EXHIBIT 10.10.3
NONCOMPETITION AGREEMENT
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This Noncompetition Agreement, dated as of July 8, 1997 (the
"Agreement"), is entered into by and among Thomas A. Price ("Price") and Donald
Strough ("Strough" and, together with Price, the "Principals"), on one hand, and
FirstAmerica Automotive, Inc., a Delaware corporation (the "Company"), on the
other hand.
RECITALS
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WHEREAS, Price, directly or indirectly, owns and operates certain
retail automotive dealerships in the State of California, including Melody
Toyota, Stevens Creek Nissan, Marin Nissan, Lexus of Serramonte, and Serramonte
Auto Plaza (the "Price Automotive Dealerships");
WHEREAS, Strough, directly or indirectly, owns and operates
California Carriage, Ltd., a retail automotive dealerships in the State of
California (the "Strough Automotive Dealership");
WHEREAS, Price is selling or otherwise disposing of all of his stock
in the Price Automotive Dealerships, together with the goodwill of those
businesses, and Strough is selling all or substantially all of the assets of the
Strough Automotive Dealership, together with the goodwill of that business;
WHEREAS, upon the consummation of the transactions contemplated by the
agreements and plans of merger, stock purchase agreements and asset purchase
agreements by Price or Strough on one hand and the Company on the other
(collectively, the "Acquisition Documents"), the Company will be acquiring all
of the stock of the Price Automotive Dealerships and the Strough Automotive
Dealership, together with the goodwill of those businesses, and the Company will
operate the Price and Strough Automotive Dealerships in the same cities and
counties throughout the State of California where those businesses previously
were carried on by the Principals. In addition, the Company will be acquiring
additional retail automotive dealerships in other geographic locations, and
generally will be engaged in the business of owning and operating retail
automotive dealerships throughout the United States;
WHEREAS, upon the consummation of the transactions contemplated by
Acquisition Documents, the Principals will acquire substantial interests of the
Company's common stock, with Price acquiring approximately 39% of the Company's
common stock and Strough acquiring approximately 11% of such stock;
WHEREAS, pursuant to certain Executive Employment Agreements, dated as
of July 8, 1997, the Principals will be employed as officers of the Company and,
together will be directly engaged in directing and overseeing the Company's
operations and business;
WHEREAS, in partial consideration for the Company's acquisition of the
Price and Strough Automotive Dealerships and the Principals' receipt of the
Company's common stock, and as a condition to effectiveness of certain
provisions of the Stockholders' Agreement, dated July 8, 1997,
among the Company, the Principals and the Stockholders listed on the signature
pages thereto (the "Stockholders' Agreement"), the Principals are entering into
this Agreement.
NOW, THEREFORE, in consideration of the mutual representations, warran
ties, covenants and agreements set forth herein and in the Stockholders'
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
AGREEMENT
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1. RESTRICTIVE COVENANTS. The Principals, by and through the Price
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and Strough Automotive Dealerships, are engaged in the business of owning and
operating retail automotive dealerships, including, without limitation, selling
and leasing new and used domestic and imported automobiles to individual and
commercial customers and clients, and repairing and servicing the same in each
of the following counties in Northern California: Santa Clara, Marin, Contra
Costa and San Mateo (the "Purchased Business"). Moreover, upon the consummation
of certain of the transactions contemplated by the Acquisition Documents, the
Principals, by and through the Company, will be engaged in the Purchased
Business, as well as the business of owning and operating retail automotive
dealer ships, including, without limitation, selling and leasing new and used
domestic and imported automobiles to individual and commercial customers and
clients, and repairing and servicing the same throughout the United States (the
"Business"). The Principals each acknowledge that (i) the market for the
Business extends throughout the United States, and that the Princ ipals,
individually and through the Company, are some of the limited number of people
engaged in the Business; (ii) as part of the transactions contemplated by the
Acquisition Documents, the Company, directly or indirectly, will be acquiring
all of the stock and/or all or substantially all of the assets, as the case may
be, of the Purchased Business, including its goodwill, and will carry on the
Purchased Business in the same or similar geographic locations and in the same
or similar manner, as the Purchased Business had been carried on by the
Principals; (iii) upon the consummation of certain of the transactions
contemplated by and upon the occurrence of certain conditions in the
Stockholders' Agreement, the Principals shall sell or otherwise dispose of all
of their stock of the Company; (iv) the restrictive cove-nants and the other
agreements contained herein are an essential part of this Agreement and the
transactions contemplated by the Stockholders' Agreement and the Acquisition
Docu ments, and that the transactions contemplated by the Stockholders'
Agreement and the Acquisition Documents are designed and intended to qualify as
a sale (or other disposition) by the Principals of all of their interests in the
Business and the Purchased Business, as the case may be, within the meaning of
section 16601 of the Business and Professions Code of California (the "BPCC"),
which section provides as follows:
(S) 16601. SALE OF GOOD WILL OR CORPORATION SHARES; AGREEMENT NOT TO
COMPETE.
Any person who sells the goodwill of a business, or any stockholder of
a corporation selling or otherwise disposing of all his shares in said
corporation, or any stockholder of a corporation which sells (a) all
or substantially all of its operating assets together with the
goodwill of the corporation, (b) all or substantially all of the
operating assets of a
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division or a subsidiary of the corporation together with the goodwill
of such division or subsidiary, or (c) all of the shares of any
subsidiary, may agree with the buyer to refrain from carrying on a
similar business within a specified county or counties, city or
cities, or a part thereof, in which the business so sold, or that of
said corporation, division, or subsidiary has been carried on, so
long as the buyer, or any person deriving title to the goodwill or
shares from him, carries on a like business therein. For the purposes
of this section, "subsidiary" shall mean any corporation, a majority
of whose voting shares are owned by the selling corporation.
The Principals further represent and warrant and acknowledge and agree that (i)
they have been fully advised by counsel in connection with the negotiation,
preparation, execution and delivery of this Agreement, the Stockholders'
Agreement, the Acquisition Documents, and the transactions contemplated by those
agreements; (ii) they have read section 16601 of the BPCC, understand its terms
and agree that section 16601 of the BPCC applies in the context of the
transactions contemplated by the Stockholders' Agreement, the Acquisition Docu
ments, and this Agreement, and such transactions are within the scope and intent
of section 16601 and an exception to section 16600 of the BPCC and agree to be
fully bound by the restrictive covenants and the other agreements contained in
this Agreement; (iii) they have read or otherwise have become familiar with the
common law regarding the enforceability of noncompetition agreements and other
restrictive covenants and agree that the restrictive covenants contained herein
are reasonable, valid and enforceable in the context of this Agreement, the
Stockholders' Agreement, the Acquisition Documents, and the transactions contem
plated by those agreements; and (iv) no reasonable Person would engage in any of
the transactions contemplated by the Acquisition Documents, the Stockholders'
Agreement, and this Agreement without the benefit of each of restrictive
covenants and agreements contained herein by the Principals. Accordingly, the
Principals agree to be bound by the noncompetition agreement and the other
restrictive covenants and agreements contained in this Agreement to the maximum
extent permitted by law, it being the intent and spirit of the parties that the
noncompetition agreement and the other restrictive covenants and agreements
contained herein shall be valid and enforceable in all respects and, subject to
the terms and conditions of this Agreement, the Stockholders Agreement, and the
Acquisition Documents, mutually dependent upon the obligations of the Company to
pay or transfer the consideration recited in such agreements to the Principals
pursuant to the Acquisition Documents and the Stockholders' Agreement.
A. NONCOMPETITION.
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(1) THE PURCHASED BUSINESS. Throughout each Principal's
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employment with the Company and for a 2-year period thereafter (the "Restricted
Period"), and excluding any Permitted Activities (defined below), each of the
Principals shall not in any city, town, county, parish or other municipality in
any state of the United States (including, without limitation, each of the 58
counties in the State of California, the names of each of which being expressly
incorporated by reference herein), or in Canada or Mexico, where the Company or
any of its subsidiaries, Affiliates (as defined in the Stockholders' Agreement),
successors or assigns engages in the Purchased Business, directly or indirectly,
(i) engage in the Purchased Business for the Principals' own account; (ii) enter
the employ of, or render any services to or for any entity that is engaged in
the Purchased Business; and/or (iii) become
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interested in any such entity in any capacity, including as an individual,
partner, stockholder, officer, director, principal, agent, trustee or
consultant; provided, however, the Principals may own, directly or indirectly,
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solely as a passive investment, securities of any entity traded on any national
securities exchange or automated quotation system if the Principals,
individually or in the aggregate, are not a controlling Person of, or a member
of a group which controls, such entity and do not, directly or indirectly,
"beneficially own" (as defined in Rule 13d-3 of the Securities Exchange Act of
1934, as amended, without regard to the 60 day period referred to in Rule 13d-
3(d)(1)(i)) 5% or more of any class of securities of such entity;
(2) THE BUSINESS. Throughout each Principal's employment
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with the Company and, in the event that either Principal, or both Principals,
sells or otherwise disposes of all of his, or their, stock in the Company
through a purchase by or other transfer to the Company or any of its
subsidiaries, Affiliates, successors or assigns, for a 2-year period thereafter,
and excluding any Permitted Activities (defined below), each of the Principals
shall not in any city, town, county, parish or other municipality in any state
of the United States (including, without limitation, each of the 58 counties in
the State of California, the names of each of which being expressly incorporated
by reference herein), or in Canada or Mexico, where the Company or any of its
subsidiaries, Affiliates, successors or assigns engages in the Business,
directly or indirectly, (i) engage in the Business for the Principals' own
account; (ii) enter the employ of, or render any services to or for any entity
that is engaged in the Business; and/or (iii) become interested in any such
entity in any capacity, including as an individual, partner, stockholder,
officer, director, principal, agent, trustee or consultant; provided, however,
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the Principals may own, directly or indirectly, solely as a passive investment,
securities of any entity traded on any national securities ex change or
automated quotation system if the Principals, individually or in the aggregate,
are not a controlling Person of, or a member of a group which controls, such
entity and do not, directly or indirectly, "beneficially own" (as defined in
Rule 13d-3 of the Securities Ex change Act of 1934, as amended, without regard
to the 60 day period referred to in Rule 13d-3(d)(1)(i)) 5% or more of any class
of securities of such entity;
(3) PERMITTED ACTIVITIES. As used herein, "Permitted
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Activities" means either of the Principal's ownership or operation of retail
automotive dealerships, including, without limitation, selling and leasing new
and used domestic and imported automobiles to individual and commercial
customers and clients, and repairing and servicing the same at those specific
dealerships and at the specific geographic locations identified in Schedule 1.
B. NONINTERFERENCE. During the Restricted Period, the
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Principals shall not, directly or indirectly, (i) solicit, induce, or attempt to
solicit or induce, any Person known to any Principal to be an employee of the
Company or any of its subsidiaries, Affiliates, successors or assigns, that is
involved in the Business, including the Purchased Business (each such Person, a
"Company Person"), to terminate his or her employment or other relationship
with the Company or any of its subsidiaries, Affiliates, successors or assigns
for the purpose of associating with (A) any entity of which any of the
Principals is or becomes a officer, director, partner, stockholder, agent,
trustee or consultant, or (B) any competitor of the Company or its subsidiaries,
Affiliates, successors or assigns, or (ii) otherwise encourage any Company
Person to terminate his or her employment or other relationship with the
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Company or any of its subsidiaries, Affiliates, successors or assigns, for any
other purpose or no purpose.
C. NONSOLICITATION. During the Restricted Period, the
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Principals shall not, directly or indirectly, solicit, induce, or attempt to
solicit or induce, any Person or entity then known to be customers, clients,
vendors, suppliers, distributors or consultants of the Company or any of its
subsidiaries, Affiliates, successors or assigns, in the Business, including the
Purchased Business, including, without limitation, any foreign or domestic
automobile manufacturer with whom the Company does business from time to time (a
"Cus tomer or Supplier"), to terminate his, her or its relationship with the
Company or any of its subsidiaries, Affiliates, successors or assigns, for any
purpose, including the purpose of associating with or becoming a Customer or
Supplier, whether or not exclusive, of any of the Principals or any entity of
which any of the Principals is or becomes a partner, stockholder, principal,
member, officer, director, principal, agent, trustee or consultant, or otherwise
solicit, induce, or attempt to solicit or induce any such Customer or Supplier
to terminate his, her or its relationship with the Company or any of its
subsidiaries, Affiliates, successors or assigns, for any other purpose or no
purpose.
D. RIGHT OF SUCCESSOR TO ENFORCE AGREEMENT. Any Person to whom
all or part of the Business and/or the Purchased Business is sold shall, if this
Agree ment is assigned, be entitled to enforce each of the covenants contained
herein.
2. CONFIDENTIALITY OF TRADE SECRETS OR PROPRIETARY INFORMATION. The
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Principals acknowledge that they have and will have access to proprietary
information, trade secrets, and confidential material (including lists of key
personnel, customers, clients, vendors, suppliers, distributors or consultants)
of the Company that, in part, is being acquired in connection with the Company's
acquisition of the Pur chased Business (the "Confidential Information"). The
Principals agree, without limitation in time or until such information shall
become public other than by the Principals' unauthorized disclosure, to maintain
the confidentiality of the Confidential Information and refrain from divulging,
disclosing, or otherwise using in any respect the Confidential Information to
the detriment of the Company and any of its subsidiaries, Affiliates, successors
or assigns, or for any other purpose or no purpose.
3. OWNERSHIP OF INTELLECTUAL PROPERTY. Each of the Principals
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acknowledge and agree that all work performed, and all ideas, concepts,
materials, products, software, documentation, designs, architectures,
specifications, flow charts, test data, programmer's notes, deliverables,
improvements, discoveries, methods, processes, or inventions, trade secrets or
other subject matter related to the Business (collectively, "Materials")
conceived, developed or prepared by each Principal alone, or with others, during
the period of each Principal's employment or other relationship with the Company
in written, oral, electronic, photographic, optical or any other form, are the
property of the Company and its successors or assigns, and all rights, title and
interest therein shall vest in the Company and its successors or assigns, and
all Materials shall be deemed to be works made for hire and made in the course
of each Principal's employment or other relationship with the Company. To the
extent that title to any Materials has not or may not, by operation of law, vest
in the Company and its successors or assigns, or such Materials may not be
considered works made for hire, each Principal hereby irrevocably assigns all
rights, title and interest therein to the Company and its successors or assigns.
All Materials
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belong exclusively to the Company and its successors or assigns, with the
Company and its successors or assigns having the right to obtain and to hold in
its or their own name, copyrights, patents, trade marks, applications,
registrations or such other protection as may be appropriate to the subject
matter, and any extensions and renewals thereof. Each Principal hereby grants to
the Company and its successors or assigns an irrevocable power of attorney to
perform any and all acts and execute any and all documents and instruments on
behalf of each Principal as the Company and its successors or assigns may deem
appropriate in order to perfect or enforce the rights defined in this Section.
Each Principal further agrees to give the Company and its successors or assigns,
or any person designated by the Company and its successors or assigns, at the
Company's or its successors' or assigns' expense, any assistance required to
perfect or enforce the rights defined in this Section. Employee shall
communicate and deliver to the Company and its successors or assigns promptly
and fully all Materials conceived or developed by each Principal (alone or
jointly with others) during the period of each Principal's employment or other
relationship with the Company and its successors and assigns. Nothing contained
is this Section shall apply to any invention that qualifies fully under the
provisions of Section 2870 of the California Labor Code. In Schedule 2, each
Principal has identified all ideas, concepts, materials, products, software,
documentation, designs, architectures, specifications, flow charts, test data,
programmer's notes, deliverables, improvements, discoveries, methods,
processes, or inventions, and trade secrets, and works in progress of the same,
if any, which each Principal, either individually or with others, owns as of the
date hereof.
4. RIGHTS AND REMEDIES UPON BREACH BY THE PRINCIPALS. If the
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Principals, or any of them, breach, or threaten to commit a breach of, any of
the provisions of this Agreement, the Company and its subsidiaries, Affiliates,
successors or assigns shall have the following rights and remedies, each of
which shall be independent of the others and severally enforceable, and each of
which shall be in addition to, and not in lieu of, any other rights or remedies
available to the Company or its subsidiaries, Affiliates, successors or assigns
at law or in equity under this Agreement, the Acquisition Documents or
otherwise:
A. SPECIFIC PERFORMANCE. The right and remedy to have each and
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every one of the covenants in this Agreement specifically enforced and the right
and remedy to obtain injunctive relief, it being agreed that any breach or
threatened breach of any of the noncompetition or other restrictive covenants
and agreements contained herein would cause irreparable injury to the Company
and its subsidiaries, Affiliates, successors or assigns and that money damages
would not provide an adequate remedy at law to the Company and its subsidiaries,
affiliates, successors or assigns.
B. ACCOUNTING. The right and remedy to require the Principals
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to account for and pay over to the Company and its subsidiaries, Affiliates,
successors or assigns, as the case may be, all compensation, profits, monies,
accruals, increments or other benefits derived or received by the Principals
that result from any transaction or activity constituting a breach of this
Agreement.
C. SEVERABILITY OF COVENANTS. The Principals acknowledge and
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agree that the noncompetition and other restrictive covenants and agreements
contained herein are reasonable and valid in geographic and temporal scope and
in all other respects. If, however, any court subsequently
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determines that any of such covenants or agreements, or any part thereof, is
invalid or unenforceable, the remainder of such covenants and agreements shall
not thereby be affected and shall be given full effect without regard to the
invalid portions.
D. BLUE-PENCILING. If any court determines that any of the
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noncompetition and other restrictive covenants and agreements, or any part
thereof, is unen forceable because of the duration or geographic scope of such
provision, such court shall have the power to reduce the duration or scope of
such provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable to the maximum extent permitted by applicable law.
E. ENFORCEABILITY IN ALL JURISDICTIONS. The Principals intend
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to and hereby confer jurisdiction to enforce each and every one of the covenants
and agree ments contained herein upon the courts of any jurisdiction within the
geographic scope of such covenants and agreements. If the courts of any one or
more of such jurisdictions hold any such covenant or agreement unenforceable by
reason of the breadth or such scope or otherwise, it is the intention of the
Principals that such determination shall not bar or in any way affect the
Company's or any of its subsidiaries', Affiliates', successors' or assigns'
right to the relief provided above in the courts of any other jurisdiction
within the geographic scope of such covenants and agreements, as to breaches of
such covenants and agreements in such other respective jurisdictions, such
covenants and agreements as they relate to each jurisdiction being, for this
purpose, severable into diverse and independent covenants and agreements.
5. NATURE OF OBLIGATIONS. Each of the parties hereto agree that the
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nature of the Principals' obligations hereunder are several and not joint and
several and no Principal shall be responsible or accountable hereunder for the
breach or violation of any of the covenants or other agreements contained herein
by any other Principal.
6. NOTICES. All notices or other communications required or
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permitted hereunder shall be in writing and shall be deemed duly given upon (a)
transmitter's confirma tion of a receipt of a facsimile transmission, (b)
confirmed delivery by a standard overnight carrier or when delivered by hand, or
(c) the expiration of three (3) business days after the day when mailed by
certified or registered mail, postage prepaid, addressed to the parties at the
following addresses (or at such other address as the parties hereto shall
specify by like notice):
If to the Company:
FirstAmerica Automotive, Inc.
c/o Kay & Merkle
100, The Embarcadero
Penthouse
San Francisco, California 94105
Attention: Bruce Bercovich, Esq.
with copies to:
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Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Rod A. Guerra, Esq.
Facsimile No.: (213) 687-5600
If to a particular the Principal:
Thomas Price
c/o Serramonte Auto Plaza
1500 Collins Avenue
Colma, California 94014
Donald Strough
c/o Concord Honda
1300 Concord Avenue
Concord, California
7. PARTIES IN INTEREST/ASSIGNMENT. Neither this Agreement nor any of
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the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, except that the Company and any
of its subsidiaries, Affiliates, and successors may sell, assign or otherwise
transfer any or all of its or their right and interest in the Business,
including the Purchased Business, whether by operation of law or otherwise, and
in this Agreement, in which case this Agreement shall remain in full force after
such sale, assignment or other transfer and may be enforced by (i) any
successor, assignee or transferee of all or any part of the Business, including
the Purchased Business, as fully and completely as it could be enforced by the
Company or its subsidiaries and Affiliates if no such sale, assignment or
transfer had occurred, and (ii) the Company and any of its subsidiaries and
Affiliates in the case of any sale, assignment or other transfer of a part, but
not all, of the Business, including the Purchased Business. The benefits under
this Agree ment shall inure to and may be enforced by the Company and any of its
subsidiaries, Affiliates, successors, transferees and assigns.
8. INTERPRETATION. The headings contained in this Agreement are for
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reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
9. COUNTERPARTS. This Agreement may be executed in two or more
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counterparts, all of which shall be considered one and the same Agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to each party.
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10. ENTIRE AGREEMENT/MODIFICATION. This Agreement, the Acquisition
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Documents, the Stockholders' Agreement, the Executive Employment Agreements,
and all documents incorporated by reference herein, represent the entire
agreement of the parties with respect to the subject matter hereof and shall
supersede any and all previous contracts, arrangements or understandings between
the parties hereto with respect to the subject matter hereof. This Agreement
may not be modified or amended except by an instru ment in writing signed by
each of the parties hereto.
11. GOVERNING LAW. This Agreement shall be construed, interpreted,
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and governed in accordance with either (i) the laws of the State of California,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof, or (ii) in the event of a breach of any of the
restrictive covenants contained in Section 1, the law of the State where such
breach actually occurs, depending on whichever choice of law shall ensure to the
maximum extent that the restrictive covenants shall be enforced in accor dance
with the intent of the parties.
12. DISPUTE RESOLUTION. Except as necessary to specifically enforce,
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or enjoin the breach of, this Agreement or any provision herein (to the extent
such remedies may otherwise be available), any dispute arising out of or
relating to this Agree ment shall be submitted to binding arbitration by one
arbiter under the then existing Commercial Arbitration Rules of the American
Arbitration Association in arbitration proceedings conducted in Los Angeles,
California. The arbitrator shall have no power or authority in making his award
to modify, enlarge or add to the terms and provisions of this Agreement, except
as otherwise expressly agreed herein. Judgement upon the award of the arbiter
shall be binding upon the parties and may be entered in any court having
jurisdiction. The arbiter shall award to the prevailing party reasonable
attorneys' fees and expenses from the other party, including any expert fees,
which fees and expenses shall be in addition to any other relief which may be
awarded.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agree
ment on the day and year first above written.
FIRSTAMERICA AUTOMOTIVE, INC.
By: /s/ Thomas A. Price
________________________________
Thomas A. Price
Its:President
/s/ Thomas A. Price
___________________________________
Thomas A. Price
/s/ Donald Strough
___________________________________
Donald Strough