governed by the laws of the State of Delaware without giving effect to
the conflicts of laws principles thereof.
 
SUCCESSORS IN INTEREST
 
This Agreement shall inure to the benefit of, and be binding upon, the Company
and its successors and assigns, whether by merger, consolidation,
reorganization, sale of assets, or otherwise.  This Agreement shall inure to the
benefit of the Executive’s legal representatives.  All obligations imposed upon
the Executive and all rights granted to the Company under this Agreement shall
be final, binding, and conclusive upon the Executive’s heirs, executors,
administrators, and successors.
 
RESOLUTION OF DISPUTES
 
Any dispute or disagreement which may arise under, or as a result of, or in any
way relate to the interpretation, construction, or application of this Agreement
shall be determined by the Board. Any determination made hereunder shall be
final, binding, and conclusive on the Executive and the Company for all
purposes.
 
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
 

  JAKKS PACIFIC, INC   EXECUTIVE           By:         Name:          John a/k/a
Jack McGrath   Title:        
 

 
 
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EXHIBIT B
VESTING SCHEDULE FOR SHARES OF RESTRICTED STOCK ISSUED
UNDER SECTION 3(d)

Dollar Value of Shares Issued
Issuance Date
First Vesting Date
% of Shares Vesting on First Vesting Date
Second Vesting Date2
% of Shares Vesting on Second Vesting Date
Third
Vesting
Date
% of Shares Vesting on Third Vesting Date
Fourth
Vesting
Date
% of Shares Vesting on Fourth Vesting Date
$75,000.00
____ 1, 2011
Date in 2012 as of which the 3% Vesting Condition is determined to have been
satisfied
25%
Jan 1, 2013
25%
Jan 1, 2014
25%
Jan 1, 2015
25%
$75,000.00
Jan 1,  2012
Date in 2013 as of which the 3% Vesting Condition is determined to have been
satisfied
33⅓%
Jan 1, 2014
33⅓%
Jan 1, 2015
33⅓%
N/A
N/A
$75,000.00
Jan 1, 2013
Date in 2014 as of which the 3% Vesting Condition is determined to have been
satisfied
50%
Jan 1, 2015
50%
N/A
N/A
N/A
N/A

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2 This schedule assumes that for each issuance of Section 3(d) Restricted Stock,
the 3% Vesting Condition is satisfied as of the first possible vesting date.
 
 
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EXHIBIT D

BASE BONUS CRITERIA FOR 2011

Executive’s 2011 Base Annual Performance Bonus shall be calculated as
Executive’s Base Salary for 2011 multiplied by the percentage of Base Salary set
forth in the table below that corresponds to the Company’s actual 2011 Adjusted
EPS (defined below):

2011 Adjusted EPS ($)
Bonus
(% of Base Salary)
Less than 1.37
0%
   
1.40
20%
   
1.44
25%
   
1.48
35%
   
1.52
45%
   
1.56
55%
   
1.60
70%
   
1.64
85%
   
1.70
100%
   
1.78
125%
   
1.74
120%

The foregoing targets shall be adjusted so that the initial target under which
Executive can earn a bonus equal to 20% of Base Salary (the “Initial EPS
Target”) is the greater of $1.41 and the amount that is 3% higher than Adjusted
Earnings Per Share for the 2010 fiscal year of the Company, and each subsequent
tranche shall be adjusted accordingly so that the maximum bonus, equal to 125%
of Executive’s 2011 Base Salary, is earned if 2011 Adjusted EPS is 30% higher
than the Initial EPS Target.
 
 
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