|EMPLOYMENT AGREEMENT


AGREEMENT
dated as of July 1, 2003 between 4Kids Entertainment Licensing, Inc. with offices at 1414
Avenue of the Americas, New York, New York 10019 (Employer), and Brian Lacey,
419 East 57th Street, New York, New York 10022 (Employee).

W I T N E S S E T H :




WHEREAS,
Employer desires to retain the services of Employee and Employee desires to be employed by
Employer upon the terms and conditions hereinafter set forth;


NOW,
THEREFORE, in consideration of the covenants herein contained, the parties hereto agree as
follows:


     1.    
          Employment and Duties.
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| | (a)       
               Employer hereby employs Employee and Employee hereby agrees to serve as
               Executive Vice President of Employer. Employees principal duties shall be
               (i) to license television broadcast rights and home video rights outside the
               U.S. to television series represented by Employer or affiliates (4Kids
               Series); (ii) to assist Employer and affiliates in identifying and
               negotiating for the rights to television series and other broadcast content for
               broadcast on the FoxBox or on other broadcasters; (iii) to license television
               broadcast rights to 4Kids Series to cable networks and satellite broadcasters in
               the U.S.; (iv) to assist the CEO, COO and other executives of Employer and
               affiliates in managing 4Kids Entertainments home video business and (v) to
               assist the CEO, COO and other executives of Employer and affiliates in managing
               4Kids Entertainments International business. 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 Chief Executive Officer (CEO), Chief Operating Officer
               (COO) and Board of Directors of 4Kids Entertainment, Inc.
               (4Kids) and such services customary to such office as are necessary
               to the operations of Employer and affiliates. Employee shall use Employees
               best efforts to promote the interests of Employer and affiliates and shall
               devote Employees full business time, energy and skill exclusively to the
               business and affairs of Employer and affiliates during the Term set forth below
               in Paragraph 2.
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|(b)       
          Employer and Employee shall hire an employee that is mutually



satisfactory to Employer and Employee
to assist Employee in performing his duties hereunder.


     2.       
          Term of Employment. (a) The term of Employees employment hereunder
          (Term) shall commence on July 1, 2003 and shall continue until June
          30, 2006 unless terminated as provided in Paragraph 10 of this Agreement.


     (b)       
          At least six (6) months prior to the end of the Term, the Parties shall begin
          discussions with respect to an extension of the Term of this Agreement.


     3.       
          Compensation.


     (a)       
          Salary. As compensation for Employees services during the Term,
          Employer shall pay Employee a salary at the rate Three Hundred Fifty Thousand
          ($350,000) per year. The CEO or 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.


     (b)       
          Withholding. All payments of compensation shall be made in appropriate
          installments to conform with 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. During the Term, Employee shall be entitled to
          participate in all insurance and other benefits as are now, 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. The benefits described herein and on the
          schedule attached hereto are the benefits referred to as Fringe
          Benefits.


     (d)       
          Vacation. Employee shall be entitled to accrued vacation at the rate of
          four (4) weeks per calendar year during the Term. Such vacation shall be taken
          at such times as shall be approved by the CEO of 4Kids. Employer further
          acknowledges that Employee typically spends four (4) to six (6) weeks each
          summer in Europe meeting with European broadcasters and home video licensees.
          Employer and Employee agree that fifty percent (50%) of such time shall be
          deemed vacation.


     (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 Compensation. (a) For each full calendar year of the Term, Employee
          shall be eligible to participate in the bonus pool established by the
          Compensation Committee (the Bonus Pool), which Bonus Pool shall be
          based upon a percentage designated by the Compensation Committee of the profit
          before tax of 4Kids and subsidiaries. The Compensation Committee and the CEO of
          4Kids, in their sole and absolute discretion, shall determine the amount of the
          Bonus Pool, if any, to be awarded to Employee based upon Employees
          performance during the calendar year in question.


     (b)(i)       
          Notwithstanding anything herein to the contrary, Employer shall pay Employee a
          minimum bonus (MB) of not less than One Hundred Fifty Thousand
          Dollars ($150,000) for each calendar year during the Term subject to the
          following reduction: the MB with respect to any calendar year during the Term
          shall be reduced by an amount equal to fifty percent (50%) of the Annual Stock
          Option Value (as defined below), if any, with respect to the applicable calendar
          year for which the MB is to be paid (Applicable Calendar Year).
          Nothing herein shall be deemed to prevent Employee from receiving both an MB and
          a share of the Bonus Pool.


     (ii)       
          For purposes of this Agreement, the Annual Stock Option Value shall equal (x)
          the Net Proceeds (as defined below) received by, or credited to, Employee from
          the exercise by Employee of stock options issued to Employee with respect to the
          Applicable Calendar Year (ACY Options) and sale by Employee of the
          4Kids stock underlying such ACY Options during such Applicable Calendar Year and
          (y) the Value Increase (as defined below), if any, of any ACY Options granted to
          but not exercised by Employee during such Applicable Calendar Year.


     (iii)       
          For purposes of this Agreement, Net Proceeds shall be defined as the sum
          received by, or credited to, Employee from the sale by Employee during the
          Applicable Calendar Year of the 4Kids stock underlying such ACY Options that
          have been exercised, after deduction of the exercise price paid with respect to
          such exercised stock options.


     (iv)       
          For purposes of this Agreement, Value Increase shall be computed by multiplying
          (x) the number of ACY Options granted to Employee during the Applicable Calendar
          Year but not exercised by Employee during such Applicable Calendar Year assuming
          that Employee were fully vested in all such ACY Options granted by 4Kids to
          Employee for such Applicable Calendar Year, by (y) the difference between the
          grant price for such 4Kids stock options and the closing price of 4Kids common
          stock as of the last day of trading for such Applicable Calendar Year.


For example: if Employee were granted
10,000 stock options for calendar



year 2003 with an exercise price of
$20 per share, Employee during 2003 sold 6,000 ACY Options for Net Proceeds of $75,000 and
the closing price of the 4Kids common stock as of the last day of trading in 2003 was 26,
the Annual Stock Option Value would be equal to fifty percent (50%) of the sum of (x)
$75,000 (i.e., the Net Proceeds on the sale during 2003 of the ACY Options), and (y)
$24,000 (i.e., 4,000 ACY Options granted but not exercised in 2003 multiplied by the
difference between the closing price on the last day of trading less the grant price for
the 2003 stock options = $24,000). In this example, Employees MB for 2003 would be
reduced by fifty percent (50%) of the sum of $75,000 and $24,000 or by a total of $49,500.


     (d)       
          The amount of the Bonus Pool to be awarded to Employee and/or the MB shall be
          paid to Employee no later than ten (10) business days after completion of the
          annual audit of the financial statements of 4Kids which audit is generally
          completed by March 31 of the year immediately succeeding the year to which the
          Bonus Pool and/or MB pertains.


     5.       
          Stock Options.


     (a)       
          4Kids hereby grants to Employee options under the terms and conditions of the
          Stock Option Plan of 4Kids (SOP) to acquire twenty-five thousand
          (25,000) shares of the common stock of 4Kids. The date of grant shall be the
          date of the execution of this Agreement. The exercise price of such stock
          options shall be determined in accordance with the SOP. Fifty percent (50%) of
          such stock options shall be vested as of the date of grant. The remaining fifty
          percent (50%) of the stock options shall vest as of the first anniversary of the
          date of grant of such stock options to Employee. The rights and obligations of
          the Parties with respect to any grant of stock options shall be set forth in the
          form Stock Option Agreement to be entered into by Employee and 4Kids.


     (b)       
          Employee shall also be eligible to receive additional grants of stock options as
          determined in the sole discretion of the Compensation Committee.


     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 of two (2)
years thereafter, Employee shall not directly or indirectly:


     (i)       
          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;


     (ii)       
          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:,


     (iii)       
          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. For the avoidance of doubt, the term client shall not be deemed
to include any of the broadcasters and/or home video licensees to whom Employee has
licensed television broadcast rights and/or home video rights to the television series
represented by Employer.



(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.


     (c)       
          If Employee commits a breach or is about to commit a breach of any of the
          provisions of Paragraph 7(a)and/or (b) above, Employer shall have the right to
          have the provisions of this Agreement specifically enforced by any court having
          equity jurisdiction without being required to post bond or other security and
          without having to prove the inadequacy of the available remedies at law, it
          being acknowledged and agreed that any such breach will cause irreparable injury
          to Employer and that money damages will not provide an adequate remedy to
          Employer. In addition, Employer may take all such other actions and remedies
          available to it under law or in equity and shall be entitled to such damages as
          it can show it has sustained by reason of such breach.


     (d)       
          The parties acknowledge that the type and period of restriction imposed in the
          provisions of Paragraph 7(a) are fair and are reasonably required for the
          protection of Employer and the goodwill associated with the business of
          Employer. Nothing in this Paragraph 7 shall prevent Employee on termination or
          expiration of this Agreement, from working as a distributor of television or
          home videos programs provided that Employee does not render directly such
          services for any client of Employer or indirectly render services for such
          client of Employer such as by working for any third party rendering television
          or home video distribution services for such client. If any of the covenants in
          Paragraph 7(a) or any part thereof, is hereafter construed to be invalid or
          unenforceable the same shall not affect the remainder of the covenant or
          covenants, which shall be given full effect, without regard to the invalid
          portions.


     8.       
          Intellectual Property. Employee agrees that all ideas, proposals and
          plans invented or developed by Employee during the Term which relate to the
          business of Employer and affiliates or any of its clients including, without
          limitation, any ideas, proposals and plans which may be copyrighted,
          trademarked, patented or otherwise protected, will be the property of Employer
          and affiliates. Employee further agrees, at Employers and/or
          affiliates request and expense, to do whatever is necessary or desirable
          to secure the rights to said ideas, proposals and plans, whether by copyright,
          trademark, patent or otherwise. If requested by Employer and/or affiliates,
          Employee shall execute and deliver such documents of assignment as shall be
          necessary in Employers and/or affiliates sole judgement, to assign,
          transfer and convey all rights thereto to Employer and affiliates.


     9.       
          Representations and Warranties. (a) Employee represents and warrants
          that:


     (i)       
          Employee has the right to enter into this Agreement and is not subject to any
          contract, commitment, agreement, arrangement or restriction of any kind which
          would prevent Employee from performing Employees duties and obligations
          hereunder;


     (ii)       
          Employee is currently in good health and to the best of Employees
          knowledge, Employee is not subject to any undisclosed medical condition which
          might have a material effect on Employees ability to perform
          satisfactorily Employees services hereunder.


     (b)       
          Employer represents and warrants that the salary and bonus provisions of this
          Agreement are equivalent to the salary and bonus provisions in the employment
          agreements of the most senior executives of Employer other than the Chairman of
          Employer.



10.       
          Termination.


     (a)       
          This Agreement may be terminated immediately on the death of Employee and may be
          terminated immediately on written notice in the event of the physical or mental
          disability of Employee to such an extent that Employee is unable to render
          services to Employer and affiliates for a period of ninety (90) consecutive days
          in any consecutive twelve(12) month period.


     (b)       
          In the event that Employer terminates this Agreement due to Employees
          death, Employee shall be paid Employees salary and shall continue to
          receive all Fringe Benefits hereunder through the date of Employees death.
          Employees estate shall also receive any bonus that has been earned but has
          not been paid as of the date of Employees death and a proportionate share
          of any bonus payable with respect to the calendar year in which Employees
          death occurs (such proportionate share to be calculated based on the number of
          days in the calendar year prior to Employees death as compared with 365).
          In the event that Employer terminates this Agreement due to Employees
          disability, Employee shall be paid Employees salary and shall continue to
          receive all Fringe Benefits hereunder until the date in which the termination
          for disability occurred. Employee shall also receive any bonus that has been
          earned but has not been paid as of the date of Employees termination due
          to disability and a proportionate share of any bonus payable with respect to the
          calendar year in which Employees termination due to disability occurs
          (such proportionate share to be calculated based on the number of days worked in
          the calendar year prior to Employees death as compared with 365).


     (c)       
          Employer shall have the right at any time, by written notice to Employee, to
          immediately terminate this Agreement for cause, which for purposes
          of this Agreement shall be defined as:


     (i)       
          Employees conviction of any act which constitutes a felony under federal,
          state or local laws;


     (ii)       
          Employees repeated refusal (other than any failure to perform arising from
          a physical or mental disability) to act in accordance with the reasonable
          directions of the Chief Executive Officer or Chief Operating Officer of 4Kids
          directing Employee to perform services consistent with Employees status as
          an officer of Employer, which refusal is not cured by Employee within twenty
          (20) days of Employees receipt of written notice thereof from Employer
          (provided, however, that if such breach cannot be cured within twenty (20) days
          and Employee commences the cure thereof and diligently pursues the same, such
          failure shall not constitute cause unless such breach is not cured
          in its entirety within thirty (30) days of Employees receipt of the
          written notice of breach).



(iii)       
          Employees dishonesty, including embezzlement or misappropriation of funds;


     (iv)       
          Employees use of illegal drugs that impairs his ability to perform his
          duties hereunder;


     (v)       
          Employees use of alcohol that impairs his ability to perform his duties
          hereunder;


     (vi)       
          Employees material breach of any obligations of Employee which remains
          uncured for more than twenty (20) days after written notice thereof by Employer
          to Employee.


In
the event that Employer terminates this Agreement for cause, Employee shall be
paid Employees salary and shall continue to receive all Fringe Benefits through the
date of termination. Thereafter, Employer shall have no further obligation to Employee and
Employee shall not receive any bonus payments except for any MB earned but not yet paid
with respect to the prior calendar year.


     (d)       
          Notwithstanding anything in this Agreement to the contrary, Employer shall have
          the right to terminate Employee for reasons other than those set forth in
          paragraphs 10(a) and 10(c) (Termination Without Cause) by delivering
          a written notice of such termination to Employee. In the event such written
          notice of termination is delivered, Employee shall continue to receive
          Employees full salary, Fringe Benefits and MB for each year during the
          remainder of the Term.


     (e)       
          In the event that Employee resigns or voluntarily terminates his employment by
          Employer, Employee shall not receive any further salary, Fringe Benefits or
          bonuses hereunder other than as required by COBRA or any similar state law or
          subsequently enacted law replacing COBRA. Employee shall provide at least thirty
          (30) days written notice of such resignation or voluntary termination.


     (f)       
          Employee shall have the right to terminate this Agreement by delivering a
          written notice of termination to Employer in the event that Employer breaches
          any of its duties and obligations hereunder and fails to cure such breach within
          twenty (20) days after receipt of a written notice of breach from Employee. In
          the event Employee terminates this Agreement as provided in this subparagraph,
          Employee shall receive Employees full salary, Fringe Benefits and MB for
          each year during the remainder of the Term.


     (g)       
          Upon termination of this Agreement, Employee shall promptly return all of
          Employers and affiliates


property to Employer.



(h)       
          Notwithstanding any termination of this Agreement, Employees obligations
          to Employer and affiliates pursuant to Paragraphs 7 and 8 of this Agreement
          shall survive the termination of this Agreement.


     11.       
          Life Insurance. Employer shall have the right to purchase life insurance
          on the life of Employee at Employers sole expense and with Employer and
          affiliates as the sole beneficiary thereof. Employee shall cooperate fully with
          Employer in obtaining such life insurance, sign any necessary consents,
          applications and other related forms or documents and take any required medical
          examinations reasonably required.


     12.       
          Assignment. This Agreement is a personal contract and Employee may not
          assign, sell or transfer Employees rights, interests and obligations
          hereunder. Any assignment contrary to this paragraph shall be null and void of
          no force and effect. In the event of any attempted assignment or transfer of
          rights hereunder contrary to the provisions hereof, Employer shall have no
          further liability for payments hereunder. The rights and obligations of Employer
          and affiliates hereunder shall be binding upon and run in favor of the
          successors and assigns of Employer and affiliates.


     13.       
          Entire Understanding; Governing Law. This Agreement represents the entire
          agreement and understanding between the parties with respect to the subject
          matter hereof and supersedes all prior agreements and understandings relating to
          the employment of Employee. This Agreement shall be governed by, and construed
          in accordance with, the laws of the State of New York applicable to agreements
          made and to be performed entirely within New York.


     14.       
          Modification. This Agreement may not be amended, modified, canceled,
          discharged, extended or changed except by an agreement in writing signed by the
          party against whom enforcement of any such amendment, modification,
          cancellation, discharge, extension or change is sought.


     15.       
          Headings. Paragraph headings contained in this Agreement are for
          convenience of reference only and shall not be considered a part of this
          Agreement.


     16.       
          Severability. If any provision or if any part of any provision of this
          Agreement is found to be unenforceable, illegal or contrary to public policy by
          a court of competent jurisdiction, the parties agree that this Agreement shall
          remain in full force and effect except for such provision or part of any such
          provision held to be unenforceable.



17.       
          Notices. Any notices or other communications required or permitted
          hereunder shall be in writing and shall be deemed effective when delivered in
          person, sent by overnight courier (e.g. Federal Express), telefaxed with a
          follow up copy by regular mail or sent by registered or certified mail, return
          receipt requested, in which case the notice shall be deemed effective on the
          date of deposit in the mails, postage prepaid, addressed to Employee at
          Employees then current home address and, in the case of Employer,
          addressed to Employer at its offices located at the address set forth on page 1.
          Either party may change the address to which notices are to be addressed by
          notice in writing given to the other in accordance with the terms hereof.


     18.       
          Counterparts. This Agreement may be signed in any number of counterparts,
          each of which shall be an original, and all of which, taken together, shall
          constitute one instrument.


IN
WITNESS WHEREOF, Employer and 4Kids have, by their appropriate officers signed this
Agreement and Employee has signed this Agreement as of the day and year first above
written.
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| | Sincerely
yours, 4Kids Entertainment Licensing, Inc.
| | ----------------------------------------------------
| | By:
/s/ Joseph P. Garrity
      Joseph P. Garrity   



|Agreed to and Accepted:



By:/s/ Brian LaceyBrian Lacey



4Kids Entertainment, Inc.



By:/s/ Samuel R. NewbornSamuel R. Newborn
|----------------------------------------------------------------------------------------------------------------------------------