Exhibit 10.7
NONCOMPETITION AND CONFIDENTIALITY AGREEMENT
NONCOMPETITION AND CONFIDENTIALITY AGREEMENT (the
"Agreement"), dated as of April 30, 1999 by and between Cherokee International,
LLC, a California limited liability company ("Cherokee" or the "Company"), and
Xxxxxx Xxxxx ( the "Executive").
RECITALS
WHEREAS, the Executive is the owner of certain equity
securities ("Units") in Cherokee; and
WHEREAS, the Executive (or an entity in which he holds an
interest), together with each of the other members of Cherokee, entered into a
Unit Purchase Agreement with Cherokee Investors, LLC (the "Purchaser") pursuant
to which the Executive sold sixty percent (60%) of his Units in Cherokee to the
Purchaser (the "Transaction"); and
WHEREAS, the Executive is employed by the Company as of the
date of consummation of the Transaction; and
WHEREAS, the Company desires that, as a condition of his
employment, the Executive agree that he or she will not disclose any
confidential information concerning the Company, and will not carry on any
business which is similar to, or in competition with, the business of the
Company, within such geographic area or areas and on such terms and conditions
as set forth herein.
NOW THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions set forth herein and in the
Unit Purchase Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Executive, intending to be legally bound hereby, agree as follows:
AGREEMENT
1. RESTRICTIVE COVENANTS. The Executive hereby represents,
warrants, acknowledges and agrees as follows:
(a) The Company is engaged in the business of
designing, manufacturing and selling power supplies throughout the United States
(the "Business").
(b) The market for the Business extends throughout
the United States. As part of the transaction contemplated by the Unit Purchase
Agreement, the Purchaser will be acquiring 60% of the Units owned, directly or
indirectly, by the Executive and will carry on the Business in the same or
similar geographic locations and in the same or similar manner, as the Business
had been carried on prior to such acquisition. The restrictive covenants and the
other
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agreements contained herein are an essential part of this Agreement and the
transaction contemplated by the Unit Purchase Agreement.
(c) Accordingly, the Executive agrees to be bound by
the noncompetition agreement and the other restrictive covenants and agreements
contained in this Agreement to the maximum extent permitted by law, it being the
intent and spirit of the parties that the noncompetition agreement and the other
restrictive covenants and agreements contained herein shall be valid and
enforceable in all respects and, subject to the terms and conditions of this
Agreement and the Unit Purchase Agreement, mutually dependent upon the
obligations of the Company to pay or transfer the consideration recited in such
agreements to, or for the benefit of, the Executive pursuant to the Unit
Purchase Agreement.
(d) The Executive further agrees that the limitations
set forth in Section 3 (including, without limitation, any time or territorial
limitations) are reasonable and properly required for the adequate protection of
the businesses of the Company and its Affiliates (as defined herein). It is
understood and agreed that the covenants made by the Executive in Sections 2 and
3 hereof shall survive the expiration or termination of this Agreement and the
Executive's term of employment with the Company.
2. INVENTIONS AND CONFIDENTIAL INFORMATION. The Executive
hereby covenants, agrees and acknowledges as follows:
(a) The Executive's employment by the Company creates
a relationship of confidence and trust between the Executive and the Company
with respect to certain information pertaining to the Business of the Company
and its Affiliates or pertaining to the business of any client or customer of
the Company or its Affiliates which may be known by the Executive pursuant to
his involvement with the Company or otherwise made known to the Executive by the
Company or any of its Affiliates or by a client or customer of the Company or
any of its Affiliates or learned by the Executive during the period of his
employment by the Company. For the purposes of this Agreement, the term
"Affiliate" or "Affiliates" shall mean the Company as well as any person,
corporation or other entity directly or indirectly controlling, controlled by or
under common control with the Company. For the purposes of this definition,
"control", "controlling" and "controlled" when used with respect to any person,
corporation or other entity means the power to direct the management and
policies of such person or entity, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise.
(b) The Company and its Affiliates possess and will
continue to possess information that has been created, discovered or developed
by, or otherwise become known to it (including, without limitation, information
created, discovered or developed by, or made known to, the Executive pursuant to
his involvement with the Company or otherwise during the period of his
employment or arising out of his employment with the Company) or in which
property rights have been or may be assigned or otherwise conveyed to the
Company and/or any Affiliate, which information has commercial value in the
business in which the
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Company and/or any Affiliate is engaged and is treated by the Company and its
Affiliates as confidential.
(c) Any and all work performed and all inventions,
products, discoveries, improvements, processes, manufacturing, marketing and
services methods or techniques, formulae, designs, styles, specifications, data
bases, computer programs (whether in source code or object code), "know-how",
"negative know-how", trade secrets, strategies and data, whether or not
patentable or registrable under copyright or similar statutes, made, developed
or created by or under the direction of the Executive (whether at the request or
suggestion of the Company, any of its Affiliates, or otherwise, whether alone or
in conjunction with others, and whether during regular hours of work or
otherwise) during the Executive's term of employment with the Company, which may
pertain to the business, products or processes of the Company or any of its
Affiliates (collectively hereinafter referred to as "Inventions"), will be
promptly and fully disclosed by the Executive to an appropriate executive
officer of the Company (other than the Executive) without any additional
compensation therefor, together with all papers, drawings, models, data,
documents and other material pertaining to or in any way relating to any
Inventions made, developed or created as aforesaid.
(d) The Executive will keep confidential and will
hold for the Company's sole benefit any Invention which is to be the exclusive
property of the Company or any of its Affiliates under this Section 2 for which
no patent, copyright, trademark or other right or protection is issued;
PROVIDED, HOWEVER, that the foregoing shall not apply to any Invention that the
Executive developed entirely on his own time without using the Company's
equipment, supplies, facilities or trade secret information, except for those
Inventions that either (i) relate, at the time of conception or reduction to
practice of the Invention to the Company's business, or actual or demonstrably
anticipated research or development of the Company, or (ii) result from any work
performed by the Executive for the Company. In any event, this Agreement does
not require assignment to the Company of any subject matter that qualifies fully
under California Labor Code Section 2870, which is set forth in Schedule 1
hereto.
(e) The Executive also agrees that he or she will
not, either directly or indirectly, without the prior written consent of the
Management Committee of the Company (i) use for his benefit or disclose at any
time during his employment by the Company, or thereafter, except to the extent
required by the performance by him of his duties as an employee of the Company,
any information obtained or developed by him with respect to any Inventions or
with respect to any customers, clients, suppliers, products, employees,
financial affairs, or methods of design, distribution, marketing, research,
service, data, formulae, information, procurement or manufacture of the Company
or any of its Affiliates, or any confidential matter, except information which
at the time is generally known to the public other than as a result of
disclosure by him not permitted hereunder, or (ii) take with him upon leaving
the employ of the Company any document, paper, computer tape or disk, record,
data, drawing, print, note or written information (and all copies thereof)
relating to any of the foregoing or any physical property of the Company or any
of its Affiliates.
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(f) The Executive agrees that upon termination of his
employment with the Company, the Executive shall forthwith return to the Company
all documents and other property in his possession belonging to the Company or
any of its Affiliates, including, but not limited to, all papers, computer tapes
and disks, records, lists, drawings, prints, notes and written information (and
all copies thereof) relating to the foregoing or any physical property of the
Company or any of its Affiliates.
3. NON-COMPETITION.
(a) "Non-Compete Term" shall mean the longer of (x)
the five-year period from the date hereof and (y) the period that the Executive
(or any Affiliate of the Executive) directly or indirectly holds any Units,
shares, options or warrants to purchase shares or any other equity interest in
the Company or any successor entity.
(b) During the Non-Compete Term the Executive shall
not, in any state of the United States where the Company or any of its
Affiliates, successors or assigns engages in the Business, either alone or in
conjunction with any other person or entity, directly or indirectly through his
present or future affiliates:
(i) make any statement or perform any act
which advances or is intended to advance an interest of any existing or
prospective competitor of the Company or any of its Affiliates in any way that
will or could reasonably be expected to injure an interest of the Company or any
of its Affiliates in its relationship and dealings with existing or potential
customers or clients, or solicit or encourage any employee of the Company or any
of its Affiliates to do any act that is detrimental to, or inconsistent with,
the interests to the Company or any of its Affiliates or in violation of any
provision of this Agreement;
(ii) discuss with any existing or potential
customers or clients of the Company or any of its Affiliates the present or
future availability of services or products of a business, if the Executive has
or expects to acquire a proprietary interest in such business or is or expects
to be an employee, officer, manager or director of such business, where such
services or products are or could reasonably be expected to become competitive
with services or products which the Company or any of its Affiliates provides;
(iii) make any statement or do any act which
causes or is intended to cause any existing or potential customers or clients of
the Company or any of its Affiliates to make use of the services or purchase the
products of any competitive business in which the Executive has or expects to
acquire a proprietary interest or in which the Executive is or expects to be
made an employee, officer, manager or director, if such services or products in
any way compete with the services or products sold or provided or expected to be
sold or provided by the Company or any of its Affiliates to any existing or
potential customer or client; and
(iv) engage or participate, directly or
indirectly (as a director, officer, employee, manager, consultant, independent
contractor, advisor or otherwise), in
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competition with, or own any interest in, lend any assistance (financial or
otherwise), perform any services for, participate in or be connected with any
business or organization which engages in competition with the Company or any of
its Affiliates in any geographical area where the Company or any of its
Affiliates (i) engages in business activities, or (ii) has engaged in business
activities and continues to carry on business therein; PROVIDED, HOWEVER, that
the provisions of this Section 3 shall not be deemed to prohibit the Executive's
passive investment of up to one percent (1%) of the total shares of all classes
of stock outstanding of any publicly held company.
(c) The Executive shall be relieved from the terms
and restrictions set forth in Section 3(b)(i) through (iv) of this Agreement (x)
following the voluntary filing of bankruptcy by the Company or the involuntary
filing of a bankruptcy petition against the Company which is not dismissed
within ninety (90) days after the filing thereof, or (y) if the Executive's
employment is terminated for any reason other than (A) material and willful
dishonesty or extreme misconduct, (B) failure to substantially perform the
duties of his employment which has not been cured within 30 days after a written
demand for substantial performance is delivered to the Executive by or on behalf
of the Management Committee of the Company, which demand specifically identifies
the manner in which the Management Committee believes that the Executive has not
substantially performed his duties, or (C) any conviction of a felony involving
moral turpitude.
(d) During the Non-Compete Term, the Executive will
not, in any state of the United States where the Company or any of its
Affiliates, successors or assigns engages in the Business, either alone or in
conjunction with any other person or entity, directly or indirectly through his
present or future affiliates:
(i) solicit for employment, encourage,
advise, recommend, cause or attempt to cause, any employee of the Company or any
of its Affiliates or any professionals who are independent contractors for the
Company or any of its Affiliates to terminate such employee's employment or such
independent contractor's engagement with the Company or any of its Affiliates;
or
(ii) hire, engage, send any work to or place
orders with any supplier, contractor, subcontractor or other person or firm
which rendered manufacturing or other services, or sold any products, to the
Company or any of its Affiliates if such action by him could foreseeably have a
material adverse effect on the business, assets, financial condition or
prospects of the Company or any of its Affiliates.
(e) For purposes of this Section 3, a person or
entity (including, without limitation, the Executive) shall be deemed to be a
competitor of the Company or any of its Affiliates, or a person or entity
(including, without limitation, the Executive) shall be deemed to be engaging in
competition with the Company or any of its Affiliates, if such person or entity
in any way does or reasonably could be expected to conduct, operate, carry out
or engage in the business of designing, manufacturing or selling power supplies
in the United States where the Company does or reasonably could be expected to
engage in significant business transactions or
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such other business or businesses as the Company or any Affiliate may reasonably
be expected in the future to conduct.
4. RIGHTS AND REMEDIES UPON BREACH. The Executive acknowledges
and agrees that a remedy at law for any breach or threatened breach of the
provisions of this Agreement would be inadequate. The Executive hereby (i)
agrees that the Company and any of its Affiliates shall be entitled to
injunctive relief in addition to any other available rights and remedies in
cases of any such breach or threatened breach and (ii) consents to the granting
by any court of any injunction or other equitable relief, without the necessity
of actual monetary loss being proved, in order that the breach or threatened
breach of this Agreement may be effectively restrained; PROVIDED, HOWEVER, that
nothing contained herein shall be construed as prohibiting the Company or any of
its Affiliates from pursuing any other rights and remedies available for any
such breach or threatened breach.
5. CALL RIGHT.
(a) In the event that (i) the Executive breaches this
Agreement or (ii) the Executive's employment with the Company is terminated for
Cause (as defined below) the Company shall have the right (the "Company's Call
Right") to require the Executive to tender and sell all or any portion of the
equity interest in the Company or any successor entity held, directly or
indirectly, by the Executive, including Units, shares, and any options, warrants
or other securities entitling the Executive to purchase shares of the Company or
any successor entity (collectively, the "Executive's Securities") to the Company
for cash in an amount equal to the lesser of (x) the value of the Executive's
Securities based upon $150 million equity value of the Company and (y) 80% of
the Fair Market Value (as defined below) of the Executive's Securities as of the
date of such breach or termination, as the case may be. For purposes of this
Section, Cause is defined as (A) material and willful dishonesty or extreme
misconduct, (B) failure to substantially perform the duties of his employment
that is demonstrably and materially injurious to the Company and which has not
been cured within 30 days after a written demand for substantial performance is
delivered to the Executive by or on behalf of the Management Committee of the
Company, which demand specifically identifies the manner in which the Management
Committee believes that the Executive has not substantially performed his
duties, or (C) any conviction of a felony involving moral turpitude.
(b) The Company's Call Right shall be exercisable at
any time, and from time to time, following the occurrence of the applicable
event in clause (i) or (ii) above. The Company shall exercise the Company's Call
Right by written notice to the Executive, specifying the amount and type of
Executive's Securities to be purchased and the time and place of delivery and
payment therefor.
(c) For purposes of this Section 3, the term "Fair
Market Value," as of the date with respect to which the determination of Fair
Market Value is being made (the "Determination Date"), shall mean (i) with
respect to a Unit or a share, the fair market value of the Unit or share as
reasonably determined by the Management Committee of the Company as of the
Determination Date, and (ii) with respect to options that are vested and
exercisable as of the
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Determination Date, (A) the fair market value of the Units or shares (determined
in accordance with clause (i) of this definition) underlying such options MINUS
(B) the exercise price for which the underlying Units or shares may be purchased
pursuant to such options. The Fair Market Value of options that are not vested
or are not exercisable as of the Determination Date shall be deemed to be zero.
In the event that, within five (5) days after receipt of notice of the valuation
by the Management Committee of the Company, the Executive gives the Company
notice that he disagrees in good faith with the Management Committee's
valuation, then the Fair Market Value of the Units or shares, as the case may
be, shall be determined by a nationally recognized accounting firm chosen by the
Company. The Company and the Executive agree that such determination shall be
conclusive and binding on each of them. If the Fair Market Value so established
is more than five percent (5%) higher than the Fair Market Value established by
the Management Committee of the Company, the expense of such accounting firm's
valuation shall be borne entirely by the Company. Otherwise, the expense of the
independent accounting firm's valuation shall be borne by the Executive.
6. BINDING EFFECT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs,
successors, legal representatives and assigns.
7. SEVERABILITY. The Executive agrees that in the event that
any court of competent jurisdiction shall finally hold that any provision of
Section 2 or Section 3 hereof is void or constitutes an unreasonable restriction
against the Executive, such provision shall not be rendered void but shall apply
with respect to such extent as such court may judicially determine constitutes a
reasonable restriction under the circumstances. If any part of this Agreement
other than Section 2 or Section 3 hereof is held by a court of competent
jurisdiction to be invalid or incapable of being enforced in whole or in part by
reason of any rule of law or public policy, such part shall be deemed to be
severed from the remainder of this Agreement for the purpose only of the
particular legal proceedings in question and all other covenants and provisions
of this Agreement shall in every other respect continue in full force and effect
and no covenant or provision shall be deemed dependent upon any other covenant
or provision.
8. WAIVER. Failure to insist upon strict compliance with any
of the terms, covenants or conditions hereof shall not be deemed a waiver of
such term, covenant or condition, nor shall any waiver or relinquishment of any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
9. RELEVANT LAW. This Agreement shall be construed and
enforced in accordance with the internal laws of the State of California without
regard to the conflicts of law principles thereof.
10. ARBITRATION. In the event of a dispute between the
parties, the parties hereto agree to enter the dispute into binding arbitration
at the local Orange County, California offices of the Judicial Arbitration &
Mediation Services, Inc. ("J.A.M.S."). The parties may agree on a jurist from
the J.A.M.S. panel. If they are unable to agree, J.A.M.S. will provide a list of
three available panel members and each party may strike one. The remaining panel
member
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will serve as the arbitrator. The aggrieved party may initiate arbitration by:
(i) sending thirty (30) days written notice of an intention to arbitrate by
registered or certified mail to all parties and to J.A.M.S.; and (ii) depositing
with J.A.M.S. the advanced fees required by J.A.M.S. to initiate the arbitration
process for the parties. The notice must contain a description of the dispute,
the amount involved and the remedies sought. Upon notice of demand for
arbitration, the parties agree to execute a submission agreement, provided by
J.A.M.S., which agreement shall provided for discovery in accordance with the
Federal Rules of Civil Procedure and for the Commercial Arbitration rules and
procedures established by the American Arbitration Association. The prevailing
party in any arbitration proceeding under this Section 10 shall be entitled to
recover from the other reasonable attorneys' fees, costs and expenses in
connection with such arbitration proceeding.
11. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12. REVIEW BY COUNSEL. For all purposes of this Agreement, the
Executive agrees that he has had, or has had the unrestricted right and
opportunity to have, the full and complete benefit and advice of independent and
competent legal counsel chosen and retained solely by him and has had, or has
had unrestricted right and opportunity to have, such legal counsel fully explain
to him the meaning and each and all of the consequences of his execution of this
Agreement. Executive further agrees that no reasonable person would engage in
any of the transactions contemplated by the Unit Purchase Agreement and this
Agreement without the benefit of each of the restrictive covenants and
agreements contained herein.
13. NO CONSTRUCTION AGAINST DRAFTSMAN. The language of this
Agreement shall for all purposes be construed as a whole, according to its fair
meaning, not strictly for or against the Executive or the Company, and without
regard to the identity or status of any person who drafted all or any part of
it.
14. NOTICES. Any notice required or permitted to be given
under this Agreement shall be sufficient if in writing and either delivered in
person or sent by first class certified or registered mail, postage prepaid, or
by facsimile transmission, as follows:
If to the Company:
Cherokee International, LLC
0000 Xxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxx Xxxxx
Facsimile No.: (000) 000-0000
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With a copy to:
Cherokee Investors, LLC
c/o GFI Energy Ventures LLC
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxx X. Xxxxxxxx
If to the Executive, to the address set forth on the signature
page hereof, or to such other address or addresses as either party shall have
designated in writing to the other party hereto.
15. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement
constitutes the entire and final expression of the agreement of the parties with
respect to the subject matter hereof and supersedes all prior agreements, oral
and written, between the parties hereto with respect to the subject matter
hereof. This Agreement may not be modified, amended or waived except by a
written instrument signed by the Executive and approved in writing by the
Company's Management Committee.
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IN WITNESS WHEREOF, the Company and the Executive have duly
executed and delivered this Agreement as of the day and year first above
written.
CHEROKEE INTERNATIONAL, LLC,
a California limited liability company
By: /s/ XXXXXX XXXXX
----------------------------
Name: Xxx Xxxxx
Title: President and Chief Executive
Officer
XXXXXX XXXXX
/s/ XXXXXX XXXXX
----------------------------
Xxxxxx Xxxxx
Address:
22526 Bayberry
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
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SCHEDULE 1
CALIFORNIA LABOR CODE SECTION 2870
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception of reduction to practice
of the invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer.
(2) Result from any work performed by the employee for the
employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
RESERVED CREATIONS OR RELATED AGREEMENTS OR ARRANGEMENTS
None.
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