Exhibit 10.23
NONCOMPETITION AND CONFIDENTIALITY AGREEMENT
This NONCOMPETITION AND CONFIDENTIALITY AGREEMENT (this "AGREEMENT") is
made and entered into as of this ___ day of ___________, 2004, by and between
PHOENIX FOOTWEAR GROUP, INC., a Delaware corporation ("BUYER"), ALTAMA DELTA
CORPORATION, a Georgia corporation (the "COMPANY"), and W. XXXXXXX XXXXX
("STOCKHOLDER").
R E C I T A L S :
A. Stockholder, Company and Buyer (the "BUYER") have entered into a Stock
Purchase Agreement dated June 15, 2004 (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 "STOCK PURCHASE AGREEMENT") pursuant to which
the Seller has agreed to sell to Buyer and Buyer has agreed to purchase from
Seller all of the issued and outstanding shares of capital stock of the Company.
Capitalized terms used herein and not defined herein shall have the meanings set
forth in the Stock Purchase Agreement.
B. The Stockholder serves as director, President and Chief Executive
Officer of the Company. As such, the Stockholder has unique knowledge and
experience regarding the Company's business, and Buyer desires to be assured
that confidential information and relationships pertaining to the Company's
business and the goodwill of the Company will be preserved and protected and
will inure to the benefit of Buyer and the Company after the closing of the
transactions contemplated by the Stock Purchase Agreement (the "CLOSING").
C. Stockholder acknowledges that the promises and restrictive covenants
that Stockholder is providing in this Agreement are reasonable and necessary to
the protection of Buyer's business and the Company Business (as defined below)
and Buyer's legitimate interests in acquiring the Company pursuant to the Stock
Purchase Agreement. Stockholder acknowledges that, in connection with the
acquisition of the Company by Buyer, that in addition to the payment being made
to Stockholder hereunder, Stockholder is receiving substantial benefits for the
consummation of the transactions contemplated in the Stock Purchase Agreement,
which benefits, along with the payments being made hereunder, constitute
adequate consideration for the covenants in this Agreement.
D. Stockholder understands and acknowledges that as an inducement for, and
a material condition to, Buyer's consummation of the transactions contemplated
in the Stock Purchase Agreement, Stockholder is entering into this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
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. CONSIDERATION.
(a) In consideration of (i) the Buyer's purchase of all of the
outstanding capital stock of the Company from Stockholder, pursuant to the terms
of the Stock Purchase Agreement, and (ii) quarterly payments during the first
five (5) years after the date hereof by the Company to the Stockholder in
immediately available funds in the amount of $100,000 each, for maximum total
payments hereunder of $2,000,000, the Stockholder shall observe, abide by and
honor his restrictions and obligations herein. Subject to the terms and
conditions herein, the first such quarterly payment shall be paid upon the
execution hereof 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 the Company fails to pay such amount within thirty (30) days after
being given such notice in accordance with the terms hereof (such failure to pay
after notice and expiration of the thirty (30) day cure period shall be referred
to as a "DEFAULT").
(b) Upon the occurrence of a Default, the Stockholder's sole and
exclusive remedy shall be to elect during the first sixty (60) days after the
Default, by written notice to the Company to (i) require the Company to promptly
pay all payments provided for in this Agreement which have not been previously
paid to Stockholder or offset against as permitted hereunder (i.e., $2,000,000
less the sum of the quarterly payments paid to Stockholder through the date of
Default or offset against as permitted hereunder), or (ii) terminate this
Agreement immediately on written notice to Buyer and Company and in such event
no further payments of any kind shall be due to the Stockholder hereunder.
Notwithstanding the foregoing, the Stockholder may not make an election pursuant
to Section 1(b)(i) at any time that he is in breach of this Agreement, the Stock
Purchase Agreement or the consulting agreement between Stockholder and the
Company executed on even date herewith (the "CONSULTING AGREEMENT").
(c) If the Stockholder makes an election pursuant to Section
1(b)(i), then the Stockholder shall continue to be bound by this Agreement and
to observe and abide by all of his restrictions and obligations herein, provided
such payment is made within sixty (60) days after the election is made. If a
payment required by Section 1(b)(i) is not made within such sixty (60) day
period, then the Stockholder's (but not the Company's) obligations under this
Agreement shall be suspended from the first day thereafter until such payment is
subsequently made by the Company to the Stockholder, provided such payment is
made within twelve (12) months thereafter. If such payment is not made on or
prior to the last day of such twelve (12) month period, then the Stockholder
shall no longer be bound by this Agreement. If such payment is made on or prior
to the last day of such twelve (12) month period, then the Stockholder shall
become bound by this Agreement and obligated to observe and abide by his
restrictions and obligations hereunder as of the date such payment is made and
continuing thereafter for the remaining term of the Restrictive Period.
(d) If the Stockholder makes an election pursuant to Section
1(b)(ii), then neither he nor the Company shall be bound by this Agreement after
he delivers written notice of his election to the Buyer.
(e) Notwithstanding the foregoing or anything else herein to the
contrary in no event shall the Stockholder be relieved of breaches of this
Agreement by him prior to the time
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his obligations hereunder are terminated or suspended.
2. NONCOMPETITION.
(a) 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) or anywhere in the World where the
Company conducts or solicits business, including, but not limited to, those
countries listed on EXHIBIT A attached hereto:
(i) directly or indirectly, alone or with others, engage in
any activity that is the same as, similar to or otherwise competitive with the
Company's Business;
(ii) be or become an employee, officer, director, stockholder,
owner, corporate affiliate, salesperson, co-owner, partner, trustee, promoter,
founder, technician, engineer, analyst, agent, representative, material
supplier, investor or lender, compensated consultant, advisor or manager of, 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 Company's Business; or
(iii) permit Stockholder's name to be used in connection with
a business that is the same as, similar to or otherwise competitive with the
Company Business;
provided, however, that nothing in this Section 2 shall prevent Stockholder from
(A) owning as a passive investment less than 2.5% of the outstanding shares of
the capital stock of a publicly-held corporation engaged in a business that is
the same as, similar to or otherwise competitive with the Company's Business if
Stockholder is not otherwise associated directly or indirectly with such
corporation or any affiliate of such corporation, (B) owning less than a 5%
interest in a venture capital fund, or (C) serving as an employee or consultant
to the Company or owning capital stock of Buyer or its successors in interest.
(b) Stockholder agrees to, and agrees that Buyer, Company and their
respective officers, directors, employees, agents and representatives may (after
providing 10 days written notice of the intent to do so), during the Restrictive
Period, inform any person or entity for whom Stockholder performs services (or
proposes to perform services) of the Stockholder's restrictions and undertakings
hereunder.
(c) During the Restrictive Period, without the Buyer's written
consent, Stockholder shall not, either in his individual capacity or as an agent
for or on behalf of another: (i) hire or offer to hire (as an employee,
independent contractor or otherwise) any of the officers or employees of Buyer
or its direct or indirect subsidiaries, including the Company; (ii) entice away
or in any other manner persuade or attempt to persuade any of the any of the
officers or employees of Buyer or its direct or indirect subsidiaries, including
the Company, to discontinue their relationship with the Company or Buyer; (iii)
contract, solicit, divert, or attempt to divert from Buyer or its direct or
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indirect subsidiaries, including the Company, any business whatsoever by
influencing or attempting to influence any customer of the Buyer or its direct
or indirect subsidiaries, including the Company, or any prospective client or
customer with whom the Buyer or any of its direct or indirect subsidiaries,
including the Company, has engaged in sales discussions prior to the termination
of this Agreement; or (iv) contract, solicit, divert, or attempt to divert from
the Buyer or any of its direct or indirect subsidiaries, including the Company,
any supplier or vendor.
(d) Stockholder agrees that he will not engage in any action or make
any public or private comments (i) that disparages, disrupts or impairs Buyer's
or the Company's normal operations or xxxxx the reputation of Buyer, the Company
or any of their directors, officers or employees with any of the Company's
customers, suppliers or vendors, lenders or the public, or (ii) that interferes
with Buyer's or the Company's existing contractual relationships.
(e) For purposes of this Agreement, the following terms have the
meanings given thereto:
"COMPANY'S BUSINESS" means the manufacture, design, promotion,
production, marketing, sale, sourcing and distribution of military specification
combat boots; tactical and police duty boots; and combat boots for civilian use.
"RESTRICTIVE PERIOD" means the period from the Closing until the
fifth (5th) anniversary thereof; provided, however, in the event that the
Stockholder violates the terms hereof by failing to observe or abide by any of
his restrictions or obligations hereunder (excluding any period while his
restrictions or obligations are suspended hereunder), the Restrictive Period
shall be extended 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.
3. CONFIDENTIAL INFORMATION.
(a) The parties acknowledge and agree that:
(i) The Company's business includes confidential and
proprietary information of the Company (including, but not limited to, the
Company's business, financial condition, customer lists, marketing strategy,
employee names, compensation amounts and formulas, billing amounts, research and
development activities, products, methods of manufacture, trade secrets,
processes, business or affairs or other confidential or proprietary information
concerning the Company) (collectively, the "CONFIDENTIAL INFORMATION"), which
Confidential Information shall include, without limitation, any information
concerning the businesses and affairs of the Company that is not already
generally available to the public (other than as a result of disclosure directly
or indirectly by Stockholder or his agents or representatives in violation of
this Section), provided, however, that Stockholder may disclose such information
(A) as compelled by any court decree, subpoena or legal or administrative order
or process; (B) as is required by law so long as no other means are readily
available; and (C) to Stockholder's agents who need to know such information for
the purposes of assisting or advising the Stockholder in connection with tax,
legal or accounting matters, it being agreed that such agents shall be informed
by Stockholder of the confidential nature of such information and that before
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receiving such information they shall agree to be bound by this Agreement. 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 Buyer and Company.
(iii) 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 Buyer.
(b) 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 Buyer, any
Confidential Information, except as expressly authorized by Buyer and as
permitted in Section 3(a) above. Stockholder further covenants and agrees that
he shall deliver promptly to the Buyer or destroy, at the request and option of
the Buyer, all tangible embodiments (and all copies) of the Confidential
Information (other than financial, tax and accounting information of the Company
which Stockholder may reasonably need to comply with tax and other legal
obligations) which are in his possession.
(c) In the event that Stockholder intends to disclose any
Confidential Information as permitted by virtue of Section 3(a) above, he will
first notify the Buyer in advance of the request or requirement so that the
Buyer may seek an appropriate protective order at its expense.
4. SPECIFIC PERFORMANCE; REMEDIES.
(a) Stockholder acknowledges and agrees that Buyer and Company 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 Buyer and Company for any such breach. Stockholder agrees that in
the event of any breach or threatened breach by Stockholder of any covenant,
obligation or other provision contained in this Agreement, and after Buyer
giving notice of such breach to Stockholder, the Company shall be entitled to
cease making payments of the unpaid portion of the consideration set forth in
Section 1 above (which will be resumed upon cure of such breach within 90 days
after being given written notice thereof) and, in addition, the Buyer and
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
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(iii) An accounting for and repayment to Buyer or Company (as
they may direct) of all profits, compensation, commissions, remuneration,
benefits or other payments or any kind whatsoever which Stockholder directly or
indirectly has realized and/or may realize as a result of, growing out of or in
connection with any transaction or event constituting a breach of his
obligations herein.
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 pursuant to a breach of
this Agreement by Stockholder as provided for in this Section 4(a) or offset
payments pursuant to Section 4(c) below.
(b) The rights and remedies of Buyer and Company hereunder are not
exclusive of or limited by any other rights or remedies which Buyer or 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 Buyer and 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. If any legal action
or other legal proceeding relating to this Agreement or the enforcement of any
provision of this Agreement is brought by either party to this Agreement, the
prevailing party shall be entitled to recover reasonable attorneys' fees, costs
and disbursements (in addition to any other relief to which the prevailing party
may be entitled).
(c) The Buyer, the Company and the Stockholder acknowledge and agree
that the Company may offset payments due under this Agreement to recover
Overpaid Amounts (as defined in the Stock Purchase Agreement) or indemnification
payments due Buyer or any Buyer Indemnitees under the Stock Purchase Agreement.
During the first eighteen (18) months after the date hereof, the Company may
exercise such right of offset only (i) to the extent that the "Market Value" of
the shares of Buyer's common stock initially deposited by Buyer in escrow
pursuant to the Escrow Agreement of even date herewith (the "ESCROW AGREEMENT")
among the Buyer, the Stockholder and Manufacturers and Traders Trust Company is
less than $2,500,000 or (ii) if the Escrow Amount, less any Disputed Securities
(as defined in such Escrow Agreement) has been fully distributed to the Buyer
and/or the Stockholder. For purposes of the foregoing, the "Market Value" of
such shares shall be the average closing price of one share of Buyer's common
stock on the American Stock Exchange for the twenty (20) consecutive trading
days of such stock ending on the second trading day for such stock prior to the
date on which the right of offset is exercised under this Section 2(c); for any
other securities received for the shares initially deposited in escrow pursuant
to the Escrow Agreement it shall mean the average closing price of such
securities in the primary market where they trade for the twenty (20)
consecutive trading days preceding the second (2nd) trading day for such
securities prior to the date on which the right of offset is exercised under
Section 2(c) or in the absence of a trading market, the fair market value
thereof determined by the Escrow Agent.. No such conditions shall apply to the
right of offset at any time that the right of offset is exercised following the
eighteen (18) months after the date hereof and at such time the right of offset
shall be fully exercisable.
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5. REASONABLENESS OF RESTRICTIONS. STOCKHOLDER HAS CAREFULLY READ AND
CONSIDERED THE PROVISIONS 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 BUYER.
6. MISCELLANEOUS.
(a) Notices. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be either hand
delivered in person, sent by facsimile, sent by certified or registered
first-class mail, postage pre-paid, or sent by nationally recognized express
courier service. Such notices and other communications shall be effective upon
receipt if hand delivered or sent by facsimile, five days after mailing if sent
by mail, and one day after dispatch if sent by express courier, to the following
addresses, or such other addresses as any party may notify the other parties in
accordance with this Section 6(a):
If to Buyer: Phoenix Footwear Group, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Chairman
Facsimile No. (000) 000-0000
If to Company: Altama Delta Corporation
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, CEO and President
Facsimile No. (000) 000-0000
with a copy to: Xxxxx Xxxxxx Xxxxxx LLP
Xxxxxx X. Forth, Esq.
000 Xxxxxxxxxx Xxxxxxxx
0 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Facsimile No. (000) 000-0000
If to Stockholder: W. Xxxxxxx Xxxxx
0000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Facsimile No. (000) 000-0000
with a copy to: Xxxxxx, Xxxxxxx & Xxxxxx, LLP
1600 Atlanta Financial Center
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: X. X. "Xxxxx" Xxxxx, Esq.
Facsimile No. (000) 000-0000
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(b) Amendments. This Agreement may not be changed or modified in
whole or in part except by a writing signed by the party against whom
enforcement of the change or modification is sought.
(c) Successors and Assigns. This Agreement will not be assignable by
either Stockholder, the Company or Buyer, except that the rights and obligations
of Buyer and the Company under this Agreement may be assigned to an entity which
succeeds to the Company's Business and the rights and obligations of the
Stockholder under this Agreement may be assigned by operation of law or contract
upon the death of Stockholder, to Stockholder's heirs, decedents or
representatives.
(d) Governing Law. This Agreement will be governed by and
interpreted according to the substantive laws of the State of Delaware without
regard to such state's conflicts laws.
(e) No Waiver. No failure on the part of Buyer, the Company or
Stockholder to exercise any power, right, privilege or remedy under this
Agreement, and no delay on the part of Buyer 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 Buyer, 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
Buyer and the Company now transacts any business.
(g) 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.
(h) 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.
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(i) Entire Agreement. This Agreement and the other agreements and
instruments referred to herein 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
----------------------------
W. Xxxxxxx Xxxxx
PHOENIX FOOTWEAR GROUP, INC.
By:
---------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman
ALTAMA DELTA CORPORATION
By:
---------------------
Name: Xxxxxxx X. Xxxxx
Title: CEO and President
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EXHIBIT A
LIST OF COUNTRIES THAT COMPANY CONDUCTS OR SOLICITS BUSINESS
[List all 70 countries in which the Company does business]
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