PHOENIX FOOTWEAR GROUP INC
EXHIBIT 10.3
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>a94279exv10w3.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
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                                                                    EXHIBIT 10.3

                  NONCOMPETITION AND CONFIDENTIALITY AGREEMENT

         This NONCOMPETITION AND CONFIDENTIALITY AGREEMENT (this "AGREEMENT") is
made by and among PHOENIX FOOTWEAR GROUP, INC., a Delaware corporation
("BUYER"), ROYAL ROBBINS, INC., a California corporation (the "COMPANY"), and
Dan J. Costa ("STOCKHOLDER").

                                R E C I T A L S :

         A.       This Agreement is entered into in connection with a Stock
Purchase Agreement, dated as of October 1, 2003 (the "STOCK PURCHASE
AGREEMENT"), by and among Buyer, the Company, Douglas C. Vient, as trustee of
the Dan J. and Denise L. Costa 1997 Family Trust, the Kelsie L. Costa Trust and
the Daniel S. Costa Trust ("SELLERS") and Stockholder, as the Sellers' agent.
The noncompetition provisions of this Agreement shall become effective only upon
the Closing as set forth in the Stock Purchase Agreement (the "CLOSING DATE").
Capitalized terms used herein and not defined herein shall have the meanings set
forth in the Stock Purchase Agreement.

         B.       Stockholder is an officer and director of the Company and a
significant beneficial owner of its outstanding capital stock. The parties
hereto recognize that 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.

         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 payment 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, the consummation of the transactions
contemplated in the Stock Purchase Agreement, Stockholder is entering into this
Agreement and agrees and approves to the terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual agreements hereinafter set forth, the parties hereto agree as follows:

         1.       CONSIDERATION. In consideration of (a) the purchase all of the
outstanding stock of the Company, pursuant to the terms of the Stock Purchase
Agreement, (b) the Company's execution and delivery of a Consulting Agreement
between the Company and the Stockholder

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and (c) the payment to Stockholder at the Closing of the sum of Two Hundred
Fifty Thousand Dollars ($250,000.00), Stockholder, agrees to observe and abide
by his restrictions and undertakings herein.

         2.       NONCOMPETITION.

                  (a)      Except as provided below, during the period
commencing on the Closing Date and ending on the fifth anniversary thereof (the
"RESTRICTIVE PERIOD"), Stockholder shall not, in any county in California,
including the following counties: Alameda, Alpine, Amador, Butte, Calaveras,
Colusa, Contra Costa, Del Norte, El Dorado, Fresno, Glenn, Humboldt, Imperial,
Inyo, Kern, Kings, Lake, Lassen, Los Angeles, Madera, Marin, Mariposa,
Mendocino, Merced, Modoc, Mono, Monterey, Napa, Nevada, Orange, Placer, Plumas,
Riverside, Sacramento, San Benito, San Bernardino, San Diego, San Francisco, San
Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz,
Shasta, Sierra, Siskiyou, Solano, Sonoma, Stanislaus, Sutter, Tehama, Trinity,
Tulare, Tuolumne, Ventura, Yolo and Yuba; or in any county, state, country or
other jurisdiction in the balance of the United States of America and the
dependent territories of the United States of America or in any other country in
the world:

                           (i)      directly or indirectly, alone or with
others, engage in any activity competitive with the Company Business;

                           (ii)     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 competitive with the Company Business; or

                           (iii)    permit Stockholder's name to be used in
connection with a business that is competitive with the Company Business;

provided, however, that nothing in this Section 1 shall prevent Stockholder from
(A) 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 owning less than a 1% interest in a venture capital fund,
(B) serving as an employee or consultant to Buyer or owning capital stock of
Buyer or its successors in interest.

                  For purposes of this Agreement, (1) "Company Business" means
the manufacture, design, promotion, production, marketing, sale, sourcing and
distribution of outdoor sportswear, travel clothing and other accessories and
the licensing of the Royal Robbins Marks in each case as conducted by the
Company as of the date hereof; (2) 5.11, Inc. or its successors or assigns shall
not be deemed to compete with the Company Business solely as a result of
engaging in the manufacture, design, promotion, production, marketing, sale,
sourcing or distribution of clothing, accessories and uniforms for use in the
public safety and/or military markets and (3) Invigour8 Ltd. or its successors
or assigns shall not be deemed to compete with the Company Business so long as
such sourcing is not for third parties who are engaged in competition with the
Company

                                       -2-

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Business. Notwithstanding the foregoing, the Company may not enforce this
Agreement with respect to Invigour8 for sourcing for a third party who is
engaged in competition with the Company Business unless the Company shall first
give the Stockholder three (3) business days written notice thereof, and the
Stockholder has ceased doing business with such competitor at the end of such
three (3) business day period.

                  (b)      Stockholder agrees to, and agrees that Buyer, Company
and their respective officers, directors, employees, agents and representatives
may, inform any person or entity for whom Stockholder performs services (or
proposes to perform services) during the Restrictive Period of Stockholder's
obligations under Section 1.

                  (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 Buyer's, or the Company's officers
or employees; (ii) entice away or in any other manner persuade or attempt to
persuade any of the Company's, or Buyer's officers or employees to discontinue
their relationship with the Company or Buyer; (iii) contract, solicit, divert,
or attempt to divert from the Company or Buyer any business whatsoever by
influencing or attempting to influence any customer of the Company, or Buyer
with whom the Company or Buyer has engaged in sales discussions prior to the
termination of this Agreement; or (iv) contract, solicit, divert, or attempt to
divert from the Company or Buyer any supplier or vendor. Notwithstanding the
foregoing, immediately following the first anniversary of the Closing Date,
Section 2(c)(i) shall not apply to any employee of the Company or the Buyer
other than those individuals listed on SCHEDULE A annexed hereto. The parties
hereby confirm, for the sake of clarity, that Section 2(c)(i) shall not in any
event be construed to prevent Stockholder, either in his individual capacity or
as an agent for or on behalf of another, from hiring or offering to hire Loren
White if THE BUYER OR THE COMPANY TERMINATE his employment with the Buyer or the
Company, AND IT IS NOT CONTINUED BY THE OTHER.

                  (d)      In the event that the Stockholder violates any of his
obligations under this Section 1, the Restrictive Period and any other
applicable period shall be extended with respect to such obligations by the
period of time equal to that period beginning when the activities constituting
such violation commenced and ending when the activities constituting such
violation terminated.

         3.       CONFIDENTIAL INFORMATION.

                  (a)      The parties acknowledge and agree that:

                           (i)      The Company's business being purchased by
Buyer includes confidential and proprietary information of Company (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 3), provided, however, that
Stockholder may disclose such information (A) as compelled by any court decree,
subpoena or legal or administrative order or

                                       -3-

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process; (B) as is required by law so long as no other means is readily
available; and (C) in connection with the exercise of any right or remedy by
Sellers to collect any Additional Consideration due under the Stock Purchase
Agreement or in connection with any litigation to which Stockholder is a party.
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.

                           (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 which are in his possession, provided, however, that he
may keep one set for the purposes of the disclosures permitted by Section 3(a)
above.

                  (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.       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 2(a):

                  If to Buyer:               Phoenix Footwear Group, Inc.
                                             5759 Fleet Street, Suite 220
                                             Carlsbad, California 92008
                                             Attention: James R. Riedman,
                                             Chairman and CEO
                                             Facsimile No. (760) 602-9684

                  If to Company:             Royal Robbins, Inc.
                                             1524 Princeton Avenue
                                             Modesto, California 95350

                                       -4-

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                                             Attention: Dan Costa, CEO
                                             Facsimile No. (209) 522-5511

                  If to Stockholder:         Dan Costa
                                             761 Kearney Avenue
                                             Modesto, California 95350
                                             Facsimile No. (209) 522-5511

                  (b)      Termination of Agreement. This Agreement shall
terminate (i) if and when the Stock Purchase Agreement is terminated prior to
the Closing Date in accordance with its terms or (ii) upon the occurrence of an
Acceleration Event thereunder other than as a result of a Change of Control.

                  (c)      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.

                  (d)      Successors and Assigns. This Agreement will not be
assignable by either Stockholder or Buyer, except that the rights and
obligations of Buyer under this Agreement may be assigned to an entity which
succeeds to the Company Business.

                  (e)      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.

                  (f)      No Waiver. No failure on the part of Buyer 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 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.

                  (g)      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

                                       -5-

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the United States, and each other country, and political subdivision thereof, in
which Buyer now transacts any business.

                  (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)      Specific Performance; Remedies. Stockholder
acknowledges and agrees that 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 Buyer 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, Buyer shall be entitled to (in addition to any other remedy that may
be available)(a) a decree or order of specific performance to enforce the
observance and performance of such covenant, obligation or other provision and
(b) 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. The rights and remedies of Buyer hereunder are not exclusive of or limited
by any other rights or remedies which Buyer 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 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 Buyer against Stockholder, if Buyer is the prevailing party, it 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).

                  (j)      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.

                  (k)      Entire Agreement. This 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. This Agreement will be binding upon
Stockholder and Stockholder's representatives, executors, administrators,
estate, heirs, successors and assigns, and will inure to the benefit of Buyer
and its successors and assigns.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       -6-

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         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

DAN J. COSTA

By: /s/ Dan J. Costa
    -------------------------------------------------
Name: -----------------------------------------------
Title: ----------------------------------------------

PHOENIX FOOTWEAR GROUP, INC.

By: /s/ James Riedman
    ------------------------------------------------
Name: James Riedman
Title: Chairman and CEO

ROYAL ROBBINS, INC.

By:  /s/ Francisco Morales
     ------------------------------------------------
Name: Francisco Morales
Title: President

                                       -7-

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                                   SCHEDULE A
                     NAMES OF INDIVIDUALS UNDER SECTION 1(c)

Francisco Morales

Loren White

Shannon Park

Gina Wiley

                                       -8-

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