Non-Competition The Employee shall not, at any time during the Employment Term and for a period (the "Restricted Period") of three (3) years thereafter, directly or indirectly, except where specifically contemplated by the terms of his employment or this Agreement, (a) be employed by, engage in or participate in the ownership, management, operation or control of, or act in any advisory or other capacity for, any Competing Entity which conducts its business within the Territory; provided, however, that notwithstanding the foregoing, the Employee may make solely passive investments in any Competing Entity the common stock of which is publicly held and of which the Employee shall not own or control, directly or indirectly, in the aggregate securities which constitute 5% or more of the voting rights or equity ownership of such Competing Entity; or (b) solicit or divert any business or any customer from the Subsidiary or any Affiliate of the Subsidiary or assist any person, firm or corporation in doing so or attempting to do so; or (c) cause or seek to cause any person, firm or corporation to refrain from dealing or doing business with the Subsidiary or any Affiliate of the Subsidiary or assist any person, firm or corporation in doing so. The Employee agrees that, notwithstanding any other provision of this Agreement to the contrary, if he breaches any of his covenants contained in this Section 13, then, in addition to any other remedy which may be available at law or in equity, the Company and the Subsidiary shall be entitled to (1) cease or withhold payment or provision of any severance compensation and benefits to which the Employee is otherwise entitled pursuant to Section 10(a), and (2) receive reimbursement from the Employee of any lump-sum payments previously made to the Employee of any severance compensation payable under Section 10(a) and any Closing Bonus theretofore paid to the Employee, and the Employee shall forfeit his right to receive any such severance compensation and Closing Bonus; provided, however, that any obligation of the Employee to reimburse the Company or the Subsidiary for any lump-sum payments and Closing Bonus pursuant to clause (2) of this sentence shall lapse on a pro rata basis as follows: the portion of such lump-sum payments and Closing Bonus that may be required to be so reimbursed by the Employee shall be the total of all such lump-sum payments and Closing Bonus multiplied by a fraction, the numerator of which shall be the number of days remaining in the Restricted Period following the date on which the Employee first engages in such breach of his covenants contained in this Section 13 and the denominator of which shall be the total number of days comprising the Restricted Period.
Covenant Not to Compete EMPLOYEE agrees that solely in the event of the sale or acquisition of the COMPANY, and to the maximum extent permitted by applicable law, EMPLOYEE shall abide by the following covenant not to compete. The sale or acquisition of the COMPANY shall include the COMPANY’s sale of its goodwill, or its sale of all or substantially all of its operating assets, together with the goodwill, or its sale or other disposition of its ownership interest in COMPANY or as otherwise provided in California Business and Professions Code Section 16601. The covenant not to compete shall exist only in the event that following the termination of this Agreement (and only in the event of the sale or acquisition of the COMPANY), the COMPANY elects, at its sole discretion, to invoke its restrictions. To exercise this covenant not to compete, the COMPANY shall notify EMPLOYEE within ten (10) days of termination of this Agreement of its intention to exercise this option and make an additional payment to EMPLOYEE of TWELVE (12) months’ base monthly salary determined at EMPLOYEE’s last rate of base monthly salary (and not including any bonus for which the EMPLOYEE may be eligible) with COMPANY. Pursuant to this covenant not to compete, EMPLOYEE agrees that for a period of one (1) year following the termination date of this Agreement, EMPLOYEE shall not directly or indirectly for EMPLOYEE, or as a member of a partnership, or as an officer, director, stockholder, employee, or representative of any other entity or individual, engage, directly or indirectly, in any business activity which is the same or similar to work engaged in by EMPLOYEE on behalf of COMPANY within the same geographic territory where the COMPANY carries on or conducts business, and which is directly competitive with the business conducted or to EMPLOYEE’s knowledge, contemplated by COMPANY at the time of termination of this Agreement, (other than investments in professionally managed funds over which the EMPLOYEE does not have control or discretion in investment decisions and investments in publicly traded companies, so long as EMPLOYEE’S beneficial ownership does not exceed 2% of the public companies outstanding voting stock). EMPLOYEE may accept employment with an entity competing with COMPANY only if the business of that entity is diversified and EMPLOYEE is employed solely with respect to a separately-managed and separately-operated part of that entity’s business that does not compete with COMPANY. Prior to accepting such employment, EMPLOYEE and the prospective employer entity shall provide COMPANY with written assurances reasonably satisfactory to COMPANY that EMPLOYEE will not render services directly or indirectly to any part of that entity’s business that competes with the business of COMPANY. EMPLOYEE acknowledges that (i) EMPLOYEE is familiar with the foregoing covenant not to compete; (ii) EMPLOYEE is an officer and key member of the management of COMPANY; (iii) EMPLOYEE is a shareholder of the COMPANY; (iv) the goodwill associated with the existing business, customers and assets of COMPANY prior to any sale or acquisition of the COMPANY is an integral component of the value of COMPANY; and (v) EMPLOYEE’s agreement as set forth herein is necessary and reasonable with respect to its length of time, scope and geographic coverage, in order to protect the goodwill related to the COMPANY in connection with its sale or acquisition.
