Exhibit 10.6
RESTRICTIVE COVENANT
AGREEMENT
THIS RESTRICTIVE COVENANT AGREEMENT
(this “ Agreement ”), dated July 31, 2005, by
Hubert Guez (“ Stockholder ”) in favor and for
the benefit of Cygne Designs, Inc., a Delaware corporation (“
Cygne ”), and its subsidiaries (Cygne and such
subsidiaries are collectively referred to herein as the “
Cygne Entities ”).
W I T N E S S E T H
:
WHEREAS, Cygne is a manufacturer of
private label women’s career and casual apparel, including
denim-related clothing products (such business of selling
denim-related clothing products as conducted by Cygne prior to the
Closing Date is herein referred to as the “ Cygne
Business ”);
WHEREAS, pursuant to the terms and
conditions of that certain Asset Purchase Agreement, dated July 31,
2005 (the “ Purchase Agreement ”), by and among
Commerce Clothing Company LLC, a California limited liability
company (“ Commerce ”), Stockholder, 215 GZ
Partners, Guez Living Trust dated December 6, 1996, Griffin James
Aron Guez Irrevocable Trust dated January 1, 1996, Stephan Avner
Felix Guez Irrevocable Trust dated January 1, 1996, and Cygne,
Cygne has purchased certain of the assets of Commerce relating to
its business of selling and distributing branded and private label
denim clothing (capitalized terms used but not defined herein shall
have the meanings given to such terms in the Purchase
Agreement);
WHEREAS, as a member of Commerce,
Stockholder has obtained extensive and valuable knowledge and
confidential information concerning the Acquired Business;
and
WHEREAS, as a condition to the
obligation of Cygne to consummate the transactions contemplated by
the Purchase Agreement, and to enable the Cygne Entities to secure
more fully the benefits of the acquisition of the Assets and the
Acquired Business, Cygne has required that Stockholder enter into
this Agreement, and Stockholder is entering into this Agreement in
order to induce Cygne to consummate the transactions contemplated
by the Purchase Agreement.
AGREEMENT
In order to induce Cygne to
consummate the transactions contemplated by the Purchase Agreement,
in consideration of the amounts to be received by Stockholder
herein, and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which is hereby acknowledged,
Stockholder, intending legally to be bound, agrees as
follows:
1. Non-Disclosure of Confidential
Information . Except for such actions necessary to ensure the
compliance by Stockholder of its obligations under the Purchase
Agreement and the Transaction Documents, from and after the Closing
Date, Stockholder covenants and agrees that, except as may be
required by applicable law, it shall not disclose any Confidential
Information (as defined herein). This limitation upon disclosure
does not apply to information (a) readily available to competitors
of the Cygne Business and the Acquired Business (the Cygne Business
and the Acquired Business as conducted on the date of this
Agreement are together referred to herein as the “
Competitive Business ”) through means other than as
the result of unauthorized disclosure and without assistance of
Stockholder in violation of this Agreement, (b) which is
publicly known at the time of disclosure to
Stockholder, or (c) that becomes publicly known or available
thereafter other than by means in violation of this Agreement. For
the purposes of this Agreement, “ Confidential
Information ” means confidential information relating to
the marketing strategies, pricing policies or characteristics,
customers, suppliers and customer and supplier information,
customer and supplier lists, product or product specifications,
Intellectual Property of any Cygne Entity (including the Purchased
Intellectual Property), designs, manufacturing, testing or assembly
processes or costs, costs of materials, business or business
prospects, plans, proposals, codes, marketing studies, research,
reports, investigations, or other information of similar character
which relate to the Competitive Business.
2. Non-Competition . Except
for such actions necessary to ensure the compliance by Stockholder
of its obligations under the Purchase Agreement and the Transaction
Documents, and except as otherwise set forth herein, Stockholder
agrees that during the period commencing on the Closing Date and
terminating on the fifth anniversary of the Closing Date (the
“ Noncompetition Period ”), Stockholder shall
not directly or through any Affiliate (as defined below), whether
for compensation or without compensation, directly or indirectly,
as an owner, principal, partner, member, shareholder, independent
contractor, consultant, joint venturer, investor, licensor, lender
or in any other capacity whatsoever, alone, or in association with
any other Person, carry on, be engaged or take part in, or render
services (other than services which are generally offered to third
parties and do not compete with the Competitive Business) or advice
to, own, share in the earnings of, invest in the stocks, bonds or
other securities of, or otherwise become financially interested in,
any Person engaged in the Competitive Business anywhere in the
United States (including Puerto Rico), Canada, Latin America,
Brazil, Mexico, the Caribbean, the United Kingdom, Japan or China.
For purposes of this Agreement, an “ Affiliate ”
means an entity in which the Stockholder or his spouse or children
owns or controls, directly or indirectly, individually or
collectively, a majority of the outstanding voting securities of or
other ownership interests in such entity or otherwise has the right
to appoint a majority of the board of directors, managers or other
like governing body; provided that, notwithstanding the foregoing,
the term “Affiliate” shall not include Innovo Group,
Inc., or any entity controlled by or affiliated with
Stockholder’s brothers. Notwithstanding the foregoing,
nothing herein shall prevent (i) AZT International S.A. de C.V.,
Apparel Distribution Services, Azteca or any affiliate thereof or
other entity in which Stockholder has an ownership interest from
continuing to manufacture denim-related clothing products for and
on behalf of any party, subject to its ability to fulfill its
obligations under the Supply Agreement, (ii) Stockholder from
acting as a third party investment banker or advisor with respect
to finding, buying, selling or otherwise packaging and marketing
companies, including, without limitation, denim clothing product
companies for purchase or sale; and (ii) Stockholder from owning
(A) less than or equal to five percent (5%) of the outstanding
capital stock of a corporation whose stock is traded on an
established stock exchange or quoted on NASDAQ or any other over
the counter market, or (B) less than or equal to twenty percent
(20%) of the outstanding capital stock, partnership interest or
membership interest in a privately-held corporation, limited
liability company, partnership or other privately-held entity. Any
activities by Stockholder undertaken in connection with clause (ii)
of this Section 2 shall not be deemed to be a violation or breach
of Section 2, 3 or 4 of this Agreement.
3. Non-Diversion .
Stockholder covenants and agrees that during the Noncompetition
Period, he and his Affiliates shall not, directly or indirectly
through any representative or agent: (a) solicit, or contact for
the purpose of soliciting, any customer of the
2
Competitive Business which has actively done
business with any of the Cygne Entities during the Noncompetition
Period or with Commerce (with respect to the Acquired Business) in
the last two years prior to the Closing Date (a “
Customer ”), for the purpose of the sale to or
servi
