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EXHIBIT 99(c)(5)
NON-COMPETE AGREEMENT
This Agreement, dated as of August 12, 1998 (the "Agreement"), between
ENVIRONMENTAL SYSTEMS PRODUCTS, INC., a Delaware corporation (the "Company") and
XXXXXXX X. XXXXXXXXX ("Xxxxxxxxx").
RECITALS
1. The Company and Envirotest Systems Corp. ("Envirotest") are parties to
a Merger Agreement dated as of August 12, 1998 (the "Merger Agreement"),
pursuant to which Envirotest will be merged with and into the Company (the
"Merger") at the Effective Time (as defined in the Merger Agreement).
2. Xxxxxxxxx serves as Chairman of the Board of Envirotest pursuant to an
Employment Agreement dated as of January 1, 1993, as amended on June 4, 1998
(the "Employment Agreement"). In accordance with the Employment Agreement,
Xxxxxxxxx has the unilateral right to terminate his employment with Envirotest
upon the consummation of the Merger, and, in the event of such termination, is
subject for two years to certain non-competition obligations (such obligations,
as set forth in the Employment Agreement, the "Existing Non-Compete
Obligations").
3. Xxxxxxxxx has determined to exercise his unilateral right to terminate
his employment with Envirotest under the Employment Agreement upon the
consummation of the Merger.
4. The Existing Non-Compete Obligations are of two years in duration, and
are not applicable to the manufacture, sale or leasing of emissions testing
equipment.
5. By reason of Xxxxxxxxx'x unique talents, background, experience and
knowledge of the industry, Xxxxxxxxx could, if he chose to compete with the
Company to the extent consistent with the Existing Non-Compete Obligations, pose
a unique and major competitive threat to the Company.
6. In furtherance of the Merger in accordance with the Merger Agreement
and the transactions contemplated thereby, in order that the Company may have
and enjoy the full benefit of the ownership of the business of Envirotest, and
more effectively to protect the value and goodwill of such business, the parties
have agreed to extend and expand the Existing Non-Compete Obligations.
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AGREEMENT
NOW, THEREFORE, in order to effect the foregoing and in consideration of
the promises and the respective covenants and agreements of the parties herein
contained and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Non-Competition; Nonsolicitation.
(a) , Xxxxxxxxx agrees that for a period of five years following the
consummation of the Merger (the "Term"), Xxxxxxxxx shall not:
(i) own, manage, operate, control, participate in, perform
services for, or otherwise engage in, a business in
competition with the business of vehicle emissions testing,
the manufacture of equipment for such testing, or the sale or
leasing of such equipment (the "Business"), either acting alone
or in conjunction with others, directly or indirectly, whether
as owner, partner, stockholder, principal, agent, consultant,
independent contractor or employer, anywhere within the United
States (it being understood that the Business can be national in
scope and not limited to any particular region of the United
States and that the Business may be engaged in effectively from
any location within the United States); and
(ii) either acting alone or in conjunction with others, directly or
indirectly, induce or attempt to persuade any customers or
prospective customers of the Company to curtail, cancel or
otherwise terminate their business with the Company.
provided, however, that nothing set forth in this Agreement shall prohibit
Xxxxxxxxx from owning not in excess of 5% in the aggregate of any class of
capital stock of any corporation if such stock is publicly traded and listed on
any national or regional stock exchange or on the NASDAQ market system.
(b) Xxxxxxxxx agrees that during the Term, Xxxxxxxxx shall not:
(i) employ, offer to employ or permit to post for any position of
employment any employee of the Company, except for Xxxx Xxxxxx or any
individual who has customarily been employed in the operations of
Envirotest in Bethesda, Maryland (the "Excepted Employees"); or
(ii) otherwise interfere with the employment by the Company or its
Affiliates of, any individual (other than an Excepted Employee) who
becomes or would otherwise become an employee of the Company, unless and
until such employee's employment is terminated by the Company after the
consummation of the Merger or the Company and Xxxxxxxxx enter into a
written agreement with respect to such employee providing otherwise.
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"Affiliate" means any person or entity that directly, or indirectly
through one of more intermediaries, controls or is controlled by or is under
common control with the person or entity specified. For purposes of this
definition, control of a person or entity means the power, direct or indirect,
to direct or cause the direction of the management and policies of such person
or entity, whether by contract or otherwise.
(c) It is expressly understood and agreed that although Xxxxxxxxx and the
Company consider the restrictions contained in paragraph (a) and paragraph (b)
above to be reasonable in scope and duration, if a final judicial determination
is made by a court of competent jurisdiction that the time or territory or any
other restriction contained in paragraph (a) or paragraph (b) is an
unenforceable restriction against Xxxxxxxxx, the provisions of such paragraph
shall not be rendered void, but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any court
of competent jurisdiction finds that any restriction contained in paragraph (a)
or paragraph (b) is unenforceable, and such restriction cannot be amended so as
to make it enforceable, such finding shall not affect the enforceability of any
of the other restrictions contained in such paragraph or in this Agreement.
2. Compensation. In consideration for the extension and expansion of the
Existing Non-Compete Obligations as set forth herein, the Company agrees to
compensate Xxxxxxxxx as follows:
(a) $1,000,000 upon the earlier to occur of (i) the acceptance of shares
for payment pursuant to the tender offer contemplated by the Merger Agreement
and (ii) consummation of the Merger and the closing of the related transactions,
(b) $333,333.33 per year for a period of three years, payable in equal
monthly installments of $27,777.78 on the first day of each month, commencing
the first month following the consummation of the Merger.
3. Injunctive Relief. In the event of breach by Xxxxxxxxx of his
obligations hereunder, the Company shall be entitled to institute legal
proceedings to obtain damages for any such breach, or to enforce the specific
performance of this Agreement by Xxxxxxxxx and to enjoin Xxxxxxxxx from any
further violation of the terms herein and to exercise such remedies cumulatively
or in conjunction with all other rights and remedies provided by law or equity.
Xxxxxxxxx acknowledges, however, that the remedies at law for any breach by
Xxxxxxxxx of the provisions herein may be inadequate since violation of this
Agreement may cause the Company irreparable harm. Xxxxxxxxx therefore agrees
that in the event of any actual or threatened violation of this Agreement, the
Company shall be entitled, in addition to other remedies that it may have, to a
temporary restraining order and to preliminary and final injunctive relief
against Xxxxxxxxx to prevent any violations of this Agreement, without the
necessity of posting a bond.
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4. Maintaining Confidential Information.
(a) At all times during the Term and thereafter, Xxxxxxxxx will hold
in strictest confidence, and not use, except for the benefit of the Company, or
disclose to any person, firm or corporation without written authorization of the
Board of Directors of the Company, any trade secrets, confidential knowledge,
data or other proprietary information relating to products, processes, know-how,
design, formulas, developmental or experimental work, computer programs, data
bases, other original works of authorship, customer lists, business plans,
financial information or other subject matter pertaining to any business of the
Company or any of its clients, consultants or licensees (the "Confidential
Information").
(b) "Confidential Information" does not include any such information,
technical data, or know-how which:
(i) is already or otherwise enters the public domain, not as a
result of any action or inaction by Xxxxxxxxx in violation of this
Agreement;
(ii) is in the receiving party's possession prior to disclosure by
Xxxxxxxxx;
(iii) is approved for release by the Company or is made available by
the Company to third parties without an obligation of
confidentiality;
(iv) relates to Xxxxxxxxx'x general business knowledge acquired as a
result of his association with and services to the Company.
(c) Xxxxxxxxx will promptly make full written disclosure to the
Company, hold in trust for the sole right and benefit of the Company and assign
to the Company all his right, title, and interest in and to all inventions,
original works of authorship, developments, improvements or trade secrets which
Xxxxxxxxx may solely or jointly conceive or develop or reduce to practice, or
cause to be conceived or developed or reduced to practice, which relate to the
Company's business, are developed by Xxxxxxxxx in connection with the services
provided hereunder or under the Employment Agreement or are developed by
Xxxxxxxxx through the use of any property, equipment or other assets of the
Company.
5. Modification; Waiver; Discharge. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by each of the parties hereto. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
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6. Effect on Other Agreements. This Agreement is not intended to amend or
otherwise affect the provisions of the Employment Agreement or any other
arrangements between Xxxxxxxxx and Envirotest.
7. Assignment; Binding on Successors. This Agreement and the rights and
obligations of the parties hereto will bind and inure to the benefit of any
successor or successors of the Company by reorganization, merger or
consolidation and any assignee of all or substantially all of its business and
properties, provided that, in the case of an assignment, the assignee assumes
all of the Company's obligations hereunder. Except as to any such successor or
assignee of the Company, neither this Agreement nor any rights or benefits
hereunder may be assigned by the Company or by Xxxxxxxxx, and no assignment by
the Company will relieve the Company from its obligations to Xxxxxxxxx
hereunder.
8. Reimbursement of Certain Costs. The Company shall reimburse Xxxxxxxxx
for reasonable attorney fees, court costs and other related expenses incurred in
defending or enforcing his rights under this Agreement; provided that if the
Company is the opposing party against Xxxxxxxxx in any action or proceeding,
Xxxxxxxxx shall not be entitled to any such reimbursement unless and to the
extent he is the prevailing party in such action or proceeding.
9. No Set-Offs. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against Xxxxxxxxx.
10. Notices. Any notice which the Company is required or may desire to
give to Xxxxxxxxx will be given by personal delivery or registered or certified
mail, return receipt requested, addressed to Xxxxxxxxx at the address of record
with the Company, or at such other place as Xxxxxxxxx may from time to time
designate in writing. Any notice which Xxxxxxxxx is required or may desire to
give to the Company will be given by personal delivery or by registered or
certified mail, return receipt requested, addressed to the Company at its
principal office, or at such other office as the Company may from time to time
designate in writing. The date of personal delivery or three days after the date
of mailing any such notice will be deemed to be the date of delivery thereof.
11. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
12. Headings. The headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Delaware without regard to its conflicts of law principles.
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14. Termination. In the event that the Merger Agreement is terminated,
this Agreement shall automatically and simultaneously terminate and be of no
further force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
ENVIRONMENTAL SYSTEMS
PRODUCTS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
Executive Vice President &
Chief Financial Officer
/s/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx
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