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EXHIBIT 10.4
NONCOMPETITION AGREEMENT
This
Noncompetition Agreement ("Agreement") is made and entered into
this
28th day of July, 2005, by and between
MediaDefender, Inc., a Delaware
corporation (the "Company"), and Octavio
Herrera ("Executive").
RECITALS:
A. The
Company is a leading provider of anti-piracy solutions in the
Internet piracy prevention industry (the
"IPP Business");
B. The
Company, ARTISTdirect, Inc., a Delaware corporation ("Parent"),
and
ARTISTdirect Merger Sub, Inc., a Delaware
corporation and wholly-owned
subsidiary of Parent ("Merger Sub"),
entered into that certain Agreement and
Plan of Merger dated as of the date hereof
(the "Merger Agreement"), pursuant to
which Merger Sub was merged with and into
the Company (the "Merger");
C. Prior
to consummation of the Merger, Executive served as the
Company's
Chief Financial Officer; and
D. As a
condition to Parent entering into the Merger Agreement, Parent
has
requested that the Executive agree, and the
Executive has agreed, to enter into
this Noncompetition Agreement.
NOW,
THEREFORE, the parties hereby agree as follows:
1.
Noncompetition Obligations. For purposes of this Agreement, the
term
"Restricted Period" shall mean the period
beginning on the date of this
Agreement and ending on the four (4)-year
anniversary. In consideration of a
cash payment of $525,000, to be paid on
December 31, 2006 (the "Noncompetition
Lump Sum Consideration") and other valuable
consideration (collectively, the
"Noncompetition Consideration"), Executive
expressly covenants and agrees that
during the Restricted Period, Executive
will not, directly or indirectly, on
behalf of any other person, firm, limited
liability company, partnership or
corporation, as owner, employee, creditor,
consultant or otherwise, engage in
any aspect of the IPP Business in the
United States or other locations where the
Company or Parent may then be conducting
the IPP Business (the "Territory");
provided, however, the beneficial ownership
of less than five percent (5%) of
the shares of stock of any publicly traded
entity shall not be deemed to
constitute a violation of this
provision.
2.
Customer Non-Solicitation. Executive expressly covenants and
agrees
that during the Restricted Period,
Executive will not solicit, divert, take
away, or attempt to solicit, divert or take
away, any of the Company's or
Parent's customers or the business or
patronage of any such customers, either
for himself or on behalf of any other
person, firm, partnership, limited
liability company or corporation within the
Territory; provided, however, that
this Section 2 shall not prohibit Executive
from soliciting such customers with
respect to business that is non-competitive
with the IPP Business.
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3.
Executive Non-Solicitation. Executive expressly covenants and
agrees
that during the Restricted Period,
Executive will not solicit, recruit or hire
any other employee of the Company or
Parent, either for himself or on behalf of
any other person, firm, partnership,
limited liability company or corporation.
4.
Confidential Information.
4.1 Definition of Confidential Information. The Company is in
the
IPP Business and has built up and
established a positive reputation in the
industry. The Company has developed and
continues to develop commercially
valuable technical and non-technical
information ("Confidential Information")
that is proprietary and confidential and/or
constitutes the Company's "trade
secrets." Such Confidential Information,
which is vital to the success of the
Company's business, includes, but is not
necessarily limited to: system
documentation, data compilations, software
and related codes or formulas,
manuals, methods, techniques, processes,
customers, prospective customers,
suppliers, prospective suppliers, contracts
with suppliers and customers, sales
proposals, methods of sales, marketing
research and data, pricing policies, cost
information, financial information,
business plans, specialized requests of the
Company's customers, and other materials
and documents developed by the Company.
Confidential Information does not include,
however, information which (i) is or
becomes generally available to the public
other than as a result of a disclosure
by Executive, (ii) was available to
Executive on a non-confidential basis prior
to its disclosure by the Company, or (iii)
becomes available to Executive on a
non-confidential basis from a person other
than the Company who is not otherwise
bound by a confidentiality agreement with
the Company, or is not otherwise
prohibited from transmitting the
information to Executive.
4.2 Nondisclosure of Confidential Information. Executive shall
not
at any time during the Restricted Period
(i) directly or indirectly, disclose or
divulge any Confidential Information to any
person not then employed by the
Company, unless authorized or directed by
the Company or ordered by a
governmental agency or court order or (ii)
appropriate any Confidential
Information for use other than performance
of Executive's duties hereunder. If
the Company authorizes or directs Executive
to disclose Confidential Information
to any such third party, Executive must
ensure that a signed confidentiality
agreement is or has been obtained from the
third party to whom Confidential
Information is being disclosed and that all
Confidential Information so
disclosed is clearly marked
"Confidential."
4.3 Return of Confidential and Other Information. All
Confidential
Information provided to Executive, and all
documents and things prepared by
Executive in the course of Executive's
employment, includi
