Its one thing for an employee to have reasonable post-employment restrictions in an employment agreement, but this clause exceeds even the most zealous restrictions I have seen.
This clause arises out of the securities industry which from my experience is notoriously thorough and probing in areas such as competition.
6. No Interference with Business.
(a) The Employee hereby agrees that from the date hereof and for a period of twelve (12) months after the termination or expiration of the Employee’s services hereunder, however occurring (the “Restricted Period”), the Employee will not (other than as an Employee of the Company and on the behalf of the Company and its Affiliates), in any manner or capacity, directly or indirectly, through or on behalf of an Affiliate (as defined above) or otherwise, (i) render any Financial Services or any other service rendered by an of the Companies (the “Competing Services”) to any present or prospective client or customer of any of the Companies, (ii) interfere with the services of any of the Companies to any of their clients, including clients introduced by the Employee to any of the Companies, (iii) solicit, induce, influence or have any other business contact with any present or prospective client or customer of any of the Companies, or (iv) induce any client of any of the Companies, to terminate or modify and/or consider terminating and/or modifying his/her/their/its relationship with any of the Companies. For the purposes of this Agreement: (i) a “prospective client” or “prospective customer” shall be one that had been specifically identified during the term of this Agreement as a prospective client or customer and in respect of whom or which the Company or any of its Affiliates had undertaken some demonstrable initiative towards being retained to render Competing Services; and (ii) a “client” or “customer” shall be one who has purchased or received or has entered into an agreement to purchase or receive for himself, itself or others, any of the Competing Services from any of the Companies at any time during the twelve (12) month period immediately preceding the termination or expiration of the Employee’s services hereunder. Notwithstanding anything to the contrary in this Agreement or otherwise and with the exception of any and all previous and/or existing clients of Employee as set forth on the attached Exhibit E, regardless of whether services are performed through any of the Company’s Affiliates any and all clients serviced by the Employee pursuant to this Agreement shall be considered clients of the Company.
(b) The Employee further agrees that during the Restricted Period, the Employee will not directly or indirectly, communicate, reveal, disclose to anyone, or use or otherwise exploit for the Employee’s own benefit or for the benefit of anyone else, the terms of this Agreement, including without limitation, the compensation paid to the Employee hereunder and the other provisions of this Agreement. In the event Employee is no longer employed by Company, the Company will be agreeable to disclosing such information to potential employers related to salary and production information upon the request from Employee.
(c) The Employee hereby further agrees during the Restricted Period, the Employee will not in any manner or capacity directly or indirectly (through or on behalf of an Affiliate or otherwise) employ any employees or agents of any of the Companies to discontinue such employment or agency or other relationship with any of the Companies unless any of the Companies terminates any such employee(s) or agent(s) and grants the Employee prior written authorization to employ such employee(s) or agent(s).
(d) The parties acknowledge that rendering Financial Services can involve, as to certain clients or customers, close personal relationships and that it is not unforeseeable that upon a termination of the Employee’s services hereunder some clients or customers may on their own initiative elect to discontinue the relationship with any of the Companies and seek to continue a relationship with the Employee. The parties also acknowledge that it is not in either parties’ interest to have a client or customer of any of the Companies discontinue its relationship with any of the Companies because of the departure of the Employee AND have the Employee be precluded by the terms of Section 6(a) from continuing a relationship with such client or customer insofar as such result would amount to a loss by both parties. Therefore, the parties agree that in any case where (i) a client or customer of any of the Companies terminates its relationship with any of the Companies (a “Former Client”), (ii) such termination has not been encouraged, solicited, or induced by the Employee in violation of his undertakings under Section 6(a), and (iii) the Former Client retains the Employee, an Affiliate of Employee or any other company, partnership, firm, association, person or other business with which the Employee and/or any of the Employee’s Affiliates has an agreement relating in any way to Financial Services (a “Successor Advisor”), to render Financial Services, then the Employee agrees to pay to the Company (or its applicable financial services Affiliate) the fees and/or commissions payable or earned by the Former Client to the Employee and/or the Successor Advisor with respect to Financial Services rendered during the first twelve (12) months after the Employee and/or Successor Advisor is retained by the Former Client. Notwithstanding anything to the contrary in this Agreement or otherwise and with exception of any and all previous and/or existing clients of employee as set forth on the attached Exhibit E, regardless of whether services are performed through any of the Company’s Affiliates, any and all clients serviced by the Employee pursuant to this Agreement shall be considered clients of the Company. By execution of this Agreement, the Employee agrees that this provision shall be binding on any Successor Advisor. Finally, the parties acknowledge and agree that it can be difficult to ascertain the circumstances of a client’s departure and the damages Company might suffer. Therefore, the parties stipulate and agree that the provisions of this Section 6(d) are reasonably calculated to compensate the Company for losses it might sustain under these circumstances and that any such payment shall constitute liquidated damages and not a penalty. The Employee agrees that during the Restricted Period it shall permit the Company to review the Employee’s books and records, and those of any Successor Advisor, relating to the identity of his or its clients and customers in order to enable Company to assure itself of the due performance by the Employee of his obligations under this Section 6. The Company agrees that it shall exercise its rights hereunder at reasonable times during regular business hours and in a manner which does not unreasonably interfere with the conduct of the Employee’s subsequent activities, to the extent properly conducted by the Employee under this Section 6, or those of the Successor Advisor. Any persistent refusal to allow such review shall suspend the Employee’s rights to perform Financial Services for a Former Client (but not the Company’s rights to recover damages on account thereof).
Follow Us!