EXHIBIT 10.12
TUT SYSTEMS, INC.
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the "Agreement") dated as of November 17,
1999 (the "Effective Date") (as defined below) by and between Tut Systems, Inc.,
a Delaware corporation ("TUT"), Freegate Corporation, a Delaware corporation and
wholly owned subsidiary of TUT (the "Company"), and Xxxxx Xxxxxx
("Stockholder"). Capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Agreement and Plan of Reorganization
(as defined below).
Background
A. TUT, the Company, Freegate Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of TUT ("Sub"), and, with respect to
Article VII thereto, Xxxxx Xxxxxxxxx, as Stockholder Representative, and U.S.
Bank Trust, as Escrow Agent, have entered into an Agreement and Plan of
Reorganization dated as of November 16, 1999 (the "Reorganization Agreement"),
which provides for the merger (the "Merger") of Sub with and into the Company.
The effective date of the consummation of the Merger shall be the Effective Date
of this Agreement.
B. Stockholder has entered into an Employment Agreement with TUT and the
Company dated November 17, 1999.
C. Stockholder is receiving significant consideration pursuant to the
terms of the Reorganization Agreement.
D. As a condition to the Merger and to preserve the value of the business
being acquired by TUT, the Reorganization Agreement contemplates, among other
things, that Stockholder enter into this Agreement and that this Agreement
become effective upon the closing of the Merger.
E. The Company and TUT are each currently engaged or planning to engage in
its business in each of the fifty (50) states of the United States and certain
other countries throughout the world. TUT and the Company, following the
Merger, will continue conducting such business in all parts of the United States
and certain other countries throughout the world.
NOW THEREFORE, in consideration of the mutual promises made herein, TUT,
Sub and Stockholder (collectively referred to as the "Parties") hereby agree as
follows:
1. Covenant Not to Compete or Solicit.
(a) Beginning on the Effective Date and ending eighteen (18) months
following the Closing Date (the "Non-Compete Period"), Stockholder shall not,
other than on behalf of the Company or TUT, directly or indirectly, without the
prior written consent of TUT, engage anywhere in the Geographic Area in (whether
as an employee, agent, consultant, advisor, independent contractor, proprietor,
partner, officer, director or otherwise), or have any ownership interest in
(except for passive ownership of five percent (5%) or less of any entity whose
securities have been registered under the Securities Act of 1933 or Section 12
of the Securities Exchange Act of 1934), or participate in the financing,
operation, management or control of, any firm, partnership, corporation, entity
or business that engages or participates in a "competing business purpose." The
term "competing business purpose" shall mean the design, development, marketing
and sale of any product competing with a product that was planned, designed,
marketed or sold by Tut or the Company while Stockholder was employed by Tut or
the Company. Notwithstanding the foregoing, in the event Stockholder's
employment with the Company is terminated by the Company without Cause (as
defined in the Stockholder's Employment Agreement with the Company) or by
Employee for Good Reason (as defined in the Stockholder's Employment Agreement
with the Company), then the Non-Compete Period shall terminate upon the earlier
to occur of (i) one (1) year following the date of such termination of
employment or (ii) eighteen (18) months following the Closing Date.
(b) During the Non-Compete Period, Stockholder shall not, directly or
indirectly, without the prior written consent of TUT or the Company, solicit,
encourage, hire or take any other action which is intended to induce or
encourage, or has the effect of inducing or encouraging, any employee of TUT,
any subsidiary of TUT or the Company to terminate his or her employment with
TUT, any subsidiary of TUT or the Company.
(c) The Geographic Area shall mean (i) the United States or (ii)
anywhere in the world outside the United States where Parent or any subsidiary
of Parent conducts business that falls within the definition of a "competing
business purpose" in Section 1(a) above.
(d) The covenants contained in the preceding paragraphs shall be
construed as a series of separate covenants, one for each county, city, state,
or any similar subdivision in any Geographic Area. Except for geographic
coverage, each such separate covenant shall be deemed identical in terms to the
covenant contained in the preceding paragraphs. If, in any judicial proceeding,
a court refuses to enforce any of such separate covenants (or any part thereof),
then such unenforceable covenant (or such part) shall be eliminated from this
Agreement to the extent necessary to permit the remaining separate covenants (or
portions thereof) to be enforced. In the event that the provisions of this
Section 1 are deemed to exceed the time, geographic or scope limitations
permitted by applicable law, then such provisions shall be reformed to the
maximum time, geographic or scope limitations, as the case may be, permitted by
applicable laws.
(e) Stockholder acknowledges that (i) the goodwill associated with
the Company prior to the Merger is an integral component of the value of the
Company to TUT and is reflected in the consideration to be received by
Stockholder in the Merger, and (ii) Stockholder's Agreement as set forth herein
is necessary to preserve the value of the Company for TUT following the Merger.
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(f) Stockholder also acknowledges and agrees that the limitations of
time, geography, and scope of activity set forth in this Agreement are
reasonable because, among other things, (i) the Company and Parent are engaged
in a highly competitive industry, (ii) the Stockholder has unique access to, and
will continue to have access to, the trade secrets and know how of the Company,
including without limitation the plans and strategy (and in particular the
competitive strategy) of the Company, (iii) the Stockholder is receiving
significant compensation in connection with the Merger, and (iv) in the event
the Stockholder's employment with the Company ended, the Stockholder would be
able to obtain suitable and satisfactory employment without violation of this
Agreement.
(g) Equitable Remedy. Stockholder agrees that it would be
impossible or inadequate to measure TUT's or the Company's damages from any
breach of the covenants set forth in this Section 1. Accordingly, Stockholder
agrees that if he breaches any provision of this Section 1, TUT or the Company
will have available, in addition to any other right or remedy otherwise
available, the right to obtain an injunction from a court of competent
jurisdiction restraining such breach or threatened breach and to specific
performance of any such provision of this Agreement. Stockholder further agrees
that no bond or other security shall be required in obtaining such equitable
relief, nor will proof of actual damages be required for such equitable relief.
Stockholder hereby expressly consents to the issuance of such injunction and to
the ordering of such specific performance.
(h) Stockholder's obligations under this Agreement shall remain in
effect if Stockholder's employment with TUT or the Company is terminated.
2. Arbitration; Consent to Personal Jurisdiction.
(a) Stockholder agrees that, except as provided in Section 1(g)
above, any dispute or controversy arising out of, relating to, or in connection
with this Agreement, or the interpretation, validity, construction, performance,
breach, or termination thereof, shall be settled by binding arbitration to be
held in California, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, supplemented by the Large Complex Case
Procedures of the American Arbitration Association (the "Rules"). The arbitrator
may grant injunctions or other relief in such dispute or controversy. The
decision of the arbitrator shall be final, conclusive and binding on the parties
to the arbitration. Judgment may be entered on the arbitrator's decision in any
court having jurisdiction.
(b) At the request of either party, the arbitration proceedings
pursuant hereto will be conducted confidentially. In such case all documents,
testimony and records shall be received, heard and maintained by the
arbitrator(s) in confidence under seal, available for inspection only by the
arbitrator(s), the parties and their respective attorneys and their respective
experts, who shall agree in advance and in writing to receive all such
information confidentially and to maintain such information in confidence.
(c) The arbitrator(s) shall apply California law to the merits of
any dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings shall be governed by federal arbitration law and by the
Rules, without reference to state arbitration law.
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(d) The arbitrator shall determine how all expenses related to the
arbitration shall be paid, including without limitation, the respective expenses
(including reasonable attorneys' fees) of each party, the fees of the arbitrator
and the administrative fee of the American Arbitration Association.
(e) STOCKHOLDER HAS READ AND UNDERSTANDS THIS SECTION 2, WHICH
DISCUSSES ARBITRATION. STOCKHOLDER UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
STOCKHOLDER AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS
ARBITRATION CLAUSE CONSTITUTES A WAIVER OF STOCKHOLDER'S RIGHT TO A JURY TRIAL
AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO THIS AGREEMENT.
3. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by the laws of
the State of California without reference to rules of conflicts of law.
(b) Severability. If any portion of this Agreement is held by an
arbitrator or a court of competent jurisdiction to conflict with any federal,
state or local law, or to be otherwise invalid or unenforceable, such portion of
this Agreement shall be of no force or effect and this Agreement shall otherwise
remain in full force and effect and be construed as if such portion had not been
included in this Agreement.
(c) No Assignment. Stockholder shall not assign this Agreement or
any rights or obligations under this Agreement without the prior written consent
of TUT and the Company. This Agreement is specific to TUT and its affiliated
entities and may not be assigned by TUT and/or its affiliates to any
unaffiliated entity.
(d) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to TUT or the Company, to:
Tut Systems, Inc.
0000 Xxxxxx Xxx
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxxxxxx X'Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to the Stockholder, to:
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Name: ____________________
Telephone No.:
Facsimile No.:
(e) Entire Agreement. This Agreement contains the entire agreement
and understanding of the parties and supersedes all prior discussions,
agreements and understandings relating to the subject matter hereof. This
Agreement may not be changed or modified, except by an agreement in writing
executed by TUT, the Company and Stockholder.
(f) Waiver of Breach. The waiver of a breach of any term or
provision of this Agreement, which must be in writing, shall not operate as or
be construed to be a waiver of any other previous or subsequent breach of this
Agreement.
(g) Headings. All captions and section headings used in this
Agreement are for convenience only and do not form a part of this Agreement.
(h) Counterparts. This Agreement may be executed in counterparts,
and each counterpart shall have the same force and effect as an original and
shall constitute an effective, binding agreement on the part of each of the
undersigned.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
TUT SYSTEMS, INC. STOCKHOLDER
/s/ Xxxxxx X. Xxxxxxxx /s/ Xxxxx Xxxxxx
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Signature of Authorized Signatory Signature
Xxxxxx X. Xxxxxxxx, CFO Xxxxx Xxxxxx
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Print Name and Title Print Name
FREEGATE CORPORATION
/s/ Xxxx-Xxxx Frailong
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Signature of Authorized Signatory
Xxxx-Xxxx Frailong
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Print Name and Title
[Signature Page to Non-Competition Agreement]
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