Exhibit 10.1


 


FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT


 


THIS FOURTH AMENDMENT (the “Fourth
Amendment”), dated September 29, 2016 by and between John a/k/a Jack McGrath, an individual (“Executive”)
and JAKKS Pacific, Inc., a Delaware corporation (“JAKKS” or the “Company”) further amends
the 2010 Employment Agreement (as defined below) between Executive and the Company, and is entered into pursuant to Section 20
of the 2010 Employment Agreement.


 


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 “2010 Employment Agreement”),
which was amended by a First Amendment to Employment Agreement dated August 23, 2011, a Second Amendment to Employment Agreement
dated May 15, 2013, and a Third Amendment Extending Term of Employment Agreement dated June 11, 2015 (the 2010 Employment Agreement,
as heretofore amended is referred to as the “Amended Employment Agreement”); and


 


WHEREAS, Executive and the Company
desire to amend the terms of the Amended Employment Agreement in certain respects without modifying, changing or otherwise amending
any other provisions of the Amended Employment Agreement (the Amended Employment Agreement, as further amended by this Fourth Amendment,
is referred to as 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 Amended Employment Agreement.



 


		2.	The text of Section 2 of the 2010 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, 2020, 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.”


 


		3.	Annual Restricted Stock Awards. Effective as of January 1, 2017, Section 3(d) of the Amended Employment Agreement is
amended in its entirety to provide as follows:



 


“d. Annual Restricted Stock Awards.


 


(i)       Definitions.


 


A. The term “Annual Restricted Shares Grant”
means the number of shares of Restricted Stock issued on each annual Issuance Date, which shall be determined by dividing $1,000,000.00
by the closing price of a share of the Company’s Common Stock on the first trading date immediately preceding such annual
Issuance Date.


 


B. The term “Common Stock” means
the Company’s common stock, par value $.001 per share.


 


C. The term “Issuance Date” means
January 1, 2017 and January 1 of each calendar year thereafter occurring during the Term.


 






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D. The term “Performance Measures”
is defined in section 5 below of this Fourth Amendment.


 


E. The term “Performance Shares”
is defined in sub-paragraph (ii) (A) below of this Section 3(d).


 


F. The term “Plan” means the Company’s
2002 Stock Award and Incentive Plan as in effect on June 1, 2016 and as subsequently may be amended, from time to time, or any
successor plan.


 


G. The term “Restricted Stock” means
shares of restricted common stock of the Company, par value $.001 per share issuable under the Plan.


 


H. The term “Restricted Stock Performance Measures”
has the meaning provided for in Schedule “A” annexed to of this Fourth Amendment.


 


(ii)        Pursuant
to and subject to the terms (including, without limitation, the availability of shares reserved for issuance thereunder) of the
Plan and the applicable Restricted Stock Agreement, which shall be substantially in the form of Exhibit A to the Amended Employment
Agreement, the Company shall issue to Executive on each annual Issuance Date that number of shares of Restricted Stock with a value
equal to $1,000,000.00 which shall vest as follows:


 


A. Sixty Percent (60%) of each Annual Restricted Shares
Grant, equal in value on its Issuance Date to $600,000.00, shall vest in accordance with the Restricted Stock Performance Measures
(the shares included in that part of each Annual Restricted Shares Grant that vest in accordance with the Restricted Stock Performance
Measures are referred to as the “Performance Shares.”)


 


B. Forty Percent (40%) of each Annual Restricted Shares
Grant, equal in value on its Issuance Date to $400,000.00, shall vest in four (4) equal annual installments, with twenty-five percent
(25%) thereof vesting on each of the first, second, third and fourth anniversaries of its Issuance Date.


 


		4.	Section 3(e) of the Amended Employment Agreement is amended in its entirety to provide that the Annual Performance Bonus for
fiscal year 2017 and each fiscal year thereafter during the Term shall equal the amount calculated as provided in clause (A) below
and be paid as provided in clauses (B) and (C) below.



 


		i.	Each Annual Performance Bonus shall be equal to an amount not exceeding 125% of Base Salary for the applicable fiscal year,
one-half of which shall be earned using Company Net Revenue performance criteria established by the Compensation Committee for
the applicable fiscal year and one-half of which shall be earned using Company EBITDA performance criteria established by the Compensation
Committee for the applicable fiscal year, such criteria to be established by the Compensation Committee during the first fiscal
quarter of the relevant fiscal year for which the Annual Performance Bonus criteria are being established, after consultation with
the Executive, in a manner consistent with past practices. The terms Net Revenue and EBITDA shall have the same meaning as provided
for in Schedule A.



 


		ii.	That portion of the Annual Performance Bonus up to an amount equal to the first 100% of Base Salary shall be paid in cash;
any excess over 100% of Base Salary shall be paid in Restricted Stock vesting in equal quarterly installments, with the first installment
vesting on the award date and the remainder over 3 years following the award date. The number of shares of Restricted Stock, if
any, forming part of the Annual Performance Bonus shall be determined by dividing the dollar amount of the Restricted Stock portion
of the 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 Annual Performance Bonus is determined to have been earned.



 






    	 	 6	 



     


    

 


		iii.	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.



 


		5.	The calculations necessary to determine the Restricted Stock Performance Measures and the Annual Performance Bonus performance
criteria (collectively, the “Performance Measures”) shall be made by the Compensation Committee in its discretion,
and will, absent manifest error, be conclusive and binding upon the Company and Executive. The Performance Measures may all be
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 Plan, and the Compensation Committee also reserves the right to modify the vesting and bonus targets and
vesting and bonus percentages in the exercise of its negative discretion to take account of any extraordinary or special items,
and business acquisitions occurring during the Performance Periods and the relevant fiscal years, or as otherwise determined by
the Compensation Committee.



 


		6.	Section 3(d) of the Amended Employment Agreement as amended by this Fourth Amendment shall continue to be subject to the provisions
of Sections 3(e) (3) through 3(e) (5) and Sections 3(f), 3(g), 3(h) through 3(i) inclusively of the Amended Employment Agreement.
Section 3(j) of the Amended Employment Agreement is supplemented to provide that unless the Employment
Agreement has been terminated by Executive other than as the result of a breach by the Company of its obligations or by the Company
for cause, if the Term or Executive’s employment by the Company does not continue after December 31, 2020, the Performance
Shares and any Restricted Stock issued in partial payment of an Annual Performance Bonus shall continue to vest in accordance with
and subject to the vesting conditions provided for in Section 3 of this Fourth Amendment.



 


		7.	Section 12(c) of the Amended Employment Agreement is amended to replace the date December 31, 2015 with the date December 31,
2020.



 


		8.	The Amended Employment Agreement, as expressly amended by this Fourth Amendment, remains in full force and effect.



 


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FOLLOWS


 






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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:	 	 
	 	 	Name: Stephen
    Berman	 
	 	 	Title:  President
    & CEO	 
	 	 	 	 
	 	 	 
	 	John
    a/k/a Jack McGrath	 







  




    	 	 8	 



     


    

 


SCHEDULE A 


To Fourth Amendment to Amended Employment
Agreement Between


John a/k/a Jack McGrath (“Executive”)
and JAKKS Pacific, Inc. (the “Company”)


 


RESTRICTED STOCK PERFORMANCE MEASURES


 


This Schedule A to the Amended Employment Agreement between
Executive and JAKKS sets forth the Restricted Stock Performance Measures that will be used to determine vesting of each Annual
Restricted Shares Grant made to Executive. Capitalized terms not otherwise defined in this Schedule “A” are used below
with the meanings ascribed thereto in Amendment Number Two to the Amended Employment Agreement.


 


		1)	Definitions.



 


a)       “Closing
Share Value” means in the case of the Company, the closing price of a share of the Company’s Common Stock, and
in the case of the Russell 2000 Index, the price reported as the closing price of the companies in the Russell 2000 Index, in both
cases, on the last trading day of a Restricted Stock Performance Period.


 


b)       “EBITDA”
means the earnings before interest, taxes, depreciation and amortization of a company for an entire fiscal year calculated in accordance
with the company’s audited financial statements.


 


c)       “Index”
means the stock market index known as the Russell 2000 Index, or if the Russell 2000 Index ceases to be published, then such other
stock market index (such as, but not limited to, the S&P Small Cap 600 Index) that the Compensation Committee determines, with
the advice of its independent compensation consultant, and after receiving input from the Executive, should be used as the Index
for determining the Restricted Stock Performance Measures.


 


d)       “Opening
Share Value” means in the case of the Company, the closing price of a share of the Company’s Common Stock, and
in the case of the Russell 2000 Index, the price reported as the closing price of the companies in the Russell 2000 Index, in both
cases, on the first trading day of a Restricted Stock Performance Period.


 


e)       “Peer
Group Companies” means those public companies whose shares of stock are traded on a recognized securities exchange that
the Compensation Committee, with the advice of its independent compensation consultant, and after receiving input from the Executive,
has chosen to comprise the group of companies used as a basis for comparison of the Company’s Net Revenue Growth and EBITDA
Growth in each Restricted Stock Performance Period.


 


f)       “Restricted
Stock Performance Measures” means the TSR Metric, Net Revenue Growth Metric and EBITDA Metric as each such term is defined
Section 2 of this Schedule “A”.


 


g)       “Restricted
Stock Performance Period” with respect to each Annual Restricted Shares Grant means the three (3) year period commencing
on its Issuance Date and ending on December 31 of the third calendar year following such Issuance Date.


 


h)       “TSR”
means the total shareholder return calculated by dividing (i) the Closing Share Value plus any dividends paid by (ii) the Opening
Share Value. The TSR of the Company shall be adjusted to give appropriate effects to any stock splits, reverse stock splits and
similar transactions, as determined by the Compensation Committee.


 




    	 	i	 



     


    

 


		2)	Vesting of the Performance Shares during each Restricted Stock Performance Period shall be determined by three performance
metrics: TSR for the Company as compared to TSR for the Index during the Restricted Stock Performance Period (the “TSR
Metric”); the percentile performance of the Company relative to the Peer Group Companies measured by the Net Revenue
Growth of the Company as compared to Net Revenue Growth of the Peer Group Companies during the Performance Period (the “Net
Revenue Growth Metric”); and the percentile performance of the Company relative to the Peer Group Companies measured
by the EBITDA Growth of the Company as compared to EBITDA Growth of the Peer Group Companies during the Performance Period (the
“EBITDA Growth Metric”.)



 


a)       Each
Annual Restricted Shares Grant shall be divided into the following three Tranches: one Tranche shall be equal to fifty percent
(50%) of the Annual Restricted Shares Grant, and vesting of such Tranche shall be determined by the TSR Metric (the “TSR
Tranche”); one Tranche shall be equal to twenty-five percent (25%) of the Annual Restricted Shares Grant, and vesting
of such Tranche shall be determined by the Net Revenue Growth Metric (the “Net Revenue Tranche”), and the third
Tranche shall be equal to twenty-five percent (25%) of the Annual Restricted Shares Grant, and vesting of such Tranche shall be
determined by the EBITDA Growth Metric (the “EBITDA Tranche”.)


 


b)       The number
of Performance Shares and the percentage of Performance Shares in each Tranche that vest shall be determined as set forth in the
table below:


 


	Percentage
                                         of

                                                                          Performance
                                         Shares in

                                                                          a
                                         Tranche that Vest

                                                                          According
                                         to the

                                                                          Applicable

                                                                          Performance
                                         Measure
	TSR
                                         Tranche (50% of

                                                                                Annual
                                         Restricted

                                                                                Shares
                                         Grant)
	Net
                                         Revenue Tranche

                                                                                (25%
                                         of Annual

                                                                                Restricted
                                         Shares

                                                                                Grant)
	EBITDA
                                         Tranche

        (25%
        of Annual

        Restricted
        Shares

        Grant)

	100%	Company’s
    TSR is 

    20% or more above 

    of Index TSR	90th
    percentile or more

    using Net Revenue

    Metric	90th
    percentile or more

    using EBITDA Metric
	75%	Company’s
    TSR is

    10%-19% TSR above  

    Index TSR 	75th
    - 89th percentile

    using Net Revenue

    Metric	75th
    - 89th percentile 

    using EBITDA Metric
	50%	Company’s
    TSR is 

    Equal to Index TSR	50th
    – 74th Percentile 

    using Net Revenue

    Metric	50th
    – 74th Percentile 

    using EBITDA Metric
	25%
    (threshold)	Company’s
    TSR is 

    10% or less below 

    Index TSR	25th
    –  49th Percentile 

    using Net Revenue

    Metric	25th
    –  49th Percentile

    using EBITDA Metric
	0%	Company’s
    TSR is 

    more than 10% below

    Index TSR	Less
    than 25th Percentile

    using Net Revenue

    Metric	Less
    than 25th Percentile 

    using Net Revenue

 Metric