EXHIBIT 10.5
EMPLOYMENT AGREEMENT
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This Employment Agreement ("Agreement") is hereby made and entered into
this 11th day of December, 1995, (the "Effective Date") by and between DSI (HK)
Limited, a Hong Kong limited company, whose principal business address is Room
No. 803-6, World Finance Center South Tower, Harbour City, Tsim Sta Tusi,
Kowloon, Hong Kong (hereinafter referred to as "Employer" or "Company"), and Yau
Wing Kong, an individual residing at Xxxx X, Xxxxx 0, 00xx Xxxxx, Xxxxxxxxx
Center, 00 Xxxxx Xxxx, Xxxxx Xxxxx, Xxxx Xxxx (hereinafter referred to as
"Employee").
W I T N E S S E T H:
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ARTICLE 1
GENERAL
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1.1 Employment. The Employer hereby employs Employee and Employee hereby
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accepts such employment with the 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 the Employer including such duties as may be customary
for a Managing Director in the toy manufacturing and marketing industry.
Employee acknowledges that the Company shall be dependent upon the 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
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position of Managing Director - DSI (HK) Limited. 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 of the Company.
1.3 Term. Subject to the provisions provided for and relating to
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termination set forth herein, the term of Employee's employment, pursuant to
this Agreement, shall be for a period beginning on the date hereof and ending
January 31, 2000 (said period being hereinafter referred to as the "Employment
Term").
ARTICLE 2
REMUNERATION AND BENEFITS
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2.1 Base Salary. For all services rendered by Employee during the
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Employment Term, the Employer shall pay to Employee a salary of One Hundred
Sixteen Thousand HK Dollars (HK $116,000) monthly ("Base Salary") payable in
accordance with Employer's regular payroll policies during the Employment Term.
Employee's Base Salary may be raised during the Employment Term at the
discretion of the Board of Directors of Employer.
The Base Salary shall begin to accrue and be paid on the Effective Date of
this Agreement and shall be distributed in monthly installments in arrears
through the Employment Term. For any period during which the Base Salary is
unpaid the Base Salary shall accrue.
2.2 Performance Bonus. Employee may become entitled hereinafter to
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receive a performance bonus ("Performance Bonus") based on the Diversified
Specialist, Inc.'s ("DSI") "Pre Tax Income" (as defined below) for each full
fiscal year in which the Employee was employed by DSI commencing with the fiscal
year ended January 31, 1997, and ending with the fiscal year ended January 31,
2000. Performance Bonus for the Employee shall be calculated based on the Pre
Tax Income of DSI. For each fiscal year beginning with the fiscal year ended
January 31, 1997, during the term of this Agreement Employee shall be entitled
to a Performance Bonus for each such fiscal year in which the Pre Tax Income
exceeds U.S. $5,800,000.00. The Performance Bonus for any such fiscal year
shall be equal to one and one-half percent (1.5%) of the total Pre Tax Income
provided Pre Tax Income exceeds U.S. $5,800,000.00. Payment of the Performance
Bonus, if any, is due thirty (30) days after completion of DSI's audited
financial statements or upon determination in writing by the DSI's Independent
accountants of the "Pre Tax Income" of DSI, whichever is sooner.
In the event the "Pre Tax Income" of DSI is less than U.S. $5,800,000.00
during any fiscal year during the Employment Term, no Performance Bonus will be
earned or paid to Employee for any such fiscal year.
For purposes of this Agreement, "Pre Tax Income" shall be computed on a
consolidated basis (defined as DSI's U.S. and Hong Kong companies operations and
including additional acquisitions made by DSI of similar toy companies or
businesses related to the business of DSI and consolidated with DSI) by DSI's
independent accountants in accordance with generally accepted accounting
principles for each fiscal year end of DSI by reducing the sales of DSI by its
cost of goods sold, operating expenses, general, selling and administrative
expenses, interest, amortization, depreciation and other non-cash expense and
not including income taxes. "Pre Tax Income" shall be determined by DSI's
independent accountants and shall be binding on all parties.
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2.3 Benefits. Employee may be eligible to participate in any and all
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benefit plans which Employer may from time to time make generally available to
all employees of the Company, however, the extent to which Employee shall be
entitled to participate in such benefit plans shall be determined at the sole
discretion of the Company's Board of Directors. Employee shall be entitled to
medical insurance in such manner as commensurate with the Company's existing
medical insurance.
2.4 Extent of Service. During the Employment Term, Employee agrees to
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devote such reasonable business time, attention, energy and efforts to further
the business of the Employer consistent with services performed by a Managing
Director of a toy manufacturing and marketing company. Further, during the
Employment Term, Employee shall not be engaged in any other business activity
pursued for gain, profit or other pecuniary advantage if such activity
interferes with Employee's duties and responsibilities as set forth herein.
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 operating and affairs of enterprises in which such
investments are made nor otherwise violate the terms hereof, or investing in toy
companies that are "publicly traded" companies.
2.5 Offices. The Employer shall provide office space for the Employee,
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said arrangement to include provisions for secretarial and other support
services necessary to the maintenance and operating of such office and the
performance of Employee's duties.
2.6 Expense Allowance. The Employer shall reimburse Employee for all
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approved deductible business expenses reasonably incurred in the performance of
his duties, including reasonable expenditures for entertainment.
2.7 Vacations and Holidays. Employee shall be entitled to three (3) weeks
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vacation in accordance with Employer policies established by the Board of
Directors, as well as those public holidays duly observed by the Employer,
however, no more than two (2) weeks vacation shall be taken at one time.
2.8 Life Insurance. Employee shall be provided individual life insurance
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and disability insurance coverage with benefits at least equal to those
presently in force on the existing group life and health insurance coverages for
all employees.
ARTICLE 3
TERMINATION
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3.1 Death. In the event of the Employee's death during the Employment
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Term, the Employer shall pay to Employee's executor(s), administrator(s) or
personal representative(s) an
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amount equal to the installment of his Base Salary payable for the month in
which he dies and for no period thereafter. Employer shall pay any Performance
Bonus due as required in Section 2.2, if such Performance bonus has been earned
by Employee. In the event of Employee's death prior to the completion of a
fiscal year during the Employment Term, Employee's estate shall be entitled to a
pro rated Performance Bonus based on the portion of the fiscal year in which
Employee was actually employed prior to his death. 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 benefits that Employee is entitled at the time of death.
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.
Upon the death of the Employee, all employee benefits accrued for the
benefit of the Employee shall be distributed in accordance with the provisions
set forth in the 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 the Employee's
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failure to perform his duties for a continuous period equal to or in excess of
ninety (90) consecutive days during the Employment Term by reason of some
illness or disability, the 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, the Employer shall pay to Employee an amount
equal to the installments of his Base Salary payable up to the time this
Agreement is terminated with no further obligations regarding the Base Salary,
and shall distribute all accrued employee benefits, as of the date of
termination, to Employee in accordance with the provision of the 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 the Employee under this
Agreement, except Employee shall be entitled to a prorated Performance bonus
based on a portion of the fiscal year in which Employee was employed prior to
notification of termination pursuant to this Section 3.2 hereof.
3.3 By Employer for Cause. An Employee may be terminated "for cause" if
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Employee after thirty (30) days written notice to Employee specifying the
details of Employee's default of his obligations under this paragraph and
actions necessary to cure such default, Employee fails to cure such "cause."
"For cause" shall be if Employee
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(a) intentionally and willfully neglects the performance of his duties
established by the Board of Directors which he is reasonably required to perform
under the terms of this Agreement to the economic detriment of the Company; or
(b) intentionally and willfully 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 felony crime against Employer; or
(d) the material breach by Employee of any of the terms and conditions
of this Agreement.
Upon determination, the Employer may, at its option, terminate this
Agreement by giving thirty (30) days written notice of such termination to
Employee, without prejudice to any other remedy to which the Employer may be
entitled either at law or in equity, or under this Agreement. In such event,
any of the obligations of the employer under this Agreement shall be terminated
as of the date given in the notice of termination referred to hereinabove,
following payment by the Employer to Employee of that portion of the Base Salary
then accrued, due and owing in accordance with Section 2.1 hereof and a pro
rated Performance bonus based on a portion of the fiscal year prior to the time
Employee was terminated hereunder. Notwithstanding the foregoing, in the event
that Employee is terminated "for cause" based on actions of the Employee to the
economic detriment of the Company, or Employee enters into competition with
Company in its line of business, then Employee shall only be entitled to his
accrued Base Salary due at the time of notification of termination and shall not
be entitled to any Performance Bonus for the portion of the fiscal year
currently employed. Employee shall remain entitled in such event to any
Performance Bonus for such prior fiscal year for which he was employed that was
earned pursuant to this Agreement but which has not been paid as of the date of
termination pursuant to Section 3.3. Any future Performance Bonuses to be
earned under this Agreement shall also be deemed to have been waived and
forfeited.
3.4 Termination Without Cause. (a) Without cause, Company may terminate
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this Agreement upon thirty (30) days' 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 six (6) months and shall be entitled to a prorated
Performance bonus for such portion of the fiscal year in which he was employed
by the Company payable in accordance with and at such time as is the Company's
policy, but no other severance shall be paid to the Employee. Further, upon
payment by the Employer to Employee of the six (6) months Base Salary and
prorated Performance Bonus, 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 is already
entitled.
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(b) The Employee may terminate this Agreement upon thirty (30) days written
notice to the Company if at any time prior to the completion of a public
offering of Employer's stock, Xxxxx Acquisition, L.L.C.'s ownership interest in
Employer is terminated or Xxxxx Acquisition, L.L.C. is no longer the controlling
shareholder of Employer. In such event, Employee shall be paid his regular Base
Salary for two weeks from the date of termination, but shall not be entitled to
any Performance bonus for such portion of the fiscal year in which he was
employed prior to termination. Additionally the non-competition provision of
Section 4.2 and the non-solicitation provision of Section 4.3 shall be void and
unenforceable against Employee.
(c) Without cause, the Employee may terminate this Agreement upon thirty
(30) days written notice to the Company. In such event, Employee shall be paid
his regular Base Salary for two weeks from the date of termination, but shall
not be entitled to any Performance bonus for such portion of the fiscal year in
which he was employed prior to termination.
ARTICLE 4
COVENANTS
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4.1 Disclosure of Information. Employee recognizes and acknowledges that
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he has and will have access to certain confidential information, proprietary
data and trade secrets of the 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,
drawings, productions, plans, specifications, records, compilations of
information, and other confidential information and data either compiled by
employer or received from its customers or Employee and that such information is
not generally available to the public and constitutes valuable, special and
unique property of the Employer, provided, however, that the names of the
Company's customers shall not be deemed confidential information pursuant to
this Agreement. 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 of such confidential information, proprietary data and/or trade
secretes, 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 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
the Employer, its affiliates or its customers for the sole use and benefit of
the Employer. All files, records, documents, drawings, plans, specifications,
contract, products, equipment or similar items relating to the business of the
Employer and/or its affiliates, whether prepared by Employee or otherwise coming
into his possession during the Employment Term or hereafter, shall remain the
exclusive property of the Employer and/or the affiliates, as applicable, and
shall not be removed from the premises of the Employer and/or its affiliates
without the prior written consent of the Employer and/or its affiliates, as
applicable.
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Employee covenants and agrees to promptly return and deliver to the
Employer 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, Employee shall not attempt to retain
copies or duplicates of any such property. In the event of a breach or a
threatened breach 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 by
this Article 4. Nothing herein shall be construed as prohibiting the 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
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terminated in accordance with Section 3.3 and 3.4 for a period of one year
thereafter, except in the course of his 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 actual or potential competition in any
manner whatsoever with the business of Employer within the United states,
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(a) 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
year period following termination of the Employment Term an amount equal to one-
twelfth (1/12) of the annual salary set forth in Section 2.1. If the Employment
Term is terminated by Employee pursuant to Section 3.4(c) and Employer elects to
enforce the provisions of this Section 4.2, Employer shall be obligated to pay
Employee a one time payment of U.S. $50,000.00 as additional consideration
within thirty (30) days of Employee's termination.
4.3 Agreement Not to Solicit. During the Employment Term, and if this
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Agreement is terminated in accordance with Sections 3.3 and 3.4 for a period of
one (1) year thereafter, Employee will not, either directly or indirectly, on
his own or in the service of other:
(a) knowingly call upon, solicit, divert or attempt to solicit or divert
any of the business contacts of Employer except on behalf of a business
which is not competitive with Employer or in the same or a similar
business as Employer;
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(b) 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 or representative of
Employer to terminate or materially alter its relationship with
Employer.
ARTICLE 5
MISCELLANEOUS PROVISIONS
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5.1 Notices. Any notice required or permitted to be given under this
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Agreement shall be in writing and shall be deemed to have been given when hand
delivered or when deposited in the mails, by registered or certified first class
mail, postage prepaid, return receipt required addressed, at the respective
addresses first written above, or at such other address as either party shall
designate by written notice to the other given in accordance with the foregoing.
Any notice so given shall be deemed to have been given as of the date mailed.
5.2 Successors Bounds, Survival of Covenants. The rights and obligations
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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 Governing Law. The laws of Hong Kong applicable to contracts shall
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govern all questions related to the execution, construction, validity,
interpretation and performance of this Agreement and to all other issues or
claims arising hereunder.
5.4 Waiver. Failure to insist upon strict compliance with any provisions
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hereof shall not be deemed to a waiver of such provisions or any other provision
hereof.
5.5 Amendment. This Agreement may not be modified except by mutual
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agreement in writing duly executed by the parties hereto and approved by the
Board of Directors of the Company.
5.6 Severability and Invalid Provisions. If any provision of this
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Agreement (including, without limitation, any provision relating to the
activities covered by, time period of, or geographical area of the covenants
contained in Article 4 of this Agreement is held to be illegal, invalid, or
unenforceable under present or future laws effective during the term thereof,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; and the remaining provisions hereof shall remain in
full force and effect and shall not be effected by the
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illegal, invalid, or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal,, invalid, or unenforceable provision,
there shall be added automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid, or unenforceable provision as may be
possible and legal, valid, and enforceable and that shall not be more
restrictive than the one severed herefrom.
5.7 Assignment. The Employee may not assign his rights or obligations
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hereunder. The rights and obligations of the Company hereunder shall inure to
the benefit of and shall be binding upon the successors and assigns of the
Employer.
5.8 Attorneys' Fees. Each party to this Agreement shall be responsible
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for their own attorneys' fees incurred in defending or pursuing such claim or
cause of action under this Agreement.
5.9 Time Is Of The Essence. All parties agree that time is of the essence
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in the performance of their respective obligations hereunder.
Executed as of the Effective Date stated above. Employee by his execution
below has read all terms and conditions of this Agreement and has had ample
opportunity to ask questions regarding this Agreement and seek legal and tax
advice concerning the effects to Employee.
EMPLOYEE:
/s/ YAU WING KONG
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Name: Yau Wing Kong
EMPLOYER:
DSI (HK) LIMITED,
a Hong Kong limited company
By: /s/ M.D. XXXXX
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Name: M.D. Xxxxx
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Title:
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