EXHIBIT 10.5
NON-COMPETITION AND
NON-DISCLOSURE AGREEMENT
This NON-COMPETITION AND NON-DISCLOSURE AGREEMENT dated this 6th day of
August, 2003 (this "AGREEMENT"), is made and entered into by and between
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("PRINCIPAL"), PHOENIX FOOTWEAR GROUP, INC., a Delaware
corporation ("PHOENIX FOOTWEAR"), and its wholly-owned subsidiary PFG
ACQUISITION, INC., a Montana corporation ("PFG ACQUISITION").
A. Phoenix Footwear, PFG Acquisition and ▇.▇. ▇▇▇▇▇ & Co., a
Montana corporation ("COMPANY"), have entered into an Agreement and Plan of
Merger, dated June 16, 2003 (the "MERGER AGREEMENT"), pursuant to which Company
shall merge with and into Acquisition Sub and the separate corporate existence
of Company shall cease.
B. Principal is employed as President and Chief Executive Officer
of Company and serves as a director of the Company.
C. It is mutually agreed between Principal, Company and PFG
Acquisition that Principal shall resign his employment as President and Chief
Executive Officer of Company and as a director, said resignation to take effect
as of the date that the Merger between Company and PFG Acquisition becomes
effective (the "MERGER EFFECTIVE DATE").
D. It is also mutually agreed between Principal, Company and PFG
Acquisition that Principal shall be employed as an employee of the surviving
corporation to the Merger ("SURVIVING CORPORATION") from the Merger Effective
Date to December 31, 2003 and thereafter as a consultant until December 31,
2005. Principal and Surviving Corporation have accordingly entered into an
Employment and Consulting Agreement dated August 6, 2003 (the "EMPLOYMENT AND
CONSULTING AGREEMENT").
E. Principal owns approximately 38% of the outstanding voting
securities of the Company, and will receive considerable financial benefit when
the Merger becomes effective.
F. The Merger Agreement requires that Principal, Phoenix Footwear
and PFG Acquisition enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and of the
respective representations, warranties, covenants and agreements contained
herein, the parties agree as follows (unless otherwise defined herein,
capitalized terms used herein shall have the meanings given such terms in the
Merger Agreement):
1. EFFECTIVE DATE. This Agreement shall take effect on the Merger
Effective Date.
2. NON-COMPETITION. In order to induce Phoenix Footwear and PFG
Acquisition to enter into the Merger Agreement and to pay the valuable
consideration required thereunder, to create a valuable independent asset of PFG
Acquisition, to preserve and protect the goodwill thereof, and to enhance the
going concern value and earnings of PFG Acquisition in future years, Principal
undertakes and agrees as follows:
(a) Commencing on the effective date hereof and
continuing thereafter until December 31, 2005 (the "RESTRICTION PERIOD"),
Principal shall not, within the United States (the "TERRITORY"), create, seek or
accept employment or compensation of any kind or character from any enterprise,
or person associated with any enterprise that is engaged or planning to engage,
directly or indirectly, in the manufacture, sale, marketing, promotion or sale
of products in the ▇▇▇▇▇ shoe market segment of the men's footwear business (a
"COMPETING ENTERPRISE"); provided, however, that Principal may accept employment
as a salesman or as a sales representative with any such Competing Enterprise
without violating the foregoing.
(b) During the Term, neither Principal nor any entity in
which Principal may be interested (as a principal, owner, partner, joint
venturer, trustee, director, officer, shareholder, option holder, security
holder, lender, creditor, guarantor, advisor, member or in any other capacity
other than solely as a salesman or as a sales representative) shall, within the
Territory, engage, directly or indirectly, in any activity that, directly or
indirectly, manufactures, markets, promotes or engages in the sale of products
in the ▇▇▇▇▇ shoe market segment of the men's footwear business; provided,
however, that the foregoing shall not be deemed to prevent Principal from
investing in securities if (i) such class of securities in which the investment
so made is listed on a national securities exchange or is issued by a company
registered under Section 12(g) of the Securities Exchange Act of 1934, so long
as such investment holdings do not, in the aggregate, constitute more than five
percent (5%) of the voting power of the entity issuing such securities; and (ii)
any other securities so long as such investment holdings do not constitute more
than two percent (2%) of the voting power of the entity issuing such securities.
(c) During the Term, without the Company's written
consent, Principal shall not, either in his individual capacity or as an agent
for another: (i) hire or offer to hire any of Company's, Phoenix Footwear's or
PFG Acquisition's officers, employees, or agents; (ii) entice away or in any
other manner persuade or attempt to persuade any of Company's, Phoenix
Footwear's or PFG Acquisition's officers, employees, or agents to discontinue
their relationship with Company, Phoenix Footwear or PFG Acquisition; (iii)
contract, solicit, divert, or attempt to divert from Phoenix Footwear or PFG
Acquisition any business whatsoever by influencing or attempting to influence
any customer of Company, Phoenix Footwear or PFG Acquisition with whom Company,
Phoenix Footwear or PFG Acquisition has engaged in sales discussions prior to
the termination of this Agreement; or (iv) contract, solicit, divert, or attempt
to divert from Company, Phoenix Footwear or PFG Acquisition any supplier or
vendor.
(d) The covenants set forth in this Section 2 shall be
construed as a series of separate covenants covering their subject matter in
each of the separate states within the
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Territory and, except for geographic coverage, each such separate covenant shall
be deemed identical in terms to the covenant set forth above in this Section 2.
To the extent that any such covenant shall be judicially unenforceable in any
one or more of such states, such covenant shall not be affected with respect to
each of the other states in the Territory. Each covenant with respect to each
such state in the Territory shall be construed as severable and independent.
(e) Phoenix Footwear, PGG Acquisition and Principal
acknowledge and recognize that these covenants not to compete are integral to
the Merger Agreement, that without the protection of such covenants, Phoenix
Footwear and PFG Acquisition would not have entered into the Merger Agreement,
that the consideration paid by Phoenix Footwear and PFG Acquisition under the
Merger Agreement bears no relationship to the damages Phoenix Footwear and PFG
Acquisition may suffer in the event of any breach of the covenants, and that
such covenants contain reasonable limitations as to time, geographical area and
scope of activity to be restrained necessary to protect Phoenix Footwear's and
PFG Acquisition's business interests. If this Section 2 shall for any reason be
held excessively broad as to time, duration, geographical scope, activity or
subject, it shall be enforceable to the extent compatible with then-applicable
laws.
3. CONFIDENTIAL INFORMATION.
(a) The parties acknowledge and agree that:
(i) The Company assets being merged into PFG
Acquisition pursuant to the Merger Agreement include confidential and
proprietary information of Company and, in the course of his employment for PFT
Acquisition, Principal may develop and obtain access to confidential and
proprietary information of Phoenix Footwear and PFG Acquisition (collectively,
the "CONFIDENTIAL INFORMATION"), which Confidential Information shall include,
without limitation, all of the following materials and information of Company,
Phoenix Footwear or PFG Acquisition (whether or not reduced to writing and
whether or not patentable or protected by copyright): trade secrets, product
specifications, proprietary software systems, sources of data, databases,
know-how, formulae, inventions and ideas, designs, sketches, photographs,
graphs, drawings, samples, selling and pricing information, procedures, research
methodologies, customer lists, business and marketing plans, current and
anticipated customer requirements, market studies, supplier lists, operational
methods, product development plans and personnel plans. The parties hereto agree
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.
(ii) The Confidential Information is confidential
and proprietary, and the development and protection of the Confidential
Information represents a substantial investment having a great economic and
commercial value to Phoenix Footwear and PFG Acquisition.
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(iii) Phoenix Footwear and PFG Acquisition would
be irreparably damaged if any of the Confidential Information was disclosed to,
or used or exploited on behalf of, any person other than Phoenix Footwear or PFG
Acquisition.
(b) Principal covenants and agrees that he shall not, at
any time, during the Restrictions Period, directly or indirectly, use, exploit,
or disclose to any person or entity, without the prior written consent of
Phoenix Footwear or PFG Acquisition, any Confidential Information, except as
expressly authorized by Phoenix Footwear or PFG Acquisition during the
performance of Principal's duties for and with PFG Acquisition.
(c) Notwithstanding the foregoing, Principal may use,
exploit, or disclose Confidential Information, but only to the extent that such
Confidential Information (i) is or becomes publicly known through no wrongful
act of Principal; or (ii) is disclosed pursuant to the requirement of a
governmental agency or a court of law or otherwise required by operation of law,
provided that Principal gives PFG Acquisition and Phoenix Footwear prompt
written notice of such requirement prior to disclosure.
4. REASONABLENESS OF RESTRICTIONS. PRINCIPAL HAS CAREFULLY READ
AND CONSIDERED THE PROVISIONS OF SECTIONS 2 AND 3 HEREOF AND, HAVING DONE SO,
HEREBY AGREES THAT THE RESTRICTIONS SET FORTH IN SUCH SECTIONS ARE FAIR AND
REASONABLE AND ARE REASONABLY REQUIRED FOR THE PROTECTION OF THE INTERESTS OF
PHOENIX FOOTWEAR AND PFG Acquisition.
5. INJUNCTIVE RELIEF.
(a) Principal acknowledges and agrees that Phoenix
Footwear and PFG Acquisition will suffer irreparable harm in the event that
Principal breaches any of its obligations under this Agreement, and that
monetary damages shall be inadequate to compensate Phoenix Footwear and PFG
Acquisition for any such breach. Principal agrees that in the event of any
breach or threatened breach by Principal of the provisions of this Agreement,
Phoenix Footwear and PFG Acquisition, or either of them, shall be entitled to a
temporary restraining order, preliminary injunction, and permanent injunction in
order to prevent or restrain any such breach or threatened breach by Principal,
or by any or all of Principal's agents, representatives or other persons
directly or indirectly acting for, on behalf of, or with Principal.
(b) Notwithstanding the provisions set forth in Section
5(a) above, or any other provision contained in this Agreement, the parties
hereby agree that no remedy conferred by any of the specific provisions of this
Agreement, including without limitation, this Section 5, is intended to be
exclusive of any other remedy, and each and every remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise.
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6. MISCELLANEOUS.
(a) Notices. All notices required or permitted to be
given under this Agreement shall be given by certified mail, return receipt
requested, to the parties at the following addresses or such other addresses as
any party may designate in writing to the other parties:
If to Phoenix Footwear or PFG Acquisition:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President and Chief Executive
Officer
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇. Forth, Esq.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
If to Principal:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(b) Governing Law. This Agreement shall be deemed to made
in and in all respects shall be interpreted, construed, and governed by and in
accordance with the laws of the State of Delaware without regard to the
conflicts of law principles thereof.
(c) Amendments. This Agreement may be amended,
supplemented, or modified only in writing, duly executed by all of the parties
hereto.
(d) Non-waiver. A delay or failure by any party to
exercise a right under this Agreement, or a partial or single exercise of that
right shall not constitute a waiver of that or any other right.
(e) Counterparts. This Agreement may be executed in any
number of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
(f) Entire Agreement. This Agreement, together with the
Employment and Consulting Agreement, constitutes the entire agreement, and
supersedes all other prior agreements, understandings, representations, and
warranties both written and oral, among the parties, with respect to the subject
matter hereof. Each party to this Agreement acknowledges
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that no representations, inducements, promises or agreements, orally or
otherwise, have been made by any party or anyone acting on behalf of any party
which are not embodied herein.
(g) Severability. The provisions of this Agreement shall
be deemed severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other provisions hereof.
If any provision of this Agreement, or the application thereof to any person or
any circumstance, is invalid or unenforceable, (i) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision; and (ii) the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
(h) Binding Effect. Principal may not assign any of his
rights or delegate any of his duties or obligations under this Agreement. The
rights and obligations of Acquisition Sub and Company under this Agreement shall
be binding upon and inure to the benefit of their respective successors and
assigns.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by each of the parties hereto as of the date first written above.
PHOENIX FOOTWEAR GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
PFG ACQUISITION, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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