Document:

exv10w3

Exhibit 10.3

EMPLOYMENT AGREEMENT

          THIS EMPLOYMENT AGREEMENT (“Agreement”), dated March 10, 2011, is entered into by and between
RC2 Corporation, a Delaware corporation (the “Company”), and Peter J. Henseler (the “Employee”)
and, solely with respect to Sections 3(b), 4 and 6, Tomy Company Ltd., a company organized under
the laws of Japan (“Purchaser”). Capitalized terms used but not defined herein shall have the
respective meanings ascribed to them in the Merger Agreement (as defined below).

          WHEREAS, The Employee and the Company are currently parties to an Employment Agreement, dated
April 1, 2008, as amended December 28, 2010, and as further amended effective March 31, 2011
(collectively, the “Prior Agreement”); and

          WHEREAS, Purchaser and Galaxy Dream Corporation, a Delaware corporation and a wholly owned
subsidiary of Purchaser, expect to enter into an AGREEMENT AND PLAN OF MERGER (the “Merger
Agreement”) with the Company whereby it is proposed that (i) MergerSub make a cash tender offer
(the “Offer”) to purchase all outstanding shares of common stock of the Company and (ii) following
the consummation of the Offer, MergerSub will merge with and into the Company, with the Company
being the surviving corporation; and

          WHEREAS, as a stockholder of the Company and as an owner of options, stock appreciation rights
(cash-settled and stock-settled) and restricted stock units, in each case covering common stock of
the Company (collectively, “Company Equity Awards”), the Employee will receive valuable
consideration as a direct result of the transactions contemplated by the Merger Agreement (the
“Sale Consideration”).

          NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Employee, intending to be legally bound, hereby agree as follows:

          1. Employment. Subject to the consummation of the Offer, the Company hereby
agrees to employ the Employee and the Employee hereby accepts employment with the Company on
the terms and subject to the conditions set forth in this Agreement.

          2. Term. This Agreement shall be effective as of the date the Offer is
consummated (the “Commencement Date”) and shall continue until terminated as

 

 

provided in Section 6 below. As of the Commencement Date, the Employee acknowledges
and agrees that the Prior Agreement shall be terminated in full and that he shall not be
entitled to any rights or benefits thereunder, including any rights to claim Good Reason (as
defined in the Prior Agreement) with respect to actions, failures or other events that
occurred on or prior to the Commencement Date.

          3. Duties.

          (a) Position. The Employee shall serve as the President of the Company
and will, under the direction of the Board of Directors of Purchaser (the “Board”),
faithfully, and to the best of his ability, perform the duties of such position,
which includes the management and operation of the Company’s brands and product
lines in North America, South America, Europe and Australia and related global
sourcing activities. The Employee shall be one of the principal executive officers
and Senior Management of the Company and shall, subject to the control of the Board,
have the normal duties, responsibilities and authority associated with such
position. The Employee shall also perform such additional duties and
responsibilities which may from time to time be reasonably assigned or delegated by
the Board. The Employee agrees to devote his entire business time, effort, skill
and attention to the proper discharge of such duties while employed by the Company.

          (b) Board Observation Rights; Company Board Membership. Subject to
applicable law and the approval of Purchaser’s shareholders, during the Employment
Period (as defined in Section 6(a)), the Employee shall be permitted (i) to attend
meetings of the Board for observation purposes, but not for voting or any other
purposes, and (ii) to obtain copies of any materials prepared for such meetings, in
each case, for so long as the Board permits. Notwithstanding anything to the
contrary, the Board may, in its sole discretion, request that the Employee remove
himself from all or a part of any meeting. The rights contained in this Section
3(b) shall not be assignable. The Employee shall be appointed as a member of the
Board of Directors of the Company (“Company Board”) as soon as reasonably
practicable following the Commencement Date. In the event of the termination or
expiration of the Employment Period, upon the request of Purchaser, the Employee
shall submit a letter of resignation from his position as a director of the Company
Board and any committees thereof, to be effective as of the date designated by
Purchaser.

          4. Compensation.

          (a) Base Salary. The Employee shall receive a base salary of $482,720
per year, payable in regular and equal bi-weekly installments (the “Base Salary”).
The Base Salary shall be reviewed annually by the Board on or around

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April 1st of each year and shall be subject to increase based on the
Employee’s performance, changes in Employee’s responsibilities and increases in the
Consumer Price Index.

          (b) Incentive Bonus. The Employee shall be entitled to participate in
an annual incentive compensation plan (the “Bonus Plan”) developed generally for the
Senior Management of the Company initially based on the Company’s earnings before
interest, taxes, depreciation and amortization, as determined by the compensation
committee of the Board (the “Compensation Committee”). The Employee’s participation
will be on a basis consistent with past practice and his position and level of
compensation with the Company. The Employee’s target bonus under the Bonus Plan
shall be reviewed annually by the Compensation Committee but shall be not less than
2.25 times the Employee’s then Base Salary.

          (c) Equity Awards. Subject to approval by the Board and any required
approval by Purchaser’s shareholders, the Employee shall be entitled to receive, as
soon as reasonably practicable after the next annual shareholders’ meeting of
Purchaser to occur following the Commencement Date, but in no event later than
September 30, 2011, an initial equity award(s) covering 200,000 shares of Purchaser
pursuant to Purchaser’s equity plan in accordance with the terms and conditions set
forth in Schedule A which is attached hereto and made a part hereof. Purchaser
hereby represents that such terms and conditions are at least as favorable as the
terms and conditions applicable to equity award(s) made by Purchaser to its senior
management generally. To the extent the above-referenced approvals are not
obtained, Purchaser shall provide the Employee with a long-term cash incentive
benefit equal to the Black-Scholes value of the equity award described above,
measured as of the date such cash incentive benefit is granted. Subject to the
approval of the Board and any required approval by Purchaser’s shareholders, the
Employee shall be eligible for future annual equity awards on the conditions, terms
and frequency applicable to equity award(s) made by Purchaser to its senior
management generally.

          (d) Rollover Bonus.

          (i) On the Commencement Date, the Employee shall be entitled to a cash
bonus (the “Rollover Bonus”) in an amount equal to $3,500,000, as set forth
under “Total Rollover Bonus” on Schedule B which is attached hereto and made
a part hereof. The Rollover Bonus represents the spread cash value of
certain Company Equity Awards that (a) have not vested as of immediately
prior to the consummation of the Offer and (b) the vesting of which, but for
this Section 4(d), otherwise would have been accelerated and cash payment
made therefor in the Merger pursuant to the Merger Agreement (the

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“Unvested Company Equity Awards”). In exchange for such Rollover Bonus,
the Employee hereby waives the acceleration of vesting with respect to the
Unvested Company Equity Awards, and agrees to cancel such awards in full as
of the Commencement Date, and the Employee hereby agrees that such awards
shall have no further force and effect on and after the Commencement Date.
Purchaser shall cause or cause to be delivered by wire transfer the amounts
constituting the Rollover Bonus to an interest-bearing escrow account
established at Harris Bank in Chicago, Illinois. Subject to the Employee’s
continued employment with or service as a consultant to the Company on the
applicable vesting dates, the Rollover Bonus shall vest as to twenty percent
(20%), thirty-five percent (35%), and forty-five percent (45%) on the eve of
each of the first, second, and third anniversaries of the Commencement Date,
respectively. Except as set forth in Section 6, the vested portion of the
Rollover Bonus and any interest thereon shall become payable within ten (10)
days following the applicable vesting date. For the avoidance of doubt, at
the Effective Time, each of the Employee’s Company Equity Awards that have
not vested as of immediately prior to the consummation of the Offer and that
do not get canceled in exchange for the Rollover Bonus described in this
Section 4(d)(i), shall, at the Effective Time, be cancelled in full and the
Employee shall be entitled to receive a cash payment therefor as provided in
the Merger Agreement (such cash payment is set forth under “Cash at Closing”
on Schedule B attached hereto).

          (ii) In the event of a Purchaser Change of Control or a Company Change
of Control, the Employee shall be entitled to immediate vesting of the then
unvested portion of the Rollover Bonus and payment therefor and any interest
thereon, payable within thirty (30) days following the Purchaser Change of
Control or Company Change of Control, as applicable.

          (iii) In the event that it shall be finally determined by the Internal
Revenue Service that all or any portion of the Rollover Bonus is subject to
the additional tax imposed by Section 409A of the Code, or any interest or
penalties incurred by Employee with respect to such additional tax (such
additional tax, together with any such interest and penalties, are
hereinafter collectively referred to as the “Additional Tax”), then the
Company agrees that it shall reimburse the Employee for the amount of the
Additional Tax finally imposed by the Internal Revenue Service on the
Rollover Bonus (the “Reimbursement Amount”) and the amount, if any, such
that the Employee receives an after-tax amount equal to the Reimbursement
Amount he would have received had no tax under Section 409A been imposed on
him (the “Additional Amount”). The Reimbursement Amount and the Additional
Amount shall be paid within ten (10) days following a final determination

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by the Internal Revenue Service that such Additional Tax is due. To
the extent the Employee receives of a refund of or credit relating to the
Additional Tax for which the Company paid the Reimbursement Amount or
relating to the Additional Amount, such refund or credit shall be for the
benefit of the Company, and the Employee shall pay such amount to the
Company within ten (10) calendar days after receiving the refund or after
the relevant tax return is filed in which the credit is so applied. The
Company’s obligation to pay the Reimbursement Amount and the Additional
Amount is subject to the Employee notifying the Company within thirty (30)
calendar days of any written notice of a pending audit, assessment or other
challenge (a “Challenge”) which, if successful, might result in the
Additional Tax. The Company, at its expense, shall have the right to
control the response to, and any proceedings relating to, any Challenge,
including initiating or defending any action and/or appeal relating to such
Challenge, with counsel selected by the Company, in any such case to a final
conclusion or settlement at the discretion of the Company. The Company
shall have full control of such response and proceedings, including any
compromise or settlement thereof. The Company shall keep the Employee
reasonably informed regarding the status and progress of such Challenge.
Upon the request of Company, the Employee shall cooperate fully with the
Company and its counsel in contesting any Challenge which the Company elects
to contest. The Company shall reimburse the Employee for all costs and
expenses, including attorneys’ fees, that the Employee reasonably incurs in
connection with any such cooperation, provided that the Employee shall
submit appropriate documentation of such costs or expenses no later than
ninety (90) calendar days after incurring such costs or expenses. Such
reimbursement shall be made no later than thirty (30) calendar days
following submission of appropriate documentation of such costs or expenses
by the Employee, and in no event later than the end of the taxable year
following the taxable year in which such expenses are incurred.

          (iv) In the event that the Challenge provides that all or any portion
of the Rollover Bonus that has not then vested is immediately includible in
income as a result of the failure to comply with Section 409A of the Code,
the Company shall immediately accelerate the vesting of solely that portion
of the Rollover Bonus necessary to pay such income taxes arising as a result
of Section 409A of the Code (“Tax Payment Amount”). The Tax Payment Amount
shall equal the aggregate of the federal, state, local or foreign tax
amounts due as a result of the application of Section 409A of the Code and
in no event shall exceed the amount that is required to be included in
income as a result of such failure to comply with the requirements of
Section 409A of the Code. Such Tax Payment Amount shall be paid to the
Employee within ten (10) days of the Employee notifying the Company of such
Challenge and in no event later

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than the last day of the Employee’s taxable year following the year in
which the Employee remits the underlying taxes to the applicable tax
authorities.

          (v) Notwithstanding anything in this Agreement to the contrary, in the
event it shall be determined that any benefit, payment or distribution by
the Company to or for the benefit of the Employee (whether payable or
distributable pursuant to the terms of this Agreement or otherwise) (such
benefits, payments or distributions are hereinafter referred to as
“Payments”) would, if paid, be subject to the excise tax (the “Excise Tax”)
imposed by Section 4999 of the Code, then, prior to the making of any
Payment to the Employee, a calculation shall be made comparing (i) the net
benefit to the Employee of the Payment after payment of the Excise Tax, to
(ii) the net benefit to the Employee if the Payment had been limited to the
extent necessary to avoid being subject to the Excise Tax. If the amount
calculated under (i) above is less than the amount calculated under (ii)
above, then the Payment shall be limited to an amount expressed in present
value that maximizes the aggregate present value of the Payments without
causing the Payments or any part thereof to be subject to the Excise Tax and
therefore nondeductible by the Company because of Section 280G of the Code
(the “Reduced Amount”). For purposes of this Section 4(d)(v), present value
shall be determined in accordance with Section 280G(d)(4) of the Code. In
the event it is necessary to reduce the Payments, payments shall be reduced
on a last to be paid, first reduced basis. All determinations required to
be made under this Section 4(d)(v), including whether an Excise Tax would
otherwise be imposed, whether the Payments shall be reduced, the amount of
the Reduced Amount, and the assumptions to be utilized in arriving at such
determinations, shall be made by an internationally recognized accounting
firm (the “Determination Firm”) which shall provide detailed supporting
calculations both to the Company and the Employee within fifteen (15)
business days of the receipt of notice from the Employee that a Payment is
due to be made, or such earlier time as is requested by the Company. All
fees and expenses of the Determination Firm shall be borne solely by the
Company. Any determination by the Determination Firm shall be binding upon
the Company and the Employee. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Determination Firm hereunder, it is possible that
Payments hereunder will have been unnecessarily limited by this Section
4(d)(v) (“Underpayment”), consistent with the calculations required to be
made hereunder. The Determination Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Employee together with
interest at the applicable Federal rate provided for in Section 7872(f)(2)
of the Code. In the event that the provisions of Code Section 280G and 4999
or any successor provisions

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are repealed without succession, this Section 4(d)(v) shall be of no
further force or effect.

          5. Fringe Benefits.

          (a) Vacation. The Employee shall be entitled to four weeks of paid
vacation annually. The Employee and the Company shall mutually determine the time
and intervals of such vacation.

          (b) Medical, Health, Dental, Disability and Life Coverage. The
Employee shall be eligible to participate in any medical, health, dental, disability
and life insurance policy in effect for the Senior Management of the Company. The
Company shall also pay for an annual executive medical physical.

          (c) Automobile. The Company agrees to reimburse the Employee up to
$750.00 per month, as such amount may be increased from time to time consistent with
the Company’s reimbursement policy for the Senior Management of the Company to cover
Employee’s expenses in connection with his leasing or ownership of an automobile.
Additionally, the Company will pay for the gas used for business purposes. All
maintenance and insurance expense for the automobile shall be the responsibility of
the Employee.

          (d) Reimbursement for Reasonable Business Expenses. The Company shall
pay or reimburse the Employee for reasonable expenses incurred by him in connection
with the performance of his duties pursuant to this Agreement including, but not
limited to, travel expenses, customer entertainment, expenses in connection with
seminars, professional conventions or similar professional functions and other
reasonable business expenses.

          (e) Key Man Insurance. The parties agree that the Company has the
option to purchase one or more key man life insurance policies upon the life of the
Employee. The Company shall own and shall have the absolute right to name the
beneficiary or beneficiaries of said policy. The Employee agrees to cooperate fully
with the Company in securing said policy, including, but not limited to, submitting
himself to any physical examination which may be required at such reasonable times
and places as the Company shall specify.

          (f) Life and Disability Insurance. During the Employment Period, the
Company shall provide coverage of at least $2 million of life insurance and 75% of
Base Salary of disability insurance. Such insurance policies to be owned by any one
or more members of Employee’s immediate

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family or by a trust for the primary benefit of the Employee’s immediate
family. The owner of the policy shall have the power to designate the beneficiary
and to assign any rights under the policy. The Company shall pay 100% of the
premiums required under these policies; provided, however, that the Company shall
not be obligated to pay greater than $20,000 for such premiums during any fiscal
year. In the event that the premiums for such policies would exceed this
limitation, the Company shall consult with the Employee to determine the allocation
of such amount to the premiums for each type of policy to obtain such insurance as
may be available for an aggregate of $20,000 per fiscal year. The Employee shall
have the right to supplement, at the Employee’s expense, the Company’s payment of
premiums for such policies up to the full coverages described in the first sentence
of this Section 5(f).

          6. Termination.

          (a) Termination of the Employment Period. The employment period shall
continue until the earlier of: (i) the second anniversary of the Commencement Date
(the “Expected Completion Date”), (ii) the Employee’s death or Disability, (iii) the
Employee resigns or (iv) the Board or its delegate determines that termination of
the Employee’s employment is in the best interests of the Company (the “Employment
Period”). The last day of the Employment Period shall be referred to herein as the
“Termination Date.”

          (b) Termination for Disability or Death.

     (i) In the event of termination for Disability during the Employment Period,
the Employee shall be entitled to (A) the Base Salary through the date of
termination, payable in accordance with the Company’s usual payment practices; (B)
such fringe benefits, if any, as to which the Employee may be entitled under the
employee benefit plans of the Company (the amounts described in clauses (A) and (B)
hereof being referred to as the “Accrued Rights”); (C) subject to the Employee’s
execution and non-revocation of a Release pursuant to Section 12 herein, continued
payment of Base Salary for a period of six months after the Termination Date,
payable in accordance with the Company’s usual payment practices; provided
that the first payment shall begin on the first regular payroll date to occur on or
after the sixtieth (60th) day following the Termination Date (the “First
Payment Date”) and shall include payment of any amounts that would otherwise be due
prior thereto; (D) subject to the Employee’s execution and non-revocation of a
Release pursuant to Section 12 herein, a pro rata portion of any incentive bonus
that the Employee would have been entitled to receive pursuant to Section 4(b)
hereof in such year based upon the percentage of the fiscal year that shall have
elapsed through the date of the Employee’s termination of employment (the “Pro-Rata
Bonus”), payable when such incentive bonus would have

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otherwise been payable to the
Employee pursuant to Section 4(b) had the
Employee’s employment not terminated; (E) subject to the Employee’s execution
and non-revocation of a Release pursuant to Section 12 herein, immediate vesting of
the then unvested portion of the Rollover Bonus and payment therefore and any
interest thereon (the “Rollover Acceleration Payment”), payable upon the First
Payment Date; (F) subject to the Employee’s execution and non-revocation of a
Release pursuant to Section 12 herein, for a period of three years after the
Termination Date, reimbursement by the Company to the Employee for amounts paid, if
any, to continue medical, dental and health coverage pursuant to the provisions of
the Consolidated Omnibus Budget Reconciliation Act (“COBRA”); and (G) subject to the
Employee’s execution and non-revocation of a Release pursuant to Section 12 herein,
for a period of three years after the Termination Date, the continuation by the
Company of Employee’s life insurance and disability coverage, to the extent limited
by Section 5(f).

     (ii) In the event of termination as a result of the Employee’s death during the
Employment Period, Employee’s designated beneficiary or his estate shall be entitled
to receive (A) the Accrued Rights; (B) the proceeds of any life insurance obtained
pursuant to Section 5(f); (C) the Pro Rata Bonus, payable when such incentive bonus
would have otherwise been payable to the Employee pursuant to Section 4(b) had the
Employee’s employment not terminated; and (D) the Rollover Acceleration Payment,
payable within thirty (30) days following the Termination Date.

          (c) Termination by the Company without Cause or by the Employee for Good
Reason. If (i) the Employment Period is terminated by the Company for any
reason other than for Cause, Disability or death, (ii) the Employment Period is
terminated by the Company for what the Company (acting in good faith) reasonably
believes is Cause or Disability, and it is ultimately determined that the Employment
Period was terminated without Cause or Disability, or (iii) the Employee resigns for
Good Reason, the Employee shall be entitled to receive, (A) the Accrued Rights; (B)
subject to the Employee’s execution and non-revocation of a Release pursuant to
Section 12 herein, continued payment of Base Salary for a period of twenty-four
months after the Termination Date, payable in accordance with the Company’s usual
payment practices; provided that the first payment shall begin on the first
regular payroll date to occur on or after the First Payment Date and shall include
payment of any amounts that would otherwise be due prior thereto; (C) subject to the
Employee’s execution and non-revocation of a Release pursuant to Section 12 herein,
the Rollover Acceleration Payment, payable upon the First Payment Date; (D) subject
to the Employee’s execution and non-revocation of a Release pursuant to Section 12
herein, for a period of two (2) years from the Termination Date, reimbursement by
the Company to the Employee for amounts paid, if any, to continue medical, dental
and health coverage pursuant to the provisions of COBRA; and (E) subject to the
Employee’s execution and non-revocation of a

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Release pursuant to Section 12 herein,
for a period two (2) years from the
Termination Date, the continuation of Employee’s life insurance and disability
coverage to the extent limited by Section 5(f). Notwithstanding anything herein to
the contrary, Employee may only resign for Good Reason pursuant to this Section 6(c)
provided that the Employee has given written notice to the Company within thirty
(30) days of the occurrence of any of the events in Section 11(f) and such event
remains uncured thirty (30) days after the Company’s receipt of such notice.

          (d) Termination by the Company for Cause or by the Employee Without Good
Reason. If the Employment Period is terminated by the Company with Cause or as
a result of the Employee’s resignation without Good Reason, the Employee shall be
entitled to receive the Accrued Rights. Following such a termination, the Employee
shall have no further rights to any compensation or any other benefits under this
Agreement. Notwithstanding anything herein to the contrary, the Company may only
terminate the Employment Period for Cause pursuant to this Section 6(d) provided
that the Company has given written notice to the Employee of the occurrence of any
events constituting Cause within ninety (90) days of the occurrence of any such
events and the Employee fails to cure such events within thirty (30) days after the
Employee’s receipt of such notice.

          (e) Effect of Termination. The termination of the Employment Period
pursuant to Section 6(a) shall not affect the Employee’s obligations as described in
Sections 7 and 8.

          (f) Retirement. Upon the Employee’s retirement from the Company, to
the extent permitted by the Company’s plans and to the extent the Employee’s or his
spouse’s or their eligible dependent(s) participation would not cause the Company to
be subject to an excise tax, the Company shall continue to provide medical coverage
for the Employee, his spouse and their eligible dependent(s) under the Company’s
medical plans from the date of the Employee’s retirement until the later of the
Employee’s or his spouse’s death. To the extent permitted by the applicable plan,
the Employee would be required to make the same contributions for such medical
benefits as active employees. In the event the Company would subject to an excise
tax as a result of such medical coverage, the Employee may nonetheless elect to
receive such medical coverage so long as the Employee reimburses the Company for
fifty percent (50%) of the excise tax imposed on the Company as a result of such
participation. The Employee shall also be eligible to participate in the Company’s
group life, disability and dental coverage on and after the retirement date until
his death provided that the Employee pays 100% of the cost for such coverage. For
the avoidance of doubt, if the Employment Period is terminated (i) by the Company
with Cause at any time or (ii) as a result of the Employee’s resignation without
Good Reason prior to the second anniversary of the Commencement Date, neither the
Employee,

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his spouse nor any of their dependents shall be entitled to any of the
benefits set forth in this Section 6(f).

          7. Noncompetition and Nonsolicitation. The Employee acknowledges and agrees
that as a stockholder of the Company and as an owner of options, stock appreciation rights
(cash-settled and stock-settled) and restricted stock units, in each case covering common
stock of the Company, the Employee will receive valuable consideration as a direct result of
the transactions contemplated by the Merger Agreement. The Employee acknowledges and agrees
that the contacts and relationships of the Company and its Affiliates with its customers,
suppliers, licensors and other business relations are, and have been, established and
maintained at great expense and provide the Company and its Affiliates with a substantial
competitive advantage in conducting their business. The Employee acknowledges and agrees
that by virtue of the Employee’s employment with the Company, the Employee will have unique
and extensive exposure to and personal contact with the Company’s customers and licensors,
and that he will be able to establish a unique relationship with those Persons that will
enable him, both during and after employment, to unfairly compete with the Company and its
Affiliates. Furthermore, the parties agree that the terms and conditions of the following
restrictive covenants are reasonable and necessary for the protection of the business, trade
secrets and Confidential Information (as defined in Section 8 below) of the Company and its
Affiliates and to prevent great damage or loss to the Company and its Affiliates as a result
of action taken by the Employee. The Employee acknowledges and agrees that the noncompete
restrictions and nondisclosure of Confidential Information restrictions contained in this
Agreement are reasonable and the consideration provided for herein is sufficient to fully
and adequately compensate the Employee for agreeing to such restrictions. The Employee
acknowledges that he could continue to actively pursue his career and earn sufficient
compensation in the same or similar business without breaching any of the restrictions
contained in this Agreement.

          (a) Noncompetition. The Employee hereby covenants and agrees that
during the Employment Period and for two years thereafter (the “Noncompete Period”),
he shall not, directly or indirectly, either individually or as an employee,
principal, agent, partner, shareholder, owner, trustee, beneficiary, co-venturer,
distributor, consultant, representative or in any other capacity, participate in,
become associated with, provide assistance to, engage in or have a financial or
other interest in any business, activity or enterprise anywhere in the world which
is competitive with the Company or any of its Affiliates or any successor or assign
of the Company or any of its Affiliates. The ownership of less than a one percent
interest in a corporation whose shares are traded in a recognized stock exchange or
traded in the over-the-counter market, even though that corporation may be a
competitor of the Company, shall not be deemed financial participation in a
competitor. If the final judgment of a court of competent jurisdiction declares
that any term or provision of this section is invalid or unenforceable, the parties
agree that the court making the determination of invalidity or unenforceability
shall have the power to reduce the scope, duration,

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or area of the term or
provision, to delete specific words or phrases, or to replace
any invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be enforceable
as so modified. The term “indirectly” as used in this section and Section 8 below
is intended to include any acts authorized or directed by or on behalf of the
Employee or any Affiliate of the Employee.

          (b) Nonsolicitation. The Employee hereby covenants and agrees that
during the Noncompete Period, he shall not, directly or indirectly, either
individually or as an employee, agent, partner, shareholder, owner, trustee,
beneficiary, co-venturer, distributor, consultant or in any other capacity:

     (i) canvass, solicit or accept from any Person who is a customer or licensor of
the Company or any of its Affiliates (any such Person is hereinafter referred to
individually as a “Customer,” and collectively as the “Customers”) any business
which is in competition with the business of the Company or any of its Affiliates or
the successors or assigns of the Company or any of its Affiliates, including,
without limitation, the canvassing, soliciting or accepting of business from any
Person which is or was a Customer of the Company or any of its Affiliates within two
years preceding the date of this Agreement, during the Employment Period or during
the Noncompete Period;

     (ii) advise, request, induce or attempt to induce any of the Customers,
suppliers, or other business contacts of the Company or any of its Affiliates who
currently have or have had business relationships with the Company or any of its
Affiliates within two years preceding the date of this Agreement, during the
Employment Period or during the Noncompete Period, to withdraw, curtail or cancel
any of its business or relations with the Company or any of its Affiliates; or

     (iii) hire or induce or attempt to induce any officer or other senior manager
of the Company or any of its Affiliates to terminate his or her relationship or
breach any agreement with the Company or any of its Affiliates unless such person
has previously been terminated by the Company.

          8. Confidential Information. The Employee acknowledges and agrees that the
customers, business connections, customer lists, procedures, operations, techniques, and
other aspects of and information about the business of the Company and its Affiliates (the
“Confidential Information”) are established at great expense and protected as confidential
information and provide the Company and its Affiliates with a substantial competitive
advantage in conducting their business. The Employee further acknowledges and agrees that
by virtue of his past employment with the Company, and

12

 

by virtue of his employment with the
Company, he has had access to and will have access
to, and has been entrusted with and will be entrusted with, Confidential Information,
and that the Company would suffer great loss and injury if the Employee would disclose this
information or use it in a manner not specifically authorized by the Company. Therefore,
the Employee agrees that during the Employment Period and at all times thereafter, he will
not, directly or indirectly, either individually or as an employee, agent, partner,
shareholder, owner trustee, beneficiary, co-venturer distributor, consultant or in any other
capacity, use or disclose or cause to be used or disclosed any Confidential Information,
unless and to the extent that any such information become generally known to and available
for use by the public other than as a result of the Employee’s acts or omissions. The
Employee shall deliver to the Company at the termination of the Employment Period, or at any
other time the Company may request, all memoranda, notes, plans, records, reports, computer
tapes, printouts and software and other documents and data (and copies thereof) relating to
the Confidential Information, Work Product (as defined below) or the business of the Company
or any of its Affiliates which he may then possess or have under his control. The Employee
acknowledges and agrees that all inventions, innovations, improvements, developments,
methods, designs, analyses, drawings, reports and all similar or related information
(whether or not patentable) which relate to the Company’s or any of its Affiliate’s actual
or anticipated business research and development or existing or future products or services
and which are conceived, developed or made by the Employee while employed by the Company and
its Affiliates (“Work Product”) belong to the Company or such Affiliate, as the case may be.

          9. Common Law of Torts and Trade Secrets. The parties agree that nothing in
this Agreement shall be construed to limit or negate the common law of torts or trade
secrets where it provides the Company and its Affiliates with broader protection than that
provided herein.

          10. Section 409A. Notwithstanding any provision to the contrary in the
Agreement, in order to be eligible to receive any termination benefits under this Agreement
that are deemed deferred compensation subject to Section 409A of the Code, the Employee’s
termination of employment must constitute a “separation from service” within the meaning of
Treas. Reg. Section 1.409A-1(h) (a “Separation from Service”). If the Employee is deemed at
the time of his termination of employment with the Company to be a “specified employee” for
purposes of Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed commencement of
any portion of the termination benefits to which the Employee is entitled under this
Agreement is required in order to avoid a prohibited distribution under Section
409A(a)(2)(B)(i) of the Code, such portion of the Employee’s termination benefits shall not
be provided to the Employee prior to the earlier of (i) the expiration of the six-month
period measured from the date of the Employee’s Separation from Service with the Company or
(ii) the date of the Employee’s death. Upon the earlier of such dates, all payments
deferred pursuant to this Section 10 shall be paid in a lump sum to the Employee, and any
remaining payments due under the Agreement shall be paid as otherwise provided herein. The
determination of whether the Employee is a “specified employee” for purposes of Section
409A(a)(2)(B)(i) of the Code as of the time

13

 

of his separation from service shall made by the
Company in accordance with the terms
of Section 409A of the Code and applicable guidance thereunder (including without
limitation Treas. Reg. Section 1.409A-1(i) and any successor provision thereto).
Notwithstanding the foregoing or any other provisions of this Agreement, the Company and the
Employee agree that, for purposes of the limitations on nonqualified deferred compensation
under Section 409A of the Code, each payment of compensation under this Agreement shall be
treated as a right to receive a series separate and distinct payments of compensation for
purposes of applying the Section 409A of the Code.

          11. Definitions.

          (a) “Affiliate” means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person and any partner
of a Person which is a partnership.

          (b) “Cause” shall be deemed to exist if the Employee shall have (i) violated
the terms of Section 7 or Section 8 of this Agreement in any material respect; (ii)
committed a felony or a crime involving moral turpitude; (iii) engaged in willful
misconduct which is shown to have material adverse effect on the Company or any of
its Affiliates; (iv) engaged in fraud or dishonesty with respect to the Company or
any of its Affiliates or made a material misrepresentation to the stockholders or
directors of the Company; or (v) committed acts of gross negligence in the
performance of his duties which are repeated and willful and are shown to have a
material adverse effect on the Company or any of its Affiliates.

          (c) “Code” means the Internal Revenue Code of 1986, as amended or corresponding
provisions of subsequent superseding federal tax laws, as amended.

          (d) “Company Change of Control” means:

     (i) the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 50% or more of either (a) the then
outstanding shares of common stock of the Company (the “Outstanding Common Stock”)
or (b) the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the “Outstanding
Voting Securities”); provided, however, that the following acquisitions shall not
constitute a Change of Control: (a) any acquisition directly from the Company, (b)
any acquisition by the Company,

14

 

(c) any acquisition by any employee benefit plan (or
related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (d)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (a) and (b) of subsection (ii) of this definition; or

     (ii) the consummation of a reorganization, merger or consolidation (a “Business
Combination”) of the Company, in each case, unless, following such Business
Combination, (a) all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding
Voting Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the Company
through one or more Subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding Common
Stock and Outstanding Voting Securities, as the case may be and (b) no Person
(excluding any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially owns, directly or
indirectly, 50% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination; or

     (iii) the consummation of (a) a complete liquidation or dissolution
of the Company or (b) the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with respect to which
following such sale or other disposition, [1] more than 60% of, respectively, the
then outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Common Stock and Outstanding
Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such sale
or other disposition, of the Outstanding Common Stock and Outstanding Voting
Securities, as the case may be and [2] less than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by any Person (excluding any employee benefit plan (or related trust) of
the Company or such corporation), except to the extent that such Person owned 50% or
more of the Outstanding Common Stock or Outstanding Voting Securities prior to the
sale or disposition.

15

 

          (e) “Disability” shall mean a physical or mental sickness or any injury which
renders the Employee incapable of performing the services required of him as an
employee of the Company and which does or may be expected to continue for more than
six months during any 12-month period. In the event the Employee shall be able to
perform his usual and customary duties on behalf of the Company following a period
of disability, and does so perform such duties or such other duties as are
prescribed by the Board for a period of three continuous months, any subsequent
period of disability shall be regarded as a new period of disability for purposes of
this Agreement. The Company and the Employee shall determine the existence of a
Disability and the date upon which it occurred. In the event of a dispute regarding
whether or when a Disability occurred, the matter shall be referred to a medical
doctor selected by the Company and the Employee. In the event of their failure to
agree upon such a medical doctor, the Company and the Employee shall each select a
medical doctor who together shall select a third medical doctor who shall make the
determination. Such determination shall be conclusive and binding upon the parties
hereto.

          (f) “Good Reason” shall mean (i) the material diminution of the Employee’s
duties set forth in Section 3(a) above or (ii) the relocation of the offices at
which the Employee is principally employed to a location which is more than 50 miles
from the offices at which the Employee is principally employed as of the date
hereof; provided, that travel necessary for the performance of the Employee’s duties
set forth in Section 3(a) above shall not determine the location where the Employee
is “principally employed.” The Employee agrees that any change in the Employee’s
duties as set forth in Section 3(a) above as compared to the Employee’s duties on or
prior to the Commencement Date shall not constitute Good Reason.

          (g) “Person” means any individual, partnership, corporation, limited liability
company, association, joint stock company, trust, joint venture, unincorporated
organization and any governmental entity or any department, agency or political
subdivision thereof.

          (h) “Purchaser Change of Control” means:

     (i) the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 50% or more of either (a) the then
outstanding shares of common stock of Purchaser (the “Outstanding Common Stock”) or
(b) the combined voting power of the then

16

 

outstanding voting securities of Purchaser
entitled to vote generally in the election of directors (the “Outstanding Voting
Securities”); provided, however, that the following acquisitions shall not
constitute a Change of Control: (a) any
acquisition directly from Purchaser, (b) any acquisition by Purchaser, (c) any
acquisition by any employee benefit plan (or related trust) sponsored or maintained
by Purchaser or any corporation controlled by Purchaser or (d) any acquisition by
any corporation pursuant to a transaction which complies with clauses (a), (b) and
(c) of subsection (iii) of this definition; or

     (ii) individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board” ) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by Purchaser’s stockholders,
was approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or

     (iii) the consummation of a reorganization, merger or consolidation (a
“Business Combination”) of Purchaser, in each case, unless, following such Business
Combination, (a) all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding
Voting Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns Purchaser
through one or more Subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding Common
Stock and Outstanding Voting Securities, as the case may be, (b) no Person
(excluding any employee benefit plan (or related trust) of Purchaser or such
corporation resulting from such Business Combination) beneficially owns, directly or
indirectly, 50% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and (c) at
least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or

17

 

     (iv) the consummation of (a) a complete liquidation or dissolution of
Purchaser or (b) the sale or other disposition of all or substantially all of
the assets of Purchaser, other than to a corporation, with respect to which
following such sale or other disposition, [1] more than 60% of, respectively, the
then outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Common Stock and Outstanding
Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such sale
or other disposition, of the Outstanding Common Stock and Outstanding Voting
Securities, as the case may be, [2] less than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by any Person (excluding any employee benefit plan (or related trust) of
Purchaser or such corporation), except to the extent that such Person owned 50% or
more of the Outstanding Common Stock or Outstanding Voting Securities prior to the
sale or disposition, and [3] at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such sale or other disposition of assets of Purchaser or were elected, appointed or
nominated by the Board.

          (i) “Senior Management” at any time means the senior executive officers of the
Company which will include, without limitation, the Chief Executive Officer,
President, Chief Operating Officer, Managing Director (China), Chief Financial
Officer, Chief Marketing Officer and such other officers of the Company as the Board
shall determine from time to time.

          12. Release of Claims. The receipt of any payments and benefits subsequent to
the termination of the employment or resignation of the Employee pursuant to this Agreement
(other than those payable on account of Employee’s death) shall be subject to the Employee
executing a release of claims (the “Release”) in a form reasonably acceptable to the Company
within twenty-one (21) days (or forty-five days (45) for a group termination) following such
termination or resignation and not subsequently revoking such Release.

          13. Consulting Services. As of the Expected Completion Date, the Employee’s
employment hereunder shall terminate and the Employee shall provide consulting services to
the Company on such projects or matters within the expertise of the Employee and/or in which
the Employee was involved or of which the Employee had knowledge during his employment with
the Company that the Board or Chief Executive

18

 

Officer of the Company may reasonably request
of him from time to time. The Company
and the Employee agree to negotiate the definitive consulting agreement that is not
inconsistent with this terns set forth in this Section 13 and on Schedule C which is
attached hereto and made a part hereof.

          14. Specific Performance. The Employee acknowledges and agrees that
irreparable injury to the Company may result in the event the Employee breaches any covenant
or agreement contained in Sections 7 and 8 and that the remedy at law for the breach of any
such covenant will be inadequate. Therefore, if the Employee engages in any act in
violation of the provisions of Sections 7 and 8, the Employee agrees that the Company shall
be entitled, in addition to such other remedies and damages as may be available to it by law
or under this Agreement, to injunctive relief to enforce the provisions of Sections 7 and 8.

          15. Waiver. The failure of either party to insist in any one or more
instances, upon performance of the terms or conditions of this Agreement shall not be
construed as a waiver or a relinquishment of any right granted hereunder or of the future
performance of any such term, covenant or condition.

          16. Notices. Any notice to be given hereunder shall be deemed sufficient if
addressed in writing and delivered by registered or certified mail or delivered personally,
in the case of the Company, to its principal business office, and in the case of the
Employee, to his address appearing on the records of the Company, or to such other address
as he may designate in writing to the Company.

          17. Severability. In the event that any provision shall be held to be invalid
or unenforceable for any reason whatsoever, it is agreed such invalidity or unenforceability
shall not affect any other provision of this Agreement and the remaining covenants,
restrictions and provisions hereof shall remain in full force and effect and any court of
competent jurisdiction may so modify the objectionable provision as to make it valid,
reasonable and enforceable. Furthermore, the parties specifically acknowledge the above
covenant not to compete and covenant not to disclose confidential information are separate
and independent agreements.

          18. Complete Agreement. Except as otherwise expressly set forth herein, this
document embodies the complete agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersedes and preempts any prior understandings,
agreements or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way. Without limiting the generality of the
foregoing, this Agreement supersedes the Prior Agreement. Upon consummation of the Offer,
the Prior Agreement is hereby terminated and shall cease to be of any further force or
effect.

19

 

          19. Amendment. This Agreement may only be amended by an agreement in writing
signed by each of the parties hereto.

          20. Governing Law. This Agreement shall be governed by and construed
exclusively in accordance with the laws of the State of Delaware, regardless of choice of
law requirements.

          21. Benefit. This Agreement shall be binding upon and inure to the benefit of
and shall be enforceable by and against the Company, its successors and assigns and the
Employee, his heirs, beneficiaries and legal representatives. It is agreed that the rights
and obligations of the Employee may not be delegated or assigned.

[Remainder of page intentionally left blank. Signature page to follow.]

20

 

          IN WITNESS WHEREOF, the parties have executed or caused this Employment Agreement to be
executed as of the date first above written.

	 	 	 	 	 
	 	RC2 Corporation

 	 
	 	By:  	/s/ Curtis W. Stoelting
 	 
	 	 	Name:  	Curtis W. Stoelting 	 
	 	 	Title:  	CEO 	 
	 
	 	EMPLOYEE

 	 
	 	By:  	/s/ Peter J. Henseler
 	 
	 	 	Name:  	Peter J. Henseler 	 
	 	 	 	 
	 

          THE UNDERSIGNED has executed or caused this Employment Agreement to be executed as of the date
first above written, solely for purposes of Sections 3(b), 4 and 6 hereof.

	 	 	 	 	 
	 	Tomy Company, Ltd.

 	 
	 	By:  	                  /s/ Kantaro Tomiyama
 	 
	 	 	Name:  	Kantaro Tomiyama 	 
	 	 	Title:  	President & C.E.O 	 

 

 

	 	 	 	 	 

SCHEDULE A

	1.	 	Award Type; Vesting and Exercisability Schedule. The initial equity award set
forth in Section 4(c) of this Agreement shall be in the form of provision of stock
acquisition rights (shinkabu yoyakuken) covering shares of Purchaser’s equity (“Taurus
Option(s)”) and shall vest as follows: 50% on the 2nd anniversary of the date
of grant and 50% on the 4th anniversary of the date of grant.
	 
	2.	 	Term of Option. The Taurus Option(s) shall expire on the 6th
anniversary of the date of grant.
	 
	3.	 	Change of Control. The Taurus Option(s) held by the Employee shall immediately
vest upon a Purchaser Change of Control.
	 
	4.	 	Exercise of Taurus Option(s) Following Termination of Employment. If the
Employee’s employment is terminated for any reason other than a termination by the Company
for Cause or resignation by the Employee without Good Reason, the Employee (or his
designated beneficiary or his estate in the event of the termination of the Employee’s
employment due to death) may exercise any Taurus Option(s) vested as of the Termination
Date at any time prior to the original expiration date of such Taurus Option(s) or within
twelve months after the Termination Date, whichever period is shorter. If the Employee’s
employment is terminated for Cause, any Taurus Options, to the extent not exercised before
such termination, shall terminate on the Termination Date.
	 
	5.	 	Other Terms. Such Taurus Option(s) shall be subject to all other terms and
conditions as may be approved by the Board and the shareholders of Purchaser that are not
inconsistent with this Schedule A.

 

 

SCHEDULE B

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Total Value of	 	 	 	 	 	 	 	 	 	 
	 	 	Company	 	 	 	 	 	 	 	 	 	 
	 	 	Equity Awards	 	 	 	 	 	 	 	 	 	 
	 	 	(unvested as of	 	 	 	 	 	 	 	 	 	Vesting Schedule
	 	 	immediately	 	 	 	 	 	 	 	 	 	Eve of 1st	 	Eve of 2nd	 	Eve of 3rd
	 	 	prior to the	 	 	 	 	 	 	 	 	 	Anniversary of	 	Anniversary of	 	Anniversary of
	 	 	consummation	 	Total Roll	 	Cash at	 	Commencement	 	Commencement	 	Commencement
	 	 	of the Offer)	 	Over Bonus	 	Closing	 	Date	 	Date	 	Date
	 	 	 	 	 	 	 	 	20%	 	35%	 	45%
	Henseler
	 	$	4,513,647	 	 	$	3,500,000	 	 	$	1,013,647	 	 	$	700,000	 	 	$	1,225,000	 	 	$	1,575,000	 

 

 

SCHEDULE C

	•	 	Consulting Period: One (1) year commencing on the 2nd anniversary of the
Commencement Date.
	 
	•	 	Consulting Role: Purchaser and the Employee agree to meet at least one
hundred twenty (120) days before the Expected Completion Date to finalize specific
consulting roles.
	 
	•	 	Time Commitment: Up to 1000 hours for the twelve (12) months (approx: 20
hours/wk)
	 
	•	 	Travel Commitment: No more than 15% of time (reasonable travel expenses paid
by company)
	 
	•	 	Roll Over Bonus: If Employee fulfills the full term of the consulting
agreement, the Rollover Bonus and Taurus Options vest according to the Schedule A and B
	 
	•	 	Compensation: Purchaser will pay 75% of then current Base Salary (payable in
regular bi-weekly installments) for the full one (1) year term. The Employee will have no
additional rights to any additional bonus or equity award compensation during the
consulting period.
	 
	•	 	Benefits: Employee will be entitled to Medical Health, Dental, Disability and
Life Coverage during the consulting period at the same levels as on the Expected Completion
Date.exv10w4

Exhibit 10.4

EMPLOYMENT AGREEMENT

          THIS EMPLOYMENT AGREEMENT (“Agreement”), dated March 10, 2011, is entered into by and between
RC2 Corporation, a Delaware corporation (the “Company”), and Peter A. Nicholson (the “Employee”)
and, solely with respect to Sections 4 and 6, Tomy Company, Ltd., a company organized under the
laws of Japan (“Purchaser”). Capitalized terms used but not defined herein shall have the
respective meanings ascribed to them in the Merger Agreement (as defined below).

          WHEREAS, The Employee and the Company are currently parties to an Employment Agreement, dated
November 5, 2008, as amended December 28, 2010 and as further amended effective March 31,
2011(collectively, the “Prior Agreement”); and

          WHEREAS, Purchaser and Galaxy Dream Corporation, a Delaware corporation and a wholly owned
subsidiary of Purchaser, expect to enter into an AGREEMENT AND PLAN OF MERGER (the “Merger
Agreement”) with the Company whereby it is proposed that (i) MergerSub make a cash tender offer
(the “Offer”) to purchase all outstanding shares of common stock of the Company and (ii) following
the consummation of the Offer, MergerSub will merge with and into the Company, with the Company
being the surviving corporation; and

          WHEREAS, as a stockholder of the Company and as an owner of options, stock appreciation rights
(cash-settled and stock-settled) and restricted stock units, in each case covering common stock of
the Company (collectively, “Company Equity Awards”), the Employee will receive valuable
consideration as a direct result of the transactions contemplated by the Merger Agreement (the
“Sale Consideration”).

          NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Employee, intending to be legally bound, hereby agree as follows:

          1. Employment. Subject to the consummation of the Offer, the Company hereby agrees to
employ the Employee and the Employee hereby accepts employment with the Company on the terms and
subject to the conditions set forth in this Agreement.

          2. Term. This Agreement shall be effective as of the date the Offer is consummated
(the “Commencement Date”) and shall continue until terminated as provided in Section 6 below. As
of the Commencement Date, the Employee acknowledges and agrees that the Prior Agreement shall be
terminated in full and that he shall not be entitled to any rights or benefits thereunder,
including any rights to claim Good Reason (as defined in the Prior Agreement) with respect to
actions, failures or other events that occurred on or prior to the Commencement Date.

          3. Duties. The Employee shall serve as the Chief Financial Officer of the Company and
will, under the direction of the Company’s Chief Executive Officer and the Board

 

of Directors of Purchaser (the “Board”), faithfully, and to the best of his ability, perform
the duties of such position, which includes the management and oversight of the Company’s internal
controls and financial information related to the sales activities of the Company’s brands and
product lines in North America, South America, Europe and Australia and related global sourcing
activities. The Employee shall be one of the principal executive officers and Senior Management of
the Company and shall, subject to the control of the Company’s Chief Executive Officer and the
Board, have the normal duties, responsibilities and authority associated with such position. The
Employee shall also perform such additional duties and responsibilities which may from time to time
be reasonably assigned or delegated by the Company’s Chief Executive Officer or the Board. The
Employee agrees to devote his entire business time, effort, skill and attention to the proper
discharge of such duties while employed by the Company.

          4. Compensation.

          (a) Base Salary. The Employee shall receive a base salary of $324,480 per year,
payable in regular and equal bi-weekly installments (the “Base Salary”). The Base Salary shall be
reviewed annually by the Board on or around April 1st of each year and shall be subject
to increase based on the Employee’s performance, changes in Employee’s responsibilities and
increases in the Consumer Price Index.

          (b) Incentive Bonus. The Employee shall be entitled to participate in an annual
incentive compensation plan (the “Bonus Plan”) developed generally for the Senior Management of the
Company initially based on the Company’s earnings before interest, taxes, depreciation and
amortization, as determined by the compensation committee of the Board (the “Compensation
Committee”). The Employee’s participation will be on a basis consistent with past practice and his
position and level of compensation with the Company. The Employee’s target bonus under the Bonus
Plan shall be reviewed annually by the Compensation Committee but shall be not less than 1.70 times
the Employee’s then Base Salary.

          (c) Equity Awards. Subject to approval by the Board and any required approval by
Purchaser’s shareholders, the Employee shall be entitled to receive, as soon as reasonably
practicable after the next annual shareholders’ meeting of Purchaser to occur following the
Commencement Date, but in no event later than September 30, 2011, an initial equity award(s)
covering 50,000 shares of Purchaser pursuant to Purchaser’s equity plan in accordance with the
terms and conditions set forth in Schedule A which is attached hereto and made a part hereof.
Purchaser hereby represents that such terms and conditions are at least as favorable as the terms
and conditions applicable to equity award(s) made by Purchaser to its senior management generally.
To the extent the above-referenced approvals are not obtained, Purchaser shall provide the Employee
with a long-term cash incentive benefit equal to the Black-Scholes value of the equity award
described above, measured as of the date such cash incentive benefit is granted. Subject to the
approval of the Board and any required approval by Purchaser’s shareholders, the Employee shall be
eligible for future annual equity awards on the conditions, terms and frequency applicable to
equity award(s) made by Purchaser to its senior management generally.

2

 

	 	(d) 	 	Rollover Bonus.
	 
	 	(i)	 	On the Commencement Date, the Employee shall be entitled to a
cash bonus (the “Rollover Bonus”) in an amount equal to $1,000,000, as set
forth under “Total Rollover Bonus” on Schedule B which is attached hereto and
made a part hereof. The Rollover Bonus represents the spread cash value of
certain Company Equity Awards that (a) have not vested as of immediately prior
to the consummation of the Offer and (b) the vesting of which, but for this
Section 4(d), otherwise would have been accelerated and cash payment made
therefor in the Merger pursuant to the Merger Agreement (the “Unvested Company
Equity Awards”). In exchange for such Rollover Bonus, the Employee hereby
waives the acceleration of vesting with respect to the Unvested Company Equity
Awards, and agrees to cancel such awards in full as of the Commencement Date,
and the Employee hereby agrees that such awards shall have no further force and
effect on and after the Commencement Date. Purchaser shall cause or cause to
be delivered by wire transfer the amounts constituting the Rollover Bonus to an
interest-bearing escrow account established at Harris Bank in Chicago,
Illinois. Subject to the Employee’s continued employment with the Company on
the applicable vesting dates, the Rollover Bonus shall vest as to twenty
percent (20%), thirty-five percent (35%), and forty-five percent (45%) on the
eve of each of the first, second, and third anniversaries of the Commencement
Date, respectively. Except as set forth in Section 6, the vested portion of
the Rollover Bonus and any interest thereon shall become payable within ten
(10) days following the applicable vesting date. For the avoidance of
doubt, at the Effective Time, each of the Employee’s Company Equity Awards that
have not vested as of immediately prior to the consummation of the Offer and
that do not get canceled in exchange for the Rollover Bonus described in this
Section 4(d)(i), shall, at the Effective Time, be cancelled in full and the
Employee shall be entitled to receive a cash payment therefor as provided in
the Merger Agreement (such cash payment is set forth under “Cash at Closing” on
Schedule B attached hereto).
	 
	 	(ii)	 	In the event of a Purchaser Change of Control or a Company
Change of Control, the Employee shall be entitled to immediate vesting of the
then unvested portion of the Rollover Bonus and payment therefor and any
interest thereon, payable within thirty (30) days following the Purchaser
Change of Control or Company Change of Control, as applicable.
	 
	 	(iii)	 	In the event that it shall be finally determined by the
Internal Revenue Service that all or any portion of the Rollover Bonus is
subject to the additional tax imposed by Section 409A of the Code, or any
interest or penalties incurred by Employee with respect to such additional tax
(such additional tax, together with any such interest and penalties, are
hereinafter collectively referred to as the “Additional Tax”), then the Company
agrees that it shall reimburse the Employee for the amount of

3

 

	 	 	 	the Additional Tax finally imposed by the Internal Revenue Service on the
Rollover Bonus (the “Reimbursement Amount”) and the amount, if any, such
that the Employee receives an after-tax amount equal to the Reimbursement
Amount he would have received had no tax under Section 409A been imposed on
him (the “Additional Amount”). The Reimbursement Amount and the Additional
Amount shall be paid within ten (10) days following a final determination by
the Internal Revenue Service that such Additional Tax is due. To the extent
the Employee receives of a refund of or credit relating to the Additional
Tax for which the Company paid the Reimbursement Amount or relating to the
Additional Amount, such refund or credit shall be for the benefit of the
Company, and the Employee shall pay such amount to the Company within ten
(10) calendar days after receiving the refund or after the relevant tax
return is filed in which the credit is so applied. The Company’s obligation
to pay the Reimbursement Amount and the Additional Amount is subject to the
Employee notifying the Company within thirty (30) calendar days of any
written notice of a pending audit, assessment or other challenge (a
“Challenge”) which, if successful, might result in the Additional Tax. The
Company, at its expense, shall have the right to control the response to,
and any proceedings relating to, any Challenge, including initiating or
defending any action and/or appeal relating to such Challenge, with counsel
selected by the Company, in any such case to a final conclusion or
settlement at the discretion of the Company. The Company shall have full
control of such response and proceedings, including any compromise or
settlement thereof. The Company shall keep the Employee reasonably informed
regarding the status and progress of such Challenge. Upon the request of
Company, the Employee shall cooperate fully with the Company and its counsel
in contesting any Challenge which the Company elects to contest. The
Company shall reimburse the Employee for all costs and expenses, including
attorneys’ fees, that the Employee reasonably incurs in connection with any
such cooperation, provided that the Employee shall submit appropriate
documentation of such costs or expenses no later than ninety (90) calendar
days after incurring such costs or expenses. Such reimbursement shall be
made no later than thirty (30) calendar days following submission of
appropriate documentation of such costs or expenses by the Employee, and in
no event later than the end of the taxable year following the taxable year
in which such expenses are incurred.
	 
	 	(iv)	 	In the event that the Challenge provides that all or any
portion of the Rollover Bonus that has not then vested is immediately
includible in income as a result of the failure to comply with Section 409A of
the Code, the Company shall immediately accelerate the vesting of solely that
portion of the Rollover Bonus necessary to pay such income taxes arising as a
result of Section 409A of the Code (“Tax Payment Amount”). The Tax Payment
Amount shall equal the aggregate of the federal, state, local

4

 

	 	 	 	or foreign tax amounts due as a result of the application of Section 409A of
the Code and in no event shall exceed the amount that is required to be
included in income as a result of such failure to comply with the
requirements of Section 409A of the Code. Such Tax Payment Amount shall be
paid to the Employee within ten (10) days of the Employee notifying the
Company of such Challenge and in no event later than the last day of the
Employee’s taxable year following the year in which the Employee remits the
underlying taxes to the applicable tax authorities.
	 
	 	(v)	 	Notwithstanding anything in this Agreement to the contrary, in
the event it shall be determined that any benefit, payment or distribution by
the Company to or for the benefit of the Employee (whether payable or
distributable pursuant to the terms of this Agreement or otherwise) (such
benefits, payments or distributions are hereinafter referred to as “Payments”)
would, if paid, be subject to the excise tax (the “Excise Tax”) imposed by
Section 4999 of the Code, then, prior to the making of any Payment to the
Employee, a calculation shall be made comparing (i) the net benefit to the
Employee of the Payment after payment of the Excise Tax, to (ii) the net
benefit to the Employee if the Payment had been limited to the extent necessary
to avoid being subject to the Excise Tax. If the amount calculated under (i)
above is less than the amount calculated under (ii) above, then the Payment
shall be limited to an amount expressed in present value that maximizes the
aggregate present value of the Payments without causing the Payments or any
part thereof to be subject to the Excise Tax and therefore nondeductible by the
Company because of Section 280G of the Code (the “Reduced Amount”). For
purposes of this Section 4(d)(v), present value shall be determined in
accordance with Section 280G(d)(4) of the Code. In the event it is necessary
to reduce the Payments, payments shall be reduced on a last to be paid, first
reduced basis. All determinations required to be made under this Section
4(d)(v), including whether an Excise Tax would otherwise be imposed, whether
the Payments shall be reduced, the amount of the Reduced Amount, and the
assumptions to be utilized in arriving at such determinations, shall be made by
an internationally recognized accounting firm (the “Determination Firm”) which
shall provide detailed supporting calculations both to the Company and the
Employee within fifteen (15) business days of the receipt of notice from the
Employee that a Payment is due to be made, or such earlier time as is requested
by the Company. All fees and expenses of the Determination Firm shall be borne
solely by the Company. Any determination by the Determination Firm shall be
binding upon the Company and the Employee. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Determination Firm hereunder, it is possible that Payments
hereunder will have been unnecessarily limited by this Section 4(d)(v)
(“Underpayment”), consistent with the calculations required to be made
hereunder. The Determination Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be

5

 

	 	 	 	promptly paid by the Company to or for the benefit of the Employee together
with interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code. In the event that the provisions of Code Section
280G and 4999 or any successor provisions are repealed without succession,
this Section 4(d)(v) shall be of no further force or effect.

          5. Fringe Benefits.

          (a) Vacation. The Employee shall be entitled to four weeks of paid vacation
annually. The Employee and the Company shall mutually determine the time and intervals of such
vacation.

          (b) Medical, Health, Dental, Disability and Life Coverage. The Employee shall be
eligible to participate in any medical, health, dental, disability and life insurance policy in
effect for the Senior Management of the Company. The Company shall also pay for an annual
executive medical physical.

          (c) Automobile. The Company agrees to reimburse the Employee up to $750.00 per month,
as such amount may be increased from time to time consistent with the Company’s reimbursement
policy for the Senior Management of the Company to cover Employee’s expenses in connection with his
leasing or ownership of an automobile. Additionally, the Company will pay for the gas used for
business purposes. All maintenance and insurance expense for the automobile shall be the
responsibility of the Employee.

          (d) Reimbursement for Reasonable Business Expenses. The Company shall pay or
reimburse the Employee for reasonable expenses incurred by him in connection with the performance
of his duties pursuant to this Agreement including, but not limited to, travel expenses, customer
entertainment, expenses in connection with seminars, professional conventions or similar
professional functions and other reasonable business expenses.

          (e) Key Man Insurance. The parties agree that the Company has the option to purchase
one or more key man life insurance policies upon the life of the Employee. The Company shall own
and shall have the absolute right to name the beneficiary or beneficiaries of said policy. The
Employee agrees to cooperate fully with the Company in securing said policy, including, but not
limited to, submitting himself to any physical examination which may be required at such reasonable
times and places as the Company shall specify.

          (f) Life and Disability Insurance. During the Employment Period, the Company shall
provide coverage of at least $2 million of life insurance and 75% of Base Salary of disability
insurance. Such insurance policies to be owned by any one or more members of Employee’s immediate
family or by a trust for the primary benefit of the Employee’s immediate family. The owner of the
policy shall have the power to designate the beneficiary and to assign any rights under the
policy. The Company shall pay 100% of the premiums required under these policies; provided,
however, that the Company shall not be obligated to pay greater than $20,000 for such premiums
during any fiscal year. In the event that the premiums for such policies would exceed this
limitation, the Company shall consult with the Employee to determine the allocation of such amount
to the premiums for each type of policy to obtain such insurance as may be

6

 

available for an aggregate of $20,000 per fiscal year. The Employee shall have the right to
supplement, at the Employee’s expense, the Company’s payment of premiums for such policies up to
the full coverages described in the first sentence of this Section 5(f).

          6. Termination.

          (a) Termination of the Employment Period. The employment period shall continue until
the earlier of: (i) the third anniversary of the Commencement Date (the “Expected Completion
Date”), (ii) the Employee’s death or Disability, (iii) the Employee resigns or (iv) the Board or
its delegate determines that termination of the Employee’s employment is in the best interests of
the Company (the “Employment Period”). The last day of the Employment Period shall be referred to
herein as the “Termination Date.”

          (b) Termination for Disability or Death.

          (i) In the event of termination for Disability during the Employment Period,
the Employee shall be entitled to (A) the Base Salary through the date of
termination, payable in accordance with the Company’s usual payment practices; (B)
such fringe benefits, if any, as to which the Employee may be entitled under the
employee benefit plans of the Company (the amounts described in clauses (A) and (B)
hereof being referred to as the “Accrued Rights”); (C) subject to the Employee’s
execution and non-revocation of a Release pursuant to Section 12 herein, continued
payment of Base Salary for a period of six months after the Termination Date,
payable in accordance with the Company’s usual payment practices; provided
that the first payment shall begin on the first regular payroll date to occur on or
after the sixtieth (60th) day following the Termination Date (the “First
Payment Date”) and shall include payment of any amounts that would otherwise be due
prior thereto; (D) subject to the Employee’s execution and non-revocation of a
Release pursuant to Section 12 herein, a pro rata portion of any incentive bonus
that the Employee would have been entitled to receive pursuant to Section 4(b)
hereof in such year based upon the percentage of the fiscal year that shall have
elapsed through the date of the Employee’s termination of employment (the “Pro-Rata
Bonus”), payable when such incentive bonus would have otherwise been payable to the
Employee pursuant to Section 4(b) had the Employee’s employment not terminated; (E)
subject to the Employee’s execution and non-revocation of a Release pursuant to
Section 12 herein, immediate vesting of the then unvested portion of the Rollover
Bonus and payment therefore and any interest thereon (the “Rollover Acceleration
Payment”), payable upon the First Payment Date; (F) subject to the Employee’s
execution and non-revocation of a Release pursuant to Section 12 herein, for a
period of three years after the Termination Date, reimbursement by the Company to
the Employee for amounts paid, if any, to continue medical, dental and health
coverage pursuant to the provisions of the Consolidated Omnibus Budget
Reconciliation Act (“COBRA”); and (G) subject to the Employee’s execution and
non-revocation of a Release pursuant to Section 12 herein, for a period of three
years after the Termination Date, the continuation by the Company of Employee’s life
insurance and disability coverage, to the extent limited by Section 5(f).

7

 

          (ii) In the event of termination as a result of the Employee’s death during the
Employment Period, Employee’s designated beneficiary or his estate shall be entitled
to receive (A) the Accrued Rights; (B) the proceeds of any life insurance obtained
pursuant to Section 5(f); (C) the Pro Rata Bonus, payable when such incentive bonus
would have otherwise been payable to the Employee pursuant to Section 4(b) had the
Employee’s employment not terminated; and (D) the Rollover Acceleration Payment,
payable within thirty (30) days following the Termination Date.

          (c) Termination by the Company without Cause or by the Employee for Good Reason.

          (i) If on or prior to the second anniversary of the Commencement Date (A) the
Employment Period is terminated by the Company for any reason other than for Cause,
Disability or death, (B) the Employment Period is terminated by the Company for what
the Company (acting in good faith) reasonably believes is Cause or Disability, and
it is ultimately determined that the Employment Period was terminated without Cause
or Disability, or (C) the Employee resigns for Good Reason, the Employee shall be
entitled to receive, (1) the Accrued Rights; (2) subject to the Employee’s execution
and non-revocation of a Release pursuant to Section 12 herein, continued payment of
Base Salary for a period of thirty-six months after the Termination Date, payable in
accordance with the Company’s usual payment practices; provided that the
first payment shall begin on the first regular payroll date to occur on or after the
First Payment Date and shall include payment of any amounts that would otherwise be
due prior thereto; (3) subject to the Employee’s execution and non-revocation of a
Release pursuant to Section 12 herein, a payment equal to the greater of (x) 200% of
the average incentive bonus payments received by the Employee under the Bonus Plan
or a predecessor annual bonus plan of the Company over the preceding three (3) years
or (y) 100% of the Employee’s target bonus under the Bonus Plan for the year in
which the termination occurs, payable upon the First Payment Date; (4) subject to
the Employee’s execution and non-revocation of a Release pursuant to Section 12
herein, the Rollover Acceleration Payment, payable upon the First Payment Date; (5)
subject to the Employee’s execution and non-revocation of a Release pursuant to
Section 12 herein, for a period of three (3) years from the Termination Date,
reimbursement by the Company to the Employee for amounts paid, if any, to continue
medical, dental and health coverage pursuant to the provisions of COBRA; and (6)
subject to the Employee’s execution and non-revocation of a Release pursuant to
Section 12 herein, for a period three (3) years from the Termination Date, the
continuation of Employee’s life insurance and disability coverage to the extent
limited by Section 5(f).

          (ii) If any time after the second anniversary of the Commencement Date (A) the
Employment Period is terminated by the Company for any reason other than for Cause,
Disability or death, (B) the Employment Period is terminated by the Company for what
the Company (acting in good faith) reasonably believes is Cause or Disability, and
it is ultimately determined that the

8

 

Employment Period was terminated without Cause or Disability, or (C) the
Employee resigns for Good Reason, the Employee shall be entitled to receive, (1) the
Accrued Rights; (2) subject to the Employee’s execution and non-revocation of a
Release pursuant to Section 12 herein, continued payment of Base Salary for a period
of twenty-four months after the Termination Date, payable in accordance with the
Company’s usual payment practices; provided that the first payment shall
begin on the first regular payroll date to occur on or after the First Payment Date
and shall include payment of any amounts that would otherwise be due prior thereto;
(3) subject to the Employee’s execution and non-revocation of a Release pursuant to
Section 12 herein, a payment equal to the 50% of the Employee’s target bonus under
the Bonus Plan for the year in which the termination occurs, payable upon the First
Payment Date; (4) subject to the Employee’s execution and non-revocation of a
Release pursuant to Section 12 herein, the Rollover Acceleration Payment, payable
upon the First Payment Date; (5) subject to the Employee’s execution and
non-revocation of a Release pursuant to Section 12 herein, for a period of two (2)
years from the Termination Date, reimbursement by the Company to the Employee for
amounts paid, if any, to continue medical, dental and health coverage pursuant to
the provisions of COBRA; and (6) subject to the Employee’s execution and
non-revocation of a Release pursuant to Section 12 herein, for a period two (2)
years from the Termination Date, the continuation of Employee’s life insurance and
disability coverage to the extent limited by Section 5(f).

          (iii) Notwithstanding anything herein to the contrary, Employee may only resign
for Good Reason pursuant to this Section 6(c) provided that the Employee has given
written notice to the Company within thirty (30) days of the occurrence of any of
the events in Section 11(f) and such event remains uncured thirty (30) days after
the Company’s receipt of such notice.

          (d) Termination by the Company for Cause or by the Employee Without Good Reason. If
the Employment Period is terminated by the Company with Cause or as a result of the Employee’s
resignation without Good Reason, the Employee shall be entitled to receive the Accrued
Rights. Following such a termination, the Employee shall have no further rights to any
compensation or any other benefits under this Agreement. Notwithstanding anything herein to the
contrary, the Company may only terminate the Employment Period for Cause pursuant to this Section
6(d) provided that the Company has given written notice to the Employee of the occurrence of any
events constituting Cause within ninety (90) days of the occurrence of any such events and the
Employee fails to cure such events within thirty (30) days after the Employee’s receipt of such
notice.

          (e) Termination of Employment Period Involving Non-Renewal or Non-Extension. If this
Agreement is not renewed or otherwise extended by the Company after the Expected Completion Date
and the Employee’s employment is terminated as of the Expected Completion Date, the Employee shall
be entitled to receive, (A) the Accrued Rights; (B) subject to the Employee’s execution and
non-revocation of a Release pursuant to Section 12 herein, continued payment of Base Salary for a
period of twenty-four months after the Termination Date, payable in accordance with the Company’s
usual payment practices; provided that the first

9

 

payment shall begin on the first regular payroll date to occur on or after the First Payment
Date and shall include payment of any amounts that would otherwise be due prior thereto; (C)
subject to the Employee’s execution and non-revocation of a Release pursuant to Section 12 herein,
a payment equal to the 50% of the Employee’s target bonus under the Bonus Plan for the year in
which the termination occurs, payable upon the First Payment Date; (D) the Rollover Acceleration
Payment, payable in accordance with Section 4(d)(i); (E) subject to the Employee’s execution and
non-revocation of a Release pursuant to Section 12 herein, for a period of two (2) years from the
Termination Date, the Company’s reimbursement to the Employee for amounts paid, if any, to continue
medical, dental and health coverage pursuant to the provisions of COBRA, and (F) subject to the
Employee’s execution and non-revocation of a Release pursuant to Section 12 herein, for a period of
two (2) years from the Termination Date, the continuation of Employee’s life insurance and
disability coverage to the extent limited by Section 5(f). The Company shall provide written
notice of any non-renewal or non-extension of the Agreement pursuant to this Section 6(e) at least
sixty (60) days prior to the Expected Completion Date.

          (f) Effect of Termination. The termination of the Employment Period pursuant to
Section 6(a) shall not affect the Employee’s obligations as described in Sections 7 and 8.

          7. Noncompetition and Nonsolicitation. The Employee acknowledges and agrees that as a
stockholder of the Company and as an owner of options, stock appreciation rights (cash-settled and
stock-settled) and restricted stock units, in each case covering common stock of the Company, the
Employee will receive valuable consideration as a direct result of the transactions contemplated by
the Merger Agreement. The Employee acknowledges and agrees that the contacts and relationships of
the Company and its Affiliates with its customers, suppliers, licensors and other business
relations are, and have been, established and maintained at great expense and provide the Company
and its Affiliates with a substantial competitive advantage in conducting their business. The
Employee acknowledges and agrees that by virtue of the Employee’s employment with the Company, the
Employee will have unique and extensive exposure to and personal contact with the Company’s
customers and licensors, and that he will be able to establish a unique relationship with those
Persons that will enable him, both during and after employment, to unfairly compete with the
Company and its Affiliates. Furthermore, the parties agree that the terms and conditions of the
following restrictive covenants are reasonable and necessary for the protection of the business,
trade secrets and Confidential Information (as defined in Section 8 below) of the Company and its
Affiliates and to prevent great damage or loss to the Company and its Affiliates as a result of
action taken by the Employee. The Employee acknowledges and agrees that the noncompete
restrictions and nondisclosure of Confidential Information restrictions contained in this Agreement
are reasonable and the consideration provided for herein is sufficient to fully and adequately
compensate the Employee for agreeing to such restrictions. The Employee acknowledges that he could
continue to actively pursue his career and earn sufficient compensation in the same or similar
business without breaching any of the restrictions contained in this Agreement.

          (a) Noncompetition. The Employee hereby covenants and agrees that during the
Employment Period and for two years thereafter (the “Noncompete Period”), he shall not, directly or
indirectly, either individually or as an employee, principal, agent, partner, shareholder, owner,
trustee, beneficiary, co-venturer, distributor, consultant, representative or in any other

10

 

capacity, participate in, become associated with, provide assistance to, engage in or have a
financial or other interest in any business, activity or enterprise anywhere in the world which is
competitive with the Company or any of its subsidiaries or any successor or assign of the Company
or any of its subsidiaries. The ownership of less than a one percent interest in a corporation
whose shares are traded in a recognized stock exchange or traded in the over-the-counter market,
even though that corporation may be a competitor of the Company, shall not be deemed financial
participation in a competitor. If the final judgment of a court of competent jurisdiction declares
that any term or provision of this section is invalid or unenforceable, the parties agree that the
court making the determination of invalidity or unenforceability shall have the power to reduce the
scope, duration, or area of the term or provision, to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or unenforceable term
or provision, and this Agreement shall be enforceable as so modified. The term “indirectly” as
used in this section and Section 8 below is intended to include any acts authorized or directed by
or on behalf of the Employee or any Affiliate of the Employee.

          (b) Nonsolicitation. The Employee hereby covenants and agrees that during the
Noncompete Period, he shall not, directly or indirectly, either individually or as an employee,
agent, partner, shareholder, owner, trustee, beneficiary, co-venturer, distributor, consultant or
in any other capacity:

          (i) canvass, solicit or accept from any Person who is a customer or licensor of
the Company or any of its subsidiaries (any such Person is hereinafter referred to
individually as a “Customer,” and collectively as the “Customers”) any business
which is in competition with the business of the Company or any of its subsidiaries
or the successors or assigns of the Company or any of its subsidiaries, including,
without limitation, the canvassing, soliciting or accepting of business from any
Person which is or was a Customer of the Company or any of its subsidiaries within
two years preceding the date of this Agreement, during the Employment Period or
during the Noncompete Period;

          (ii) advise, request, induce or attempt to induce any of the Customers,
suppliers, or other business contacts of the Company or any of its subsidiaries who
currently have or have had business relationships with the Company or any of its
subsidiaries within two years preceding the date of this Agreement, during the
Employment Period or during the Noncompete Period, to withdraw, curtail or cancel
any of its business or relations with the Company or any of its subsidiaries; or

          (iii) hire or induce or attempt to induce any officer or other senior manager
of the Company or any of its Affiliates to terminate his or her relationship or
breach any agreement with the Company or any of its Affiliates unless such person
has previously been terminated by the Company.

          8. Confidential Information. The Employee acknowledges and agrees that the
customers, business connections, customer lists, procedures, operations, techniques, and other
aspects of and information about the business of the Company and its Affiliates (the

11

 

“Confidential Information”) are established at great expense and protected as confidential
information and provide the Company and its Affiliates with a substantial competitive advantage in
conducting their business. The Employee further acknowledges and agrees that by virtue of his past
employment with the Company, and by virtue of his employment with the Company, he has had access to
and will have access to, and has been entrusted with and will be entrusted with, Confidential
Information, and that the Company would suffer great loss and injury if the Employee would disclose
this information or use it in a manner not specifically authorized by the Company. Therefore, the
Employee agrees that during the Employment Period and at all times thereafter, he will not,
directly or indirectly, either individually or as an employee, agent, partner, shareholder, owner
trustee, beneficiary, co-venturer distributor, consultant or in any other capacity, use or disclose
or cause to be used or disclosed any Confidential Information, unless and to the extent that any
such information become generally known to and available for use by the public other than as a
result of the Employee’s acts or omissions. The Employee shall deliver to the Company at the
termination of the Employment Period, or at any other time the Company may request, all memoranda,
notes, plans, records, reports, computer tapes, printouts and software and other documents and data
(and copies thereof) relating to the Confidential Information, Work Product (as defined below) or
the business of the Company or any of its Affiliates which he may then possess or have under his
control. The Employee acknowledges and agrees that all inventions, innovations, improvements,
developments, methods, designs, analyses, drawings, reports and all similar or related information
(whether or not patentable) which relate to the Company’s or any of its Affiliate’s actual or
anticipated business research and development or existing or future products or services and which
are conceived, developed or made by the Employee while employed by the Company and its Affiliates
(“Work Product”) belong to the Company or such Affiliate, as the case may be.

          9. Common Law of Torts and Trade Secrets. The parties agree that nothing in this
Agreement shall be construed to limit or negate the common law of torts or trade secrets where it
provides the Company and its Affiliates with broader protection than that provided herein.

          10. Section 409A. Notwithstanding any provision to the contrary in the Agreement, in
order to be eligible to receive any termination benefits under this Agreement that are deemed
deferred compensation subject to Section 409A of the Code, the Employee’s termination of employment
must constitute a “separation from service” within the meaning of Treas. Reg.
Section 1.409A-1(h) (a “Separation from Service”). If the Employee is deemed at the time of his
termination of employment with the Company to be a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed commencement of any portion of the
termination benefits to which the Employee is entitled under this Agreement is required in order to
avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of the
Employee’s termination benefits shall not be provided to the Employee prior to the earlier of
(i) the expiration of the six-month period measured from the date of the Employee’s Separation from
Service with the Company or (ii) the date of the Employee’s death. Upon the earlier of such dates,
all payments deferred pursuant to this Section 10 shall be paid in a lump sum to the Employee, and
any remaining payments due under the Agreement shall be paid as otherwise provided herein. The
determination of whether the Employee is a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code as of the time of his separation from service shall made by
the Company in accordance with the terms of

12

 

Section 409A of the Code and applicable guidance thereunder (including without limitation
Treas. Reg. Section 1.409A-1(i) and any successor provision thereto). Notwithstanding the
foregoing or any other provisions of this Agreement, the Company and the Employee agree that, for
purposes of the limitations on nonqualified deferred compensation under Section 409A of the Code,
each payment of compensation under this Agreement shall be treated as a right to receive a series
separate and distinct payments of compensation for purposes of applying the Section 409A of the
Code.

          11. Definitions.

          (a) “Affiliate” means, with respect to any Person, any other Person controlling, controlled by
or under common control with such Person and any partner of a Person which is a partnership.

          (b) “Cause” shall be deemed to exist if the Employee shall have (i) violated the terms of
Section 7 or Section 8 of this Agreement in any material respect; (ii) committed a felony or a
crime involving moral turpitude; (iii) engaged in willful misconduct which is shown to have
material adverse effect on the Company or any of its Affiliates; (iv) engaged in fraud or
dishonesty with respect to the Company or any of its Affiliates or made a material
misrepresentation to the stockholders or directors of the Company; or (v) committed acts of gross
negligence in the performance of his duties which are repeated and willful and are shown to have a
material adverse effect on the Company or any of its Affiliates.

          (c) “Code” means the Internal Revenue Code of 1986, as amended or corresponding provisions of
subsequent superseding federal tax laws, as amended.

          (d) “Company Change of Control” means:

          (i) the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (a) the then
outstanding shares of common stock of the Company (the “Outstanding Common Stock”)
or (b) the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the “Outstanding
Voting Securities”); provided, however, that the following acquisitions shall not
constitute a Change of Control: (a) any acquisition directly from the Company,
(b) any acquisition by the Company, (c) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (d) any acquisition by any corporation pursuant to a
transaction which complies with clauses (a) and (b) of subsection (ii) of this
definition; or

          (ii) the consummation of a reorganization, merger or consolidation (a “Business
Combination”) of the Company, in each case, unless, following such Business
Combination, (a) all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Common Stock

13

 

and Outstanding Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a result
of such transaction owns the Company through one or more Subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Common Stock and Outstanding Voting
Securities, as the case may be and (b) no Person (excluding any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 50% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination; or

          (iii) the consummation of (a) a complete liquidation or dissolution of the
Company or (b) the sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect to which following
such sale or other disposition, [1] more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Common Stock and Outstanding
Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such sale
or other disposition, of the Outstanding Common Stock and Outstanding Voting
Securities, as the case may be and [2] less than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by any Person (excluding any employee benefit plan (or related trust) of
the Company or such corporation), except to the extent that such Person owned 50% or
more of the Outstanding Common Stock or Outstanding Voting Securities prior to the
sale or disposition.

          (e) “Disability” shall mean a physical or mental sickness or any injury which renders the
Employee incapable of performing the services required of him as an employee of the Company and
which does or may be expected to continue for more than six months during any 12-month period. In
the event the Employee shall be able to perform his usual and customary duties on behalf of the
Company following a period of disability, and does so perform such duties or such other duties as
are prescribed by the Board for a period of three continuous months, any subsequent period of
disability shall be regarded as a new period of disability for purposes of this Agreement. The
Company and the Employee shall determine the existence of a Disability and the date upon which it
occurred. In the event of a dispute regarding whether or

14

 

when a Disability occurred, the matter shall be referred to a medical doctor selected by the
Company and the Employee. In the event of their failure to agree upon such a medical doctor, the
Company and the Employee shall each select a medical doctor who together shall select a third
medical doctor who shall make the determination. Such determination shall be conclusive and binding
upon the parties hereto.

          (f) “Good Reason” shall mean (i) the material diminution of the Employee’s duties set forth in
Section 3 above or (ii) the relocation of the offices at which the Employee is principally employed
to a location which is more than 50 miles from the offices at which the Employee is principally
employed as of the date hereof; provided, that travel necessary for the performance of the
Employee’s duties set forth in Section 3 above shall not determine the location where the Employee
is “principally employed.” The Employee agrees that any change in the Employee’s duties as set
forth in Section 3 above as compared to the Employee’s duties on or prior to the Commencement Date
shall not constitute Good Reason.

          (g) “Person” means any individual, partnership, corporation, limited liability company,
association, joint stock company, trust, joint venture, unincorporated organization and any
governmental entity or any department, agency or political subdivision thereof.

          (h) “Purchaser Change of Control” means:

          (i) the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (a) the then
outstanding shares of common stock of Purchaser (the “Outstanding Common Stock”) or
(b) the combined voting power of the then outstanding voting securities of Purchaser
entitled to vote generally in the election of directors (the “Outstanding Voting
Securities”); provided, however, that the following acquisitions shall not
constitute a Change of Control: (a) any acquisition directly from Purchaser,
(b) any acquisition by Purchaser, (c) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by Purchaser or any corporation
controlled by Purchaser or (d) any acquisition by any corporation pursuant to a
transaction which complies with clauses (a), (b) and (c) of subsection (iii) of this
definition; or

          (ii) individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board” ) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by Purchaser’s stockholders,
was approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or

15

 

          (iii) the consummation of a reorganization, merger or consolidation (a
“Business Combination”) of Purchaser, in each case, unless, following such Business
Combination, (a) all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding
Voting Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns Purchaser
through one or more Subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding Common
Stock and Outstanding Voting Securities, as the case may be, (b) no Person
(excluding any employee benefit plan (or related trust) of Purchaser or such
corporation resulting from such Business Combination) beneficially owns, directly or
indirectly, 50% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and (c) at
least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or

          (iv) the consummation of (a) a complete liquidation or dissolution of Purchaser
or (b) the sale or other disposition of all or substantially all of the assets of
Purchaser, other than to a corporation, with respect to which following such sale or
other disposition, [1] more than 60% of, respectively, the then outstanding shares
of common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Common Stock and Outstanding Voting Securities
immediately prior to such sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such sale or other disposition,
of the Outstanding Common Stock and Outstanding Voting Securities, as the case may
be, [2] less than 50% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by any Person
(excluding any employee benefit plan (or related trust) of Purchaser or such
corporation), except to the extent that such Person owned 50% or more of the
Outstanding Common Stock or Outstanding Voting Securities prior to the sale or
disposition, and [3] at least a majority of the members of the board of directors of
such corporation were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board,

16

 

providing for such sale or other disposition of assets of Purchaser or were
elected, appointed or nominated by the Board.

          (i) “Senior Management” at any time means the senior executive officers of the Company which
will include, without limitation, the Chief Executive Officer, President, Chief Operating Officer,
Managing Director (China), Chief Financial Officer, Chief Marketing Officer and such other officers
of the Company as the Board shall determine from time to time.

          12. Release of Claims. The receipt of any payments and benefits subsequent to the
termination of the employment or resignation of the Employee pursuant to this Agreement (other
than those payable on account of Employee’s death) shall be subject to the Employee executing a
release of claims (the “Release”) in a form reasonably acceptable to the Company within twenty-one
(21) days (or forty-five days (45) for a group termination) following such termination or
resignation and not subsequently revoking such Release.

          13. Specific Performance. The Employee acknowledges and agrees that irreparable
injury to the Company may result in the event the Employee breaches any covenant or agreement
contained in Sections 7 and 8 and that the remedy at law for the breach of any such covenant will
be inadequate. Therefore, if the Employee engages in any act in violation of the provisions of
Sections 7 and 8, the Employee agrees that the Company shall be entitled, in addition to such other
remedies and damages as may be available to it by law or under this Agreement, to injunctive relief
to enforce the provisions of Sections 7 and 8.

          14. Waiver. The failure of either party to insist in any one or more instances, upon
performance of the terms or conditions of this Agreement shall not be construed as a waiver or a
relinquishment of any right granted hereunder or of the future performance of any such term,
covenant or condition.

          15. Notices. Any notice to be given hereunder shall be deemed sufficient if addressed
in writing and delivered by registered or certified mail or delivered personally, in the case of
the Company, to its principal business office, and in the case of the Employee, to his address
appearing on the records of the Company, or to such other address as he may designate in writing to
the Company.

          16. Severability. In the event that any provision shall be held to be invalid or
unenforceable for any reason whatsoever, it is agreed such invalidity or unenforceability shall not
affect any other provision of this Agreement and the remaining covenants, restrictions and
provisions hereof shall remain in full force and effect and any court of competent jurisdiction may
so modify the objectionable provision as to make it valid, reasonable and
enforceable. Furthermore, the parties specifically acknowledge the above covenant not to compete
and covenant not to disclose confidential information are separate and independent agreements.

          17. Complete Agreement. Except as otherwise expressly set forth herein, this document
embodies the complete agreement and understanding among the parties hereto with respect to the
subject matter hereof and supersedes and preempts any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related to

17

 

the subject matter hereof in any way. Without limiting the generality of the foregoing, this
Agreement supersedes the Prior Agreement. Upon consummation of the Offer, the Prior Agreement is
hereby terminated and shall cease to be of any further force or effect.

          18. Amendment. This Agreement may only be amended by an agreement in writing signed
by each of the parties hereto.

          19. Governing Law. This Agreement shall be governed by and construed exclusively in
accordance with the laws of the State of Delaware, regardless of choice of law requirements.

          20. Benefit. This Agreement shall be binding upon and inure to the benefit of and
shall be enforceable by and against the Company, its successors and assigns and the Employee, his
heirs, beneficiaries and legal representatives. It is agreed that the rights and obligations of
the Employee may not be delegated or assigned.

          [Remainder of page intentionally left blank. Signature page to follow.]

18

 

          IN WITNESS WHEREOF, the parties have executed or caused this Employment Agreement to be
executed as of the date first above written.

	 	 	 	 	 
	 	RC2 Corporation

 	 
	 	By:  	/s/ Curtis W. Stoelting
 	 
	 	 	Name:  	Curtis W. Stoelting 	 
	 	 	Title:  	CEO 	 
	 
	 	EMPLOYEE

 	 
	 	By:  	/s/ Peter A. Nicholson
 	 
	 	 	Name:  	Peter A. Nicholson 	 
	 	 	 	 
	 

          THE UNDERSIGNED has executed or caused this Employment Agreement to be executed as of the date
first above written, solely for purposes of Sections 4 and 6 hereof.

	 	 	 	 	 
	 	Tomy Company, Ltd.

 	 
	 	By:  	                  /s/ Kantaro Tomiyama
 	 
	 	 	Name:  	Kantaro Tomiyama 	 
	 	 	Title:  	President & C.E.O. 	 

 

	 	 	 	 	 

SCHEDULE A

	1.	 	Award Type; Vesting and Exercisability Schedule. The initial equity award set
forth in Section 4(c) of this Agreement shall be in the form of provision of stock
acquisition rights (shinkabu yoyakuken) covering shares of Purchaser’s equity (“Taurus
Option(s)”) and shall vest as follows: 50% on the 2nd anniversary of the date
of grant and 50% on the 4th anniversary of the date of grant.

	2.	 	Term of Option. The Taurus Option(s) shall expire on the 6th
anniversary of the date of grant.

	3.	 	Change of Control. The Taurus Option(s) held by the Employee shall immediately
vest upon a Purchaser Change of Control.

	4.	 	Exercise of Taurus Option(s) Following Termination of Employment. If the
Employee’s employment is terminated for any reason other than a termination by the Company
for Cause or resignation by the Employee without Good Reason, the Employee (or his
designated beneficiary or his estate in the event of the termination of the Employee’s
employment due to death) may exercise any Taurus Option(s) vested as of the Termination
Date at any time prior to the original expiration date of such Taurus Option(s) or within
twelve months after the Termination Date, whichever period is shorter. If the Employee’s
employment is terminated for Cause, any Taurus Options, to the extent not exercised before
such termination, shall terminate on the Termination Date.

	5.	 	Other Terms. Such Taurus Option(s) shall be subject to all other terms and
conditions as may be approved by the Board and the shareholders of Purchaser that are not
inconsistent with this Schedule A.

 

SCHEDULE B

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Total Value of	 	 	 	 	 	 	 	 	 	 
	 	 	Company	 	 	 	 	 	 	 	 	 	 
	 	 	Equity Awards	 	 	 	 	 	 	 	 	 	Vesting Schedule
	 	 	(unvested as of	 	 	 	 	 	 	 	 	 	Eve of 1st	 	Eve of 2nd	 	Eve of 3rd
	 	 	immediately	 	 	 	 	 	 	 	 	 	Anniversary of	 	Anniversary of	 	Anniversary of
	 	 	prior to the	 	 	 	 	 	 	 	 	 	Commencement	 	Commencement	 	Commencement
	 	 	consummation	 	Total Roll	 	Cash at	 	Date	 	Date	 	Date
	 	 	of the Offer)	 	Over Bonus	 	Closing	 	20%	 	35%	 	45%
	Nicholson
	 	$	2,649,747	 	 	$	1,000,000	 	 	$	1,649,747	 	 	$	200,000	 	 	$	350,000	 	 	$	450,000

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