UNFAIR COMPETITION AND NONSOLICITATION AGREEMENT
Exhibit 10.4
Execution Version
UNFAIR COMPETITION AND NONSOLICITATION AGREEMENT (hereafter, the “Agreement”) entered into as
of this 25th day of May, 2005 (the “Effective Date”), by and between Santa Acquisition
Corporation, Inc. (the “Company”) and Xxxx Xxxxx, a resident of California.
W I T N E S S E T H
WHEREAS, Xx. Xxxxx owns a membership interest in Automotive Lease Guide (alg), LLC, a
California limited liability corporation with its principle place of business in Santa Barbara,
California (“ALG, LLC”), and is a shareholder in Automotive Lease Guide (alg) Canada, Inc. (“ALG,
Inc.”) (ALG, LLC and ALG, Inc. hereinafter collectively referred to as “ALG”). ALG is the leading
provider of residual values, analytical data products and consultation with respect to residual
values to the automotive industry throughout the United States (including each county in the State
of California) and Canada (the “Territory’) through, inter alia, the provision of residual guides,
portfolio risk analysis, portfolio securitization valuations, consulting and special studies
regarding residual values, development and provision of automotive data analysis and reporting
products, and providing data analysis for residual value insurance (the “Business”);
WHEREAS, on even date herewith, the Company and ALG executed an Asset Purchase Agreement
(“Purchase Agreement”) pursuant to which the Company will purchase substantially all of the assets
of ALG;
WHEREAS, the Company intends to carry on the Business of ALG and to employ Xx. Xxxxx as its
Chief Executive Officer after consummation of the transactions contemplated by the Purchase
Agreement;
WHEREAS, it is a condition precedent to the obligation of the Company to consummate the
transactions contemplated by the Purchase Agreement that Xx. Xxxxx enter into and on the Effective
Date be bound by this Agreement;
WHEREAS, the Company recognizes the importance of Xx. Xxxxx to the Business and to the ability
of the Company to retain its client, employee and vendor relationships in respect of the Business;
WHEREAS, the parties agree that Xx. Xxxxx will be subject to certain restrictive covenants
necessary to protect the value of the assets and good will of ALG purchased by the Company,
including, without limitation, confidential, proprietary and trade secret information, and goodwill
among customers, employees and vendors;
NOW THEREFORE, in consideration of good valuable consideration, including, without limitation,
the Company’s agreement to consummate the transactions contemplated by the
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Purchase Agreement and the consideration provided by the Company therewith, the receipt and
adequacy whereof are hereby acknowledged, Xx. Xxxxx covenants and agrees as follows:
Section 1. Nonsolicitation/Non-Compete.
(a) In view of the fact that any activity of Xx. Xxxxx in violation of the terms hereof would
deprive the Company of the benefits of their bargain under the Purchase Agreement and under the
other agreements relating to that transaction, and to preserve the goodwill associated with the
Business, Xx. Xxxxx hereby agrees during the Restricted Period he will not, without the express
written consent of DealerTrack Holdings, Inc. (the “Parent”), directly or indirectly, anywhere in
the Territory, (i) engage in any activity which is competitive with any portion of the Business or
is like or similar to the Business, (ii) participate or invest in, or provide or facilitate the
provision of financing to, or assist (whether as owner, part-owner, shareholder, partner, director,
officer, trustee, employee, agent or consultant, or in any other capacity), any business,
organization or person other than the Company (or any affiliate of or Successor to the Company)
whose business, activities, products or services are competitive with any portion of the Business
or are like or similar to the Business (a “Competitor”), (iii) solicit for or on behalf of himself
or any Competitor any client of the Business or any of its direct or indirect subsidiaries or
affiliates or divert to any person any client or business opportunity of the Company or any of its
direct or indirect subsidiaries or affiliates in respect of the Business, (iv) solicit or attempt
to hire or engage for or on behalf of himself or any Competitor any officer or employee of the
Company or any of its direct and/or indirect subsidiaries or affiliates, or (v) encourage for or on
behalf of himself or any Competitor, any such officer or employee to terminate his or her
relationship or employment with the Company or any of its direct or indirect subsidiaries or
affiliates.
Ownership, for personal investment purposes only, of not to exceed (i) individually, two (2%)
percent of the outstanding capital stock of any privately held entity, or (ii) two (2%) percent of
the outstanding voting stock of any publicly held corporation shall not constitute a violation
hereof.
(b) “Restricted Period” means ten (10) years from the Effective Date, provided that
the Restricted Period will terminate earlier (i) with respect to all or a portion of the Territory,
on the date when the Company or any person deriving any right, title or interest from the Company
to the Business acquired from ALG (any such person, a “Successor”) ceases to carry on a business
like or similar to that of the Business therein, or (ii) with respect to Subsections 1(a)(i)-(iii)
only, following a determination by a court or arbitrator, that is final and unappealable (“Final
Order”), that the Company has defaulted under Section 2.06 of the Purchase Agreement, but only if
and when the Company or Parent fails to make the payment with respect to which it is found to be in
default within the later of (A) the time specified in the Final Order or, (B) 30 days following the
entry of a Final Order. By way of further clarification, Xx. Xxxxx hereby acknowledges and agrees
that in the event Company, or any of its affiliates or any Successor ceases to carry on the
Business or a like or similar business in a portion of the Territory, Section 1(a) shall be deemed
to expire only with respect to that portion of the Territory and shall continue in full force and
effect with respect to the remainder of the Territory.
(c) Xx. Xxxxx acknowledges that the time, scope, geographic area and other provisions of this
Section 1 have been specifically negotiated by sophisticated commercial
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parties and agrees that (i) all such provisions are reasonable under the circumstances of the
transactions contemplated hereby, (ii) are given as an integral and essential part of the
transactions contemplated in the Purchase Agreement and (iii) but for Xx. Xxxxx’x agreement to
Section 1 contained herein, Parent and the Company would not have entered into or consummated the
transactions contemplated hereby. Xx. Xxxxx has independently consulted with his counsel and has
been advised in all respects concerning the reasonableness and propriety of the covenants contained
herein, with specific regard to the Business to be conducted by Company and its subsidiaries and
affiliates, and represents that this Section 1 is intended to be and shall be fully enforceable and
effective in accordance with its terms.
Section 2. Equitable Relief. Xx. Xxxxx acknowledges and agrees that the Company will
suffer irreparable damage which cannot be adequately compensated by money damages in the event of a
breach, or threatened breach, of any of the terms and provisions of Section 1 of this Agreement,
and that, in the event of any such breach, or threatened breach, the Company will not have an
adequate remedy at law. It is therefore agreed that the Company, in addition to all other such
rights, powers, privileges and remedies that it may have, shall be entitled to injunctive relief,
specific performance or such other equitable relief as the Company may request to enforce any of
those terms and provisions and to enjoin or otherwise restrain any act prohibited thereby, and Xx.
Xxxxx will not raise and hereby waives any objection or defense that there is an adequate remedy
available at law. Xx. Xxxxx agrees that the Company shall be entitled to seek such injunctive
relief, without bond, in a court of competent jurisdiction and Xx. Xxxxx hereby consents to the
jurisdiction of the state and federal courts of California for purposes of such an action. The
foregoing shall not constitute a waiver of any of the Company’s rights, powers, privileges and
remedies against or in respect of a breaching party or any other person or thing under this
Agreement, or applicable law. The Company shall have the right to enforce this Agreement in a
court of competent jurisdiction and shall not be required to arbitrate any claims hereunder
pursuant to Section 18 of the Employment Agreement of even date herewith by and between the Company
and Xx. Xxxxx.
Section 3. Disclosure of Agreement. Xx. Xxxxx will disclose the existence and terms
of this Agreement to any prospective employer, partner, co-venturer, investor or lender prior to
entering into an employment, partnership or other business relationship with such person or entity.
Section 4. Miscellaneous.
(a) The parties agree that if any portion or provision of this Agreement is to any extent be
declared illegal or unenforceable by a court of competent jurisdiction, then the court may amend
such portion or provision so as to comply with the law in a manner consistent with the intention of
this Agreement, the remainder of this Agreement, or the application of such illegal or
unenforceable portion or provision in circumstances other than those as to which it is so declared
illegal or unenforceable, will not be affected thereby, and each portion and provision of the
Agreement will be valid and enforceable to the fullest extent permitted by law. In the event that
any provision of this Agreement is determined by any court of competent jurisdiction to be
unenforceable by reason of excessive scope as to geographic, temporal or functional coverage, such
provision will be deemed to extend only over the maximum geographic, temporal and functional scope
as to which it may be enforceable.
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(b) Xx. Xxxxx agrees that no claim that he may have against the Parent or Company shall serve
as a defense to enforcement of his obligations hereunder.
(c) This Agreement constitutes the entire agreement between the Parent, the Company and Xx.
Xxxxx with respect to the subject matter hereof, and supersedes all prior representations and
agreements with respect to such subject matter. This Agreement may not be amended, modified or
waived except by a written instrument duly executed by the person against whom enforcement of such
amendment, modification or waiver is sought. The failure of any party to require the performance
of any portion or provision of this Agreement, or the waiver by any party of any breach of this
Agreement, in any particular case will not prevent any subsequent enforcement of such portion or
provision or to be deemed a waiver of any separate or subsequent breach.
(d) This Agreement shall be governed by California law. The parties consent to exclusive
personal jurisdiction of the state and federal courts situated in Los Angeles, California in
respect to enforcement of this Agreement and waive any defenses based on personal jurisdiction or
venue in such courts. Should any action or proceeding be brought to construe or enforce the terms
and conditions of this Agreement or the rights of the parties hereunder, the losing party shall pay
to the prevailing party all court costs and reasonable attorneys’ fees and costs (at the prevailing
party’s attorney’s then-current rates) incurred in such action or proceeding.
I UNDERSTAND THAT THIS AGREEMENT AFFECTS IMPORTANT RIGHTS THAT I HAVE. I HAVE READ IT
CAREFULLY AND AM SATISFIED THAT I UNDERSTAND IT COMPLETELY AND AGREE TO IT.
Date:
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/s/ Xxxx Xxxxx | |||||||
| Xxxx Xxxxx | ||||||||
| Address | ||||||||
| SANTA ACQUISITION CORPORATION | ||||||||
Date:
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/s/ Xxxx X’Xxxx | |||||||
| By: | ||||||||
| Its: |
