NON·COMPETITION AGREEMENT
Exhibit
10.12
Exhibit
1,06(a)(vi)(B)
THIS
NON-COMPETITION AGREEMENT (this "Agreement") is made this 2nd day of January,
2001, by and between DARIUS MARKETING INC, (hereinafter referred to as the
"Company"), and XXXXXX X. XXXXX and XXXXXXX X. XXXXX (hereinafter referred to as
the "Restricted Persons").
EXPLANATORY
STATEMENT
The
Company has purchased the business and certain of the assets of HIKARI HOLDINGS,
L.C. and INNERLIGHT INTERNATIONAL, INC. (the 'Sellers") under that certain Asset
Purchase Agreement dated December 22, 2000, by and among various parties
including the Company and the Restricted Persons (the "Acquisition Agreement").
For many years, the Restricted Persons have been key employees and principal
owners of the Sellers, and possess valuable knowledge, expertise and experience
in the business of developing, marketing and selling nutritional supplements,
dietary supplements and related products (the "Products" which were purchased by
the Company, are set forth on Exhibit A to the Acquisition Agreement, and are
distributed for sale through independent representatives nationally and
internationally (collectively, the "Business"). The Company desires to insure
that the Restricted Persons do not compete with the Company, and its affiliates,
except as expressly permitted hereby.
NOW,
THEREFORE, in consideration of their mutual agreements and covenants contained
herein. and for other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and ;n further consideration of the affixation by
the parties of their respective seals herein below, the parties agree as
follows:
1.
Non-Competition and Confidentiality Covenants,
1.1.
The Restricted Persons shall not, for so long as the Company pays the Restricted
Persons a monthly payment pursuant to the terms of a Consulting Agreement
between the Company and the Restricted Persons of even date herewith, without
the Company's prior and specific written consent, engage in any of the following
activities:
1.1.1.
Directly or indirectly, anywhere in the world, as a principal, partner,
shareholder, agent, director, employee, consultant, or in any other capacity
whatsoever, engage, participate, invest or become interested in, affiliated or
connected with, render services to, or, in exchange for any compensation or
remuneration, direct or indirect, furnish any aid, assistance or advice to any
person. corporation, firm or other organization engaged in, a business that is
competitive with the Business that is conducted by the Company, or by any
Affiliate, as defined in Section 1.4, as of the date hereof or to be conducted
by the Company, or by any Affiliate, immediately after the date hereof with the
assets acquired pursuant to the Acquisition
Agreement.
1.1.2.
Directly or indirectly, as a principal, partner, shareholder, agent, director,
employee, consultant, or in any other capacity whatsoever, employ, retain, or
enter into any employment, agency, consulting or other similar arrangement with,
any person who, within the twelve-month period prior to such employment,
retention or arrangement, was an employee of the Company, or of any Affiliate,
or, induce or attempt to induce any employee of the Company, or of any
Affiliate, to terminate his employment with the Company, or with any
Affiliate.
1.2.
The Restricted Persons acknowledge that it is the policy of the Companyto
maintain as secret and confidential all Confidential Information as hereinafter
defined.
1.2.1.
"Confidential Information" shall mean any information, notgenerally known in the
Company's industry, which information was either sold by theRestricted Persons
or the Sellers to the Company or acquired by the Restricted Personsfrom the
Company, and which gives the Company a competitive advantage in the industry,
heretofore or hereafter acquired, discovered, developed, conceived, originated,
used or prepared by the Company or by an employee of the Company as the result
of employment with the Company and which falls within the following
categories:
(a)
Information relating to trade secrets of the Company or anysupplier, customer,
distributor, independent representative or consultant of the
Company;
(b)
Information relating to existing or contemplated products,services, technology,
designs, processes, manuals, formulas, computer systems and/orsoftware, and any
research or development of the Company or any supplier or customer ofthe
Company;
(c)
Information relating to business plans, sales or marketingmethods, methods of
doing business, distributor or independent representative lists orinformation,
customer lists, customer usages and/or requirements, and supplier orcustomer
information of the Company or any supplier or customer of the
Company;
(d) Information
relating to work product in general; and
(e)
Any other confidential information that either the Company orany supplier,
distributor, independent representative or consultant customer of theCompany may
wish to protect by patent, copyright or by keeping it secret and
confidential.
1.2.2
The Restricted Persons recognize that the services to be performed by the
Restricted Persons from time to time for the benefit of the Company arespecial
and unique, and that by reason of their duties, they will acquire
ConfidentialInformation. The Restricted Persons recognize that all such
Confidential Information is the property of the Company. Accordingly, the
Restricted Persons agree that:
(a)
The Restricted Persons shall never, during the term of engagement or
thereafter, directly or indirectly, use, publish, disseminate or
otherwisedisclose any Confidential Information obtained in connection with their
engagement by theCompany without the prior written consent of the
Company;
(b)
During the term of their engagement by the Company, theRestricted Persons shall
exercise all due and diligent precautions to protect the integrity ofthe
Company's Confidential Information and, upon termination of their engagement,
theRestricted Persons shall return all documents containing any
Confidential Information and any copies thereof, in their possession or control;
and
(c)
During the Non-Competition Period, the Restricted Personsshall exercise all due
and diligent precautions to protect any Confidential Information andshall never,
directly or indirectly, use, publish, disseminate or otherwise disclose
anyConfidential Information obtained in connection with their
engagement.
1.2.3.
Upon termination or expiration of this Agreement, the RestrictedPersons shall
immediately deliver to the Company all books, records, memoranda,
reports,software data and documents relating to the Company’s business,
suppliers, customersand other assets of the Company in the possession, custody
or under the control of the Restricted Persons, whether or not such material
contains Confidential Information.
1.3 The
Restricted Persons and the Company acknowledge and agree that(i) the
restrictions set forth in this Section 1 are reasonable in terms of scope,
duration,geographic area, and otherwise, and (ii) the protections afforded to
the Company, and itsAffiliates, hereunder are necessary to protect their
legitimate business interests.
1.4 For
the purposes hereof, the term "Affiliate" shall mean any corporation,
partnership or other firm or entity that is engaged in the Business, and (i)
thatowns more than 50% of the stock of the Company, or (ii) more than 50% of the
ownershipinterests of which are owned by the Company or by stockholders of the
Company, including, without limitation, Darius Corporation,
Inc
2. Compensation
2.1
In consideration of the Restricted Persons' covenant not to compete
andconfidentiality agreement, the Company shall deliver to the Restricted
Persons FiftyThousand (50,000) shares of The Xxxxxxx Corporation's Common Stock
(the "QuigleyStock"), issued in the Restricted Persons' names. The Xxxxxxx Stock
shall not be registered and shall be subject to the restrictions set forth in
Section 2.3 below.
2.2.
The compensation payable to the Restricted Persons hereunder shall besubject to
reduction as provided in Section 6of this Agreement.
2.3.
In addition to any restrictions on transfer imposed on the Xxxxxxx Stockby
applicable federal and state securities laws, for a period of six (6) months
from theClosing Date under the Acquisition Agreement (during which time the
Xxxxxxx Stock shallbe held in escrow by Company for the benefit of Restricted
Persons), neither the Restricted Persons nor any of the Restricted Persons'
permitted transferees will transfer, or permit the transfer of, any Xxxxxxx
Stock. For the purposes of this Section, "transfer" shall mean any voluntary or
involuntary act by which a Restricted Person or a permitted transferee makes, or
attempts or purports to make, or suffers to occur, any gift, sale, mortgage,
pledge, assignment, hypothecation, encumbrance or other disposition of any
Xxxxxxx Stock, or interest therein, owned by any of them. The term "transfer"
includes any purported transfer, assignment, sale or other disposition by
assignment or operation of law, as a result of the appointment of a trustee in
bankruptcy, under any judgment or order, as the result of the appointment of a
receiver, or as a result of any assignment for the benefit of creditors.
Notwithstanding the foregoing, nothing in this Section shall be construed to
prevent the transfer by Restricted Persons of Xxxxxxx Stock to one or more
trusts for the benefit of Restricted Persons' line,1 descendants. The
certificates evidencing the Xxxxxxx Stock delivered to Restricted Persons
pursuant to this Agreement will bear a legend substantially in the form set
forth below and containing such other information as The Xxxxxxx Corporation may
deem necessary or appropriate:
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THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE
DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO JUNE 2, 2001. UPON
THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES
TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
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3. Representations and Warranties Respecting Xxxxxxx Stock.
3.1.
Restricted Persons:
3.1.1.
Acknowledge and agree that (x) the shares of Xxxxxxx Stock to tedelivered to the
Restricted Persons pursuant to this Agreement have not been and will notbe
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
thereforemay not be sold, transferred or otherwise conveyed without compliance
with the 1933 Act or pursuant to an exemption therefrom and (y)
the Xxxxxxx Stock to be acquired by Restricted Persons pursuant to this
Agreement is being acquired solely for their own account, for investment
purposes only, and with no present intention of distributing, selling or
otherwise disposing of the Xxxxxxx Stock in connection with a
distribution;
3.1.2.
Acknowledge and agree that they understand that an investmentin the Xxxxxxx
Stock is a speculative investment which involves a high degree of risk of
loss;
3.1.3.
Represents and warrants that they are able to bear the economicrisk of an
investment in the Xxxxxxx Stock acquired pursuant to this Agreement, can
affordto sustain a total loss of such investment and have such knowledge and
experience infinancial and business matters that they are capable of evaluating
the merits and risks of the proposed investment in the Xxxxxxx
Stock;
3.1.4.
Represent and warrant that they have had an adequate opportunity to review
and to ask questions and receive answers concerning any and allmatters relating
to the transactions described in this Agreement;
3.1.5.
Represent and warrant that they have had an adequate opportunity to ask
questions and receive answers concerning the business, operations andfinancial
condition of The Xxxxxxx Corporation;
3.1.6.
Represent and warrant that they are either "accredited investors"(as defined in
Rule 501 (a) promulgated under Ihe 0000 Xxx) or, after taking intoconsideration
the information and advice provided to the Restricted Persons, have therequisite
knowledge and experience in financial and business matters to be capable of
evaluating the merits and risks of an investment in the Xxxxxxx
Stock;
3.1.7.
Representand warrant that, to their knowledge, there have beenno general or
public solicitations or advertisements or other broadly disseminateddisclosures
(including, without limitation, any advertisement, article, notice or
othercommunication published in any newspaper, magazine or similar media or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or advertising) by or on behalf of
The Xxxxxxx Corporation regarding an investment in the Xxxxxxx Stock;
and
3.1.8.
Acknowledge and agree that the Xxxxxxx Stock shall bear thefollowing legend in
addition to the legend required under Section 2.3 of this
Agreement:
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT'). THE SHARES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT OR
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS AND, IF REQUIRED BY THE XXXXXXX CORPORATION, AN OPINION OF
COUNSEL TO THE XXXXXXX CORPORATION STATING THAT REGISTRATION IS NOT REQUIRED
UNDER THE ACT.
3.1.9.
Acknowledge that they have received copies of the reports anddocuments listed in
Section 3.2.
Restricted Persons
acknowledge that the effect of the foregoing legend, among otherthings, is or
may be to limit or destroy the value of the certificate for purposes of sale or
useas loan collateral. Restricted Persons consent that "stop transfer"
instructions may be notedagainst the Xxxxxxx Stock.
3.2.
The Company has made available to the Restricted Persons reports filedwith the
Securities and Exchange Commission respecting the Xxxxxxx
Corporation.
4. Prior Restriction. The Restricted Persons represent and covenant to the
Companythat (a) the Restricted Persons are able in all respects to execute and
perform thisAgreement, and the execution and performance hereof does not
constitute a breach ordefault under any other agreement, contract or arrangement
which is binding upon the Restricted Persons; (b) the Restricted Persons are
entering into this Agreement in good faith, are free to execute this Agreement
and to enter into the engagement pursuant to the provisions hereof; (c) the
Restricted Persons are not presently engaged and shall not during the term of
this Agreement be engaged in any enterprise and are not receiving income or
royalties from any company engaged in the Business; and (d) the Restricted
Persons shall disclose the existence and terms of the restrictive covenants set
forth in this Agreement to any employer or entity that the Restricted Persons
may work for during the term of this Agreement or after the termination of the
Restricted Persons' engagement with the Company.
5. Assignment. This Agreement is personal to the Restricted Persons and may not
beassigned in any way by them except as may be agreed to in writing by the
Company.Subject to the foregoing, the rights and obligations under this
Agreement shall inure to thebenefit of, and shall be binding upon, the heirs,
legatees, successors and permitted assigns of the Restricted Persons, and upon
the successors and assigns of the Company.
6.
Default.
6.1.
In the event either of the Restricted Persons commits any
material violation of the provisions of this Agreement, then, in addition
to any other remedies whichthe Company might have at law or in equity, the
Company shall have the right to set-off anyactual and reasonable damages
incurred by it against any Xxxxxxx Stock in the Company's possession. Nothing
contained herein shall preclude the Company from seeking damages or injunctive
relief against the Restricted Persons as provided in Section 6.2. For the
purposes of determining the value of any Xxxxxxx Stock retained by the Company
in accordance with its set-off rights, the value of Xxxxxxx Stock shall be
determined based on the average of the closing price per share for Xxxxxxx Stock
for the ten (10) trading days immediately preceding the date on which Restricted
Persons surrenders such Xxxxxxx Stock, as reported on the Nasdaq National
Market. The foregoing ten (10) day period shall be referred to as the "Price
Determination Period.' In the event that there shall be no trade on any trading
day within the Price Determination Period, or if the Nasdaq National Market
shall fail to report a closing price on any such day, the closing price for such
day shall be the average of the closing bid price and the closing asked price as
reported by the Nasdaq National Market.
6.2.
In the event either of the Restricted Persons commits any material violation of
the provisions of Section 1of this Agreement, as determined by the Company in
good faith, the Company may, by injunctive action, compel the Restricted Persons
to comply with, or restrain the Restricted Persons from violating, such
provision, and, in addition, and not in the alternative, the Company shall be
entitled to declare the Restricted Persons in default hereunder and to terminate
any further payments hereunder.
6.3 The
Xxxxxxx Stock issued to the Restricted Persons hereunder shall be subject to
reduction as provided in Section 6.01 (d) of the Acquisition Agreement.
Indemnity obligations of the Restricted Persons under the Acquisition Agreement
may, at their election, be satisfied through the payment of cash or the delivery
of Xxxxxxx Stock, or a combination thereof. For purposes of calculating the
value of the Xxxxxxx Stock retained by the Company, or received or delivered by
the Restricted Persons (for purposes of determining the amount of any indemnity
paid), the value of Xxxxxxx Stock shall be determined as of the date of payment
of the Indemnity claim in the manner described in Section 6.1
hereof.
7. Severability and Reformation. The parties hereto intend all
provisions of this Agreement to be enforced to the fullest extent permitted by
law. If any restriction set forth in Section 1is held by a court of competent
jurisdiction to be unenforceable with respect to one or more geographic areas,
lines of business and/or months of duration, then the Restricted Persons agree,
and hereby submit, to the reduction and limitation of such restriction to the
minimal extent necessary so that the provisions of Section 1 shall be
enforceable. If any other provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future law, such provision shall be
fully severable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision were never a part hereof, and the
remaining provisions shall remain in full force and shall not be affected by the
illegal, invalid, or unenforceable provision, or by its severance.
8. Notices. Any notices required by this Agreement shall (i) be made in writing
andmailed by certified mail, return receipt requested, with adequate postage
prepaid, (Ii) bedeemed given when so mailed, (iii) be deemed to be received by
the addressee within ten(10) days after given or when the certified mail receipt
for such mail is executed, whichever is earlier, and (iv) in the case of the
Company, be mailed to its principal office, or in the case of the Restricted
Persons, be mailed to the last address that the Restricted Persons have given to
the Company.
9. WAIVER OF JURY TRIAL. THE PARTIES HEREBY VOLUNTARILY ANDINTENTIONALLY WAIVE
ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANYACTION, PROCEEDING OR
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT.
10. Miscellaneous.
10.1.
This Agreement may not amended except by a written instrument signed
and delivered by the parties hereto.
10.2.
This Agreement, together with the Acquisition Agreement, constitute theentire
understanding between the parties hereto with respect to the subject matter
hereof,and all other agreements relating to the subject matter hereof are hereby
superseded.
10.3.
This Agreement shall be governed by, and construed in accordancewith, the laws
of the Commonwealth of Pennsylvania.
10.4. The
Company's Affiliates are intended to be third-party beneficiaries ofthis
Agreement, whether or not parties hereto, and each of them shall have the right
to enforce this Agreement against the Restricted Persons, whether or not the
Company joinsin such action.
IN
WITNESS WHEREOF, the parties have executed, under seal, this Non-Competition
Agreement as of the day and year first above written.
Xxxxxx X.
Xxxxx
/s/ Xxxxxx X. Xxxxx
Xxxxxxx
X. Xxxxx /s/
Xxxxxxx X. Xxxxx
XXXXXX
MARKETING INC /s/
Xxxxxx X. Xxxxxx
By:
Xxxxxx X. Xxxxxx, President
