EXHIBIT 10.5
CONFIDENTIALITY AND NONCOMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NONCOMPETITION AGREEMENT (this
"Agreement") is being executed and delivered as of _________, 2002 by XXXXX X.
XXXXXXX ("Stockholder") in favor and for the benefit of X.X. XXXXXX, INC., a
Delaware corporation ("DHI").
RECITALS
WHEREAS, Stockholder beneficially owns approximately 47.7% of
the outstanding shares of Class A common stock of Xxxxxxx Homes, Inc., a
Delaware corporation ("Xxxxxxx Homes"), and is the Co-Chairman, President and
Chief Executive Officer of Xxxxxxx Homes;
WHEREAS, as an employee and stockholder of Xxxxxxx Homes,
Stockholder has obtained extensive and valuable knowledge and information
concerning the business of Xxxxxxx Homes, including confidential information
relating to Xxxxxxx Homes and its operations, assets, contracts, customers,
personnel, plans, and prospects;
WHEREAS, in connection with the Agreement and Plan of Merger,
dated as of October 22, 2001 (as it may be amended from time to time, the
"Merger Agreement"), between DHI and Xxxxxxx Homes, Xxxxxxx Homes will, as a
result thereof, merge with and into DHI, with DHI as the surviving corporation
and DHI shall, by operation of law, succeed to all property, rights, privileges,
powers and franchises, and all and every other interest of Xxxxxxx Homes,
including the reputation and goodwill associated therewith (the "Merger");
WHEREAS, the business of Xxxxxxx Homes prior to the date of
the Merger Agreement has been (i) the construction or sale of single-family or
multi-family residences, (ii) the development of real property for use as lots
for residential construction, and (iii) activities ancillary or related to the
foregoing activities (collectively, the "Business");
WHEREAS, DHI and its Affiliates (as defined below) intend to
continue to engage in the Business and like business activities in the cities,
counties and territories set forth on Schedule A hereto (the "Territories");
WHEREAS, if Stockholder were to compete with DHI or any of its
Affiliates' operation of the Business in the Territories, DHI would be deprived
of the full benefit of any reputation or goodwill associated with Xxxxxxx Homes
and DHI as the surviving corporation in the Merger;
WHEREAS, in connection with the Merger and as a condition to
consummating the Merger, and to more fully secure unto DHI the benefits of the
Merger, DHI has requested that Stockholder enter into this Agreement; and
Stockholder is entering into this Agreement in order to induce DHI to consummate
the Merger; and
WHEREAS, the covenants provided herein are material,
significant and essential to effecting the transactions contemplated by the
Merger Agreement, and good and valuable consideration under the Merger Agreement
has been transferred to Stockholder in exchange for such covenants and the
goodwill associated with DHI.
AGREEMENT
NOW, THEREFORE, in order to induce DHI to consummate the
Merger, and in consideration of the benefits transferred to Stockholder pursuant
to the Merger Agreement and the agreements and instruments related thereto, the
receipt and sufficiency of such consideration being hereby acknowledged by
Stockholder, Stockholder agrees as follows:
1. Acknowledgments By Stockholder. Stockholder acknowledges
that the promises and restrictive covenants that Stockholder is providing in
this Agreement are reasonable and necessary to the protection of DHI's business
and DHI's legitimate interests in its acquisition of Xxxxxxx Homes, including
Xxxxxxx Homes's goodwill, pursuant to the Merger Agreement. Stockholder further
acknowledges that, in connection with the consummation of the Merger, all of
Stockholder's shares of common stock of Xxxxxxx Homes will be exchanged for cash
and shares of common stock of DHI pursuant to the terms of the Merger Agreement.
2. Covenant Not to Compete. During the one year period
following the effective time of the Merger, except for (i) activities to be
engaged by him on behalf of DHI (whether as an employee, director, consultant or
in any other capacity) or (ii) the activities or investments engaged by him as
of the date hereof that are described on Schedule B hereto, Stockholder shall
not, voluntarily or involuntarily, for any reason whatsoever, directly or
indirectly, individually or on behalf of persons not now parties to this
Agreement, or as a partner, stockholder, member, director, officer, manager,
principal, agent, employee, or in any other capacity or relationship, for his
own account or for the benefit of any other person:
(a) engage in the Business or any business activity
competing with the Business within any city or county included within any of the
Territories; or
(b) have any interest in, own, manage, operate, control, or
join or participate in the ownership, management, operation, or control of, or
provide consulting services to or otherwise advise or assist, enable (whether by
license, sublicense, assignment or otherwise), or furnish any capital to or be
connected in any manner with, either as a stockholder, joint venturer,
proprietor, member, officer, director, manager, agent, lender, representative,
partner, trustee, affiliate, employee or consultant, or otherwise engage or
invest or participate in the Business or any business that competes with the
Business, whether conducted by DHI, any Affiliate of DHI or any of their
successors or assigns in any city or county included within any of the
Territories; or
(c) in any of the Territories, accept any business relating
to the Business from any material customer, supplier or contractor of DHI, any
of its Affiliates, or any of their respective successors or assigns or solicit
or encourage any such person to terminate or adversely alter in any material
respect any relationship such person may have with DHI, any of its Affiliates or
any of their successors or assigns; or
2
(d) market, endorse or promote any products that are
competitive with the Business;
provided, however, that nothing in this Section 2 shall prevent Stockholder from
owning as a passive investment less than 5% of the outstanding shares of the
capital stock of a publicly-held corporation if (i) such shares are actively
traded on an established national securities market in the United States and
(ii) Stockholder is not otherwise associated directly or indirectly with such
corporation or any affiliate of such corporation.
3. Nonsolicitation. During the one-year period following the
Effective Time of the Merger, Stockholder shall not nor will he permit any of
his Affiliates to:
(a) personally or through others, encourage, induce,
attempt to induce, solicit, or attempt to solicit (on Stockholder's own behalf
or on behalf of any other person or entity) anyone who is employed at that time,
or was employed during the previous six (6) months, by DHI, its Affiliates, or
their respective successors or assigns to leave his or her employment with such
entity; or
(b) personally or through others, use any trade secret or
proprietary information of DHI or any other improper means to interfere or
attempt to interfere with the relationship or prospective relationship of DHI,
its Affiliates, or their respective successors or assigns with any person or
entity that is, was, or is expected to become a customer or client of such
entity; or
(c) solicit the business of any client or customer of DHI,
its Affiliates, or their respective successors or assigns for any activity
relating to the Business, other than on behalf of such entity.
4. Confidential and Proprietary Information. Stockholder
acknowledges and agrees that, as an executive officer of Xxxxxxx Homes, he has
obtained extensive and valuable knowledge and information concerning the
business of Xxxxxxx Homes, including confidential information relating to
Xxxxxxx Homes and its operations, assets, contracts, customers, personnel, plans
and prospects. Stockholder further acknowledges and agrees that, through the
dealings in connection with the Merger, he has obtained and will continue to
obtain extensive and valuable knowledge and information concerning the business
of DHI, including confidential information relating to DHI and its operations,
assets, contracts, customers, personnel, plans, and prospects. Collectively, all
of the knowledge and information described in the preceding two sentences
constitutes the "Confidential Information". Stockholder further acknowledges and
agrees that the Confidential Information has been acquired and developed through
the expenditure of valuable resources, that it provides a competitive advantage
over those who do not know and use it and that both Xxxxxxx Homes and DHI have
taken reasonable precautions against its disclosure to and use by others.
Accordingly:
a. Stockholder shall not, directly or indirectly, divulge,
communicate, disclose, or use any Confidential Information at any time except as
may be expressly authorized by DHI in writing.
3
b. All files, records, documents, computer-recorded
information, marketing surveys, operating manuals, price lists, memoranda, and
similar items arising out of the Business or any business activity of DHI,
whether prepared by Stockholder or otherwise coming into his possession, shall,
following the Merger, be and remain the exclusive property of DHI. Upon the
request of DHI, Stockholder shall immediately turn over to DHI all such
material, along with any copies or derivatives of such material, following the
Merger.
c. Notwithstanding the foregoing, this Section 4 shall not
preclude Stockholder from disclosing information and material described herein
to the extent that it (i) is or becomes generally available to the public other
than by Stockholder's breach of this Section 4, (ii) is required to be disclosed
by law or court order, and Stockholder has promptly notified DHI of the
requirement to disclose and allowed DHI a reasonable period to obtain a
protective order or take other steps to prevent such disclosure, or (iii) is
disclosed to Stockholder's accountant, lawyer, or other professional advisor for
the sole purpose of receiving professional advice with respect thereto, provided
that such professional advisor does not disclose the covered information or
material to any other person or entity except as permitted by this Section 4.
5. Definition of Affiliate. As used in this Agreement,
Affiliate means a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first mentioned person, including any partnership, limited liability company or
joint venture in which the first mentioned person (either alone, or through or
together with any other subsidiary) has, directly or indirectly, an interest of
10% or more.
6. Equitable Remedies. Stockholder hereby acknowledges and
agrees that the obligations under this Agreement are such that DHI, its
Affiliates, and their respective successors and assigns cannot be fully and
adequately compensated by damages for breach of such obligations. As a result,
Stockholder hereby acknowledges and agrees that, in the event of any breach or
threatened breach of this Agreement, DHI, its Affiliates, and their respective
successors and assigns will be entitled not only to damages or other relief at
law, but also to equitable relief to enforce the breached obligations, including
preliminary and permanent injunctive relief (including temporary restraining
orders) without the need to post any bond in connection therewith.
7. Amendment, Modification and Waiver; Beneficiary. Except as
provided herein, no amendment, modification, alteration or supplement of the
terms or provisions of this Agreement shall be binding unless the same shall be
in writing and duly executed by the parties hereto, except that any of the terms
or provisions of this Agreement may be waived in writing at any time by the
party that is entitled to the benefits of such waived terms or provisions.
Nothing in this Agreement, express or implied, is intended to confer upon any
third person (other than Affiliates, successors, and assigns of DHI, which are
hereby expressly made third party beneficiaries of this Agreement) any rights or
remedies under or by reason of this Agreement. No waiver of any provision of
this Agreement shall be deemed to or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided. No delay on the part of
any party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof.
4
8. Enforceability and Severability. It is the desire and
intent of the parties hereto that the provisions of this Agreement be enforced
to the fullest extent permissible under the laws and public policies of each
jurisdiction in which enforcement is sought. Accordingly, if any provision of
this Agreement shall be adjudicated to be invalid or unenforceable, such
provision, without any action on the part of the parties hereto, shall be deemed
amended to modify (including a reduction in duration, geographical area, or
prohibited business activities), or if such modification is impossible then to
delete, the portion adjudicated to be invalid or unenforceable, such
modification or deletion to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made, and
such deletion or modification to be made only to the extent necessary to cause
the provision as amended to be valid and enforceable.
9. Complete Understanding. This Agreement, in combination with
the Merger Agreement and the agreements and instruments related thereto,
constitutes the full and complete understanding and agreement of the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous oral understandings and agreements with respect to the subject
matter hereof and all prior written understandings and agreements with respect
to the subject matter hereof.
10. Costs. In the event a dispute or controversy arises
hereunder, or any action is brought by any party hereto or any other
party-in-interest to enforce its rights hereunder, the prevailing party in any
such dispute, controversy or action shall be entitled to recover its reasonable
attorneys' fees, court costs and other related expenses of enforcement.
11. Section Headings and Construction. The headings of
Sections in this Agreement are provided for convenience only and will not affect
its construction or interpretation. Unless otherwise expressly provided, the
word "including" means including, without limitation, with regard to the items
listed thereafter.
12. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made if and when delivered personally or by overnight courier to the
parties at the following addresses or sent by electronic transmission, with
confirmation received, to the telecopy numbers specified below (or at such other
address or telecopy number for a party as shall be specified by like notice):
If to Stockholder:
0000 Xxxxxxx Xxxx Xx.
Xxxxxxxx, Xxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
5
If to DHI:
X.X. Xxxxxx, Inc.
0000 Xxxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000 and (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxxx Xxxxxxxx and Xxx Xxxxxxx
13. Governing Law. This Agreement shall be governed by the
laws of the State of Delaware without regard to the principles of conflicts of
law that would apply any other law.
14. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, it being agreed that only an express written amendment,
termination, or waiver of this Agreement by DHI or its Affiliates, successors,
or assigns can relieve Stockholder of his personal obligations hereunder and
then only with respect to the entity executing such amendment, termination, or
waiver.
15. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute
one and the same agreement.
16. Cumulative Remedies. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided under applicable law.
[SIGNATURES ON NEXT PAGE]
6
IN WITNESS WHEREOF, the undersigned has executed this
Confidentiality and Noncompetition Agreement as of the date first above written.
THE COMPANY:
X.X. XXXXXX, INC.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
STOCKHOLDER:
----------------------------------------------
Xxxxx X. Xxxxxxx
7
Schedule A
Territories
(i) Anywhere within the State of California within the Counties of Alameda,
Contra Costa, Los Angeles, Napa, Orange, Riverside, Sacramento, San Xxxxxx, San
Xxxxxxxxx, San Diego, San Xxxxxxx, San Mateo, Santa Xxxxx, Xxxxxx, Xxxxxxxxxx
and Xxxxxxx;
(ii) anywhere else within every other city and county within the State of
California; and
(iii) anywhere within every city and county within the States of Arizona,
Colorado, Hawaii, Oregon and Washington.
Schedule B
Activities and Investments
NAME OF ACTIVITY OR INVESTMENT NATURE OF BUSINESS INVOLVEMENT IN BUSINESS
------------------------------ ------------------ -----------------------
Port Quendall Development Co., Inc. Lot Development Single Family President/Investor
Home Sales
Cle Elum, WA
Pacific Resorts, Inc. Land Development President
Cle Elum, WA
Xxxxx X. Xxxxxxx & Assoc., Inc. Land Development President
36 Acres
Hyak Ski Resort
Diamond Point Joint Venture Single Family Lot Development Partner
Moses Lake, WA
Ronald Mill Site I, II & III, Inc. Land Development Investor
Ronald, WA
Xxxxxx/Xxxxxxx Partnership Duplex Development Partner
State of WA
Malulani Partners, Inc. Construction & Sale of Single Partner
Family Homes
Kona, HI
American Housing Partners, Inc. Apartment Development Partner
WA & NV
