Exhibit 10.2
NON-COMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT (the "Agreement") is made as of February
19, 2004, by and between COLLECTORS UNIVERSE, INC., a Delaware corporation
("Seller"), and SPECTRUM NUMISMATICS INTERNATIONAL, INC., a California
corporation ("Buyer").
R E C I T A L S:
A. Concurrently herewith, Seller and Buyer are entering into that certain
Asset Purchase Agreement dated of even date herewith (the "Asset Purchase
Agreement"), pursuant to which Buyer is acquiring the Auction Businesses and
purchasing, or acquiring the right to use, a substantial portion of the
operating assets of those Businesses, including all of the goodwill associated
with the conduct of those Businesses (the "Acquired Assets"), all as more fully
described in the Asset Purchase Agreement.
B. Seller has agreed, in the Asset Purchase Agreement, to execute and
deliver this Non-Competition Agreement and the Seller's execution and delivery
thereof is a condition precedent to the effectiveness of the Asset Purchase
Agreement.
NOW, THEREFORE, in satisfaction of the above referenced condition and
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged by the parties, it is agreed as follows:
1. Definitions and Interpretive Rules.
1.1 Unless otherwise defined in this Agreement, terms with initial
capital letters contained in the above Recitals to, or elsewhere in, this
Agreement (including the term "Auction Businesses") shall have the meanings
ascribed to them in the Asset Purchase Agreement.
1.2 For purposes of this Agreement, the following terms shall have
the respective meanings set forth hereinafter in this Section 1.2:
(a) For purposes of this Agreement, a Person shall be deemed to be an
"Affiliate" of another Person if, at the time the determination of Affiliation
is to be determined, (i) the other Person is a Parent (as defined below) of the
Person, (ii) the Other Person is a Subsidiary of the Person or of any Parent of
the Person
(b) The term "Competitive Business" means the conduct or management of a
business or venture that (1) acquires, by purchase or consignment, Collectible
Coins or Collectible Sports Memorabilia (as such terms are defined in the Asset
Purchase Agreement) for sale at in-person, telephonic and internet auctions, (2)
conducts in-person, telephonic and internet auctions at which such Collectible
Coins or Collectible Sports Memorabilia are sold, or (3) is making preparations
to engage any of the foregoing.
(c) The term "Grading Services" means services that consist of any or all
of the following: (i) grading the quality of, (ii) authenticating the
genuineness or authenticity of, (iii) certifying the grade of quality assigned
to or authenticity of, and (iv) providing any service or device designed to
reduce the incidence of (or to help identify) forgeries of Collectible Coins,
Collectible Sports Memorabilia or any other collectibles, to or for owners,
dealers, sellers, purchasers and consignees of such collectibles, including
Competitive Businesses (collectively, "Grading Customers"). The term "Grading
Business" means a business engaged in providing any Grading Services to any
Grading Customers.
(d) The term "Parent" of a Person shall mean any corporation or other
entity that acquires beneficial ownership of common stock possessing, either
directly or indirectly (through one or more entities), more than fifty percent
(50%) of the total combined voting power of that Person. Accordingly if any
corporation or other entity acquires beneficial ownership of common stock of
Seller possessing, either
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directly or indirectly (through one or more entities), more than fifty percent
(50%) of the total combined voting power of Seller, such corporation or other
entity shall, for purposes of this Agreement, be the Parent of Seller.
(e) The term "Person" shall mean a natural person, corporation, limited
liability company, limited or general partnership or a joint venture, trust,
unincorporated organization or other entity.
(f) The term "Restrictive Period" shall mean the period commencing on the
date hereof and ending on the fifth (5th) anniversary of the date hereof.
(g) The term "Restricted Territory" shall mean any state, city or other
locality in the United States of America, Europe and Asia.
(h) The term "Seller-Related Parties" shall mean any Parent of Seller and
any Subsidiary of Seller or of Parent.
(i) The term "Subsidiary" of a Person shall mean any corporation or other
entity more than fifty percent (50%) of the voting stock or other equity
ownership interests of which are held, directly or indirectly (through one or
more entities), by such Person or, by an Affiliate of such Person.
1.3 This Agreement is the result of arms'-length negotiations
between the parties hereto and no provision hereof, because of any ambiguity
found to be contained therein or otherwise, shall be construed against a party
by reason of the fact that such party or its legal counsel was the draftsman of
that provision. The section, subsection and any paragraph headings contained
herein are for the purpose of convenience only and are not intended to define or
limit or affect, and shall not be considered in connection with, the
interpretation of any of the terms or provisions of this Agreement. Unless
otherwise indicated expressly or by the context in which such terms are found
elsewhere in this Agreement, (1) the term "or" shall not be exclusive, (2) the
term "including" shall mean "including, but not limited to" and (3) the terms
"herein," "hereof," "hereto," "hereunder" and other terms similar to such terms
shall refer to this Agreement as a whole and not merely to the specific section,
subsection, paragraph or clause where such terms may appear. The Recitals to
this Agreement are fully incorporated into and are an integral part of this
Agreement.
2. Non-Competition Covenants and Certain Acknowledgements.
2.1 Non-Competition Covenants. Except as otherwise permitted by
Section 2.2 hereof, during the Restrictive Period, neither Seller nor any
Seller-Related Parties shall directly or indirectly:
B. (a) conduct or engage in any Competitive Business in
the Restricted Territory; or
C. (b) acquire, invest in, operate, control, manage, own
or have any ownership interest in, or participate or become or be a
partner, member, joint venturer, shareholder or owner, or consultant,
advisor or agent of, any Competitive Business, or with any Person that
engages in, or to the best knowledge of Seller is preparing to engage
in, any Competitive Business, anywhere in the Restricted Territory; or
(c) provide marketing, promotional, management, consulting,
advisory or financial assistance to any Person that engages in. or to the best
knowledge of Seller is preparing to engage in, any Competitive Business anywhere
in the Restricted Territory.
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2.2 Limited Exceptions. Notwithstanding the foregoing, or any other
provision contained herein to the contrary:
(a) Seller and any of the Seller-Related Parties may own
shares of voting stock of any corporation whose shares are listed for trading on
any stock exchange or on the Nasdaq National Market or Nasdaq SmallCap Market,
without thereby breaching its covenants contained in this Agreement, provided
that the aggregate number of voting shares of any such corporation that may be
owned, in the aggregate, by the Seller and the Seller-Related Parties shall not
exceed five percent (5%) of such corporation's voting stock so long as Seller
does not in fact have the power to control, or direct the management of that
corporation.
(b) Seller and the Seller-Related Parties shall be entitled,
and it shall not be a breach of this Agreement (including Section 2.1(c) above),
for Seller or any of the Seller Related Parties, to acquire, invest in, operate,
control, manage, own, participate or have any ownership interest in, or to sell
or otherwise transfer, or become or be a partner, member, joint venturer,
shareholder or owner, consultant, advisor or agent of: (1) any Grading Business
that provides, in the ordinary course, any Grading Services to or for any
Competitive Business, or with any Person that engages in any Competitive
Business, anywhere in the Restricted Territory; (2) subject to Paragraph 2.3
below, any business that, in the ordinary course, provides services (other than
or in addition to those currently being provided by Seller's Grading Services)
that facilitate or enhance commerce, trading or dealing in Collectible Coins or
Collectible Sports Memorabilia (such as, by way of illustration but not
limitation, Seller's sportscard set registry program) (hereinafter "Value Added
Services") for any Competing Businesses anywhere in the Restricted Territory;
provided, however, that in no event shall Value Added Services include
conducting, managing, or controlling the conduct of any auctions anywhere in the
Restricted Territory for Seller's account or for the account of any other
Person; (3) sell or consign Seller's Collectible Inventory (as defined in the
Asset Purchase Agreement) to any Competitive Business if Buyer does not exercise
its option to purchase such Collectibles Inventory pursuant to the Asset
Purchase Agreement; (4) consign or sell to any Competitive Businesses any
Collectible Coins or Collectible Sports Memorabilia that Seller or any of the
Seller Related Parties may acquire as an incident to the conduct of any Grading
Business or Value Added Services businesses and (5) the businesses described in
Paragraph 2.2(c) and 2.2(d) below.
(c) Odyssey Publications, a wholly owned subsidiary of Seller
("Odyssey"), conducts an auction business which acquires, by purchase or
consignment, and sells at auctions conducted by it or by direct sales methods,
entertainment and historical memorabilia (but not Collectible Coins or
Collectible Sports Memorabilia). Such historical memorabilia sometimes includes
sports memorabilia that has been autographed by Persons associated therewith.
Nothing in this Agreement shall restrict or preclude (1) Odyssey, or any Person
that might purchases or otherwise acquire, hereafter, Odyssey or its business,
from continuing such business and the continuation thereof shall not constitute
a breach of this Agreement, or (2) Seller or any of the Seller Related Parties
from selling or otherwise transferring to any other Person, including to a
Competitive Business, the stock or business and assets of Odyssey, provided that
such assets do not include the Licensed Information. Notwithstanding the
foregoing, however, nothing in this Agreement, including the proviso contained
in the immediately preceding sentence, shall preclude Seller, Odyssey or any
successor to the business of Seller or Odyssey from using or transferring
information concerning Odyssey's customers, consignors or vendors even if some
of those customers, consignors or vendors also are Auction Business Customers,
Auction Business Consignors or Auction Business Vendors (as defined in the Asset
Purchase Agreement).
(d) Xxxxx Xxxx Rare Coins ("DHRC"), a division of Seller,
purchases and sells collectible coins by direct retail methods, but does not
conduct auctions. Nothing in this Agreement shall restrict or preclude (1) DHRC
or any Person that might purchase or otherwise acquire, hereafter, DHRC or its
business, from continuing such business and the continuation thereof shall not
constitute a breach of this Agreement, or (2) Seller or any of the Seller
Related Parties from selling or otherwise transferring to any other Person,
including to a Competitive Business, the business and assets of DHRC, provided
that such assets do not include the Licensed Information. Notwithstanding the
foregoing, however, nothing in this Agreement, including the proviso contained
in the immediately preceding sentence shall preclude Seller, DHRC, any purchaser
of DHRC's business or assets or any successor of DHRC from using or transferring
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information concerning DHRC's customers or vendors, even if some of those
customers or vendors also are Auction Business Customers, Auction Business
Consignors or Auction Business Vendors.
2.3 Covenants Related to Value Added Services. If, during the
Restrictive Period, Seller offers any Value Added Services to any Competitive
Business, Seller shall offer such Value Added Services to Buyer on substantially
the same terms and at the same time as Seller has offered to provide such
Services to such other Competitive Business (subject to variations in terms to
take account of differences in the sizes and locations of and in the volume of
Value Added Services that such Businesses may elect to purchase from Seller or
any of the Seller Related Parties).
3. Informational Use Restrictions and Confidentiality Obligations.
3.1 Confidentiality Obligations and Use Restrictions. During the
period commencing on the date hereof and ending on the tenth (10th) anniversary
of the date hereof (the "Confidentiality Period"), neither Seller nor any of the
Seller-Related Parties shall directly or indirectly (1) use any of the Licensed
Information (as defined in the Asset Purchase Agreement), for or in connection
with the conduct of any Competitive Business, or (2) disclose, furnish, make
available, license, transfer or permit the use in any manner any of the Licensed
Information to any Person that is conducting or is engaged or, to the best
knowledge of Seller, is making preparations to engage, in the conduct of any
Competitive Business.
3.2 Certain Exceptions. Notwithstanding the foregoing or anything to
the contrary that may be contained elsewhere in this Agreement:
(a) The use restrictions and confidentiality obligations set
forth in Section 3.1 above shall not apply to any of the Licensed Information
which is or becomes lawfully available from any third parties without breaching
any confidentiality agreement, including a breach of this Agreement by Seller or
any of the Seller-Related Parties;
(b) Without breaching or violating this Agreement:
(i) Seller or any of the Seller-Related Parties may
disclose or furnish any of the Licensed Information pursuant to subpoena
or other legal process, or upon making a good faith determination (after
consultation with its outside legal counsel) that such disclosure is
required to be made under applicable law , but in any such event it shall
be obligated to comply with the procedure set forth in Section 3.3 below;
(ii) As owner of the Licensed Information, Seller is
free to use and permit any of the Seller-Related Parties to use any of the
Licensed Information in connection with the conduct of any businesses,
provided, however, that (A) any such use with respect to DHRC shall be
subject to the restrictions set forth in Section 2.1(8) of the Asset
Purchase Agreement, and (B) all such businesses shall be bound by all of
the terms and provisions of this Agreement;
(iii) Seller and any of the Seller-Related Parties shall
be free during the Confidentiality Period to disclose or otherwise furnish
to any other Person (a "Third Party"), and to license any Third Party to
use, any of the Licensed Information, provided that such Third Party (1)
is not engaged in or, to Seller's best knowledge, is not planning to
engage in, a Competitive Business, and (2) expressly agrees, in writing,
to be bound by all the terms and provisions of this Section 3 and Sections
4, 5, 7, 10 and 11 of this Agreement;
(iv) During the Confidentiality Period, Seller or any of
the Seller-Related Parties may sell or otherwise transfer ownership of any
of the Licensed Information to any Third Party, whether by operation of
law or otherwise, as part of or in connection with a sale or other
transfer to such Third Party (or any Subsidiary thereof) of (1) a majority
or more of the outstanding shares of Seller or of any Seller Related Party
(whether by outright sale of shares or a
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merger or Reorganization (as defined in the California Corporations Code),
(2) substantially all of the assets of Seller, or of any Seller Related
Party or of any businesses conducted by any of them, provided that such
Third Party agrees, in writing, that it shall be bound by all of the terms
and provisions of this Agreement.
3.3 Seller's Responsibilities on Receipt of Subpoena, etc. In the
event that any Seller or any Seller-Related Party is served with a subpoena or
other legal process requiring the disclosure of, or determines that it is
required under applicable law to disclose, any of the Auction Business
Confidential Information or Licensed Information, then (1) before disclosing
such Information Seller or any of the Seller-Related Businesses shall promptly
notify Buyer, in writing, of the receipt of such subpoena or other legal process
or of such determination (as the case may be), which notice shall be accompanied
by a copy of such subpoena or other legal process or the law or regulations that
have been determined to require such disclosure and (2) thereafter shall, at the
expense of Buyer, cooperate with any efforts undertaken by Buyer to quash such
subpoena or other legal process or to obtain a protective order, as Buyer deems
appropriate.
3.4 Auction Business Confidential Information. In accordance with
the Asset Purchase Agreement, Buyer and its Affiliates are purchasing and
succeeding to the ownership of the Auction Business Confidential Information
that has great value in the Auction Businesses and the unauthorized disclosure
of which could be detrimental to the interests of Buyer or its Affiliates.
Seller acknowledges and agrees that the Auction Business Confidential
Information is the exclusive property of Buyer and its Affiliates. Accordingly,
Seller shall not, directly or indirectly, use, make available, sell, disclose or
otherwise communicate any Auction Business Confidential Information to any third
party, except as permitted by the Asset Purchase Agreement.
4. Equitable Remedies. Seller agrees that its covenants and the
restrictions contained in Sections 2 and 3 of this Agreement are reasonable and
necessary in order to protect the goodwill of the Auction Businesses that Buyer
is acquiring from Seller, and that any violation of any such covenants or
restrictions by any of the Seller-Related Parties would result in irreparable
injuries to Buyer, for which damages would not be an adequate remedy. Therefore,
Seller hereby acknowledges and agrees that, in the event of the occurrence of
such a violation or breach or threatened breach by Seller or any of the
Seller-Related Parties, Buyer shall be entitled, to obtain, from any court of
competent jurisdiction, a temporary restraining order, temporary, preliminary
and permanent injunctive relief, or other equitable remedy that may then be
available for purposes of restraining Seller or any of the Seller-Related
Parties from any actual or threatened breach of its obligations, without proving
damages or posting a bond,. or thereby limiting any other rights and remedies
that Buyer may have hereunder or under applicable law by reason of such
violation breach or threatened breach. The rights and remedies of Buyer under
this Agreement are cumulative and shall not be exclusive, and Buyer shall be
entitled to pursue all legal and equitable rights and remedies and to secure
performance of the obligations and duties under this Agreement, and the
enforcement of one or more of such rights and remedies shall in no way preclude
Buyer from pursuing, at the same time or subsequently, any and all other rights
and remedies available to it.
5. Scope of Covenants. Seller agrees that if, in any judicial proceeding,
the geographic coverage of the covenant contained in Section 2 hereof or the
period of time specified in Section 2 or Section 3 hereof should be adjudged
unreasonable, then, such geographic coverage or such period of time, as the case
may be, shall be reduced to the extent necessary to enable the court to enforce
the covenants and restrictions in Sections 2 and 3 to the fullest extent
permitted under applicable law.
6. Amendment and Waiver. No term or condition of this Agreement may be
waived, amended or modified except by means of a written instrument duly
executed by the parties to be charged therewith. No waiver of any provision,
performance or default hereunder in any instance shall be construed as a
continuing waiver of such provision, performance or default or a waiver of any
other provision, performance or default or a waiver of any future performance or
default.
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7. Adjudication Fees and Expenses. In the event of a controversy, claim or
dispute between any of the parties hereto arising out of or relating to this
Agreement, or the breach thereof, the prevailing party shall be entitled to
recover its reasonable attorneys' fees, expenses and costs.
8. Entire Agreement. This Agreement, together with the provisions of the
Asset Purchase Agreement relating to the Auction Business Confidential
Information and the Licensed Information, constitutes all of the agreements of
the parties with respect to, and supersedes all prior agreements and
understandings (written or oral) relating to, the subject matter of this
Agreement. This Agreement may not be modified or amended except by a written
instrument specifically referring to this Agreement signed by the parties
hereto.
9. Inurement and Binding Nature of Agreement. This Agreement shall inure
to the benefit of Buyer and its successors and assigns and shall be binding on
Seller and its successors and assigns.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California, without regard to
its conflicts of laws provisions.
11. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW EACH
PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES SUCH PARTY'S RIGHTS TO A TRIAL BY
JURY WITH RESPECT IN ANY LEGAL PROCEEDING THAT MAY BE BROUGHT AS A RESULT OF ANY
CLAIM, CONTROVERSY OR DISPUTE BETWEEN THE PARTIES RELATING TO OR ARISING OUT OF
THIS AGREEMENT AND EACH PARTY EXPRESSLY AND IRREVOCABLY AGREES THAT THE TRIER OF
FACT IN ANY SUCH PROCEEDING SHALL BE THE JUDGE.
12. Counterparts. This Agreement may be executed by the parties in
separate counterparts hereof and, provided that each party has executed and
delivered a counterpart hereof, this Agreement shall be effective despite the
fact that the parties have not executed the same counterpart hereof. Each of
such signed counterparts, and any facsimiles or photocopies thereof, shall be
deemed an original and all of such signed counterparts and any facsimiles or
photocopies thereof, when taken together, shall constitute but one and the same
instrument.
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IN WITNESS WHEREOF, this Non-Competition Agreement has been executed by
the parties hereto as of the date and year first above written.
"Seller": COLLECTORS UNIVERSE, INC.
a Delaware corporation
By: /s/ XXXXXXX XXXXXX
------------------------------------
Xxxxxxx Xxxxxx, CEO
"Buyer": SPECTRUM NUMISMATICS INTERNATIONAL, INC.
a California corporation
By: /s/ XXXXXXX X. XXXXXXX
------------------------------------
Xxxxxxx X. Xxxxxxx, President
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