Document:

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.

 

    	 	 5	 

     

    

 

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.

 

BALANCE OF
THIS PAGE DELIBERATELY LEFT BLANK

SIGNATURE PAGE
FOLLOWS

 

    	 	 7	 

     

    

 

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

 Metriclitera_ex101.htm

EXHIBIT 10.1
 
OPTION AND LITERARY PURCHASE AGREEMENT
 
This AGREEMENT, made and entered into as of September 29, 2016 by and between Litera Group Inc (hereinafter “Writer”) and Jennifer Fox (hereinafter “Producer”).
 
WHEREAS, Writer is the sole and exclusive proprietor, throughout the world of that certain original Property written by Writer, titled Saturday Detention (the “Property”).
 
1. OPTION
 
In consideration of payment of Three Thousand Five Hundred Dollars ($3,500), receipt of which is hereby acknowledged, Writer hereby grants the Producer a six (6) month exclusive option (the “Option”) to purchase all motion picture, television, ancillary and exploitation rights in and to the Property and in the copyright thereof and all renewals and extensions of copyright, in order to develop and produce an original motion picture based on the Property (“the Picture”) and exploit the Picture and all rights acquired herein, provided that any sums paid under this Section 1 or any other provision of this agreement with respect to the option shall be credited against the first sums payable on account of such purchase price. If Producer shall fall to exercise this option, then the sums paid to Writer hereunder with respect to the option shall be and remain the sole property of Writer.
 
2. OPTION PERIOD
 
The option shall be effective during the period commencing on the date hereof and ending six months later (the “Initial Option Period”). The Initial Option Period may be extended for an additional six months by payment of One Thousand Dollars ($1,000.00) on or before the expiration date specified above (the “Second Option Period”).
 
3. EXERCISE OF OPTION
 
(a) If Producer elects to exercise the option, Producer (at any time during the Initial or Extended Option period) shall serve upon Writer written notice of the exercise by addressing such notice to Writer at his address by certified mail, return receipt requested with postage prepaid, in the United States mail. The deposit of such notice in the United States mall as hereinabove specified shall constitute service thereof, and the date of such deposit shall be deemed to be the date of service of such notice. The Option may be exercised only by notice in writing as set forth.
 
(b) If Producer exercises this option, Writer, without cost to Producer shall execute, acknowledge and deliver to Producer, or shall cause the execution, acknowledgment and delivery to Producer of, such further instruments as Producer may reasonably require in order to confirm unto Producer the rights, licenses, privileges and property which are the subject of the within option. If Writer shall fail to execute and deliver or to cause the execution and delivery to Producer of any such instruments, Producer is hereby irrevocably granted the power coupled with an interest to execute such instruments and to take such other steps and proceedings as may be necessary in connection therewith in the name and on behalf of Writer and as Writer’s attorney-in-fact. Writer shall supply all supporting agreements and documentation requested by Producer.
 
	 
	1

	

	 

  
4. PURCHASE PRICE OF PROPERTY
 
(a) As consideration for all rights granted and assigned to Producer including the production of one or more theatrical or television motion pictures, and for Writer’s representations and warranties, Producer agrees to pay to Writer, and Writer agrees to accept, the following compensation (the “Purchase Price”): 
 
(1) If a motion picture is produced based on the Property with a final production budget more than $100,000 but less than $500,000, the Writer shall be paid the sum of $10,000. 
 
(2) If a motion picture is produced based on the Property with a final production budget more than $500,000 but less than $1M, the Writer shall be paid the sum of $30,000. 
 
(3) If a motion picture is produced based on the Property with a final production budget more than $1M, the Writer shall be paid the sum of $50,000. 
 
(b) The Purchase Price shall be paid by Producer as follows: $5,000 within thirty (30) days of exercise of the option as set forth in section 3; the remainder within thirty (30) days of the first day of principal photography. 
 
(c) In addition to the aforesaid Purchase Price, Writer shall receive Additional Compensation as follows: 
 
(1) For any sequel produced based on the Property, in whole or in part, Producer will pay or cause Writer to be paid one-half of the Purchase Price; and for any remake produced based on the Property, in whole or in part, Producer will pay or cause Writer to be paid one-third of the Purchase Price. The compensation described in this section 4(c)(1) shall be paid to Writer upon commencement of principal photography of any such sequel and/or remake. (2) For any television series produced, based on the Property, Producer will pay or cause to be paid to Writer the following royalties per initial production upon completion of production of each program: programs up to 30 minutes---$1,500; over thirty (30) minutes but not more than sixty (60) minutes—$1,750; over sixty (60) minutes but not more than ninety (90) minutes-- $2,000; over ninety (90) minutes--$2,500; and in addition to the foregoing, as a buyout of all royalty obligations, one hundred percent (100%) of the applicable initial royalty amount, in equal installments over five (5) reruns, payable within thirty (30) days after each such rerun, or subject to the WGA minimum, whichever is greater.
 
(d) All of the sums set forth as compensation in this paragraph are for the total amount of monies payable by Producer.
 
5. CREDIT
 
In determining whether Writer is awarded sole, shared, or no writing credit for the Property, reference shall be made to the principles of the WGA credit arbitration rules. Although Producer is not a WGA signatory, and Writer is not a member of the WGA, to the extent possible, the principles of the WGA credit arbitration rules shall be followed by the parties. In the event of a credit dispute, the arbitrator of such a dispute shall follow the WGA credit rules.
 
	 
	2

	

	 

 
6. RIGHT TO ENGAGE IN PREPRODUCTION
 
Writer acknowledges that Producer may during the option period, undertake production and preproduction activities in connection with any of the rights to be acquired hereunder including, without limitation, the preparation and submission of treatments and/or screenplays based on the Property.
 
7. ASSIGNMENT
 
This Option Agreement and the rights granted hereunder may be assigned by Producer to any other person, firm or corporation, without the consent of the Writer.
 
8. OPTION REVERSION
 
If the Producer does not timely exercise the option during its original or extended term, the option shall terminate and all rights in the Property shall immediately revert to the Writer. The Writer shall retain all sums paid. Producer shall immediately execute and deliver to Writer any assignments and documents required to effectuate the Reversion. If Producer shall fail or be unable to do so, Producer hereby grants Writer a power coupled with an interest to execute and deliver such documents as Producer’s attorney-in-fact.
 
9. WARRANTY AND INDEMNIFICATION
 
(a) Writer represents and warrants to Producer that Writer has not adapted the Property from any other literary, dramatic or other material of any kind, nature or description, nor, excepting far material which is in the public domain, nor has Writer copied or used in the Property the plot, scenes, sequence or story of any other literary, dramatic or other material; that the Property docs not infringe upon any common law or statutory rights in any other literary, dramatic, or other material; that insofar as Writer has knowledge, no material in the Property is libelous or violative of the right of privacy of any person and the full utilization of the rights in the Property which are covered by the within option would not violate any rights of any person, firm or corporation; and that the Property is not in the public domain in any country in the world where copyright protection is available.
 
(b) Writer represents and warrants to Producer that Writer is the exclusive proprietor, throughout the world, of the rights in the Property which are covered by the within option; that Writer has not assigned, licensed nor in any manner encumbered, diminished or impaired these right. Writer further represents and warrants that no attempt hereafter will be made to encumber, diminish or impair any of the rights herein granted and that all appropriate protections of such rights will continue to be maintained by Writer. 
 
(c) Writer agrees to indemnify Producer against all judgments, liability, damages, penalties, losses and expense (including reasonable attorneys’ fees) which may be suffered or assumed by or obtained against Producer, its successors, licensees, and assigns, by reason of any breach or failure of any warranty or agreement herein made by Writer. This paragraph shall survive termination of this Agreement. 
 
	 
	3

	

	 

 
10. FURTHER AGREEMENT
 
In the event the Option is exercised by Producer, the parties intend to enter into a more formal agreement consistent with the terms of this purchase agreement and containing such other terms and conditions as are customary in option agreements in the motion picture and television industry.
 
11. MISCELLANEOUS
 
4.1 Terms used herein in the masculine gender include the feminine and neuter gender, and terms used in the singular number include the plural number, if the context may require. 
 
4.2 The headings of paragraphs, sections and other subdivisions of this agreement are for convenient reference only. They shall not be used in any way to govern, limit, modify, construe this agreement or any part or provision thereof or otherwise be given any legal effect. 
 
4.3 This agreement contains the full and complete understanding and agreement between the parties with respect to the within subject matter, and supersedes all other agreements between the parties whether written or oral relating thereto, and may not be modified or amended except by written instrument executed by both of the parties hereto. This agreement shall in all respects be subject to the laws of California applicable to agreements executed and wholly performed within such State. All the rights, licenses, privileges and property herein granted to Producer are irrevocable and not subject to rescission, restraint, or injunction under any or all circumstances.
 
(d) In the event of any dispute or disagreement regarding this agreement, the parties agree that common-sense should prevail, and that if necessary an independent person or persons mutually agreed upon by both parties shall be called upon to make a decision which is binding upon both parties. If the parties cannot agree on an arbitrator within thirty days of a written arbitration request by either party, the parties may pursue remedies in law or equity in any court of competent jurisdiction.
 
IN WITNESS THEREOF, the parties hereto have signed this Option Agreement as of the day and year first hereinabove written.
 
/s/ Wade Gardner                                 
LITERA GROUP INC - WRITER
 
/s/ Jennifer Fox                                   
JENNIFER FOX - PRODUCER
 
 
 
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