EXHIBIT 10.35
EXCLUSIVE DEVELOPMENT AGREEMENT
THIS AGREEMENT, dated as of the 30th day of December, 2000, between MARK
W. DUFFEY, a resident of Harris County, Texas ("Duffey"), and CARRIAGE SERVICES,
INC., a Delaware corporation ("Carriage");
W I T N E S S E T H:
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WHEREAS, Carriage, through its subsidiaries, owns and operates funeral
homes, cemeteries and related businesses within the death care industry;
WHEREAS, Carriage has, directly and through the EDS Development Rights (as
defined below), acquired, developed, and improved certain proprietary rights and
interests, referred to below as "E-Commerce Rights", with the intent of further
developing and then exploiting the same in connection with a possible E-Commerce
Venture (as hereafter defined); and
WHEREAS, Duffey has been Carriage's President since December 1996 and was
one of Carriage's founders, and in such capacity he has been instrumental in
developing and arranging for the development of such rights and interests for
and on behalf of Carriage; and
WHEREAS, pursuant to the Separation Agreement and Release dated December
30, 2000 between Duffey and Carriage (the "Separation Agreement"), the parties
have mutually agreed to convert Duffey's status from that of an employee to that
of a consultant; and
WHEREAS, Carriage Life Events, Inc., a Delaware corporation ("Carriage
Life Events"), has been formed as a wholly owned subsidiary of Carriage in order
to continue to pursue development of the E-Commerce Rights and as a possible
vehicle for attracting investment from third parties; and
WHEREAS, in connection with such further development, the parties desire
that Duffey continue to remain involved in the development of the E-Commerce
Rights, and that Duffey have the exclusive right to continue such development,
on the terms and subject to the conditions hereafter specified;
NOW, THEREFORE, the parties agree as follows:
1. Defined Terms. The following terms, when used in this Agreement, shall
have the meanings assigned to them below:
(a) "E-Commerce Business" means a portal, or distribution channel,
conducted primarily (but not necessarily exclusively) through electronic
means (such as via the Internet), for consumers to plan, finance and/or
fulfill major life events and celebrations, which may include but will not
necessarily be limited to death care and memorialization. An E-Commerce
Business specifically excludes any business that is engaged in the
traditional delivery of funeral or cemetery services.
(b) "E-Commerce Rights" means, collectively, the following, whether
in existence on the date of this Agreement or hereafter arising: (i) all
EDS Development Rights; (ii) all other trade secrets, know-how,
intellectual property, methodologies, ideas, concepts, processes,
technologies, confidential or proprietary information, algorithms,
software and computer programs (which includes input and output formats,
source and object codes, program listings, data models, flow charts,
outlines, narrative descriptions, operating instructions and supporting
documentation, together with the tangible media upon which such programs
and documentation are recorded), and development tools, and all rights and
interests in the foregoing, however arising, whether or not registered,
including patents, patent applications, copyrights, trademarks and service
marks, and other similar rights, and any licenses covering any of the
foregoing, all to the extent the same have been developed by or for
Carriage and its affiliates in connection with the development of an
E-Commerce Business; and (iii) all confidentiality, development and other
contracts and agreements associated with Carriage's development of an
E-Commerce Business.
(c) "E-Commerce Venture" means one or more business ventures, in
whatever form (whether corporation, limited liability company, general or
limited partnership, joint venture, business trust or otherwise), in which
Carriage or its affiliates or their successors and assigns has a financial
interest, if such venture is primarily engaged in the E-Commerce Business.
Any business venture which arises from EDS Development Rights is
specifically intended to be encompassed with the definition of "E-Commerce
Venture." In addition, the parties acknowledge that Carriage Life Events
has been formed for the specific purpose of developing such rights and
concepts and that it constitutes an E-Commerce Venture for purposes
hereof. On the other hand, neither Lifetime Reflections nor Legacy
Management Partners shall be deemed E-Commerce Ventures. The parties
acknowledge that the idea or concept of rating businesses or firms (other
than in the death care industry) according to quality or other criteria is
not intellectual property of Carriage for purposes hereof.
(d) "EDS" means, collectively, Electronic Data Systems Corporation,
a Delaware corporation, EDS Information Services L.L.C., a Delaware
limited liability company, and any affiliate of the foregoing from which
Carriage or its affiliates acquire any EDS Development Rights.
(e) "EDS Development Rights" means all proprietary rights, including
copyrights, trademark rights, patent rights and other rights, which have
been acquired by Carriage or its affiliate, by ownership under work for
hire, by license, or otherwise, from EDS, in connection
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with Carriage's development of an E-Commerce Business and the E-Commerce
Venture. EDS Development Rights specifically include rights created and
acquired under the letter agreements between Carriage and EDS dated March
29, 2000 and October 23, 2000.
2. Carriage Life Events. On or prior to the date of this Agreement,
Carriage has organized Carriage Life Events, which is and shall remain a wholly
owned subsidiary of Carriage, subject to Section 5 below. In connection with the
capitalization of Carriage Life Events, Carriage shall transfer and contribute
to Carriage Life Events all of Carriage's right, title and interest in the
E-Commerce Rights. It is understood, however, that Carriage shall retain all
management and control over the operation of Carriage Life Events and the
E-Commerce Rights and the development of an E-Commerce Venture, whether through
Carriage Life Events or otherwise, and nothing in this Agreement prevents or
restricts Carriage from transferring or assigning all or any part of any
E-Commerce Rights to any other vehicle acting as an E-Commerce Venture, or to
change the corporate structure, management or other aspects of the development
of the E-Commerce Business as Carriage may choose in its sole and absolute
discretion, subject to the other terms and conditions of this Agreement.
3. Duffey Transition. As provided in the Separation Agreement, Duffey
shall cease to be an employee of Carriage as of December 31, 2000. He shall
thereafter become a consultant to Carriage under the terms of the Consulting
Agreement referred to in the Separation Agreement ("Consulting Agreement"), but
his activities as such shall be separate and apart from his involvement in any
E-Commerce Venture as described in this Agreement.
(a) Relation to Carriage Life Events. It is the parties' intention
that Carriage Life Events will continue to develop the E-Commerce Business
and associated E-Commerce Rights while at the same time seeking out equity
financing as described in Section 5. It is understood that until any
equity funding transaction described in Section 5, Carriage Life Events
will remain 100% owned by Carriage. Duffey may continue to seek out equity
financing for the E-Commerce Venture, but Duffey will not take or permit
anyone under his supervision or control to take any major action involving
Carriage Life Events or the E-Commerce Business without the unanimous
approval of the Board of Directors of Carriage Life Events, including the
following: (A) any contract or commitment with EDS which calls for the
expenditure (or agreement to expend) any money, (B) any transfer,
assignment, license, encumbrance or other disposition of any E-Commerce
Rights, (C) the issuance of any equity or other ownership interests, (D)
the incurrence of any obligation for borrowed money (other than advances
from Duffey as described in paragraph (b) of Section 4 below), or (E) any
transaction, contract or commitment outside the ordinary course of
Carriage Life Events' business, which the parties acknowledge to be
limited to the continued development of the E-Commerce Business and
seeking equity funding. The selection and appointment of a financial
advisor, broker or other similar intermediary in seeking such financing
shall similarly require such unanimous approval. The entering into of
confidentiality agreements with possible affiliation partners or equity
sources does not require such approval.
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(b) Office Space and Infrastructure. From January 1, 2001 through
June 30, 2001, Carriage will make available to Carriage Life Events (or
any successor E-Commerce Venture) office space at Carriage's corporate
offices, and related administrative support (in the form of the use of
existing staff, provided such use does not unreasonably interfere with
Carriage's other operations, as well as office equipment and normal office
supplies), in such manner as Carriage may reasonably determine from time
to time. Such support shall specifically include access to Carriage's
phones, including reasonable long-distance, fax, and computer (including
Internet) use, consistent with prior practice.
(c) Certain Personnel Issues. The parties acknowledge that it is
Duffey's present intention to offer to include Michael S. Lade and Vicki
McArthur to remain involved in the E-Commerce Venture, following the
cessation of their association with Carriage effective December 31, 2000.
The terms of any severance between Carriage and such individuals have been
separately negotiated between the applicable parties. It is understood,
however, that their involvement in the E-Commerce Venture shall not
constitute a violation of any non-competition covenants to which either of
them may be bound with Carriage.
(c) Confidentiality. Duffey acknowledges the importance of
maintaining the confidentiality of the E-Commerce Rights and agrees that
he will maintain the confidentiality thereof in the same manner and to the
same degree that he will maintain the confidentiality of other Carriage
information as provided in Section 7 of his Consulting Agreement with
Carriage, which is hereby incorporated herein by reference.
4. E-Commerce Venture Interim Funding.
(a) Carriage Funding. Except as hereafter provided, the parties
acknowledge that Carriage's funding of the E-Commerce Business and the
E-Commerce Venture shall cease as of December 31, 2000. Items which
Carriage will not fund after such date specifically include, but are not
necessarily limited to, the following: development fees, service fees,
consulting fees and similar fees and costs under any now existing or
hereafter arising contract with EDS or any other third-party provider
relating to the development of E-Commerce Rights; compensation, benefits
and other costs of employment (not including severance costs or payments
under the Separation Agreement) to Duffey or any other individual,
including Michael S. Lade or Vicki McArthur; travel, food and lodging; and
legal fees and expenses for work performed after such date.
Notwithstanding the foregoing, Carriage will be responsible for funding
any legal fees and expenses for work performed on behalf of Carriage's own
interests, and if Carriage receives on or before December 31, 2001 one or
more commitment letters or letters of intent in form acceptable to
Carriage containing terms and conditions for equity funding of the
E-Commerce Venture as accepted by Carriage pursuant to Section 5, then
Carriage will fund the legal fees and expenses associated with the
preparation, negotiation, execution and delivery of the formal definitive
documentation associated with such equity funding transactions, through
legal counsel of Carriage's choice.
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(b) Duffey/Third Party Funding. Duffey may, in his sole discretion
but without any obligation to do so, provide funding to Carriage Life
Events (or any successor E-Commerce Venture organized by Carriage), in
order to finance the continued development of E-Commerce Rights and the
pursuit of funding sources for an equity financing to be sought as
described in Section 5. Any such funding so provided by Duffey shall be
deemed contingent advances by him subject in all respects to the
successful completion of equity funding of the E-Commerce Venture on terms
acceptable to Carriage. Such funding by Duffey shall not entitle him to
any equity interest in Carriage Life Events or any other E-Commerce
Venture, except that in connection with any such equity funding, Carriage,
Duffey and any equity investors may negotiate to permit Duffey to either
be repaid such advances or to convert the same into equity interests in
the E- Commerce Venture, on terms mutually acceptable to the parties.
Duffey may also propose to obtaining outside interim financing for the
E-Commerce Venture for the foregoing purposes, but the terms of such
interim financing must in all respects be acceptable to Carriage in its
sole discretion. In no event shall there be recourse against Carriage or
any of its subsidiaries for any advances made pursuant to this paragraph
(b).
(c) Retention of Ownership. Notwithstanding any funding provided by
Duffey or any third party as described in paragraph (b) above, Carriage
(whether directly or through Carriage Life Events or any other E-Commerce
Venture) shall retain full and exclusive ownership over all E-Commerce
Rights and all ownership in Carriage Life Events and any other E- Commerce
Venture, and any such funding by Duffey or any other party shall not,
unless otherwise specifically agreed to in writing by an authorized
officer of Carriage, constitute a claim, interest, lien or other right of
any kind in any of the E-Commerce Rights or the E-Commerce Venture.
(d) No Rights as Member of Consolidated Group. Until consummation of
an equity funding pursuant to Section 5, Carriage Life Events shall be a
member of the consolidated group of corporations of which Carriage is the
corporate parent. However, it is specifically intended that no persons
associated or affiliated with Carriage Life Events (including but not
limited to Duffey, Michael S. Lade and Vicki McArthur) shall be eligible
to participate in any plans or benefits normally available to employees of
Carriage's subsidiaries (such as medical benefits, retirement plans, stock
option and stock purchase plans, and other similar rights and benefits),
subject to any separate agreement expressly conferring those benefits as
severance, and Duffey shall not cause or permit anyone under his
supervision or control to participate in Carriage Life Events or any other
E-Commerce Venture in such a way that any such person becomes eligible for
any such rights or benefits.
5. Equity Funding. It is the parties' intention that an E-Commerce Venture
(whether Carriage Life Events or another vehicle) will obtain financing from one
or more third party investors, at which time the capital of the E-Commerce
Venture will be restructured in a way that involves (i) the investors acquiring
economic and voting control over the E-Commerce Venture, (ii) Duffey and other
proposed members of an E-Commerce Venture management team acquiring substantial
financial interests therein, which may include any combination of conversion of
any advances made by Duffey under
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Section 4(b), new investment, or management stock options, and (iii) Carriage
retaining a substantial financial interest in the E-Commerce Venture. The
parties acknowledge that the precise terms and conditions of the financing for
and ultimate capital structure resulting from such a transaction cannot now be
determined with any precision, although the parties acknowledge that third-party
investment may be made by any combination of purchases of common or preferred
securities, subordinated debt with related warrants, convertible notes, or any
other funding mechanisms, and that in some circumstances, equity interests may
be issued in exchange for services rendered or to be rendered. However, all of
the terms, provisions and conditions of any and all such equity funding
transactions, as well as the form and substance of all documentation related
thereto, will be subject to the approval of Carriage, which it may grant or
withhold in its sole discretion. It is anticipated that Duffey will take the
leadership role in pursuing such equity funding, but Duffey shall keep Carriage
reasonably informed of his efforts in that regard, and in particular any
discussions or negotiations concerning the proposed terms, provisions and
conditions associated with any proposed or possible equity funding transaction.
6. Exclusivity. It is the parties' intention that Duffey be given a period
of one year in which he may pursue the further development of the E-Commerce
Business for Carriage and seek out equity funding for the E-Commerce Venture as
contemplated in Section 5. Consequently, Carriage grants Duffey the exclusive
right to pursue equity funding for an E-Commerce Venture, subject to Section 5
above. Such right shall commence on January 1, 2001 and end on the earlier to
occur of December 31, 2001 or the date on which Duffey has suspended active
efforts to continue the development of the E- Commerce Business and to pursue
such equity funding (the "Exclusivity Period"). Neither Duffey's rendering of
services under his Consulting Agreement with Carriage, nor his employment with
any other party, shall by itself be evidence that Duffey has suspended such
active efforts, unless Duffey becomes bound by a written commitment which would
conflict with his ability to continue such efforts or to remain involved after
equity funding in the E-Commerce Venture on a full-time executive level. During
the Exclusivity Period, Carriage may (in coordination with Duffey) itself pursue
equity funding sources for an E-Commerce Venture, but any equity funding
transaction consummated during the Exclusivity Period must be on terms
reasonably acceptable to Duffey.
7. Stock Options. If (but only if) the E-Commerce Venture receives on or
before December 31, 2001 a Cash Equity Infusion (as defined in the Separation
Agreement) of at least $10,000,000, then Carriage shall cause to be issued to
Duffey non-qualified options under Carriage's 1995 Stock Incentive Plan to
purchase up to 50,000 shares of Carriage's Class A Common Stock, $.01 par value.
The exercise price shall be the closing price of Carriage's Class A Common
Stock, as reported on the New York Stock Exchange, on the date of grant. Such
options shall be fully vested upon the grant date and shall expire ten years
from such date, and shall otherwise be subject to the terms and conditions of
such Plan and the option agreement evidencing such grant.
8. Non-Revocation. This Agreement is expressly made subject to Duffey not
revoking the Separation Agreement, and in the event of such revocation, this
Agreement shall thereupon become void ab initio, as if never entered into.
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9. Notices. All notices, requests, consents and other communications
hereunder shall be given in writing and shall be deemed given if personally
delivered or when mailed, first class, registered or certified mail, return
receipt requested, as follows:
If to Duffey: Mr. Mark W. Duffey
597 Piney Point Road
Houston, Texas 77024
If to Carriage: Carriage Services, Inc.
1900 St. James Place, 4th Floor
Houston, Texas 77056
Attn: Chief Executive Officer
Either party may change his, her or its address upon written notice of
such change delivered to the other parties hereto.
10. Assignment; Binding Effect. This Agreement is unique and personal to
the parties and may not be assigned by either party without the prior written
consent of the other party hereto. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto, Duffey's
heirs and personal representatives, and the successors and assigns of Carriage.
11. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Texas.
12. Entire Agreement; Amendment. This Agreement, together with the
Separation Agreement and the other exhibits thereto, embody the entire agreement
and understanding among the parties concerning the subject matter hereof and
thereof, and supersede any and all prior agreements and arrangements between the
parties concerning such subject matter. This Agreement may be amended only by a
written instrument signed by or on behalf of the parties hereto.
13. Captions. The section and paragraph headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14. Counterparts. This Agreement may be executed in multiple original
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same in strument.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
CARRIAGE SERVICES, INC.
By: ________________________________________
MELVIN C. PAYNE, Chief Executive Officer
____________________________________________
MARK W. DUFFEY
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