Exhibit 10.4
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is effective as of the 1st day
of March, 2005, by and among Xxxxxx Lighting Products, Inc., a Delaware
corporation (the "Company"), Craftmade International, Inc., a Delaware
corporation ("Craftmade"), and Xxxx Xxxxxx, an individual resident in Collin
County ("Consultant").
RECITALS
WHEREAS, concurrently with the execution and delivery of this
Agreement, Craftmade is acquiring all of the outstanding capital stock of Xxxx
Xxxxxx Co., Inc., a Texas corporation doing business as Xxxxxx Lighting Products
("Xxxxxx Lighting"), through a merger (the "Merger") of Xxxxxx Lighting with and
into the Company, pursuant to a Merger Agreement dated as of March 1, 2005 among
Craftmade, the Company, Consultant, Xxxxxx Xxxxxxxxx and Xxxxxx Lighting (the
"Merger Agreement").
WHEREAS, the Company recognizes the knowledge and experience of
Consultant and desires to secure the services of Consultant with respect to the
operations of the Company; and
WHEREAS, Consultant desires to perform such services for the Company,
all on the terms and conditions as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Duties of Consultant.
(a) Consultant shall, from time to time upon the request of the Company
and subject to the terms hereof, render assistance, advice, and consultation to
the Company concerning the conduct of the business of the Company (collectively,
the "Services"). The Services shall include, but shall not be limited to, (i)
providing design support services; (ii) the education and instruction of the
Company's employees with the business as conducted by the Company; and (iii)
investigation, analysis, and the preparation of recommendations and advice
concerning purchasing, sales, marketing, organization, management, operations,
and personnel issues of concern to the Company.
(b) Consultant shall perform such duties in Coppell, Texas, or at such
other place or places as Company may, from time to time, reasonably deem
appropriate.
(c) Consultant shall be available to perform services under this
Agreement on such days during the Term (as defined below) as reasonably
requested by the Company.
2. Compensation.
(a) The Consultant will be paid an annual consulting fee of
$100,000.00, which will be payable in equal monthly installments.
(b) The Consultant will be paid royalties on certain future products
absorbed into the Company's product offering, pursuant to Craftmade's normal
royalty agreements.
3. Independent Contractor Status.
(a) The parties hereby terminate as of the effective date of this
Agreement all prior relationships between them and hereby create the
relationship of the Company and independent contractor. The parties (i)
acknowledge and covenant that Consultant is an independent contractor and will
act exclusively as an independent contractor and not as an employee of the
Company or Craftmade in performing the duties assigned hereunder, and (ii) do
not intend, and will not hold out that there exists, any partnership, joint
venture, undertaking for a profit or other form of business venture or any
employment relationship among the parties other than that of an independent
contractor relationship.
(b) The Consultant, as an independent contractor under this Agreement,
is responsible for all employment taxes of any nature whether incurred as a
result of the Consultant's services and remuneration paid hereunder or as a
result of the employment of any other individuals by the Consultant (such
employment taxes to be referred to herein as the "Taxes"). The Taxes include,
but are not limited to, federal, state, provincial and local income, social
security, self-employment and unemployment taxes.
(c) With respect to the Taxes, the Company shall not treat the
Consultant as an employee, and in no event shall the Company be liable to the
Consultant or the Consultant's heirs, assigns, successors or legal
representatives, nor any governmental agency, for the withholding or payment of
any Taxes.
(d) The Consultant shall release, hold harmless and indemnify
Craftmade, the Company and their respective directors, officers, affiliates,
employees and agents (collectively, the "Indemnitees"), from and against any and
all obligations, losses, costs, claims, judgments, damages, attorneys' fees and
expenses suffered or incurred by the Indemnitees arising out of or reasonably
attributable to any claim related to or concerning the Taxes.
(e) With regard to the Services rendered by Consultant hereunder, the
Company and Craftmade shall not be liable to the Consultant nor to any third
party who may claim any right due to the Consultant's relationship with the
Company or with Craftmade, for any acts or omissions in the performance of the
Services on the part of the Consultant or due to the Consultant's misconduct or
negligence. The Consultant shall indemnify, defend and hold harmless the
Indemnitees from and
against any and all obligations, losses, costs, claims, judgments, damages,
attorneys' fees and expenses suffered or incurred by the Indemnitees arising out
of or attributable to such Services rendered by the Consultant.
4. Term; Termination.
(a) Subject to the provisions of this Section 4, the term (the "Term")
of this Agreement shall initially be for the period beginning on the effective
date of this Agreement (the "Effective Date") and ending on the third
anniversary of the Effective Date (the "Initial Term"). After the Initial Term,
the Agreement shall be extended for two additional one-year terms (the "First
Additional Term" and the "Second Additional Term," respectively), unless the
Consultant provides written notice of election not to renew at least 45 days
before the commencement of the First Additional Term and the Second Additional
Term, respectively.
(b) This Agreement may be terminated immediately with the mutual
written agreement of the Company, Craftmade and the Consultant. Upon termination
of this Agreement pursuant to this provision, the Consultant shall be entitled
to receive only such compensation payable through the effective date of
termination, payable in full on the effective date of such termination of this
Agreement.
(c) Notwithstanding the preceding, the Company or Craftmade may
terminate this Agreement for Cause with respect to the Consultant. Termination
for "Cause" shall mean termination because of the Consultant's (A) death, (B)
breach of this Agreement, (C) Disability (as defined below), (D) willful
misconduct that causes material economic harm to the Company or Craftmade or
that brings substantial discredit to the Company's or Craftmade's reputation,
(E) failure to follow directions of the Company that are consistent with the
Consultant's duties under this Agreement, or (F) final, nonappealable conviction
of a felony involving moral turpitude; provided, however, that subsections (D)
or (E) shall not constitute Cause unless the Company or Craftmade notifies the
Consultant thereof in writing, specifying in reasonable detail the basis
therefor and stating that it is grounds for Cause, and unless Consultant fails
to cure such matter within 10 days after such notice is sent or given under this
Agreement.
"Disability" shall exist if because of ill health, physical or mental
disability or any other reason beyond his control, and notwithstanding
reasonable accommodations made by the Company, Consultant shall have been unable
or shall have failed to perform his services under this Agreement, as determined
in good faith by the Company or Craftmade, for a period of 120 consecutive days,
or, if in any 12-month period, Consultant shall have been unable or shall have
failed to perform the Services for a period of 180 days, irrespective of whether
or not such days are consecutive.
5. Non-Disclosure.
(a) Confidential Information. Upon Consultant's execution of this
Agreement, the Company and Craftmade agree that they will immediately provide
Consultant with specialized knowledge and training regarding the business in
which the Company and Craftmade are involved, and will immediately provide
Consultant with Confidential Information (as hereinafter defined) and trade
secrets of the Company and Craftmade. The Company and Craftmade also agree to
provide Consultant with Confidential Information on an on-going basis.
Consultant understands and acknowledges that (a) such Confidential
Information has been developed and/or acquired by the Company and Craftmade
through the expenditure of substantial time, effort and money, (b) such
Confidential Information gives the Company and Craftmade a competitive advantage
over others who do not have this information, (c) the Company and Craftmade
would be irreparably harmed if the Confidential Information were disclosed; (d)
Craftmade has required that the Consultant make the covenants in this Section 5
as a condition to the Merger; and (e) the provisions of this Section 5 are
reasonable and necessary to prevent the improper use or disclosure of
Confidential Information.
(b) Disclosure of Confidential Information and Return of Company
Property. In exchange for the Company and Craftmade's promises to provide
Consultant with specialized training and Confidential Information, Consultant
agrees that he will hold all Confidential Information of the Company and
Craftmade in trust for the Company and will not: (a) use the information for any
purpose other than the benefit of the Company; or (b) disclose to any person or
entity any Confidential Information of the Company or Craftmade except as
necessary during Consultant's work with the Company to perform services on
behalf of the Company.
To execute and enforce the terms of this Section 5, Consultant
covenants as follows:
(vi) During and following the Term, the Consultant will hold
in confidence the Confidential Information and will not disclose it to
any person except (A) with the specific prior written consent of the
Company and Craftmade, (B) as necessary to carry out the Consultant's
duties under this Agreement or (C) except as otherwise expressly
permitted by the terms of this Agreement.
(vii) Any trade secrets of the Company and Craftmade will be
entitled to all of the protections and benefits under applicable law.
If any information that the Company and Craftmade deem to be a trade
secret is found by a court of competent jurisdiction not to be a trade
secret for purposes of this Agreement, such information will,
nevertheless, be considered Confidential Information for purposes of
this Agreement. The Consultant hereby waives any requirement that the
Company and Craftmade submit proof of the economic value of any trade
secret or post a bond or other security.
(viii) None of the foregoing obligations and restrictions
applies to any part of the Confidential Information that the Consultant
demonstrates was or became generally available to the public other than
as a result of a direct or indirect disclosure by the Consultant.
(ix) The Consultant will not remove from the Company and
Craftmade's premises (except to the extent such removal is for purposes
of the performance of the Consultant's duties at home or while
traveling, or except as otherwise specifically authorized by the
Company and Craftmade) any document, record, notebook, plan, model,
component, device, or computer software or code, whether embodied in a
disk or in any other form (collectively, the "Proprietary Items"). The
Consultant recognizes that, as between the Company, Craftmade and the
Consultant, all of the Proprietary Items, whether or not developed by
the Consultant, are the exclusive property of the Company and
Craftmade. Upon termination of this Agreement by either party, or upon
the request of the Company and Craftmade during the Term, the
Consultant will return to the Company and Craftmade all of the
Proprietary Items in the Consultant's possession or subject to the
Consultant's control, and the Consultant shall not retain any copies,
abstracts, sketches, or other physical embodiment of any of the
Proprietary Items.
(x) Consultant will take reasonable steps to safeguard all
Confidential Information and prevent its disclosure to unauthorized
persons.
(c) Disputes or Controversies. Consultant recognizes that should a
dispute or controversy arising from or relating to this Agreement be submitted
for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All
pleadings, documents, testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for inspection by the
Company and Craftmade, the Consultant, and its attorneys and experts, who will
agree, in advance and in writing, to receive and maintain all such information
in secrecy, except as may be limited by them in writing.
(d) Definitions. For purposes of this Agreement:
(i) "Confidential Information" means any and all:
(1) trade secrets concerning the business and affairs
of the Company, Craftmade, and their respective affiliates,
product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs,
graphs, drawings, samples, inventions and ideas, past,
current, and planned research and development, current and
planned manufacturing or distribution methods and processes,
customer lists, current and anticipated customer requirements,
price lists, market studies, business plans, computer software
and programs (including object code and source code), computer
software and database technologies, systems, structures, and
architectures (and related formulae, compositions, processes,
improvements, devices, know-how, inventions, discoveries,
concepts, ideas, designs, methods and information), and any
other information, however documented, that is a trade secret
within the meaning of applicable trade secret laws; and
(2) information concerning the business and affairs
of the Company, Craftmade and their respective affiliates
(which includes historical financial statements, financial
projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds
of key personnel, personnel training and techniques and
materials), however documented; and
(3) notes, analysis, compilations, studies,
summaries, and other material prepared by or for the Company,
Craftmade, or their respective affiliates, containing or
based, in whole or in part, on any information included in the
foregoing.
(ii) "Person" includes any individual, corporation (including
any non-profit corporation), general or limited partnership, limited
liability company, joint venture, estate, trust, association,
organization, or governmental body.
6. Non-Competition and Non-Interference.
(a) Acknowledgements of the Consultant. The Consultant acknowledges
that: (a) the services to be performed by him under this Agreement are of a
special, unique, unusual, extraordinary, and intellectual character; (b) the
Company and Craftmade's business is international in scope and their products
are marketed throughout the world; (c) the Company and Craftmade compete with
other businesses that are or could be located in any part of the world; (d)
Craftmade has required that the Consultant make the covenants set forth in this
Section 6 as a condition to the Merger; and (e) the provisions of this Section 6
are reasonable and necessary to protect the Company's business.
(b) Covenant Not to Compete. In order to protect the Company and
Craftmade's Confidential Information, it is necessary to enter into the
following restrictive covenant. Thus, except as set forth below, Consultant
covenants that he will not, directly or indirectly:
(i) during the Term, directly or indirectly, engage or invest
in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be employed
by, associated with, or in any manner connected with, lend Consultant's
name or any similar name to, lend Consultant's credit to or render
services or advice to, any business whose products, services or
activities compete in whole or in part with the products, services or
activities of the Company, Craftmade or any affiliate of the Company or
Craftmade ("Competing Business"), anywhere in the world; provided,
however, that Consultant may purchase or otherwise acquire up to (but
not more than) one percent (1%) of any class of securities of any
enterprise involved in the business of the Company (but without
otherwise participating in the activities of such enterprise), if such
securities are listed on any national or regional securities exchange
or have been registered under Section 12(g) of the Securities Exchange
Act of 1934;
(ii) during the Post-Agreement Period (as defined below),
directly or indirectly, engage or invest in, own, manage, operate,
finance, control, or participate in the ownership, management,
operation, financing, or control of, be employed by, associated with,
or in any manner connected with, lend Consultant's name or any similar
name to, lend Consultant's credit to or render services or advice to,
any Competing Business in the market areas utilized by the Company,
Craftmade or any affiliate of the Company or Craftmade on the last day
this agreement remains in effect, which includes, but is not limited
to, markets in the United States; provided, however, that Consultant
may purchase or otherwise acquire up to (but not more than) one percent
(1%) of any class of securities of any enterprise involved in the
business of the Company (but without otherwise participating in the
activities of such enterprise), if such securities are listed on any
national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934;
(iii) whether for Consultant's own account or for the account
of any other Person, at any time during the Term and the Post-Agreement
Period, solicit business of the same or similar type and in the same
market areas of that of the business being carried on by the Company,
Craftmade or any affiliate of the Company or Craftmade, from any Person
known by Consultant to be a customer of the Company, Craftmade or any
affiliate of the Company or Craftmade, whether or not Consultant had
personal contact with such Person during and by reason of Consultant's
relationship with the Company;
(iv) whether for Consultant's own account or the account of
any other Person (a) at any time during the Term and the Post-Agreement
Period, solicit, employ, or otherwise engage as a consultant,
independent contractor, or otherwise, any Person who is or was an
employee of the Company, Craftmade or any affiliate of the Company or
Craftmade at any time during the Term or in any manner induce or
attempt to induce any employee of the Company, Craftmade or any
affiliate of the Company or Craftmade to terminate his employment with
the Company, Craftmade or any affiliate of the Company or Craftmade; or
(b) at any time during the Term and the Post-Agreement Period,
interfere with the Company's relationship with any Person, including
any Person who at any time during the Term was an employee, agent,
contractor, supplier, or customer of the Company, Craftmade or any
affiliate of the Company or Craftmade; or
(v) at any time during the Term and the Post-Agreement Period,
disparage the Company, Craftmade, or any of their respective
interestholders, stockholders, managers, directors, officers,
employees, or agents.
Notwithstanding anything herein this Agreement, Consultant may during
the Term and the Post-Term Period engage in the activities described in
subsection 6(b)(i) and (ii) hereof for any Competing Business, provided that
Consultant shall not directly or indirectly sell ceiling fan products that
compete with the products listed on Exhibit "A" hereto, unless Craftmade
expressly consents to such representation. Craftmade may revise Exhibit "A" from
time to time, upon prior notice to
Consultant. Consultant shall submit to Craftmade a list of companies it
represents (attached hereto as Exhibit "B") and shall update the list at least
quarterly.
For purposes of this Section 6, the term "Post-Agreement Period" means
two years after the Term.
If any covenant in this Section 6 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against the
Consultant.
The period of time applicable to any covenant in this Section 6 with
respect to Consultant will be extended by the duration of any violation by
Consultant of such covenant.
Consultant will, while the covenant under this Section 6 is in effect,
give notice to the Company, within ten days after accepting any employment, of
the identity of Consultant's employer. Craftmade or the Company may notify such
employer that Consultant is bound by this Agreement and, at the Company's
election, furnish such employer with a copy of this Agreement or relevant
portions thereof.
7. Injunctive Relief and Additional Remedy. Consultant acknowledges
that the injury that would be suffered by the Company and Craftmade as a result
of a breach of the provisions of this Agreement (including any provision of
Sections 5 and 6) would be irreparable and that an award of monetary damages to
the Company or Craftmade for such a breach would be an inadequate remedy.
Consequently, the Company and Craftmade will have the right, in addition to any
other rights it may have, to obtain injunctive relief to restrain any breach or
threatened breach or otherwise to specifically enforce any provision of this
Agreement, and the Company and Craftmade will not be obligated to post bond or
other security in seeking such relief.
8. Covenants of Sections 5 and 6 Are Essential and Independent
Covenants. The covenants by Consultant in Sections 5 and 6 are essential
elements of this Agreement, and without the Consultant's agreement to comply
with such covenants, the Company and Craftmade would not have entered into this
Agreement or the Merger Agreement or obtained the Services of the Consultant.
The Company, Craftmade and Consultant have been advised in all respects
concerning the reasonableness and propriety of such covenants, with specific
regard to the nature of the business conducted by the Company and Craftmade.
Consultant's covenants in each of Section 5 and in Section 6 are independent
covenants and the existence of any claim by Consultant against the Company or
Craftmade under this Agreement or otherwise, will not excuse Consultant's breach
of any covenant in Section 5 or Section 6. This Agreement will continue in full
force and effect as is necessary or appropriate to enforce the covenants and
agreements of Consultant in Sections 5 and 6.
9. Representations and Warranties by the Consultant. Consultant
represents and warrants to the Company and to Craftmade that the execution and
delivery by Consultant of this Agreement do not, and the performance by
Consultant of its obligations hereunder will not, with or without the giving of
notice or the passage of time, or both: (a) violate any judgment, writ,
injunction, or order of any court, arbitrator, or governmental agency applicable
to Consultant; or (b) conflict with, result in the breach of any provisions of
or the termination of, or constitute a default under, any agreement to which
Consultant is a party or by which Consultant is or may be bound.
10. Obligations Contingent on Performance. The obligations of the
Company and Craftmade hereunder, including the Company's obligation to pay the
compensation provided for herein, are contingent upon Consultant's performance
of its obligations hereunder.
11. Amendment. This Agreement may be amended only by a writing signed
by all parties.
12. Waiver. A waiver of any clause of this Agreement by either party
shall not be construed as a waiver of any other clause. Neither the failure nor
any delay on the party of either party to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of such right, remedy, power
or privilege with respect to any other occurrence.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without regard to conflicts of
law principles.
14. Successors and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and upon their respective
successors-in-interest and assigns. It is agreed that the Company may assign
this Agreement to a subsidiary of the Company or Craftmade (or a subsidiary of
any affiliate of the Craftmade which is directly or indirectly in a line of
corporate ownership with the Craftmade) now in or hereinafter to come into
existence. If such assignment is made, Consultant agrees to substitute assignee
for the Company and assignee shall succeed to all the rights and privileges of
the Company under this Agreement, provided that no such assignment shall relieve
the Company of its obligations hereunder.
15. Jurisdiction; Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Texas, County of Dallas, or, if it has or can acquire jurisdiction, in the
United States District Court for the Northern District of Texas, Dallas
Division, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in the
world.
16. Severability. If any portion or portions of this Agreement shall,
for any reason, be declared by a court of competent jurisdiction to be invalid
or unenforceable, the remaining portion or portions of this Agreement shall
remain valid and enforceable and shall be carried into effect, unless to do so
would clearly violate the present legal and valid intention of the parties
hereto.
17. Notices. All notices and other communications hereunder must be
delivered in writing and shall be deemed to have been given if delivered by hand
or mailed by first class, registered mail, return receipt requested, postage and
registered fees prepaid, and addressed as follows:
If to the Company:
Xxxxxx Lighting Products, Inc.
000 Xxxxx Xxxxx Xxxx
Xxxxx 000
P.O. Box #1037
Coppell, Texas 75019-1037
Attention: Xxxx X. Xxxxxxx
If to Craftmade:
Craftmade International, Inc.
000 Xxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxx
If to Consultant:
Xxxx Xxxxxx
0000 Xxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
18. Entire Agreement. This Agreement embodies the entire understanding
among the parties hereto respecting the subject matter hereof and no change,
alteration or modification may be made except in writing signed by both parties
hereto.
19. Legal Fees. If any legal action is brought by either of the parties
hereto, it is expressly agreed that the party in whose favor final judgment
shall be entered shall be entitled to recover from the other party reasonable
attorney's fees in addition to any other relief which may be awarded, including
attorneys fees on appeal.
20. Construction. The parties understand and acknowledge that they have
each been represented by (or have had the opportunity to be represented by)
counsel in connection with the preparation, execution and delivery of this
Agreement. This Agreement shall not be construed against any party for having
drafted it.
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall together constitute one and the same Agreement.
*****
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first written above.
XXXXXX LIGHTING PRODUCTS, INC.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman of the Board, President and
Chief Executive Officer
CRAFTMADE INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman of the Board, President and
Chief Executive Officer
/s/ Xxxx Xxxxxx
--------------------------------------------
Xxxx Xxxxxx
EXHIBIT A
LIST OF PRODUCTS
CRAFTMADE CEILING FANS
CRAFTMADE LIGHT KITS
CRAFTMADE ACCESSORIES
CRAFTMADE UNDER-CABINET LIGHTING
ACCOLADE BATH LIGHTING
ACCOLADE OUTDOOR LIGHTING
ACCOLADE LAMPS
FLUSHMOUNTS
XXXXXX LIGHT BULBS
LIGHT BULBS
DOOR CHIMES
VENTILATION PRODUCTS
SMOKE DETECTORS
XXXXXX OUTDOOR LIGHTING
EXHIBIT B
LIST OF COMPANIES REPRESENTED BY CONSULTANT
AMERICAN FLUORESCENT CORPORATION
CRAFTMADE INTERNATIONAL
XXXXXXX LIGHTING
KALCO LIGHTING
SEA GULL LIGHTING PRODUCTS
XXXXXX LIGHTING PRODUCTS
XXXXXXXXX LAMP COMPANY
XXXXX DESIGNS
