EXHIBIT 10.42
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is hereby made and effective as of
the 1st day of June, 1999, by and between DSI Toys, Inc., a Texas corporation,
whose principal business address is 0000 Xxxx Xxx Xxxxxxx Xxxxxxx, Xxxxxxx,
Xxxxx 00000 ("Employer" or "Company"), and Xxxxxx X. Xxxxxxxx, an individual
residing at 0000 Xxxxxxxx Xxxx, Xx Xxxxx, Xxxxxxxxxx 00000 ("Employee").
WITNESSETH:
A. Employer is in the business of inventing, developing, manufacturing and
marketing toys. Employer is a public company.
B. Employee has extensive experience and expertise in the toy industry.
C. Employer wishes to employ Employee and Employee wishes to become an
employee of Employer pursuant to the terms and conditions of this Agreement.
ARTICLE 1
GENERAL
1.1 EMPLOYMENT. Employer hereby employs Employee and Employee hereby
accepts such employment with Employer upon the terms and conditions hereinafter
set forth. Employee shall perform such duties and responsibilities and exercise
such powers for the Employer as may from time to time be assigned or delegated
to him by Employer, including such duties as may be customary for a Senior Vice
President in the toy industry. Employee acknowledges that Employer shall be
dependent upon Employee for its continued ongoing business operations and that
the provisions hereof are necessary for the successful conduct of the business
and affairs of the Company.
1.2 POSITION. Employee shall be employed in the capacity and hold
the position of Senior Vice President of Business Development of Employer. In
such capacity, Employee agrees to, at all times, exercise his best efforts for
the benefit of the Company and to thereby undertake to use and implement the
management, organizational, intellectual, technical and other skills of Employee
to the best of his ability on the Company's behalf. Employee shall be
responsible to and report to the President and Chief Executive Officer of the
Company.
1.3 TERM. Subject to the provisions provided for and relating to
termination set forth herein, the term of Employee's employment pursuant to this
Agreement shall be for a period beginning on June 15, 1999, and ending on June
14, 2002 (said period being hereinafter referred to as the "Employment Term").
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ARTICLE 2
REMUNERATION AND BENEFITS
2.1 BASE SALARY. For all services rendered by Employee during the
Employment Term, Employer shall pay to Employee a salary of Ninety-Six Thousand
Dollars ($96,000.00) per year (the "Base Salary"). The Base Salary shall begin
to accrue and be paid on the Effective Date of this Agreement and shall be
distributed in semi-monthly installments in arrears through the Employment Term.
(a) At a minimum, the Base Salary shall be adjusted annually
on the anniversary date to reflect any increase in the Consumer Price Index -
All Urban Wage Earners (the "Index"). The Base Salary shall not be adjusted
downward to reflect any decrease in the Index.
(b) The Base Salary may also be raised at any time during the
Employment Term at the discretion of the Company's Board of Directors.
2.2 BENEFITS. Employee shall be eligible to participate in any and
all benefit plans which Employer may from time to time make generally available
to all employees of the Company, including but not limited to participation in
the Company's 401(k) plan, group life insurance and health insurance programs.
2.3 STOCK OPTIONS. Employee shall be eligible to participate in
Employer's 1997 Stock Option Plan (the "Plan") at the senior executive level.
Employee shall be granted nonqualified stock options for the purchase of 100,000
shares of the common stock of Employer (the "Options") pursuant to the terms and
conditions of the Plan.
2.4 EXTENT OF SERVICE. During the Employment Term, Employee agrees
to devote such amount of time, attention, energy and effort as is necessary to
further the business and profitability of Employer. Further, during the
Employment Term, Employee shall not be engaged in any other business activity
pursued for gain, profit or other pecuniary advantage. However, the foregoing
limitations shall not be construed as prohibiting Employee from making personal
investments in any business enterprise not competitive with that of Employer in
such form or manner as will neither require his services in the operations or
affairs of enterprises in which such investments are made, nor otherwise violate
the terms of this Agreement.
2.5 OFFICES. Employer shall provide office space for Employee, with
provisions for secretarial and other support services necessary to the
maintenance and operations of such office, and the performance of Employee's
duties hereunder.
2.6 EXPENSE ALLOWANCE. Employer shall reimburse Employee for all
approved, deductible business expenses reasonably incurred in the performance of
his duties hereunder, including reasonable expenditures for entertainment,
consistent with Employer's then existing expense reimbursement policy.
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2.7 VACATIONS AND HOLIDAYS. Employee shall be entitled to fifteen
(15) vacation days annually in accordance with the policies established by
Employer's Board of Directors, as well as those public holidays duly observed by
Employer; provided, however, no more than ten (10) consecutive vacation days
shall be taken at any one time.
2.8 INSURANCE. Employee shall be provided group life, disability and
health insurance coverages by Employer throughout the term of this Agreement. If
qualified, Employee shall be provided a group life insurance policy with a death
benefit of no less than $200,000.00.
2.9 BUSINESS TRAVEL. Employee shall be entitled to travel portal to
portal via business class on all international air travel performed for the
Company. All domestic air travel performed for the Company shall be via coach
class.
2.10 AUTOMOBILE ALLOWANCE. Employee shall be entitled to an
automobile allowance of Five Hundred Dollars ($500.00) per month.
ARTICLE 3
TERMINATION
3.1 DEATH. In the event of the Employee's death during the
Employment Term, the Employer shall pay to Employee's executor(s),
administrator(s) or personal representative(s) an amount equal to the
installment of his Base Salary payable for the month in which he dies and for no
period thereafter. Employer shall have no other liabilities or other obligations
of any kind or character under this Agreement to Employee's executor(s),
administrator(s) or personal representative(s) except such accrued salary and
unused vacation that Employee is entitled at the time of death.
(a) It is expressly understood and agreed that the Company may
maintain key man term life insurance for the benefit of the Company on the life
of Employee. Additionally, the Company may maintain such other life insurance
for the benefit of Employer, the Company's shareholders, as from time to time
the Board of Directors of the Company deems reasonable and appropriate.
(b) Upon the death of Employee, any and all vested employee
benefits accrued for the benefit of Employee shall be distributed in accordance
with the provisions set forth in the subject plan agreement or arrangement
providing the applicable benefits, and otherwise distributed in accordance with
applicable laws.
3.2 DISABILITY; FAILURE TO PERFORM DUTIES. In the event of
Employee's failure to perform his duties hereunder by reason of illness or
disability for a period equal to or in excess of ninety (90) consecutive days
during the Employment Term or for ninety (90) days during any twelve (12) month
period throughout the Employment Term, Employer shall have the option to
terminate this Agreement by giving thirty (30) days written notice of
termination to Employee. Upon such notice of termination, Employer shall pay to
Employee an amount equal to the installments of his Base Salary payable up to
the time this Agreement is terminated, and Employer shall distribute any
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and all accrued employee benefits as of the date of termination to Employee in
accordance with the provision of the applicable benefit plan, agreement or
arrangement giving rise to the applicable benefits. Upon the termination of this
Agreement as a result of such disability, Employer shall have no other
liabilities or obligations of any kind or character to Employee under this
Agreement.
3.3 TERMINATION FOR CAUSE. Employee may be terminated for cause by
Employer upon written notice to Employee. For purposes of this Agreement, "for
cause" shall be if Employee:
(a) Neglects the performance of his duties required to be
performed under the terms of this Agreement to the economic detriment of the
Company;
(b) Fails or refuses in the opinion of the Board of Directors
to comply with the reasonable policies, standards and regulations of the Company
which from time to time may be established;
(c) Is convicted of a crime or is charged with committing a
felony;
(d) Materially breaches any of the terms or conditions of this
Agreement; or
(e) Performs any action constituting fraud or an intentional
misrepresentation.
Upon such determination, Employer may, at its option, terminate this
Agreement immediately without prejudice to any other remedy to which Employer
may be entitled either at law or in equity, or under this Agreement. In such
event, any of the obligations of Employer under this Agreement shall be
terminated as of the date given in the notice of termination referred to
hereinabove, following payment by Employer to Employee of that portion of the
Base Salary and vacation then accrued, due and owing in accordance with Section
2.1 hereof.
3.4 TERMINATION WITHOUT CAUSE. Employer may terminate this Agreement
without cause upon prior written notice to Employee. In such event, Employee
shall be paid his regular Base Salary from the date of termination for a period
of three (3) months, but no other severance shall be paid to the Employee.
Further, upon payment by Employer to Employee of the three (3) months' Base
Salary, Employee shall have no further rights and Employer no other liabilities
or other obligations of any kind or nature under this Agreement except for
accrued employee benefits to which Employee may otherwise be entitled.
ARTICLE 4
COVENANTS
4.1 DISCLOSURE OF INFORMATION. Employee recognizes and acknowledges
that he has and will have access to certain confidential information,
proprietary data and trade secrets of Employer, and of entities and individuals
controlling, controlled by or under common control with Employer ("affiliates"),
including but not limited to, contracts, patterns, devices, calculations,
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drawings, productions, plans, specifications, records, compilations or
information, and other confidential information and data either compiled by
Employer or received from its customers or Employer, and that such information
is not generally available to the public and constitutes valuable, special and
unique property of the Employer. Employee shall not, during or after the term of
this Agreement, undertake in any fashion, to take commercial or proprietary
advantage of or profit from any such confidential information to any person or
firm, corporation, association or other entity for any reason or purpose
whatsoever, except to authorized representatives of Employer and as otherwise
may be proper in the course of performing his employment hereunder. Further,
Employee shall maintain the confidentiality of all such information of Employer,
its affiliates or its customers for the sole use and benefit of Employer. All
files, records, documents, drawings, plans, specifications, contracts, products,
equipment or similar items relating to the business of Employer and/or the
affiliates shall not be removed from the premises of Employer and/or its
affiliates without the prior consent of Employer and/or its affiliates, as
applicable.
(a) Employee further covenants and agrees to promptly return
and deliver to Employer all documents, information, or other material or
property of any kind or character which in any way relate to the business of
Employer or any of its affiliates or customers, whether or not asserted to be
the exclusive property of Employer; and, further, Employee shall not attempt to
retain copies or duplicates of any such property. In the event of a breach or a
threatened breach of these covenants by Employee, Employer and/or its
affiliates, in addition to all other remedies made available hereby or as a
matter of law or in equity, may seek an injunction restraining Employee from
disclosing, in whole or in part, such confidential information. In addition to
any other damages sustained by Employer, Employee shall pay to Employer all
profits, payments, earnings compensation or other emoluments paid or accruing to
Employee, directly or indirectly, by reason of Employee's disclosure of
information as provided herein. Nothing herein shall be construed as prohibiting
Employer and/or its affiliates from pursuing any other remedies available to it
or them for such breach or threatened breach, including the recovery of damages
from Employee.
4.2 NON-COMPETITION. During the Employment Term, and if this
Agreement is terminated in accordance with Sections 3.3 or 3.4, for a period of
one (1) year from the date of Employee's termination of employment hereunder,
Employee shall not directly or indirectly, either for himself, or as an
employer, employee, owner, manager, independent contractor, consultant, agent,
principal, partner, co-venturer, shareholder, director, officer or in any other
capacity, engage or have any indirect interest in any person that is engaged, or
to the knowledge of Employee is planning to engage, in competition in any manner
whatsoever with the business of Employer including, without limitation, any
person that manufactures, markets, imports, sells or distributes toys. If the
Employment Term is terminated by Employer pursuant to Section 3.4 and Employer
elects to enforce the provisions of this Section 4.2, Employer shall be
obligated to pay Employee as additional consideration on or before the fifteenth
(15th) day of each month during the one (1) year period following termination of
the Employment Term an amount equal to one-twelfth (1/12) of Employee's then
existing Base Salary.
4.3 AGREEMENT NOT TO SOLICIT. During the Employment Term, and if
this Agreement is terminated in accordance with Section 3.3 or 3.4, for a period
of one (1) year from the date of Employee's termination of employment hereunder,
Employee will not, either directly or
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indirectly, on his own or in the service of another:
(a) Knowingly call upon, solicit, divert or attempt to solicit
or divert any of the business contacts of Employer;
(b) Knowingly employ any employee of Employer or solicit,
divert, recruit or induce any employee of Employer to leave the employ of
Employer, whether or not such employment is at will; and/or
(c) Knowingly induce or advise any service provider, customer,
factory or representative of Employer to terminate or materially alters its then
existing relationship with Employer.
ARTICLE 5
MISCELLANEOUS PROVISIONS
5.1 MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
shall apply to the terms and conditions of this Agreement:
(a) Pursuit of any one remedy shall not preclude pursuit of
any other remedies provided for herein or by law. No waiver of one violation of
this Agreement shall be deemed or construed to constitute a waiver of any
similar violations subsequently occurring, or any other violation whatsoever.
(b) This Agreement shall be construed under the laws of Texas,
and the rights and obligations of each of the parties to this Agreement during
the term hereof and upon its termination shall be governed exclusively by Texas
law.
(c) This instrument contains all of the understandings and
agreements of whatsoever kind and nature existing between the parties hereto
with respect to this Agreement, and the rights, interests, understandings,
agreements and obligations of the respective parties and their prior oral
agreements.
(d) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
(e) If any one or more of the provisions contained in this
Agreement are held to be invalid or unenforceable in any respect, such
invalidity or unenforceability shall not affect any other provision hereof, and
the intent manifested thereby shall be recognized.
(f) Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, other than the parties hereto
and their respective heirs and successors, any legal or equitable rights, remedy
or claim under or in respect to this Agreement,
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or any provisions herein contained.
(g) This Agreement may not be amended, altered or modified
except by a written instrument signed by each of the parties.
(h) If any legal proceeding, arbitration or other action is
brought or threatened for the enforcement or interpretation of this Agreement,
or because of any alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, and the prevailing
party in any such action should incur any legal fees, including, but not limited
to, attorneys' fees, paralegal fees, expert witness fees, and other similar
costs, a successful prevailing party or parties to any such dispute or action
will be entitled to recover their reasonable attorneys' fees and additional
legal costs incurred, together with any other relief to which he/it may
otherwise be entitled, as determined by an arbitrator, judgment at trial, upon
appeal or petition.
5.2 SUCCESSORS BOUND; SURVIVAL OF COVENANTS. The rights and
obligations of the parties hereunder shall inure to the benefit of and shall be
binding upon the successors of each respective party. The representations,
warranties, covenants, and agreements of the parties, as well as any rights and
benefits of the parties, shall survive the execution hereof and following the
Employment Term to the extent so provided herein.
5.3. ARBITRATION. All disputes, controversies or differences which
may arise between the parties out of or in relation to or in connection with
this Agreement, or for the breach thereof, shall be finally settled by
arbitration in accordance with the Rules of the American Arbitration
Association. Any such arbitration shall be convened and take place in Houston,
Texas. Any such arbitration shall be absolute and binding upon the parties.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on and
as of the date first above written.
"EMPLOYEE" "EMPLOYER"
DSI TOYS, INC., A TEXAS CORPORATION
/S/ XXXXXX X. XXXXXXXX
XXXXXX X. XXXXXXXX By: /s/ Xxxxxxx X. Xxxxx
Title: President and CEO
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