EXHIBIT 10.5
NON-COMPETE AGREEMENT
THIS NON-COMPETE AGREEMENT is made and entered into as of April 14, 1997 by
and among SLJ RETAIL LLC, a Delaware limited liability company (the "Company"),
-------
XXXXXXX SHOE COMPANY INC., a Delaware corporation ("Xxxxxxx"), each of XXXXXXX
-------
V. XXXX, XXXXX XXX XXXX, XXXXXXXX X. XXXX, XXXX X. XXXXXXX and XXXXX XXXXXXXX,
AS TRUSTEE OF THE XXXXXXX X. XXXX TRUST (individually, a "Xxxxxxx Control
---------------
Shareholder" and collectively, the "Xxxxxxx Control Shareholders"), XXXXXXX
----------- ----------------------------
RETAIL INC., a Delaware corporation ("Xxxxxxx Retail"), and XXXXXXX COMPANY, a
--------------
Delaware corporation ("Xxxxxxx").
-------
RECITALS
--------
A. The Xxxxxx Group Inc., a Delaware corporation ("Xxxxxx"), Xxxxxxx and
------
Xxxxxxx Retail are parties to a Contribution Agreement dated of even date
herewith (the "Contribution Agreement"), pursuant to which the Company has been
----------------------
formed.
B. Capitalized terms used in this Agreement and not otherwise defined
herein will have the definitions set forth in the Contribution Agreement, unless
otherwise clearly indicated to the contrary herein.
C. Pursuant to the Contribution Agreement, Xxxxxxx has agreed with Xxxxxx
to enter into this Agreement with the Company, and to cause the Xxxxxxx Control
Shareholders, as the controlling shareholders of Xxxxxxx, and Xxxxxxx Retail and
Xxxxxxx, as the wholly-owned subsidiaries of Xxxxxxx, to enter into this
Agreement with the Company, providing that Xxxxxxx, the Xxxxxxx Control
Shareholders, Xxxxxxx Retail and Xxxxxxx (collectively, the "Xxxxxxx Parties")
---------------
shall not engage in certain activities in competition with the Company, under
and subject to all of the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto agree as follows:
1. Definitions; Rules of Construction.
-----------------------------------
(a) Definitions. The following definitions will apply to the capitalized
-----------
terms used in this Agreement for all purposes, unless otherwise clearly
indicated:
"Closeout Merchandise" means merchandise that remains on hand at the end of
--------------------
a fashion season and that Xxxxxxx has determined should be closed out, marked
down and disposed of, provided that Xxxxxxx has notified the Company (with a
copy to Xxxxxx) of its intent to sell such merchandise as closeout merchandise
and the Company (with the concurrence of the Required Members) has consented to
the characterization of such merchandise as "Closeout Merchandise" for the
purposes of this Agreement.
"Company Activities" means (i) as of the date hereof, the business of
------------------
selling S&L/JNY Products in Mall Specialty Footwear Stores and, provided that
the Company opens five or more Retail Outlet Footwear Stores within three years
after the Closing Date, in Retail Outlet Footwear Stores, and (ii) as of any
subsequent date, such business together with any Retail Opportunity actually
undertaken by the Company as of such date and referred to the Company or
required to be referred to the Company pursuant to the Retail Opportunity
Agreement.
"Company Products" means (i) as of the date hereof, S&L/JNY Products, and
----------------
(ii) as of any subsequent date, such products together with any other Retail
Footwear Products sold by the Company pursuant to any Retail Opportunity
actually undertaken by the Company as of such date and referred to the Company
or required to be referred to the Company pursuant to the Retail Opportunity
Agreement.
"Confidential Information" means any data or information, other than Trade
------------------------
Secrets, relating to the Company Activities which is valuable information to the
Company and not generally known to competitors of the Company.
"Mall Anchor Stores" means department or general merchandise stores serving
------------------
as anchor stores in enclosed regional shopping malls (such as the department
stores operated by Federated Department Stores, Inc. as of the date of this
Agreement and the department or general merchandise stores operated under the
Marshalls, T.J. Maxx, Filene's Basement, Xxxx Stores or Xxxxxxxx'x names as of
the date of this Agreement).
"Mall Discount Footwear Stores" means retail stores (excluding Mall Anchor
-----------------------------
Stores) which specialize in selling close-out, off-price, second quality or
discounted footwear and accessories and which are located in enclosed regional
shopping malls (such as the stores operated under the Famous Footwear, Payless
Shoe Source and Shoe Department names as of the date of this Agreement).
"Mall Specialty Apparel Stores" means retail stores (excluding Mall Anchor
-----------------------------
Stores) which specialize in selling first-quality apparel and accessories and
which are located in enclosed regional shopping malls (such as the stores
operated under the GAP, Limited and Banana Republic names as of the date of this
Agreement).
"Mall Specialty Footwear Stores" means retail stores (excluding Mall Anchor
------------------------------
Stores) which specialize in selling first-quality footwear and accessories and
which are located in enclosed regional shopping malls (such as the stores
operated under the 9 Xxxx, Xxxxxxx Xxxx and Rack Room names as of the date of
this Agreement).
"Xxxxxxx Entities" means any entity (other than the Company) that is
----------------
controlled, directly or indirectly, by one or more of the Xxxxxxx Parties.
-2-
"Xxxxxxx Parties" has the meaning set forth in the Recitals to this
---------------
Agreement.
"Non-compete Period" means the period commencing on the date hereof and
------------------
ending on the earliest to occur of (i) the termination of the Xxx & Xxxxx
Trademark License (or, if Xxxxxxx does not exercise the option set forth in
Section 8.4 thereof to purchase all of the "Termination Inventory" (as defined
therein), six months after the expiration of Xxxxxxx'x option to purchase such
Termination Inventory); (ii) the date when neither Xxxxxx nor any other
Affiliate of GE Capital holds any Member Interest in the Company; or (iii) the
tenth anniversary of the date of this Agreement;
"Retail Footwear Products" means men's, women's or children's footwear
------------------------
products intended for retail (and not wholesale) sale.
"Retail Opportunity" has the meaning set forth in the Retail Opportunity
------------------
Agreement.
"Retail Outlet Apparel Stores" means retail stores which specialize in
----------------------------
selling off-price, second quality or close-out apparel and accessories and which
are located in outlet malls or centers.
"Retail Outlet Footwear Stores" means retail stores which specialize in
-----------------------------
selling women's footwear and accessories and which are located in outlet malls
or centers.
"Territory" has the meaning set forth in the Xxx & Xxxxx Trademark License.
---------
"Trade Secret" means information relating to the Company Activities,
------------
including but not limited to technical or nontechnical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings, processes,
financial data or plans, product plans, lists of suppliers, or other information
similar to any of the foregoing, which derives economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other Persons who can derive economic value
from its disclosure or use. For purposes of this Agreement, "Trade Secret"
shall include any such information developed for the Company by any of the
Xxxxxxx Parties pursuant to any of the Xxxxxxx Documents but shall not include
information that the Xxxxxxx Parties can show, by competent proof, (i) became
generally known to the public through no act or omission of any Xxxxxxx Party,
or (ii) was disclosed by a third party having a bona fide right both to possess
---- ----
the information and to disclose the information.
(b) Rules of Construction.
---------------------
(i) All section and paragraph titles and captions in this Agreement
are for convenience only, will not be deemed part of this Agreement, and in
no way define, limit, extend, or describe the scope or intent of any
provisions of this Agreement. Except as specifically provided otherwise,
references to "Sections" are to Sections of this Agreement.
--------
-3-
(ii) Whenever the context may require, any pronoun used in this
Agreement includes the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs includes the plural and
vice versa. The locative adverbs "hereof," "herein," "hereafter," etc.
---- -----
refer to this Agreement as a whole.
2. Confidential Information. Each of the Xxxxxxx Parties agrees that ,
------------------------
during the Non-compete Period, it will hold in confidence all Confidential
Information, and will not disclose, publish or make use of any Confidential
Information without the prior written consent of the Required Members (except
that Xxxxxxx may make use of Confidential Information which has been developed
by it or to which it otherwise has rights in connection with any business in
which Xxxxxxx is then engaged in compliance with the terms of this Agreement and
may disclose Confidential Information to the extent required by applicable legal
requirements).
3. Trade Secrets. Each of the Xxxxxxx Parties agrees that, at all time s
-------------
after the date hereof, it will hold in confidence all Trade Secrets, and will
not disclose, publish or make use of any Trade Secrets without the prior written
consent of the Required Members (except that Xxxxxxx may make use of Trade
Secrets which have been developed by it or to which it otherwise has rights in
connection with any business in which Xxxxxxx is then engaged in compliance with
the terms of this Agreement and may disclose Trade Secrets to the extent
required by applicable legal requirements).
4. Covenant Not to Compete.
-----------------------
(a) The Xxxxxxx Parties acknowledge that (i) the Company has the right to
engage in, and proposes to engage in, the Company Activities throughout the
Territory at all times during the Non-compete Period; (ii) the interests of the
Company and its Members in conducting the Company Activities would not be
adequately protected unless the covenant not to compete agreed to herein by each
of the Xxxxxxx Parties covers all Company Activities and the entire Territory at
all times during the Non-compete Period; and (iii) the execution and delivery of
this Agreement by the Xxxxxxx Parties is a fundamental economic element of the
agreements between the Xxxxxxx Parties on the one hand, and Xxxxxx, on the
other, with respect to the formation of the Company and the other matters set
forth in the Contribution Agreement; and (iv) Xxxxxx would not have entered into
the Contribution Agreement or consummated the transactions contemplated thereby,
other than in reliance on the protection of the economic interests of the
Company provided by this Agreement.
(b) Each of the Xxxxxxx Parties agrees that, at all times during the Non-
compete Period, it will not, and will neither cause nor permit any Xxxxxxx
Entity to, in any manner, directly or indirectly (through any member of the
Immediate Family of such Xxxxxxx Party or otherwise):
(i) engage in the Company Activities in the Territory;
-4-
(ii) have any equity interest in, make any loan to or for the benefit
of, or render services (of the types set forth in the Services Agreement or
the Operating Agreement, or of any other type) to, any Person or business
which engages in the Company Activities in the Territory (other than
investments constituting less than one percent of the issued and
outstanding capital stock or corporate bonds of a publicly traded
corporation); or
(iii) sell Company Products, for resale at retail, to any Mall
Specialty Apparel Store, Mall Specialty Footwear Store or Mall Discount
Footwear Store; provided that Company Products consisting of Closeout
--------
Merchandise may be sold to Famous Footwear and Rack Room for so long as
such Company Products are not resold by either of them at retail in malls
in which the Company has Mall Specialty Footwear Stores.
Notwithstanding clause (iii) above, in the event that (x) any wholesale customer
of Xxxxxxx xxxxx Company Products in any Mall Specialty Apparel Store, Mall
Specialty Footwear Store or Mall Discount Footwear Store, or (y) Famous Footwear
or Rack Room offers Company Products for retail sale in any mall in which the
Company has a Mall Speciality Footwear Store, in either case in violation of its
agreement with any Xxxxxxx Party or Xxxxxxx Entity not to do so or contrary to
Xxxxxxx'x understanding as to where such Company Products would be sold, then
neither Xxxxxxx nor any Xxxxxxx Party shall be deemed to be in breach of its
obligations under clause (iii) above unless such event continues uncured for 30
days or more after receipt by such Xxxxxxx Party of written notice thereof from
the Company or Xxxxxx.
5. Blue-Penciling. If any of the restrictions set forth in Section 4
-------------- ---------
hereof shall, for any reason, be held by a court of competent jurisdiction to be
excessively broad as to duration, geographical scope, activity or subject, such
restrictions shall be construed so as thereafter to be limited or reduced to the
extent necessary so as to be enforceable in accordance with applicable law as it
shall then appear (it being understood that, by the execution and delivery of
this Agreement, each of the Xxxxxxx Parties confirms that it regards all such
restrictions to be reasonable, necessary and fully compatible with its
respective rights and interests).
6. Equitable Remedies; Consent to Jurisdiction.
-------------------------------------------
(a) It is expressly understood and acknowledged by each of the Xxxxxxx
Parties that any breach or threatened breach of this Agreement cannot be
remedied solely by the recovery of damages and that, in the event of a breach or
threatened breach hereof by any of the Xxxxxxx Parties, the Company or any third
party beneficiary of the Company's rights hereunder may pursue both injunctive
relief and any and all other remedies available at law or in equity for any such
breach or threatened breach, including the recovery of damages and reasonable
attorneys' fees and costs.
-5-
(b) THE XXXXXXX PARTIES AGREE THAT ANY ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT MAY BE BROUGHT BY THE COMPANY OR ANY THIRD PARTY BENEFICIARY
OF THE COMPANY'S RIGHTS HEREUNDER IN THE COURTS OF THE STATE OF NEW YORK OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY ITS
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE XXXXXXX PARTIES
IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE XXXXXXX PARTIES WAIVES ANY OBJECTION TO
JURISDICTION OR VENUE (INCLUDING ANY OBJECTION BASED ON THE GROUNDS OF FORUM NON
---------
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
----------
ACTION OR PROCEEDING IN SUCH JURISDICTION. EACH OF THE XXXXXXX PARTIES HEREBY
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY ANY OF THE COURTS REFERENCED
IN THIS PARAGRAPH (b) IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, IN
ACCORDANCE WITH SECTION 8 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE UPON THE
---------
EARLIER OF (i) THE DATE FIVE (5) CALENDAR DAYS AFTER SUCH MAILING OR (ii) ANY
EARLIER DATE PERMITTED BY APPLICABLE LAW.
7. Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations hereunder can be assigned or delegated by any Xxxxxxx Party,
without the prior written consent of the Company, or by the Company, without the
prior written consent of Xxxxxxx.
8. Notices. All notices that are required or may be given pursuant to
-------
this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as any
party may provide to the other parties by notice in accordance with this Section
-------
8):
-
If to any Xxxxxxx Party:
-----------------------
c/x Xxxxxxx Shoe Company Inc.
000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxxxxx 00000
(or, if by mail, X.X. Xxx 00
Xxxxxxxxx, Xxxxxxxxxxxxx 00000)
Attention: Xxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
With a copy to:
--------------
Xxxxxx, Xxxx & Xxxxxxxx LLP
-6-
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
If to the Company:
-----------------
000 Xxxxxxxxxx Xxxxx
Xxxxx X
Xxxxxx, Xxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
With copies to:
--------------
GE Capital Equity Capital Group, Inc.
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
and
General Electric Capital Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Counsel -- Equity Capital Group
Facsimile: (000) 000-0000
and
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx Xxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
9. Binding Effect. This Agreement will be binding upon and inure to the
--------------
benefit of the parties hereto and their successors, legal representatives, and
permitted assigns.
-7-
10. Third Party Beneficiaries. This Agreement is made solely and
-------------------------
specifically between and for the benefit of the parties hereto, the Members from
time to time of the Company as third party beneficiaries of the rights of the
Company hereunder and their respective successors and assigns (subject to the
express provisions hereof relating to successors and assigns). Except for such
parties, such Members as third party beneficiaries and their respective
successors and assigns, no other Person whatsoever will have any rights,
interest, or claims hereunder or be entitled to any benefits under or on account
of this Agreement as a third party beneficiary or otherwise.
11. Waiver. No failure by any party to insist upon the strict performance
------
of any covenant, duty, agreement, or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof will constitute waiver of
any such breach or any other covenant, duty, agreement, or condition.
12. Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which together will constitute one agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart.
13. Entire Agreement. This Agreement contains the entire understanding of
----------------
the parties relating to the subject matter hereof and supersedes all prior
written or oral and all contemporaneous oral agreements and understandings
relating to the subject matter hereof. This Agreement cannot be modified or
amended except in accordance with Section 7.5 of the Operating Agreement, and
then only in writing signed by the party against whom enforcement is sought.
14. Governing Law. This Agreement will be governed by and construed and
-------------
interpreted in accordance with the laws of the State of New York applicable to
contracts made and to be performed in that State.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement as of the date first above written.
SLJ RETAIL LLC
By: XXXXXXX RETAIL INC., its Manager
By:/s/ Xxxxx X. Xxxxxxxx
_______________________________
Xxxxx X. Xxxxxxxx
Chairman
-8-
XXXXXXX SHOE COMPANY INC.
By:/s/ Xxxxx X. Xxxxxxxx
__________________________________
Xxxxx X. Xxxxxxxx
Executive Vice President
/s/ Xxxxxxx X. Xxxx
_____________________________________
Xxxxxxx X. Xxxx
/s/ Xxxxx Xxx Xxxx
_____________________________________
Xxxxx Xxx Xxxx
/s/ Xxxxxxxx X. Xxxx
_____________________________________
Xxxxxxxx X. Xxxx
/s/ Xxxx X. Xxxxxxx
_____________________________________
Xxxx X. Xxxxxxx
/s/ Xxxxx Xxxxxxxx
_____________________________________
Xxxxx Xxxxxxxx, as Trustee of the
Xxxxxxx X. Xxxx Trust Fund of the
Xxxxxxx X. Xxxx Irrevocable Trust
dated 12/23/80
XXXXXXX RETAIL INC.
By:/s/ Xxxxx X. Xxxxxxxx
__________________________________
Xxxxx X. Xxxxxxxx
-9-
Chairman
XXXXXXX COMPANY
/s/ Xxxxx X. Xxxxxxxx
By:__________________________________
Xxxxx X. Xxxxxxxx
Chief Financial Officer
-10-
