1
EXHIBIT 10.1
CONSULTING CONTRACT
This Consulting Contract made and entered into as of the 30th day of
September, 1999 by and between Payless ShoeSource, Inc., ("Payless") a Delaware
corporation and Xxxxxxx X. Xxxxxxx ("Consultant).
WHEREAS, Payless and Consultant desire that Consultant serve as a
consultant to Payless for the fees and upon and subject to the terms and
provisions hereinafter set forth;
In consideration of the mutual promises and agreements hereinafter set
forth, it is hereby agreed by and between Payless and Consultant as follows:
1.(a)The term of the Consulting Contract shall be from October 1, 1999
to September 30, 2002. Consultant covenants and agrees that he will, when and as
requested by Payless (subject to Section 1(c), below), from time to time during
the term of this Consulting Contract, and at such place or places as Payless may
reasonably request, render and furnish consulting services relating to the
conduct and operation of Payless' affairs as shall be requested by the proper
officers of Payless.
(b) In rendering the consulting services provided for herein,
Consultant shall make available to Payless such personal expertise, know-how and
assistance as Payless may reasonably request. The parties recognize and agree
that Consultant's services are of a special and unique character. Consultant's
obligations hereunder are obligations of the Consultant alone, and may not be
assigned to or performed by others.
(c) Consultant and Payless desire to permit Consultant maximum
flexibility in terms of the timing of his work, consistent with Payless' need
for his consulting services. In addition, however, Consultant and Payless
recognize that, in many instances, Payless must be able to count on receiving
such services in a timely fashion. Therefore, Consultant and Payless shall both
seek to be as reasonable as possible in exercising their respective rights in
carrying out their respective duties hereunder, and shall communicate with each
other as far in advance as reasonably practicable concerning the scheduling of
consulting services.
(d) Consultant shall render consulting services during the term of this
Consulting Contract as follows:
1) for up to 120 days during the period
commencing October 1, 1999, and ending
September 30, 2000; plus
2) for up to 80 days during the period
commencing October 1, 2000, and ending
September 30, 2001; plus
3) for up to 40 days during the period
commencing October 1, 2001, and ending
September 30, 2002
For purposes of this Consulting Contract, Consultant shall be deemed to
have furnished and rendered consulting services under this Consulting Contract
for a "day" for each calendar day or portion thereof on which Consultant
provides not less than three hours of consulting services under this Consulting
Contract; provided, however, that in no event shall any single calendar day be
counted as more than one "day" for purposes of calculating fees payable to
Consultant under this Consulting Contract. In the event that Consultant provides
less than three hours of services in any calendar day (a
2
"short-hour day") under this Consulting Contract, then Consultant shall be
deemed to have furnished and rendered consulting services under this Consulting
Contract for a "day" for each group of short-hour days in which the aggregate
of hours or consulting services rendered is not less than seven hours; provided,
however, that in no event shall any one short-hour day be included in more than
one such group of short-hour days.
2.(a) Payless agrees to pay Consultant consulting fees (before taxes)
for the performance of its obligations under this Consulting Contract, to be
paid on or about the first week after the close of the fiscal quarter as
follows:
1) for the period commencing October 1, 1999,
and ending September 30, 2000, the amount
of $250,000 (before taxes), payable in
equal quarterly installments;
2) for the period commencing October 1, 2000,
and ending September 30, 2001, the amount
of $166,700 (before taxes), payable in
equal quarterly installments;
3) for the period commencing October 1, 2001,
and ending September 30, 2002, the amount
of $83,300 (before taxes), payable in equal
quarterly installments.
(b) In the event that, during the term of this Consulting Contract,
Consultant renders and furnishes consulting services in excess of the number of
days described in Section 1(d) of this Consulting Contract, then Payless agrees
to pay Consultant supplementary consulting fees, in addition to the consulting
fees described in Section 2 (a) of this Consulting Contract, at a rate of $2,100
per day for each day that Consultant so renders and furnishes such excess
consulting services. In the event that Payless becomes obligated to pay
supplementary consulting fees under this Section 2(b) Payless agrees to pay such
supplementary consulting fees accrued on or about the first week after the close
of the fiscal quarter.
(c) Payless shall reimburse Consultant for all reasonable ordinary and
necessary business expenses incurred directly in the rendering of consulting
services hereunder, including, but not by way of limitation, expenses for such
matters as transportation, travel, entertainment, long distance telephone calls
and other necessary and customary expenses on the same terms as were offered
while Consultant was employed as Vice Chairman by Payless. Payment of such
expenses during the term of this Consulting Contract shall be made promptly upon
presentation of supporting documents comparable to those required to be
submitted by employees of Payless. If business is conducted by Consultant on any
trip for Payless and for a non-Payless client of consultant, then such trip
costs will be allocated equally among all of the clients so served.
(d) It is agreed and understood that nothing in this Section 2 or
elsewhere in this Consulting Contract shall be deemed or construed to create or
continue an employer-employee relationship between Consultant and Payless, it
being agreed that such employer-employee relationship between Consultant Xxxxxxx
X. Xxxxxxx terminated on or about September 30, 1999.
3.(a) Consultant covenants and agrees that during the term of this
Consulting Contract, and for a period of two years from the earlier of September
30, 2002 or the actual termination of this Consulting Contract, he shall not:
3
(i) either alone or in concert with others, directly or
indirectly, own, be a partner in, be a member of,
operate, be employed by, or act as an advisor,
consultant, agent, officer, director, or independent
contractor for, or otherwise have an interest in, a
Competing Business;
(ii) solicit for employment, hire or offer employment to,
or disclose information to or otherwise aid or assist
any other person or entity other than Payless in
soliciting for employment, hiring or offering
employment to, any employee of Payless, or
(iii) take any action which is intended to harm Payless or
its reputation, which Payless reasonably concludes
could lead to unwanted or unfavorable publicity to
Payless;
unless Consultant (i) shall first have written to the Chairman of Payless and
shall have fully disclosed in advance of such activity both (1) the identity of
such competing business and (2) the nature of the consulting or similar services
to be rendered and (ii) shall first have secured the prior written approval of
the Chairman to Consultant's rendering such consulting or other similar
services, which prior written approval shall not be unreasonably withheld; but
except to the extent limited as aforesaid, and as hereinafter provided,
Consultant's activities shall not be otherwise restricted by its Consulting
Contract.
(b) The term "Competing Business" shall include, but not be limited to:
(i)any retail business with gross sales or revenue in the prior fiscal year
of more than $25 million (or which is a subsidiary, affiliate or joint venture
partner of a business with gross sales or revenue in the prior fiscal year of
more than $25 million) which sells footwear at retail to consumers at price
points competitive, or likely to be competitive with Payless (e.g. including,
without limitation, Wal-Mart, K-Mart, Target, Bradlee's, Ames, Mervyn's,
Pic-N-Pay, Foot Star, Inc., Xxxxxx, Xxxx, Genesco, Venator, Famous Footwear,
Shoe Carnival, Nine West, Xxxx'x, Xxx Xxxxxxxxx, Big Five, X.X. Penney, and
Sears)within 20 miles of any Payless store or the store of any wholesale
customer of Payless in the United States, or anywhere in any foreign country in
which Payless has retail stores, franchisees or wholesale customers;
(ii)any franchising or wholesaling business with gross sales or revenue in
the prior fiscal year of more than $25 million (or which is a subsidiary,
affiliate or joint venture partner of a business with gross sales or revenue in
the prior fiscal year of more than $25 million) which sells footwear at
wholesale to franchisees, retailers or other footwear distributors located
within 20 miles of any Payless store or the store of any wholesale customer of
Payless in the United States, or anywhere in any foreign country in which
Payless has retail stores, franchisees or wholesale customers;
(iii)any footwear manufacturing business with gross sales or revenue in the
prior fiscal year of more than $25 million (or which is a subsidiary, affiliate
or joint venture partner of a business with gross sales or revenue in the prior
fiscal year of more than $25 million) which sells footwear to retailers or other
footwear distributors located within 20 miles of any Payless store or the store
of any wholesale customer of Payless in the United States, or anywhere in any
foreign country in which Payless has retail stores, franchisees or wholesale
customers; (e.g. including, without limitation, Nine
4
West. Dexter, Stride Rite, Liz Claiborne, Wolverine Worldwide, Timberland, Nike,
Reebok, K-Swiss, Keds and Adidas): or
(iv)any business which provides buying office services to any store or
group of stores or businesses referred to in Paragraph 3.(b) (i), 3.(b) (ii) and
3.(b) (iii).
(c) The background of the non-compete restriction is as follows:
(i) Payless is one of the leading retail companies in the United States,
with self-service shoe stores throughout the United States, Puerto
Rico, X.X.Xxxxxx Islands, Guam, Saipan and Canada; and
(ii) In connection with its business, Payless has expended a great deal of
time, money and effort to develop and maintain its confidential,
proprietary and trade secret information; this information, if
misused or disclosed, could be very harmful to Payless' business and
its competitive position in the marketplace; and
(iii) Consultant desires to contract with Payless, to be given access to
confidential and proprietary information of Payless necessary for
Consultant to perform the Consulting Contract, but which Payless
would not make available to Consultant but for Consultant's signing
and agreeing to abide by the terms of this Consulting Contract with
Payless; and
(iv) Consultant recognizes and acknowledges that the Consulting Contract
with Payless provides Consultant with access to Payless' confidential
and proprietary trade secret information and other confidential
business information; and
(v) long-term customer and supplier relationships often can be difficult
to develop and require a significant investment of time, effort and
expense; and
(vi) Consultant recognizes and acknowledges that if Consultant's contract
with Payless were to cease, Payless needs certain protections in
order to ensure that Consultant does not appropriate and use any
confidential information entrusted to Consultant during the course of
this Consulting Contract by Payless or take any other action which
could result in a loss of Payless' goodwill that was generated on
Payless' behalf and at its expense, and, more generally, to prevent
Consultant from having an unfair competitive advantage over Payless.
4. Payless and Consultant shall each be entitled to pursue all legal and
equitable rights and remedies to secure performance of the obligations and
duties of the other under this Consulting Contract, and enforcement of one or
more of such rights and remedies shall in no way preclude Payless or Consultant
from pursuing, at the same time or subsequently, any and all other rights and
remedies available to each of them. In no event may either party (the
"terminating party") terminate this Consulting Contract or Consultant's
engagement hereunder on account of the breach of this Consulting Contract by the
other party unless the terminating party gives notice to the other party of the
grounds for claiming such breach and such grounds continue for ten days after
the other party receives such notice. The giving of one such notice on one or
more grounds shall not preclude the giving of a subsequent notice or notices. In
any legal or other proceeding with respect to any such breach of this Consulting
Contract, the only basis on which the terminating party may establish such
stated breach
5
will be the grounds stated in any such notice or subsequent notice or notices.
5. Whenever it is provided herein that notice, demand, request or other
communication shall or may be given to or served upon either of the parties by
the other, and whenever either of the parties shall desire to give or serve upon
the other any notice, demand, request or other communication, each such notice,
demand, request or other communication shall be in writing and shall not be
effective for any purposes unless the same shall be given or served by mailing
the same or having the same delivered by an independent courier, addressed as
follows:
(a) If to Payless:
Payless ShoeSource, Inc.
0000 XX 0xx Xxxxxx
Xxxxxx, Xxxxxx 00000
Attention: Chairman
or at such other address or addresses as Payless may from time
to time designate by notice given to Consultant.
(b) If to Consultant: With a copy to:
Xxxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxxx
0000 Xxxxx Xxx Xxxxxxxx & Xxxxx
Xxxxxxxx, Xxxxxx 00000 0000 Xxxxx Xxxxxxxxxx Xxxx
Xxx X000
Xxxxxxxxxx, Xxxxxxx 00000
or at such other address or addresses as Payless Consultant
may from time to time designate by notice given to Payless
Consultant.
Every notice, demand, request or other communication under this Consulting
Contract shall be given or served by (i) depositing the same in the United
States mail, first-class, registered or certified, postage paid, return receipt
requested, or (ii) depositing the same with an independent courier, expenses
prepaid, return receipt requested, and the postal receipt or courier receipt
showing delivery to Payless or to Consultant, as the case may be, of any such
notice, demand, request or other communication addressed and delivered in
accordance with this Section 5 shall be deemed conclusive evidence that (i) such
notice, demand, request or other communication shall have been given or served
as of the date so deposited in the United States mail or with such independent
courier and (ii) such addressee shall have received the same; such notice,
demand, request or other communication shall be effective as of the time of
receipt by the addressee.
6. (a) Consultant will not, at any time, directly or indirectly, use or
disclose any of Payless' Confidential Information except as authorized
and within the scope of the Consulting Contract with Payless.
(b) At Payless' request and/or termination of this Consulting Contract
with Payless, Consultant
6
will return to Payless all documents, records, notebooks, computer
diskettes and tapes and anything else containing Payless' Confidential
Information, including all copies thereof, as well as any other Payless
property, in Consultant's possession, custody or control. Consultant
will also delete from Consultant's own computer or other electronic
storage medium, any of Payless' proprietary or Confidential
Information. Not later than 20 days after the Consulting Contract is
terminated, Consultant will certify in writing to Payless that
Consultant has complied with these obligations.
(c) During the terms of this Consulting Contract with Payless and
thereafter, Consultant will (i) notify and provide Payless immediately
with the details of any unauthorized possession, use or knowledge of
any of Payless' Confidential Information, (ii) assist in preventing any
reoccurrence of this possession, use or knowledge, and (iii) cooperate
with Payless in any litigation or other action to protect or retrieve
Payless' Confidential information.
(d) "Confidential Information" means any non-public information
pertaining to Payless' business. Confidential Information includes
information disclosed by Payless to Consultant, and information
developed or learned by Consultant during the course of or as a result
of the Consulting Contract with Payless, which Consultant also agrees
is Payless' property. Consultant further agrees that any item of
intellectual or artistic property generated or prepared by Consultant,
for Consultant or with others, in connection with this Consulting
Contract with Payless is Payless' sole property and shall remain so
unless Payless otherwise specifically agrees in writing. Confidential
Information includes, without limitation, information and documents
concerning Payless' processes; suppliers (including Payless' terms,
conditions and other business arrangements with suppliers); supplier
and customer lists; advertising, marketing plans and strategies; profit
margins; seasonal plans, goals, objectives and projections,
compilations, analysis and projections regarding Payless' divisions,
businesses, product segments, product lines, suppliers, sales and
expenses; files; trade secrets and patent applications (prior to their
being public); salary, staffing and employment information (including
information about performance of other executives); and "know-how,"
techniques or any technical information not of a published nature
relating, for example, to how Payless conducts it business.
(e) Consultant agrees that Consultant will not disclose to Payless or
use, or induce Payless to use, any proprietary information, trade
secret or confidential business information of any other person or
entity, including any previous employer of Consultant. Consultant also
represents that Consultant has returned all property, proprietary
information, trade secret and confidential business information
belonging to any prior employer.
7. Consultant acknowledges and agrees that Consultant understands the
restrictions in paragraph 3 above, that they are reasonable and that such
restrictions are enforceable in view of the background for the non-compete
restriction set forth in Section 3(c), and in view of, among other things,
(i) the market in which Payless operates it business;
(ii) the confidential information to which Consultant has access;
(iii) Consultant's training and background, which are such that
neither Payless nor Consultant believe that the restraint will pose
an undue hardship on the Consultant;
7
(iv) the fact that a Competing Business could benefit greatly if it
were to obtain Payless' confidential information;
(v) the fact that Payless would not have adequate protection if
Consultant was permitted to work for any Competing Business
since Payless would be unable to verify whether its
confidential information was being disclosed or misused;
(vi) The limited duration of, the limited scope of, and the limited
activities prohibited by, the restrictions in paragraph 3
above; and
(vii) Payless' legitimate interests in protecting its confidential
information, goodwill and relationships
Furthermore, Payless and Consultant hereby expressly agree that should any
court of competent jurisdiction determine that any provision of this Consulting
Contract is, but for the provisions of this Section 7, illegal or void as
against public policy, for any reason, then such provision shall automatically
be amended to the extent (but only to the extent) necessary to make it
sufficiently narrow in scope, time and geographic area that such court shall
determine it not to be illegal or void as against public policy. If any such
provision cannot be amended to the extent provided in the preceding sentence,
then such provision shall be severed from this Consulting Contract. In either
event, all other remaining terms and provisions shall remain in full force and
effect.
8. Payless Work-Product. Consultant agrees to disclose fully to Payless,
and hereby assigns and transfers to Payless, and agrees to execute any
additional documentation Payless may reasonably request to evidence the
assignment and transfer, immediately upon the conception, development, making or
acquisition thereof, the right, title, and interest in and to any and all
inventions, discoveries, improvements, innovations, and/or designs (the "Work
Product") conceived, discovered, developed, acquired or secured by Consultant,
solely or jointly with others or otherwise, together with all associated U.S.
and foreign intellectual property rights (i.e. patents, copyrights, trademarks
or trade secrets) either:
(a) during the period of this Consulting Contract, if such Work
Product is related directly to or indirectly, to the business
of, or to the research or development work of Payless;
(b) with the use of the time, materials, or facilities of Payless;
or
(c) within six (6) months after termination of this Consulting
Contract if conceived as a result of and is attributable to
work done during such employment and relates to Work Product
within the scope of the business of Payless, together with
rights to all intellectual property rights which may be
granted thereon.
Upon discovery, development or acquisition of any such Work Product, Consultant
shall notify Payless and shall execute and deliver to Payless, without further
compensation, such documents prepared by Payless as may be reasonable or
necessary to prepare or prosecute applications for rights in such Work Product
and to assign and transfer to Payless Consultant's right, title and interest in
and to such Work Product and intellectual property rights thereof. Consultant
acknowledges that Consultant has carefully read and considered the provisions of
this paragraph and, having done so, agrees that the
8
restrictions set forth herein are fair and reasonable and are reasonably
required for the protection of the interests of Payless, its officers, directors
and other associates.
9. This Consulting Contract shall be governed by and construed in
accordance with the laws of the State of Kansas. The appropriate state or
federal courts of the State of Kansas shall have exclusive jurisdiction over the
parties hereto and each party hereby submits to the personal jurisdiction of
said courts of the State of Kansas otherwise having jurisdiction over the
subject matter.
10. The entire understanding and agreement between the parties with respect
to Consultant's consulting services hereunder has been incorporated into this
Consulting Contract. This Consulting Contract may not be amended, except in
writing, signed by both parties.
11. Consultant's obligations hereunder may not be assigned without the
express written consent of Payless. This Consulting Contract shall be binding
upon Consultant, its successors and assigns and upon Payless, its successors and
assigns.
IN WITNESS THEREOF, Payless and Consultant have executed this Consulting
Contract in two counterparts, each of which shall be deemed an original, on the
dates indicated below, but effective as of the day and year first above written.
Payless ShoeSource, Inc.
8/19/99
------------------
Date By /s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Title: Chairman
Xxxxxxx X. Xxxxxxx
9/16/99
-------------------
Date By /s/ Xxxxxxx X. Xxxxxxx
-----------------------------
