Exhibit 10.4
NON-COMPETITION
AGREEMENT
This Non-Competition Agreement (the
“ Agreement ”) is entered into, as of
December 30, 2005, by and among Irvine Sensors Corporation, a
Delaware corporation (“ Parent ”), Optex
Systems, Inc., a Texas corporation (the “
Company ”), and the undersigned, Timothy
Looney, an individual (“ Executive
”).
RECITALS
A. The Company is engaged in the
business of developing, manufacturing and distributing telescopes,
periscopes, lenses, collimators, vision blocks and other optical
systems and instruments, including related components and test
equipment. Parent designs, develops, manufactures and sells
miniaturized electronic products for defense, security and
commercial applications. The foregoing businesses, together with
any other business of the Company, Parent or their respective
subsidiaries or affiliates existing or reasonably contemplated
prior to the Closing (as that term is defined in the Purchase
Agreement), are collectively referred to herein as the “
Business ”). For purposes of this Agreement, a
business of the Company, Parent or their respective subsidiaries or
affiliates (each a “ Group Company ” and
collectively, the “ Group Companies ”)
will be deemed “reasonably contemplated” if it is
included in the fiscal year 2006 budget or included in any business
plan or product plans of such Group Companies as of the date
hereof.
B. The Company’s key customers
include the U.S. government and other governmental agencies that
work with manufacturers located throughout the world. The parties
acknowledge that the relevant market for the Business is worldwide
in scope (the “ Restricted Area ”) and
that there exists intense worldwide competition for the products
and services of the Business.
C. Pursuant to the Stock Purchase
Agreement, dated as of December 30, 2005 (the “
Purchase Agreement ”), among the Parent,
Company and Executive, Parent will acquire 70% of all of the issued
and outstanding shares of capital stock of the Company from
Executive, and the Company will become a subsidiary of the Parent
(the “ Acquisition ”). In connection with
the Acquisition, Executive has also granted Parent the right to
acquire the remaining 30% of the Company’s capital
stock.
D. The Group Companies possess
certain information (whether or not recorded in documentary form or
on computer disk or tape) to which they attach a level of
confidentiality or in respect of which any of them owe an
obligation of confidentiality to any third-party, relating to,
without limitation, business methods, corporate plans, management
systems, finances, maturing new business opportunities, research
and development projects, marketing or sales of any past, present
or future product or service of any Group Company including,
without limitation, sales targets and statistics, market share and
pricing statistics, marketing surveys and plans, market research
reports, sales techniques, price lists, discount structures,
advertising and promotional material, the names, addresses,
telephone numbers, contact names and identities of customers and
potential customers of, and suppliers and potential suppliers to,
any Group Company, the nature of their business operations, their
requirements for any product or service sold to or purchased by any
Group Company and all confidential aspects of their business
relationship with any Group Company, any and all trade secrets,
secret formulae, manufacturing
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techniques, processes, technology, inventions,
designs, know-how, discoveries, technical specifications and other
technical information relating to the creation, production or
supply of any past, present or future product or service of any
Group Company, and all other Intellectual Property Rights and
confidential and proprietary information of any Group Company
(“ Confidential Business Information
”).
E. Executive is the sole
shareholder, President and Chief Executive Officer of the Company
and has, or will learn or otherwise acquire during his service to
any Group Company, detailed knowledge of the Confidential Business
Information.
F. Executive holds 100% of the total
shares of capital stock of the Company outstanding at the date
hereof, and therefore has a material economic interest in the
consummation of the Acquisition and, in order to induce Parent to
consummate the Acquisition and the transactions contemplated by the
Purchase Agreement, Executive has agreed to enter into this
Agreement.
G. In order to protect the goodwill,
trade secrets and other Confidential Business Information related
to the Company being acquired by Parent in the Acquisition, the
Parent, Company and Executive have agreed that Parent’s
obligation to consummate the Acquisition and the transactions
contemplated by the Purchase Agreement is subject to the condition,
among others, that Executive shall have entered into this
Agreement.
H. Capitalized terms used herein and
not defined shall have the meanings ascribed to them in the
Purchase Agreement.
NOW, THEREFORE
, in consideration of the promises
and mutual covenants and agreements hereinafter set forth, and for
other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Executive, Company and Parent,
intending to be legally bound, hereby agree as follows:
ARTICLE 1
NON-COMPETITION
1.1 Non-Competition . As an
inducement for Parent to enter into the Purchase Agreement and
consummate the Acquisition, and in connection with the sale of
Executive’s shares of Company capital stock in connection
with the Acquisition, and the acquisition of the goodwill of the
Company by Parent, Executive agrees that, without the express prior
written consent of Parent, from and after the consummation of the
Acquisition and until the date that is two (2) years after the
date that Executive ceases to be employed by a Group Company (as
defined below) (the “ Non-Competition Period
”), Executive shall not, anywhere in the Restricted Area,
directly or indirectly, whether individually or as an employee,
consultant, partner, advisor, independent contractor, officer,
director, member, equity holder, debt holder, joint venture
participant, lender, guarantor, principal, agent, representative or
in any other similar capacity, for any Person, firm, partnership,
company, corporation or other entity (other than a Group Company)
(without limitation by specific enumeration of the foregoing):
(1) in any way own, manage, operate, sell, control or
participate in the ownership, management, operation, sale or
control of any business, activity, entity or Person, or engage in
any business or activity, that is competitive (wholly or partly)
with or similar to the Business, or (2) render any services
or
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provide any advice with respect to or involving
the Business to any business, activity, entity or Person (other
than a Group Company), or (3) allow his name or the name of
the Company to be used in connection with any business, activity,
entity or Person (other than a Group Company) that is competitive
(wholly or partly) with or similar to the Business. Notwithstanding
the foregoing, Executive may own, directly or indirectly, solely as
an investment, up to one percent (1%) of any class of Publicly
Traded Securities (as defined below) of any Person that owns or
operates a business that is competitive (wholly or partly) with or
similar to the Business; provided however, that Executive may not
devote any managerial efforts for, or provide any services to, such
Person. For the purposes of this Section 1.1, the term “
Publicly Traded Securities ” shall mean
securities that are traded on a national securities exchange or
listed on the Nasdaq National Market.
1.2 No Interference with the
Business; Non-Solicitation . As an inducement for Parent to
enter into the Purchase Agreement and consummate the Acquisition,
Executive agrees that during the Non-Competition Period, at any
time or for any reason, Executive shall not, directly or
indirectly, (a) solicit or divert away from a Group Company
any business or customers, vendors, clients, licensors, licensees,
suppliers, agents or other Persons made known to Executive during
his employment with a Group Company, (b) induce customers,
vendors, clients, licensors, licensees, suppliers, agents or other
Persons under contract or otherwise associated or doing business
with a Group Company to reduce or alter any such association or
business with the Group Company or otherwise interfere in the
business relationship of any such Persons and the Group Company,
and/or (c) solicit any employee, independent contractor,
consultant or other Person in the employment or service of a Group
Company, at the time of such solicitation, in any case to
(i) terminate such employment or service, and/or
(ii) accept employment, or enter into any consulting or other
service arrangement, with any Person other than a Group
Company.
ARTICLE 2
REMEDIES AND CONFLICT RESOLUTION
2.1 Remedies . The parties to
this Agreement agree that: (i) Executive’s services are
unique, because of the particular skill, knowledge, experience and
reputation of Executive; (ii) if Executive breaches Article 1
of this Agreement, the damage to Parent will be substantial, and
difficult to ascertain, and
