SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential; for use
[X] Definitive Proxy Statement of the Commission Only
[ ] Definitive Additional Materials (as permitted by Rule
[ ] Soliciting Material Pursuant to 14a-6(e)(2))
Rule 14a-11 or Rule 14a-12
4KIDS ENTERTAINMENT, INC.
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
<PAGE>
4KIDS ENTERTAINMENT, INC.
1414 Avenue of the Americas
New York, New York 10019
- --------------------------------------------------------------------------------
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 29, 1999
- --------------------------------------------------------------------------------
To the Shareholders of
4KIDS ENTERTAINMENT, INC.
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders of
4KIDS ENTERTAINMENT, INC. (the "Company"), a New York corporation, will be held
at Chase Manhattan Worldwide Headquarters, 270 Park Avenue, New York, New York
10017 Conference Room C, on Thursday, April 29, 1999 at 11:00 a.m., local time,
for the following purposes:
1. To elect three directors to serve, subject to the provisions of the
By-laws, until the next Annual Meeting of Shareholders and until their
respective successors have been duly elected and qualified;
2. To consider and act upon a proposal to approve the Company's 1999
Stock Option Plan;
3. To consider and act upon a proposal to amend the Certificate of
Incorporation to change the Company's authorized common stock to
20,000,000 shares having par value of $.01 per share;
4. To consider and act upon a proposal to approve the selection of
Deloitte & Touche as the Company's independent auditors for the fiscal
year ending December 31, 1999;
5. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 26, 1999 as
the record date for the meeting and only holders of shares of record at that
time will be entitled to notice of and to vote at the Annual Meeting of
Shareholders or any adjournment or adjournments thereof.
By order of the Board of Directors.
ALFRED R. KAHN
Chairman of the Board
New York, New York
April 5, 1999
- --------------------------------------------------------------------------------
IMPORTANT
IF YOU CANNOT PERSONALLY ATTEND THE MEETING, IT IS REQUESTED THAT YOU INDICATE
YOUR VOTE ON THE ISSUES INCLUDED ON THE ENCLOSED PROXY AND DATE, SIGN AND MAIL
IT IN THE ENCLOSED SELF-ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
4KIDS ENTERTAINMENT, INC.
1414 Avenue of the Americas
New York, New York 10019
- --------------------------------------------------------------------------------
P R O X Y S T A T E M E N T
for
ANNUAL MEETING OF SHAREHOLDERS
to be held April 29, 1999
- --------------------------------------------------------------------------------
April 5, 1999
The enclosed proxy is solicited by the Board of Directors of 4Kids
Entertainment, Inc., a New York corporation (the "Company") in connection with
the Annual Meeting of Shareholders to be held at Chase Manhattan Worldwide
Headquarters, 270 Park Avenue, New York, New York 10017 Conference Room C on
Thursday, April 29, 1999, at 11:00 a.m., local time, and any adjournments
thereof, for the purposes set forth in the accompanying Notice of Meeting.
Unless instructed to the contrary on the proxy, it is the intention of the
persons named in the proxy to vote the proxies in favor of (i) the election as
directors of the three nominees listed below to serve until the next annual
meeting of shareholders; (ii) approval of the Company's 1999 Stock Option Plan;
(iii) the amendment to the Certificate of Incorporation to change the authorized
common stock of the Company to 20,000,000 shares; and (iv) approval of the
selection of Deloitte & Touche LLP as the Company's independent auditors for the
fiscal year ending December 31, 1999. The record date with respect to this
solicitation is the close of business on March 26, 1999 and only shareholders of
record at that time will be entitled to vote at the meeting. The principal
executive office of the Company is 1414 Avenue of the Americas, New York, New
York 10019, and its telephone number is (212) 758-7666. The shares represented
by all validly executed proxies received in time to be taken to the meeting, and
not previously revoked, will be voted at the meeting. The proxy may be revoked
by the shareholder at any time prior to its being voted. This proxy statement
and the accompanying proxy were mailed to you on or about April 5, 1999.
OUTSTANDING SHARES
The number of outstanding shares entitled to vote at the meeting is
3,351,435 common shares, par value $.01 per share, each of which is entitled to
one vote. The presence in person or by proxy at the Annual Meeting of the
holders of one-third of such shares shall constitute a quorum. There is no
cumulative voting. Assuming the presence of a quorum at the Annual Meeting, the
affirmative vote of a majority of the common shares present at the meeting and
entitled to vote on each matter is required for the approval of the election as
directors of the three nominees listed below. The affirmative vote of the
holders of a majority of the total outstanding common shares is necessary to
approve the Company's 1999 Stock Option Plan and the amendment to the
Certificate of Incorporation. Votes shall be counted by one or more employees of
the Company's Transfer Agent who shall serve as the inspectors of election. The
inspectors of election will canvas the shareholders present in person at the
meeting, count their votes and count the votes represented by proxies presented.
Abstentions and broker nonvotes are counted for purposes of determining the
number of shares represented at the meeting, but are deemed not to have voted on
the proposal. Broker nonvotes occur when a broker nominee (which has voted on
one or more matters at the meeting) does not vote on one or more other matters
at the meeting because it has not received instructions to so vote from the
beneficial owner and does not have discretionary authority to so vote.
<PAGE>
ELECTION OF DIRECTORS
The three persons named below, who are currently the entire Board of
Directors, have been nominated for election to serve until the next Annual
Meeting of Shareholders and until their respective successors have been elected
and qualified.
Unless specified to be voted otherwise, each proxy will be voted for the
election of the nominees named below. All of the nominees have consented to
serve as directors if elected. If at the time of the Annual Meeting, any nominee
is unable or declines to serve, the proxies may be voted for any other person
who shall be nominated by the present Board of Directors to fill the vacancy.
Number
of Shares
Name Beneficially Percent
and Positions with Director Owned as of of
Age the Company Since March 20, 1999 Class
---- -------------- -------- -------------- ------
Alfred R. .... Chairman of the 1987 939,000(1) 24.0
Kahn, 52 Board (Chief
Executive
Officer)
and Director
Robert Dunn .. Director 1998 1,070,167(2) 27.2
Glick, 63
Gerald ....... Director 1991 204,896(3) 5.8
Rissman, 78
- ----------
(1) Includes 352,000 shares owned by Mr. Kahn, 2,000 shares owned by Mr. Kahn's
wife, 5,000 shares held by Mr. Kahn for the benefit of his minor daughter
under the NY/UGMA, currently exercisable options to acquire 565,000 shares,
and 15,000 shares owned by Mr. Kahn's three adult children with respect to
which Mr. Kahn disclaims beneficial ownership.
(2) Includes 2,000 shares owned by Mr. Glick, currently exercisable options to
aquire 12,500 shares,116,667 shares owned by a trust of which Mr. Glick is
the sole trustee and 939,000 shares beneficially owned by Mr. Kahn over
which the Liquidating Trust for Lion Holdings, Inc. has the sole power to
vote pursuant to an Irrevocable Proxy executed by Mr. Kahn and of which Mr.
Glick is the sole trustee.
(3) Mr. Gerald Rissman has the right to acquire the number of shares shown
pursuant to currently exercisable stock options.
Mr. Alfred R. Kahn has been Chairman (Chief Executive Officer) of the
Company since March 1991. Mr. Kahn was Vice Chairman of the Company from July
1987 until he became Chairman.
Mr. Robert Dunn Glick has been a practicing attorney and partner in the law
firm of Schwartz, Cooper, Greenberger & Krauss for more than five years.
Mr. Gerald Rissman serves as a consultant in the electronics industry.
The Liquidating Trust for Lion Holdings, Inc. ("Lion") (successor in
interest Tiger Electronics, Inc.), Mr. Kahn and Mr. Randy Rissman, President of
Lion's predecessor, Tiger Electronics, Inc. and a member of the Board of
Directors of the Company until his resignation on March 4, 1998, have agreed to
use their best efforts to cause the Board of Directors to consist of three
persons, two recommended by Lion and one recommended by Mr. Kahn. If Lion sells
any of its shares of the Company's Common Stock, Lion, Mr. Kahn and Mr. Randy
Rissman will use their best efforts to cause a majority of the Board of
Directors to consist of persons recommended by Mr. Kahn.
Meetings and Committees of the Board of Directors.
The Board of Directors of the Company met four times during the fiscal year
which ended on December 31, 1998. None of the directors attended fewer than 75%
of the total number of meetings of the Board of Directors and committees on
which he serves.
The Company has an Audit Committee which consists of Mr. Robert Dunn Glick
and Mr. Gerald Rissman. The Audit Committee reviews the financial reporting and
internal controls of the Company and meets with appropriate financial personnel
of the Company, as well as its independent auditors, in connection with these
reviews. The Audit
2
<PAGE>
Committee also recommends to the Board the firm which is to be presented to the
shareholders for designation as independent auditors to examine the corporate
accounts of the Company for the current fiscal year. Although the Audit
Committee did not formally meet during fiscal 1998, Messrs. Glick and Rissman
informally discussed these matters during the course of the fiscal year. The
Company also has a Compensation Committee, the members of which are Mr. Robert
Dunn Glick and Mr. Gerald Rissman. Subject to existing contractual obligations,
the Compensation Committee is responsible for setting and administering the
policies which govern annual and long-term compensation for the Company's
executives. The Compensation Committee is also empowered to grant Stock Options
pursuant to the Company's Stock Option Plans and to administer such Plans. The
Compensation Committee met one time during fiscal 1998.
The Company does not have a nominating committee.
Other Executive Officers.
In addition to Mr. Kahn, the Company has four other executive officers,
Joseph P. Garrity, Sheldon Hirsch, Thomas Kenney and Norman Grossfeld. Mr.
Garrity has been the Chief Financial Officer since joining the Company in June
1991. In October 1994 he became Executive Vice President (Chief Operating
Officer). For more than five years prior to such time, Mr. Garrity was a Senior
Audit Manager for Deloitte & Touche LLP. Sheldon Hirsch has been Chief Executive
Officer of The Summit Media Group, Inc. ("Summit Media"), the Company's media
buying, planning and television syndication subsidiary, since November 1992. For
three years prior to such time, Mr. Hirsch was President of Sachs Family
Entertainment, a television program distribution company. Thomas Kenney has been
President of Summit Media since February 1993. For five years prior to such time
Mr. Kenney served as Senior Vice President - Advertising at Tiger Electronics
Inc. Norman Grossfeld has been President of 4Kids Productions, Inc., the
Company's television and home video production subsidiary, since February 1994.
For two years prior to such time he was President of Gold Coast Television
Entertainment. Prior to such time he served as Coordinating Director for NBC
Sports from 1991 through 1992, and as Producer/Director for Television
Programming Enterprises from 1988-1991.
COMPENSATION OF DIRECTORS AND OFFICERS
The following table sets forth compensation paid to the Company's Chief
Executive Officer and the three most highly compensated executive officers for
the three fiscal years ended December 31, 1998:
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Award
Name and --------------------------------- Stock Options
Principal Position Year Salary ($) Bonus ($) (Shares)
- ------------------ ---- ---------- --------- ---------
Alfred R. Kahn 1998 $395,000 $556,917 65,000
Chairman of the Board 1997 $395,000 $177,563 100,000
1996 $395,000 -0- 100,000
Joseph P. Garrity 1998 250,000 111,383 59,500
EVP,COO & CFO 1997 215,000 35,512 65,000
1996 200,000 -0- 15,000
Sheldon Hirsch, Chief 1998 250,000 78,976 35,000
Executive Officer, 1997 250,000 108,212 55,000
Summit Media 1996 250,000 46,462 10,000
Thomas Kenney, President 1998 250,000 78,976 35,000
Summit Media 1997 225,000 108,212 55,000
1996 225,000 6,462 10,000
- ------------------
3
<PAGE>
The following table sets forth information concerning the grants of stock
options made during fiscal 1998:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term (1)
- ------------------------------------------------------------------------------- --------------------
% of Total Exercise
Number of Options Granted or Base
Options to Employees in Price Expiration
Name Granted Fiscal Year ($/Sh) (2) Date 5% 10%
- ---- -------- ------------- ---------- ------ --- ----
<S> <C> <C> <C> <C> <C> <C>
Alfred R. Kahn 65,000 (3) 20% $2.75- 1/08,11/08 $215,592 $546,354
9.3125
Joseph Garrity 59,500 19% $2.75- 1/03,11/03 $90,533 $200,056
9.3125
Sheldon Hirsch 35,000 11% $2.75- 1/03,11/03 $44,722 $98,825
9.3125
Thomas Kenney 35,000 11% $2.75- 1/03,11/03 $44,722 $98,825
9.3125
</TABLE>
(1) The Company used such method as it is one of the alternative methods of
option valuation suggested by the Securities and Exchange Commission's
rules on executive compensation disclosure. The Company does not advocate
or necessarily agree that such method can properly determine the value of
an option.
(2) Based upon the fair market value of the Company's Common Stock on the date
of grant.
(3) All such options are currently exercisable.
Option Exercises and Fiscal Year End Option Values
The following table sets forth the number of options exercised and dollar
value realized for such exercises and fiscal year end value of unexercised
options:
<TABLE>
<CAPTION>
Number of
Unexercised Value of Unexer-
Shares Value Options at cised In-the-Money
Acquired on Realized December 31, Options at December
Name Exercise (#) ($) 1998(1) 31, 1998 (2)
- ---- ------------ ----- --------- ------------
<S> <C> <C> <C> <C>
Alfred R. Kahn -0- -0- 565,000 $3,252,500
Joseph P. Garrity -0- -0- 174,500 1,242,781
Sheldon Hirsch 20,000 100,450 115,000 873,438
Thomas Kenney 10,000 75,462 125,000 950,313
</TABLE>
- --------------
(1) All options are currently exercisable.
(2) Calculation based upon the average of the high and low prices of the
Company's Common Stock on Nasdaq on December 31, 1998 of $10.3125 per
share.
Compensation of Directors.
No director of the Company receives any cash compensation for his services
as such. Currently, the Company has two directors who are not employees, Messrs.
Glick and Rissman (the "Non-Employee Directors"). Pursuant to the Company's 1994
Stock Option Plan, on January 22, 1997 Mr. Rissman was granted options to
purchase 50,000 shares at a purchase price of $1.375. On January 2, 1998, Mr.
Rissman was granted options to purchase 20,000 shares at a purchase price of
$2.375. On November 13, 1998, the Non-Employee Directors were each granted
options to purchase 12,500 shares at a purchase price of $9.3125. In addition,
on November 13, 1998 options to
4
<PAGE>
purchase 50,000 shares at an exercise price of $10.25 which were granted to Mr.
Rissman on January 1, 1994 were re-priced to $9.3125. All suchoptions were
granted at the fair market value on the date of grant, are currently exercisable
in full and terminate ten years from the date of grant.
In March 1999, the Company purchased an aggregate of $5,000,000 of
insurance from National Union Fire Insurance Company of Pittsburgh for
indemnification of all of its directors and officers at a cost of $49,500.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Mr. Kahn has an employment agreement with the Company pursuant to which he
receives a fixed salary of $395,000 per year plus an annual bonus equal to 10%
of the Company's Income Before Income Tax Provision as stated on the Company's
financial statements in its annual report on Form 10-K. The agreement expires on
March 31, 2003. The agreement also provides that for a period of six months
after termination of employment, Mr. Kahn will not "compete" with the Company.
Under the employment agreement, if Mr. Kahn is terminated without cause, he will
be entitled to receive a payment equal to 2.99 times his average annual
compensation paid by the Company (including bonuses, if any) during the five
years preceding the date of termination ("Severance Payment"). If a majority of
the directors of the Company consists of individuals who have not been
recommended by either Lion or Mr. Kahn (a "Change of Control"), Mr. Kahn can
terminate the agreement within six months of such Change of Control, in which
event he would be entitled to receive the Severance Payment.
Mr. Garrity has an employment agreement with the Company which currently
provides for an annual salary of $250,000 (the "Fixed Salary") plus an annual
bonus equal to 2% of the Company's Income Before Income Tax Provision as stated
on the Company's financial statements in it's Annual Report on Form 10- K. The
agreement expires December 31, 2000. The agreement may be terminated by the
Company in the event of Mr. Garrity's disability or for cause. If during the
term of Mr. Garrity's agreement there shall occur a Change of Control, Mr.
Garrity can terminate the agreement within six months of such Change of Control,
in which event he would be entitled to receive a payment equal to the Fixed
Salary remaining to be paid for the year during which such termination occurs.
Mr. Grossfeld has an agreement with 4Kids Productions which currently
provides for an annual salary of $250,000 (the "Fixed Salary") plus an annual
bonus equal to 10% of 4Kids Productions Income Before Income Tax Provision as
stated on 4Kids Productions books and records.
Each of Mr. Hirsch and Mr. Kenney has an employment agreement with Summit
Media for the period January 1, 1995 through December 31, 2000. Mr. Hirsch and
Mr. Kenney's agreements currently provide for an annual salary of $250,000(the
"Fixed Salary"). Each agreement currently provides for an annual bonus equal to
6% of Summit Media's Income Before Income Tax Provision as stated on Summit
Media's books and records. The agreements automatically renew on a year-to-year
basis unless terminated by either party at least 90 days prior to December 31,
2000. The respective agreements may be terminated by the Company in the event of
either of Mr. Hirsch's or Mr. Kenney's respective disability or for cause. If
during the term of the agreements there shall occur a Change of Control, each of
Mr. Hirsch and Mr. Kenney can terminate his respective agreement within six
months of such Change of Control, in which event he would be entitled to receive
a payment equal to the Fixed Salary remaining to be paid for the year during
which such termination occurs.
Compensation Committee Interlocks and Insider Participation.
As described in "Election of Directors - Meetings and Committees of the
Board of Directors" above, the Company has a Compensation Committee, the members
of which are Messrs. Glick and Rissman. Neither of such individuals has ever
been an officer or employee of the Company or any of its subsidiaries. During
fiscal 1998, no executive officers of the Company served as a member of the
compensation committee or board of directors of another entity, one of whose
executive officers served on the Board of Directors of the Company.
Report on Executive Compensation.
Subject to existing contractual obligations, the Compensation Committee of
the Board of Directors is responsible for the Company's executive compensation
policy. In general, the Company's executive compensation policy is to attract
and retain high performing executives and to motivate and reward such executives
based on overall corporate and individual performance, and the creation of
shareholder value.
5
<PAGE>
For 1998, the compensation of the Company's executive officers was composed
primarily of salaries and stock options. Salary ranges for the Company's
executive officers are established with reference to the competitive marketplace
for equivalent job levels. Each executive officer's base salary is set based on
the level and scope of responsibility within the Company and individual
performance. Salaries are reviewed annually by the Compensation Committee either
formally or informally.
Stock options are intended to strengthen the mutuality of interest of
executive officers and the Company's shareholders in maximizing long-term
shareholder value. The Company's Compensation Committee is responsible for
granting stock options to the executive officers pursuant to the Company's stock
option plans. Grants of stock options are made from time to time to the
executive officers based on the Company's overall performance and the individual
performance of each executive officer. In addition, pursuant to the Company's
1994 Stock Option Plan and 1985 Stock Option Plan (each of which was approved by
the Company's shareholders at the 1994 and 1985 Annual Meetings of Shareholders,
respectively), stock options to acquire 100,000 shares of the Company were
granted in January 1997 to Mr. Kahn at an exercise price of $1.375 per share,
the fair market value of the shares on the date of grant. On January 2, 1998,
stock options to acquire 40,000 shares were granted pursuant to the Company's
(i) 1992 Stock Option Plan (which was approved at the 1992 Annual Meeting of
Shareholders) and (ii) 1998 Stock Option Plan. On November 13, 1998, options to
acquire 25,000 shares were granted at an exercise price of $9.3125, the fair
market value on the date of grant. Such options were granted pursuant to the
1998 Stock Option Plan. In addition, on November 13, 1998 options to purchase
100,000 shares at an exercise price of $10.25 which were granted to Mr. Kahn on
January 1, 1994 were re-priced to $9.3125.
Basis for the Compensation of the CEO.
The Company has an employment agreement with Mr. Kahn pursuant to which he
receives a fixed salary of $395,000 per year and an annual during the term of
the agreement, which expires in 2003. The Company believes that Mr. Kahn's base
salary, which has remained unchanged since 1991, is reasonable and no more
generous to him than base salaries paid to other similarly situated chief
executive officers.
In addition to cash compensation, Mr. Kahn is also eligible to receive
stock options pursuant to the Company's stock option plans. On January 1, 1997,
Mr. Kahn was granted an option to purchase 100,000 shares at an exercise price
of $1.375. On January 2, 1998, Mr. Kahn was granted options to purchase 40,000
shares at an exercise price of $2.375. On November 13, 1998, Mr. Kahn was
granted options to purchase 25,000 shares at an exercise price of $9.3125. In
addition, on November 13, 1998 options to purchase 100,000 shares at an exercise
price of $10.25 which were granted to Mr. Kahn on January 1, 1994 were re-priced
to $9.3125. The purpose of such stock option grants was to provide Mr. Kahn with
a further inducement to contribute to the long-term growth and development of
the business of the Company. Consequently, during the terms of such options, Mr.
Kahn will receive, for no consideration prior to exercise, the opportunity to
profit from any rise in the market value of the Company's common stock. The
market price for the Company's common stock on March 19, 1999 was $28.50.
Compensation Committee
Robert Dunn Glick
Gerald Rissman
6
<PAGE>
Performance Graph.
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total return on the Company's common stock against the cumulative
total return of the Nasdaq U.S. Market Index and the Nasdaq Non-Financial Index
for the past five fiscal years.
[The following information was depicted as a line graph in the printed material]
4KIDS PERFORMANCE CHART RAW DATA
1998
Year 4Kids Nasdaq NonFin
---- ----- ------ ------
1992 100 100 100
1993 179 115 115
1994 62 112 111
1995 43 159 155
1996 17 195 188
1997 47 239 221
1998 187 337 323
7
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of March 19, 1999, certain information
concerning stock ownership of the Company by (i) each person who is known by the
Company to own beneficially more than 5% of the outstanding common shares of the
Company, (ii) each of the Company's directors and (iii) all current directors
and officers of the Company as a group. Except as otherwise indicated, all such
persons have both sole voting and investment power over the shares shown as
being beneficially owned by them.
Percent
Number of Shares of
Name and Address (1) Beneficially Owned Class
- -------------------- ------------------ -----
Randy Rissman ............. 233,333 7.0%
Alfred R. Kahn ............ 939,000 (2) 24.0%
Robert Dunn Glick ......... 1,070,167 (6) 27.2%
The Liquidating Trust ..... 939,000 (3) 24.0%
for
Lion Holdings, Inc.
Gerald Rissman ............ 204,896 (5) 5.8%
All directors and ......... 1,736,763 (4) 37.8%
officers as a group
(7 persons)
(1) The address for Mr. Randy Rissman is 980 Woodlands Parkway, Vernon Hills,
Illinois 60061; the address for Mr. Glick and The Liquidating Trust for
Lion Holding, Inc. is 180 North LaSalle Street, Chicago, Illinois 60601 and
the address for Messrs. Kahn and Rissman is 1414 Avenue of the Americas,
New York, New York 10019.
(2) Includes 352,000 shares owned by Mr. Kahn, 2,000 shares owned by Mr. Kahn's
wife, 5,000 shares held by Mr. Kahn for the benefit of his minor daughter
under the NY/UGMA, currently exercisable options to acquire 565,000 shares,
and 15,000 shares owned by Mr. Kahn's three adult children with respect to
which Mr. Kahn disclaims beneficial ownership.
(3) Includes (i) Mr. Kahn's currently exercisable options to acquire 565,000
shares, over which Lion would have the sole power to vote if exercised by
Mr. Kahn, pursuant to an Irrevocable Proxy dated as of March 11, 1991 (the
"Irrevocable Proxy"), and (ii) 374,000 shares owned by Mr. Kahn and his
family which Lion has the sole power to vote pursuant to the Irrevocable
Proxy.
(4) Includes 461,700 shares which four executive officers have the right to
acquire pursuant to stock options, 439,200 of such options are currently
exercisable.
(5) Mr. Gerald Rissman has the right to acquire the number of shares shown
pursuant to currently exercisable stock options.
(6) Includes 2,000 shares owned by Mr. Glick, currently exercisable options to
aquire 12,500 shares,116,667 shares owned by a trust of which Mr. Glick is
the sole trustee and 939,000 shares beneficially owned by Mr. Kahn over
which the Lion has the sole power to vote pursuant to an Irrevocable Proxy
executed by Mr. Kahn and of which Mr. Glick is the sole trustee.
Mr. Kahn has, from time to time, borrowed a total of $711,582 from Lion,
the sucessor in interest to Tiger Electronics, Inc. in connection with three
purchases of a total of 191,426 shares. As of March 20, 1999, the outstanding
principal balance of such loans was approximately $247,600. The loans were
partially due in 1997 with the balance due in April, 1999 and bear interest on
part at the rate of 8% per annum and on the balance at 1% over prime rate,
payable annually. Mr. Kahn has agreed that he will use 40% of his annual
performance bonuses, if any, toward the repayment of his indebtedness to Lion.
Lion, Mr. Randy Rissman and Mr. Kahn are parties to an agreement which
provides that neither Lion nor Mr. Kahn nor any of their respective affiliates,
shall directly or indirectly acquire any other shares of the Company without the
consent of Mr. Kahn or Lion, as the case may be. In the event Lion desires to
sell any of its shares, it shall first provide Mr. Kahn an opportunity to
purchase the shares subject to such offer on the same terms and conditions. In
the event Mr. Kahn desires to sell any of his shares, he must provide Lion the
right to sell a proportional number of shares on the same terms and conditions.
In the event Mr. Kahn shall terminate his
8
<PAGE>
employment with the Company, Lion shall have the right to buy all of Mr. Kahn's
shares at the lower of a specified price or the market value prior to such
termination, unless Mr. Kahn shall concurrently sell his shares as set forth
above.
PROPOSED 1999 STOCK OPTION PLAN
There is being submitted to the shareholders for approval at the Annual
Meeting, the 4Kids Entertainment, Inc. 1999 Stock Option Plan (the "1999 Plan")
which authorizes the issuance not later than December 31, 2009 of options to
purchase up to 165,000 of the Company's common shares. The 1999 Plan was
approved by the Board of Directors at a meeting held on November 13, 1998
subject to shareholder approval.
The Board of Directors believes that the Company and its shareholders have
benefitted from the grant of stock options in the past and that similar benefits
will result from the adoption of the 1999 Plan. It is believed that stock
options play an important role in providing eligible employees with an incentive
and inducement to contribute fully to the further growth and development of the
Company and its subsidiaries because of the opportunity to acquire a proprietary
interest in the Company on an attractive basis.
All stock options granted under the 1999 Plan will be exercisable at such
time or times and in such installments, if any, as the Company's Compensation
Committee or the Board of Directors may determine and expire no more than ten
years from the date of grant. The exercise price of the stock option will be the
fair market value of the Company's common shares on the date prior to the date
of grant and must be paid in cash or in stock of the Company valued at its then
fair market value. The market value of the Company's shares at March 20, 1999
was $28.50. Options are non-transferable except by will or by the laws of
descent and distribution. Each option to be granted under the 1999 Plan will be
evidenced by an agreement subject to the terms and conditions set forth above.
Options granted under the 1999 Plan terminate three months after the
optionee's relationship with the Company is terminated except if termination is
by reason of death or disability. In such event the option terminates six months
after the optionee's death or termination of employment by reason of disability.
Upon the issuance of any shares pursuant to the exercise of a stock option
granted under the 1999 Plan, the Company may pay an optionee a supplemental cash
award, the primary purpose of which is to assist the optionee in paying any
income tax which may be payable upon the exercise of such stock option. This
award will be the smaller of (i) 65% of the difference between the aggregate
fair market value of the shares issued on the exercise and the option price paid
by the optionee or (ii) 90% of the option exercise price paid by the optionee.
The Board of Directors has a limited right to modify or amend the 1999 Plan
which does not include the right to increase the number of shares which is
available for the grant of options.
During the term of the 1999 Plan, eligible employees of the Company will
receive, for no consideration prior to exercise, the opportunity to profit from
any rise in the market value of the common stock. This will dilute the equity
interest of the other shareholders of the Company. The grant and exercise of the
options also may affect the Company's ability to obtain additional capital
during the term of any options.
The 1999 Plan will be administered by the Compensation Committee appointed
by the Board of Directors. The Compensation Committee currently consists of
Messrs. Robert Glick and Gerald Rissman, neither of whom are employees of the
Company.
The Board of Directors is recommending the adoption of the 1999 Plan. The
description of the proposed 1999 Plan set forth above is qualified in its
entirety by reference to the text of the 1999 Plan as set forth in Exhibit A.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the Federal income tax treatment of the stock
options which may be granted under the 1998 Plan based upon the current
provisions of the Internal Revenue Code.
An option holder who exercises a stock option will generally realize
compensation taxable as ordinary income in an amount equal to the difference
between the option price and the fair market value of the shares on the date of
exercise, and the Company will be entitled to a deduction from income in the
same amount. The option holder's basis in such shares will be their fair market
value on the date of exercise, and when he disposes of the shares he will
recognize capital gain or loss, either long-term or short-term, depending on the
holding period of the shares.
9
<PAGE>
The exercise of an option by the exchange of common shares already owned by
the optionee generally will not result in any taxable gain or loss on the
unrealized appreciation of the shares so used. The Internal Revenue Service has
ruled that (i) a number of shares of the stock received equal to the number of
shares surrendered will have the same basis as the shares surrendered and (ii)
the remaining shares received will have a basis equal to their fair market value
on the date of exercise (the sum of the option price and the compensation income
recognized upon exercise). For purposes of determining whether shares have been
held for the long-term capital gain holding period, the holding period of shares
received will generally include the holding period of shares surrendered only if
the shares received have the same basis, in whole or in part, in the employee's
hands as the shares surrendered.
Whenever under the 1999 Plan shares are to be delivered upon exercise of a
stock option, the Company shall be entitled to require as a condition of
delivery that the option holder remit an amount sufficient to satisfy all
Federal, state, and other governmental withholding tax requirements related
thereto.
PROPOSAL TO INCREASE AUTHORIZED COMMON STOCK
There is being submitted to the shareholders for approval at the 1999
Annual Meeting a proposal to amend the Certificate of Incorporation to increase
the authorized common stock of the Company, par value $.01, from 10,000,000 to
20,000,000. On March 16, 1999, there were 3,351,435 shares of common stock
outstanding.
In connection with its Stock Option Plans at December 31, 1998, the Company
has reserved 1,653,096 shares of common stock for issuance. The Company has also
reserved 165,000 shares of common stock to be issued under the 1999 Plan. The
increase in authorized shares is not necessary to provide shares for the 1999
Stock Option Plan.
Authorized but unreserved shares at December 31, 1998 are 5,284,169. If the
proposal to change the Company's authorized common stock is approved by the
shareholders, the Company will have 15,284,169 shares authorized but unreserved.
Although the Company has no current plans to issue any shares to be
authorized under this proposal, the increase in capital stock will provide the
Company's Board of Directors with the ability to use the Company's stock to
respond to developments in the Company's business, including possible financing
and acquisition transactions and general corporate purposes. While the increase
in authorized Common Stock will not change substantially the rights of holders
of the Corporation's Common Stock, issuance of shares in future transactions may
have a dilutive effect.
The Board of Directors could use the additional shares of common stock to
discourage an attempt to change control of the Company; however, the Board has
no present intention of issuing any shares of common stock for such purposes and
this proposal is not being recommended in response to any specific effort to
obtain control of the Company of which the Company is aware.
The Board of Directors is recommending such increase.
SELECTION OF AUDITORS
The Company's financial statements for the past several fiscal years were
examined by Deloitte & Touche LLP, independent public accountants. On November
13, 1998, the Board of Directors voted to propose and recommend the selection of
Deloitte & Touche LLP as independent auditors to examine its financial
statements for the fiscal year ending December 31, 1999.
Representatives of Deloitte & Touche LLP are expected to be present at the
annual meeting of shareholders with the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
mentioned above to be presented to the meeting. If any other matters do come
before the meeting, the persons named in the proxy will exercise their
discretion in voting thereon.
10
<PAGE>
SHAREHOLDER PROPOSALS
Proposals by any shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Corporation for inclusion in
proxy material relating to such meeting not later than October 15, 1999.
EXPENSES
All expenses in connection with solicitation of proxies will be borne by
the Company. Officers and regular employees of the Company may solicit proxies
by personal interview and telephone and telegraph. Brokerage houses, banks and
other custodians, nominees and fiduciaries will be reimbursed for out-of-pocket
and reasonable expenses incurred in forwarding proxies and proxy statements.
Georgeson & Co. has been engaged to assist in the solicitation of proxies,
brokers, nominees, fiduciaries and other custodians. The Company will pay that
firm approximately $6,000 for its services and reimburse its out-of-pocket
expenses.
By Order of the Board of Directors,
Alfred R. Kahn
Chairman of the Board
11
<PAGE>
Exhibit A
4KIDS ENTERTAINMENT, INC.
1999 STOCK OPTION PLAN
1. Purpose of Plan. This 1999 Stock Option Plan (the "Plan") is designed to
assist 4Kids Entertainment, Inc. (the "Company") in attracting and retaining the
services of employees, Non-Employee Directors (as hereinafter defined) and such
consultants as may be designated and to provide them with an incentive and
inducement to contribute fully to the further growth and development of the
business of the Company and its subsidiaries.
2. Legal Compliance. It is the intent of the Plan that all options granted
under it shall be either "Incentive Stock Options" ("ISOs"), as such term is
defined in Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), or non-qualified stock options ("NQOs"); provided, however, ISOs shall
be granted only to employees of the Company. An option shall be identified as an
ISO or an NQO in writing in the document or documents evidencing the grant of
the option. All options that are not so identified as ISOs are intended to be
NQOs. It is the further intent of the Plan that it conform in all respects with
the requirements of Rule 16b-3 of the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended ("Rule 16b-3"). To the extent
that any aspect of the Plan or its administration shall at any time be viewed as
inconsistent with the requirements of Rule 16b-3 or, in connection with ISOs,
the Code, such aspect shall be deemed to be modified, deleted or otherwise
changed as necessary to ensure continued compliance with such provisions.
3. Definitions. In addition to other definitions contained elsewhere in the
Plan, as used in the Plan the following terms have the following meanings unless
the context requires a different meaning:
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as the same may from
time to time be amended.
"Committee" means the committee referred to in Section 5 hereof.
"Common Stock" means the Common Stock of the Company, par value $.01
per share.
"Designated Beneficiary" means the person designated by an optionee to
be entitled on his death to any remaining rights arising out of an option,
such designation to be made in accordance with such regulations as the
Committee or Board may establish.
"Fair market value" means the average of the high and low prices on
the over-the-counter market on the last day on which the Company's shares
of Common Stock were traded immediately preceding the date an option is
granted pursuant to the Plan, as reported by the National Association of
Security Dealers Automated Quotation System ("NASDAQ"), or NASDAQ's
Successor, or if not reported on NASDAQ, the fair market value of such
Common Stock as determined by the Committee or the Board in good faith and
based on all relevant factors.
"Non-Employee Directors" means Non-Employee Director as defined in
Rule 16b-3(b)(3), or any successor provision promulgated under the
Securities Exchange Act of 1934.
"Stock Options" means any stock options granted to an optionee under
the Plan.
"Stock Option Agreement" means a stock option agreement entered into
pursuant to the Plan.
4. Stock Options: Stock Subject to Plan. The stock to be issued upon
exercise of Stock Options granted under the Plan shall consist of authorized but
unissued shares, or of treasury shares, of Common Stock, as determined from time
to time by the Board. The maximum number of shares for which Stock Options may
be granted under the Plan is 165,000 shares, subject to adjustment as provided
in Section 8 of the Plan. If any Stock Option granted under the Plan should
expire or terminate for any reason whatsoever without having been exercised in
full, the unpurchased shares shall become available for new options.
<PAGE>
5. Administration.
(a) The Plan shall be administered by a Stock Option Committee or, if such
Committee is not appointed, then it shall be administered by the Board. Options
may be granted by the Board or the Committee. For purposes of the Plan, the
Board or its appointed Committee shall be referred to as the "Committee." The
Committee, if any, shall be appointed by the Board and shall consist of not less
than two members. The Board shall establish the number of members to serve on
the Committee, shall fill all vacancies or create new openings on the Committee,
and may remove any member of the Committee at any time with or without cause.
The Committee shall select its own chairman and shall adopt, alter or repeal
such rules and procedures as it may deem proper and shall hold its meetings at
such times and places as it may determine. The Committee shall keep minutes of
its meetings and of actions taken by it without a meeting. A majority of the
Committee present at any meeting at which a quorum is present, or acts approved
in writing by all members of the Committee without a meeting, shall be the acts
of the Committee.
(b) Unless otherwise determined by the Board, the Committee shall have full
and final authority in its discretion, but subject to the express provisions of
the Plan, to:
(i) prescribe, amend and rescind rules and regulations relating to the
Plan;
(ii) interpret the Plan and the respective Stock Options; and
(iii) make all other determinations necessary or advisable for
administering the Plan. All determinations and interpretations by the
Committee or the Board shall be binding and conclusive upon all parties. No
member of the Committee or the Board shall be liable for any action or
determination made in good faith in respect of the Plan or any Stock Option
granted under it.
(c) The provisions of this Section 5 shall survive any termination of the
Plan.
6. Terms and Exercise of Stock Option.
(a) Unless otherwise determined by the Committee each Stock Option shall
terminate no later than ten years (or such shorter term as may be fixed by the
Committee) after the date on which it shall have been granted. The date of
termination pursuant to this paragraph is referred to hereinafter as the
"termination date" of the option.
(b) Stock Options shall be exercisable at such time or times and in such
installments, if any, as the Committee or Board may determine. In the event any
option is exercisable in installments, any shares which may be purchased during
any year or other period which are not purchased during such year or other
period may be purchased at any time or from time to time during any subsequent
year or period during the term of the option unless otherwise provided in the
Stock Option Agreement.
(c) A Stock Option shall be exercised by written notice to the Secretary or
Treasurer of the Company at its then principal office. The notice shall specify
the number of shares as to which the Stock Option is being exercised and shall
be accompanied by payment in full of the purchase price for such shares;
provided, however , that an optionee at his or her discretion may, in lieu of
cash payment, to the Company, deliver Common Stock already owed by him or her,
valued at fair market value on the date of delivery, as payment for the exercise
of any Stock Option or (ii) request that the Company withhold, from the number
at shares of Common stock that may otherwise be obtained upon the exercise of
the Stock Option, that number of shares having an aggregate fair market value
equal to the Stock Option exercise price. In the event a Stock Option is being
exercised, in whole or in part pursuant to Section 6(c) hereof by any person
other than the optionee, a notice of election shall be accompanied by proof
satisfactory to the Company of the rights of such person to exercise said Stock
Option. An optionee shall not, by virtue of the granting of a Stock Option, be
entitled to any rights of a shareholder in the Company and such optionee shall
not be considered a record holder of shares purchased by him or her until the
date on which he or she shall actually be recorded as the holder of such shares
upon the stock records of the Company. The Company shall not be required to
issue any fractional shares upon exercise of any Stock Option and shall not be
required to pay to the person exercising the Stock Option the cash equivalent of
any fractional share interest unless so determined by the Committee.
A-2
<PAGE>
(d) In the event an optionee elects to deliver Common Stock already owned
by such optionee or to request that Common Stock be withheld in accordance with
subsection (c) above, upon exercise of a Stock Option granted hereunder, the
Company shall be entitled to require as a condition thereto that the optionee
remit an amount which the Company deems sufficient to satisfy all Federal, state
and other governmental withholding tax requirements related thereto. The Company
shall have the right, in lieu of or in addition to the foregoing to withhold
such sums from compensation otherwise due to the optionee.
(e) Upon the issuance of any shares pursuant to the exercise of a Stock
Option, the Company may pay an optionee a supplemental cash award, the primary
purpose of which is to assist the optionee in paying any income tax which may be
payable upon the exercise of such Stock Option. This award shall be the lesser
of (i) 65% of the difference between the aggregate fair market value of the
shares issued on the exercise and the option price paid by the optionee or (ii)
90% of the Stock Option exercise price paid by the optionee.
7. Other Stock Option Conditions.
(a) Except as expressly permitted by the Board, no Stock Option shall be
transferred by the optionee otherwise than by will or by the laws of descent and
distribution. During the lifetime of the optionee the Stock Option shall be
exercisable only by such optionee, by his or her legal representative or by a
transferee permitted under the terms of the grant of the Stock Option.
(b) Unless otherwise determined by the Committee, in the event of the
termination of an optionee's employment by the Company at any time for any
reason (excluding disability or death), his or her option and all rights
thereunder shall be exercisable by the optionee at any time within three months
thereafter but in no event later than the termination date of his or her Stock
Option. Notwithstanding the foregoing, unless otherwise determined by the
Committee, in the event an optionee is permanently and totally disabled (within
the meaning of section 105(d)(4), or any successor section, of the Code), his or
her Stock Option and all rights thereunder shall be exercisable by the optionee
(or his or her legal representative) at any time within six (6) months of
termination of employment - but in no event later than the termination date of
his Stock Option.
(c) Unless otherwise determined by the Committee, if an optionee shall die
while in the employ of the Company, his or her Stock Option may be exercised by
his or her designated beneficiary or beneficiaries (or if none have been
effectively designated, by his or her executor, administrator or the person to
whom his or her rights under his or her Stock Option shall pass by will or by
the laws of descent arid distribution) at any time within six (6) months after
the date of death, but not later than the termination date of his or her Stock
Option.
(d) In the event a Non-Employee Director ceases to serve as a member of the
Board of Directors of the Company at any time for any reason, his option and all
rights thereunder shall be exercisable by him at any time within one year
thereafter, but in no event later than the termination date of his option. If a
Non-Employee Director shall die while serving as a director of the Company, his
Stock Option may be exercised by his designated beneficiary or beneficiaries
(or, if none have been effectively designated, by his executor, administrator or
the person to whom his rights under his Stock Option shall pass by his will or
by the laws of descent and distribution) at any time within one year after the
date of his death, but not later than the termination date of his Stock Option.
(e) Nothing in the Plan or in any option granted pursuant hereto shall
confer on an employee any right to continue in the employ of the Company or
prevent or interfere in any way with the right of the Company to terminate his
employment at any time, with or without cause.
(f) Nothing in the Plan or in any Stock Option granted pursuant hereto
shall confer on any Non-Employee Director any right to continue as a director of
the Company.
(g) Each Stock Option granted pursuant to the Plan shall be evidenced by a
written Stock Option Agreement duly executed by the Company and the optionee, in
such form and containing such provisions as the Committee may from time to time
authorize or approve.
8. Adjustments. The Stock Option Agreements shall contain such provisions
as the Committee shall determine to be appropriate for the adjustment of the
kind and number of shares subject to each outstanding Stock Option, or the Stock
Option prices, or both, in the event of any changes in the outstanding Common
Stock of the Company by reason of stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations or
A-3
<PAGE>
exchanges of shares, or the like. In the event of any such change or changes in
the outstanding Common Stock, and as often as the same shall occur, the kind and
aggregate number of shares available under the Plan may be appropriately
adjusted by the Committee, whose determination shall be binding and conclusive.
9. Amendment and Termination.
(a) Unless the Plan shall have been otherwise terminated as provided
herein, it shall terminate on, and no option shall be granted thereunder, after
December 31, 2009. The Board may at any time prior to that date alter, suspend
or terminate the Plan as it may deem advisable, except that it may not without
further shareholder approval (i) increase the maximum number of shares subject
to the Plan (except for changes pursuant to Section 8); (ii) permit the grant of
options to anyone other than the employees, Non-Employee Directors and
consultants; (iii) change the manner of determining the minimum stock exercise
prices (except for changes pursuant to Section 8); or (iv) extend the period
during which Stock Options may be granted or exercised. Except as otherwise
hereinafter provided, no alteration, suspension or termination of the Plan may,
without the consent of the optionee to whom any Stock Option shall have
theretofore been granted (or the person or persons entitled to exercise such
Stock Option under Section 6(c) of the Plan), terminate such optionee's Stock
Option or adversely affect such optionee's rights thereunder.
(b) Anything herein to the contrary notwithstanding, in the event that the
Board shall at any time declare it advisable to do so in connection with any
proposed sale or conveyance of all or substantially all of the property and
assets of the Company or of any proposed consolidation or merger of the Company
(unless the Company shall be the surviving corporation in such merger), the
Company may give written notice to the holder of any Stock Option that his or
her Stock Option may be exercised only within thirty (30) days after the date of
such notice but not thereafter, and all rights under said Stock Option which
shall not have been so exercised shall terminate at the expiration of such
thirty (30) days, provided that the proposed sale, conveyance, consolidation or
merger to which such notice shall relate shall be consummated within six (6)
months after the date of such notice. If such proposed sale, conveyance,
consolidation or merger shall not be consummated within said time period, no
unexercised rights under any Stock Option shall be affected by such notice
except that such Stock Option may, not be exercised between the date of
expiration of such thirty (30) days and the date of the expiration of such six
month period.
10. Option Exercise Price. The price per share to be paid by the optionee
at the time an ISO is exercised shall not be less than one hundred percent
(100%) of the Fair Market Value (as hereinafter defined) of one share of the
optioned Common Stock on the date on which the Option is granted. No ISO may be
granted under the Plan to any person who, at the time of such grant, owns
(within the meaning of Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any parent thereof, unless the exercise price of such ISO is
at least equal to one hundred and ten percent (110%) of Fair Market Value on the
date of grant. The price per share to be paid by the optionee at the time an NQO
is exercised shall not be less than eighty-five percent (85%) of the Fair Market
Value on the date on which the NQO is granted, as determined by the Committee.
11. Ceiling of ISO Grants. The aggregate Fair Market Value (determined at
the time any ISO is granted) of the Common Stock with respect to which an
optionee's ISOs, together with incentive stock options granted under any other
plan of the Company and any parent, are exercisable for the first time by such
optionee during any calendar year shall not exceed $100,000. If an optionee
holds such incentive stock options that become first exercisable (including as a
result of acceleration of exercisability under the Plan) in any one year for
shares having a fair market value at the date of grant in excess of $100,000,
then the most recently granted of such ISOs, to the extent that they are
exercisable for shares having an aggregate Fair Market Value in excess of such
limit, shall be deemed to be NQOs.
12. Indemnification. Any member of the Committee or the Board who is made,
or threatened to be made, a party to any action or proceeding, whether civil or
criminal, by reason of the fact that such person is or was a member of the
Committee or the Board insofar as it relates to the Plan shall be indemnified by
the Company, and the Company may advance such person's related expenses, to the
full extent permitted by law and/or the Certificate of Incorporation or By-laws
of the Company.
A-4
<PAGE>
13. Effective Date of the Plan; Termination of the Plan and Stock Options.
The Plan shall become effective on the date of adoption by the Board, provided,
however, that the Plan shall be subject to approval by the affirmative vote of
the holders of the majority of Common Stock of the Company on or before December
31, 1999.
14. Expenses. Except as otherwise provided herein for the payment of
Federal, State and other governmental taxes, the Company shall pay all fees and
expenses incurred in connection with the Plan and the issuance of the stock
hereunder.
15. Government Regulations, Registrations and Listing of Stock.
(a) The Plan, and the grant and exercise of Stock Options thereunder, and
the Company's obligation to sell and deliver stock under such Stock Options
shall be subject to all applicable Federal and State laws, rules and regulations
and to such approvals by any regulatory or governmental agency as may, in the
opinion of the Company, be necessary or appropriate.
(b) The Company may in its discretion require whether or not a registration
statement under the Securities Act of 1933 and the applicable rules and
regulations thereunder (collectively the "Act") is then in effect with respect
to shares issuable upon exercise of any stock option or the offer and sale of
such shares is exempt from the registration provisions of such Act, that as a
condition precedent to the exercise of any Stock Option the person exercising
the Stock Option give to the Company a written representation and undertaking
satisfactory in form and substance to the Company that such person is acquiring
the shares for his or her own account for investment and not with a view to the
distribution or resale thereof and otherwise establish to the company's
satisfaction that the offer or sale of the shares issuable upon exercise of the
Stock Option will not constitute or result in any breach or violation of the Act
or any similar act or statute or law or regulation in the event that a
Registration statement under the Act is not then effective with respect to the
Common Shares issued upon the exercise of such stock option; the company may
place upon any stock certificate appropriate legends referring to the
restrictions on disposition under the Act
(c) In the event the class of shares issuable upon the exercise of any
Stock Option is listed on any national securities exchange or NASDAQ, the
Company shall not be required to issue or achieve any certificate for shares
upon the exercise of any Stock Option, or to the listing of the shares so
issuable on such national securities exchange or NASDAQ and prior to the
registration of the same under the Securities Exchange Act of 1934 or any
similar act or statute.
A-5
<PAGE>
Exhibit B
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
4KIDS ENTERTAINMENT, INC.
- - - - - - - - - - - - - - - - - - - - - - - - -
Under Section 805 of the Business Corporation Law
- - - - - - - - - - - - - - - - - - - - - - - - -
Pursuant to the provisions of Section 805 of the Business Corporation Law,
the undersigned Executive Vice President and Secretary, respectively, of 4Kids
Entertainment, Inc., hereby certify:
FIRST: The name of the Corporation is 4Kids Entertainment, INC.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State, Albany, New York on April 28, 1970 under the original
name of American Leisure Industries, Inc.
THIRD: The amendment of the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to increase the number of shares of
authorized common stock of the corporation.
FOURTH: To accomplish the foregoing amendment, the first sentence of
Article FOURTH of the Certificate of Incorporation of the Corporation, relating
to the name of the Corporation, is hereby amended to read as follows:
"FOURTH: The aggregate number of shares which the Corporation shall
have authority to issue is Twenty-Three Million (23,000,000) shares divided
into two classes of which Twenty Million (20,000,000) shares shall be
designated as Common Stock, $.01 par value per share and Three Million
(3,000,000) shares shall be designated as Preferred Stock, $.01 par value
per share.
FIFTH: The foregoing amendment of the Certificate of Incorporation of the
Corporation was authorized by a vote of the Board of Directors of the
Corporation, followed by a vote of the holders of a majority of all outstanding
shares of the Corporation entitled to vote on the said amendment of the
Certificate of Incorporation.
IN WITNESS WHEREOF, we have subscribed this document on the date set forth
below and do hereby affirm, under the penalties of perjury, that the statements
contained herein have been examined by us and are true and correct.
Date: April 29, 1999
By _____________________________
Alfred R. Kahn, Chairman
By _____________________________
Joseph P. Garrity, Executive
Vice President, Secretary
<PAGE>
4KIDS ENTERTAINMENT, INC.
PROXY
Annual Meeting of Shareholders -- Thursday, April 29, 1999.
The undersigned shareholder of 4Kids Entertainment, Inc. (the "Company")
hereby appoints Alfred R. Kahn, the attorney and proxy of the undersigned, with
full power of substitution, to vote, as indicated herein, all the common shares
of the Company standing in the name of the undersigned at the close of business
on March 26, 1999 at the Annual Meeting of Shareholders of the Company to be
held at Chase Manhattan Worldwide Headquarters, 270 Park Avenue, New York, New
York 10017, Conference Room C, at 11:00 a.m., local time, on Thursday, April 29,
1999, and at any and all adjournments thereof, with all the powers the
undersigned would possess if then and there personally present and especially
(but without limiting the general authorization and power hereby given) to vote
as indicated on the proposals, as more fully described in the Proxy Statement
for the meeting.
Please mark boxes / / or /x/ in blue or black ink.
1. Election of Directors.
FOR all nominees / /
WITHHOLD authority only for those nominees whose name(s) I
have stricken below / /
WITHHOLD authority for ALL nominees / /
Nominees for Director are: Alfred R. Kahn, Robert Dunn Glick and
Gerald Rissman.
2. Proposal to approve the Company's 1999 Stock Option Plan.
For / / Against / / Abstain / /
3. Proposal to amend the Certificate of Incorporation to change the authorized
common stock to 20,000,000 shares, par value $.01.
For / / Against / / Abstain / /
4. Proposal to approve the selection of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 31, 1999.
For / / Against / / Abstain / /
(Continued, and to be signed on reverse side)
<PAGE>
(Continued from other side)
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
adjournments thereof.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED FOR THE
ELECTION OF THE PROPOSED DIRECTORS AND FOR THE ABOVE PROPOSALS UNLESS OTHERWISE
INDICATED.
SIGNATURE(S) should be exactly
as name or names appear on this
proxy. If stock is held jointly,
each holder should sign. If
signing is by attorney, executor,
administrator, trustee or guardian,
please give full title.
Dated ________________________, 1999
_____________________________________
Signature
_____________________________________
Print Name
_____________________________________
Signature
_____________________________________
Print Name
[Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.]
