EXHIBIT 10.6
NONCOMPETITION AGREEMENT
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This Noncompetition Agreement (this "Agreement") is entered into as of July
16, 1995 among Xxxxx Paper Company, a Pennsylvania corporation ("Xxxxx"),
Xxxxxxxx-Xxxxx Corporation, a Delaware corporation ("Xxxxxxxx-Xxxxx"), and
Xxxxxx X. Xxxxxx (the "Executive").
WHEREAS, the Executive has acquired extensive knowledge of and experience
in the business conducted by Xxxxx;
WHEREAS, concurrently herewith, Xxxxxxxx-Xxxxx, Rifle Merger Co. and Xxxxx
are entering into an Agreement and Plan of Merger dated as of the date hereof
(the "Merger Agreement"), pursuant to which Rifle Merger Co. is merging with and
into Xxxxx and Xxxxx is becoming a wholly-owned subsidiary of Xxxxxxxx-Xxxxx;
WHEREAS, the Executive will cease to be a director and officer of Xxxxx and
of all of its subsidiaries, effective as of the Effective Time of the Merger (as
such terms are defined in the Merger Agreement);
WHEREAS, concurrently herewith, Xxxxx, Xxxxxxxx-Xxxxx and the Executive are
entering into a Consulting Agreement (the "Consulting Agreement") dated as of
the date hereof; and
WHEREAS, Xxxxx, Xxxxxxxx-Xxxxx and the Executive desire to enter into a
noncompetition agreement upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the adequacy and sufficiency of which are hereby acknowledged,
Xxxxx, Xxxxxxxx-Xxxxx and the Executive hereby agree as follows:
1. Term of Agreement. The term of this Agreement shall commence at the
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Effective Time of the Merger and end on the date which is the fifth one-year
anniversary of the Effective Time of the Merger (the "Noncompetition Period");
provided, however, that this Agreement shall terminate and shall be of no
further force or effect if the Merger Agreement shall be terminated and the
Merger shall not become effective pursuant to the terms thereof.
2. Noncompetition. (a) During the Noncompetition Period, the Executive
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shall not, directly or indirectly, own,
manage, operate, control or participate in the ownership, management, operation
or control of, or be connected as an officer, employee, partner, or director
with, any business conducted anywhere in the world which, for the fiscal year of
such business immediately preceding the Executives' involvement with such
business derives at least twelve and one half percent (12 1/2%) or $250,000,000,
whichever is greater, of its total worldwide revenue from any business or
businesses which compete with any of the following business or businesses
conducted as of the Effective Time of the Merger by Xxxxx or Xxxxxxxx-Xxxxx, or
by any corporation in which Xxxxx or Xxxxxxxx-Xxxxx has, as of the Effective
Time of the Merger, a 40% or more equity investment: disposable diapers,
training pants, youth pants or baby wipes; disposable feminine hygiene products;
adult incontinence products; tissue products for household, commercial,
institutional or industrial uses; nonwoven and/or tissue based industrial or
commercial wipes; nonwoven and/or tissue based hospital/health care products for
use as surgical gowns, surgical packs, sterilization wrap and protective
hospital apparel; or premium uncoated writing, text and cover papers for use as
business, printing and correspondence papers (each such business, a "Competitive
Operation"). During the Noncompetition Period, the Executive shall not solicit
(1) any employee of Xxxxx or Xxxxxxxx-Xxxxx or any corporation in which Xxxxx or
Xxxxxxxx-Xxxxx has, as of the Effective Time of the Merger a 40% or more equity
investment, to leave such employment or (ii) any customer of Xxxxx or Xxxxxxxx-
Xxxxx or any corporation in which Xxxxx or Xxxxxxxx-Xxxxx has, as of the
Effective Time of the Merger, a 40% or more equity investment, if to do so could
reasonably be expected to result in a reduction of the business such customer
has with Xxxxx or Xxxxxxxx-Xxxxx or any corporation in which Xxxxx or Xxxxxxxx-
Xxxxx has, as of the Effective Time of the Merger, a 40% or more equity
investment; provided that an activity by a business which is not deemed to be a
Competitive Operation shall not be a violation of this sentence. During the
Noncompetition Period ownership by the Executive of not to exceed five percent
(5%) of the equity securities of any Competitive Operation shall not constitute
a violation of this Section 2.
(b) In the event any restriction against engaging in a competitive activity
contained in this Section 2 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its extending for too great a
period of time or over too great a geographical area or by reason of its being
too extensive in any other respect, it shall be interpreted to extend only over
the maximum period of time for which it may be enforceable, over the maximum
geographical area as to which it may be enforceable and to the maximum extent in
all other respects as to which it may be enforceable, all as determined by such
court in such action.
(c) The provisions of this Section 2 and of Section 5 hereof shall be in
lieu of Sections 6 and 7 of the Employment
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Agreement between Xxxxx and the Executive dated as of April 19, 1994, as
amended, which sections of the Employment Agreement shall terminate and be of no
further force or effect after the Effective Time of the Merger.
(d) In the event that Executive desires to determine if a business meets
the definition of a Competitive Operation, Executive may request from Xxxxx and
Xxxxxxxx-Xxxxx information concerning the sale of their products in specific
countries or territories. Xxxxx and Xxxxxxxx-Xxxxx shall promptly respond to
such request by furnishing the information necessary for Executive to make his
determination.
3. Compensation. As compensation for the noncompetition covenants
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contained in Section 2 hereof, Xxxxx shall pay to the Executive on the Effective
Time of the Merger the sum of six million dollars ($6,000,000) and on each
anniversary of the Effective Time of the Merger, during the term hereof, the
following sums:
1st Anniversary five million dollars ($5,000,000)
2nd Anniversary four million dollars ($4,000,000)
3rd Anniversary three million dollars ($3,000,000)
4th Anniversary two million dollars ($2,000,000)
(such payments, in the aggregate, being referred to herein as the
"Noncompetition Fee"). Notwithstanding any disability of the Executive during
the Noncompetition Period, the remaining unpaid installments of the
Noncompetition Fee payable pursuant to this Agreement shall be paid by Xxxxx to
the Executive or to his legal representative designated in writing by the
Executive on the dates such Noncompetition Fee would otherwise have been paid
hereunder. In the event of the death of the Executive during the Noncompetition
Period, the remaining unpaid installments of the Noncompetition Fee payable
pursuant to this Agreement shall be paid by Xxxxx within 90 days following the
date of such death as a death benefit to the beneficiary or beneficiaries
designated in writing by the Executive or, if no beneficiary or beneficiaries
have been so designated, to the Executive's estate.
4. Unauthorized Disclosure. (a) The Executive shall not, without the
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written consent of the Chief Executive Officer of Xxxxxxxx-Xxxxx, use other than
for Company purposes pursuant to Section 2 of the Consulting Agreement or
disclose to any person other than as required by law or court order or to a
person to whom disclosure is necessary or appropriate in connection with the
performance by the Executive of his duties pursuant to Section 2 of the
Consulting Agreement, any confidential information material in nature obtained
by him while in the employ of Xxxxx or while a consultant pursuant to the
Consulting Agreement, including such information with respect to any products,
improvements, formulae, designs or styles, processes, services, customers,
suppliers, marketing techniques,
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methods, future plans or operating practices ("Confidential Information");
provided, however, that Confidential Information shall not include any
information known generally to the public or previously disclosed to the public
(other than as a result of unauthorized disclosure by the Executive) or any
specific information or type of information generally not considered
confidential by persons engaged in the same business as Xxxxx or Xxxxxxxx-Xxxxx,
or information disclosed by Xxxxx or Xxxxxxxx-Xxxxx by any member of its Board
of Directors or any officer thereof to a third party without restrictions on the
disclosure of such information.
(b) The Executive agrees that all documents, records, files, letters,
memoranda, reports, data, sketches, drawings, laboratory notebooks, program
listings or other written, electronic, photographic or other tangible material
("Tangible Property") containing Confidential Information, whether created by
the Executive or others, which have or shall come into his custody or possession
shall be and are the exclusive property of Xxxxx and shall be used by the
Executive only in the performance of his duties pursuant to Section 2 of the
Consulting Agreement. The Executive agrees that upon the earlier of (i) a
request by Xxxxx or Xxxxxxxx-Xxxxx or (ii) the termination or cessation of his
consulting services pursuant to the Consulting Agreement for any reason, he
shall promptly deliver to Xxxxx all Tangible Property in his possession or under
his control which contains Confidential Information. The Executive shall not
retain or deliver to any third person copies of such Tangible Property.
(c) The Executive agrees that his obligations not to disclose or use
information, knowhow, records or Tangible Property of the types set forth in
Section 4(a) or 4(b) hereof also extend to such types of information, knowhow,
records and Tangible Property of customers of Xxxxx or any of its subsidiaries
or suppliers to Xxxxx or any of its subsidiaries or other third parties who may
have disclosed or entrusted the same to Xxxxx or any of its subsidiaries or to
the Executive in the course of Xxxxx'x business.
5. Public Announcements. (a) The Executive agrees that he shall not make
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or cause to be made any public statement, public announcement, press release or
other disclosure to the press which is intended, or could reasonably be
expected, to have a detrimental effect on Xxxxx or Xxxxxxxx-Xxxxx or their
respective businesses or operations, their public image or reputation or their
relations with customers, suppliers, employees, lenders or other business
associates.
(b) Xxxxx and Xxxxxxxx-Xxxxx agree that they shall not make or cause to be
made any public statement, public announcement, press release or other
disclosure to the press which is intended, or could reasonably be expected, to
have a
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detrimental effect on the Executive, his public image or reputation or his
relations with lenders or business associates.
6. Interests in Xxxxxxxx-Xxxxx. The Executive agrees that he shall not at
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any time during the Noncompetition Period (and shall not at any time during the
Noncompetition Period assist or encourage others to):
(a) acquire or agree, offer, seek or propose to acquire (or directly or
indirectly request permission to do so), directly or indirectly, alone or
in concert with any other Person (within the meaning of Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), by
purchase or otherwise, any ownership, including, but not limited to,
beneficial ownership as defined in Rule 13d-3 under the Exchange Act, of
any of the assets, businesses or securities of Xxxxxxxx-Xxxxx or any
subsidiary thereof, or any rights or options to acquire such ownership
(including from any third party);
(b) solicit proxies (as such terms are defined in Rule 14a-1 under the
Exchange Act), whether or not such solicitation is exempt under Rule 14a-2
under the Exchange Act, with respect to any matter from holders of any
shares of capital stock of Xxxxxxxx-Xxxxx or any securities convertible
into or exchangeable for or exercisable (whether currently or upon the
occurrence of any contingency) for the purchase of capital stock of
Xxxxxxxx-Xxxxx (such capital stock and such other securities being
hereinafter collectively called the "Voting Securities"), or make any
communication exempted from the definition of solicitation by Rule 14a-
1(l)(2)(iv) under the Exchange Act;
(c) initiate, or induce or attempt to induce any other Person, entity or
group (as defined in Section 13(d)(3) of the Exchange Act) to initiate, any
stockholder proposal or tender offer for any securities of Xxxxxxxx-Xxxxx
or any subsidiary thereof, any change in control of Xxxxxxxx-Xxxxx or any
subsidiary thereof or the convening of a stockholders' meeting of Xxxxxxxx-
Xxxxx or any subsidiary thereof;
(d) otherwise seek or propose (or request permission to propose) to
influence or control the management or policies of Xxxxxxxx-Xxxxx or any
subsidiary thereof;
(e) enter into any discussions, negotiations, arrangements or
understandings with any other Person with respect to any matter described
in the foregoing Subsections 6(a) through 6(d);
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(f) request Xxxxx or its directors, officers, employees or agents,
directly or indirectly, to amend or waive any provision of this Section 6;
(g) take any action inconsistent with any of the foregoing Subsections 6(a)
through 6(f); or
(h) take any action with respect to any of the matters described in this
Section 6 that requires public disclosure.
Notwithstanding the foregoing provisions of this Section 6, the Executive may
beneficially own for his personal investment purposes up to two percent (2%) of
the outstanding Voting Securities of Xxxxxxxx-Xxxxx.
7. Expenses. Xxxxx shall promptly pay or reimburse the Consultant
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for all costs and expenses (including, without limitation, court costs and
attorney's fees) incurred by the Consultant as a result of any claim, action or
proceeding (including, without limitation, a claim, action or proceeding by
Consultant against Xxxxx or Xxxxxxxx-Xxxxx to collect amounts due to Consultant
or to otherwise enforce this Agreement) arising out of, or challenging the
validity, advisability or enforceability of, this Agreement or any provision
hereof; provided, however, that no such payment or reimbursement shall be made
to Consultant if Consultant is the plaintiff in such claim, action or proceeding
and a final, nonappealable judgment is rendered against Consultant with respect
to all of his claims.
8. Injunctive Relief. The Executive acknowledges that a breach of
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the restrictions contained in Section 2, 5 or 6 hereof shall cause irreparable
damage to Xxxxx and Xxxxxxxx-Xxxxx, the exact amount of which shall be difficult
to ascertain, and that the remedies at law for any such breach shall be
inadequate. Accordingly, the Executive agrees that, if the Executive breaches
any of the restrictions contained in Section 2, 5 or 6 hereof, then Xxxxx and
Xxxxxxxx-Xxxxx shall be entitled to injunctive relief, without posting bond or
other security in addition to any other remedy or remedies available to Company
or Xxxxxxxx-Xxxxx at law or in equity.
9. Termination. This Agreement may be terminated by the Executive
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upon ten (10) day's prior written notice to Xxxxx and Xxxxxxxx-Xxxxx in the
event that Xxxxx or Xxxxxxxx-Xxxxx shall breach any of their obligations under
Section 3, 5(b) or 7 hereof, or Section 2, 4, 5 or 7 of the Consulting
Agreement; provided, however, that the Executive shall not be entitled to
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terminate this Agreement pursuant to this Section 9 in the event that Xxxxx and
Xxxxxxxx-Xxxxx shall cure any such breach within such ten (10) day period. In
the event of such termination by the Executive, Xxxxx shall pay to the Executive
all remaining payments due under this Agreement within five (5) business days of
such termination.
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10. Successors; Binding Agreement. This Agreement shall inure to the
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benefit of and be enforceable by the Executive and by his personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees and by Xxxxx and Xxxxxxxx-Xxxxx and their respective successors and
assigns.
11. Notices. All notices and other communications required or
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permitted under this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered, when delivered by courier or
overnight express service or five days after having been sent by certified or
registered mail, postage prepaid, addressed (a) if to the Executive, to the
Executive's address set forth in the records of the Company, or if to Xxxxx or
Xxxxxxxx-Xxxxx, to Xxxxx X. Xxxxxxx, Chairman of the Board and Chief Executive
Officer, 000 Xxxxxx Xxxxx, Xxxxxx, Xxxxx 00000, with a copy to O. Xxxxxx
Xxxxxxxx, Senior Vice President - Law and Government Affairs, 000 Xxxxxx Xxxxx,
Xxxxxx, Xxxxx 00000, or (b) to such other address as any party may have
furnished to the other parties in writing in accordance herewith, except that
notices of change of address shall be effective only upon receipt.
12. Guaranty. Xxxxxxxx-Xxxxx hereby guarantees the payment of all
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amounts payable by Xxxxx pursuant to this Agreement.
13. Governing Law; Validity. The interpretation, construction and
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performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware without regard to the
applicable principles of conflicts of laws. The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity or
enforceability of any of the other provisions of this Agreement, which other
provisions shall remain in full force and effect.
14. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
15. Miscellaneous. No provision of this Agreement may be modified or
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waived unless such modification or waiver is agreed to in writing and executed
by the Executive and by a duly authorized officer of Xxxxx and of Xxxxxxxx-
Xxxxx. No waiver by any party hereto at any time of any breach by another party
hereto of, or failure to comply with, any condition or provision of this
Agreement to be performed or complied with by such other party shall be deemed a
waiver of any similar or dissimilar conditions or provisions at the same or at
any prior or subsequent time. Failure by the Executive, Xxxxx or Xxxxxxxx-Xxxxx
to insist upon strict compliance with any provision of this
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Agreement or to assert any right which the Executive, Xxxxx or Xxxxxxxx-Xxxxx
may have hereunder shall not be deemed to be a waiver of such provision or right
or any other provision of or right under this Agreement.
IN WITNESS WHEREOF, each of Xxxxx and Xxxxxxxx-Xxxxx has caused this
Agreement to be executed by its duly authorized officer and the Executive has
executed this Agreement as of the day and year first above written.
Xxxxx Paper Company
By
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Xxxxxxxx-Xxxxx Corporation
By
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CONSULTANT:
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Xxxxxx X. Xxxxxx
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