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Tco 361918551v2 1 Non-competition Agreement This Non-competition Agreement

NonCompetition Agreement

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 This NonCompetition Agreement involves

DLH HOLDINGS CORP. | Danya International LLC | DLH Holdings Corp | Health and Human Services

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Title: TCO 361918551v2 1 NON-COMPETITION AGREEMENT THIS NON-COMPETITION AGREEMENT
Governing Law: Maryland     Date: 5/6/2016
Industry: Business Services     Law Firm: Holland Knight     Sector: Services

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TCO 361918551v2 1 NON-COMPETITION AGREEMENT THIS NON-COMPETITION AGREEMENT (“Non-Competition Agreement”) is being executed and delivered effective as of May 3, 2016, by Jeffrey Hoffman, individually (the “Owner”), the indirect majority owner of Danya International LLC, a Maryland limited liability company (the “Company”), in favor of and for the benefit of DLH Holdings Corp., a New Jersey corporation (the “Buyer”), the Company and each of the Buyer’s and the Company’s present and future successors, assigns and direct and indirect subsidiaries (individually, a “Covered Party” and collectively, the “Covered Parties”). A. As the majority (direct or indirect) equity holder of the Company, and as an officer and director/manager of the Company, prior to the closing (the “Closing”) of the Transaction (as defined below), the Owner has obtained extensive and valuable knowledge and confidential information concerning the business of the Company that has contributed to the value of the Company. B. Pursuant to an Equity Purchase Agreement dated as of even date herewith, by and among the Buyer, the Owner and the other parties named therein (the “Purchase Agreement”), the Owner has agreed to sell to the Buyer, and the Buyer has agreed to purchase all of the issued and outstanding equity interests of the Company (the “Transaction”). C. In connection with, and as a condition to the consummation of, the Transaction, and to enable the Buyer to secure more fully the benefits of such Transaction, including the protection and maintenance of the Company’s goodwill and confidential information, the Buyer has required that the Owner enter into this Non-Competition Agreement. D. The Owner is entering into this Non-Competition Agreement in order to induce the Buyer to consummate the transactions contemplated by the Purchase Agreement, pursuant to which the Owner will receive a material benefit. In order to induce the Buyer to consummate the Transaction, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Owner agrees as follows: 1. Restriction on Competition. (a) Restriction. The Owner agrees that during the period beginning on the date hereof and continuing until the fourth anniversary of the date hereof (the “Restricted Period”), the Owner will not, directly or indirectly (other than on behalf of a Covered Party), without the prior written consent of the Company, engage in a Competitive Business Activity (as defined below) anywhere in the Territory (as defined below); provided, however, that notwithstanding the foregoing, the Owner agrees that during the period beginning on the date hereof and continuing until the end of the second procurement cycle (including, for the avoidance of doubt, any modifications of existing contracts) with respect to Contract No. HHSP233201500 144G with the Department of Health and Human Services, dated April 29, 2015, as it may be extended, modified, replaced, superseded, succeeded or followed-on (the “Head Start Contract”), Owner will not take any action to interfere, or attempt to interfere, with the business interests of any of the Covered Parties in such Head Start Contract. For all purposes hereof, the term “Competitive Business Activity” shall mean having an ownership interest of greater than three percent (3%) (individually or in combination with an affiliate or immediate family member of the Owner) in or participating, directly or indirectly, in the operation, financing, management or control of, or becoming employed in a management level position by, any firm, partnership, corporation, entity or business that sells, delivers or provides products or services that are directly competitive with the products or services that are sold, delivered or provided by the Company as of the date hereof to any agency, branch or instrumentality of the United States


 

TCO 361918551v2 2 Government, or to any state or local government, that is a client of the Company as of the date hereof or was a client of the Company within the one (1) year period prior to the date hereof; provided, that nothing in this Section 1(a) shall restrict the Owner from being employed directly by the United States federal government or any state or local government entity. For all purposes hereof, the term “Territory” means only the geographic areas in which the Company conducted business during the one (1) year period prior to the date hereof. (b) Acknowledgment. The Owner acknowledges and agrees, based upon the advice of legal counsel and his own education, experience and training, that (i) the Owner possesses knowledge of confidential information of the Company, (ii) because of the Owner’s education, experience and capabilities, the provisions of this Non-Competition Agreement will not prevent the Owner from earning a livelihood, (iii) the Owner’s execution of this Non-Competition Agreement is a material inducement to the Buyer to enter into the Purchase Agreement and to realize the Company’s goodwill, and consummate the transactions contemplated thereby, for which the Owner will receive a substantial financial benefit, (iv) it would impair the goodwill of the Company and reduce the value of the assets of the Company and cause serious and irreparable injury if the Owner were to use his ability and knowledge in competition with a Covered Party, and/or to otherwise breach the obligations contained herein and that the Covered Parties would not have an adequate remedy at law because of the unique nature of the Company’s products and services, (v) the Owner has no intention of competing in the Territory with the Company in violation of the terms of this Agreement during the Restricted Period, (vi) the relevant public policy aspects of restrictive covenants, covenants not to compete and non-solicitation provisions have been discussed, and every effort has been made to limit the restrictions placed upon the Owner to those that are reasonable and necessary to protect the Covered Parties’ legitimate interests, (vii) the foregoing restrictions on competition are fair and reasonable in type of prohibited activity, geographic area covered, scope and duration, (viii) the consideration provided by the Buyer under this Non-Competition Agreement is not illusory, and (ix) such provisions do not impose a greater restraint than is necessary to protect the goodwill or other business interests of the Covered Parties. 2. No Solicitation; No Disparagement. (a) No Solicitation of Employees and Consultants. The Owner agrees that, during the Restricted Period, the Owner will not, either on his own behalf or on behalf of any other person or entity (other than the Covered Parties), directly or indirectly, (i) hire or engage as an employee, independent contractor, consultant or otherwise any Covered Party Personnel (as defined below), (ii) encourage, induce, attempt to induce, solicit or attempt to solicit any Covered Party Personnel to leave the service (whether as an employee, consultant or independent contractor) of any Covered Party or (iii) in any way interfere with the relationship between any Covered Party Personnel and any Covered Party. For purposes of this Non- Competition Agreement, “Covered Party Personnel” means and includes any person or entity who is an employee, consultant or independent contractor of the Company on the date hereof or who was an employee, consultant or independent contractor of the Company within the one (1) year period prior to the date hereof, other than (i) any such person or entity who has ceased to be an employee, consultant or independent contractor of the Company for a period of six (6) or more months and (ii) any such consultant or independent contractor that has provided professional services to the Company, such as legal, financial or accounting services; provided, however, the Owner will not be deemed to have violated this Section 2(a) if any Covered Party Personnel voluntarily and independently solicits an offer of employment from such employer by responding to a general advertisement or solicitation program conducted by or on behalf of such employer, or is subsequently hired by such employer, as long as the Owner has no involvement or participation, either directly or indirectly, in the recruitment of, or the hiring process or decision with respect to, such employee or consultant (and at the written request of a Covered Party provides an affidavit to that effect).


 

TCO 361918551v2 3 (b) Non-Solicitation of Customers and Suppliers. The Owner agrees that, during the Restricted Period, the Owner will not, individually or on behalf of any other person or entity (other than a Covered Party), directly or indirectly: (i) (A) induce, attempt to induce, solicit or otherwise cause any Covered Customer (as defined below) to (1) cease being a client or customer of or to not become a client or customer of the Company, or (2) reduce the amount of business of such Covered Customer with the Company or otherwise to discontinue or alter, in a manner adverse to the Company, such business relationship, (B) otherwise interfere with, disrupt or attempt to interfere with, reduce or disrupt, the contractual relationship between the Company and any Covered Customer, including, without limitation, influencing or attempting to influence, for a purpose competitive with the products or services that are sold or provided by the Company as of the date hereof, any Covered Customer to terminate or modify any written or oral agreement with the Company, (C) otherwise divert any business from any Covered Customer with the Company, or (D) solicit for business, provide services to, engage in or do business with, or become employed or retained by, any Covered Customer for products or services that are the same as or substantially similar to, or otherwise competitive with, the products or services that are sold or provided by the Company as of the date hereof; or (ii) interfere with or disrupt, or arrange to have any other person or entity interfere with or disrupt, any person or entity that was a vendor, supplier, distributor, agent or other service provider of, the Company as of the date hereof or during the one (1) year period prior to the date hereof, for a purpose competitive with the products and services that are sold or provided by the Company as of the date hereof. For purposes of this Non-Competition Agreement, “Covered Customer” means any client or customer of the Company as of the date hereof or during the one (1) year period immediately prior to the date hereof, and any prospective client or customer to which the Company has actively marketed or has made or has taken specific action to make a proposal within the one (1) year period prior to the date hereof. In the case of a government agency, “client or customer” includes the source selection officials or program office for any applicable contract or program and all offices and personnel that report to or support such source selection officials or program office, and each successor thereto (whether by reorganization or otherwise). (c) Non-Disparagement. (i) The Owner agrees that, during the Restricted Period, he will not engage in any conduct that involves the making or publishing (including, without limitation, through electronic mail distribution or online social media) of written or oral statements or remarks (including, without limitation, the repetition or distribution of derogatory rumors, allegations, negative reports or comments) that are disparaging, deleterious or damaging to the integrity, reputation or goodwill of one or more Covered Parties or their respective management, officers, employees, independent contractors or consultants. This provision is not applicable to (A) truthful testimony obtained through subpoena, (B) any truthful information provided pursuant to investigation by any governmental body, and shall not be construed to (1) require the Owner to refrain from offering any testimony (whether by deposition, written interrogatory, at trial, or otherwise) he may be required to offer in connection with any legal proceeding) or (2) restrict the Owner from enforcing his rights under the Purchase Agreement or under any other agreements and instruments executed in connection therewith. (ii) By its acceptance hereof, the Buyer agrees that, during the Restricted Period, it will instruct its officers and directors to not, and it will instruct each other Covered Party’s officers and directors to not, engage in any conduct that involves the making or publishing (including, without limitation, through electronic mail distribution or online social media) of written or oral statements or


 

TCO 361918551v2 4 remarks (including, without limitation, the repetition or distribution of derogatory rumors, allegations, negative reports or comments) that are disparaging, deleterious or damaging to the integrity, reputation or goodwill of the Owner. This provision is not applicable to (A) truthful testimony obtained through subpoena, (B) any truthful information provided pursuant to investigation by any governmental body, and shall not be construed to (1) require the Buyer or any other Covered Party to refrain from offering any testimony (whether by deposition, written interrogatory, at trial, or otherwise) it may be required to offer in connection with any legal proceeding) or (2) restrict the Buyer from enforcing its rights under the Purchase Agreement or under any other agreements and instruments executed in connection therewith. The Buyer shall be responsibl


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