EXHIBIT 10.28
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement") is entered into as
of this 3rd day of December, 1998 by and among XXXXXXXXXX.XXX INC., a Delaware
corporation (the "Company"); BUY CORP., a Delaware corporation ("XXX.XXX");
Xxxxxx Entertainment Inc. ("Xxxxxx Entertainment"); and Xxxxx X. Xxxxxx ("Xxxxx
Xxxxxx") (Xxxxxx Entertainment and Xxxxx Xxxxxx are referred to collectively as
the "Sellers").
WHEREAS, the Company is a wholly owned subsidiary of XXX.XXX;
WHEREAS, XXX.XXX intends to merge SpeedServe Inc. ("SpeedServe") into
the Company (the "Merger");
WHEREAS, Xxxxxx Entertainment is a principal shareholder of SpeedServe
and Xxxxx Xxxxxx is a principal shareholder of Xxxxxx Entertainment;
WHEREAS, one or both of the Sellers is engaged, or may during the Term
(defined below) be engaged, in those businesses listed on Exhibit A hereto (the
---------
"Exempt Businesses") and has investments in, or may have investments in, those
companies listed on Exhibit B hereto (the "Exempt Investments");
---------
WHEREAS, neither SpeedServe nor XXX.XXX is presently engaged in the
sale of music products over the world-wide web/Internet; and
WHEREAS, it is a condition to the Merger that each of the Sellers
enter into a non-competition agreement with the Company;
NOW, THEREFORE, the parties agree as follows:
1. The term (the "Term") of this Agreement shall be for a period
commencing on the date hereof and ending on the second anniversary of the date
hereof.
2. During the Term, neither Seller will, without the Company's prior
written consent, directly or indirectly, own a controlling interest (defined
below) in any company or business engaged in the ownership or hosting of any
world-wide web/Internet site targeted at the direct sale to the individual
consumer of books; videos; music; games; or computer hardware or software (the
"Internet Retail Business"). Notwithstanding the foregoing, (a) the ownership
by any Seller of any of the Exempt Investments shall not violate the
prohibitions of this paragraph; and (b) neither (i) the conduct by any Seller of
any of the Exempt Businesses nor (ii) the conduct by any entity in which any
Seller has one of the Exempt Investments of any business (including one directly
or indirectly in competition with the Company or offering any of the products or
services being developed, marketed, distributed, planned, sold or otherwise
provided by the Company or any successor to the Company at any time) shall
violate the prohibitions of this paragraph. For purposes of this Agreement, a
"controlling interest" in a company or business
shall mean direct or indirect ownership or control of more than 50% of the
shares or other equity securities entitled to vote for the election of directors
or, if there are no such directors, to direct the business affairs and
operations of, such company or business.
3. During the Term hereof, neither Seller will, directly or
indirectly, knowingly employ, or knowingly permit any other company or business
organization which is directly or indirectly controlled by any Seller to employ,
any person while that person is employed by the Company, or in any manner seek
to induce any such person to leave his or her employment with the Company;
provided, however, that former employees of SpeedServe separated from SpeedServe
-------- -------
prior to the date hereof in connection with the Merger shall be exempt from this
restriction; provided, further, that hiring any employee of the Company as a
-------- -------
result of a general advertising solicitation to which such individual responds
without specific inducement shall not constitute a violation hereunder. The
parties acknowledge that the Company will sublease premises from Xxxxxx
Entertainment in connection with the Merger and that general job postings by
Xxxxxx Entertainment on its premises shall be deemed a general advertising
solicitation for these purposes.
4. During the Term hereof, the Company will not, directly or
indirectly, knowingly employ, or knowingly permit any other company or business
organization which is directly or indirectly controlled by it to employ, any
person while that person is employed by either Seller, or in any manner seek to
induce any such person to leave his or her employment with either of the
Sellers; provided, however, that employees of any Seller separated from such
-------- -------
Seller prior to the date hereof in connection with the Merger shall be exempt
from this restriction; provided, further, that hiring any employee of either
-------- -------
Seller as a result of a general advertising solicitation to which such
individual responds without specific inducement shall not constitute a violation
hereunder.
5. Each Seller, the Company, and XXX.XXX agree that any material
breach of this Agreement by the other will cause irreparable damage to the non-
breaching party and that in the event of such breach the non-breaching party
shall have, in addition to any and all remedies of law, the right to an
injunction, specific performance or other equitable relief to prevent the
violation of the breaching party's obligations hereunder.
6. Any amendment to or modification of this Agreement, and any waiver
of any provision hereof, shall be in writing. Any waiver of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach hereof.
7. Each party hereby agrees that each provision herein shall be
treated as a separate and independent clause, and the unenforceability of any
one clause shall in no way impair the enforceability of any of the other clauses
herein. Moreover, if one or more of the provisions contained in this Agreement
shall for any reason be held to be excessively broad as to scope, activity or
subject so as to be unenforceable at law, such provision or provisions shall be
construed by the appropriate judicial body by limiting and reducing it or them,
so as to be enforceable to the maximum extent compatible with the applicable law
as it shall then appear.
8. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
9. The term "Company" shall include Xxxxxxxxxx.Xxx Inc.. and any of
its subsidiaries, subdivisions or affiliates, including XXX.XXX. The Company
shall have the right to assign this Agreement to its successors and assigns, and
all covenants and agreements hereunder shall inure to the benefit of and be
enforceable by said successors or assigns; provided that such assignment does
not expand the scope or coverage of this Agreement.
10. This Agreement and its contents, including Exhibits A and B, are
----------------
confidential and shall remain confidential following its execution. No party
hereto shall knowingly make any disclosure of the existence or the terms of this
Agreement or provide an original or copy of all or any portion thereof to
anyone, except in compliance with a lawful order or process of a court or
arbitrator of competent jurisdiction or governmental agency, or as may otherwise
be required by law or regulation, or with the written consent of all other
parties hereto.
[CONTINUED ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Non-
Competition Agreement as of the date first written above.
Very truly yours,
XXXXXXXXXX.XXX INC.
By:_________________________________________
Name:
Title:
BUY CORP.
By:_________________________________________
Name:
Title:
XXXXXX ENTERTAINMENT INC.
By: _______________________________________
Xxxxx X. Xxxxxx
President
XXXXX X. XXXXXX
____________________________________________
Xxxxx X. Xxxxxx
EXHIBIT A
to
Non-Competition Agreement
EXEMPT BUSINESSES
-----------------
Either Seller can engage in one or more of the following activities or provide
one or more of the following services (the "Exempt Businesses"):
1. Wholesale distribution of consumer products, including videos, DVD's,
audio books, games, multimedia, electronics and related products, to customers,
including, but not limited to, traditional retailers and world-wide
web/Internet customers, and the providing of related services. For purposes of
the preceding sentence, wholesale distribution specifically excludes sales
directly to the consumer, but includes electronic ordering by non-consumer
customers on a business-to-business basis. This business also includes the
solicitation of advertising dollars from studios and other suppliers.
2. Wholesale distribution or retail sale to the consumer of computer
products in connection with the computer liquidation business, including the
providing of related services, whether directly or through a company in which
one or both of the Sellers or an affiliate holds an investment, and including
distribution or sale through the world-wide web/Internet and the ownership or
hosting of one or more world-wide web/Internet sites related to this business.
3. Product fulfillment, "fee-based" distribution, cashiering (i.e.
----
processing payments in connection with commercial transactions), electronic
ordering, or other value-added services for world-wide web/Internet sites owned
or hosted by others, including sites in competition with those of the Company
and its affiliates. These services may include world-wide web/Internet-based
ordering from in-store PC/kiosks located on the premises of retailers which sell
directly to the consumer, which sites are or may be hosted by either of the
Sellers. (The parties acknowledge that wholesale competitors of Xxxxxx
Entertainment presently offer product fulfillment, "fee-based" distribution,
cashiering, electronic ordering, and other value-added services as contemplated
by the first sentence of this item 3).
4. In connection with the acquisition of a controlling interest in an
entertainment product distributor business that does not primarily engage in the
retail sale of entertainment products through the world-wide web/Internet, but
which hosts one or more world-wide web/Internet sites of others targeted at the
direct sale to the individual consumer of entertainment products (collectively
the "Internet Entertainment Business"), the Seller acquiring such ownership
shall be entitled to take one of the following courses of action:
(a) Continue to operate that Internet Entertainment Business during
the term of this Agreement without dedicating materially greater resources
(including expanding advertising and capital expenditure budgets) to that
Internet Entertainment Business than was dedicated by the predecessor
company immediately prior to the acquisition;
(b) Divest itself of the Internet Entertainment Business; or
(c) Commence the winding down of the Internet Entertainment Business
and proceed with such winding down in an orderly manner (which winding down
may extend beyond the term of this Agreement.)
Nothing herein shall limit either Seller's right during the term of the
Agreement to maintain or expand hosting relationships with customers engaged in
retail sales, or the scope of services provided to such customers of the
acquired business immediately prior to the acquisition.
EXHIBIT B
to
Non-Competition Agreement
EXEMPT INVESTMENTS
------------------
Investments or ownership by either Seller in the following entities (including
their successors by way of merger, consolidation, acquisition of assets or
stock, or otherwise), or of the following types, shall constitute Exempt
Investments:
1. Xxxxxx Micro Inc.
2. Attitude Network, Ltd.
3. HSX Holdings, Inc.
4. Magnitude Network, L.L.C.
5. Video City, Inc.
6. Movie Gallery, Inc.
7. West Coast Entertainment Corp.
8. Video Update, Inc.
9. Nashville Computer Liquidators, Inc., or any entity in which that
corporation and Xxxxxx Entertainment, or subsidiaries or affiliates of
either of them, are equity owners.
10. XxXxx, Best, Xxxxx & Xxxxxx LLC.
11. Xxxxxx / XxXxxx Music Inc.
12. XxXxxx / Xxxxxx Songs Inc.
13. Video Financial Services Inc.
14. Xxxxxx Design Group L.P.
15. Big Time Toys, Inc.
16. Equity interests in customers of Xxxxxx Entertainment received in
settlement of account balances arising from the furnishing of product
to those customers in one of the Exempt Businesses.
