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EXHIBIT 10.38
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is entered into as of June
1, 1999, between DSI Toys, Inc., a Texas corporation (the "Company") and M. D.
Xxxxx (the "Consultant").
WHEREAS, the Consultant has acquired extensive knowledge of and
experience in the businesses conducted by the Company;
WHEREAS, the Company desires to obtain the benefit of the Consultant's
knowledge and experience by retaining the Consultant, and the Consultant desires
to accept such position, for the term and upon the other conditions hereinafter
set forth;
WHEREAS, the Company and MVII, LLC have entered into that certain Stock
Purchase Agreement dated as of April 15, 1999 (the "Stock Purchase Agreement"),
pursuant to which MVII, LLC will acquire a substantial equity interest in the
Company, subject to the terms and conditions thereof; and
WHEREAS, the Consultant will cease to be an employee and officer of the
Company and of all its subsidiaries, effective as of the Second Closing (as such
term is defined in the Stock Purchase Agreement).
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the adequacy and sufficiency of which are hereby acknowledged,
the Company, Purchaser and the Consultant hereby agree as follows:
1. Term of the Agreement. The Company engages the Consultant as a
consultant, subject to the terms and conditions hereof, for the period
commencing at the Second Closing and ending on the third annual anniversary of
the Second Closing (the "Consulting Period"), subject to earlier termination
pursuant to Section 5 hereof.
2. Consulting Services; Expenses. During the Consulting Period, the
Consultant shall make himself available at times and places that are mutually
convenient to the Company and the Consultant to perform consulting services with
respect to the business conducted, or in development, by the Company. Such
consulting services shall include those matters as the Board of Directors of the
Company may reasonably request from time to time. At such mutually convenient
times and places, the Consultant shall use commercially reasonable efforts to
perform such consulting services, provided that the Consultant shall not be
required to provide such consulting services for more than twenty (20) hours per
month during the Consulting Period. The Company shall reimburse the Consultant
for all necessary travel and other reasonable out-of-pocket expenses incurred by
the Consultant in providing such consulting services in accordance with the
Company's policies for reimbursing such expenses as the same may be in effect
from time to time, subject to the reasonable approval of the Company's Board of
Directors.
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3. Independent Contractor. The Consultant shall perform the consulting
services described in Section 2 hereof as an independent contractor without the
power to bind, obligate or represent the Company for any purpose whatsoever. The
Consultant shall not, by virtue of being a consultant hereunder, be eligible to
receive any benefits for which officers or other employees of the Company are
eligible at any time, such as insurance, participation in Company pension plans
or other employee benefits. The Consultant hereby acknowledges his separate
responsibility for all federal and state withholding taxes, Federal Insurance
Contribution Act taxes, and workers' compensation and unemployment compensation
taxes, if applicable, and agrees to indemnify and hold the Company harmless from
any claim or liability therefor.
4. Compensation. As compensation for the consulting services to be
performed by the Consultant hereunder, the Company shall pay the Consultant
$450,000.00 (the "Consulting Payment"), payable in equal monthly installments of
$12,500.00. No amounts shall be payable following termination of this Agreement,
except as provided in Section 5 hereof.
5. Termination.
(a) This Agreement may be terminated at any time by the
Consultant on sixty (60) days' prior written notice to the Company. In
the event of such termination by the Consultant, the obligation of the
Company to pay compensation to the Consultant pursuant to Section 4
hereof shall cease, effective on the date of such termination.
(b) This Agreement may be terminated at any time by the
Company upon written notice to the Consultant. In the event of such
termination by the Company, the Company shall pay to the Consultant the
unpaid portion of the Consulting Payment in one lump sum within thirty
(30) days of such termination.
(c) This Agreement may be terminated by the Consultant upon
ten (10) days prior written notice to the Company in the event that the
Company shall breach any of its obligations under Section 2 or 4
hereof; provided, however, that the Consultant shall not be entitled to
terminate this Agreement pursuant to this Section 5(c) in the event
that the Company shall cure any such breach within such ten (10) day
period. In the event of such termination by Consultant, the Company
shall pay to the Consultant, the unpaid portion of the Consulting
Payment in one lump sum within thirty (30) days of such termination.
(d) This Agreement shall terminate immediately upon the death
of the Consultant or the permanent disability of the Consultant which
disability prevents him from performing the services described
hereunder. In the event of such termination by Consultant, the Company
shall pay to the Consultant, the Consultant's estate or the
Consultant's guardian, the unpaid portion of the Consulting Payment in
one lump sum within thirty (30) days of such termination.
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6. Disclosure of Information. The Consultant recognizes and
acknowledges that he has and will have access to certain confidential
information, proprietary data and trade secrets of the Company, and of entities
and individuals controlling, controlled by or under common control with the
Company ("affiliates"), including but not limited to, contracts, patterns,
devices, calculations, drawings, productions, plans, specifications, records,
compilations of information, and other confidential information and data either
compiled by the Company or received from its customers or the Consultant and
that such information is not generally available to the public and constitutes
valuable, special and unique property of the Company. The Consultant 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 of such confidential
information, proprietary data and/or trade secrets, directly or indirectly, or
disclose any of such information to any person or firm, corporation, association
or other entity for any reason or purpose whatsoever, except to authorized
representatives of the Company and as otherwise may be proper in the course of
performing his services hereunder. Further, the Consultant shall maintain the
confidentiality of all such information of the Company, its affiliates or its
customers for the sole use and benefit of the Company. All files, records,
documents, drawings, plans, specifications, contracts, products, equipment or
similar items relating to the business of the Company and/or its affiliates,
whether prepared by the Consultant or otherwise coming into his possession
during the Consulting Period or hereafter, shall remain the exclusive property
of the Company and/or the affiliates, as applicable, and shall not be removed
from the premises of the Company and/or its affiliates without the prior written
consent of the Company and/or its affiliates, as applicable. The Consultant
covenants and agrees to promptly return and deliver to the Company, on written
request, all documents, drawings, information, or other material or property of
any kind or character which in any way relate to the business of the Company or
any of its affiliates or customers, whether or not asserted to be the exclusive
property of the Company, and, further, the Consultant shall not attempt to
retain copies or duplicates of any such property. In the event of a breach or a
threatened breach by the Consultant, the Company and/or its affiliates may seek
an injunction restraining the Consultant from disclosing, in whole or in part,
such confidential information, in addition to all other remedies made available
hereby as a matter of law or in equity. In addition to any other damages
sustained by the Company, the Consultant shall pay to the Company all profits,
payments, earnings, compensation or other emoluments paid or accruing to the
Consultant, directly or indirectly, by reason of the Consultant's disclosure of
information as provided by this Section 6. Nothing herein shall be construed as
prohibiting the Company 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 the Consultant.
7. Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Consultant and by his personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees, and by the Company and Purchaser and their respective successors and
assigns.
8. Assignment. This Agreement is personal to the Consultant and shall
not be assigned or otherwise transferred by the Consultant.
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9. Notices. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered, when delivered by facsimile or by courier or
overnight express service or five days after having been sent by certified or
registered mail, postage prepaid, addressed: (a) if to the Consultant, to the
Consultant's address set forth below, or if to the Company, to Xxx Xxxxxx, 000
Xxxx Xxxxxx, Xxx Xxxx Xxxxxx, XX 00000, fax #805/000-0000, with a copy to J.
Xxxx Xxxxxxx, Esq., Andre, Morris & Buttery, 0000 Xxxxxxx Xxxxxx, Xxx Xxxx
Xxxxxx, XX 00000, fax #805/000- 0000, or (b) to such other address as any party
may have furnished to the other parties in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
10. Governing Law; Validity. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Texas without regard to
principles of conflicts of laws. The invalidity or enforceability of any other
provisions of this Agreement, which other provisions shall remain in full force
and effect.
11. Counterparts. This Agreement may be executed in three counterparts,
each of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
12. Miscellaneous. No provision of this Agreement may be modified or
waived unless such modification or waiver is agreed to in writing and executed
by the Consultant and by a duly authorized officer of the Company. No waiver by
any party hereto at any time of any breach by another party hereto of, or
failure to comply with, any condition or provision of this Agreement to be
performed or complied with by such other party shall be deemed a wavier of any
similar or dissimilar conditions or provisions at the same or at any prior or
subsequent time. Failure by the Consultant, the Company to insist upon strict
compliance with any provisions of this Agreement or to assert any right which
the Consultant, the Company may have hereunder shall not be deemed to be a
waiver of such provision or right or any other provision of or right under this
Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Consultant has executed this
Agreement as of the day and year first above written.
DSI TOYS, INC.
By: /s/ M.D. Xxxxx
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Name: M.D. Xxxxx
Title: C.E.O.
CONSULTANT:
/s/ M.D. Xxxxx
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M. D. Xxxxx
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