EXHIBIT 10.13
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into as
of November 29, 2004 by and between Sunset Brands, Inc., a Nevada corporation
("Client"), and Xxxxxxx Xxxxxx ("Consultant").
A. WHEREAS, Consultant has extensive sales, marketing and other
experience in the pre-packaged food and beverage industry;
B. WHEREAS, Client is a public corporation engaged in the business of
operating and developing low-carbohydrate and other health-oriented food and
beverage products and related businesses;
C. WHEREAS, the Client deems it to be in its best interest to retain
Consultant to render to the Client management consulting and advisory services,
and
D. WHEREAS, Consultant is ready, willing and able to render such
consulting and advisory services to the Client as hereinafter described on the
terms and conditions more fully set forth below.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Agreement, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
1. CONSULTING SERVICES. The Client hereby retains the Consultant as an
independent consultant to the Client and/or any direct or indirect subsidiaries
of Client (including, without limitation, Low Carb Creations, Inc.) and the
Consultant hereby accepts and agrees to such retention. The Consultant shall
personally render to the Client such services as set forth on Exhibit A,
attached hereto and by reference incorporated herein. Consultant shall use his
commercially reasonable best efforts to conduct his services and affairs in a
professional manner and in accordance with good industry practice. Consultant
shall devote such time and attention to Client matters as is reasonably
requested by the Client in order to assure the timely, professional and
successful provision of the services described in Exhibit A. Consultant agrees
that during the Term of the engagement contemplated by this Agreement Consultant
shall not provide consulting or other services to any other company or entity
engaged in the business of manufacturing or selling health-oriented pre-packaged
food and beverage products; provided, however, that (i) Client acknowledges and
agrees that Consultant owns and operates an existing media consulting and
advertising firm (the "Continuing Activities"), and (ii) nothing herein shall be
deemed to prohibit Consultant from engaging in the Continuing Activities in a
manner consistent with historical practices.
Consultant hereby represents and warrants to Client that (i) he carries
all such professional licenses necessary for Consultant to perform the services
and receive the compensation contemplated by this Agreement, and (ii) the
execution of this Agreement and performance by Consultant of his obligations
hereunder does not violate or constitute a breach by Consultant of any
employment or consulting arrangement, or any contract or other agreement to
which Consultant or his affiliates may be a party (including, without
limitation, any non-competition, non-disclosure, confidentiality or other
restrictive covenant).
2. INDEPENDENT CONTRACTOR. Consultant agrees to perform his consulting
duties hereunder as an independent contractor. Nothing contained herein shall be
considered to
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create an employer-employee relationship between the parties to this Agreement.
The Client shall not be liable to third parties for the acts of Consultant or
his employees or agents, in performing the consulting duties hereunder. The
Client shall not be responsible to make social security, workers' compensation
or unemployment insurance payments on behalf of Consultant and/or Consultant's
officers, employees, representatives and agents.
3. TIME, PLACE AND MANNER OF PERFORMANCE. The Consultant shall be
available for advice and counsel to the officers and directors of the Client (or
any affiliates of Client) at such reasonable times and places as may be
requested by the Client. Notwithstanding the foregoing, the Consultant shall (a)
not be required to devote more than fifteen (15) hours per week to the business
of the Client without the consent of the Consultant; (b) perform services
hereunder primarily from his office in New York, New York; and (c) not be
required to relocate to the Client's offices.
4. EFFECTIVE DATE; TERM OF AGREEMENT. Subject to the termination rights
contained in Section 7 below, the term of this Agreement (the "Term") shall be
for a period of commencing on the date of this Agreement and terminating two (2)
years following the date of this Agreement.
5. COMPENSATION. In full consideration of the services to be provided
to the Client by the Consultant as fully set forth in Exhibit A, the Client
agrees to compensate Consultant in the manner set forth in Exhibit B.
Notwithstanding anything to the contrary contained in this Agreement, in the
event any federal or state regulatory authority determines that the compensation
payable pursuant to the terms of this Agreement is prohibited by law, Client and
Consultant agree to use commercially reasonable efforts to restructure the
compensation in such a way as to satisfy all applicable legal requirements.
6. EXPENSES. Consultant shall be solely responsible for all expenses
and disbursements anticipated to be made in connection with his performance
under this Agreement; provided, however, that Client shall reimburse Consultant
for all expenses and disbursements which are pre-approved in writing by Client
and incurred by Consultant in connection with the performance of services to
Client.
7. TERMINATION. Subject to Exhibit B, this Agreement may be terminated
by Client or Consultant upon thirty (30) days' prior written notice to the other
party.
8. WORK PRODUCT. It is agreed that all information and materials
produced for the Client by Consultant or his agents hereunder shall be the
property of the Client, free and clear of all claims thereto by the Consultant,
his agents or employees, and the Consultant shall retain no claim of authorship
therein, except with respect to any such information and materials produced by
Consultant primarily in connection with his Continuing Activities. It is
expressly understood that the Consultant has the unlimited right to use such
work product during the term of this Agreement but only in connection with the
rendering of services to the Client pursuant to the terms hereof.
9. INDEMNITY BY THE CLIENT. The Client shall protect, defend, indemnify
and hold Consultant and his assigns and attorneys, accountants, employees,
officer and directors harmless from and against all losses, liabilities,
damages, judgments, claims, counterclaims, demands, actions, proceedings, costs
and expenses (including reasonable attorneys' fees) of every kind and character
resulting from, relating to or arising out of (a) the inaccuracy,
non-fulfillment or breach of any representation, warranty, covenant or agreement
made by the Client herein; or
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(b) gross negligence, bad faith or willful misconduct of the Client with respect
to its actions in connection with the services provided by Consultant.
10. INDEMNITY BY THE CONSULTANT. The Consultant shall protect, defend,
indemnify and hold Client and its assigns and attorneys, accountants, employees,
officer and directors harmless from and against all losses, liabilities,
damages, judgments, claims, counterclaims, demands, actions, proceedings, costs
and expenses (including reasonable attorneys' fees) of every kind and character
resulting from, relating to or arising out of (a) the inaccuracy,
non-fulfillment or breach of any representation, warranty, covenant or agreement
made by the Consultant herein; or (b) gross negligence, bad faith or willful
misconduct of the Consultant, his agents or employees in the performance of
their duties hereunder; provided, that such indemnity shall be limited to the
compensation of Consultant pursuant to Exhibit B.
11. RESTRICTIVE COVENANTS.
(a) Except for the Continuing Activities, during the term of
this Agreement, Consultant agrees not to, without the prior written consent of
the Client, for whatever reason, own, manage, control, operate, invest or
acquire an interest in, become employed by, a consultant to, 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 the Client in the United States; provided, that the Consultant may (i) invest
in stock, bonds, or other securities of any business that may be in
"Competition" (as defined below) with the business conducted by the Client in
the United States if (x) such stock, bonds, or other securities are listed on a
national or regional securities exchange or have been registered under Section
12(g) of the Securities Exchange Act of 1934 and (y) the Consultant's investment
does not exceed, in the case of any class of the capital stock of any one
issuer, 5% of the issued and outstanding shares, or in the case of bonds or
other securities, 5% of the aggregate principal amount thereof issued and
outstanding and (ii) continue to hold his existing interest in Xxxxx'x
Nutritionals Inc. or any securities exchanged therefor.
(b) The trades, businesses or activities that are or would be
in "Competition" with the business of the Client include: (1) the direct or
indirect ownership of or other material 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.
(c) [Intentionally omitted]
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(d) 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 11, and Section 12 and 13 below (collectively, the
"Restrictive Covenants") are reasonable. However, in furtherance of the
provisions of such sections, 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.
12. NONSOLICITATION.
(a) During the Term and for the one year period following
expiration of the Term, Consultant will not, directly or indirectly, (i) 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 the Client as an
employee, consultant or agent at any time during the Term; or (ii) influence or
attempt to influence any such person to terminate or modify his/her employment
arrangement or other relationship with the Client.
(b) During the Term and the one year period following
expiration of the Term, Consultant will not, 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 the Client.
13. CONFIDENTIALITY.
(a) Consultant recognizes that as a consultant to the Client,
Consultant will occupy a position of trust with respect to "Confidential
Information." The "Confidential Information" protected by this Section 13 and
subsections hereunder means all business information of any nature or in any
form not generally known (at the time concerned) to persons engaged in business
similar to the business conducted or contemplated by the Client or its direct or
indirect subsidiaries (other that by the act or acts of a person not authorized
by the Client to disclose such information) and which relates to any aspect of
the present or past business of the Client, its subsidiaries or affiliates or
any of their predecessors or any of their future plans and strategies.
Confidential Information includes, but is not limited to policies, processes,
products, reports, analyses, memoranda, component lists, developments, projects,
distribution systems, work processes, known-how and other facts relating to
sales, advertising, promotions, financial matters, pricing policies and price
lists, customers, customer lists, potential purchasers and sellers, customer's
purchases or requirements, information systems, corporate policies and other
trade secrets. Confidential Information shall not include any information that
(a) is or becomes publicly available through no act or omission of the
Consultant; (b) is already in the rightful possession of the Consultant prior to
receipt from the Client and without any separate obligation of confidentiality;
(c) can be demonstrated by written records as independently developed by the
Consultant without reference to any of the Confidential Information; or (d) is
rightfully obtained by the Consultant from a third party without any obligation
of confidentiality.
(b) During the Term and at all times thereafter, the
Consultant will keep, and will cause his agents, employees and affiliates to
keep, all Confidential Information in strictest confidence. Furthermore, without
the prior written consent of the Client, unless otherwise required in the
performance of Consultant's duties hereunder or ordered by any court of law,
Consultant will not divulge Confidential Information to any third party or use
it for the benefit of
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Consultant or any third party or for any purpose other than the exclusive
benefit of the Client or its subsidiaries or affiliates.
(c) Upon the termination of Consultant's services hereunder
for any reason, Consultant, at the expense of the Consultant, will promptly
return all Confidential Information to the Client. The material to be returned
includes, but is not limited to any and all copies of the records, materials,
memoranda and other data constituting or pertaining to the Confidential
Information that were prepared by the Client, Consultant or any other person.
(d) Consultant agrees that following any termination or
cessation of his services under this Agreement, Consultant shall not disclose or
cause to be disclosed any negative, adverse or derogatory comments or
information about the Client or its management or about any product or service
provided by the Client, or about the Client's prospects for the future
(including any such comments or information with respect to affiliates of the
Client) provided, however, that nothing in this Section 13 and subsections
thereunder shall be construed to limit Consultant's ability to enforce his
rights under this Agreement or to contest any claim made against Consultant
under this Agreement. The Client and/or any of its affiliates may seek the
assistance, cooperation or testimony of Consultant following any such
termination in connection with any investigation, litigation or proceeding
arising out of matters within the knowledge of Consultant and related to
Consultant's services to the Client, and in such instance, Consultant shall
provide such assistance, cooperation or testimony, and the Client shall pay the
Consultant's customary compensation and reasonable costs in connection
therewith.
14. SURVIVAL. Notwithstanding the termination or expiration of this
Agreement, the Consultant's obligations under Sections 11, 12 and 13 hereof
shall remain in full force and effect for the periods therein provided.
15. NOTICES. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when hand-delivered, mailed by registered
or certified mail (three days after deposited), faxed (with confirmation
received) or sent by a nationally recognized courier service, as follows
(provided that notice of change of address shall be deemed given only when
received):
If to the Client, to:
Sunset Brands, Inc.
00000 Xxxxxxxx Xxxx., Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Chief Executive Officer
With a required copy to:
Xxxxxx X. Xxxxxxxxx, Esq.
Jeffer, Mangels, Xxxxxx & Xxxxxxx
1900 Avenue of the Stars
0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx, 00000
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If to Consultant, to:
Xxxxxxx Xxxxxx
000 Xxxx 00xx Xxxxxx
Xxxxxxxxx 00X
Xxx Xxxx, Xxx Xxxx 00000
With a required copy to:
Xxxx X. Xxxxxxx, Esq.
Davidoff Xxxxxx & Hutcher LLP
000 Xxxxxx Xxxx Xxxxx
Xxxxx 000
Xxxxxx Xxxx, Xxx Xxxx 00000
or to such other names and addresses as the Client or Consultant, as the case
may be, shall designate by notice to each other person entitled to receive
notices in the manner specified in this Section.
16. WAIVER OF BREACH. Any waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by any party.
17. ASSIGNMENT. This Agreement and the rights and obligations of the
Consultant hereunder shall not be assignable without the written consent of the
Client. Client may assign its rights and obligations hereunder in connection
with any merger, reorganization or change of control transaction to which Client
or its parent or related entities is a party.
18. APPLICABLE LAW. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special proceedings
hereunder be construed in accordance with and under and pursuant to the laws of
the State of California and that in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by reason
of this Agreement, the laws of the State of California shall be applicable and
shall govern to the exclusion of the law of any other forum, without regard to
the jurisdiction on which any action or special proceeding may be instituted.
19. ARBITRATION. Any dispute, controversy or claims arising out of, or
relating to, this Agreement, or its performance or breach, shall be resolved by
binding arbitration in Los Angeles, California under the Commercial Arbitration
Rules (the "AAA Rules") of the American Arbitration Association (the "AAA").
This arbitration provision is expressly made pursuant to and shall be governed
by the Federal Arbitration Act, 9 U. S. C. Sections 1-14 as well as the AAA
Rules. The Parties agree that pursuant to Section 9 of the Federal Arbitration
Act, a judgment of a United States District Court of competent jurisdiction
shall be entered upon the award made pursuant to the arbitration. A single
arbitrator, who shall have the authority to allocate the costs of any
arbitration initiated under this paragraph, shall be selected according to the
AAA Rules within fifteen (15) days of the submission to the AAA of the response
to the statement of claim or the date on which any such response is due,
whichever is earlier. To the extent permissible, the arbitrator shall be
required to furnish to the parties to the arbitration a preliminary statement of
the arbitrator's decision that includes the legal rationale for the arbitrator's
conclusion and the calculations pertinent to any damage award being made by the
arbitrator. The arbitrator shall then furnish each of the parties to the
arbitration the opportunity to comment upon and/or contest the arbitrator's
preliminary statement of decision either, in the
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discretion of the arbitrator, through briefs or at a hearing. The arbitrator
shall render a final decision following any such briefing or hearing. The
arbitrator shall conduct the arbitration in accordance with the AAA Rules. The
arbitrator shall decide the amount and extent of the pre-hearing discovery which
is appropriate. The arbitrator shall have the power to enter any award of
monetary and/or injunctive relief, including the power to render an award as
provided in Rule 43 of the AAA Rules. The arbitrator shall have the power to
award the prevailing party its costs and reasonable attorney's fees; provided,
however, that the arbitrator shall not award attorneys' fees to a prevailing
party if the prevailing party received and rejected a settlement offer unless
the arbitrator's award to the prevailing party is greater than such settlement
offer without taking into account attorneys' fees in the case of the settlement
offer or the arbitrator's award.
20. SEVERABILITY. All agreements and covenants contained herein are
severable, and in the event any of them shall be held to be invalid by any
competent court, the Agreement shall be interpreted as if such invalid
agreements or covenants were not contained herein.
21. ENTIRE AGREEMENT; INTERPRETATION. This Agreement constitutes and
embodies the entire understanding and agreement of the parties and supersedes
and replaces all prior understanding, agreements and negotiations between the
parties. This Agreement has been jointly negotiated and drafted by the parties
hereto and no provision shall be interpreted against the drafting party.
22. WAIVER AND MODIFICATION. Any waiver, alteration, or modification of
any of the provisions of this Agreement shall be valid only if made in writing
and signed by the parties hereto. Each party hereto may waive any of his or its
rights hereunder without effecting a waiver with respect to any subsequent
occurrences or transactions hereof.
23. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
CLIENT: CONSULTANT:
SUNSET BRANDS, INC.
By: /s/ XXXX XXXXXXX /s/ XXXXXXX XXXXXX
--------------------------------- ---------------------------------
Xxxx Xxxxxxx XXXXXXX XXXXXX
Title: PRESIDENT AND CEO
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EXHIBIT A
If and when requested by Client, Consultant agrees to provide the following
services to Client and such other services related thereto as the Client shall
reasonably request:
1. Consultation with the Client and its affiliates with respect to the
operation and management of the business of Client and its affiliates including,
without limitation, (i) assisting Client in connection with the design and
implementation of sales, marketing and distribution strategies and
relationships, (ii) assisting Client in connection with the identification,
negotiation and oversight of production, distribution and sales arrangements,
and (iii) assisting Client in connection with the formulation of branding
strategies;
2. Assisting Client or its affiliates, agents or representatives in
connection with due diligence investigation and analysis relating to any
potential acquisitions or dispositions by Client or its affiliates; and
3. Work with management of Client on key marketing and sales programs
to better promote Client and its products and to increase sales.
In addition, Consultant agrees that, upon request by the Client and for no
additional consideration (other than customary indemnification arrangement and
reimbursement of out-of-pocket expenses relating to attendance at Board
meetings), he will serve as a member of the Board of Directors and/or advisory
board of Client and/or its affiliates; provided, that Consultant shall receive
such additional compensation for such service as other directors or advisory
board members, as applicable, may receive in exchange for their services on such
board(s).
Initials:
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EXHIBIT B
For all services rendered by Consultant under this Agreement, Client
shall provide the following compensation to Consultant (the "Compensation"):
A non-qualified stock option (the "Option") to purchase up to 450,000
shares of common stock of Client at an exercise price of $1.00 per share
(subject to customary anti-dilution adjustments). To the extent eligible, the
Option will be issued pursuant to the Sunset Brands, Inc. 2004 Stock Incentive
Plan. The Option will have a term of five (5) years and shall vest (i) with
respect to 100,000 shares upon execution of this Agreement by Client and
Consultant, and (ii) with respect to the remaining 350,000 shares, at the rate
of 14,585 shares per month commencing on the first monthly anniversary of the
effective date of this Agreement and on the same day of each subsequent month.
Vesting shall terminate immediately upon termination of the Agreement by either
party for any reason, except that if Consultant is terminated at any time after
120 days following the date of this Agreement for reasons other than "cause,",
all options shall immediately vest, become exercisable and be non-cancellable.
If termination is for "cause" (as defined below), Consultant shall have thirty
(30) days following receipt of written notice from the Client of termination for
"cause") to exercise the Option. The Option will provide for customary cashless
exercise provisions. Subject to the foregoing, the Option will be evidenced by
an option agreement in the Client's customary form (subject to the terms set
forth above).
For purposes hereof, "cause" shall include (i) material breach of this Agreement
or repeated failure or refusal after opportunity to cure (to the extent curable)
by Consultant to render services to the Client in accordance with the
Consultant's obligations under this Agreement; (ii) negligence in the
performance of Consultant's duties which results in material harm or prejudice
the Client or its affiliates, (iii) the commission by Consultant of any act of
fraud or embezzlement against Client or any affiliates thereof, or the
commission by Consultant of any other bad faith action which can be reasonably
anticipated to materially injure the Client or its affiliates; or (iv)
Consultant having been convicted of, or pleading nolo contendere to, a felony
involving moral turpitude (other than traffic offenses which do not bring such
person or the Client into disgrace or disrepute).
Initials:
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