SIDE LETTER AGREEMENT
This Side Letter Agreement (this "Agreement"), is entered into this
15th day of April, 1999, between MVII, LLC, a limited liability company formed
under the laws of the State of California ("Purchaser"), and ___________________
WHEREAS, Shareholder beneficially owns and has dispositive power over
__________ shares (the "Shares") of common stock, par value $.01 per share
("Common Stock"), of DSI Toys, Inc., a Texas corporation (the "Company");
WHEREAS, concurrently herewith, the Company and Purchaser are entering
into a Stock Purchase Agreement dated as of April 15, 1999, (the "Stock Purchase
Agreement"), pursuant to which Purchaser has agreed, among other things, to make
a cash tender offer (the "Offer") for up to 1,600,000 shares of Common Stock of
the Company at $4.38 per share (or any higher price paid in the Offer, the
"Offer Price"), net to the seller in cash;
WHEREAS, as a condition to the willingness of Purchaser to enter into
the Stock Purchase Agreement, Purchaser has required that Shareholder agree, and
in order to induce Purchaser to enter into the Stock Purchase Agreement,
Shareholder has agreed, among other things, to tender the Shares into the Offer;
WHEREAS, capitalized terms not defined herein shall have the meanings
ascribed to them in the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the adequacy of
which is hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Tender of Shares.
(a) Shareholder agrees, in the event the Minimum Condition is
not met as of the initial scheduled expiration date of the Offer, to tender and
sell to Purchaser, free and clear of all mortgages, pledges, security interests,
encumbrances, liens, options, debts, charges, claims and restrictions of any
kind, such number of Shareholder's Shares, pursuant to the terms of the Offer,
except where such sales in response to the Offer might result in liability under
Section 16(b) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), so that the number of Shares tendered by Shareholder and all
other shareholders of the Company shall meet the Minimum Condition. Shareholder
agrees that Shareholder shall deliver to the depository for the Offer for
receipt prior to the initial scheduled expiration date of the Offer, either a
letter of transmittal together with the certificates for the Shares, if
available, or a "Notice of Guaranteed Delivery," if the Shares are not
available. Shareholder agrees not to withdraw any Shares tendered into the
Offer. Nothing contained herein shall prevent Shareholder from tendering any or
all Shares, even if the Minimum Condition is otherwise met, subject to the pro
rata reduction as described in Section 1(b) of this Agreement.
(b) In the event more than 1,600,000 shares of Common Stock
are tendered into the Offer, the Shares tendered by the Shareholder shall be
subject to a pro rata reduction to the same extent as the shares of Common Stock
tendered by any other shareholder in the Offer, as required by the Stock
2. Representations and Warranties of Shareholder.
Shareholder hereby represents and warrants to Purchaser as follows:
Shareholder is the owner (both beneficially and of record) of
the Shares. Except for the Shares and as set forth in Exhibit 2.1 attached
hereto, Shareholder is not the record or beneficial owner of any shares of, and
does not have any other rights of any nature to acquire any additional shares
of, capital stock of the Company. Shareholder will deliver in accordance with
the terms of this Agreement, all of the Shares, free and clear of all security
interests, liens, claims, pledges, options, restrictions, rights of first
refusal, agreements, limitations on Shareholder's voting rights, charges and
other encumbrances of any nature whatsoever, except for those rights and
limitations contemplated by the Stock Purchase Agreement and the Other
Agreements. Except as provided in that certain Shareholders' and Voting
Agreement of DSI Toys, Inc. dated as of even date herewith among the Company,
Purchaser, and the DSI Group, Shareholder has not appointed or granted any
proxy, which appointment or grant is still effective, with respect to any of the
Shares. The Shareholder has sole power of disposition with respect to all of the
2.2 Authority Relative to This Agreement.
Shareholder has all necessary power and authority to execute
and deliver this Agreement, to perform Shareholder's obligations hereunder and
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Shareholder and, assuming the due
authorization, execution and delivery by Purchaser, constitutes a legal, valid
and binding obligation of Shareholder enforceable against Shareholder in
accordance with its terms.
2.3 No Conflict.
The execution and delivery of this Agreement by Shareholder
does not, and the performance of this Agreement by Shareholder will not, (a)
except for any filings required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), require any consent,
approval, authorization or permit of, or filing with or notification to , any
governmental or regulatory authority, domestic or foreign, or (b) conflict with,
violate or result in any breach of or constitute a default under (or an event
which with notice or lapse of time or both would become a default under) any
agreement, judgment, injunction, order, law, rule, regulation, decree or
arrangement to which Shareholder or the Company is a party or is bound.
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Shareholder or the Company.
2.5 Absence of Claims.
Shareholder has no claims, demands, actions, causes of action,
suits, damages, or losses of any nature whatsoever, whether asserted or
unasserted, as a result of actions or omissions through the date of this
Agreement, including without limitation any claims of alleged employment
discrimination, either as a result of the negotiated and specifically agreed to
separation of the Shareholders's employment with the Company or otherwise, under
the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of
1964, the Americans with Disabilities Act, any other federal, state or local
statute, rule, ordinance, or regulation, as well as any claims for alleged
wrongful discharge, negligent or intentional infliction of emotional distress,
breach of contract, including, without limitation, the breach of any employment
agreement between the Company and the Shareholder, or any other claims sounding
in tort, contract, or any other unlawful or wrongful behavior ("Claims"), and
knows of no set of facts which, currently or with the passage of time, would
give rise to any Claims by the Shareholder, against the Company, any of its
subsidiaries or any affiliated companies and businesses thereof, or any of their
successors, assigns, officers, owners, directors, agents, representatives,
attorneys or employees (the "Company Affiliates").
3. Representations and Warranties of Purchaser.
3.1 Authority Relative to This Agreement.
Purchaser has all necessary power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Purchaser and the consummation by Purchaser of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly and
validly executed and delivered by Purchaser and, assuming the due authorization,
execution and delivery by Shareholder, constitutes a legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
3.2 No Conflict.
The execution and delivery of this Agreement by Purchaser does
not, and the performance of this Agreement by Purchaser will not, (a) except for
any filings required under the HSR Act, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, (b) conflict with or violate the
governing instruments of Purchaser, (c) conflict with, violate or result in any
breach of or constitute a default under (or an event which with notice or lapse
of time or both would become a default under) any agreement, judgment,
injunction, order, law, rule, regulation, decree or arrangement
applicable to Purchaser or by which any property or asset of Purchaser is bound
or affected, other than, in the case of clause (c), any such conflicts,
violations, breaches or defaults that, individually or in the aggregate, would
not materially impair the ability of Purchaser to perform its obligations
Except for Gerard, Klauer, Xxxxxxxx & Co., Inc. and other
broker-dealers Purchaser may elect to retain, all of whose fees will be paid by
Purchaser, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Purchaser.
3.4 Investment Intent.
Purchaser hereby represents that any securities it purchases
pursuant to this Agreement are being purchased for its own account for
investment and not with a view to, or for sale in connection with, any public
4. Covenant of Shareholder.
Shareholder shall not, directly or indirectly, solicit, initiate or
knowingly encourage (including by way of furnishing information), entertain or
consider any Takeover Proposal from any Person other than Purchaser or engage in
or continue discussions or negotiations relating to any Takeover Proposal,
except that the provisions of this Section 4 shall not restrict the
Shareholder's ability to act in such Shareholder's capacity as a director of the
Company in accordance with Section 5.2 of the Stock Purchase Agreement.
Shareholder shall immediately cease any existing activities, discussions or
negotiations by Shareholder or any investment banker, attorney, accountant or
other advisor or representative of Shareholder with parties conducted heretofore
with respect to any of the foregoing.
5. Additional Covenants of Shareholder.
Shareholder hereby covenants and agrees that until the earlier of the
Second Closing or the termination of the Stock Purchase Agreement in accordance
with the terms and conditions thereof, except as contemplated by this Agreement
and except pursuant to the Offer, Shareholder shall not, and shall not offer or
agree to, sell, transfer, tender, assign, or otherwise dispose of, or create or
permit to exist any restriction, right of first refusal, agreement or limitation
on Shareholder's voting rights, with respect to, the Shares now owned or any
other shares that may hereafter be acquired by Shareholder, other than as
contemplated by the Stock Purchase Agreement and the Other Agreements.
This Agreement shall terminate automatically on the earlier to occur of
the Second Closing or termination of the Stock Purchase Agreement in accordance
with the terms and conditions thereof.
All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
The representations and warranties of the Shareholder
contained in this Agreement shall survive the termination of this Agreement only
upon the occurrence of the Second Closing until the fourth anniversary of the
7.3 Further Assurances.
Shareholder and Purchaser shall execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
7.4 Specific Performance.
The parties hereto agree that irreparable damage would occur
in the event any provision of this Agreement were not performed in accordance
with the terms hereof and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or in
7.5 Entire Agreement.
This Agreement constitutes the entire agreement between
Purchaser and Shareholder with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written and oral,
between Purchaser and Shareholder with respect to the subject matter hereof.
This Agreement shall not be assigned by operation of law or
7.7 Parties in Interest.
This Agreement shall be binding upon, inure solely to the
benefit of, and be enforceable by, the parties hereto and their successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended to
or shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
7.8 Amendment; Waiver.
This Agreement may not be amended except by an instrument in
writing signed by the parties hereto. Any party hereto may (a) extend the time
for the performance of any obligation or other act of any other party hereto,
(b) waive any inaccuracy in the representations and warranties contained herein
or in any document delivered pursuant hereto and (c) waive compliance with any
agreement or condition contained herein, provided, however, any such extension
or waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law, or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain
fully in force and effect so long as the economic or legal substance of this
Agreement is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the terms of
this Agreement remain as originally contemplated to the fullest extent possible.
All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or facsimile to the
respective parties as follows:
If to Purchaser:
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
if to Shareholder:
with a copy to:
Xxxxxxx X. Xxxxxxxx, Esq.
Xxxxxxxx & Knight
1200 San Jacinto Center
00 Xxx Xxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Fax #: 512/000-0000
7.10 Governing Law.
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Texas applicable to contracts executed
in and to be performed in Texas without regard to any principles of choice of
law or conflicts of law of such State.
The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
This Agreement may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when as executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed and delivered as of the date first written above.
Name: E. Xxxxxx Xxxxxx