SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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|X| Preliminary Proxy Statement |_| Confidential, for Use of the Commission
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|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
4Kids Entertainment, Inc.
------------------------------------------------------------------------
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<PAGE>
4KIDS ENTERTAINMENT, INC.
1414 Avenue of the Americas
New York, New York 10019
April ___, 2000
Dear Shareholder:
You are cordially invited to attend the 4Kids Entertainment, Inc.
("4Kids") Annual Meeting of Shareholders to be held at 11:00 a.m. (New York City
time) on May 18, 2000, at (the "Annual Meeting").
The purposes of the Annual Meeting are to (i) elect directors, (ii)
consider and vote upon a proposal to approve the 4Kids Entertainment, Inc. 2000
Stock Option Plan, (iii) consider and vote upon a proposal to approve an
amendment to the 4Kids Certificate of Incorporation to increase the number of
shares of authorized 4Kids common stock from 20,000,000 shares to 40,000,000
shares, (iv) ratify the appointment of auditors and (v) transact such other
business as may properly come before the meeting and any adjournment or
postponements thereof. These matters are described in the formal Notice of
Annual Meeting of Shareholders and the accompanying Proxy Statement.
Your Board of Directors recommends a vote "FOR" each of the listed
nominees for Director and "FOR" each of the other proposals.
Your vote is very important. We hope you will find it convenient to attend
the Annual Meeting in person. Whether or not you are personally able to attend,
it is important that your shares be represented at the meeting. Accordingly, you
are requested to sign, date and return the enclosed proxy promptly. If you do
attend the Annual Meeting you may still revoke your proxy and vote in person.
Your cooperation is greatly appreciated.
Sincerely,
ALFRED R. KAHN
Chairman of the Board of Directors,
Chief Executive Officer
<PAGE>
4KIDS ENTERTAINMENT, INC.
1414 Avenue of the Americas
New York, New York 10019
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April __, 2000
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders (the
"Annual Meeting") of 4Kids Entertainment, Inc., a New York corporation
("4Kids"), will be held at , on Thursday, May 18, 2000, at 11:00
a.m. (New York City time) for the purpose of considering and acting upon the
following matters as set forth in the accompanying proxy statement:
1. Election of four directors to serve until the next Annual Meeting and
until their successors are duly elected and qualified;
2. Approval of a proposal to approve the 4Kids Entertainment, Inc. 2000
Stock Option Plan;
3. Approval of a proposed amendment to the 4Kids Certificate of
Incorporation to increase the number of shares of authorized 4Kids common stock
from 20,000,000 shares to 40,000,000 shares;
4. Ratification of the appointment of Deloitte & Touche LLP as auditors
for 4Kids for the fiscal year ending December 31, 2000; and
5. The transaction of such other business as may properly come before the
meeting and any adjournment or postponements thereof.
The Board of Directors has fixed the close of business on April 10, 2000
as the record date for the Annual Meeting and only holders of shares of record
at that time are entitled to notice of, and to vote at, the Annual Meeting and
any adjournment or postponements thereof.
By Order of the Board of Directors,
ALFRED R. KAHN
Chairman of the Board of Directors,
Chief Executive Officer
April ___, 2000
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. WHETHER OR
NOT YOU INTEND TO BE PRESENT, PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD IN THE STAMPED AND ADDRESSED ENVELOPE ENCLOSED FOR YOUR
CONVENIENCE. SHAREHOLDERS CAN HELP 4KIDS AVOID UNNECESSARY EXPENSE AND DELAY BY
PROMPTLY RETURNING THE ENCLOSED PROXY CARD. THE BUSINESS OF THE MEETING TO BE
ACTED UPON BY THE SHAREHOLDERS CANNOT BE TRANSACTED UNLESS ONE-THIRD OF THE
OUTSTANDING SHARES OF 4KIDS' COMMON STOCK ARE REPRESENTED AT THE ANNUAL MEETING.
<PAGE>
PROXY STATEMENT
General
This Proxy Statement is being furnished to the shareholders of 4Kids
Entertainment, Inc., a New York corporation ("4Kids"), in connection with the
Annual Meeting of Shareholders of 4Kids to be held at 11:00 a.m. (New York City
time) on May 18, 2000, at (the "Annual Meeting"). Accompanying this
proxy statement ("Proxy Statement") is a notice of such Annual Meeting and a
form of proxy solicited by the 4Kids Board of Directors. Audited financial
statements of 4Kids for the fiscal year ended December 31, 1999 are contained in
the 4Kids Annual Report which has been mailed with this Proxy Statement.
Proxies in the accompanying form which are properly executed and duly
returned to 4Kids and not revoked prior to the voting at the Annual Meeting will
be voted as specified. If no contrary specification is made and if not
designated as broker non-votes, the common shares of 4Kids, par value $.01 per
share, represented by the enclosed proxy will be voted FOR the election of the
nominees for director (Proposal 1), FOR the approval of the 4Kids Entertainment,
Inc. 2000 Stock Option Plan (Proposal 2), FOR the approval of the amendment to
the 4Kids Certificate of Incorporation (Proposal 3) and FOR the ratification of
the appointment of Deloitte & Touche LLP as auditors (Proposal 4). In addition,
the common shares represented by the enclosed proxy will be voted by the person
named therein, in such person's discretion, with respect to any other business
which may properly come before the Annual Meeting or any adjournment or
postponements thereof. Any shareholder giving a proxy has the power to revoke it
at any time prior to the voting by filing with the Secretary of 4Kids a written
notice of revocation or a duly executed proxy bearing a later date or by voting
in person at the Annual Meeting.
The Board of Directors has fixed the close of business on April 10, 2000,
as the record date for the determination of the shareholders entitled to receive
notice of, and to vote at, the Annual Meeting. The holders of one-third of the
voting power of all issued and outstanding common shares present in person, or
represented by proxy, shall constitute a quorum at the Annual Meeting. Assuming
the presence of a quorum, the affirmative vote by the holders of a majority of
the votes cast at the Annual Meeting is necessary to approve Proposals 2 and 4.
The affirmative vote of a majority of the total outstanding common shares of
4Kids is necessary to approve Proposal 3. The affirmative vote by a plurality of
the votes cast at the Annual Meeting is required for approval of the election of
directors.
On April 10, 2000, the record date for the Annual Meeting, 4Kids had
_________________ common shares outstanding. Each common share is entitled to
one vote on each matter to come before the Annual Meeting. There is no
cumulative voting. Votes shall be counted by 4Kids' Transfer Agent.
Shares represented by proxies designated as broker non-votes will be
counted for purposes of determining a quorum. Broker non-votes occur when a
broker nominee (which has voted on one or more matters at a meeting) does not
vote on one or more other matters at a meeting because it has not received
instructions to so vote from the beneficial owner and does not have
discretionary authority to so vote. Shares represented by proxies marked as
abstentions will also be treated as present for purposes of determining the
outcome of a vote on any matter, but will not serve as a vote "for" or "against"
any matter. Shares represented by proxies designated as broker non-votes,
however, will not be treated as present for purposes of determining the outcome
of a vote on any matter.
PROPOSAL 1 - ELECTION OF DIRECTORS
The directors are elected annually by the shareholders of 4Kids. The 4Kids
By-laws provide that the number of directors shall be no less than three or more
than seven unless and until otherwise determined by vote of a majority of the
entire Board of Directors. In accordance therewith, a total of four persons have
been designated by the Board of Directors as nominees for election at the Annual
Meeting and are being presented to the shareholders for election. The directors
to be elected at the Annual Meeting shall be determined by a plurality of the
votes cast at the Annual Meeting.
<PAGE>
The four persons named below, who are currently the entire Board of
Directors, have been nominated for election to serve until the next Annual
Meeting and until their respective successors have been elected and qualified:
o Alfred R. Kahn
o Joseph P. Garrity
o Joel I. Cohen
o Jay Emmett
The Board of Directors recommends that shareholders vote FOR the director
nominees named above, and, unless a shareholder gives instructions on the proxy
card to the contrary or a broker non-vote is indicated on the proxy card, the
appointees named thereon intend so to vote. 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 the
election of such other person or persons as the remaining members of the Board
of Directors may recommend.
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of 4Kids, as of April 10, 2000, are
as follows:
<TABLE>
<CAPTION>
Name Age Position
- --------------------------------------------- ------------ -----------------------------------------
<S> <C> <C>
Alfred R. Kahn 53 Chairman, Chief Executive Officer
Joseph P. Garrity 44 Executive Vice-President, Chief
Operating Officer and Chief Financial
Officer, Director
Joel I. Cohen (1)(2) 53 Director
Jay Emmett (1)(2) 71 Director
Norman Grossfeld 36 President of 4Kids Productions, Inc.
Sheldon Hirsch 52 Chief Executive Officer of The Summit
Media Group, Inc.
Thomas Kenney 40 President of The Summit Media Group, Inc.
Samuel R. Newborn, Esq. 46 Executive Vice-President, General Counsel
</TABLE>
- ----------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Joel I. Cohen has been a director since November 1999. Mr. Cohen has been
a Managing Director of J.P. Morgan & Co. Incorporated for more than five years.
Jay Emmett has been a director since August 1999. For more than five
years, Mr. Emmett has been sitting on the International Board of Directors of
the Special Olympics and the Board of Directors of the San Diego Padres.
2
<PAGE>
Joseph P. Garrity has been a director since August 1999. Mr. Garrity has
been the Chief Financial Officer since joining 4Kids 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.
Alfred R. Kahn has been Chairman and Chief Executive Officer of 4Kids
since March 1991. Mr. Kahn was Vice Chairman of 4Kids from July 1987 until he
became Chairman in 1991.
Norman Grossfeld has been President of 4Kids Productions, Inc., 4Kids'
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.
Sheldon Hirsch has been Chief Executive Officer of The Summit Media Group,
Inc. ("Summit Media"), 4Kids' 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.
Samuel R. Newborn, Esq. has been Executive Vice-President General Counsel
since January 2000. Prior to joining 4Kids, Mr. Newborn was a partner in the law
firm of Janklow, Newborn & Ashley for more than five years.
Meetings and Committees of the Board of Directors
The Board of Directors of 4Kids met four times during the fiscal year
which ended on December 31, 1999. 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, since the date of his appointment.
4Kids has an Audit Committee which consists of Mr. Cohen, who serves as
the chairman, and Mr. Emmett. The Audit Committee reviews the financial
reporting and internal controls of 4Kids and meets with appropriate financial
personnel of 4Kids, as well as its independent auditors, in connection with
these reviews. The Audit Committee also recommends to the Board of Directors the
firm which is to be presented to the shareholders for designation as independent
auditors to examine the corporate accounts of 4Kids for the current fiscal year.
The Audit Committee met once during fiscal 1999 and once subsequent to December
31, 1999 but before the filing of the 4Kids' Annual Report on Form 10-K. 4Kids
also has a Compensation Committee which consists of Mr. Emmett, who serves as
the chairman, and Mr. Cohen. The Compensation Committee is responsible for
setting and administering the policies which govern annual and long-term
compensation for our executives. The Compensation Committee is also empowered to
grant Stock Options pursuant to the 4Kids' Stock Option Plans and to administer
such Plans. The Compensation Committee met one time during fiscal 1999.
4Kids does not have a nominating committee.
3
<PAGE>
COMPENSATION
Executive Compensation - Annual Compensation
The following table sets forth a summary of annual and long-term
compensation paid to 4Kids' Chief Executive Officer and the four most highly
compensated executive officers (as defined in Rule 3b-7 promulgated under the
Securities Exchange Act of 1934, as amended) of 4Kids (other than the Chief
Executive Officer) whose total annual salary and bonus for the year ended
December 31, 1999 was in excess of $100,000 (collectively, the "Named
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------------------
Long-Term
Compensation
Name and Principal Other Annual Awards All Other
Position Year Salary ($) Bonus ($) Compensation ($)(1) Stock Options (Shares) Compensation ($)(2)
---- ---------- --------- ------------------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Alfred R. Kahn, 1999 $ 395,000 $4,771,917 100,000
Chairman of the Board 1998 395,000 556,917 195,000
1997 395,000 177,563 300,000
Joseph P. Garrity, 1999 $ 250,000 $ 954,383 20,000
EVP, COO & CFO 1998 250,000 111,383 178,500
1997 215,000 35,512 195,000
Sheldon Hirsch, 1999 $ 250,000 $ 16,010 --
Chief Executive Officer, 1998 250,000 78,976 105,000
Summit Media 1997 250,000 108,212 165,000
Thomas Kenney, 1999 $ 250,000 $ 16,010 --
President, 1998 250,000 78,976 105,000
Summit Media 1997 225,000 108,012 165,000
Norman Grossfeld, 1999 $ 250,000 $ 420,664 10,000
President, 1998 250,000 29,881 30,000
4Kids Productions 1997 225,000 25,000 30,000
</TABLE>
(1) Does not include amounts paid on behalf of executive officers under the
Company's benefit plans. Such benefit plans, which are offered to all full
time employees of the Company include, a 401K Plan, major medical
insurance, long term disability insurance and life insurance.
(2) In accordance with the rules of the SEC, other compensation in the form of
perquisites and other personal benefits has been omitted as such
perquisites and other personal benefits constituted less than the lesser
of $50,000 or 10% of the total annual salary and bonus for each of the
executive officers for each fiscal year.
The following table sets forth certain information concerning individual
grants of stock options made during fiscal 1999 to the Named Officers:
4
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term(1)
--------------------------------------------------------------- ------------------------
% of Total
Number of Options Granted
Options to Employees in Exercise or Base Expiration
Name Granted Fiscal Year Price ($/Sh)(2) Date 5% 10%
- ------------------- ---------- --------------- ---------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Alfred R. Kahn(3) 100,000 38% $33.2813 12/21/09 $2,093,000 $5,304,000
Joseph Garrity(4) 20,000 8% $33.2813 12/21/04 $184,000 $406,000
Norman Grossfeld(4) 10,000 4% $33.2813 12/21/04 $92,000 $203,000
</TABLE>
(1) 4Kids used such method as it is one of the alternative methods of option
valuation suggested by the Securities and Exchange Commission's rules on
executive compensation disclosure. 4Kids does not advocate or necessarily
agree that such method can properly determine the value of an option.
(2) Based upon the fair market value of 4Kids common shares on the date of
grant.
(3) All such options are currently exercisable.
(4) 50% of such options are currently exercisable and 50% are exercisable on
the one year anniversary of the date of grant.
Option Exercises and Fiscal Year End Option Values
The following table sets forth the number of options exercised and dollar
value realized for such exercises and fiscal year end value of unexercised
options:
<TABLE>
<CAPTION>
Shares Number of Unexercised Value of Unexercised
Acquired on Value Realized Options at December In-the-Money Options at
Name Exercise (#) ($) 31, 1999(1) December 31, 1999(2)
- ------------------- ------------- -------------- --------------------- -----------------------
<S> <C> <C> <C> <C>
Alfred R. Kahn 336,200 $9,055,422 1,458,800 $36,163,000
Joseph P. Garrity 158,600 $4,141,589 384,900 $9,901,000
Sheldon Hirsch 205,000 $6,959,393 140,000 $3,795,000
Thomas Kenney 141,000 $3,020,039 234,000 6,425,000
Norman Grossfeld 141,600 $5,051,492 10,000 $0
</TABLE>
- ----------
(1) All options of Mr. Kahn and Mr. Hirsch are currently exercisable; 374,900
and 5,000 for Mr. Garrity and Mr. Grossfeld respectively, are currently
exercisable.
(2) Calculation based upon the average of the high and low prices of 4Kids'
common stock on The Nasdaq National Market on December 31, 1999 of $28.375
per share.
5
<PAGE>
Compensation of Directors
No director of 4Kids receives any cash compensation for his services in
such capacity. Currently, 4Kids has two directors who are not employees, Messrs.
Cohen and Emmett. Mr. Cohen and Mr. Emmett were each granted options to acquire
10,000 shares of the Company's common stock in December 1999 at an exercise
price of $33.2813, the market price of the Company's common stock on that date.
In March 2000, 4Kids purchased an aggregate of $25,000,000 of insurance
from National Union Fire Insurance Company of Pittsburgh, Royal Specialty
Underwriting and Ace USA Group for indemnification of all of its directors and
officers at a cost of $242,000.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Mr. Kahn has an employment agreement with 4Kids pursuant to which he
receives a fixed salary of $395,000 per year plus an annual bonus equal to 10%
of 4Kids' Income Before Income Tax Provision as stated on 4Kids' 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 4Kids. 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 4Kids (including bonuses, if any) during the five years
preceding the date of termination ("Severance Payment"). If a majority of the
directors of 4Kids consists of individuals who have not been recommended by 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 4Kids which currently
provides for an annual salary of $250,000 (the "Fixed Salary") plus an annual
bonus equal to 2% of 4Kids' Income Before Income Tax Provision as stated on
4Kids' financial statements in its Annual Report on Form 10-K. The agreement
expires December 31, 2000. The agreement may be terminated by 4Kids 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 plus an annual bonus ranging from 3%
to 10% of 4Kids Productions Income Before Income Tax Provision depending on the
source of the revenue to 4Kids Productions. The Agreement expires December 31,
2001.
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 4Kids in the event 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 or
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, 4Kids has a Compensation Committee, the members of
which are Messrs. Cohen and Emmett. Neither of such individuals has ever been an
officer or employee of 4Kids or any of its subsidiaries. During fiscal 1999, no
executive officer of 4Kids 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 4Kids.
6
<PAGE>
Report of Executive Compensation
The Compensation Committee of the Board of Directors is responsible for
4Kids' executive compensation policy. In general, our executive compensation
policy seeks 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.
For 1999, the compensation of our executive officers was composed
primarily of salaries, bonuses and stock options. Salary ranges for our
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 4Kids 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 our
executive officers and our shareholders in maximizing long-term shareholder
value. The 4Kids Compensation Committee is responsible for granting stock
options to the executive officers pursuant to the 4Kids stock option plans.
Grants of stock options are made from time to time to the executive officers
based on our overall performance and the individual performance of each
executive officer. During 1999, stock options to acquire 100,000 shares of 4Kids
were granted in December 1999, to Mr. Kahn at an exercise price of $33.2813 per
share, the fair market value of the shares on the date of grant. On June 1, 1999
options to acquire 45,000 shares were granted pursuant to the Company's 1999
Stock Option Plan at an exercise price of $10.3125, the fair market value on the
date of grant. On December 22, 1999 options to acquire 120,000 shares were
granted pursuant to the Company's 1999 Stock Option Plan at an exercise price of
$33.2813, the fair market value on the date of grant.
Basis for the Compensation of the CEO
We have an employment agreement with Mr. Kahn pursuant to which he
receives a fixed annual salary of $395,000 and an annual bonus during the term
of the agreement, which expires in 2003. We believe 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 4Kids stock option plans. During 1999, stock
options to acquire 100,000 shares of 4Kids were granted in December 1999, to Mr.
Kahn at an exercise price of $33.2813 per share, the fair market value of the
shares on the date of grant. 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 4Kids. Consequently, during the term 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 4Kids common
shares. The closing price for 4Kids common shares on April 10, 2000 was $______.
Compensation Committee
Joel I. Cohen
Jay Emmett
Performance Graph
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total return on the 4Kids common shares against the cumulative
total return of the Nasdaq U.S. Market Index and the Nasdaq Non-Financial Index
for the past five fiscal years.
7
<PAGE>
4KIDS PERFORMANCE CHART RAW DATA
1999
Year 4Kids Nasdaq S&P 500
---- ----- ------ -------
1994 100 100 100
1995 69 141 138
1996 28 174 170
1997 76 213 226
1998 304 300 292
1999 2318 542 354
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of March 30, 2000, certain information
concerning the beneficial ownership of common shares of 4Kids by (i) each person
who is known by 4Kids to own beneficially more than five percent of the
outstanding common shares of 4Kids, (ii) each of our directors and (iii) all
current directors and officers of 4Kids 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.
<TABLE>
<CAPTION>
Common Shares
Beneficially Owned
-----------------------------------------
Name and Address of Beneficial Owner(1) Shares Options Total Percent of Class
- ---------------------------------------------------- ---------- --------- ------------ ----------------
<S> <C> <C> <C> <C>
Alfred R. Kahn...................................... 1,122,000 1,458,800 2,580,800(2) 19%
Joseph P. Garrity................................... -- 384,900 384,900 3%
Joel Cohen.......................................... 11,000 10,000 21,000 less than 1%
Jay Emmett.......................................... 900 12,900 13,800 less than 1%
All directors and officers as a group (8 persons)... 1,133,900 2,300,600 3,434,500(3) 24%
</TABLE>
- ---------------
(1) The address for Messrs. Kahn, Garrity, Cohen and Emmett is 4Kids
Entertainment, Inc., 1414 Avenue of the Americas, New York, New York
10019.
(2) Includes 1,056,000 shares owned by Mr. Kahn, 6,000 shares owned by Mr.
Kahn's wife, 15,000 shares held by Mr. Kahn for the benefit of his minor
daughter under the NY/UGMA, currently exercisable options to acquire
1,458,000 shares, and 45,000 shares owned by Mr. Kahn's three adult
children with respect to which Mr. Kahn disclaims beneficial ownership.
(3) Includes 434,000 shares which four executive officers have the right to
acquire pursuant to stock options; 404,000 of such options are currently
exercisable.
Mr. Kahn has, from time to time, borrowed a total of $711,582 from Lion
Holdings, the successor in interest to Tiger Electronics, Inc. in connection
with three purchases of a total of 191,426 shares. This loan has been repaid in
full as of April 29, 1999.
8
<PAGE>
PROPOSAL 2 - PROPOSED 2000 STOCK OPTION PLAN
The Board of Directors has determined that it is in the best interests of
4Kids to adopt the 2000 Stock Option Plan (the "2000 Plan") and will submit the
2000 Plan to the shareholders at the Annual Meeting. The 2000 Plan authorizes
the issuance not later than December 31, 2010 of options to purchase up to
500,000 of 4Kids' common shares. The 2000 Plan was approved by the Board of
Directors at a meeting held on November 16, 1999 subject to shareholder
approval.
The Board of Directors believes that 4Kids 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 2000 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
4Kids and its subsidiaries because of the opportunity to acquire a proprietary
interest in 4Kids on an attractive basis.
All stock options granted under the 2000 Plan will be exercisable at such
time or times and in such installments, if any, as the 4Kids 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 each stock option will be
the fair market value of the 4Kids common shares on the date prior to the date
of grant and must be paid in cash or in stock of 4Kids valued at its then fair
market value. The closing price of 4Kids common shares at April 10, 2000 was
$_____. Options are non-transferable except by will or by the laws of descent
and distribution or for estate planning purposes. Each option to be granted
under the 2000 Plan will be evidenced by an agreement subject to the terms and
conditions set forth above.
Options granted under the 2000 Plan terminate three months after the
optionee's relationship with 4Kids or its subsidiaries 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 2000 Plan, 4Kids 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 lesser of (i) 65% of the difference between the aggregate fair
market value of the shares issued on the exercise and the exercise price paid by
the optionee and (ii) 90% of the exercise price paid by the optionee.
The Board of Directors has a limited right to modify or amend the 2000
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 2000 Plan, eligible employees of 4Kids will
receive, for no consideration prior to exercise, the opportunity to profit from
any rise in the market value of the common shares. This will dilute the equity
interest of the other shareholders of 4Kids. The grant and exercise of the
options also may affect 4Kids' ability to obtain additional capital during the
term of any options.
The 2000 Plan will be administered by the Compensation Committee appointed
by the Board of Directors. The Compensation Committee currently consists of
Messrs. Joel Cohen and Jay Emmett, neither of whom are employees of 4Kids.
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 2000 Plan based upon the current
provisions of the Internal Revenue Code of 1986, as amended.
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 exercise price and the fair market value of the shares on the date
of exercise, and 4Kids will be entitled to a deduction from income in the same
amount. The option holder's basis in such
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shares will be their fair market value on the date of exercise, and when the
option holder 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.
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 exercise 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 2000 Plan shares are to be delivered upon exercise of a
stock option, 4Kids 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.
The Board of Directors recommends a vote FOR approval of the 2000 Plan as
described above at the Annual Meeting and it is intended that proxies not marked
to the contrary and not designated as broker non-votes will be so voted. The
description of the proposed 1999 Plan set forth above is qualified in its
entirety by reference to the text of the 2000 Plan as set forth in Exhibit A
hereto.
PROPOSAL 3 - PROPOSAL TO INCREASE AUTHORIZED COMMON SHARES
There is being submitted to the shareholders for approval at the Annual
Meeting a proposal to amend the Certificate of Incorporation to increase the
authorized common shares of 4Kids, par value $.01, from 20,000,000 shares to
40,000,000 shares. On April 10, 2000, there were __________ common shares
outstanding.
At December 31, 1999, 4Kids reserved 2,784,738 common shares for issuance
pursuant to options granted or to be granted under its stock option plans. 4Kids
has also reserved 500,000 common shares to be issued under the 2000 Plan.
At December 31, 1999 4Kids had 5,357,507 authorized and unreserved shares
available for issuance. If the proposal to increase the authorized common shares
of 4Kids is approved by the shareholders, 4Kids will have 25,357,507 common
shares authorized but unreserved.
The issuance of additional common shares of 4Kids may dilute the present
equity ownership position of 4Kids shareholders. The issuance of additional
common shares of 4Kids may, among other things, have a dilutive effect on
earnings per share and on the equity and voting power of existing 4Kids
shareholders and may adversely affect the market price for 4Kids common shares.
Although 4Kids has no current plans to issue any shares to be authorized
under this proposal, the increase in capital stock will provide the Board of
Directors with the ability to use the 4Kids stock to respond to developments in
our business, including possible acquisition transactions and general corporate
purposes, including stock splits, stock dividends and the raising of additional
capital, at times when the Board of Directors, in its discretion, deems it
advantageous to do so. While the increase in authorized common shares will not
change substantially the rights of holders of 4Kids common shares, the issuance
of shares in future transactions may have a dilutive effect.
The Board of Directors could use the additional common shares to
discourage an attempt to change control of 4Kids; however, the Board has no
present intention of issuing any common shares for such purposes and this
proposal is not being recommended in response to any specific effort to obtain
control of 4Kids of which we are aware.
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The Board of Directors recommends a vote FOR approval of the amendment to
increase the authorized number of common shares of 4Kids as described above at
the Annual Meeting and it is intended that proxies not marked to the contrary
and not designated as broker non-votes will be voted in favor of approval of the
amendment. In the event that Proposal 3 is not approved by the 4Kids
shareholders at the Annual Meeting, the Certificate of Incorporation in effect
as of the date hereof will remain in full force and effect. The full text of the
proposed resolution amending the Certificate of Incorporation is set forth in
Appendix B hereto and the description of the proposed amendment herein is
qualified in its entirety by reference to such Appendix B.
PROPOSAL 4 - SELECTION OF AUDITORS
The 4Kids financial statements for the past several fiscal years were
examined by Deloitte & Touche LLP, independent public accountants. On November
16, 1999, 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, 2000.
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.
The Board of Directors recommends a vote FOR ratification of the
appointment of Deloitte & Touche LLP as auditors and it is intended that proxies
not marked to the contrary and not designated as broker non-votes will be so
voted.
SECTION 16(a) BENEFICIAL REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the officers and directors of
4Kids, and persons who own more than ten percent of a registered class of 4Kids'
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. These persons are required by regulation
to furnish 4Kids with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
4Kids believes that other than disclosed below, during the fiscal year ended
December 31, 1999, 4Kids' officers, directors and greater than ten percent
beneficial owners complied with all applicable Section 16(a) filing
requirements.
During 1999, each of Messrs. Cohen and Emmett were appointed directors of
4Kids. Neither of them filed a Form 3 when required in connection with their
appointment. Mr. Newborn was appointed Executive Vice-President, General Counsel
during 1999 and did not file a Form 3 when required in connection with his
appointment. During 1999, the 4Kids Compensation Committee extended the
expiration dates of stock options belonging to Messrs. Cohen and Emmett. Neither
of them filed a Form 4 when required in connection with the extension of the
expiration date of their respective stock options. All of the above-mentioned
forms were filed late with the Securities and Exchange Commission. During 1999,
each of Messrs. Cohen, Emmett, Hirsch and Grossfeld purchased and sold common
shares of 4Kids and exercised stock options granted to them under the 4Kids
stock option plans. None of them filed Form 4's when required in connection with
their transactions. Mr. Cohen failed to file two Form 4's accounting for three
separate transactions. Mr. Emmett failed to file three Form 4's accounting for
eight separate transactions. Mr. Hirsch failed to file one Form 4 accounting for
two transactions. Mr. Grossfeld failed to file one Form 4 accounting for ten
transactions. All of the above-mentioned transactions were reported on timely
filed Form 5's.
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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.
SHAREHOLDER PROPOSALS
Proposals by any shareholders intended to be presented at the 2001 Annual
Meeting of Shareholders must be received by the Corporation for inclusion in
proxy material relating to such meeting not later than January 18, 2001.
EXPENSES
All expenses in connection with solicitation of proxies will be borne by
4Kids. Officers and regular employees of 4Kids may solicit proxies by personal
interview and telephone and telegraph. Brokerage houses, banks and 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. 4Kids 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
New York, New York
April __, 2000
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4KIDS ENTERTAINMENT, INC.
PROXY
Annual Meeting of Shareholders -- May 18, 2000
The undersigned shareholder of 4Kids Entertainment, Inc. hereby appoints
Alfred R. Kahn, attorney and proxy of the undersigned, with full power of
substitution and resubstitution, to vote, as indicated herein, all the common
shares of 4Kids standing in the name of the undersigned at the close of business
on April 10, 2000 at the Annual Meeting of Shareholders of 4Kids to be held at
at 11:00 a.m., local time, on Thursday, May 18, 2000, and at any and all
adjournments or postponements 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 /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, Joseph P. Garrity, Joel I.
Cohen and Jay Emmett.
2. Proposal to approve the 4Kids 2000 Stock Option Plan.
For / / Against / / Abstain / /
3. Proposal to amend the Certificate of Incorporation to change
the authorized common stock to 40,000,000 shares, par value
$.01.
For / / Against / / Abstain / /
4. Proposal to approve the selection of Deloitte & Touche LLP as
4Kids independent auditors for the fiscal year ending December
31, 2000.
For / / Against / / Abstain / /
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 postponements 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.
(Continued, and to be signed on reverse side)
<PAGE>
(Continued from other side)
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 _____________, 2000
___________________________________
Signature
___________________________________
Print Name
___________________________________
Signature
___________________________________
Print Name
[Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.]
<PAGE>
EXHIBIT INDEX
Number Description
- ------ -----------
99 A 4Kids Entertainment, Inc., 2000 Stock Option Plan
99 B Certificate of Amendment to Certificate of Incorporation
13
Exhibit A
4KIDS ENTERTAINMENT, INC.
2000 STOCK OPTION PLAN
1. Purpose of Plan. This 2000 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 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 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.
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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 500,000 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.
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 hereinafter referred to 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 owned 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
of shares of Common Stock that may otherwise be obtained upon the
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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.
(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 Options Conditions.
(a) Except as expressly permitted by the Committee, no Stock Option shall
be transferred by the optionee otherwise than by will or by the laws of descent
and distribution or for estate planning purposes. 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 and 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.
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(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. 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
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 maybe 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 7 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, 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.
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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 ISO, 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.
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 a majority of the votes cast at a meeting of shareholders on or
before December 31, 2000.
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
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 Chairman and the 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 FOUR 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 forty-three million (43,000,000) shares divided
into two classes of which forty million (40,000,000) 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: _________ __, 2000
By ___________________________________________
Alfred R. Kahn, Chairman
By ___________________________________________
Joseph P. Garrity,
Executive Vice President, Secretary
B-1
