COVENANT NOT TO COMPETE
THIS COVENANT NOT TO COMPETE ("Covenant") is entered into as of the 2nd
day of January, 1998, by and among FIELDS AIRCRAFT SPARES, INC., a Utah
corporation ("Fields"), FLIGHTWAYS MANUFACTURING, INC., a California corporation
("Flightways"), and XXXXXXXXX X. XXXXXX, an individual ("Luhnow"), with
reference to the following facts:
A. Concurrently herewith, pursuant to that certain Stock Purchase
Agreement, of even date herewith, Fields has purchased all of the issued and
outstanding shares of common stock of Flightways, expressly including, but not
limited to, all of the issued and outstanding shares of common stock of
Flightways owned by Luhnow (the "Stock").
B. In connection with, and as a bargained-for element of the purchase
of the Stock, Luhnow has agreed not to compete with the business of Flightways,
all on the terms and conditions hereinafter set forth.
WHEREFORE, in consideration of the foregoing premises, the purchase by
Fields of the Stock, and the promises and covenants hereinafter set forth, the
parties hereby agree as follows:
1. DEFINITIONS.
As used herein, the following terms and phrases shall have the meanings
indicated:
(a) "Affiliate" means, (i) with respect to any corporation, any
officer, director or 10% or more shareholder of such
corporation, or (ii) with respect to any individual, any
partner or immediate family member of such individual or the
estate of such individual, or (iii) with respect to any
partnership, trust or joint venture, any partner, co-venturer
or trustee of such partnership, trust or joint venture, or any
beneficiary or owner having a 10% or more interest in the
equity, property or profits of such partnership, trust or
joint venture, or (iv) with respect to any person or entity,
any other person or entity which, directly or indirectly,
controls, is controlled by, or is under common control with
such person or entity or any Affiliate of such person or
entity.
(b) "Business" means the types of business and business operations
currently conducted by Flightways, or conducted by Flightways
in the past.
(c) "Confidential Information" means any and all information
obtained by or disclosed to Luhnow or which Luhnow gained
knowledge of as a consequence of or through his Relationship
with Flightways (including information conceived, originated,
discovered or developed by Luhnow) about or regarding the
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business, products, processes, and services of Flightways,
including information relating to research, development,
inventions, manufacture, purchasing, accounting, engineering,
marketing, merchandising, selling, trade secrets, or customer
lists, which information Flightways maintains as confidential.
(d) "Conflicting Organization" means any person, business, company
or organization engaged in or about to become engaged in a
business or activity anywhere in the Territory which is
substantially similar to, or would reasonably be deemed to
compete with, the Business.
(e) "Fields" means and includes Fields Aircraft Spares, Inc., a
Utah corporation, and any subsidiaries or Affiliates of Fields
now in existence or hereafter created or acquired.
(f) "Relationship" means and includes any employment, consulting
or similar relationship with, acting as or being elected to a
position as an officer or director of, or being a shareholder,
officer, director, agent or employee of, any company or
person.
(g) "Territory" means and includes all geographical areas in which
Flightways conducts or has conducted the Business. Luhnow
expressly acknowledges and agrees that Flightways currently
does business around the world, including substantial business
in South America, Europe and Asia, as well as North America.
2. COVENANT OF CONFIDENTIALITY.
(a) Except with the express prior written consent of Flightways,
neither Luhnow nor any Affiliate of Luhnow will, directly or
indirectly or by action in concert with others, use for their
own benefit or the benefit of others, or disseminate,
disclose, lecture upon or publish articles concerning, any
Confidential Information at any time after the date of this
Agreement.
(b) All documents, papers, notes, notebooks, memoranda, computer
files, and other written or electronic records of any kind
made by Luhnow during and in connection with his Relationship
with Flightways shall remain the property of Flightways at all
times. Concurrently herewith, all documents, papers, notes,
notebooks, memoranda, computer files and other written or
electronic records in the possession of Luhnow or any
Affiliate of Luhnow, whether prepared by him or others, have
been surrendered to Flightways.
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3. NON-COMPETITION.
(a) During the Term of this Agreement, neither Luhnow nor any
Affiliate of Luhnow shall, directly or indirectly or by action
in concert with others, own an interest in, operate, join,
control, participate in, have a Relationship with or be
connected as an officer, employee, agent, independent
contractor, partner, shareholder, or principal of, any
Conflicting Organization. Ownership of less than five percent
(5%) of the common stock or equity interest of a public
corporation shall not be deemed in violation of this
provision.
(b) During the Term of this Agreement, neither Luhnow nor any
Affiliate of Luhnow shall, directly or indirectly or by action
in concert with others, undertake planning for or organization
of any Conflicting Organization or any business activity
materially competitive with the Business or combine with other
employees or representatives of Flightways or Fields for the
purpose of organizing any such Conflicting Organization or
materially competitive business activity.
(c) During the Term of this Agreement, and for a period of three
(3) years thereafter, neither Luhnow nor any Affiliate of
Luhnow shall, directly or indirectly or by action in concert
with others, shall induce or influence or seek to induce or
influence, any person who is engaged as an employee,
consultant, agent, independent contractor, or otherwise by
Flightways or Fields to terminate his or her employment or
engagement.
4. TERM OF COVENANT; TERMINATION.
(a) Except as otherwise expressly provided in Paragraphs 2(a),
3(c), 3(d) or 4(b) hereof, the term of the covenants contained
herein, and in particular the covenants set forth in
Paragraphs 3(a) and 3(b) hereof, shall continue for two (2)
years from the date hereof (the "Term").
(b) In the event that the employment of Luhnow by Flightways is
terminated (i) by Flightways other than for Good Cause (as
hereinafter defined), or (ii) by Luhnow with Reason (as
hereinafter defined), the Term of this Covenant shall end as
of the effective date of such termination.
(c) As used herein, "Good Cause" shall mean and include (i)
Luhnow's material failure to perform the duties of his
position with Flightways, which duties are reasonably
consistent with the duties currently performed by Luhnow,
which failure continues uncured for ten (10) business days
following written notice of such failure, or (ii) Luhnow's
failure to perform the aforesaid duties to the reasonable
satisfaction of the Board of Directors of Flightways, which
failure continues uncured for thirty (30) days following
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written notice of such failure (provided, however, that in the
event the nature of such failure is such that it cannot
reasonably be cured in such thirty (30) day period, such
failure shall be deemed cured if Luhnow undertakes such cure
within such period and diligently prosecutes such cure to
completion), or (iii) Luhnow is substantially unable, due to
injury or illness, to perform the aforesaid duties for a
period of sixty (60) consecutive days, or for a period of
ninety (90) days in any twelve (12) month period, or (iv)
Luhnow's death, or (v) Luhnow's commission of any felony, or
(vi) Luhnow's commission of any material theft, defalcation or
other act of dishonesty in his performance of the aforesaid
duties.
(d) As used herein, "Reason" shall mean (i) a reduction of
Luhnow's base compensation from the level in effect as of the
date hereof, (ii) a material adverse change in the nature of
the duties assigned to Luhnow from those in effect as of the
date hereof, or (iii) a material adverse change in the nature
or type of the office, and secretarial and administrative
support, afforded to Luhnow from those afforded to Luhnow as
of the date hereof.
5. ACKNOWLEDGMENTS.
(a) Luhnow hereby expressly acknowledges that this Covenant Not to
Compete, and each term and provision hereof, were expressly
bargained for and given in exchange for the purchase by Fields
of his Stock. Luhnow further agrees and acknowledges that
Fields would not have agreed to the purchase of the Stock but
for the agreement by Luhnow to enter into and perform this
Covenant Not to Compete, and that the execution, delivery and
performance of this Covenant Not to Compete constituted a
material inducement to Fields to enter into the Stock Purchase
Agreement.
(b) Luhnow hereby expressly acknowledges and agrees that the terms
of this Covenant Not to Compete, expressly including, but not
limited to, the Term hereof and the Territory, are fair and
reasonable.
(c) Luhnow hereby expressly acknowledges and agrees that nothing
herein, expressly including but not limited to Paragraphs
4(b), 4(c) and 4(d), shall be deemed or construed to create a
contract of employment, or any right to continued employment,
between Luhnow and Flightways.
6. MISCELLANEOUS.
(a) Any notices to be given hereunder shall be in writing, sent by
registered or certified mail, postage prepaid, return receipt
requested, or through by telegram or facsimile followed by a
confirmation letter sent as provided above, addressed to such
party as follows:
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(i) Notices to Luhnow:
Xxxxxxxxx X. Xxxxxx
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Fax No. (___) ___-____
(ii) Notices to Fields:
Fields Aircraft Spares, Inc.
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Attn: Xxxx Xxxxxx
Fax No. (___) ___-____
Notices sent in accordance with this Section shall be deemed
effective on the date of dispatch.
(b) This Covenant constitutes the entire understanding between the
parties, and supersedes all prior agreements and negotiations,
whether oral or written. There are no other agreements between
the parties, except as set forth herein. No supplement,
modification, waiver or termination of this Covenant shall be
binding unless in writing and executed by all parties hereto.
(c) This Covenant shall inure to the benefit of and be binding
upon all of the parties hereto and their respective executors,
administrators, successors and permitted assigns.
(d) In the event any of the provisions of this Covenant are found
by a court of competent jurisdiction to be invalid, illegal or
unenforceable, the validity, legality and enforceability of
the remaining provisions shall not be affected thereby.
(e) The covenants set forth herein shall be deemed to be and
construed as a series of separate covenants, one for each
country in the world, one for each state in the United States,
and one for each county in the State of California. In the
event that, notwithstanding the agreement of the parties and
the acknowledgments of Luhnow in Paragraph 5 hereof, any court
of competent jurisdiction determines that the geographic scope
of this Agreement is excessive, the Territory shall be deemed
to be reduced by striking therefrom the covenants relating
only to those countries, states and/or counties that such
court determines must be stricken in order to render the
remainder of the covenants valid and enforceable.
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(f) The headings of the Sections contained in this Covenant are
for reference purposes only, and shall not affect the meaning
or interpretation of this Covenant. The parties have been
advised by counsel in connection with this Covenant. This
Covenant shall be construed and interpreted in accordance with
the plain meaning of its language, and not for or against
either party, and as a whole, giving effect to all of the
terms, conditions and provisions hereof.
(g) This Covenant shall be governed by and construed in accordance
with the laws of the State of California.
(h) This Covenant may be executed in two or more counterparts,
which shall together constitute one and the same agreement.
(i) In the event that any party to this Covenant shall commence
any suit or action to interpret or enforce this Covenant, the
prevailing party in such action shall recover such party's
costs and expenses incurred in connection therewith, including
attorney's fees and costs of appeal, if any.
(j) Luhnow hereby expressly agrees and acknowledges that a breach
of any material term, condition or provision of this Covenant
would result in severe and irreparable injury to Fields and
Flightways, which injury could not be adequately compensated
by an award of money damages, and Luhnow therefore agrees and
acknowledges that Fields and/or Flightways, or both of them,
shall be entitled to injunctive relief in the event of any
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breach of any material term, condition or provision of this
Covenant, or to enjoin or prevent such a breach, including
without limitation an action for specific performance hereof.
Luhnow further agrees and acknowledges that, in the event of
such action for injunctive relief, a bond in the amount of One
Thousand Dollars ($1,000) shall be sufficient.
IN WITNESS WHEREOF, the parties have executed this Covenant Not to
Compete as of the date first written above.
FIELDS AIRCRAFT SPARES, INC.,
a Utah corporation
By: /s/ Xxxx X. Xxxxxx
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Its: COO
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FLIGHTWAYS MANUFACTURING, INC.,
a California corporation
By: /s/ Xxxxxxx Xxxxxxxxx
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Its: Secretary
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/s/ Xxxxxxxxx X. Xxxxxx
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XXXXXXXXX X. XXXXXX
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