EXHIBIT 10.11
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (the "Agreement") is effective
beginning as of October 4, 2004 ("Effective Date"), by and between Sunset
Holdings International, Ltd., a Delaware corporation ("Holdings"), and Sunset
Brands, Inc., a Nevada corporation formerly known as Cascade Sled Dog
Adventures, Inc. ("Sunset"),with reference to the following facts:
RECITALS
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A. Prior to the Effective Date, Holdings and Sunset Brands
California, Inc., a Nevada corporation formerly known as Sunset Brands, Inc.
("Old Sunset"), had an arrangement pursuant to which Holdings provided Old
Sunset with certain administrative services, office space and the services of
certain of personnel of Holdings, all of which was used by Old Sunset in
connection with its business.
B. Effective October 4, 2004, Old Sunset completed a merger with
a wholly-owned subsidiary of Sunset and, as a result of that merger, Old Sunset
became a wholly-owned subsidiary of Sunset (the "Merger").
C. Following the Merger, Sunset desires to assure the continued
services of Holdings and its personnel pursuant to the terms of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, Sunset hereby contracts with Holdings to obtain the management and
support services described herein and Holdings agrees to provide such services
on the terms and conditions set forth in this Agreement.
1. PERSONNEL SERVICES.
(a) SERVICES OF EXECUTIVE PERSONNEL. Holdings agrees to
provide Sunset with the services of the following personnel (collectively, the
"Personnel"): (i) Xxxx Xxxxxxx ("Xxxxxxx"), who shall serve as Chairman and
Chief Executive Officer of Sunset, and in such capacity shall provide the
services typically associated with the title of Chairman and Chief Executive
Officer of a public company, (ii) Xxxxx Xxxxxxx ("Radusch"), who shall serve as
Chief Financial Officer of Sunset, and in such capacity shall provide the
services typically associated with the title of Chief Financial Officer of a
public company, (iii) and Xxxx Xxxxxxx ("Xxxxxxx"), who shall serve as Vice
President, Corporate Development of the operating subsidiaries of Sunset, and in
such capacity shall provide the services typically associated with the title of
Vice President, Corporate Development of a public company or its subsidiaries,
and (iv) such secretarial and other office support personnel as Sunset and
Holdings shall mutually agree (the "Support Personnel") but which shall include,
at a minimum, (1) one receptionist/switchboard operator, and (2) one executive
assistant, secretary or other such person providing similar services. Xxxxxxx,
Radusch and Xxxxxxx are sometimes collectively referred to herein as the
"Executive Personnel."
(b) EMPLOYEES OF HOLDINGS. Each of the Personnel shall be
employees of Holdings and shall report to Holdings; provided, however, at the
request of Sunset, such Personnel shall make periodic reports to Sunset, its
officers, directors or other third parties designated by Sunset in their
capacity as agents of Holdings.
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(c) ADDITIONAL BENEFITS. In addition to any compensation
received by Personnel as employees of Holdings, during the term of this
Agreement and subject to the approval of specific grants by the Board of
Directors of Sunset and compliance with the terms of particular plans, each of
the Executive Personnel and such other Personnel as Sunset may determine, shall
be entitled to participate in equity compensation plans maintained for officers,
employees and/or consultants of Sunset but shall not be entitled to participate
in any insurance or other benefit plans maintained by Sunset for its officers or
employees.
2. COMPENSATION FOR SERVICES.
(a) MONTHLY FEE. Subject to the provisions of Section
2(b) below, as compensation for providing the Personnel and the Office Overhead
(as defined below) (collectively, the "Services"), Sunset shall pay Holdings a
gross monthly fee of $43,333 (the "Monthly Fee"), which, unless otherwise agreed
by Sunset and Holdings, shall be payable monthly in advance on the first day of
each month during the Term (and any extension or renewal thereof). In addition
to the Monthly Fee, during the Term Sunset shall pay or reimburse Holdings for
(i) the direct costs of providing medical and dental insurance to the Executive
Personnel, (ii) one-half of the salaries and related employment taxes paid by
Sunset with respect to the Support Personnel, and (iii) one-half of the direct
costs of providing medical and dental insurance to the Support Personnel. At the
request of Sunset, Holdings shall provide documentation reasonably supporting
Holdings' determination of the costs of such insurance. Holdings shall be
required to pay any payroll taxes and withholdings required under applicable law
with respect to the Personnel providing services to Sunset pursuant to this
Agreement.
(b) REDUCTION OF MONTHLY FEE IN THE EVENT OF TERMINATION
OF EXECUTIVE PERSONNEL. Notwithstanding anything to the contrary set forth in
Section 2(a) above, in the event that any of the Executive Personnel are (i)
terminated or resign as employees of Holdings, (ii) cease providing services to
Sunset or its direct or indirect subsidiaries, or (iii) are required to be
terminated as providers of Services for "Cause" in accordance with the
provisions of Section 6(d) below, then the Monthly Fee shall be reduced by the
amounts set forth in Schedule A effective on the first day of the month
following the months of such resignation or termination of services. Such
reduction shall continue unless and until Holdings and Sunset agree upon a
replacement for the terminated Executive Personnel.
(c) EXPENSE REIMBURSEMENT. Sunset shall reimburse
Holdings or, to the extent applicable, the Executive Personnel, for all out of
pocket travel, entertainment and other business expenses incurred by them in
connection with the provision of Services to Sunset (which reimbursement shall
not include Office Space or Office Overhead expenses). Any such expense
reimbursement shall be subject to the same reasonable and customary expense
reimbursement policies and procedures established by Sunset for its employees.
3. METHOD OF PROVIDING SERVICES. Holdings and Sunset will
cooperate in planning the scope and timing of the Services to be provided by
Holdings under this Agreement. It is expected that the Executive Personnel shall
perform such duties and exercise powers related thereto as may from time be
assigned to them by Holdings at the request of Sunset. Each of the Executive
Personnel agree to duly and diligently perform all duties assigned to them by
Holdings relating to Sunset. Each of the Personnel and Holdings shall be bound
by and faithfully observe and abide by all rules and regulations of Sunset which
are brought to the attention of such
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Personnel or Holdings or of which they reasonably should be aware. It is
expected that each of the Executive Personnel shall devote substantially all of
his working time, attention, skill and energies to providing Services to Sunset;
provided, however, that it is expressly understood and agreed that (i) Radusch
may continue to serve as an officer of another public company in the process of
liquidating, and (ii) both Xxxxxxx and Xxxxxxx may continue to provide services
to Holdings with respect to business opportunities that are unrelated to the
business of Sunset so long as such activities do not materially interfere with
the ability of Holdings to provide the Services contemplated by this Agreement.
4. OFFICE SPACE AND ADMINISTRATIVE SUPPORT. During the term of
this Agreement, Holdings shall provide Sunset with office space sufficient for
Sunset to maintain its corporate offices (the "Office Space"). The Office Space
shall be located at the premises currently occupied by Holdings at 00000
Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000 or such other
location mutually acceptable to Holdings and Sunset. In addition, Holdings will
provide furniture, telephone usage, customary business liability insurance
coverage relating to the office (but excluding errors or omission, product
liability and other such insurance relating to the operation of Sunset's
business), computer equipment, copier service and other normal office equipment,
supplies and overhead (collectively, the "Office Overhead"). As consideration
for the expenses incurred by Holdings in providing and maintaining the Office
Space and Office Overhead, Sunset shall pay to Holdings $12,500 per month, each
payment due and payable in advance on the first business day of each calendar
month and pro rated for any period during the Term of this Agreement (as
hereafter defined) of less than a calendar month based on the actual number of
days elapsed. Sunset understands and acknowledges that during the Term of this
Agreement, Holdings shall continue to maintain its corporate offices in the
Office Space. Holdings and Sunset will cooperate in order to minimize any
interference caused by Holdings and Sunset sharing the Office Space and Holdings
providing the Office Overhead; provided, however if such interference is
unavoidable, Holdings will apportion, in its sole discretion, the available
Office Space and Office Overhead in a fair and reasonable manner.
5. INSURANCE. During the Term and subject to any applicable
insurance policy limits, Holdings and all of the Personnel shall be entitled to
indemnification and the benefits of any officer, director or employee errors and
omissions insurance coverage on the same terms generally provided to officers,
directors agents or employees of Sunset as in effect immediately prior to the
Effective Date. Nothing in this Agreement shall be deemed to limit any
indemnification rights that any Personnel may have under the charter documents
of Sunset or its subsidiaries or under applicable law or under the terms of any
indemnification agreement, if any, between Sunset and the Personnel in question.
6. TERM AND TERMINATION.
(a) TERM. The term of this Agreement (the "Term") shall
commence on the Effective Date and terminate on the first anniversary of the
Effective Date; provided, however, that the term of this Agreement shall
automatically renew for successive one (1) year terms unless either party
delivers written notice to the other of its desire to terminate the Agreement at
least thirty (30) days prior expiration of the then-effective Term.
(b) TERMINATION. Either party may terminate this
Agreement at any time upon 30 days written notice. In the event Sunset
terminates this Agreement without Cause (as hereafter defined) prior to the
expiration of the Term (or any renewal of the Term), Holdings
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shall be entitled to receive on the date of termination the compensation due and
payable to Holdings for the remainder of the then-effective Term. This Agreement
shall terminate immediately, in the event that either party files a petition in
voluntary bankruptcy or an assignment for the benefit of creditors, or upon
other action taken or suffered, voluntarily or involuntarily, under any federal
or state law for the benefit of creditors or debtors, except for the filing of a
petition in involuntary bankruptcy against either party which is dismissed
within 30 days thereafter.
(c) CAUSE DEFINED. As used herein, the term "Cause" shall
mean (i) Holdings' material breach of this Agreement or failure or refusal to
render services to Sunset in accordance with this Agreement, provided that if
Holdings' breach, failure or refusal is capable of remedy, Cause shall exist if
Holdings fails to cure such breach, failure or refusal within a reasonable
period of time not to exceed thirty (30) business days or if such breach,
failure or refusal is timely cured, Holdings repeats such breach, failure or
refusal; (ii) negligence in the performance of Holdings' duties which results in
or could reasonably be expected to harm or prejudice Sunset in any material
respect, (iii) the commission by Holdings or any of the Executive Personnel of
an act of fraud or embezzlement against Sunset or any subsidiaries thereof, or
the commission by Holdings or any of the Executive Personnel of any other bad
faith action which can be reasonably anticipated to injure Sunset; (iv) an act
of moral turpitude by any of the Executive Personnel; or (vi) any of the
Executive Personnel having been convicted of, or pleading nolo contendere to, a
felony (other than traffic offenses which do not bring any of the Executive
Personnel or Sunset into disgrace or disrepute).
(d) TERMINATION OF EXECUTIVE PERSONNEL. Upon 30 days
prior written notice, Sunset may require that Holdings terminate the Services of
any Executive Personnel; provided, however, such termination shall not have any
effect on the employment by Holdings of the Executive Personnel in question. In
the event that such termination is required by Sunset for "Cause", as such term
is defined in this subsection (d), the Monthly Fee shall be reduced in
accordance with the provisions of Section 2(b) of this Agreement. In the event
that such termination is required by Sunset without "Cause" then no reduction in
the Monthly Fee shall apply. Solely for purposes of this subsection (d), the
term "Cause" shall mean (i) a material breach by the Executive Personnel in
question of his duties to Sunset (or its direct or indirect subsidiaries) or his
failure or refusal to render services to Sunset as contemplated by this
Agreement, provided that if the breach, failure or refusal is capable of remedy,
Cause shall exist if the Executive Personnel fails to cure such breach, failure
or refusal within a reasonable period of time not to exceed thirty (30) business
days or if such breach, failure or refusal is timely cured, the Executive
Personnel in question repeats such breach, failure or refusal; (ii) negligence
in the performance of the Executive Personnel's duties which results in or could
reasonably be expected to harm or prejudice Sunset in any material respect,
(iii) the commission by the Executive Personnel of an act of fraud or
embezzlement against Sunset or any subsidiaries thereof, or the commission by
the Executive Personnel of any other bad faith action which can be reasonably
anticipated to injure Sunset; (iv) an act of moral turpitude by the Executive
Personnel; or (vi) the Executive Personnel having been convicted of, or pleading
nolo contendere to, a felony (other than traffic offenses which do not bring the
Executive Personnel or Sunset into disgrace or disrepute).
7. NON-COMPETITION AND NON-SOLICITATION.
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(a) NON-COMPETITION.
(i) In the event this Agreement is terminated
(for any reason, including the expiration of its Term) Holdings and each of the
Executive Personnel agree, for a period of 18 months (the "Restricted Period")
not to, without the prior written consent of Sunset, for whatever reason, own,
manage, control, operate, invest or acquire an interest in, become employed by,
interested in, associated with, or otherwise engaged in, or act on behalf of any
trade or business that is in "Competition" (as defined below) with the business
conducted by Sunset (directly or through its direct or indirect subsidiaries) in
the United States.
(ii) The trades, businesses or activities that
are or would be in "Competition" with the business of Sunset include, but are
not limited to: (1) the direct or indirect ownership of or other participation
in the design, manufacture, sale or distribution of low-carbohydrate, natural or
health-oriented food and beverage products; (2) employment or other engagement
in a management or consulting position that includes responsibility for
oversight of the design, manufacture, sale or distribution of low-carbohydrate,
natural or health-oriented food and beverage products.
(iii) Nothing in the preceding Sections 7(a) or
(b) shall be construed to preclude any of Holdings or the Executive Personnel
from being employed by a competitor of Sunset in a position not involving any
direct or indirect services by Holdings or the Executive Personnel by, for or on
behalf of any division, unit or enterprise which is engaged in competitive
activities with the business of Sunset. Without limiting the generality of the
foregoing, for the avoidance of doubt, the parties agree that Sections 7(a), (b)
and (c) preclude Holdings or the Executive Personnel, during the Restricted
Period, from participating in the design, production, sale, licensing or
distribution of products or product distribution systems that are competitive
with the business of Sunset.
(iv) It is specifically agreed and understood
that because of the nature of the business, the duration and geographic scope of
the covenants set forth in this Section 7(a) (the "Restrictive Covenants") are
reasonable. However, in furtherance of the provisions of this Section 7(a) and
subsections hereunder, the Parties agree that in the event a court should
decline to enforce all of the Restrictive Covenants, or any part thereof, the
other Restrictive Covenants and the remainder of any of the Restrictive
Covenants so impaired shall not thereby be affected and shall be given full
effect, without regard to the invalid portions. If any court determines that any
of the Restrictive Covenants or any parts thereof are unenforceable because of
the duration or scope thereof, such court shall have the power to reduce the
duration or scope, as the case may be and such Restrictive Covenants shall then
be enforceable in their reduced form.
(b) NONSOLICITATION.
(i) During the Restricted Period, neither
Holdings nor the Executive Personnel will, directly or indirectly (a) employ or
retain, or arrange to have any other person or entity recruit, solicit, employ
or retain, any person who was employed or retained by Sunset or its direct or
indirect subsidiaries as an employee, consultant or agent at any time during the
Term; or (b) influence or attempt to influence any such person to terminate or
modify his/her employment arrangement or other relationship with Sunset or any
of its direct or indirect
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subsidiaries.
(ii) During the Restricted Period, neither
Holdings nor the Executive Personnel will advertise or otherwise promote any
business (or any corporation, firm or enterprise carrying on business) in
Competition with Sunset.
(iii) During the Restricted Period, neither
Holdings nor the Executive Personnel will, directly or indirectly, solicit,
divert or take away, or attempt to divert or take away, the business or
patronage of any of the clients, customers or accounts, or prospective clients,
customers or accounts, of Sunset.
8. INDEPENDENCE.
(a) PERSONNEL ARE EMPLOYEES OF HOLDINGS. All of the
Personnel, and any other employees and representatives of Holdings providing the
Services to Sunset under this Agreement, will be deemed for purposes of all
compensation and employee benefits to be employees of Holdings and not employees
of Sunset; provided, however, that it is expected that the Executive Personnel
will serve as officers and/or directors of Sunset and/or its direct or indirect
subsidiaries. In performing the Services, the Personnel will be under the
direction, control and supervision of Holdings (not of Sunset) and, subject to
the rights of Sunset to request that specific Personnel not provide the
Services, Holdings will have the sole right to exercise all authority with
respect to the employment (including termination of employment), assignment and
compensation of such employees and representatives.
(b) SERVICE AS OFFICERS OR DIRECTORS. Notwithstanding
anything to the contrary contained in this Agreement, it is expected that the
Executive Personnel will serve as officers and/or directors of Sunset and/or its
direct or indirect subsidiaries. To the extent any Executive Personnel serve as
(i) an officer of Sunset or its direct or indirect subsidiaries, then such
Executive Personnel shall, in such capacities, serve at the discretion of, and
shall answer to, the Board of Directors of the applicable companies and shall
have such duties to Sunset and its affiliates as may be required by the
applicable Board of Directors and/or under applicable charter documents and
applicable law, and/or (ii) a director of Sunset or its direct or indirect
subsidiaries, then such Executive Personnel shall, in such capacities, serve at
the discretion of the shareholders of the applicable companies and shall have
such duties thereto as required under applicable charter documents and
applicable law.
9. CONFIDENTIALITY. Each party hereto agrees to hold, and to use
its commercially reasonable efforts to cause its employees and representatives
to hold, in confidence all confidential information concerning the other parties
furnished to or obtained by such party after the Effective Date in the course of
providing Services under this Agreement, in a manner consistent with such
party's standard policies with respect to the preservation and disclosure of
confidential information concerning such party.
10. MISCELLANEOUS
(a) ASSIGNMENT. Neither party may assign this Agreement
except with the prior written consent of the other party.
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(b) GOVERNING LAW. This Agreement is intended to be
performed in and governed by the laws of the State of California.
(c) SEVERABILITY. If any term, provision, covenant or
condition of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining portions of this Agreement shall
remain in full force and effect.
(d) ARBITRATION. Any disputes arising between the parties
with respect to this Agreement shall be resolved through binding arbitration to
be held in Los Angeles County, California in accordance with the Rules of the
American Arbitration Association and applicable law. Such arbitration shall be
binding and final and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The arbitrator shall have no
right, power or jurisdiction to award an Applicant any punitive or exemplary
damages of any kind. THE PARTIES ACKNOWLEDGE AND AGREE THAT THEY ARE AGREEING TO
THIS ARBITRATION PROVISION AND ARE WAIVING ALL RIGHTS TO A TRIAL BY JURY. The
prevailing party in any arbitration shall be entitled to recover its reasonable
attorneys' fees and costs.
(e) HEADINGS. Headings or captions of paragraphs and
sections of this Agreement are for reference only and are not to be construed in
any way as a part of this Agreement.
(f) NOTICES. All notices under this Agreement will be in
writing and shall be deemed to have been given if personally delivered,
transmitted by facsimile (with mechanical confirmation of transmission), or
deposited in the United States mail, registered or certified, postage prepaid,
addressed to the parties' addresses set forth below:
To Holdings: Sunset Holdings International Ltd.
00000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
To Sunset: Sunset Brands, Inc.
00000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: President and Chairman of
the Board
Notices shall be deemed effective on the third day following deposit in the mail
or on the day of transmission or delivery if given by facsimile or by hand.
(g) MODIFICATION. There are no other agreements or
understandings, written or oral, between the parties regarding the subject
matter of this Agreement. This Agreement shall not be modified or amended,
except by a written document executed by both parties and specifically referring
to this Agreement.
(h) WAIVER. Any waiver of any terms and conditions in
this Agreement must be in writing and signed by the parties. No delay or
omission by either party to
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exercise any right or remedy under this Agreement shall be construed to be
either acquiescence or the waiver of the ability to exercise any right or remedy
in the future. A waiver of any of the terms and conditions of this Agreement
shall not be construed as a waiver of any other terms and conditions.
(i) AUTHORITY. Each party represents and warrants it has
the capacity to enter into and bind itself to this Agreement and has taken all
corporate or other compliance actions necessary to do so.
(j) EXECUTION IN COUNTERPARTS. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument. Signatures to this Agreement delivered by facsimile or
electronic form shall have the same force and effect as originals.
(k) ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties with respect to the subject matter hereof, and
supersedes any and all prior written or oral agreements between the parties with
respect to the subject matter hereof. There are no representations, agreements,
arrangements, or understandings, either written or oral, between or among the
parties with respect to the subject matter hereof which are not set forth in
this Agreement.
(l) EMPLOYMENT AGREEMENT OF XXXX XXXXXXX. Xxxx Xxxxxxx
hereby acknowledges and agrees that his Employment Agreement, dated December 3,
2003, has been terminated and that no severance or other payments are owed to
him by Sunset or its affiliates thereunder.
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IN WITNESS WHEREOF, the duly authorized agents of each of the parties
have duly executed this Agreement effective as of the day and year first above
written.
SUNSET HOLDINGS INTERNATIONAL, LTD.
By: /s/ XXXX XXXXXXX
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Xxxx Xxxxxxx, President
SUNSET BRANDS, INC.
By: /s/ XXXXXXX XXXXXXX
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Xxxxxxx Xxxxxxx, Chief Financial Officer
AGREED TO AND ACCEPTED IN ITS ENTIRETY:
/s/ XXXX XXXXXXX
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Xxxx Xxxxxxx
/s/ XXXX XXXXXXX
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Xxxx Xxxxxxx
/s/ XXXXXXX XXXXXXX
-------------------------------
Xxxxxxx Xxxxxxx
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SCHEDULE A
REDUCTION OF MONTHLY FEE IN THE EVENT OF TERMINATION OF EXECUTIVE PERSONNEL
Name Reduction in Monthly Fee on Termination
Xxxx Xxxxxxx $16,667
Xxxx Xxxxxxx $ 5,833
Xxxxxxx Xxxxxxx $ 8,333
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