EXHIBIT 10.6
NATURAL HEALTH TRENDS CORP.
RESTRICTED ACTIVITY AND PROPRIETARY RIGHTS
------------------------------------------
ASSIGNMENT AGREEMENT
--------------------
Consultant's Name: Xxxx X. Xxxxxxxx ("Xxxxxxxx")
Date: October 31, 2006
In consideration of Xxxxxxxx'x engagement by Natural Health Trends
Corp. (including their subsidiaries, successors and assigns, the
"Company") and in consideration for and as a condition to the
transactions contemplated by that certain Agreement dated as of the
date hereof by and between the Company, Xxxxx X. XxXxxx and Xxxxxxxx,
Xxxxxxxx hereby agrees with the Company as follows:
1. Confidential Information. Xxxxxxxx may have received or may
receive and otherwise be exposed to confidential or competitively sensitive
information of the Company, or of a third party with which the Company has a
business relationship, relating to the Company's or such third party's current
or prospective business, research and development activities, products,
technology, strategy, organization and/or finances (collectively, "Confidential
Information"). Such Confidential Information, which may be disclosed orally or
in writing, shall include, without limitation, Technology (as defined in Section
2(a)), Work Product (as defined in Section 2(a)), plans, strategies,
negotiations, customer or prospect identities, market analyses, projections,
forecasts, cost and performance data, sales data, financial statements, price
lists, pre-release information regarding the Company's products, personnel lists
and data, and all documents and other materials (including any notes, drawings,
reports, manuals, notebooks, summaries, extracts or analyses), whether in
written or electronic form, that disclose or embody such Confidential
Information.
Confidential Information shall not include information that is now, or
hereafter becomes, through no act or failure to act on Xxxxxxxx'x part,
generally known to the public; information that was rightfully in Xxxxxxxx'x
possession without confidentiality restriction prior to the Company's disclosure
to Xxxxxxxx; information that was rightfully obtained by Xxxxxxxx from a third
party who has the right, without obligation to the Company, to transfer or
disclose such information; or information which Xxxxxxxx is required to disclose
pursuant to judicial order, provided that in the latter case Xxxxxxxx shall
promptly notify the Company and take reasonable steps to assist the Company in
protecting the Company's rights prior to disclosure. At all times, both during
Xxxxxxxx'x relationship with the Company and after the termination thereof,
Xxxxxxxx will keep all Confidential Information in strict confidence; will not
use Confidential Information except for the purpose of providing services to the
Company; and will not divulge, publish, disclose or communicate Confidential
Information, in whole or in part, to any third party. Xxxxxxxx further agrees
that Xxxxxxxx will not allow any unauthorized person access to Confidential
Information, either before or after the termination of this Agreement, and will
take all action reasonably necessary and satisfactory to the Company to protect
the confidentiality of Confidential Information. Xxxxxxxx agrees not to
reproduce or copy by any means Confidential Information, except as reasonably
required to accomplish the purposes of this Agreement, and further agrees not to
remove any proprietary rights legend from such Confidential Information or
copies thereof made in accordance with this Agreement. Upon termination of
Xxxxxxxx'x services for any reason, or upon demand by the Company at any time,
Xxxxxxxx'x right to use Confidential Information shall immediately terminate,
and Xxxxxxxx shall return promptly to the Company, or destroy, at the Company's
option, all tangible and electronic materials that disclose or embody
Confidential Information.
2. Assignment of Work Product.
--------------------------
(a) For purposes of this Agreement: "Technology" shall
mean all ideas, concepts, inventions, discoveries,
developments, creations, methods, techniques,
processes, machines, products, devices, compositions
of matter, improvements, modifications, designs,
systems, specifications, schematics, formulas, mask
works, works of authorship, software, algorithms,
data and know-how, whether or not patentable or
copyrightable, and all related notes, drawings,
reports, manuals, notebooks, summaries, memoranda and
other documentation; "Intellectual Property Rights"
shall mean all worldwide intellectual property rights
including, without limitation, all rights relating to
the protection of inventions, including patents,
patent applications and certificates of invention;
all rights associated with works of authorship,
including copyrights and moral rights; all rights
relating to the protection of trade secrets and
confidential information; all rights related to the
protection of trademarks, logos and service marks;
any rights analogous to those set forth herein, and
all other proprietary rights related to intangible
property; and "Work Product" shall mean any and all
Technology made, conceived, designed, created,
discovered, invented or reduced to practice by
Xxxxxxxx during the term of this Agreement that (i)
results from Xxxxxxxx'x performance of services for
the Company, (ii) is related to the business of the
Company or (iii) is based upon the use of
Confidential Information.
(b) Xxxxxxxx agrees to promptly disclose to the Company
in writing all Work Product upon the development,
conception or creation thereof by Xxxxxxxx, as well
as, at any time, upon the request of the Company.
(c) Xxxxxxxx agrees that all Work Product shall be the
sole and exclusive property of the Company, and does
hereby irrevocably and unconditionally transfer and
assign to the Company, its successors and assigns,
all right, title and interest it may have or acquire
in or to any Work Product, including all Intellectual
Property Rights therein. Xxxxxxxx further agrees that
any and all works of authorship created, authored or
developed by Xxxxxxxx hereunder shall be deemed to be
"works made for hire" within the meaning of the
United States copyright law and, as such, all rights
therein including copyright shall belong solely and
exclusively to the Company from the time of their
creation. To the extent any such work of authorship
may not be deemed to be a work made for hire,
Xxxxxxxx agrees to, and does hereby, irrevocably and
unconditionally transfer and assign to the Company
all right, title, and interest including copyright in
and to such work.
(d) Upon request by the Company, Xxxxxxxx agrees to
execute and deliver all such documents, certificates,
assignments and other writings, and take such other
2
actions, as may be necessary or desirable to vest in
the Company ownership in all Work Product as provided
in this Section 2, including, but not limited to, the
execution and delivery of all applications for
securing all United States and foreign patents,
copyrights and other intellectual property rights
relating to Work Product. The Company shall reimburse
Xxxxxxxx for any reasonable expenses incurred by
Xxxxxxxx at the Company's request to secure title or
legal protection on the Company's behalf for any such
Work Product. In the event that the Company is unable
to secure Xxxxxxxx'x signature to any document, or if
Xxxxxxxx otherwise fails to take any action deemed
necessary by the Company to protect or maintain the
Company's ownership of Work Product and Intellectual
Property Rights therein, then the Company may, and
Xxxxxxxx hereby irrevocably designates and appoints
the Company and its duly authorized officers and
agents as Xxxxxxxx'x agent and attorney-in-fact to
act on and in Xxxxxxxx'x behalf and stead to, execute
and file any such applications and perform all other
lawfully permitted acts to perfect Xxxxxxxx'x
assignment and transfer of ownership rights to the
Company with the same legal force and effect as if
executed, filed and performed by Xxxxxxxx.
(e) For purposes of this Section 2(e), "Background
Technology" shall mean Technology owned by or
licensed to Xxxxxxxx as of the Effective Date of this
Agreement or developed or otherwise obtained by
Xxxxxxxx following the Effective Date hereof
independently of the performance of services
hereunder by Xxxxxxxx. The Company acquires no rights
in the Background Technology, except as specifically
provided in this Agreement and, as between the
parties, Xxxxxxxx retains all rights therein.
Xxxxxxxx hereby grants to Company a royalty-free,
worldwide, non-exclusive, perpetual, sublicensable
and irrevocable right and license to use, for all
purposes in Company's business, Background Technology
that has been disclosed by Xxxxxxxx to Company or
that is embodied within or related to the use,
operation or improvement of Work Product created by
Xxxxxxxx in connection with Xxxxxxxx'x performance of
services for the Company.
3. Representation. Xxxxxxxx hereby represents to the Company that
the Work Product Xxxxxxxx creates under this Agreement will be original, and
that Xxxxxxxx'x performance of services under this agreement and the Company's
use of Xxxxxxxx'x Work Product will not breach any agreement Xxxxxxxx has with
any third party or the intellectual property rights or other rights of any third
party.
4. Return of Materials. All documents, records, apparatus,
equipment and other physical property, whether or not pertaining to Confidential
Information, which are furnished to Xxxxxxxx by the Company or are produced by
Xxxxxxxx in connection with Xxxxxxxx'x services will be and remain the sole
property of the Company. Xxxxxxxx will return to the Company all such materials
and property as and when requested by the Company. In any event, Xxxxxxxx will
return all such materials and property immediately upon termination of
Xxxxxxxx'x services for any reason. Xxxxxxxx will not retain any such material
or property or any copies thereof upon such termination.
5. Covenants. (a) Covenant not to Compete. Except for Permitted
Consulting Arrangements (as hereinafter defined), during the Consulting Period
3
(as hereinafter defined), Xxxxxxxx shall not, directly or indirectly, whether as
a sole practitioner, owner, partner, shareholder, investor, employee, employer,
or venturer, (i) own, manage, assist, advise, invest in or acquire any economic
stake or interest in any Person (as hereinafter defined) involved in a
Competitive Activity (as hereinafter defined), (ii) derive economic benefit from
or with respect to any Competitive Activity, or (iii) otherwise engage or
participate in any manner whatsoever in any Competitive Activity; provided,
however, this Section 4(a) shall not restrict Xxxxxxxx from owning less than 3%
of the publicly traded debt or equity securities issued by a corporation or
other entity. Xxxxxxxx shall be deemed to have derived economic benefit in
violation of this Section 5(a) if, among other things, any of his compensation
or income is in any way related to any Competitive Activity conducted by any
Person. Further, during the Consulting Period, Xxxxxxxx shall not directly or
indirectly advance, cooperate in or help or aid any Competitor (as hereinafter
defined) in the conduct of any Competitive Activity. As used herein: (A)
"Company Affiliates" means the Company and each of its current, former and
future subsidiaries and affiliates and their respective successors and assigns;
(B) "Competitive Activity" means any activity conducted in any country which
competes with any substantial aspect or part of any Company Affiliate business
whether as a proprietor, partner, shareholder, owner, member, employer,
employee, independent contractor, venturer or otherwise; (C) "Competitor" means
any Person which at any time during the Consulting Period engages in any
Competitive Activity; (D) "Consulting Notice" shall mean a written notice to the
Company describing all of the terms and conditions of a proposed Permitted
Consulting Arrangement, including without limitation: (i) the name of each
Person (including the names of the officers, directors, principal stockholders
and controlling persons thereof) seeking to engage Xxxxxxxx; (ii) the proposed
commencement and termination dates of such consulting arrangement; (iii) a
detailed description of the services to be provided by Xxxxxxxx, and (iv) a
description of all compensation and other benefits to be realized by Xxxxxxxx
directly or indirectly from such consulting engagement; (E) "Consulting Period"
means the period commencing on the date hereof and ending on the first
anniversary of the date hereof; (F) "Initial Period" means the period commencing
on the date hereof and ending one (1) year following the most recent date on
which the Company has paid Xxxxxxxx a monthly fee or a Subsequent Payment (as
defined in that certain consulting engagement letter dated the date hereof
between the Company and Xxxxxxxx (the "Engagement Letter")) pursuant to the
Engagement Letter, whichever is more recent; (G) "Permitted Consulting
Arrangements" shall mean any consulting or similar arrangement or agreement
between Xxxxxxxx and any Person, including a Competitor, so long as Xxxxxxxx
delivers to the Company not less than ten (10) business days prior to the
commencement of services to such Person a Consulting Notice; (H) "Person" shall
mean any natural person, corporation, association, partnership (general or
limited), joint venture, trust, estate, limited liability company, government or
any agency or political subdivision thereof, or any other legal entity or
organization.
(b) Covenant not to Interfere. During the Initial Period, Xxxxxxxx shall not,
directly or indirectly, (i) recruit, solicit or otherwise assists, induce or
influence any Personnel (as hereinafter defined) of any Company Affiliate to
discontinue, reduce the extent of, discourage the development of or otherwise
harm such Personnel's relationship or commitment to such Company Affiliate, (ii)
solicit, induce or attempt to induce any Distributor or Potential Distributor to
terminate, diminish, or materially alter his or her relationship with a Company
Affiliate; or (iii) solicit, perform or attempt to perform any services for a
Distributor or Potential Distributor, except in accordance with this Agreement
or the Consulting Agreement. "Company Affiliates" means the Company and each of
its current and future subsidiaries and affiliates and their respective
successors and assigns. "Distributor or Potential Distributor" is any Person who
or which, at any time during the Initial Period, (i) directly or indirectly,
worked with any Company Affiliate as an independent distributor, or (ii)
considered working with any Company Affiliate as an independent distributor.
4
"Personnel" means any and all employees, contractors, agents, consultants or
other Persons rendering services to any Company Affiliates for compensation in
any form, whether employed by or independent of any Company Affiliates.
6. Acknowledgments. Xxxxxxxx acknowledges and agrees that the
restrictions set forth in this Agreement are intended to protect the Company's
interest in Confidential Information and its commercial relationships and
goodwill (with its Customers, Distributors, vendors, directors and consultants),
and are reasonable and appropriate for these purposes.
7. Disclosure of Agreement. Xxxxxxxx will disclose the existence
and terms of this Agreement to any prospective employer, partner, co-venturer,
investor or lender prior to entering into an employment, partnership or other
business relationship with such person or entity.
8. Third-Party Agreements and Rights. Xxxxxxxx hereby confirms
that Xxxxxxxx is not bound by the terms of any agreement with any previous
employer or other party which restricts in any way Xxxxxxxx'x use or disclosure
of information or Xxxxxxxx'x engagement in any business, prior to its acceptance
by the Company. Xxxxxxxx represents to the Company that Xxxxxxxx'x execution of
this Agreement, Xxxxxxxx'x engagement by the Company and the performance of
Xxxxxxxx'x proposed duties for the Company will not violate any obligations
Xxxxxxxx may have to any such previous employer or other party. In Xxxxxxxx'x
work for the Company, Xxxxxxxx will not disclose or make use of any information
in violation of any agreements with or rights of any such previous employer or
other party, and Xxxxxxxx will not bring to the premises of the Company any
copies or other tangible embodiments of non-public information belonging to or
obtained from any such previous employment or other party.
9. Injunction. Xxxxxxxx agrees that it would be difficult to
measure any damages caused to the Company which might result from any breach by
Xxxxxxxx of the promises set forth in this Agreement, and that in any event
money damages would be an inadequate remedy for any such breach. Accordingly,
Xxxxxxxx agrees that if Xxxxxxxx breaches, or proposes to breach, any portion of
this Agreement, the Company shall be entitled, in addition to all other remedies
that it may have, to an injunction or other appropriate equitable relief to
restrain any such breach without showing or proving any actual damage to the
Company.
10. Insolvency Notwithstanding the foregoing, this Agreement shall
terminate and be of no further force and effect if any of the following events
occur: (i) the Company admits in writing its inability to pay its debts
generally as they become due; (ii) the Company has a liquidator, receiver,
conservator or statutory successor of such party appointed by any court or
governmental authority having jurisdiction over it; (iii) the Company commences
a proceeding under any federal or state bankruptcy, insolvency, reorganization
or similar law, or has such a proceeding commenced against it and either has an
order of insolvency or reorganization entered against it or has the proceeding
remain undismissed and unstayed for ninety (90) days; (iv) the Company makes an
assignment for the benefit of creditors; or (v) the Company has a receiver or
trustee appointed for it or for the whole or any substantial part of its
property.
[Signature Page Follows]
5
XXXXXXXX UNDERSTANDS THAT THIS AGREEMENT AFFECTS IMPORTANT RIGHTS.
XXXXXXXX HAS READ IT CAREFULLY AND IS SATISFIED THAT XXXXXXXX
UNDERSTANDS IT COMPLETELY.
NATURAL HEALTH TRENDS CORP.
By: /s/ XXXXXXXXX X. XXXXXX /s/ XXXX X. XXXXXXXX
------------------------------------- ---------------------------------
Xxxxxxxxx X. Xxxxxx Xxxx X. Xxxxxxxx
President and Chief Executive Officer
Dated: October 31, 2006 Dated: October 31, 2006
6
