Exhibit 10(ai)
NON-COMPETE AGREEMENT
---------------------
AGREEMENT, dated as of February 26, 1999, by and between WALLS
INDUSTRIES, INC., CLEBURNE, TEXAS, a Delaware corporation (the "Buyer"), and BIG
XXXXX BRANDS, INC., a Delaware corporation (the "Seller").
WHEREAS, pursuant to an asset purchase agreement executed as of
the date hereof (the "Asset Purchase Agreement"), the Buyer is acquiring certain
of the assets of the Seller (the "Assets");
WHEREAS, it is a condition precedent to the execution of the
Asset Purchase Agreement that the Seller enter into this Agreement and a
condition of closing to the Asset Purchase Agreement that this Agreement remain
in full force and effect;
WHEREAS, the Seller acknowledges that the Seller has been
involved in the business (the "Business") of manufacturing, distributing and
selling apparel defined as Workwear Products by the trademark license agreement
executed as of the date hereof (the "Trademark License"); and
WHEREAS, the Seller acknowledges that its officers, directors,
employees, consultants, agents and other representatives have collectively had
close contact with many confidential affairs of the Seller not readily available
to the public, and plans for future developments.
NOW, THEREFORE, the parties hereto agree as follows:
1. Restrictive Covenants.
---------------------
(a) Non-Compete. For a period (the "Restricted Period")
commencing on the Closing Date (as defined in the Asset Purchase Agreement) and
2
terminating on the tenth anniversary of the Closing Date, the Seller shall not
anywhere in the world (the "Territory"), directly or indirectly, (i) engage in
the Business (or any material facet thereof) for the Seller's own account or
(ii) render any services to, or become interested in, any person, partnership,
firm or corporation in material direct competition with the Buyer or any of its
affiliates with respect to the Business, including, without limitation, as a
partner or shareholder; provided, however, that the Seller may own, directly or
indirectly, but solely as a passive investment, less than 5% of any class of
equity securities of any corporation that is publicly traded. The Seller agrees
that the geographic scope of the covenants set forth in this Section 1(a) is
necessary in order to secure for the Buyer the benefits it has contracted for
and is reasonable.
(b) Confidential Information; Personal Relationships.
During and after the Restricted Period, the Seller's officers, directors,
employees, consultants, agents and other representatives shall keep secret and
retain in strictest confidence, and shall not use for the benefit of the Seller,
themselves or others, all confidential information relating to the Business or
the Assets, including, without limitation, "know-how", trade secrets, customer
lists, details of client or consultant contracts, pricing policies, operational
methods, marketing plans or strategies, product development techniques or plans,
business acquisition plans, new personnel processes, designs and design
projects, inventions and research projects relating to the Business or the
Assets
3
and shall not disclose them to anyone outside of the Buyer, except with the
Buyer's express written consent.
(c) Employees of the Buyer. During the Restricted
Period, the Seller shall not, directly or indirectly, hire or solicit (i) any
person then employed by the Buyer or any of its affiliates or (ii) any person
employed by the Seller who, within one year of the Closing Date, has been
offered employment by the Buyer, or encourage any such employee as described in
clause (i) or (ii) to leave or decline such employment.
(d) Consultants of the Buyer Group. During the
Restricted Period, the Seller shall not, directly or indirectly, hire or solicit
any consultant then under exclusive contract with the Buyer or any of its
affiliates or encourage any such consultant to terminate such relationship.
2. Consideration. The Seller acknowledges that the Buyer is not
obligated, and would not otherwise agree, to close its purchase under the Asset
Purchase Agreement without the Seller's execution and delivery of this
Agreement. As consideration to induce the Buyer to purchase the Assets from the
Seller, and as a condition precedent for entering into the Asset Purchase
Agreement, the Seller agrees to be bound by the representations, warranties,
covenants and agreements contained in this Agreement. In addition, the Buyer
shall pay the Seller over a period of eight years, the following amounts (the
"Non-Compete Payments"): (i) $400,000 at the Closing; (ii) $400,000 at the end
of the sixth month after the Closing Date;
4
(iii) $700,000 on each of the second and third anniversaries of the Closing
Date; (iv) $600,000 on each of the fourth and fifth anniversaries of the Closing
Date; and (v) $400,000 on each of the sixth, seventh and eighth anniversaries of
the Closing Date. The Buyer's obligation to make the Non-Compete Payments shall
terminate in the event that (a) the Seller materially breaches this Agreement,
(b) S. Xxxxx Xxxxxxxx (the "Shareholder") materially breaches the separate
non-compete agreement into which the Buyer and the Shareholder entered as of the
date hereof, (c) the Seller or the Licensor (as defined in the Trademark
License) materially breaches the Trademark License or (d) the Seller or the
Licensor terminates or attempts to terminate the Trademark License by rejection
in bankruptcy or otherwise.
3. Rights and Remedies Upon Breach. If the Seller breaches, or
threatens to commit a breach of, any of the provisions of Section 1 (the
"Restrictive Covenants"), the Buyer shall have, in addition to, and not in lieu
of, any other rights and remedies available to the Buyer under law or in equity,
the right and remedy to have the Restrictive Covenants specifically enforced by
any court of competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause irreparable injury to
the Buyer and that money damages would not provide an adequate remedy to the
Buyer.
4. Severability of Covenants. The Seller acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographic and
temporal scope and in all other respects. If any court determines that any of
the Restrictive
5
Covenants, or any part thereof, is invalid or unenforceable, then the remainder
of the Restrictive Covenants shall not thereby be affected and shall be given
full effect without regard to the invalid portions. In addition, such court
shall have the power to reduce the duration or scope of a temporal or geographic
provision, as the case may be, it finds unenforceable as written and, in its
reduced form, such provision shall then be enforceable.
5. Enforceability in Jurisdictions. The Buyer and the Seller
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the Territory. If the courts of any
one or more of such jurisdictions hold the Restrictive Covenants unenforceable
by reason of the breadth of such scope or otherwise, it is the intention of the
Buyer and the Seller that such determination not bar or in any way affect the
Buyer's right to the relief provided above in the courts of any other
jurisdiction within the Territory, as to breaches of such Restrictive Covenants
in such other respective jurisdictions, such Restrictive Covenants as they
relate to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
6. Successors and Assigns. The Agreement is binding upon and
shall inure to the benefit of the parties hereto and any successors to the
Buyer. This Agreement and all of the Seller's rights, duties and obligations
hereunder are personal in nature and shall not be assignable by the Seller. Any
purported assignment shall not be valid or binding on the Buyer.
6
7. Waiver, Modification or Amendment. No waiver of any provision
of this Agreement or modification or amendment of the same shall be effective,
binding or enforceable unless in writing and signed by the party to be charged
therewith.
8. Applicable Law. This Agreement shall be governed by and
administered in accordance with the laws of the State of New York applicable to
agreements made and to be entirely performed therein.
9. Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and understandings,
written or oral, relating to the subject matter hereof. No representation,
promise or inducement has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or liable for any alleged
representation, promise or inducement not so set forth.
10. Termination. This Agreement shall be terminated and become
null and void and have no further force or effect upon termination of the Asset
Purchase Agreement.
11. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
7
12. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
8
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
WALLS INDUSTRIES, INC., CLEBURNE,
TEXAS
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
BIG XXXXX BRANDS, INC.
By: /s/ S. Xxxxx Xxxxxxxx
-----------------------------------
Name: S. Xxxxx Xxxxxxxx
Title: President
