Non-Competition Agreement
THIS AGREEMENT is made as of the 24th day of May, 1999, between
XXXXXXXX.XXX, INC., a Florida corporation (the "Company"), and XXXX XXXXXXX, an
individual resident of the State of Florida ("Xxxxxxx" or "Executive").
W I T N E S S E T H
WHEREAS, the Company originates, processes, underwrites, funds, closes
and sells mortgage loans throughout the United States, using loan
correspondents, network members, retail loan officers and strategic business
partners, each of whom employs the Company's proprietary CLOser software system
and its associated Internet capabilities; and
WHEREAS, Xxxxxxx is employed by the Company and is currently the
President of the Company's Advanced Technology Group where he is charged with
the overall development and maintenance of all of the Company's computer
technology; and
WHEREAS, in his position with the Company, Xxxxxxx has access to
valuable confidential business and professional information possessed by the
Company, has substantial relationships with prospective and existing technology
customers and clients of the Company, has specialized training in the methods by
which the Company employs its technology and conducts its business and has
access to trade secrets related to the CLOser software system and its associated
Internet capabilities; and
WHEREAS, because of Xxxxxxx'x intimate knowledge of the Company's
confidential information, trade secrets, customer and client relationships,
technology and methods of operation, there would be a detrimental effect on the
Company's business if Xxxxxxx were to enter into competition with the Company
after the date hereof; and
WHEREAS, the Company is contemplating an initial public offering of its
common stock and the underwriters managing the offering are unwilling to proceed
with the offering in the absence of reasonable non-competition restrictions
being placed on the Company's senior executive officers, including Xxxxxxx; and
WHEREAS, Xxxxxxx holds shares of the Company's common stock, and has a
financial interest in the Company's common stock being publicly traded following
an initial public offering; and
NOW THEREFORE, in consideration of the above premises and of the
promises herein contained, the parties covenant and agree as follows:
1. Certain Definitions. For purposes of this Agreement, the following
words and phrases have the following meanings:
"Affiliate" has the same meaning as "affiliate" in Rule 144(a)
promulgated under the Securities Act of 1933, as amended.
"Beneficial Owner" has the same meaning as "beneficial owner" in Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended.
"Cause" for termination means (i) Executive's conviction of a felony,
(ii) acts of Executive which, in the judgment of the Board, constitute fraud on
the part of Executive, including but not limited to misappropriation or
embezzlement in the performance of duties as an employee of the Company, or
-1-
willful engagement in conduct materially injurious to the Company, or (iii)
gross misconduct, including but not limited to the willful failure of Executive
either to (a) obey lawful written instructions of the Board after thirty (30)
days notice in writing of Executive's failure to do so and the Board's intention
to terminate Executive if such failure is not corrected, or (b) correct any
conduct of Executive which constitutes a breach of this Agreement after thirty
(30) days notice in writing of Executive's failure to do so and of the Board's
intention to terminate Executive if such failure is not corrected.
"Change of Control" shall be deemed to have occurred if, after the
effective date of this Agreement,
(a) any one Person (or group of Affiliated Persons or entities)
other than an Excluded Person or an underwriter temporarily
holding securities pursuant to an offer of such securities,
becomes a Beneficial Owner, directly or indirectly, of
securities representing 50% or more of the total number of
votes that may be cast for the election of directors of the
Company; or
(b) the shareholders of the Company approve, and the Company
consummates, a merger, consolidation or share exchange of the
Company with any other corporation or approve the issuance of
voting securities of the Company in connection with a merger,
consolidation or share exchange of the Company, other than (i)
a merger, consolidation or share exchange which would result
in the voting securities of the Company outstanding
immediately prior to such merger, consolidation or share
exchange continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof) at least 50% of
the combined voting power of the voting securities of the
Company or such surviving entity or any parent thereof
outstanding immediately after such merger, consolidation or
share exchange, or (ii) a merger, consolidation or share
exchange effected to implement a recapitalization of the
Company (or similar transaction) in which no Person other than
an Excluded Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company
representing 50% or more of either the then outstanding shares
of common stock of the Company or the combined voting power of
the Company's then outstanding voting securities; or
(c) the shareholders of the Company approve, and the Company
consummates, an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets
(in one transaction or a series of related transactions within
any period of 24 consecutive months), other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity at least 50% of the combined
voting power of the voting securities of which are owned by
Persons in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change of Control" shall be deemed
to have occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of the common stock
of the Company immediately prior to such transaction or series of transactions
continue to own, directly or indirectly, in the same proportions as their
ownership in the Company, an entity that owns all or substantially all of the
assets or voting securities of the Company immediately following such
transaction or series of transactions.
"Excluded Person" means Xxxx Xxxxxx, Canaan Equity, L.P., Dominion Fund
III, or Affiliates of any of the foregoing.
-2-
"Good Reason" shall be deemed to have occurred if (i) the Company
reduces the Executive's base salary, (ii) the Company requires the Executive to
relocate more than 50 miles from Plantation, Florida, (iii) the Company fails to
meet its obligations hereunder or the Letter Agreement of even date or engages
in any other material breach of the terms of this Agreement, (iv) there is a
material adverse change by the Board of the Executive's functions, duties,
authority or responsibilities without the Executive's written consent, and, as a
result of such change, the Executive's position with the Company shall be or
becomes one of less dignity, responsibility, authority or scope.
"Person" means any individual, firm, partnership, corporation or other
entity, including any successor (by merger or otherwise) of such entity, or a
group of any of the foregoing acting in concert.
"Retirement" shall be deemed to have occurred if the Executive's
employment terminates at age 62 or older, and if the Executive has accrued 15
years of continuous service with the Company or any Affiliate company.
2. Confidentiality. Xxxxxxx will not reveal to others or use any of the
Company's trade secrets, proprietary information, or other confidential
information pertaining to the financial affairs, condition, business,
technology, customers and clients, products, manner of operation, training
systems, plans or prospects of the Company or its Affiliates, or aid others in
doing so, except in the proper exercise of his duties for the Company.
3. Non-Competition. During Xxxxxxx'x employment with the Company, and
for a period of twelve (12) months following the termination of Xxxxxxx'x
employment for any reason whatsoever, Xxxxxxx will not, anywhere in the United
States:
(a) compete, directly or indirectly, with the Company or its
Affiliates in any business that would be deemed to be
competitive with the online residential mortgage origination
business of the Company or its Affiliates as such business was
conducted by the Company or its Affiliates during Xxxxxxx'x
employment; and
(b) become employed by or affiliated in any manner with any other
business entity or person which owns or operates or is seeking
to acquire or operate a business which would be deemed to be
competitive with the online residential mortgage business of
the Company or its Affiliates as such business was conducted
by the Company or its Affiliates during Xxxxxxx'x employment.
(c) nothing in this section shall prohibit Xxxxxxx from owning
stock or other securities of a competitor amounting to less
than five (5) percent of the outstanding capital stock of such
competitor.
4. Non-Solicitation. During Xxxxxxx'x employment with the Company, and
for a period of twelve (12) months following the termination of Xxxxxxx'x
employment for any reason whatsoever, Xxxxxxx will not:
(a) solicit any business from customers or prospects of the
Company or its Affiliates, which solicitation would be deemed
to be competitive with the business of the Company or its
Affiliates as such business was conducted by the Company or
its Affiliates during Xxxxxxx'x employment; and
(b) solicit persons who are or have been employees or consultants
of the Company or its Affiliates during the one (1) year
period prior to termination of Xxxxxxx'x employment, to leave
-3-
their employment or terminate their consulting arrangements
with the Company or its Affiliates, or to become employed by
or to engage in business with Xxxxxxx, which business would be
deemed to be competitive with business of the Company or its
Affiliates as such business was conducted by the Company
during Xxxxxxx'x employment.
5.Compensation Upon Termination or During Disability.
(a) Death or Disability. If the Executive's employment is
terminated by reason of his death or disability, the Executive
or the Executive's estate shall be entitled to (1) his then
current base salary, pro-rata bonus and all fringe benefits
accrued and vested through the date of termination, (2) all
accrued and vested retirement benefits and (3) in the case of
the Executive's death, if no beneficiary is designated, the
proceeds of any Company maintained life insurance policy.
(b) Termination by Company For Cause. If the Executive's
employment is terminated for Cause or by reason of voluntary
termination, the Executive shall be entitled to receive (1)
his base salary accrued through the date of termination at the
rate in effect at the time the notice of termination is given
and (2) only such stock options as have vested prior to the
date of termination. The Company shall have no further
obligations to the Executive under this Agreement.
(c) Termination Upon Retirement. If the Executive's employment is
terminated as a result of his Retirement the Executive shall
be entitled to receive (1) his base salary accrued through the
date of termination plus a pro-rata bonus at the rate in
effect at the time the notice of termination is given and (2)
100% vesting of the stock options he has been granted prior to
the date of termination. The Company shall have no further
obligations to the Executive under this Agreement, other than
its obligations under the Company's retirement plans and
policies if the Executive's employment is terminated as a
result of his Retirement. If the Executive's stock options
vest under this paragraph, the deadline for exercising such
stock options under the applicable Option Agreement shall be
the date which is the sooner of three years after the date of
termination or the deadline for exercising such stock options
set forth in the Option Agreement.
(d) Termination by Company Without Cause or by the Executive with
Good Reason. If the Company terminates the Executive's
employment pursuant Without Cause or if the Executive resigns
for Good Reason, then the Company shall pay to the Executive
his base salary accrued through the date of termination at the
rate in effect on the date of termination. In addition, the
Company shall pay to the Executive, as liquidated damages, or
severance pay, or both, on the thirtieth (30th) day following
the date of termination, a lump-sum amount equal to one times
the base salary then in effect, and in addition, in such
event, one hundred percent of the stock options granted to
Executive prior to the date of termination shall become fully
vested. In addition, the Company shall maintain in full force
and effect, for the continued benefit of the Executive for
twelve (12) months following the date of termination, all
employee benefit plans and programs in which the Executive was
entitled to participate immediately prior to the date of
termination, so long as the Executive's continued
participation is possible under the general terms and
provisions of such plans and programs.
6.Injunctions. In the event of a breach or threatened breach by Xxxxxxx
of his obligations under this Agreement, Xxxxxxx acknowledges that the Company
will not have an adequate remedy at law and shall be entitled to such equitable
and injunctive relief as may be available to restrain Xxxxxxx from the violation
of the provisions hereof. Nothing herein shall be construed as prohibiting the
-4-
Company from pursuing any other remedies available for such breach or threatened
breach, including the recovery of monetary damages from Xxxxxxx.
7. Modification of Restriction. Xxxxxxx acknowledges that the
enforcement of the provisions in this Agreement shall not result in unreasonable
deprivation of Xxxxxxx'x right to earn a living and that if the provisions of
this Agreement shall be determined by any court to be invalid or unenforceable
to any extent, then this Agreement shall be deemed to be amended so as to be
valid and enforceable to the fullest extent permitted by law.
8.Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if hand delivered, sent by
recognized overnight courier, or sent by certified mail to his residence in the
case of Xxxxxxx, or to the principal office in Plantation, Florida, in the case
of the Company.
9. Governing Law. Xxxxxxx and the Company agree that this Agreement
shall be governed by, construed and enforced in accordance with the laws of the
State of Florida, exclusive of choice of laws and conflict of laws principles.
The parties stipulate that any action or other legal proceeding arising under or
in connection with this Agreement shall be commenced and prosecuted in its
entirety in the federal or state courts having jurisdiction over Broward County,
Florida, each party hereby submitting to the personal jurisdiction thereof, and
the parties agree not to raise the objection that such courts are not a
convenient forum.
10.Counterparts. This Agreement may be executed in counterparts each of
which shall be original and together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
XXXXXXXX.XXX, INC.
By: ---------------------------------------------
Xxxx X. Xxxxxx, President and Chief Executive
Officer
-------------------------------------------------
Xxxx Xxxxxxx, individually
