Exhibit 10.118
Noncompetition, Nondisclosure and Nonsolicitation
Agreement
This
Noncompetition, Nondisclosure and Nonsolicitation Agreement
(this “Agreement”) is made as of the 26th day of
February, 2008, by and among Xfone, Inc., a Nevada corporation
(“Purchaser”), on the one hand, and each of
Telephone Electronics Corporation, a Mississippi corporation
(“TEC”), Joseph D. Fail, Chris Chelette, Robert
Healea, Joey Garner, and Walter Frank (each a “TEC
Affiliate” and collectively the “TEC
Affiliates”), severally and not jointly, each of such
individuals being an officer or director of TEC or an
affiliate of TEC, including NTS (as defined herein), on the
other hand. TEC and the TEC Affiliates shall each
be referred to herein from time to time as a “TEC
Party,” and collectively as the ‘TEC
Parties.”
RECITALS
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A.
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TEC
owns 799,214 shares of the common stock which constitutes 63.5
percent (63.5%) of all the issued and outstanding Equity Interests
of NTS Communications, Inc. (together with its subsidiaries
“NTS”), a Texas corporation, and is the single largest
shareholder of NTS.
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B.
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Concurrently
with the execution and delivery of this Agreement, Purchaser is
purchasing from TEC all of the Equity Interests owned by TEC in NTS
pursuant to the terms and conditions of a stock purchase agreement
made as of the 22nd day of August, 2007, as amended (the
“Stock Purchase Agreement”), by and among Purchaser,
NTS and the shareholders of NTS identified as the
“Sellers” on the signature pages of the Stock Purchase
Agreement.
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C.
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Section
2.5(q) of the Stock Purchase Agreement requires that a
noncompetition agreement in the form of this Agreement be executed
and delivered by the TEC Parties to Purchaser on or before the
Closing.
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D.
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This
Agreement represents all of the agreements and obligations of any
of the TEC parties arising under Section 2.5 of the Stock Purchase
Agreement or otherwise with regard to the subject matter hereof,
including the Confidential Information (as subsequently defined) of
NTS.
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AGREEMENT
The
parties, intending to be legally bound, agree as
follows:
1.
DEFINITIONS
“Confidential
Information,” is defined in Section 2.
Capitalized
terms not expressly defined in this Agreement shall have the
meanings ascribed to them in the Stock Purchase
Agreement.
2.
ACKNOWLEDGMENTS BY THE TEC PARTIES
Each
of the TEC Parties acknowledge that he (or it) has occupied a
position of trust and confidence with TEC or NTS prior to the
date hereof and has had access to and has become familiar with
the following, any and all of which constitute confidential
information of NTS (collectively the “Confidential
Information”): Except as provided in the final sentence
of this paragraph, (a) any and all trade secrets concerning
the business and affairs of NTS, including product
specifications, data, compositions, processes, past, current
and planned research and development, current and planned
construction, products and distribution methods and processes,
customer lists, current and anticipated customer requirements,
price lists, market studies, business plans, computer software
and programs (including object code and source code), database
technologies, systems, structures architectures processes,
improvements, devices, know-how, discoveries, concepts,
methods and information of NTS’s business and any other
information, however documented, of NTS that is a trade secret
within the meaning of applicable law as of the date hereof;
(b) any and all information concerning the business and
affairs of NTS (which includes historical financial
statements, financial projections and budgets, historical and
projected sales, capital spending budgets and plans, personnel
training and techniques and confidential information related
to NTS’ customers, however documented; and (c) any and
all notes, analysis, compilations, studies, summaries and
other material prepared by or for NTS containing or based, in
whole or in part, upon any information included in the
foregoing which has been treated as confidential by NTS or the
creator thereof, as the case may
be. Notwithstanding the foregoing, the Confidential
Information shall not include: (i) information that has been
provided to TEC or any TEC Party solely in connection with
such person or entity’s (or such person’s status
as an officer or agent of another business entity) commercial
dealings with NTS, outside of the TEC Party’s
relationship of authority or trust with NTS, if any, (ii)
information readily ascertainable or compilable from the books
and records of any other business or governmental entity,
other than those provided to a TEC Party in confidence by NTS,
(iii) information that relates to the business dealings
between TEC and its affiliates and the TEC Parties, on the one
hand, and NTS on the other, other than any information
received in such TEC Party’s service as an officer or
director of NTS, (iv) information which is also the
confidential information of TEC or any of the TEC Parties, or
their respective Affiliates.
Each
of the TEC Parties acknowledge that (a) the business of NTS
relating to the use and operation of all its assets prior to
Closing (the “Business”) is interstate in scope
but relates primarily to that part of the State of Texas west
of a line drawn from the Grayson County Courthouse to the
Jefferson County Court House (the “Primary
Market”); (b) its products and services related to such
Business are marketed in several regions of the United States,
including the Primary Market; (c) NTS’ s Business prior
to Closing competes with other businesses that are or could be
located in any part of the United States; (d) Purchaser has
required that each of the TEC Parties make the covenants set
forth in Sections 3 and 4 of this Agreement as a condition to
the closing of the Stock Purchase Agreement; (e) the
provisions of Sections 3 and 4 of this Agreement are
reasonable and necessary to protect and preserve NTS and its
Business and the Purchaser’s interests in and right to
the use and operation of the Business from and after Closing;
and (f) Purchaser would be irreparably damaged if any of the
TEC Parties were to breach the covenants set forth in Sections
3 and 4 of this Agreement.
3.
CONFIDENTIAL INFORMATION
Each
of the TEC Parties acknowledge and agree that the protection
of the Confidential Information is necessary to protect and
preserve the value of the Business. Therefore, each of the TEC
Parties hereby agree not to disclose to any unauthorized
Persons or use for his or its own account or for the benefit
of any third party any Confidential Information, whether or
not such information is embodied in writing or other physical
form or is retained in the memory any of the TEC Parties,
without Purchaser’s written consent, unless and to the
extent that the Confidential Information is or becomes
generally known to by the public other than as a result of the
TEC Party’s fault, the provisions hereof are waived by
Purchaser or the disclosure in question is required by
applicable law or process of law. Notwithstanding
the foregoing, however, no provision of this agreement shall
be deemed to limit the ability of any TEC Party to provide
truthful testimony or to offer truthful information to any
agent of the United States Government or any member of the
United States Congress.
4.
NONCOMPETITION AND NONSOLICITATION
As
an inducement for Purchaser to enter into the Stock Purchase
Agreement and as additional consideration for the
consideration to be paid to TEC under the Stock Purchase
Agreement, each of the TEC Parties agree that:
(a)
For a period of two (2) years after the Closing:
(i)
TEC will not, directly or indirectly, engage or invest in,
own, manage, operate, finance, control or participate in the
ownership, management, operation, financing or control of, be
employed by, associated with or in any manner connected with,
or render services or advice or other aid to, or guarantee any
obligation of, any Person, engaged in or planning to become
engaged in providing to any Primary Market Customer, local or
long distance telecommunications services or any other
products or services which compete with the products and
services provided by NTS prior to the Closing
(“Competitive Products”), including without
limitation, local, long distance, broadband, dial up data
services, wireless, DSL, Voice-over-Internet Protocol
(VoIP). TEC agrees that this covenant is reasonable
with respect to its duration, geographical area and
scope. For the purposes hereof, a “Primary
Market Customer” shall be any individual resident in, or
any business entity whose principal executive offices are
located in, the Primary Market Area.
(ii)
The TEC Parties, severally and not jointly, will not directly
or indirectly, engage or invest in, own, manage, operate,
finance, control or participate in the ownership, management,
operation, financing or control of, be employed by, associated
with or in any manner connected with, or render services or
advice or other aid to, or guarantee any obligation of, any
Person, other than a Current Competitor, engaged in or
planning to become engaged in providing to any Primary Market
Customer, local or long distance telecommunications services
or any other products or services which compete with the
Competitive Products, including without limitation, local,
long distance, broadband, dial up data services, wireless,
DSL, Voice-over-Internet Protocol (VoIP). The TEC Parties
agree that this covenant is reasonable with respect to its
duration, geographical area and scope. For the purposes
hereof, the “Current Competitors” shall mean those
business entities of which a TEC Party is the record or
beneficial owner of less than all of such entity’s debt
or equity securities as of the date hereof, and which
is currently
offering or proposing to offer Competitive Products in the
Primary Market, including but not limited to Randy
Wh
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