10.6 RESTRICTIVE COVENANT AGREEMENT AMONG REGISTRANT, ADS ACQUISITION, INC.
AND THE ALLARD CHILDREN'S TRUST F/B/O MICHAEL E. ALLARD
RESTRICTIVE COVENANT AGREEMENT
This Restrictive Covenant Agreement ("Covenant") is among DeCrane Aircraft
Holdings, Inc. ("Buyer"), ADS Acquisition, Inc. ("Acquisition", collectively
with Buyer "Buyers") and The Allard Children's Trust f/b/o Michael E. Allard
("Seller");
A. Seller acknowledges that the consideration received from Buyers by
Seller for these Covenants is adequate.
B. Seller has owned and controlled ADS and has knowledge of the business,
prospects, customers, needs of the customers, product specifications, key
employees, future development of the business of ADS, each of which (if not
otherwise known to the public or other persons) Seller acknowledges that ADS has
advised Seller is either a trade secret ("Trade Secret") or confidential
information ("Confidential Information") of ADS; and that to the extent that
such Trade Secret or Confidential Information is a secret or is confidential, it
is owned by and belongs to ADS.
C. If Seller were to compete with the business of ADS, Seller's
competition is likely cause material harm to ADS and diminish the value of the
assets of ADS being sold by Seller to Buyers pursuant to the Agreement.
D. The Business of ADS is worldwide; ADS's sales occur throughout the
United States and in many foreign countries. If this Covenant were limited to
the Commonwealth of Pennsylvania, its scope would not be sufficient to protect
the interest of ADS.
Based on the foregoing facts, Seller and Buyers agree as follows:
1. TERM OF THIS COVENANT AND CONSIDERATION.
1.1. As used in this Covenant, the "Term of this Covenant" shall
mean a period commencing upon the Closing of the Agreement and expiring on
September 17, 2000 Notwithstanding the foregoing, in the event that prior to
the expiration hereof (i) ADS ceases business operations and there is no
successor in interest to ADS's business (and ADS or the corporate entity of
which it is a part is not a Debtor operating a business pursuant to any
bankruptcy law), this Covenant shall terminate concurrent with such a cessation
of business operations of ADS (ii) or within 10 days after notice from Seller to
Buyers, any payment required pursuant to Section 1.2 is not made the restriction
set forth in Section 2 shall terminate (Buyers shall nonetheless be liable for
the payments pursuant to Section 1.2).
1.2 Buyers will pay to Sellers the aggregate sum of $636,363.64 which
Seller is entitled to receive which amount shall be paid in 36 equal monthly
installments commencing on the Closing Date. In the event that Buyers fail to
make any payment pursuant to this Section 1.2 and such failure continues for a
more than 10 days following notice from Seller to Buyers of such failure and
demanding payment, Seller shall have the right to accelerate the full amount
which is owing and unpaid pursuant to this Section 1.2 by giving notice to
Buyers. Notwithstanding the foregoing sentence, Seller acknowledges that
pursuant to an agreement with a senior lender, Buyers are prevented from making
any payment pursuant to this Covenant at any time during which Buyers are in
payment default to such senior lender.
2. COVENANT NOT TO COMPETE.
For the Term of this Covenant, Seller shall not directly or indirectly
engage in the design, engineering, manufacture or sale of dichroic liquid
crystal displays ("LCDs") or dichroic LCD modules, or active matrix displays or
otherwise engage in any business which competes with the business of ADS.
"Directly or indirectly" means that Seller will not participate as an officer,
director, shareholder, partner, member or consultant. The business of ADS is
the design, engineering, manufacture and sale of dichroic LCDs, dichroic LCD
modules and components incidental thereto to the Aircraft Industry. The
"Aircraft Industry" means the manufacture, repair or assembly of airframes or
component parts for commercial and military aircraft and aerospace applications.
Notwithstanding the provisions of this Section 2, nothing shall prevent Seller
from making a passive investment in up to 5% of the securities of any company
whose common stock is traded on any national securities exchange or on NASDAQ.
3. COVENANT AGAINST HIRING. Seller understands that it is essential to
the successful operation of the business to be acquired hereunder that Buyer
retain substantially unimpaired ADS's operating organization. Seller agrees
that neither he nor it shall purposefully take any action which would induce
any employee or representative of Allard not to become or continue as an
employee or representative of Buyer. Without limiting the generality of the
foregoing, Seller shall not, whether directly or indirectly through any
subsidiary or affiliate, for a three (3) year period from the Closing Date
solicit to employ (whether as an employee, officer, director, agent,
consultant or independent contractor), or enter into any partnership, joint
venture or other business association with, any person who was at any time
during the 12 months preceding the Closing Date an employee, partner,
representative, or manager of ADS. Provided, however, if the Buyer rand
Robert G. Martin sign a three (3) year employment agreement and thereafter
Buyer terminates Robert G. Martin other than "for cause" and does not
compensate him for the
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three (3) year period from the Closing, then Allard and the Principal
Shareholders shall have the right, after such termination, to employ Robert G.
Martin.
4. COVENANT NOT TO USE TRADE SECRETS. Seller agrees not to (a) disclose
to any person, association, firm, corporation or other entity (other than Buyer
or those designated in writing by Buyer) in any manner, directly or indirectly
any information or data relevant to the business of ADS, or whether of a
technical or commercial nature, or (b) by use, or permit or assist, by
acquiescence or otherwise, any person, association, firm corporation or other
entity (other than Buyer or those designated in writing by Buyer) to use, in any
manner, directly or indirectly, any such information or data, excepting only use
of such data or information as is at the time generally known to the public
other than by any breach of any provision of this Section 4.
5. RECITALS.
The recitals are a part of this Covenant and shall be used in construing and
interpreting it.
6. IRREPARABLE INJURY.
Seller acknowledges that (i) the violation by Seller of any of the
provisions of Sections 2, 3 and of this Covenant will result in irreparable
injury to Buyers and that Buyers, shall be entitled to (i) the issuance of a
temporary restraining order, (ii) a preliminary injunction and (iii) a permanent
injunction to prohibit either the continuation or another breach of Sections 2,
3 or 4 of this Covenant.
7. MONETARY DAMAGES.
Notwithstanding any provision of this Covenant, Buyers may seek and obtain
monetary damages according to proof for any breach of this Covenant by Seller.
8. JURISDICTION.
Seller and Buyers hereby consent to the jurisdiction and venue of the state
and federal courts in the Commonwealth of Pennsylvania.
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9. NOTICES.
All notices, requests, demands, deliveries and other communications
hereunder shall be in writing and, except as otherwise specifically provided in
this Covenant, shall be given by commercial courier service providing proof of
delivery to the parties at the following addresses (all such notices shall be
effective upon receipt):
If to Buyers: DeCrane Aircraft Holdings, Inc.
2201 Rosecrans Avenue
El Segundo, California 90245
Attention: R. Jack DeCrane
Fax Number: (310) 536-0257
with a copy to; DeCrane Aircraft Holdings, Inc.
155 Montrose West Avenue, Suite 210
Copley, OH 44321
Fax Number: (216) 668-2518
and a copy to: Spolin & Silverman
100 Wilshire Boulevard, Suite 940
Santa Monica, California 90401
Attention: Stephen A. Silverman, Esq.
Fax Number: (310) 576-4844
If to Seller: Michael E. Allard
96 Riverview Park
Manchester, NH 03102
with a copy to: William V.A. Zorn, Esq.
McLane, Graf, Raulerson & Middleton
900 Elm Street
Manchester, NH 03105-0326
Fax No. (603) 625-5650
Any of the parties hereto may, from time to time, change its address for
receiving notices by giving written notice thereof in the manner outlined above.
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10. GOVERNING LAW.
This Agreement shall in all respects be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
11. HEADINGS.
The paragraph headings contained in this Covenant are for convenience only
and shall not control or affect the meaning or construction of any of the
provisions of this Agreement.
12. ASSIGNMENT.
This Covenant may be assigned to any successor of Buyers; provided,
however, Buyers shall remain primarily liable for the payments in Section 1.2.
13. COUNTERPARTS.
This Covenant may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
"Buyers"
DeCrane Aircraft Holdings, Inc.
/s/ R. Jack DeCrane
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By: R. Jack DeCrane,
Chief Executive Officer
ADS Acquisition, Inc.
/s/ R. Jack DeCrane
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By: R. Jack DeCrane,
Chief Executive Officer
/s/ Michael E. Allard
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Seller
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