EXHIBIT 10.7
NON-COMPETITION AND
CONFIDENTIALITY AGREEMENT
This NON-COMPETITION AND CONFIDENTIALITY AGREEMENT (this "AGREEMENT") is
made and entered into as of this 28th day of June, 2005, by and between XXXXXXXX
DELAWARE ACQUISITION COMPANY, a Delaware corporation (the "COMPANY") and XXXXXXX
XXXXXXX (the "STOCKHOLDER").
R E C I T A L S :
A. The Company is a wholly-owned subsidiary of Phoenix Footwear Group,
Inc. ("PHOENIX FOOTWEAR" and together with the Company, the "BUYER").
B. The Company, Xxxxxxxx Belt Company (the "SELLER"), Stockholder and the
other Xxxxxxxx Belt stockholders entered into an Asset Purchase Agreement dated
April 18, 2005 (such agreement, together with any and all agreements and
instruments to be executed and delivered pursuant thereto and all schedules and
exhibits thereto, all as the same may be amended, supplemented or modified from
time to time, the "ASSET PURCHASE AGREEMENT") pursuant to which the Seller
agreed to sell to the Company and the Company agreed to purchase from Seller
certain properties, goodwill and tangible and intangible business assets and
assume certain liabilities of Seller necessary for the Company to continue
Seller's business of designing, manufacturing, sourcing, importing, warehousing,
marketing, distributing, and selling men's, women's, boy's and girl's western
dress and casual belts and related leather accessories and products
(collectively, the "BUSINESS").
C. Phoenix Footwear has guaranteed certain obligations of the Company
pursuant to a Guaranty dated April 18, 2005 executed by Phoenix Footwear in
favor of Seller and the Stockholders, has issued shares of its common stock to
the Seller in partial payment of the purchase price due under the Asset Purchase
Agreement, may issue additional shares of its common stock to Seller under the
earn-out provisions of the Asset Purchase Agreement and has granted registration
rights to Seller with respect to such shares.
D. The Stockholder has served as a President and Chief Executive Officer
of Seller and as such, has unique knowledge and experience regarding the
Business, and the Buyer desires to be assured that confidential information and
relationships pertaining to the Business and the goodwill associated with the
Business will be preserved and protected and will inure to the benefit of the
Buyer after the closing of the transactions contemplated by the Asset Purchase
Agreement (the "CLOSING").
E. As an inducement for, and to fulfill a material condition to the
obligation of the Buyer to consummate the transactions contemplated in the Asset
Purchase Agreement (the "CLOSING"), Stockholder is entering into this Agreement
and agreeing to abide by and observe the terms and restrictions hereof.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements hereinafter set forth and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. ACKNOWLEDGMENTS. Stockholder acknowledges that: (a) the goodwill
associated with the Business, customers and assets of the Seller prior to the
Closing are an integral component of the value being purchase by the Buyer
pursuant to the Asset Purchase Agreement and that Stockholder's agreement as set
forth herein is important to preserve that value following the Closing; and (b)
in connection with the acquisition of the Business, Stockholder is receiving
substantial economic benefits which constitute consideration in addition to the
payments provided for below for the covenants in this Agreement.
2. PAYMENTS. In consideration for observing his covenants herein, the
Company shall pay to the Stockholder twenty (20) equal quarterly payments in
immediately available funds in the amount of $70,000 each, for a maximum total
payment hereunder of $1,400,000. Subject to the terms and conditions herein, the
first such quarterly payment shall be paid on June 28, 2005 and each remaining
payment shall be due on the last day of each successive ninety (90) day period
thereafter. If the Company fails to make a timely payment due hereunder, the
Company shall not be in breach of this Agreement unless the Stockholder has
first given written notice thereof to the Company and Phoenix Footwear and the
Company fails to pay such amount within five (5) business days after being given
such notice in accordance with the terms hereof.
3. RESTRICTIVE COVENANTS.
(a) Non-Competition and Non-Solicitation.
(i) Except as provided below, during the Restrictive Period
(as defined below), the Stockholder shall not, within the United States of
America and all territories, possessions and commonwealths thereof (including
Puerto Rico, Guam and the U.S. Virgin Islands), Canada, Mexico or anywhere in
the World where the Company conducts or solicits business after the date hereof:
(A) directly or indirectly, alone or with others, engage
in any activity that is the same as, similar to or otherwise competitive with
the Business or any other business engaged in by Phoenix Footwear or the Company
or any direct or indirect subsidiary thereof (collectively, the "PHOENIX
GROUP");
(B) be or become an employee, officer, director,
stockholder, owner, corporate affiliate, salesperson, co-owner, partner,
trustee, promoter, founder, technician, engineer, analyst, stockholder, agent,
representative, supplier, investor or lender, compensated consultant, advisor or
manager of or to, or otherwise acquire or hold any interest in or otherwise
engage in the providing of services to, any person or entity that engages in a
business that is the same as, similar to or otherwise competitive with the
Business or any other business engaged in by any member of the Phoenix Group; or
(C) permit Stockholder's name to be used in connection
with a business that is the same as, similar to or otherwise competitive with
the Business or any other business engaged in by any member of the Phoenix
Group;
provided, however, that nothing in this Section 3 shall prevent Stockholder from
(1) owning as a passive investment less than 1% of the outstanding shares of the
capital stock of a publicly-held corporation if Stockholder is not otherwise
associated directly or indirectly with such corporation or any affiliate of such
corporation or from, (2) serving as an employee or consultant to the Company or
its successors in interest or (3) during the first twelve (12) months following
the date of this Agreement, continuing to have an ownership interest in
Maquiladora Xxxxxxxx de Mexico, S.A. De C. V. ("XXXXXXXX DE MEXICO"), provided
that the Stockholder shall not devote any time or perform any services for
Xxxxxxxx de Mexico other than administrative functions consistent with
historical practices. As of the last day of such twelve (12) month period,
Stockholder shall not directly or indirectly have any ownership interest
whatsoever in Xxxxxxxx de Mexico and he shall provide evidence thereof to the
Company and Phoenix Footwear which is satisfactory to them; provided that if
Xxxxxxxx de Mexico has ceased all operations by the last day of such twelve (12)
month period, Stockholder may take such actions to the extent reasonably
necessary to dissolve Xxxxxxxx de Mexico or dispose of his ownership interest
therein during a period of time up to a maximum of six additional months.
(ii) Without the prior written consent of the Chief Executive
Officer of Phoenix Footwear, during the Restrictive Period, Stockholder shall
not either in his individual capacity or as an agent for or on behalf of
another: (A) hire or offer to hire (as an employee, independent contractor or
otherwise) any of the directors, officers, employees or independent sales staff
of the Company or any other member of the Phoenix Group; (B) entice away or in
any other manner persuade or attempt to persuade any of the directors, officers,
employees or independent sales staff of the Company or any other member of the
Phoenix Group, to discontinue their relationship with Phoenix Footwear or the
Company or their respective direct and indirect subsidiaries; (C) contract,
solicit, divert or attempt to divert from the Company or any other member of the
Phoenix Group any business whatsoever by influencing or attempting to influence
any client or customer of the Company or any member of the Phoenix Group; or (D)
contract, solicit, divert, or attempt to divert from the Company or any member
of the Phoenix Group any supplier, vendor, manufacturer or distributor.
(iii) Stockholder agrees that he will not at any time engage
in any action or make any public or private comments (A) that disparages,
disrupts or impairs the normal operations or xxxxx the reputation of or
relationship between the directors, officers or employees of the Company or any
other member of the Phoenix Group and any of their respective customers,
prospective customers, suppliers, vendors, manufacturers, distributors or
lenders, or (B) that interferes with the existing contractual relationships of
the Company or any other member of the Phoenix Group.
(iv) Stockholder agrees to, and agrees that Phoenix Footwear
or the Company or any of their respective officers, directors, employees, agents
and representatives may inform any person or entity for whom Stockholder
performs services (or proposes to perform services) of the Stockholder's
restrictions and undertakings hereunder.
(v) For purposes of this Agreement, the "RESTRICTIVE PERIOD"
shall mean the later to occur of (A) the fifth (5th) anniversary of the Closing
or (B) the second anniversary of the Stockholder's termination of employment
from the Company or Phoenix Footwear; provided, however, in the event that the
Stockholder violates any of his restrictions or undertakings hereunder, the
Restrictive Period shall be extended with respect to such obligations by the
period of time equal to that period beginning when the activities constituting
such breach commenced and ending when the activities constituting such breach
terminated.
(b) Confidential Information.
(i) The parties acknowledge and agree that:
(A) The Business being purchased by the Buyer includes
confidential and proprietary information, including, but not limited to, the
financial condition, customer lists, marketing strategy, employee names,
compensation amounts and formulas, sales amounts, research and development
activities, products, methods of manufacture, trade secrets, processes, business
or affairs or other confidential or proprietary information concerning the
Business and any other information concerning the Business that is not generally
available to the public other than as a result of disclosure directly or
indirectly by Stockholder in violation of his duties and obligations
(collectively, the "CONFIDENTIAL INFORMATION"). The term "Confidential
Information" does not include material which is or becomes generally available
to the public other than as a result of disclosure by Stockholder. The
Stockholder agrees that the failure of any Confidential Information to be marked
or otherwise labeled as confidential or proprietary information shall not affect
its status as Confidential Information.
(B) The Confidential Information is confidential and
proprietary, and the development and protection of the Confidential Information
represents a substantial economic and commercial value being acquired by the
Buyer.
(C) The Buyer would be irreparably damaged if any of the
Confidential Information was disclosed to, or used or exploited on behalf of,
any person other than the Buyer.
(ii) Stockholder covenants and agrees that he shall not, at
any time, during the Restrictive Period, directly or indirectly, use, exploit,
or disclose to any person or entity, without the prior written consent of the
Chief Executive Officer of Phoenix Footwear, any Confidential Information,
except (A) as compelled by any court decree, subpoena or legal or administrative
order or process; and (B) as is required by law so long as no other means are
readily available. Stockholder further covenants and agrees that he shall
deliver promptly to the Phoenix Footwear or destroy, at the request and option
of Phoenix Footwear all tangible embodiments (and all copies) of the
Confidential Information which are in his possession.
(iii) In the event that Stockholder intends to disclose any
Confidential Information as permitted by virtue of Sections 3(b)(ii) above, he
will first notify the Company in advance of the request or requirement so that
the Company may seek an appropriate protective order at its expense.
4. SPECIFIC PERFORMANCE; REMEDIES.
(a) Stockholder acknowledges and agrees that the Buyer will suffer
irreparable harm in the event that Stockholder breaches any of its obligations
under this Agreement, and that monetary damages shall be inadequate to
compensate the Buyer for any such breach. Stockholder agrees that in the event
of any breach by Stockholder of Section 3(a)(i) or (ii) or any material breach
of any other covenant, obligation or other provision contained in this
Agreement, the Buyer shall be entitled to cease making the payments set forth in
Section 2 above and, in addition, the Company may seek any or all of the
following rights and remedies (in addition to any other remedy that may be
available), which shall be severally enforceable:
(i) A decree or order of specific performance to enforce the
observance and performance of such covenant, obligation or other provision;
(ii) A temporary restraining order, preliminary injunction and
an injunction restraining such breach or threatened breach or by any or all of
Stockholder's agents, representatives or other persons directly or indirectly
acting for, on behalf of, or with Stockholder, in all cases without the
necessity of posting bond; or
(iii) An accounting for and repayment to the Buyer of all
damages caused by Stockholder's breach of this Agreement.
(b) Stockholder further agrees that the Company shall be entitled to
cease making payments set forth in Section 2 above to the extent of any
indemnification payments due from Stockholder under the Asset Purchase Agreement
or for any payments or damages due Buyer from Stockholder. Stockholder
acknowledges and agrees that he will continue to be bound by and that he will
observe, abide by and honor his obligations hereunder even though the Company
has ceased to make payments hereunder.
(c) The rights and remedies of the Buyer hereunder are not exclusive
of or limited by any other rights or remedies which the Company may have,
whether at law, in equity, by contract or otherwise, all of which shall be
cumulative (and not alternative). Without limiting the generality of the
foregoing, the rights and remedies of the Company hereunder, and the obligations
and liabilities of Stockholder hereunder, are in addition to their respective
rights, remedies, obligations and liabilities under the law of unfair
competition, misappropriation of trade secrets and the like and any other
agreement to which the Stockholder and Phoenix Footwear and/or the Company are
parties. If any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision hereof is brought by Phoenix
Footwear and/or the Company against the Stockholder, if Phoenix Footwear and/or
the Company is the prevailing party, they shall be entitled to recover
reasonable attorneys fees, costs and disbursements (in addition to any other
relief to which they are entitled).
5. REASONABLENESS OF RESTRICTIVE COVENANTS. STOCKHOLDER HAS CAREFULLY READ
AND CONSIDERED THE PROVISIONS HEREOF AND, HAVING DONE SO, HEREBY AGREES THAT THE
RESTRICTIVE COVENANTS SET FORTH HEREIN ARE FAIR AND REASONABLE AND ARE
REASONABLY REQUIRED FOR THE PROTECTION OF THE INTERESTS OF THE BUYER.
6. MISCELLANEOUS.
(a) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Phoenix Footwear shall be provided
with a copy of any notice sent to the Company. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) when
delivered personally to the recipient, (ii) one (1) business day after being
sent to the recipient by reputable overnight courier service (charges prepaid),
(iii) one (1) business day after being sent to the recipient by facsimile
transmission or electronic mail, or (iv) four (4) business days after being
mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid, and addressed to the intended recipient as set
forth below:
If to Stockholder:
Xxxxxxx Xxxxxxx
0000 Xxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
If to the Company and Phoenix Footwear:
Xxxxxxxx Acquisition Company
Phoenix Footwear Group, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx, Chairman of the Board
With a copy to:
Xxxxx Xxxxxx Xxxxxx LLP
000 Xxxxxxxxxx Xxxxxxxx
0 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Forth, Esq.
Any party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
(b) Amendments. This Agreement may not be changed or modified in
whole or in part except by a writing signed by both parties hereto and consented
to by Phoenix Footwear.
(c) Successors and Assigns. This Agreement will not be assignable by
either Stockholder or the Company, except that the rights and obligations of the
Company under this Agreement may be assigned to an entity which succeeds to the
Company's Business. The Stockholder acknowledges and agrees that Phoenix
Footwear is an expressed third party beneficiary of this Agreement and entitled
to enforce all of the covenants of the Stockholder in this Agreement, including
the right to bring an action against the Stockholder to do so as if were a party
hereto.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.
(e) Amendments and Waiver. No failure on the part of Phoenix
Footwear, the Company or Stockholder to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of Phoenix Footwear, the
Company or Stockholder in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege or
remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy. Neither Phoenix Footwear, the Company nor
Stockholder shall be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement, unless
the waiver of such claim, power, right, privilege or remedy is expressly set
forth in a written instrument duly executed and delivered on behalf of such
party; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
(f) Severability. If any covenant set forth in this Agreement is
determined by any court to be unenforceable by reason of its extending for too
great a period of time or over too great a geographic area, or by reason of its
being too extensive in any other respect, such covenant shall be interpreted to
extend only for the longest period of time and over the greatest geographic
area, and to otherwise have the broadest application as shall be enforceable.
The invalidity or unenforceability of any particular provision hereof shall not
affect the other provisions contained hereof, which shall continue in full force
and effect. Without limiting the foregoing, the covenants contained herein shall
be construed as separate covenants, covering their respective subject matters,
with respect to each of the separate cities, counties and states of the United
States, and each other country, and political subdivision thereof, in which any
portion of the Business is conducted.
(g) Submission to Jurisdiction. Each of the parties submits to the
jurisdiction of any state or federal court sitting in the State of Delaware in
any action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of
the parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other party with respect thereto.
(h) Counterparts. This Agreement may be executed in counterparts
which when taken together will constitute one instrument. Any copy of this
Agreement with the original signatures of all parties appended will constitute
an original.
(i) Captions. The captions contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
(j) Entire Agreement. This Agreement, the Employment Agreement
entered into on even date herewith between the Stockholder and Buyer, together
with the Asset Purchase Agreement, constitutes the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect to the subject matter hereof. The express terms hereof
control and supersede any course of performance or usage of trade inconsistent
with any of the terms hereof. The parties agree that this Agreement shall not be
interpreted against either party solely because this Agreement was drafted by
counsel to Buyer. The Stockholder agrees that the obligations under the above
mentioned agreements are independent of one another and that Buyer's rights
against Stockholder shall under each agreement shall be cumulative together with
those available at law and Buyer may pursue any and all remedies available to it
without limitation.
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[SIGNATURE PAGE TO NON-COMPETITION AND CONFIDENTIALITY AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
/s/ Xxxxxxx Xxxxxxx
------------------------------------
Xxxxxxx Xxxxxxx
XXXXXXXX DELAWARE ACQUISITION
COMPANY
By: /s/ Xxxxx Xxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxx
Title: Chairman
