COVENANT NOT TO COMPETE
This
Covenant Not to Compete (the “Covenant”) is entered into and effective as of
July 15, 2008 by and between _________________________________ (“Seller”) and
Platinum Studios, Inc., a California corporation (“Purchaser”).
WHEREAS,
Purchaser, Seller and others have entered into an Acquisition Agreement dated
as
of July 15, 2008 (the “Acquisition Agreement”) pursuant to which Purchaser is
purchasing all of the outstanding membership interests in WOWIO, LLC, a
Pennsylvania limited liability company (the “Company”), including the membership
interests in the Company owned by Seller (“Seller’s Membership Interests”).
Capitalized terms not otherwise defined herein shall have the same meanings
set
forth for such terms in the Acquisition Agreement;
WHEREAS,
Seller is receiving significant consideration in exchange for the sale of
Seller’s Membership Interests to Purchaser pursuant to the terms of the
Acquisition Agreement;
WHEREAS,
to preserve the value of the business of the Company being acquired by Purchaser
under the Acquisition Agreement, it is a condition to the consummation of the
sale of Seller’s Membership Interests thereunder that Seller shall enter into
this Covenant;
NOW,
THEREFORE, in consideration of the mutual promises made herein, Seller hereby
agrees as follows:
1. Covenant
Not to Compete or Solicit.
(a)
Non-Competition.
For a
period of three years measured from the Closing Date (the “Non-Competition
Period”), Seller shall not, without the prior written consent of Purchaser,
engage in a Competitive Business Activity (as defined below) anywhere in the
Restricted Territory (as defined below).
(i) For
all
purposes hereof, the term “Competitive Business Activity” shall mean: (A)
engaging in, or managing or directing persons engaged in any business in
competition with the business of the Company being acquired by Purchaser
pursuant to the Acquisition Agreement (the “Acquired Business”); (B) acquiring
or having an ownership interest in any entity that derives revenues from any
business substantially similar to the Acquired Business (except for passive
ownership of one percent (1%) or less of any entity whose securities are
publicly traded on a national securities exchange or market or five percent
(5%)
or less of any entity whose securities are not publicly traded on a national
securities exchange or market); or (C) participating in the operation,
management or control of any firm, partnership, corporation, entity or business
(each, an “Entity”) described in subsection (B) above.
(ii) For
all
purposes hereof, the term “Restricted Territory” shall mean each and every
country, province, state, city or other political subdivision in which the
Company is engaged in the Acquired Business.
(iii) Notwithstanding
the provisions of subsection (i) above, the term “Competitive Business Activity”
does not include (A) writing, editing, contributing to, compiling, publishing,
or promoting a book, magazine, or other literary work, electronically or
otherwise as long as such activities are not being performed by Seller as an
employee of, or independent contractor or consultant for, a business
substantially similar to the Acquired Business; or (B) giving lectures, giving
addresses, speaking at conferences, or engaging in any other type of public
speaking
(b) Non-Solicitation.
During
the Non-Competition Period, Seller shall not solicit, encourage or take any
other action which is intended to induce or encourage, or could reasonably
be
expected to have the effect of inducing or encouraging, any employee or
independent contractor of the Company or Purchaser or any of its subsidiaries
to
terminate his or her employment or engagement with the Company or Purchaser;
provided, however, that any general solicitation of employees or independent
contractors not specifically targeted to Purchaser’s shall not be deemed a
violation of this Section 1(b).
(c) The
covenants contained in Section 1(a) hereof shall be construed as a series of
separate covenants, one for each country, province, state, city or other
political subdivision of the Restricted Territory. Except for geographic
coverage, each such separate covenant shall be deemed identical in terms to
the
covenant contained in Section 1(a) hereof. If, in any judicial proceeding,
a
court refuses to enforce any of such separate covenants (or any part thereof),
then such unenforceable covenant (or such part) shall be eliminated from this
Agreement to the extent necessary to permit the remaining separate covenants
(or
portions thereof) to be enforced. In the event that the provisions of this
Section 1 are deemed to exceed the time, geographic or scope limitations
permitted by applicable law, then such provisions shall be reformed to the
maximum time, geographic or scope limitations, as the case may be, permitted
by
applicable laws.
(d)
Seller
acknowledges that (i) the goodwill associated with the Company Assets is an
integral component of the value of the Company to Purchaser and is reflected
in
the consideration received by Seller under the Acquisition Agreement; and (ii)
the Covenant as set forth herein is necessary to preserve the value of the
Company for Purchaser following the Closing Date. Seller also acknowledges
that
the limitations of time, geography and scope of activity agreed to in this
Agreement are reasonable because, among other things, (1) The Company is engaged
in business in a highly competitive industry, and (2) this Covenant provides
no
more protection than is necessary to protect Purchaser’s interests in the
goodwill associated with the Company.
2. Specific
Performance; Injunctive Relief.
The
parties acknowledge that Purchaser will be irreparably harmed and that there
will be no adequate remedy at law for a violation of any of the covenants or
agreements of Seller. Therefore, it is agreed that, in addition to any other
remedies that may be available to Purchaser upon any such violation, Purchaser
shall have the right to seek enforcement of such covenants and agreements by
specific performance, injunctive relief or by any other means available to
Purchaser at law or in equity.
3. Miscellaneous
Provisions.
(a) Amendment
and Waiver.
This
Agreement may be amended, modified and supplemented only by written agreement
of
each of the parties hereto. By an instrument in writing, either Party may waive
compliance by the other party with any term or provision of this Agreement
that
such other party was or is obligated to comply with or perform.
(b) Notices.
All
notices, requests, demands and other communications which are required or may
be
given under this Agreement shall be in writing and shall be deemed to have
been
duly given when received if personally delivered; the day after it is sent,
if
sent for next day delivery to a domestic address by recognized overnight
delivery service (e.g.,
Federal Express); upon receipt, if sent by certified or registered mail, return
receipt requested; and upon confirmed transmission if sent by telecopier. In
each case notice shall be sent to:
If
to
Seller:
______________________
______________________
______________________
If
to
Purchaser:
00000
Xxxx Xxxxxxx Xxxx.
00xx
Xxxxx
Xxx
Xxxxxxx, XX 00000
Facsimile:
(000) 000-0000
or
to
such other person or address as any Party hereto shall furnish to the other
Party hereto in writing pursuant to this Section
3.
(c) Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Parties hereto
and their respective successors and permitted assigns. This Agreement may not
be
assigned by either Party hereto without the prior written consent of the other
parties;
provided
however,
that
Purchaser may assign its rights and obligations under this Agreement to any
Person who acquires all or substantially all of the assets, stock or business
of
Purchaser or the Company (whether by sale, merger or otherwise) without the
consent of Seller.
(d) Governing
Law.
This
Agreement shall be governed by the law of the State of California, regardless
of
the laws that might otherwise govern applicable conflicts of laws.
(e) Attorney
Fees.
If any
party to this Agreement brings an action to enforce its rights under this
Agreement, the prevailing party shall be entitled to recover its costs and
expenses, including without limitation, reasonable attorneys’ fees, incurred in
connection with such action, including any appeal of such action.
(f) Invalidity.
In the
event that any one or more of the provisions contained in this Agreement or
in
any other instrument referred to herein, shall, for any reason, be held to
be
invalid, illegal or unenforceable in any respect, then to the maximum extent
permitted by law, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such
instrument.
(g) Counterparts;
Facsimile.
This
Agreement may be signed and delivered either originally or by facsimile, and
in
one or more counterparts, each of which shall be deemed an original, but all
of
which together shall constitute one and the same instrument.
(h) Headings.
The
section headings contained in this Agreement are for reference purposes only
and
shall not affect in any way the meaning or interpretation of this
Agreement.
(i) Interpretation.
When a
reference is made in this Agreement to a Section, Exhibit or Schedule, such
reference shall be to a Section, Exhibit or Schedule of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of
this Agreement. Whenever the words “included,”
“includes”
or
“including”
are
used in this Agreement, they shall be deemed to be followed by the phrase
“without
limitation.”
(j) Entire
Agreement
This
Agreement embodies the entire agreement and understanding of the parties hereto
in respect of the subject matter contained herein. This Agreement supersedes
all
prior agreements and understandings between the parties hereto with respect
to
such subject matter.
4. Cross-Default.
This
Agreement shall be of no further force and effect, and the competition and
solicitation restrictions described herein shall not apply, in the event of
a
material breach of the Acquisition Agreement by Company, including but not
limited to a failure by Company to direct the transfer agent to issue any
Purchase Price Shares or Earn Out Shares to the Shareholders (the “Transfer
Agent Instructions”), within the specific timelines set forth in the Acquisition
Agreement, even in the absence of bad faith; provided that the Seller must
give
notification of such breach to the Company in writing and the Company shall
have
20 days following such notice to cure such breach unless such breach involves
the Transfer Agent Instructions and then such cure period shall be only five
business days.
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IN
WITNESS WHEREOF, the parties, acting through their duly authorized
representative, to the extent applicable, have executed this COVENANT NOT TO
COMPETE as of the date first written above.
| “Purchaser” | “Seller” |
| Platinum Studios, Inc. | __________________________ |
By:
_____________________________
Xxxxx
Xxxxxxxxx, President
[SIGNATURE
PAGE TO COVENANT NOT TO COMPETE]
