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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of October 1, 1999 by and between JAKKS
Pacific, Inc., a Delaware corporation (the "Company"), and Xxxxxxx Xxxxxx
("Executive")
W I T N E S S E T H :
WHEREAS, concurrently with the effectiveness of this Agreement, the
Company is acquiring (the "Acquisition") all of the outstanding capital stock of
Flying Colors Toys, Inc., a Michigan corporation formerly known as "Colorbok
Paper Products, Inc." ("Flying Colors"); and
WHEREAS, Executive was, until the closing of the Acquisition, an
executive officer and shareholder of Flying Colors; and
WHEREAS, the Company desires to employ Executive on the terms and
subject to the conditions hereinafter set forth, and Executive desires so to be
employed;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the Company and Executive agree as follows:
1. Offices and Duties. The Company hereby employs Executive during the
Term (as hereinafter defined) to serve as the senior employee of Flying Colors
responsible for sales and marketing with the divisional title of Senior Vice
President - Sales and Development and to perform such executive and supervisory
duties on behalf of Flying Colors as the Board of Directors or an executive
officer of the Company or the Board of Directors or an executive officer of
Flying Colors may from time to time reasonably direct; provided that such duties
are substantially within the scope of the duties required to be performed by
Executive for Flying Colors immediately prior to the date hereof. The Board of
Directors of Flying Colors may elect or designate Executive to serve in such
other corporate offices of Flying Colors or a subsidiary thereof as they may
from time to time deem necessary, proper or advisable. Executive hereby accepts
such employment and agrees that throughout the Term he shall faithfully,
diligently and to the best of his ability, in furtherance of the business of the
Company and Flying Colors, perform the duties assigned to him or incidental to
the offices assumed by him pursuant to this Section. Executive shall devote
substantially all of his business time and attention to the business and affairs
of the Company, but Executive shall not be required to devote any minimum amount
of time or report or perform his duties hereunder on a fixed or periodic basis,
and Executive may engage or participate in such other activities incidental to
any other employment, occupation or business venture or enterprise as do not
materially interfere with or compromise his ability to perform his duties
hereunder. Executive shall at all times be subject to the direction and control
of the Boards
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of Directors of the Company and Flying Colors, respectively, and observe and
comply with such rules, regulations, policies and practices as the Board of
Directors of the Company or of Flying Colors may from time to time establish.
2. Term. The employment of Executive hereunder shall commence on the
date hereof and continue for a term ending on December 31, 2002, subject to
earlier termination upon the terms and conditions provided elsewhere herein (the
"Term"). As used herein, "Termination Date" means the last day of the Term.
3. Compensation.
(a) As compensation for his services hereunder:
(i) the Company is granting to Executive on the date hereof
options to purchase 10,000 shares of the Company's Common Stock pursuant to the
Company's Third Amended and Restated Stock Option Plan and subject to the terms
and conditions set forth in Annex I hereto; and
(ii) the Company shall pay to Executive during the Term:
(A) a base salary at the rate of $300,000
per annum (the "Base Salary"), such Base Salary to be
paid in substantially equal installments no less often
than twice monthly; and
(B) such additional incentive or bonus compensation
as the Company's Board of Directors may from time to time
determine.
(b) In addition to his Base Salary and other compensation
provided herein, Executive shall be entitled to participate, to the extent he is
eligible under the terms and conditions thereof, in any stock, stock option or
other equity participation plan and any profit-sharing, pension, retirement,
insurance, medical service or other employee benefit plan generally available to
the executive officers of the Company, and to receive any other benefits or
perquisites generally available to the executive officers of the Company
pursuant to any employment policy or practice, which may be in effect from time
to time during the Term. Except as otherwise expressly provided herein, the
Company shall be under no obligation hereunder to institute or to continue any
such employee benefit plan or employment policy or practice.
(c) During the Term, Executive shall not be entitled to
additional compensation for serving as a director or officer of the Company (or
any subsidiary thereof) to which he is elected or appointed; provided that such
duties are substantially within the scope of the duties required to be performed
by Executive for Flying Colors immediately prior to the date hereof. Throughout
any period or periods during which he shall serve as a director of the Company
(or such subsidiary), Executive shall be entitled to directors' fees in
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accordance with the policies and practices of the Company (or such subsidiary)
then in effect.
4. Expense Allowance.
The Company shall pay directly, or advance funds to Executive
or reimburse Executive for, all expenses reasonably incurred by him in
connection with the performance of his duties hereunder and the business of the
Company, upon the submission to the Company of itemized expense reports,
receipts or vouchers in accordance with its then customary policies and
practices.
5. Location. Except for routine travel and temporary accommodation
reasonably required to perform his services hereunder, Executive shall not be
required to perform his services hereunder at any location other than the
principal executive office of Flying Colors, which office shall be located
throughout the Term at its location on the date hereof, or, if relocated, at a
location within a distance of 30 miles from its location on the date hereof, or
at such other office or site to which Executive may, in his sole discretion,
consent; nor shall he be required to relocate his principal residence to, or
otherwise to reside at, any location specified by the Company.
6. Office. The Company shall provide Executive with suitable office
space, furnishings and equipment, secretarial and clerical services and such
other facilities and office support as are reasonably necessary for the
performance of his services hereunder.
7. Vacation. Executive shall be entitled to four weeks paid vacation
during each year of his employment hereunder, such vacation to be taken at such
time or times as shall be agreed upon by Executive and the Company. Vacation
time shall be cumulative from year to year, except that Executive shall not be
entitled to take more than six weeks vacation during any consecutive 12-month
period during the Term.
8. Key-Man Insurance. The Company shall have the right from time to
time to purchase, increase, modify or terminate insurance policies on the life
of Executive for the benefit of the Company in such amounts as the Company may
determine in its sole discretion. In connection therewith, Executive shall, at
such time or times and at such place or places as the Company may reasonably
direct, submit himself to such physical examinations and execute and deliver
such documents as the Company may deem necessary or appropriate.
9. Trade Secrets. Executive shall hold in a fiduciary capacity for the
benefit of the Company all confidential or proprietary information relating to
or concerned with its operations, business and affairs, and he shall not, at any
time hereafter, use or disclose any such information to any person other than to
the Company or its designees or except as may otherwise be required in
connection with the business and affairs of the Company.
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10. Intellectual Property. Subject to Sections 2870 and 2871 of the
California Labor Code:
(a) Any invention, design, process, system, procedure,
improvement, development or discovery conceived, developed, created or made by
Executive, alone or with others, during the Term and applicable to the business
of the Company, whether or not patentable or registrable, shall become the sole
and exclusive property of the Company.
(b) Executive shall disclose the same promptly and completely
to the Company and shall, during the Term or thereafter, (i) execute all
documents requested by the Company for vesting in the Company the entire right,
title and interest in and to the same, (ii) execute all documents requested by
the Company for filing and procuring such applications for patents, trademarks,
service marks or copyrights as the Company, in its sole discretion, may desire
to prosecute, and (iii) give the Company all assistance it may reasonably
require, including the giving of testimony in any Proceeding (as hereinafter
defined), in other to obtain, maintain and protect the Company's right therein
and thereto; provided that the Company shall bear the entire cost and expense of
such assistance, including without limitation paying the Executive reasonable
compensation for any time or effort expended by him in connection with such
assistance after the Termination Date.
11. No Competition.
(a) During the Term, and unless his employment terminates
pursuant to Section 14 or by action of the Company or Flying Colors other than
pursuant to Section 13, for a further period of three years thereafter,
Executive shall not, directly or indirectly:
(i) own, control, manage, operate, participate or invest in, or
otherwise be connected with, in any manner, any business activity, venture or
enterprise which is engaged in the Restricted Business or any other business in
which the Company (or any subsidiary thereof) is engaged at the time of
termination of Executive's employment hereunder; provided, however, that
Executive may invest his funds in securities of an issuer engaged in the
Restricted Business or any other business in which the Company (or any
subsidiary thereof) is engaged if the securities of such issuer are listed for
trading on a registered securities exchange or actively traded in an
over-the-counter market and Executive's holdings therein represent less than 1%
of the total number of shares or principal amount of the securities of such
issuer outstanding; or
(ii) for himself or on behalf of any other person, employ or
engage any Person (other than a Shareholder) who at the time shall have been
within the preceding 12-month period an employee of the Company (or any
subsidiary thereof) or contact any supplier, customer or employee of the Company
(or such subsidiary) for the purpose of soliciting or diverting any supplier,
customer or employee from the Company (or such subsidiary);
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provided that no provision of this Section 11(a) is intended or shall be deemed
to preclude Executive or the Divestee from engaging any sales representative or
conducting business or dealing with any vendor, supplier or customer in the
ordinary course of the Divested Business.
(b) The provisions of Section 11(a) notwithstanding, Executive may:
(i) retain (but not increase, except pursuant to an agreement
in effect on the date hereof or by operation of law) his interest in the
Divestee; and
(ii) until December 31, 2000, serve as a director of, and
perform consulting services for, the Divestee.
(c) Executive acknowledges that the provisions of this Section, and the
period of time, geographic area and scope and type of restrictions on his
activities set forth herein, are reasonable and necessary for the protection of
the Company.
12. Termination Upon Death or Disability. Executive's employment hereunder shall
terminate immediately upon his death. In the event that Executive is unable to
perform his duties hereunder by reason of any disability or incapacity (due to
any physical or mental injury, illness or defect) for an aggregate of 90 days in
any consecutive 12-month period, the Company shall have the right to terminate
Executive's employment hereunder within 60 days after the 90th day of his
disability or incapacity by giving Executive notice to such effect at least 30
days prior to the date of termination set forth in such notice, and on such date
such employment shall terminate.
13. Termination for Cause.
(a) In addition to any other rights or remedies provided by law or in
this Agreement, the Company may terminate Executive's employment under this
Agreement if:
(i) Executive is convicted of, or enters a plea of guilty or
nolo contendere (which plea is not withdrawn prior to its approval by the court)
to, a felony offense and either Executive fails to perfect an appeal of such
conviction prior to the expiration of the maximum period of time within which,
under applicable law or rules of court, such appeal may be perfected or, if
Executive does perfect such an appeal, his conviction of a felony offense is
sustained on appeal; or
(ii) the Company's Board of Directors determines, after due
inquiry, that Executive has:
(A) committed fraud against, or embezzled or misappropriated
funds or other assets of, the Company (or any subsidiary thereof);
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(B) violated, or caused the Company (or any
subsidiary thereof) or any officer, employee or other agent
thereof, or any other Person to violate, any material law,
regulation or ordinance, which violation has or would
reasonably be expected to have a significant detrimental
effect on the Company or Flying Colors, or any material rule,
regulation, policy or practice established by the Board of
Directors of the Company or Flying Colors;
(C) willfully, or because of gross or persistent
negligence, (A) failed properly to perform his duties
hereunder or (B) acted in a manner detrimental to, or adverse
to the interests of, the Company; or
(D) violated, or failed to perform or satisfy any
material covenant, condition or obligation required to be
performed or satisfied by Executive hereunder.
(b) The Company may effect such termination for cause by giving
Executive notice to such effect, setting forth in reasonable detail the factual
basis for such termination, at least 20 days prior to the date of termination
set forth therein; provided however that Executive may avoid such termination if
Executive, prior to the date of termination set forth in such notice, cures or
explains to the reasonable satisfaction of the Company's Board of Directors the
factual basis for termination set forth therein.
(c) In making any determination pursuant to Section 13(a) as to the
occurrence of any act or event described in clauses (A) to (D) of paragraph (ii)
thereof (each, a "For Cause Event"), each of the following shall constitute
convincing evidence of such occurrence:
(i) if Executive is made a party to, or target of, any
Proceeding arising under or relating to any For Cause Event, Executive's failure
to defend against such Proceeding or to answer any complaint filed against him
therein, or to deny any claim, charge, averment, or allegation thereof asserting
or based upon the occurrence of a For Cause Event;
(ii) any judgment, award, order, decree or other adjudication
or ruling in any such Proceeding finding or based upon the occurrence of a For
Cause Event (that is not reversed or vacated on appeal); or
(iii) any settlement or compromise of, or consent decree
issued in, any such Proceeding in which Executive expressly admits the
occurrence of a For Cause Event;
provided that none of the foregoing shall be dispositive or create an
irrebuttable presumption of the occurrence of such For Cause Event; and provided
further that the Company's Board of Directors may rely on any other factor or
event as convincing evidence of the occurrence of a For Cause Event.
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14. Termination by Executive for Good Reason. In addition to any other
rights or remedies provided by law or in this Agreement, Executive may terminate
his employment hereunder if (a) the Company violates, or fails to perform or
satisfy any material covenant, condition or obligation required to be performed
or satisfied by it hereunder or, (b) as a result of any action or failure to act
by the Company, there is a material change in the nature or scope of the duties,
obligations, rights or powers of Executive's employment, by giving the Company
notice to such effect, setting forth in reasonable detail the factual basis for
such termination, at least 20 days prior to the date of termination set forth
therein; provided however that the Company may avoid such termination if it,
prior to the date of termination set forth in such notice, cures or explains to
the reasonable satisfaction of Executive the factual basis for termination set
forth therein. The termination by Executive of his employment pursuant to this
Section 14 shall not constitute or be deemed to constitute for any purpose a
"voluntary resignation" of his employment.
15. Compensation upon Termination.
(a) Upon termination of Executive's employment hereunder, he
shall be entitled to receive, in any case, any compensation or other amount due
to him pursuant to Section 3 or 4 in respect of his employment prior to the
Termination Date, and from and after the Termination Date, except as otherwise
provided in Section 15(b), the Company shall have no further obligation to
Executive hereunder. Any amount payable to Executive pursuant to this Section
15(a) upon termination of his employment hereunder shall be paid promptly, and
in any event within 30 days, after the Termination Date.
(b) If Executive terminates his employment hereunder for Good
Reason pursuant to Section 14 or if the Company terminates his employment
hereunder other than upon his disability or incapacity pursuant to Section 12
and other than for cause pursuant to Section 13, the Company shall make to
Executive payments at the times and in the amounts provided herein for the
payment of his Base Salary during the period beginning on the day after the
Termination Date and ending on December 31, 2002 offset by any amount earned by
Executive as compensation for services he performs for any other Person during
such Period.
(c) Executive shall have no obligation hereunder to seek or to
accept any other employment after the Termination Date or otherwise to mitigate
the payments required to be made by this Section. Except as provided in Section
15(b), no compensation or other amount received or receivable by Executive on
account of any employment or engagement after the Termination Date shall be
offset against or deducted from any payment required to be made by this Section.
16. Limitation of Authority. Except as expressly provided herein, no
provision hereof shall be deemed to authorize or empower either party hereto to
act on behalf of, obligate or bind the other party hereto.
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17. Notices. Any notice or demand required or permitted to be given or
made hereunder to or upon either party hereto shall be deemed to have been duly
given or made for all purposes if (a) in writing and sent by (i) messenger or an
overnight courier service against receipt, or (ii) certified or registered mail,
postage paid, return receipt requested, or (b) sent by telegram, telecopy, telex
or similar electronic means, provided that a written copy thereof is sent on the
same day by postage-paid first-class mail, to such party at the following
address:
to the Company at: 00000 Xxxxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn: President
Fax: (000) 000-0000
with a copy to: Feder, Kaszovitz, Isaacson, Weber, Xxxxx & Bass LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
to Executive at: 0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
with a copy to: Xxxxxx Xxxx, Esq.
000 Xxxxxxxx Xxxxx
Xxxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this Section.
The date of giving or making of any such notice or demand shall be, in the case
of clause (a) (i), the date of the receipt; in the case of clause (a) (ii), five
business days after such notice or demand is sent; and, in the case of clause
(b), the business day next following the date such notice or demand is sent.
18. Amendment. Except as otherwise provided herein, no amendment of
this Agreement shall be valid or effective, unless in writing and signed by or
on behalf of the parties hereto.
19. Waiver. No course of dealing or omission or delay on the part of
either party hereto in asserting or exercising any right hereunder shall
constitute or operate as a waiver of any such right. No waiver of any provision
hereof shall be effective, unless in writing and signed by or on behalf of the
party to be charged therewith. No waiver shall be deemed a continuing waiver or
waiver in respect of any other or subsequent breach or default, unless expressly
so stated in writing.
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20. Governing Law. This Agreement shall be governed by, and interpreted
and enforced in accordance with, the laws of the State of California without
regard to principles of choice of law or conflict of laws.
21. Jurisdiction. Each of the parties hereto hereby irrevocably
consents and submits to the jurisdiction of the courts of the State of
California and the United States District Court for the Southern District of
California in connection with any suit, action or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby, waives any
objection to venue in the County of Los Angeles, State of California, or such
District, and agrees that service of any summons, complaint, notice or other
process relating to such proceeding may be effected in the manner provided by
clause (a) (ii) of Section 17.
22. Remedies. In the event of any actual or prospective breach or
default under this Agreement by either party hereto, the other party shall be
entitled to equitable relief, including remedies in the nature of rescission,
injunction and specific performance. All remedies hereunder are cumulative and
not exclusive, and nothing herein shall be deemed to prohibit or limit either
party from pursuing any other remedy or relief available at law or in equity for
such actual or prospective breach or default, including the recovery of damages;
provided that, except as provided in Section 15 and except with respect to a
breach by Executive of his obligations pursuant to Sections 9, 10 and 11, no
party hereto shall be liable under this Agreement for lost profits or
consequential damages.
23. Severability. The provisions hereof are severable and in the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions hereof shall not be affected, but shall, subject to the discretion of
such court, remain in full force and effect, and any invalid or unenforceable
provision shall be deemed, without further action on the part of the parties
hereto, amended and limited to the extent necessary to render the same valid and
enforceable.
24. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and which together shall constitute one
and the same agreement.
25. Assignment. This Agreement, and each right, interest and obligation
hereunder, may not be assigned by either party hereto without the prior written
consent of the other party hereto, and any purported assignment without such
consent shall be void and without effect, except that this Agreement shall be
assigned to, and assumed by, any person with or into which the Company merges or
consolidates, or which acquires all or substantially all of its assets, or which
otherwise succeeds to and continues the Company's business substantially as an
entirety. Except as otherwise expressly provided herein or required by law,
Executive shall not have any power of anticipation, assignment or alienation of
any payments required to be made to him hereunder, and no other person may
acquire any
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right or interest in any thereof by reason of any purported sale, assignment or
other disposition thereof, whether voluntary or involuntary, any claim in a
bankruptcy or other insolvency proceeding against Executive, or any other
ruling, judgment, order, writ or decree.
26. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement is not intended, and shall not be deemed, to create or
confer any right or interest for the benefit of any person not a party hereto.
27. Titles and Captions. The titles and captions of the Articles and
Sections of this Agreement are for convenience of reference only and do not in
any way define or interpret the intent of the parties or modify or otherwise
affect any of the provisions hereof.
28. Grammatical Conventions. Whenever the context so requires, each
pronoun or verb used herein shall be construed in the singular or the plural
sense and each capitalized term defined herein and each pronoun used herein
shall be construed in the masculine, feminine or neuter sense.
29. References. The terms "herein," "hereto," "hereof," "hereby," and
"hereunder," and other terms of similar import, refer to this Agreement as a
whole, and not to any Article, Section or other part hereof.
30. No Presumptions. Each party hereto acknowledges that it has had an
opportunity to consult with counsel and has participated in the preparation of
this Agreement. No party hereto is entitled to any presumption with respect to
the interpretation of any provision hereof or the resolution of any alleged
ambiguity herein based on any claim that the other party hereto drafted or
controlled the drafting of this Agreement.
31. Certain Definitions. As used herein:
(a) "Person" includes without limitation a natural person,
corporation, joint stock company, limited liability company, partnership, joint
venture, association, trust, government or governmental authority, agency or
instrumentality, or any group of the foregoing acting in concert.
(b) A "Proceeding" is any suit, action, arbitration, audit,
investigation or other proceeding before or by any court, magistrate,
arbitration panel or other tribunal, or any governmental agency, authority or
instrumentality of competent jurisdiction.
(c) Other capitalized terms not defined herein are used herein
as defined in the Stock Purchase Agreement dated as of September 22, 1999
relating to the Acquisition.
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32. Entire Agreement. This Agreement embodies the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes any
prior agreement, commitment or arrangement relating thereto, including without
limitation Sections 1, 2, 3 and 6 of the Employment Reinstatement Agreement
dated as of May 1, 1999 among Flying Colors, Executive and certain other
Persons, as amended, which shall terminate, notwithstanding any contrary
provision thereof, immediately upon the commencement of the Term, except that
(a) each party thereto shall (i) remain required to perform any act and to
satisfy any obligation or condition that such party is required to perform or
satisfy thereunder with respect to any event occurring or circumstance existing
during the term thereof (including without limitation the payment or delivery to
Executive of any compensation, reimbursable expense or employee benefit or
perquisite to which he may be entitled, but which has not yet been paid to him,
on account of his employment thereunder) that has not been so performed or
satisfied, and (ii) retain its right thereunder to assert or to allege any claim
or cause of action relating to or based upon, or otherwise to enforce, any
provision thereof with respect to any event occurring or circumstance existing
during the term thereof, and (b) Sections 4, 5, 7, 8 and 9 of such Employment
Reinstatement Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the day and year first above written.
THE COMPANY:
JAKKS PACIFIC, INC.
By: /s/ Xxxx X. Xxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer
EXECUTIVE:
/s/ Xxxxxxx Xxxxxx
----------------------------------------
Xxxxxxx Xxxxxx
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ANNEX I
Exercise Price: closing sale price as reported by Nasdaq National
Market on grant date
Term: 6 years from grant date
Vesting Schedule: 1,500 shares after 1st anniversary of grant date
1,500 shares after 2nd anniversary of grant date
1,500 shares after 3rd anniversary of grant date
2,500 shares after 4th anniversary of grant date
3,000 shares after 5th anniversary of grant date
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