NON-COMPETITION AGREEMENT
Exhibit 10.5
This Non-Competition Agreement (this “Agreement”) is entered as of September 15, 2006, to be
effective as of July 1, 2006 (the “Effective Date”), between Trade Source International, Inc., a
Delaware corporation (“Buyer”) and Xxxxxx X. Xxxxxx (“Xxxxxx”) on the following terms and
conditions:
RECITALS
WHEREAS, Buyer is contemporaneously entering into an agreement with Xxxxxx (the “Stock
Purchase Agreement”) pursuant to which it is purchasing all of Xxxxxx’x interest in MARKETING
IMPRESSIONS, INC., a Georgia corporation (“MI”) (capitalized terms used herein without definition
shall have the meanings given to such terms in the Stock Purchase Agreement); and
WHEREAS, Buyer and MI each owns a 50% membership interest in Prime/Home Impressions, LLC (the
“Company”) and, subsequent to the acquisition of MI, Buyer will directly or indirectly own all of
the membership interests in the Company; and
WHEREAS, Xxxxxx has been engaged in the Business; and
WHEREAS, Buyer has agreed to pay certain compensation to Xxxxxx in return for his agreement
not to compete with Buyer in the conduct of the Business, as described herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants
contained herein, the parties agree as follows:
1. Xxxxxx Restrictive Covenant. In consideration of the amounts to be paid hereunder, Xxxxxx
agrees that, except as otherwise provided in Section 4 below, he shall not directly or
indirectly for the period beginning with the Effective Date and ending seven years thereafter (such
seven-year period, the “Restricted Period”):
(a) engage or invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be employed by, associated with,
or in any manner connected with, lend his name, or any similar name to, lend his credit to
or render services or advice to, any Person that is engaged in the Business or directly
competes with the Business as conducted by one or more members of the TSI Group as of the
Effective Date (any such business, a “Competing Business”) in United States;
provided, however, subject to the other limitations set forth in this Agreement,
including but not limited to the limitations set forth in Section 4, Xxxxxx shall
not be prohibited from developing, designing, manufacturing, merchandising, packaging,
supplying, selling or distributing ceiling fans, light fixtures and/or lamps, or investing
in, owning, managing, operating, financing, controlling, or participating in the ownership,
management, operation, financing, or control of, be employed by, associated with, or in any
manner connected with, lend his name, or any similar name to, lend his credit to or render
services or advice to, any Person engaged in any of the foregoing;
(b) whether for Xxxxxx’x own account or for the account of any other Person, solicit
business within the scope of the Business and in the same market as the Business being
conducted by one or more members the TSI Group as of the Effective Date from any Person
known by
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Xxxxxx to be a customer of any member of the TSI Group, whether or not Xxxxxx had
personal contact with such Person during and by reason of Xxxxxx’x relationship with MI;
(c) whether for Xxxxxx’x own account or the account of any other Person solicit,
employ, or otherwise engage as a consultant, independent contractor, or otherwise, any
Person who is, at any time after the Effective Date, an employee of any member of the TSI
Group or in any manner induce or attempt to induce any such employee to terminate his
employment with any member of the TSI Group; or
(d) disparage any member of the TSI Group or any of their respective interest holders,
stockholders, managers, directors, officers, employees, or agents.
The term “Person” includes any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture, estate, trust,
association, organization, or governmental body.
2. Buyer Restrictive Covenant. In consideration of Xxxxxx’x entering into this Agreement and the
Stock Purchase Agreement and consummating the transactions contemplated hereby and thereby, Buyer
agrees that neither it nor any of its Affiliates shall directly or indirectly for the Restricted
Period:
(a) whether for its own account or the account of any other Person solicit, employ, or
otherwise engage as a consultant, independent contractor, or otherwise, any Person who is,
at any time after the Effective Date, an employee of Xxxxxx or any of his Affiliates or in
any manner induce or attempt to induce any such employee to terminate his employment with
Xxxxxx or any of his Affiliates; or
(b) disparage Xxxxxx or any of his Affiliates or any of their respective interest
holders, stockholders, managers, directors, officers, employees, or agents.
3. Payment Terms. Buyer shall pay to Xxxxxx the consideration provided for in Section 2.03(c) of
the Stock Purchase Agreement in accordance with the provisions the Stock Purchase Agreement.
4. Exceptions. The ownership by Xxxxxx of up to five percent (5%) of any class of securities of
any company which has a class of securities registered under Section 12 of the Securities Exchange
Act of 1934, as amended, shall not constitute a breach of this Agreement. Nothing in this
Agreement shall be construed as prohibiting Xxxxxx from directly or indirectly selling any products
to any customer that is not a Mass Merchant. Nothing in this Agreement shall be construed as
prohibiting Xxxxxx from selling any freshener products, except for the sale to Lowe’s of the
freshener products currently being sold to Lowe’s by the Company for use with ceiling fans.
In addition, should Xxxxxx wish during the Restricted Period to invest in, be employed by or
otherwise provide services to any Person (except X. Xxxx, Creative Concepts, Xxxxxx Lighting
(Westinghouse), Fantech or any Person who acquires all or substantially all of the stock in or
assets of any of the foregoing Persons) whose primary business is not within the scope of the
Competing Business, but who conducts the Competing Business as a secondary or incidental activity,
Xxxxxx, upon prior notice to Buyer, may engage in such primary business; provided that (i) the
secondary or incidental Competing Business does not represent more than ten percent (10%) of total
sales for the preceding fiscal year (as determined every year during the Restricted Period) of such
other Person; (ii) Xxxxxx does not directly or indirectly provide services, consultation or advice
to the subsidiary, division or other segment of that Person that is conducting the Competing
Business and (iii) Xxxxxx provides Buyer with prior notice thereof.
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Furthermore, if at any time during the Restricted Period Xxxxxx believes there is an
opportunity to sell Ceiling Medallions to one or more persons or entities not then purchasing
Ceiling Medallions from the TSI Group (any such opportunity, a “Business Opportunity”), then Xxxxxx
may present such Business Opportunity to Buyer. Upon receiving notice of such Business Opportunity
from Xxxxxx, Buyer shall have 30 days during which to elect to pursue such Business Opportunity.
If (i) Buyer notifies Xxxxxx that the TSI Group shall not pursue such Business Opportunity, (ii)
Buyer fails to notify Xxxxxx in writing of its decision to pursue such Business Opportunity prior
to the end of the relevant 30-day period or (iii) Buyer elects to pursue such Business Opportunity
but fails to receive a purchase order for Ceiling Medallions from or deliver Ceiling Medallions to
the Person constituting such Business Opportunity within 365 days, if such Person is a Mass
Merchant, or 180 days, in the case of all other potential customers, following the end of the
relevant 30-day period, then Xxxxxx and his Affiliates shall be permitted to pursue such Business
Opportunity independently of the TSI Group and shall be deemed to have a royalty-free nonexclusive
license under the intellectual property rights owned or licensed by Parent and its Affiliates to
the extent required to pursue such Business Opportunity. If Xxxxxx and/or his Affiliates pursues
and obtains such Business Opportunity (as evidenced by a purchase order for Ceiling Medallions from
or the delivery of Ceiling Medallions to the Person constituting such Business Opportunity), then
to the extent the TSI Group produces or is able to produce such Ceiling Medallions at a capacity
sufficient to fill Xxxxxx’x and/or his Affiliates orders in a timely manner, Xxxxxx and/or his
Affiliates shall purchase from the TSI Group, and the TSI Group shall sell to Xxxxxx and/or his
Affiliates, all of the Ceiling Medallions necessary to satisfy his or its obligations with respect
to such Business Opportunity for an amount equal to the sum of the cost of the Ceiling Medallion,
packaging and third-party handling charges times a multiple of 1.42 plus freight charges; provided,
however, that neither Xxxxxx, his Affiliates nor the TSI Group shall have any obligation to
continue this arrangement after the Restricted Period. In the event that Xxxxxx and/or his
Affiliates pursues and obtains such Business Opportunity, then Buyer shall not, and Buyer shall
cause its Affiliates to not, directly or indirectly, at any time during the Restricted Period,
solicit or obtain such Business Opportunity until Xxxxxx and/or his Affiliates are no longer
providing Ceiling Medallions in connection with such Business Opportunity.
5. Reasonable Restrictions. Buyer and Xxxxxx agree and acknowledge that the restrictions imposed
by this Agreement hereof are legitimate, reasonable and necessary to protect Buyer’s investment in
MI and the Company. Prior to the Effective Date, Buyer and Xxxxxx have both participated
indirectly, throughout the United States, in the Business, and their products, services, names,
goodwill and reputations are well-known throughout the United States. Therefore, Xxxxxx and Buyer
acknowledge that the scope and duration of the restrictions contained in this Agreement are
reasonable. Xxxxxx and Buyer further acknowledge that the restrictions contained herein are not
burdensome to Xxxxxx or Buyer in light of the consideration received by them therefor and the other
opportunities that remain open to them.
6. Remedies. In the event of a breach or a threatened breach by either party of any provision in
this Agreement, the other party shall be entitled to a temporary restraining order and injunctive
relief restraining such party from the commission of any breach, and to recover the attorneys’
fees, costs and expenses incurred by such party in obtaining such temporary restraining order or
injunctive relief. Nothing contained in this Agreement shall be construed as prohibiting a party
from pursuing any other remedies available to it for any breach or threatened breach, including,
without limitation, the recovery of money damages, attorneys’ fees, and costs. The restrictions in
this Agreement shall each be construed as independent of any other provisions in this Agreement,
and the existence of any claim or cause of action by a party against the other, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the enforcement of this
Agreement.
7. Tolling. If Xxxxxx or Buyer violates any of the restrictions contained in Section 1 or
Section 2 above, respectively, the Restricted Period will be suspended and will not run in
favor of such party from the time of the commencement of any violation until such party cures the
violation.
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8. Entire Agreement. This Agreement and the Stock Purchase Agreement embody the entire agreement
between the parties with respect to the subject matter hereof and supersedes all prior agreements
and understandings, if any, relating to the subject matter of this Agreement. This Agreement may
be amended or supplemented only by an instrument in writing executed by both parties. No oral
understandings, statements, or inducements contrary to the terms of this Agreement exist.
9. Construction. Each party acknowledges that such party and its attorneys have been given an
equal opportunity to negotiate the terms and conditions of this Agreement and that any rule of
construction to the effect that ambiguities are to be resolved against the drafting party or any
similar rule operating against the drafter of an agreement shall not be applicable to the
construction or interpretation of this Agreement.
10. Partial Invalidity. In the event that any court of competent jurisdiction holds any provision
of this Agreement to be invalid, the remaining provisions shall not be affected or invalidated and
shall remain in full force and effect.
11. Reformation. In the event that any court of competent jurisdiction holds any restrictions in
this Agreement to be unreasonable and/or unenforceable as written, the court may reform the
Agreement to make it enforceable, and the Agreement shall remain in full force and effect as
reformed by the court.
12. Assignment of Rights. This Agreement and the rights of Buyer hereunder may be assigned by
Buyer in connection with a sale or assignment by Buyer of all or substantially all of the Business,
to the extent such sale or assignment is permitted by the terms of the Stock Purchase Agreement.
This Agreement and the rights of Xxxxxx hereunder may not be assigned by Xxxxxx. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto, the permitted
successors and assigns of Buyer and the heirs, beneficiaries and legal representatives of Xxxxxx.
13. Waiver. Neither party’s waiver of any provision of the Agreement shall constitute (i) a
continuing waiver of that provision, or (ii) a waiver of any other provision of this Agreement.
14. Controlling Law and Venue. This Agreement shall be governed by and construed in accordance
with the domestic laws of the State of Delaware without giving effect to any choice or conflict of
law provision or rule that would cause the application of the laws of any jurisdiction other than
the State of Delaware. Each of the parties submits to the jurisdiction of any state or
federal court sitting in New Castle County, Delaware, in any action or proceeding arising out of or
relating to this Agreement and agrees that all claims in respect of the action or proceeding may be
heard and determined in any such court.
15. Execution. This Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute but one and the same
instrument. Execution and delivery of this Agreement by facsimile or as an attachment to an
electronic mail shall constitute a valid and binding execution and delivery of this Agreement by
such party. Such facsimile copies or electronic mail attachments shall constitute enforceable
original documents.
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IN WITNESS WHEREOF, the parties hereto have executed this Non-Competition Agreement as of the
date first above written.
| TRADE SOURCE INTERNATIONAL, INC., | ||||||
| a Delaware corporation | ||||||
| By: | /s/ Xxxxxx Xxxxxxxx | |||||
| Name: Xxxxxx Xxxxxxxx | ||||||
| Title: Chief Financial Officer | ||||||
| /s/ Xxxxxx X. Xxxxxx | ||||||
| Xxxxxx X. Xxxxxx | ||||||
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