Pioneer Power Solutions Inc. 8-K [ppsi-8k_012219.htm]  

Exhibit 10.3

 

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

 

This Non-Competition and Non-Solicitation Agreement (this "Agreement") is
entered into as of January 22, 2019 (the "Effective Date"), by and between
CleanSpark, Inc., a Nevada corporation ("Buyer"), and Pioneer Power Solutions
Inc., a Delaware corporation ("Shareholder").

 

RECITALS

 

A.  This Agreement is being entered into pursuant to and as a condition of that
certain Agreement and Plan of Merger (the "Merger Agreement"), dated the date
hereof, by and among Buyer, CleanSpark, Acquisition Inc., a Delaware corporation
(the "Merger Sub"), and Pioneer Critical Power, Inc., a Delaware corporation
(the "Company"), pursuant to which Buyer will acquire all of the outstanding
capital stock held by Shareholder of the Company (the "Transaction").  As a
result of the Merger Agreement, Merger Sub shall be merged with and into the
Company, and the resulting entity shall be referred to as the "Surviving
Company."

 

B. It is anticipated and expected that the Effective Date of this Agreement
shall correspond to the Effective Time of the Merger as set forth in Section 1.3
of the Merger Agreement.

 

C. Shareholder is the sole equity holder of the Company and controls management
of the Company, such that it is in possession of confidential and proprietary
information, including trade secrets, relating to the business and operations of
the Company, and will derive substantial economic benefit from the Transaction
as a result of Buyer's purchase of all of Shareholder's equity interest in the
Company.

 

D. The parties recognize and agree that this Agreement is necessary to protect
Buyer's interest in the Company, including its goodwill that will be acquired in
connection with the Transaction.  As a result, in order to protect its interest
in the Company, including its goodwill, Buyer desires to ensure that Shareholder
and its Affiliates (as that term is defined in the Merger Agreement) will not
compete with the Company for the period set forth in this Agreement, in a
business which is in competition with the business of the Company, in all of the
geographical areas where the Company has conducted or carried on business prior
to the closing of the Transaction pursuant to the terms set forth herein.

 

E. This Agreement is a material inducement to Buyer to enter into the
Transaction, and Shareholder is agreeable to entering into this Agreement with
Buyer, on the terms set forth herein, in order to protect Buyer's legitimate
interests as a buyer of the stock and goodwill of the Company.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:

 

1.  RESTRICTION ON COMPETITION.  Subject to the terms and conditions hereof,
Shareholder covenants and agrees that, for the Restricted Period (as defined
below), Shareholder and its Affiliates shall not, either directly or indirectly,
through an affiliated or controlled entity or person, on Shareholder's own
behalf or as an employee, shareholder, officer, director, partner, consultant,
proprietor, principal, agent, creditor, security holder, trustee or otherwise in
any other capacity (except by ownership of up to one percent (1%) or less of any
class of the securities of any publicly held corporation that engages in or
plans to engage in operations that are in competition with the Company, the
Surviving Company or Buyer, if such securities are set forth in any national
securities exchange or have been registered under section 12 (g) of the Exchange
Act), own, manage, operate, finance, control, advise, render services to (as a
shareholder, employee, officer, director, consultant, owner, partner, volunteer
or in any other capacity) or guarantee the obligations of any person or entity
that engages in or plans to engage in a business which is in competition

 

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with the business of the Company, the Surviving Company or Buyer, which for
purposes of this Agreement shall mean the business that is described in Exhibit
“A” attached hereto and incorporated herein based on geography or a business
that is otherwise competitive with the business of Buyer as conducted on the
Effective Date (the "Restricted Business") within any state or county within the
United States of America in which Buyer or the Surviving Company conducts the
Restricted Business during the Restricted Period (the "Restricted Territory"). 
The term "Restricted Period" shall mean the period commencing on the Effective
Date of this Agreement and continuing for a period of four (4) years (or if a
court should determine that 4 years is not reasonable, then the parties agree
that the longer period of 3 years, or 2 years, or 1 year, as the court shall
deem reasonable, shall apply).

 

2. NONSOLICITATION.  During the Restricted Period, Shareholder and its
Affiliates shall not, whether for Shareholder's own account or for the account
of any other individual, partnership, firm, corporation or other business
organization, directly or indirectly, separately or in association with others,
interfere with, impair, disrupt or damage the business of the Surviving Company,
Buyer or any affiliated entities by:

 

(i) soliciting, recruiting, or encouraging any of the Surviving Company's,
Buyer's or their affiliated entities' employees or independent contractors to
discontinue their employment or engagement with the Surviving Company, Buyer or
any affiliated entity or by causing others to solicit, recruit or encourage any
of the Surviving Company's, Buyer's or their affiliated entities' employees or
independent contractors to discontinue their employment or engagement with the
Surviving Company, Buyer or any affiliated entities.

 

(ii) soliciting, inducing or attempting to induce any person or entity that was
a customer, supplier, licensee, licensor, franchisee, consultant or other
business associate of the Restricted Business as conducted by the Company,
Surviving Company, Buyer or any affiliated entity on or within one year
preceding the Effective Date, or during the Restricted Period, to cease doing
business with Surviving Company, Buyer or any affiliated entities.

 

3. NONDISPARAGEMENT. From and after the Effective Date, (i) Shareholder and its
Affiliates agree not to disparage the business reputation of the Company,
Surviving Company, Buyer or any of their affiliated entities, or the personal or
business reputations of any of their respective officers, directors or owners,
and (ii) Buyer and its Affiliates agree not to disparage the business reputation
of Shareholder or any of its affiliated entities, or the personal or business
reputations of any of their respective officers, directors or owners.

 

4. SEPARATE COVENANTS.  The covenants contained herein shall be construed as if
each covenant is divided into separate and distinct covenants with respect to
the Restricted Business, each capacity in which Shareholder is prohibited from
competing and each part of the Restricted Territory in which the Company is
carrying on the Restricted Business.  Each such covenant shall constitute
separate and several covenants distinct from all other such covenants.  In
addition, each of the parties hereto recognizes that the territorial
restrictions contained in this Agreement are properly required for the adequate
protection of the interests purchased by Buyer in the Transaction, and that in
the event any covenant or other provision contained herein shall be deemed to be
illegal, unenforceable or unreasonable by a court or other tribunal of competent
jurisdiction with respect to any part of the Restricted Territory, such covenant
or provision shall not be affected with respect to any and all other parts of
the Restricted Territory, and each of the parties hereto agrees and submits to
the reduction of said territorial restriction to such an area as said court
shall deem reasonable.  Similarly, in the event any covenant or other provision
contained herein shall be deemed to be illegal, unenforceable or unreasonable by
a court or other tribunal of competent jurisdiction with respect to the
Restricted Period, each of the parties hereto agrees and submits to the shortest
reduction of the Restricted Period to such a time period as said court shall
deem reasonable.

 

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5. REPRESENTATIONS AND REMEDIES.  Each of the parties acknowledge that: 
(i) Shareholder is deriving substantial economic benefit from his sale of all of
his equity in the Company to the Buyer in connection with the Transaction;
(ii) the covenants and the restrictions contained in this Agreement are
necessary, fundamental and required for the protection of Buyer's interest in
the Company; (iii) such covenants relate to matters which are of a special,
unique and extraordinary character that gives each of such covenants a special,
unique and extraordinary value; (iv) Shareholder is entering into this Agreement
solely in connection with Transaction; and (v) a breach of any of such covenants
or any other provision of this Agreement will result in irreparable harm and
damage to Buyer that cannot be adequately compensated by a monetary award. 
Accordingly, it is expressly agreed that in addition to all other remedies
available at law or in equity (including, without limitation, money damages from
Shareholder), Buyer shall be entitled to seek the remedy of a temporary
restraining order, preliminary injunction or such other form of injunctive or
equitable relief as may be used by any court of competent jurisdiction to
restrain or enjoin any of the parties hereto from breaching any such covenant or
provision or to specifically enforce the provisions hereof.

 

6. NOTICES.  All notices, requests, demands and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered to Buyer in the fashion and at the
addresses as specified in Section 7.2 of the Merger Agreement and to Shareholder
at: 400 Kelby Street, 12th Floor Fort Lee, New Jersey 07024 or to such other
addresses as any party hereto may specify by notice in writing to the other.

 

7. GOVERNING LAW.  This Agreement shall be construed and interpreted and its
performance shall be governed by the laws of the State of Nevada without regard
to conflicts of law principles of any jurisdiction.  As a result of the fact
that Buyer is headquartered in Las Vegas, Nevada, each of the parties hereto
irrevocably consents to the exclusive jurisdiction and venue of the state or
federal courts in and around Las Vegas, Nevada in connection with any matter
based upon or arising out of this Agreement or the matters contemplated herein,
agrees that process may be served upon them in any manner authorized by the laws
of the State of Nevada for such persons and waives and covenants not to assert
or plead any objection which they might otherwise have to such jurisdiction,
venue and such process.

 

8. SUCCESSORS AND ASSIGNS.  This Agreement is the valid and legally binding
obligation of the parties hereto, enforceable against each party in accordance
with its terms, and shall inure to the benefit of such parties and their
respective successors and assigns.

 

9.  COUNTERPARTS.  This Agreement may be executed in any number of counterparts
and any party hereto may execute any such counterpart, each of which when
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument. 
This Agreement shall become binding when one or more counterparts taken together
shall have been executed and delivered by the parties by facsimile transmission
or otherwise.

 

10. ENTIRE AGREEMENT.  This Agreement is entered into concurrently with the
Merger Agreement, and together with the provisions therein on the same subject,
constitutes the entire agreement between the parties with respect to the subject
matter of this Agreement and supersedes all prior written and oral agreements
and understandings between the parties with respect to the subject matter of
this Agreement.  This Agreement may not be amended except by a written agreement
executed by all parties.

 

11. WAIVER.  The rights and remedies of the parties to this Agreement are
cumulative and not alternative.  Neither the failure or any delay by any party
in exercising any right, power or privilege under this Agreement will operate as
a waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or

 

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privilege or the exercise of any other right, power or privilege.  To the
maximum extent permitted by applicable law:  (i) no claim or right arising out
of this Agreement can be discharged by one party, in whole or in part, by a
waiver or renunciation of the claim or right unless in writing signed by the
other party; (ii) no waiver that may be given by a party will be applicable
except in the specific instance for which it is given; and (iii) no notice to or
demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further
action without notice or demand as provided in this Agreement.

 

12. INDEPENDENCE OF OBLIGATIONS.  The covenants and obligations of Shareholder
set forth in this Agreement shall be construed as independent of any other
agreement or arrangement between Shareholder, on the one hand, and Buyer, on the
other hand, and the existence of any claim or cause of action by Shareholder
against Buyer shall not constitute a defense to the enforcement of such
covenants or obligations against Shareholder.

 

13. ADVICE OF COUNSEL.  Each party hereto acknowledges that it has either been
represented by independent legal counsel or that it has waived its right to
obtain advice of legal counsel in connection with the transactions contemplated
by this Agreement.

 

 

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IN WITNESS WHEREOF, the parties have duly executed this Non-Competition and
Non-Solicitation Agreement as of the date first written above.

 

 

  CLEANSPARK, INC.       By: /s/ Zachary Bradford         Name: Zachary Bradford
        Title: President           SHAREHOLDER       By: /s/ Nathan Mazurek    
    Name: Nathan Mazurek

 

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Exhibit A

The design, manufacture, distribution and service of paralleling switchgear,
automatic transfer switches, and related products. 

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