Exhibit (d)(5)
EXECUTION COPY
NON-COMPETE AGREEMENT
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THIS AGREEMENT is made and entered into as of July 9, 2001, by and between
FLD Acquisition Corp., a Georgia corporation ("Merger Sub") and Xxxxxx X.
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Xxxxxxx ("Shareholder").
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WHEREAS, Merger Sub, Broder Bros., Co., a Michigan corporation, and Full
Line Distributors, Inc., a Georgia corporation (the "Company") are parties to
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that certain Agreement and Plan of Merger dated as of the date hereof (the
"Merger Agreement"), whereby Merger Sub shall merge with and into the Company
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and the Company shall be the surviving corporation in the merger (the "Merger").
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Capitalized terms used herein without definition shall have the respective
meanings set forth in the Merger Agreement.
WHEREAS, the Company is, among other things, engaged in the business of (i)
purchasing, warehousing, distributing, selling and marketing Apparel Products
(as defined below) (the foregoing be referred to as the "Distribution Business")
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and (ii) manufacturing and producing (whether for internal use or sale to third
parties) Apparel Products, which manufactured products are generally sold to
distributors and marketers of Apparel Products, including the Company's
Distribution Business (the foregoing being referred to as the "Manufacturing
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Business" and together with the Distribution Business, the "Restricted
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Businesses").
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WHEREAS, the Company conducts the Restricted Businesses (including
production, promotional and marketing activities and sales activities)
throughout the Restricted Territory (as defined below).
WHEREAS, Shareholder possesses extensive knowledge and proprietary
information with respect to the Company which, if disclosed or made available to
the Company's or its successors' competitors, would have a material adverse
effect on the Company and its successors, and Shareholder has been responsible
for the creation of goodwill inherent in the Company and its subsidiaries.
WHEREAS, in connection with the Merger, Shareholder will sell or otherwise
dispose of all of his shares of capital stock of the Company.
WHEREAS, in light of Shareholder's ownership of outstanding shares of
capital stock of the Company and Shareholder's contributions to the growth and
development of the Company, including the creation of goodwill, Confidential
Information (as defined below) and Work Product (as defined below) of the
Company, in order to induce Merger Sub to execute and deliver the Merger
Agreement, Shareholder shall execute and deliver this Agreement for the purpose
of preserving for the Company's, its successors' and any of their respective
subsidiaries' benefit the goodwill, Confidential Information, Work Product,
proprietary rights and going concern value of the Company, its successors and
any of their respective subsidiaries, and to protect the Company's, its
successors' and their respective subsidiaries' business opportunities. This
Agreement is integral to the transactions contemplated by the Merger Agreement
(including the sale or disposition of the capital
stock of the Company owned by Shareholder) and Merger Sub would not enter into
and deliver the Merger Agreement absent Shareholder's execution and delivery of
this Agreement and Merger Sub would not consummate the transactions contemplated
by the Merger Agreement unless this Agreement is in full force and effect and
valid, binding and enforceable against Shareholder as of the expiration of the
Offer (the "Expiration Date").
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WHEREAS, simultaneously with the execution and delivery of this Agreement,
Shareholder and Company Sub have entered into an Employment Agreement (the
"Employment Agreement") pursuant to which Shareholder will serve as president of
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the Company's manufacturing division pursuant to the terms of such Employment
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties, intending to be legally bound, hereby
agree:
1. Non-Compete, Non-Solicitation.
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(a) In order to protect the value of the capital stock of the Company
acquired by Merger Sub's stockholders pursuant to the Merger Agreement
(including the goodwill, Confidential Information and Work Product of the
Company, its successors and any of their respective subsidiaries), Shareholder
agrees that (i) during the period beginning as of the Expiration Date and ending
on the third anniversary thereof (the "Noncompete Period"), he shall not,
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directly or indirectly, either for himself or for any other person, partnership,
corporation, company or other entity, own, manage, control, participate in,
consult with, render services for, or in any other manner engage in any business
or enterprise which is engaged in the Distribution Business anywhere in the
Restricted Territory and (ii) during the period beginning as of the Expiration
Date and ending on the second anniversary thereof (the "Manufacturing Noncompete
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Period"), he shall not, directly or indirectly, either for himself or for any
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other person, partnership, corporation, company or other entity, own, manage,
control, participate in, consult with, render services for, or in any other
manner engage in any business or enterprise which is engaged in the
Manufacturing Business anywhere in the Restricted Territory. The Shareholder's
services to Company's manufacturing division pursuant to the Employment
Agreement shall not be deemed a violation of this paragraph 1(a).
Notwithstanding this paragraph 1(a), Executive shall be entitled to own, manage
and render services to T Shirt Brokerage Services, Inc. ("TSBS") as TSBS's
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business exists on the date hereof (which business is described on Exhibit A
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attached hereto) without violation of paragraph 1of this Agreement (subject to
the other obligations of Executive under this Agreement and the covenants of
Shareholder set forth in Exhibit A attached hereto). Shareholder agrees that the
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aforementioned covenants are reasonable with respect to their duration,
geographical area and scope of the restricted activities. In particular,
Shareholder acknowledges and agrees that the Company currently conducts its
business throughout the Restricted Territory and that the geographic scope of
this restriction is necessary to protect the goodwill, Confidential Information
and Work Product being sold.
For purposes of this Agreement,
(i) "participate" includes any direct or indirect interest in any
enterprise, whether as an officer, director, employee, partner,
sole proprietor, agent, representative,
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independent contractor, executive, franchisor, franchisee,
creditor, owner or otherwise; provided that the foregoing
activities shall not include the passive ownership (i.e.,
Executive does not directly or indirectly participate in the
business or management of the applicable entity) of less than 2%
of the stock of a publicly-held corporation whose stock is traded
on a national securities exchange and which is not primarily
engaged in a business of providing products or services which are
similar to or compete with the products and services of the
Company (or any products or services the Company is then in
process of developing),
(ii) "Restricted Territory" means the geographic area that is within
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the one day shipping zone of United Parcel Service from the
Company's facilities located in Fullerton, California; Miramar,
Florida; Doraville, Georgia; Xxxxxxx, Georgia; Berkeley,
Missouri; Bedford Heights, Ohio; and Houston, Texas, and
(iii) "Apparel Products" means casualwear and sportswear for men,
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women, children and infants, including but not limited to T-
shirts, sweatshirts, golf shirts, denim products, fleece
products, sleep wear, sweaters, woven shirts, outerwear,
headgear, sports jerseys, jackets, turtlenecks, bags, aprons,
towels, robes and shorts, whether imprintable or imprinted.
(b) During the Noncompete Period, Shareholder shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company, its successors or any of their respective subsidiaries to leave
the employ of the Company, its successors or such subsidiaries or in any way
interfere with the relationship between the Company, its successors or any of
their respective subsidiaries and any employee thereof, (ii) hire or employ any
person who was an employee of the Company, its successors or any of their
respective subsidiaries at any time during the Noncompete Period, (iii) induce
or attempt to induce any customer (including, without limitation, any
subsidiaries, divisions or affiliates thereof), supplier, licensee, licensor,
franchisee or other business relation of the Company, its successors or any of
their respective subsidiaries to cease doing business with the Company, its
successors or such subsidiary, or in any way interfere with the relationship
between any such customer, supplier, licensee, licensor, franchisee or other
business relation and the Company, its successors or any of their respective
subsidiaries (including, without limitation, making any negative statements or
communications about the Company, its successors or any of their respective
subsidiaries) or (iv) service, engage in business with or provide products to
any customer (including any subsidiaries, divisions or affiliates thereof) of
the Company, its successors or any of their respective subsidiaries with respect
to Apparel Products.
(c) Shareholder acknowledges that, in connection with the consummation of
the Merger, he will sell or otherwise dispose of all of his shares of capital
stock of the Company owned beneficially or of record by him, and that Merger Sub
would not consummate the Merger and the other transactions contemplated by the
Merger Agreement unless this Agreement shall be in full force and effect and be
a binding and enforceable contract of Shareholder. Shareholder also acknowledges
that, in the course of serving as a director of the Company and during his
employment as an executive officer of the Company, its successors and any of
their respective subsidiaries, he has become and will
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continue to become familiar with the Confidential Information and Work Product
of the Company, its successors and any of their respective subsidiaries.
Shareholder further acknowledges that, as a former executive officer and
director of the Company (during periods prior to the consummation of the
Merger), Shareholder has had direct or indirect responsibility, oversight or
duties with respect to all of the businesses of the Company and its employees,
vendors, customers, clients and other business relations, and that, accordingly,
the geographical restriction contained in this paragraph 1 is reasonable in all
respects and necessary to protect the goodwill, Confidential Information and
Work Product of the Company, its successors and their respective subsidiaries
and that, without such protection, the Company's, its successors' and their
respective subsidiaries' customer and client relations and competitive advantage
would be materially adversely effected. It is specifically recognized by
Shareholder that Merger Sub would not have entered into the Merger Agreement or
engaged in the Merger without the restrictions contained in this paragraph 1.
Shareholder further acknowledges that the restrictions contained in this
paragraph 1 do not impose an undue hardship on him due to the fact that (i) he
has general business skills which may be used in industries other than that in
which each of the Company, its successors and their respective subsidiaries
conduct their business and do not deprive Shareholder of his livelihood and (ii)
in connection with the Merger, Shareholder has received substantial amounts of
consideration which will enable Shareholder to conduct business in businesses
other than that in which each of the Company, its successors and their
respective subsidiaries conduct their business. Shareholder agrees that the
covenants made in paragraphs 1(a) and 1(b) shall be construed as agreements
independent of any other provision(s) of this Agreement and shall survive any
order of a court of competent jurisdiction terminating any other provision(s) of
this Agreement.
2. Confidential Information. Shareholder acknowledges that the
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information, observations and data (including without limitation trade secrets,
know-how, research and product plans, customer lists, software, inventions,
processes, formulas, technology, designs, drawings, specifications, marketing
and advertising materials, distribution and sales methods and systems, sales and
profit figures and other technical or business information) disclosed or
otherwise revealed to him, or discovered or otherwise obtained by him, directly
or indirectly, while employed by the Company, its successors and their
respective subsidiaries or while serving as a director or an executive officer
of the Company, its successors and their respective subsidiaries concerning the
business or affairs of the Company, its successors or any of their respective
subsidiaries ("Confidential Information") are the property of the Company, its
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successors or such subsidiary. Therefore, Shareholder agrees that he shall not
disclose to any unauthorized person or use for his own purposes any Confidential
Information without the prior written consent of the Board of Directors of the
Company (the "Board"), unless and to the extent that the aforementioned matters
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become generally known to and available for use by the public other than as a
result of Shareholder's acts or omissions in violation of this Agreement.
Notwithstanding the foregoing, Shareholder shall not be deemed to be in breach
of this Section 2 by virtue of his owning, managing or rendering services to
TSBS (as such business exists on the date hereof as described on Exhibit A
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attached hereto); provided, that the foregoing shall not permit Executive to
disclose Confidential Information to third parties other than TSBS or to
disclose written or electronic Confidential Information to TSBS. Shareholder
shall deliver to the Company, at any time as the Company may request, all
memoranda, notes, plans, records, reports, computer tapes, printouts and
software and other documents and data (and copies thereof) relating to the
Confidential Information, Work Product or the business of the Company, its
successors or any of their respective subsidiaries which he may then possess or
have under his control.
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3. Inventions and Intellectual Property Rights. Shareholder agrees that
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he will promptly make full written disclosure to the Board and will hold in
trust for the sole right and benefit of the Company, its successors and their
respective subsidiaries, and Shareholder hereby assigns to the Company or its
designee, his entire right, title and interest in and to, any and all
inventions, innovations, improvements, original works of authorship,
developments, concepts, methods, trade secrets, designs, analyses, drawings,
reports and all similar or related information (whether or not patentable or
registrable under copyright or similar laws) which have been solely or jointly
conceived, developed or made by Shareholder while employed by the Company, its
successors or any of their respective subsidiaries (collectively "Work
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Product"). Shareholder acknowledges that any original works of authorship which
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were made by him (solely or jointly with others) within the scope of his
employment and which are protectable by copyright are "works made for hire," as
that term is defined in the United States Copyright Act. Any inventions,
innovations, improvements, developments, methods, designs, analyses, drawings or
reports that are developed by Executive while performing services for TSBS and
relate solely to the business of TSBS (i.e., they have no commercial application
to the Company's business) shall be the property of TSBS.
4. Enforcement. If, at the time of enforcement of paragraph 1, 2 or 3 of
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this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area. Because
Shareholder's services are unique and because Shareholder has access to
Confidential Information and Work Product, and for the other reasons set forth
herein, the parties hereto agree that money damages would not be an adequate
remedy for any breach of this Agreement. Therefore, in the event a breach or
threatened breach of this Agreement, Merger Sub or its successors or assigns
(including, without limitation, the Company) may, in addition to other rights
and remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive or other relief in order
to enforce, or prevent any violations of, the provisions hereof (without posting
a bond or other security). In addition, in the event of an alleged breach or
violation by Shareholder of paragraph 1, the Noncompete Period shall be tolled
until such breach or violation has been duly cured.
5. Shareholder's Representations. Shareholder hereby represents and
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warrants to Merger Sub that (i) the execution, delivery and performance of this
Agreement by Shareholder do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Shareholder is a party or by which he is bound, (ii) Shareholder
is not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by Merger Sub and the expiration of the
Offer, this Agreement shall be the valid and binding obligation of Shareholder,
enforceable in accordance with its terms. Shareholder hereby acknowledges and
represents that he has consulted with independent legal counsel regarding his
rights and obligations under this Agreement and that he fully understands the
terms and conditions contained herein.
6. Survival. Paragraphs 1, 2 and 3 shall survive and continue in full
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force in accordance with their terms notwithstanding any termination of this
Agreement.
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7. Notices. Any notice provided for in this Agreement shall be in
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writing and shall be either personally delivered, mailed by first class mail
(return receipt requested), or sent by overnight courier service, to the
recipient at the address indicated below:
Notices to Shareholder:
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Xxxxxx X. Xxxxxxx
0000 Xxxxx Xxxxxx Xxxxx Xxxx
Xxxxxxx, XX 00000
with a copy to:
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Xxxxx, Xxxxxxxx & Xxxxxxx, LLP
1230 Peachtree Street, N.E.
Suite 3100, Promenade II
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxx Xxxxxxxx
Xxxxxx X. Xxxxx
Notices to Merger Sub:
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Broder Bros., Co.
00000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxx
Xxxxxx Xxxxx
With copies to:
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Broder Bros., Co.
x/x Xxxx Xxxxxxx, Xxx.
Xxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxx Xxxxx
Xxxxxxxx & Xxxxx
000 X. Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, P.C.
Xxxxx Breach
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
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8. Severability. Whenever possible, each provision of this Agreement
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shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
9. Complete Agreement. This Agreement, those documents expressly
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referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
10. No Strict Construction. The language used in this Agreement shall be
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deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
11. Counterparts. This Agreement may be executed in separate counterparts,
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each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
12. Successors and Assigns. This Agreement is intended to bind and inure
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to the benefit of and be enforceable by Shareholder, Merger Sub and their
respective heirs, successors and assigns, except that Shareholder may not assign
his rights or delegate his obligations hereunder without the prior written
consent of Merger Sub (which consent may be withheld in Merger Sub's sole
discretion). Without limiting the foregoing, from and after the Effective Time
of the Merger, all references herein to Merger Sub shall be deemed to be
references to the Company.
13. Choice of Law. All issues and questions concerning the construction,
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validity, enforcement and interpretation of this Agreement shall be governed by,
and construed in accordance with, the laws of the State of Georgia, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of Georgia or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Georgia.
14. Amendment and Waiver. The provisions of this Agreement may be amended
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or waived only with the prior written consent of Merger Sub's board of directors
and Shareholder, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
15. Effectiveness. This Agreement shall become effective on the Expiration
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Date. In the event that the Merger Agreement is terminated in accordance with
its terms prior to the Expiration Date, this Agreement shall be null and void
and of no force and effect.
16. Recitals. The recitals to this Agreement are an integral part of this
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Agreement and shall be deemed to be part of the text of this Agreement as if
fully set forth herein.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
FLD ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxx
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Name:
Its: CEO
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/s/ Xxxxxx X. Xxxxxxx
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XXXXXX X. XXXXXXX
[Signature Page to Non-Compete Agreement]
EXHIBIT A
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The following is a description of the current business of T Shirt Brokerage
Services, Inc. ("TSBS"), as described by Shareholder:
TSBS is engaged in the business of acting as a broker (as opposed to a
distributor) for apparel products purchased from either apparel manufacturers,
apparel importers, screen printers and embroiders, fabric xxxxx or apparel
distributors. Except as described below, the products that TSBS brokers are
materially discounted (i.e., in excess of 20% of the then current standard
price) apparel products that are primarily close outs, discontinued items or
overstocked items. As a broker, TSBS does not generally warehouse any of the
goods that it sells. Occasionally, TSBS may take possession and warehouse the
goods that it is brokering, however TSBS will not use more than 10,000 square
feet, in the aggregate, of storage space at any one time. Subject to the
foregoing, TSBS does not act as a distributor, meaning that it does not (a)
purchase goods for storage and redistribution or (b) solicit orders or customers
through catalog solicitation or other general advertising methods. TSBS's
business is national in scope.
For purposes of the Agreement, the foregoing describes the business that
Shareholder may continue to engage in without violating the terms of Section 1
of the Agreement.
On occasion, TSBS has the opportunity to act as a broker for the sale of apparel
products which are not materially discounted (i.e., the discount on such
products is less than 20% of the then current standard price). TSBS shall be
permitted to act as a broker in such transactions without Shareholder violating
the terms of this Agreement so long as Shareholder causes TSBS to give the
Company a right of first refusal with respect to such apparel products before
TSBS brokers such products to a third party, it being understood that if the
Company declines to purchase such products TSBS may only sell such products to a
third party on terms no more favorable than the terms offered to the Company.
