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EXHIBIT 2.5
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT ("Agreement") is made and
entered into as of this 2nd day of March, 1998, by and among Thomas Wah Tong Wan
(the "Executive"), Thomrose Holdings (BVI) Limited, a British Virgin Islands
company ("Thomrose"), SRS Labs, Inc., a Delaware corporation (the "Company") and
Valence Technology Inc., a British Virgin Islands company ("Valence").
RECITALS
WHEREAS, the Executive, prior to the date hereof, has been
an executive officer and a director of Valence;
WHEREAS, the Executive is the sole record and beneficial
holder of the issued and outstanding share capital of Thomrose;
WHEREAS, Thomrose is the record and beneficial holder of
18.93% of the issued and outstanding share capital of Valence;
WHEREAS, the Company is entering into two separate stock
purchase agreements to acquire 100% of the issued and outstanding share capital
of Valence (the "Valence Shares");
WHEREAS, Thomrose is a party to one of the two stock purchase
agreements, namely that certain Stock Purchase Agreement dated February 24, 1998
by and among the Company, Valence, Thomrose, Cape Spencer International Limited,
Rayfa (BVI) Limited and Anki (BVI) Limited (the "Valence Stock Purchase
Agreement"), and pursuant thereto has agreed to sell all of the Valence Shares
that it owns to the Company;
WHEREAS, as a condition to the closing of the Valence Stock
Purchase Agreement, the Executive shall enter an Employment Agreement with the
Company and Valence (the "Employment Agreement");
WHEREAS, the parties hereto agree that it would be detrimental
to the Company if either the Executive or Thomrose, directly or indirectly, were
to engage in the business of Valence or any Affiliate of Valence once the
Executive ceases to be employed by the Company or Valence, particularly while
the Executive is in possession of confidential, secret or proprietary
information about the business of Valence or any of its Affiliates;
WHEREAS, to protect the value of the Valence Shares being
acquired by the Company, and in consideration for the issuance by the Company to
Thomrose of 68,750 shares of the Company's common stock, the parties hereto have
agreed to enter into this Agreement. The agreements contained herein are
valuable, bargained-for consideration, and the purchase of the Valence Shares by
the Company as contemplated by the Stock Purchase Agreement described above is
based in substantial part on the Company's reliance on the agreements set forth
herein.
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AGREEMENT
In consideration of the above recitals and of the terms,
conditions and covenants set forth below, the parties agree as follows:
1. Noncompetition.
(a) Except as otherwise explicitly permitted by this
Agreement, from the Closing Date (as defined in the Stock Purchase Agreement)
and continuing throughout the duration of Executive's employment with the
Company or any of its Affiliates and thereafter for the remainder of the then
current term of the Employment Agreement plus twelve (12) months, (the
"Noncompete Term"), Executive and Thomrose will not, either directly or
indirectly, and will not permit any Covered Entity to, either directly or
indirectly, engage or participate in any business or enterprise competing with
Valence, any Affiliate of Valence or any Managed Entity (as now or hereafter
conducted) in the Territory.
(b) A "Covered Entity" means every Affiliate of Executive and
Thomrose and every business, association, trust, entity, corporation,
partnership or proprietorship in which Executive, Thomrose or any Affiliate of
Executive or Thomrose has an ownership interest or profit sharing percentage of
five percent (5%) or more, or a firm from which Executive, Thomrose or any
Affiliate of Executive or Thomrose receives or is entitled to receive income or
compensation, or in which Executive, Thomrose or any Affiliate of Executive or
Thomrose has an interest as a lender. The agreements of Executive and Thomrose
contained herein specifically apply to each entity which is presently a Covered
Entity or which becomes a Covered Entity subsequent to the date of this
Agreement.
(c) Executive, Thomrose and any Covered Entity will be deemed
to be engaging or participating in competition prohibited by this Agreement if
Executive, Thomrose or a Covered Entity contracts with, consults with, advises
or assists (financially or otherwise) any other party to engage in activities
which may not, consistent with this Agreement, be undertaken directly by
Executive, Thomrose or a Covered Entity, whether or not such contract,
consultation, advice or assistance is for explicitly stated compensation.
(d) "Affiliate" means, with respect to any party, any
corporation, company, partnership, joint venture and/or firm which controls, is
controlled by or is under common control with such party; provided, however,
that the Company shall not be deemed to be an Affiliate of Valence. "Control"
means (i) in the case of corporate entities, direct or indirect ownership of at
least twenty five percent (25%) of the stock or participating shares entitled to
vote for the election of directors; and (ii) in the case of non-corporate
entities (such as limited liability companies, partnerships or limited
partnerships), either (A) direct or indirect ownership of at least twenty five
percent (25%) of the equity interest, or (B) the power to direct the management
and policies of the noncorporate entity.
(e) A "Managed Entity" means any corporation, company,
partnership, joint venture and/or firm in which the Company, Valence or any
Affiliate of the
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Company or Valence has a direct or indirect equity interest or interest as a
lender and in which Executive has at any time held a management position.
(f) "Territory" means the entirety of each of Hong Kong, the
People's Republic of China and Taiwan. Executive and Thomrose acknowledge that
Valence and its Affiliates are and have been conducting business throughout the
entire Territory. Executive and Thomrose agree and acknowledge that Valence and
the Company have a valid and legitimate business interest in protecting their
business in the Territory from any activity prohibited by this Agreement.
2. Non-Solicitation of Employees.
During the Noncompete Term, Executive and Thomrose will not,
either directly or indirectly, and will not permit any Covered Entity to, either
directly or indirectly, hire, solicit, take away, or attempt to hire, solicit or
take away (either on behalf of Executive or Thomrose or on behalf of any other
person or entity) any person (a) who is then an employee of Valence, any
Affiliate of Valence or any Managed Entity, or (b) who has terminated his or her
employment by Valence, any Affiliate of Valence or any Managed Entity without
the consent of such employer, within 180 days of such termination.
3. Non-Solicitation of Customers and Suppliers.
During the Noncompete Term, Executive and Thomrose will not,
directly or indirectly, and will not permit any Covered Entity to, either
directly or indirectly, with respect to each and every individual, corporation,
partnership, company or other association that during Executive's term of
employment by the Company, Valence or any of its Affiliates (a) has obtained or
contracted to obtain intellectual property, technology, goods or services from
Valence, any Affiliate of Valence or any Managed Entity (a "Customer") and with
which the Executive or Thomrose had contact during his term of employment by the
Company, Valence or any of its Affiliates, or (b) became known to the Executive
or Thomrose as a Customer or potential Customer of Valence, any Affiliate of
Valence or any Managed Entity in any manner and whose name and/or address would
constitute proprietary or confidential information, or (c) has a contractual
relationship with Valence, any Affiliate of Valence or any Managed Entity to
provide intellectual property, technology, goods or services to be utilized in
the business of Valence, any Affiliate of Valence or any Managed Entity (a
"Supplier"), solicit, call upon, divert or take away such Customer or potential
Customer or Supplier as a client, customer or supplier on his behalf or on
behalf of any other individual, corporation, company, partnership or other
association conducting a business substantially similar to the business of
Valence, any Affiliate of Valence or any Managed Entity or cause or attempt to
cause such Customer or potential Customer or Supplier to redirect, terminate,
limit, modify or fail to enter into any actual or potential relationship with
Valence, any Affiliate of Valence or any Managed Entity involving the business
of Valence, any Affiliate of Valence or any Managed Entity, notwithstanding that
any such Customer, potential Customer or Supplier may have been induced to give
his or its patronage to Valence, any Affiliate of Valence or any Managed Entity
by the solicitation by the Executive or Thomrose or by someone on the
Executive's or Thomrose's behalf.
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4. Enforcement.
(a) Executive and Thomrose acknowledges that a breach of this
Agreement by Executive, Thomrose or any Covered Entity will cause serious and
potentially irreparable harm to Valence, the Company, each of their Affiliates
and each Managed Entity. Executive and Thomrose therefore acknowledge that a
breach of this Agreement by either of them or any Covered Entity cannot be
adequately compensated in an action for damages at law, and equitable relief
would be necessary to protect Valence, the Company, each of their Affiliates and
each Managed Entity from a violation of this Agreement and from the harm which
this Agreement is intended to prevent. By reason thereof, Executive and Thomrose
acknowledge on behalf of themselves and each Covered Entity that Valence, the
Company, each of their Affiliates and each Managed Entity are entitled, in
addition to any other remedies they may have under this Agreement or otherwise,
to preliminary and permanent injunctive and other equitable relief to prevent or
curtail any breach of this Agreement. Executive and Thomrose acknowledge,
however, that no specification in this Agreement of a specific legal or
equitable remedy may be construed as a waiver of or prohibition against pursuing
other legal or equitable remedies in the event of a breach of this Agreement by
Executive, Thomrose or any Covered Entity.
(b) Notwithstanding anything to the contrary, this Agreement
shall be of no force and effect if Executive obtains (i) a final judgment (after
exhaustion of all appeals and termination or waiver all rights to appeal)
stating that the Company or Valence has committed a material monetary breach of
the Employment Agreement which the Company or Valence did not cure within a
reasonable period of time or (ii) a final, binding arbitration award in his
favor pursuant to Section 27 of the Employment Agreement.
5. Survival.
All recitals, covenants, commitments and agreements of any of
the parties made in this Agreement survive the execution and delivery of this
Agreement and the closing of the transactions contemplated by the Stock Purchase
Agreement.
6. Binding Effect; Successors and Assigns.
This Agreement may be assigned by the Company or Valence if
such assignment is accompanied by the sale of the stock of the Company or
Valence, as applicable, or of substantially all of the assets of the Company or
Valence, as applicable. The terms and provisions set forth in this Agreement
inure to the benefit of and are enforceable by the Company and its successors,
assigns, and successors-in-interest, including without limitation any
corporation with which the Company may be merged or by which it may be acquired,
or which may be the acquiring corporation in an asset sale transaction or other
form of corporate reorganization. This Agreement may not be assigned by
Executive or Thomrose.
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7. Severability.
In the event that any provision or term of this Agreement, or
any word, phrase, clause, sentence or other portion thereof (including, without
limitation, the geographic and temporal restrictions and provisions contained in
this Agreement) is held to be unenforceable or invalid for any reason, such
provision or portion thereof will be modified or deleted in such a manner as to
make this Agreement, as modified, legal and enforceable to the fullest extent
permitted under applicable laws.
8. Governing Law.
This Agreement will be governed by and construed in accordance
with the laws of Hong Kong without regard to the conflicts of law principles
thereof.
9. Venue.
The parties hereby irrevocably and unconditionally consent to
submit to the exclusive jurisdiction of the courts of the State of California,
County of Orange, and/or the United States District Court for the Central
District of California (Southern Division) for any actions, suits, controversies
or proceedings arising out of or relating to this agreement and the transactions
contemplated hereby (and the parties agree not to commence any action, suit or
proceeding relating thereto except in such courts), and further agree that
service of any process, summons, notice or document by U.S. registered mail to
the respective addresses set forth above shall be effective service of process
for any action, suit or proceeding brought against the parties in any such
court. The parties hereby irrevocably and unconditionally waive any objection to
the laying of venue of any action, suit, controversies or proceeding arising out
of this agreement or the transactions contemplated hereby, in the courts of the
State of California, County of Orange and/or the United States District Court
for the Central District of California (Southern Division), and hereby further
irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient or improper forum.
10. Notices.
All notices, claims, requests, demands, and other
communications hereunder ("notices") shall be in writing and shall be deemed to
have been given if personally delivered or if sent by telecopy or facsimile or
mailed by overnight, commercial air courier service or by first class,
registered or certified mail, postage prepaid, and properly addressed as
follows:
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To Executive Valence Technology Inc.
or Thomrose: Unit 413 4th Floor
Hong Kong Industrial Technology Centre
72 Tat Chee Avenue
Kowloon Tong, Hong Kong
Attention: Thomas Wah Tong Wan
Fax: (852) 2776-7770
with a copy to: Milbank, Tweed, Hadley & McCloy
3007 Alexandra House
16 Chater Road
Hong Kong
Attention: Douglas Tanner, Esq.
Fax: (852) 2840-0792
To Company SRS Labs, Inc.
or Valence: 2909 Daimler Street
Santa Ana, California 92705
Attention: John Au Yeung, Director
Fax: (714) 852-1099
with a copy to: Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, 17th Floor
Costa Mesa, California 92626
Attention: John F. Della Grotta, Esq.
Fax: (714) 979-1921
Any party may change its address for the purpose of this Article by giving the
other parties written notice of the new address in the manner set forth above.
Notice will conclusively be deemed to have been given when personally delivered,
or if given by mail, on the second day after being sent by an overnight,
commercial air courier service or on the fifth day after being sent by first
class, registered or certified mail, or if given by telecopy or facsimile
machine, when confirmation of transmission is indicated by the sender's telecopy
or facsimile machine.
11. Miscellaneous Terms.
(a) The headings contained in this Agreement are for reference
purposes only, are not necessarily descriptive of the paragraphs to which they
relate and shall not affect the meaning or interpretation of this Agreement.
(b) No change, modification, addition or amendment to this
Agreement will be valid unless in writing and signed by the party against which
enforcement of such change, modification, addition or amendment is sought.
(c) The parties agree to cooperate in good faith to accomplish
the objectives of this Agreement and, to that end, agree to execute and/or
deliver from time to
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time such other and further instructions and documents and to take such other
actions as may be necessary or convenient to fulfillment of these purposes.
(d) No waiver of any term, provision or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances, will
be deemed to be, or may be construed as, a further or continuing waiver of any
such term, provision or condition.
(e) In the event of any dispute concerning the interpretation
of this Agreement or its enforcement, or any proceeding arising out of or in
connection with an alleged or actual breach of this Agreement, the prevailing
party will be entitled to recover, in addition to any other relief obtained or
awarded, any reasonable attorneys' fees and expenses incurred in relation to
such dispute, enforcement or proceeding.
(signature page follows)
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first above written.
SRS LABS, INC.
By: /s/ THOMAS C.K. YUEN
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Thomas C.K. Yuen
Chairman of the Board
and Chief Financial Officer
VALENCE TECHNOLOGY INC., a
British Virgin Islands company
By: /s/ THOMAS WAH TONG WAN
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Thomas Wah Tong Wan
President and Chief Executive Officer
/s/ Thomas Wah Tong Wan
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Thomas Wah Tong Wan
THOMROSE HOLDINGS (BVI) LIMITED,
a British Virgin Islands Company
By: /s/ Thomas Wah Tong Wan
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Thomas Wah Tong Wan
Director
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