Exhibit 10.6
AGREEMENT RELATING TO
NONCOMPETITION AND OTHER COVENANTS
This AGREEMENT, dated as of June ___, 1999 (this "AGREEMENT"), is by
and between XxXxxxxxx & Co Inc., a Delaware corporation (the "COMPANY"), and the
individual whose name appears at the end of this Agreement ("COVENANTOR").
WHEREAS, in connection with Covenantor's participation in the Exchange
Agreement, dated as of June __, 1999, by and among the Company, LaB Investing
Co. L.L.C., a New York limited liability company ("INVESTING"), and the members
of Investing listed on Schedule A thereto (the "EXCHANGE AGREEMENT"), Covenantor
has agreed to certain obligations, inter alia, to keep information concerning
the Company, XxXxxxxxx & Co., a New York limited partnership ("XXXXXXXXX XX"),
and Investing (the Company, XxXxxxxxx XX and Investing being hereinafter
referred to collectively or individually, as applicable, as the "COMPANY
GROUP"), confidential, not to engage in competitive activities, not to solicit
listed companies (as defined below) or the Company Group's employees and to
cooperate with the Company Group in maintaining certain relationships following
the termination of Covenantor's employment with the Company Group.
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Covenantor and the Company agree as follows:
1. CONFIDENTIAL INFORMATION. In the course of involvement in the
Company Group's activities or otherwise, Covenantor has obtained or may obtain
confidential information concerning the Company Group's businesses, strategies,
operations, financial affairs, organizational and personnel matters (including
information regarding any aspect of Covenantor's tenure as an officer, managing
director, partner, consultant or employee of the Company Group or of the
termination of such office, position, partnership, arrangement or employment),
policies, procedures and other non-public matters, or concerning those of third
parties. Such information ("CONFIDENTIAL INFORMATION") may have been or be
provided in written or electronic form or orally. In consideration of, and as a
condition to, continued access to Confidential Information, and without
prejudice to or limitation of any other confidentiality obligations imposed by
agreement or by law, Covenantor hereby undertakes to use and protect
Confidential Information in accordance with any restrictions placed on its use
or disclosure. Without limiting the foregoing, except as authorized by the
Company Group or as required by law, Covenantor may not disclose or allow
disclosure of any Confidential Information, or of any information derived
therefrom, in whatever form, to any person unless such person is a director,
officer, partner, employee, attorney or agent of the Company Group and, in
Covenantor's reasonable good faith judgment, has a need to know the Confidential
Information or information derived therefrom in furtherance of the business of
the Company Group. The foregoing obligations will survive, and remain binding
and enforceable notwithstanding any
termination of Covenantor's employment with the Company Group and any settlement
of the financial rights and obligations arising from Covenantor's employment
with the Company Group. Without limiting the foregoing, the existence of, and
any information concerning, any dispute between Covenantor and the Company Group
shall constitute Confidential Information except that Covenantor may disclose
information concerning such dispute to the arbitrator or court that is
considering such dispute, or to Covenantor's legal counsel (provided that such
counsel agrees not to disclose any such information other than as necessary to
the prosecution or defense of the dispute).
2. NONCOMPETITION. (a) In view of Covenantor's importance to the
Company Group, Covenantor hereby agrees that the Company Group would likely
suffer significant harm from Covenantor's competing with the Company Group
during the Restricted Period. Accordingly, Covenantor hereby agrees that
Covenantor will not, without the written consent of the Company Group, during
the Restricted Period:
(1) form, or acquire a 5% or greater equity ownership, voting
or profit participation interest in, any Competitive Enterprise; or
(2) associate (including, but not limited to, association as
an officer, employee, partner, director, consultant, agent or advisor)
with any Competitive Enterprise and in connection with such association
engage in, or directly or indirectly manage or supervise personnel
engaged in, any activity
(i) which is similar or substantially related to any
activity in which Covenantor was engaged, in whole or in part,
at the Company Group, or
(ii) which calls for the application of the same or
similar specialized knowledge or skills as those utilized by
Covenantor in Covenantor's activities with the Company Group,
at any time during the one-year period immediately prior to
the Date of Termination (or, in the case of an action taken
during the Covenantor's period of employment with the Company
Group, during the one-year period immediately prior to such
action), and, in any such case, irrespective of the purpose of
the activity or whether the activity is or was in furtherance
of advisory, agency, proprietary or fiduciary business of
either the Company Group or the Competitive Enterprise.
(b) For purposes of this Agreement, "RESTRICTED PERIOD" means the
period commencing on the date hereof and ending on the later of (1) the fifth
anniversary of the date of consummation of the initial public offering of the
common stock of the Company (the "IPO DATE") or (2) the first anniversary of
Covenantor's Date of Termination.
(c) For purposes of this Agreement, a "COMPETITIVE ENTERPRISE" is a
business enterprise that (1) engages in any activity, or (2) owns or controls a
significant interest in any entity that engages in any activity, that, in either
case, competes anywhere with any business activity in
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which the Company Group is engaged. The activities covered by the previous
sentence include, without limitation, specialist services and/or securities
brokerage, sales, lending, custody, clearance, settlement or trading.
(d) For purposes of this Agreement, if Covenantor and the Company Group
are parties to a written agreement relating to Covenantor's employment with the
Company Group on or after the date hereof (the "EMPLOYMENT AGREEMENT"), "DATE OF
TERMINATION" means (i) if Covenantor's employment is terminated by the Company
Group for Cause or on account of Disability, as those terms are defined in the
Employment Agreement, the date of the Company Group's delivery of written notice
of termination to Covenantor, (ii) if Covenantor's employment is terminated by
the Company Group other than for Cause or on account of Disability, the date
that is ninety (90) days after the Company Group's delivery of written notice of
termination to Covenantor, or (iii) if Covenantor's employment is terminated by
Covenantor, the date that is ninety (90) days after Covenantor's delivery of
written notice of termination to the Company Group. If Covenantor and the
Company Group are not parties to an Employment Agreement, "DATE OF TERMINATION"
means the date Covenantor's employment with the Company Group is terminated, for
whatever reason.
3. NONSOLICITATION OF LISTED COMPANIES (a) Covenantor hereby agrees
that during the Restricted Period, Covenantor will not, in any manner, directly
or indirectly, (1) Solicit a listed company to transact business with a
Competitive Enterprise or to reduce or refrain from doing any business with the
Company Group, or (2) interfere with or damage (or attempt to interfere with or
damage) any relationship between the Company Group and a listed company.
(b) For purposes of this Agreement, the term "SOLICIT" means any direct
or indirect communication of any kind whatsoever, regardless of by whom
initiated, inviting, advising, encouraging or requesting any person or entity,
in any manner, to take or refrain from taking any action.
(c) For purposes of this Agreement, the term "LISTED COMPANIES" means
any company (1) for whom the Company Group acts as a specialist, (2) which is
seeking a listing of its stock on the New York Stock Exchange, Inc. (the
"NYSE"), or (3) which is identified by the Company Group as a potential listed
company (whether by new listing, transfer or other means) during the period of
Covenantor's employment by the Company Group.
4. NONSOLICITATION OF EMPLOYEES. Covenantor hereby agrees that during
the Restricted Period, Covenantor will not, in any manner, directly or
indirectly, Solicit any person who is an employee of the Company Group to resign
from the Company Group or to apply for or accept employment with any Competitive
Enterprise.
5. TRANSFER OF RELATIONSHIPS WITH LISTED COMPANIES. (a) During the
Coverage Period, Covenantor hereby agrees to take all actions and do all such
things as may be reasonably requested by the Company Group from time to time to
maintain for the Company Group the
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business, goodwill, and business relationships with any listed company with whom
Covenantor worked during the term of Covenantor's employment with the Company
Group.
(b) For purposes of this Agreement, the term "COVERAGE PERIOD" means,
(1) if Covenantor and the Company Group are parties to an Employment Agreement,
the 90-day period beginning on the date on which notice of Covenantor's
termination of employment is delivered to or by the Company Group by or to
Covenantor, or in the case of termination for Cause or on account of Disability,
the 90-day period beginning on the Date of Termination or (2) if Covenantor is
not a party to an Employment Agreement, the 90-day period beginning on the date
Covenantor's employment with the Company Group is terminated, for whatever
reason.
6. PRIOR NOTICE REQUIRED. Covenantor hereby agrees that prior to
accepting employment with any other person or entity during the Restricted
Period, Covenantor will provide such prospective employer with written notice of
the provisions of this Agreement, with a copy of such notice delivered
simultaneously to the Company Group.
7. COVENANTS GENERALLY. (a) Covenantor's covenants as set forth in the
preceding paragraphs of this Agreement are from time to time referred to herein
as the "COVENANTS." If any of the Covenants is finally held to be invalid,
illegal or unenforceable (whether in whole or in part), such Covenant shall be
deemed modified to the extent, but only to the extent, of such invalidity,
illegality or unenforceability and the remaining such Covenants shall not be
affected thereby; provided, however, that if any of such Covenants is finally
held to be invalid, illegal or unenforceable because it exceeds the maximum
scope determined to be acceptable to permit such provision to be enforceable,
such Covenant will be deemed to be modified to the minimum extent necessary to
modify such scope in order to make such provision enforceable hereunder.
(b) Covenantor understands that the provisions of the Covenants may
limit Covenantor's ability to earn a livelihood in a business similar to the
business of the Company Group.
(c) Covenantor acknowledges that a violation on Covenantor's part of
any of the Covenants would cause irreparable damage to the Company Group.
Accordingly, Covenantor agrees that the Company Group will be entitled to
injunctive relief for any actual or threatened violation of any of the Covenants
in addition to any other remedies it may have.
8. DAMAGES. (a) Covenantor acknowledges that Covenantor's compliance
with the Covenants is an important factor to the continued success of the
Company Group's operations and its future prospects. Covenantor and the Company
agree that if at any time during the Restricted Period, Covenantor were to
breach any of the Covenants set forth in this Agreement, the damages to the
Company Group would be material, but that the amount of such damages would be
uncertain and not readily ascertainable. Accordingly, Covenantor and the Company
agree that if, prior to the fifth anniversary of the IPO Date, Covenantor
breaches any of such Covenants, as determined by the Board of Directors of the
Company (the "BOARD") in its good faith judgment, the Company Group will be
entitled to receive immediately following such determination and written demand
therefor,
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and Covenantor will make, a cash payment as and for liquidated damages (the
"LIQUIDATED DAMAGES") in an amount equal to 75% of the aggregate value of the
common stock of the Company (based on the initial offering price of the common
stock of the Company) and any cash received by Covenantor in the LLC Exchange
(as defined in the Exchange Agreement).
The payment of any amount as Liquidated Damages will not be construed as a
release or waiver by the Company of the right to prevent the continuation of any
such violation of such Covenants in equity or otherwise. In addition, Covenantor
and the Company agree that it would be too speculative to attempt to determine
any amount of liquidated damages that would be applicable following the fifth
anniversary of the IPO Date, and that any damages payable as a result of any
breach following such date shall be determined without regard to this Section 8.
(b) Covenantor and the Company agree that the Liquidated Damages are
reasonable in proportion to the probable damages likely to be sustained by the
Company Group if Covenantor breaches at any time prior to the fifth anniversary
of the IPO Date any of the Covenants set forth in Sections 2, 3 and 4 hereof,
that the amount of actual damages to be sustained by the Company Group in the
event of such breach is incapable of precise estimation and that such cash
payments are not intended to constitute a penalty or punitive damages for any
purpose.
(c) Covenantor acknowledges and agrees that Covenantor's payment
obligations in respect of Liquidated Damages under this Agreement will be full
recourse obligations and will be secured pursuant to a Pledge Agreement in
substantially the form set forth as Exhibit A hereto (the "PLEDGE AGREEMENT").
Covenantor further acknowledges and agrees that upon expiration of the Pledge
Agreement, the Company Group will continue to be entitled to all available
remedies for any breach of this Agreement.
(d) Covenantor acknowledges and agrees that any cash payment of
Liquidated Damages pursuant to this Section 8 shall be in addition to, and not
in lieu of, any forfeitures of awards (required pursuant to the terms of any
such awards) that may be granted to Covenantor in the future under one or more
of the Company Group's compensation and benefit plans.
9. ARBITRATION. Subject to the provisions of Sections 10 and 11 hereof,
any dispute, controversy or claim between Covenantor and the Company Group
arising out of or relating to or concerning the provisions of this Agreement,
the Pledge Agreement, any agreement between Covenantor and the Company Group
relating to or arising out of Covenantor's employment with the Company Group or
otherwise concerning any rights, obligations or other aspects of Covenantor's
employment relationship in respect of the Company Group ("EMPLOYMENT RELATED
MATTERS"), shall be finally settled by arbitration in New York City before, and
in accordance with the rules then obtaining of, the NYSE or, if the NYSE
declines to arbitrate the matter, the American Arbitration Association (the
"AAA") in accordance with the commercial arbitration rules of the AAA; PROVIDED
HOWEVER, that, in addition to the right to compel arbitration of any dispute or
controversy, the Company Group may bring an action or special proceeding in a
state or federal court of competent jurisdiction sitting in New York City,
whether or not an arbitration proceeding has theretofore been
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or is ever initiated, for the purpose of temporarily, preliminarily, or
permanently enforcing the provisions of this Agreement or to enforce an
arbitration award and, for the purposes of this provision, each participant in
this Agreement expressly consents to the jurisdiction of any such court in
respect of any such action and waives to the fullest extent permitted by
applicable law any objection to personal jurisdiction or to the laying of venue
of any such suit, action or proceeding in such court, agrees that proof shall
not be required that monetary damages for breach of the provisions of this
Agreement would be difficult to calculate and that remedies at law would be
inadequate and irrevocably appoints the Secretary of the Company as the
participant's agent for service of process in connection with any such action or
proceeding, who shall promptly advise such participant of any such service of
process.
10. INJUNCTIVE RELIEF; SUBMISSION TO JURISDICTION. Notwithstanding the
provisions of Section 9, and in addition to its right to submit any dispute or
controversy to arbitration, the Company Group may bring an action or special
proceeding in a state or federal court of competent jurisdiction sitting in the
City of New York, whether or not an arbitration proceeding has theretofore been
or is ever initiated, for the purpose of temporarily, preliminarily, or
permanently enforcing the provisions of the Covenants, the Employment Agreement
(if applicable) or the Pledge Agreement, or to enforce an arbitration award,
and, for the purposes of this Xxxxxxx 00, Xxxxxxxxxx (x) expressly consents to
the application of Section 11 to any such action or proceeding, (ii) agrees that
proof will not be required that monetary damages for breach of the provisions of
the Covenants, the Employment Agreement (if applicable) or the Pledge Agreement
would be difficult to calculate and that remedies at law would be inadequate and
(iii) irrevocably appoints the Secretary of the Company as Covenantor's agent
for service of process in connection with any such action or proceeding, who
shall promptly advise Covenantor of any such service of process.
11. CHOICE OF FORUM. (a) COVENANTOR AND THE COMPANY HEREBY IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN
THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO OR CONCERNING THIS AGREEMENT, THE EMPLOYMENT AGREEMENT (IF
APPLICABLE), THE PLEDGE AGREEMENT, OR ANY EMPLOYMENT RELATED MATTER THAT IS NOT
OTHERWISE ARBITRATED OR RESOLVED ACCORDING TO THE PROVISIONS OF SECTION 9
HEREOF. This includes any suit, action or proceeding to compel arbitration or to
enforce an arbitration award. This also includes any suit, action, or proceeding
arising out of or relating to any post-employment Employment Related Matters.
Covenantor and the Company acknowledge that the forum designated by this Section
11 has a reasonable relation to this Agreement, and to Covenantor's relationship
to the Company Group. Notwithstanding the foregoing, nothing herein shall
preclude the Company Group from bringing any action or proceeding in any other
court for the purpose of enforcing the provisions of Sections 9, 10 or 11.
(b) The agreement of Covenantor and the Company as to forum is
independent of the law that may be applied in the action, and Covenantor and the
Company agree to such forum even if the forum may under applicable law choose to
apply non-forum law. Covenantor and the
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Company hereby waive, to the fullest extent permitted by applicable law, any
objection which Covenantor or the Company now or hereafter may have to personal
jurisdiction or to the laying of venue of any such suit, action or proceeding in
any court referred to in Section 11(a). Covenantor and the Company undertake not
to commence any action arising out of or relating to or concerning this
Agreement in any forum other than a forum described in this Section 11.
Covenantor and the Company agree that, to the fullest extent permitted by
applicable law, a final and non-appealable judgment in any such suit, action or
proceeding in any such court shall be conclusive and binding upon Covenantor and
the Company Group.
12. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS.
13. MISCELLANEOUS. (a) This Agreement shall not supersede any other
agreement, written or oral, pertaining to the matters covered herein, except to
the extent of any inconsistency between this Agreement and any prior agreement,
in which case this Agreement shall prevail.
(b) Notices hereunder shall be delivered to the Company Group at its
principal office directed to the attention of the Secretary of the Company, and
to Covenantor at Covenantor's last address appearing in the Company Group's
employment records.
(c) This Agreement may not be amended or modified, other than by a
written agreement executed by Covenantor and the Company or its successor, nor
may any provision hereof be waived other than by a writing executed by
Covenantor or the Company or its successor; provided, that any waiver, consent,
amendment or modification of any of the provisions of this Agreement will not be
effective against the Company Group without the written consent of the Chief
Executive Officer of the Company or its successor, or such individual's
designee. Covenantor may not, directly or indirectly (including by operation of
law), assign Covenantor's rights or obligations hereunder without the prior
written consent of the Chief Executive Officer of the Company or its successor,
or such individual's designee, and any such assignment by Covenantor in
violation of this Agreement shall be void. This Agreement shall be binding upon
Covenantor's permitted successors and assigns. Without impairing Covenantor's
obligations hereunder, the Company may at any time and from time to time assign
its rights and obligations hereunder to Investing or XxXxxxxxx XX (and have such
rights and obligations reassigned to it or to any other subsidiary or
affiliate). This Agreement shall be binding upon and inure to the benefit of the
Company Group and its assigns.
(d) Without limiting the provisions of Section 7(a) hereof, if any
provision of this Agreement is finally held to be invalid, illegal or
unenforceable (whether in whole or in part), such provision shall be deemed
modified to the extent, but only to the extent, of such invalidity, illegality
or unenforceability and the remaining provisions shall not be affected thereby.
(e) Except as expressly provided herein, this Agreement shall not
confer on any person other than the Company Group and Covenantor any rights or
remedies hereunder.
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(f) The captions in this Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
IN WITNESS WHEREOF, Covenantor, and the Company hereto have caused this
Agreement to be executed and delivered on the date first above written.
XxXXXXXXX & CO INC.
By:
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Name: Xxxxxx X.X. XxXxxxxxx, XX
Title: Chairman and Chief Executive Officer
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Name:
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