<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
-----------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _____________
Commission file number 0-21335
GARGOYLES, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
-----------------------
Washington 91-1247269
- ------------------------ ----------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)
5866 South 194th Street
Kent, Washington 98032
(253) 796-2752
-------------------------------------------------------------------------
(Address and telephone number of registrant's principal executive offices)
Securities Registered Pursuant to Section 12(b) of the Act:
None
-----------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 22, 1999, 7,822,191 shares of the registrant's common stock,
no par value, were outstanding. The aggregate market value of the common stock
held by non-affiliates or the registrant on that date was $1,046,922, computed
at the closing price on that date.
The information called for by Part III is incorporated by reference to the
definitive Proxy Statement for the Annual Meeting of Shareholders of the
Company to be held in June, 1999.
<PAGE>
INDEX
Page
----
PART I
Item 2. Properties ............................................. 3
Item 3. Legal Proceedings ...................................... 3
Item 4. Submission of Matters to a Vote of
Security Holders ....................................... 4
PART II
Item 5. Market for Registrant's Common Stock and
Related Shareholder Matters ............................ 4
Item 9. Changes and Disagreements with Accountants
on Accounting and Financial Disclosures ................ 5
PART III
Item 10. Directors and Executive Officers
of the Registrant ...................................... 6
Item 11. Executive Compensation ................................. 7
Item 12. Security Ownership of Certain Beneficial
Owners and Management ................................ 8
Item 13. Certain Relationships and Related
Transactions ........................................ 8
PART IV
Item 14. Exhibits, Financial Statements and Reports
on Form 8-K ........................................... 8
<PAGE>
ITEM 1. BUSINESS
- -----------------
To be filed by amendment.
ITEM 2. PROPERTIES
- -------------------
With the acquisitions of Sungold and Private Eyes in 1997, the Company
acquired various leased operating facilities and showrooms. In the same year,
executing on a plan to consolidate its operations to one facility, the Company
leased an approximately 93,000 square foot facility in Lynnwood, Washington
which was anticipated to be its primary assembly, warehousing and shipping
facilities and for use as its corporate headquarters. As part of the
restructure process, the Company negotiated terminations of many of these
facilities, including the Lynnwood facility, and relocated the Company's
operations in Washington state to its original corporate headquarters in Kent,
Washington and to a new 20,000 sq. ft. leased facility located nearby in Kent,
Washington. Sungold continues to operate from its facility in Farmingdale, New
York. The following table sets forth the leases to which the Company was a
party as of January 1, 1998 and the current status of each lease.
<TABLE>
<CAPTION>
LOCATION SQ. FT. CORPORATE FUNCTION STATUS
- --------------- ------- --------------------------- ----------------
<S> <C> <C> <C>
Lynnwood, WA 93,000 New corporate headquarters; Lease terminated
assembly; warehousing and
shipping
Kent, WA 26,000 Current headquarters No change
Kent, WA 24,000 Formerly shipping and Lease terminated
warehousing
Farmingdale, NY 26,000 Sungold operations No change
Norwell, MA 16,000 Formerly Private Eyes Lease terminated
operations
Kent, WA 15,000 Vacant office space Lease terminated
New York, NY 3,500 Private Eyes showroom No change
London 3,000 International sales and Sublet
marketing office
San Ramon, CA 1,500 Kindling office Lease terminated
Dallas, TX N/A Private Eyes showroom Lease terminated
</TABLE>
As a result of the restructure of the Company's leased facilities, to date the
Company has reduced its minimum future lease payments under such leases by more
than $7.3 million. Management believes that its current facilities will be
sufficient to meet the Company's operating needs for the foreseeable future.
See "Business -- Forward Looking Statements."
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
On October 8, 1998, the Company reached a settlement and full release
from Michele J. Maulden and David B. Maulden in a lawsuit filled against the
Company in the Superior Court of Washington, for King County under Case No. 97-
2-1877-1 KNT. Payment made by the Company to settle this dispute did not
materially, adversely affect the results of the Company's operations or its
financial position.
On November 22, 1996, the Company filed an action in the United States
District Court for the District of Massachusetts, under Case No. 996-12344RCL,
against Aearo Corporation, a Delaware corporation, alleging infringement of the
Company's toric curve lens utility patent. On May 19, the Court ruled in favor
of the Company and found that product manufactured by Aearo Corporation
infringes the Company's toric curve patent. Following the Court's ruling, the
only significant issues left for trial included the extent of damages to be
awarded to the Company resulting from Aearo's patent infringement and whether
the Company's patent was validly issued. On October 20, 1998 the Company
reached a settlement agreement with Aearo Corporation. Under the terms of the
settlement, all claims by and against the parties were fully released and the
Company granted to Aearo Corporation a license to continue to make and sell
certain infringing product into certain markets in exchange for a one-time,
lump sum royalty of $1.2 million, which was paid by Aearo upon execution of the
license agreement.
On November 18, December 4 and December 9, 1998 the State of
Washington Department of Revenue assessed the Company, in the aggregate,
$475,830 plus interest in business and occupation taxes and use taxes allegedly
due and payable related to the Company's operations during various periods
between January 1, 1993 and June 30, 1997. At issue in this matter is the
Company's status as a "manufacturer" or "wholesaler" as such terms are defined
by the state of Washington's business and occupation and use tax statutes. The
Company has retained counsel in this matter and intends to appeal and to
vigorously defend the Department's assessment.
The Company also is a party to various other claims, complaints and
legal actions that have arisen in the ordinary course of business from time to
time. The Company believes that the outcome of all such pending legal
proceedings, in the aggregate, will not have a material adverse effect on its
results of operations or financial position. See "Business _ Forward-Looking
Statements" "Business -- Risk Factors -- Litigation Risks."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
The Company did not submit any matter to a vote of its security
holders during the fourth quarter of its fiscal year ended December 31, 1998.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
- -----------------------------------------------------------------------------
The Company effected its initial public offering of Common Stock on
September 27, 1996, at a price to the public of $16.00 per share. Between
September 27, 1996 and July 13, 1998 the Company's Common Stock traded on the
NASDAQ National Market. Since July 13, 1998, the Company's Common Stock has
continued to be quoted on the OTC Bulletin Board. The table below sets forth
for the fiscal quarters indicated the reported high and low last sale prices of
the Company's Common Stock, as reported on the Nasdaq National Market System
and quoted on the OTC Bulletin Board.
<TABLE>
<CAPTION>
1996 High Low
-------------- ------- -------
<S> <C> <C> <C>
Third quarter $23.50 $19.75
(from September 27, 1996)
Fourth quarter $21.25 $ 8.00
1997 High Low
-------------- ------- -------
First quarter $10.00 $6.75
Second quarter 9.38 7.19
Third quarter 8.00 5.88
Fourth quarter 6.13 3.13
1998 High Low
-------------- ------- -------
First quarter $4.50 $2.63
Second quarter 3.50 1.00
Third quarter 1.63 0.13
Fourth quarter 0.63 0.15
</TABLE>
As of March 22, 1998, there were 127 record holders of Common Stock,
although the Company believes that the number of beneficial owners of its
Common Stock is much higher. On March 22, 1998, the Company's Common Stock
traded at a high of $0.28 and a low of $0.28.
The Company anticipates that for the foreseeable future, all earnings,
if any, will be retained for the operation and expansion of its business and
that it will not pay cash dividends. The payment of dividends, if any, in the
future will be at the discretion of the Board of Directors and will depend
upon, among other things, future earnings, capital requirements, restrictions
in future financing agreements, the general financial condition of the Company
and general business conditions. In addition, the Company's current credit
facility with the Bank prohibits the payment of dividends.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
To be filed by amendment.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------
To be filed by amendment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
To be filed by amendment.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
- ------------------------------------------------------------------------
On February 23, 1999, the client-auditor relationship between the
Company and its principal accountants, Ernst & Young LLP, ceased. The
resignation of Ernst & Young LLP was effective on February 23, 1999. At a
meeting held on February 22, 1999, the Board of Directors of the Company
approved the engagement of BDO Seidman, LLP as its independent auditors to
replace Ernst & Young LLP who also resigned as auditors of the Company
effective February 23, 1999. The Audit Committee of the Board of Directors
approved the change on February 22, 1999.
The audit reports of Ernst & Young LLP on the financial statements of
the Company for the Company's last two fiscal years did not contain an adverse
opinion or disclaimer of opinion, nor was either opinion qualified or modified
as to uncertainty, audit scope, or accounting principles. During registrant's
two most recent fiscal years and the subsequent interim periods preceding such
termination, there have been no disagreements with Ernst & Young LLP on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Ernst & Young LLP, would have caused it to make reference to
the subject matter of the disagreements in connection with its report. There
have occurred no "reportable events" within the meaning of Item 304(a)(1)(v) of
Regulation S-K during registrant's two most recent fiscal years and the
subsequent interim periods preceding such termination.
During the registrant's two most recent fiscal years, and the
subsequent interim period prior to engaging BDO Seidman, LLP, neither the
registrant nor someone on its behalf consulted BDO Seidman, LLP regarding (i)
either the application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that might be
rendered on the registrant's financial statements, and neither a written report
was provided to registrant nor oral advice provided that BDO Seidman, LLP
concluded was an important factor considered by the registrant in reaching a
decision as to an accounting, auditing or financial reporting issue; or (ii)
any matter that was either the subject of a disagreement (as defined in
paragraph 304(a)(1)(iv) of Regulation S-K and the related instructions to this
item) or a reportable event (as described in paragraph 304(a)(1)(v) of
Regulation S-K.
PART III.
---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
The directors and executive officers of the Company, and their ages as
of March 31, 1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Leo Rosenberger 48 Chief Executive Officer, Chief
Financial Officer and Treasurer
Cynthia L. Pope 47 Vice President and General Counsel and
Secretary
Sheldon Goldman 36 President, Sungold
Robert G. Wolfe (1) 42 Chairman of the Board
Timothy C. Potts (1) 50 Director
William D. Ruckelshaus (2) 66 Director
Paul S. Shipman (2) 46 Director
Walter F. Walker (1) 44 Director
- --------------------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
</TABLE>
The Company's Board of Directors is comprised of five directors and is
divided into three classes. Each director serves for a three-year term, and
one class will be elected each year by the Company's shareholders. Directors
hold office until their terms expire and their successors are elected and
qualified. Executive officers of the Company are appointed by, and serve at
the direction of, the Board of Directors. There are no family relationships
between any of the directors or executive officers of the Company.
LEO ROSENBERGER, Chief Executive Officer and Chief Financial Officer,
joined the Company in February 1998. From January 1996 to January 1998, Mr.
Rosenberger was President and Chief Financial Officer of Pacific Linen, Inc.
Pacific Linen, Inc. filed a voluntary petition for Chapter 11 bankruptcy April
1996 and emerged therefrom in December 1997. In May 1995, Mr. Rosenberger was
appointed by the court as the Chapter 7 Trustee in Bankruptcy for Waterbed,
Inc. From August 1994 to February 1995 Mr. Rosenberger served as interim Chief
Financial Officer of Jay Jacobs, Inc., a company which filed a voluntary
petition for Chapter 11 bankruptcy protection in May 1994 and emerged therefrom
in November 1995. Mr. Rosenberger was a general partner in a national
accounting and consulting firm and has over twenty years experience as a
turnaround crisis manager and financial restructuring and management
consultant.
CYNTHIA L. POPE joined the Company in February 1998. From July 1995
until joining the Company, Ms. Pope had a private law practice in Bellingham,
Washington and served as corporate counsel to the Company. From June 1992
until July 1996, Ms. Pope was a partner in the law firm of Brett & Daugert in
Bellingham, Washington. From June 1989 until June 1992 Ms. Pope was an
associate with the law firm of Bogle & Gates in Seattle, Washington. From
January 1985 until June 1989, Ms. Pope was an associate with the law firm of
Ross & Hardies in Chicago, Illinois.
SHELDON GOLDMAN, President of Sungold, joined the Company in April
1997 with the acquisition of Sungold. From 1992 until joining the Company, Mr.
Goldman was President and part owner of Sungold Enterprises, Ltd. From 1985
to 1992 Mr. Goldman was Vice President of Sungold Enterprises, Ltd.
ROBERT G. WOLFE was appointed by the board of directors of the Company
in January 1998 as a Director and as Chairman of the Board of Directors on an
interim basis until the 1998 annual meeting of the Company's shareholders.
Since February 1999, Mr. Wolfe has served as President of GT Group Telecom,
Inc. Mr. Wolfe was Chief Financial Officer of Trillium Corporation from 1996
to December 1998. From 1987 to 1995, Mr. Wolfe was a corporate finance
executive at Goldman Sachs. Mr. Wolfe serves as a director of Trillium
Corporation, GT Group Telecom, Inc., Babylon Entertainment, and RODI Power
Systems, Inc.
TIMOTHY C. POTTS has been a Director of the Company since March 1995.
Mr. Potts has been Senior Vice President--Finance of Trillium since July 1994.
From April 1987 to July 1994, Mr. Potts was the Chief Financial Officer of
Trillium.
WILLIAM D. RUCKELSHAUS has been a Director of the Company since July
1996. Since March 1996, Mr. Ruckelshaus has been a principal of the Madrona
Investment Group, L.L.C., a private investment firm. Mr. Ruckelshaus is also
Chairman of the Board of Browning-Ferris Industries, Inc., a waste services
company, and from October 1988 to October 1995 was its Chief Executive Officer.
From 1983 to 1985, Mr. Ruckelshaus was Administrator of the Environmental
Protection Agency and from 1979 to 1983, a Senior Vice President of
Weyerhaeuser Co. Mr. Ruckelshaus is also a director of Cummins Engine Co.,
Monsanto Company, Nordstrom, Inc. and Weyerhaeuser Co.
PAUL S. SHIPMAN has been a Director of the Company since June 1996.
Mr. Shipman has been President since September 1981, Chairman of the Board
since November 1992 and Chief Executive Officer since June 1993 of Redhook Ale
Brewery, Incorporated ("Redhook"), a brewer of craft beers.
WALTER F. WALKER has been a Director of the Company since December
1995. Since September 1994, Mr. Walker has been the President of the Seattle
Supersonics National Basketball Association basketball team, owned by a
subsidiary of Ackerley Communications, Inc. From March to September 1994, he
was President of Walker Capital, Inc., a money management firm. From July 1987
to March 1994, Mr. Walker was a Vice President of Goldman, Sachs & Co., a
registered broker-dealer. From 1976 to 1985, Mr. Walker was a professional
basketball player in the National Basketball Association. Mr. Walker is also a
director of Redhook and Interpoint Corporation.
ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------
Information regarding executive compensation is incorporated by
reference from the Company's 1999 Proxy Statement for its 1999 Annual Meeting
of Shareholders (the "1999 Proxy Statement") under the caption "Executive
Compensation".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------
Information regarding security ownership of certain beneficial owners
and management is incorporated by reference from the 1999 Proxy Statement under
the caption "Beneficial Ownership of Shares".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Information regarding certain relationships and related transactions
is incorporated by reference from the 1999 Proxy Statement under the caption
"Certain Transactions".
PART IV.
--------
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
- ---------------------------------------------------------------
(a) Financial Statements and Financial Statement Schedules
To be filed by amendment.
(b) Reports on Form 8-K
Form 8-K with respect to the sale of assets of the Company's majority-
owned subsidiary, the kindling company, was filed with the Securities
and Exchange Commission on September 8, 1998.
Form 8-K with respect to an agreement in principal with respect to a
proposed transaction for a recapitalization of the Company was filed
with the Securities and Exchange Commission on November 5, 1998.
(c) Exhibits
The following exhibits are filed as a part of, or incorporated by
reference into, this report:
<TABLE>
<S> <C>
3.1 (1) Form of Amended and Restated Articles of Incorporation of the
registrant currently in effect.
3.2 (1) Bylaws of the registrant currently in effect.
10.1 (1) Stock Purchase Agreement, dated as of March 14, 1995, among
Gargoyles and certain other parties.
10.2 (1) Nondisclosure, Noncompetition and Indemnity Agreement, dated as
of March 22, 1995, among Gargoyles, Inc., Conquest Sports, Inc.,
Antone Manufacturing, Inc. and the Founder.
10.3 (1) Stock Purchase Agreement, dated as of January 25, 1996, among
Gargoyles, Inc., H.S.C., Inc., Douglas B. Hauff, H.S.I., a
California corporation, dba Hobie Sunglasses and the Sellers
listed therein.
10.4 (1) Industrial Real Estate Lease (Single Tenant Facility), dated
December 16, 1993, between Gargoyles, Inc. and DB&D Partnership.
10.5 (1) Lease Amendment, dated as of March 17, 1995, between Gargoyles,
Inc. and DB&D Partnership.
10.6 (1) + Gargoyles, Inc. Common Stock Purchase Warrant, dated January
1996, between Gargoyles, Inc. and Wally Walker.
10.7 (1) + Form of Indemnity Agreement between Gargoyles, Inc. and each of
its directors.
10.8 (1) + 1995 Stock Incentive Compensation Plan.
10.9 (1) Amended and Restated Agreement Regarding Claim Rights, dated
July 3, 1996, by and between the Founder, Gargoyles, Inc. and
Conquest Sports, Inc.
10.10*(1) Ratification of Settlement Agreement and General Release, dated
April 12, 1995.
10.11*(1) Trademark License Agreement dated as of April 12, 1995.
10.12*(1) License Agreement, effective January 1, 1989, between Hobie
Designs, Inc. and H.S.I.
10.13*(1) License Agreement, dated as of May 31, 1996, among Ixela, Inc.,
Alexi Lalas and Gargoyles, Inc.
10.14 (2) Indemnity Agreement, dated September 26, 1996, by Trillium
Corporation and Douglas B. Hauff in favor of Gargoyles.
10.15 (3) Agreement, dated January 9, 1997, between Gargoyles and
International Speedway Corporation.
10.16 (3) Registration Rights Agreement, dated February 20, 1997, between
Gargoyles and Douglas B. Hauff.
10.17 (3) Registration Rights Agreement, dated February 20, 1997, between
Gargoyles and Trillium Investors II.
10.18 (4) First Amended and Restated Credit Agreement, dated April 7,
1997, between U.S. Bank of Washington, National Association and
Gargoyles, Inc.
10.19 (5) Second Amendment to First Amended and Restated Credit Agreement,
dated July 15, 1997, between U.S. Bank of Washington, National
Association, and Gargoyles, Inc.
10.20 (6) Third Amendment to First Amended and Restated Credit Agreement,
dated January 15, 1998, between U.S. Bank of Washington,
National Association, and Gargoyles, Inc.
10.21 (6) Fourth Amendment to First Amended and Restated Credit Agreement,
dated January 30, 1998, between U.S. Bank of Washington,
National Association, and Gargoyles, Inc.
10.22 (6) Fifth Amendment to First Amended and Restated Credit Agreement,
dated March 17, 1998, between U.S. Bank of Washington, National
Association, and Gargoyles, Inc.
10.23 (6) Promissory Note, dated April 9, 1997, between Douglas B. Hauff
in favor of Gargoyles, Inc.
10.24 (7) Asset Purchase and Sales Agreement, dated as of April 10, 1997,
between Sungold Enterprises, Ltd., Sheldon Goldman, Lionel
Goldman and Lionel Goldman, Trustee of The Lionel Goldman Family
Trust u/a, dated September 30, 1994, and Gargoyles Acquisition
Corporation (n/k/a Sungold Eyewear, Inc.).
10.25 (6) + Employment Agreement, dated as of April 10, 1997, between
Gargoyles Acquisition Corporation (n/k/a Sungold Eyewear, Inc.)
and Sheldon Goldman.
10.26 (6) Royalty Agreement, dated April 10, 1997, between Gargoyles
Acquisition Corporation (n/k/a Sungold Eyewear, Inc.) and
Sungold Enterprises, Ltd.
10.27 (6) Nondisclosure and Noncompetition Agreement dated as of April 10,
1997, between Gargoyles Acquisition Corporation (n/k/a Sungold
Eyewear, Inc.) and Lionel Goldman.
10.28*(6) Amended and Restated License Agreement dated April 10, 1997,
between Stussy, Inc. and Sungold Enterprises, Ltd.
10.29 (8) Asset Purchase and Sale Agreement, dated as of May 5, 1997,
between The Private Eyes Sunglass Corporation, Richard W.
Hammel, Sr., Patricia Lynch, Annette Hammel, Robert Hammel and
Ronald Hammel and Gargoyles Acquisition Corporation II (n/k/a
Private Eyes Sunglass Corporation).
10.30 (6) Contingent Price Agreement, dated as of May 14, 1997, between
Gargoyles Acquisition Corporation II (n/k/a Private Eyes
Sunglass Corporation) and The Private Eyes Sunglass Corporation.
10.31*(6) Exclusive Distributorship Agreement, dated October 25, 1997,
between Cebe International S.A. and Private Eyes Sunglass
Corporation.
10.32 (6) Settlement Agreement, dated as of May 30, 1997, between
Gargoyles, Inc. and Peter G. and Sandra L. LaHaye, LaHaye
Laboratories, Inc. and Neoptx, Inc.
10.33 (6) License Agreement, dated as of June 30, 1997, between Neoptx,
Inc. and Gargoyles, Inc.
10.34 (6) Settlement Agreement and Mutual Release, dated as of July 14,
1997, between Adidas America, Inc., Gargoyles, Inc., Conquest
Sports, Inc., Axcent Sports, Inc., Sports Performance Products,
Inc., Douglas Hauff, and Trillium Corporation.
10.35 (6) + Separation and Release Agreement, dated January 30, 1998,
between Steven R. Kingma and Gargoyles, Inc.
10.36 (6) + Separation and Release Agreement, dated January 30, 1998,
between G. Travis Worth and Gargoyles, Inc.
10.37 (6) + Separation and Release Agreement, dated February 2, 1998,
between David Jobe and Gargoyles, Inc.
10.38 (6) + Separation and Release Agreement, dated March 11, 1998, between
Douglas B. Hauff and Gargoyles, Inc.
10.39 (6) + Mutual General Release and Payment Agreement, dated as of March
2, 1998, between HXPE, Inc., f/k/a/ The Private Eyes Sunglass
Corporation, Richard Hammel, Sr., Patricia Lynch, Gargoyles,
Inc. and Gargoyles Acquisition Corporation II, a/k/a/ Private
Eyes Sunglas Corporation.
10.40 (6) + Employment Agreement, dated as of February 1, 1998, between
Gargoyles, Inc. and Leo Rosenberger.
10.41 (6) Lease Agreement, dated November 27, 1996, between Leonard
Delalio and Robert P. Delalio and Sungold Enterprises Limited.
10.42 (6) $14,000,000 Renewal Revolving Note, dated January 15, 1998, by
Gargoyles, Inc. in favor of U.S. Bank National Association.
10.43 (6) $3,650,000 Renewal Equipment Note, dated January 15, 1998, by
Gargoyles, Inc. in favor of U.S. Bank National Association.
10.44 (6) $250,000 Renewal Equipment Note, dated January 15, 1998, by
Gargoyles, Inc. in favor of U.S. Bank National Association.
10.45 (6) Security Agreement, dated January 15, 1998, between Sungold
Eyewear, Inc. and U.S. Bank National Association.
10.46 (6) Security Agreement, dated January 15, 1998, between Private Eyes
Sunglass Corp. and U.S. Bank National Association.
10.47*(13) License Agreement dated October 23, 1998, by and between Dale
Earnhardt and Gargoyles, Inc.
10.48*(13) License Agreement dated October 23, 1998, by and between Dale
Earnhardt, Jr. and Gargoyles, Inc.
10.49 (13) Agreement dated January 8, 1999 between Golden Bear Golf, Inc.
and Gargoyles, Inc.
10.50 (13) Agreement Regarding Hauff Notes dated February 2, 1999 by and
between Gargoyles, Inc. and Douglas B. Hauff.
10.51 (13) Letter Agreement between the Susan G. Komen Breast Cancer
Foundation and the Private Eyes Sunglass Corporation.
10.52 (11) Renewal Term Note I dated September 17, 1998, made by
Gargoyles, Inc. in favor of the U.S. Bank National Association.
10.53 (11) Renewal Term Note II dated September 17, 1998, made by
Gargoyles, Inc. in favor of the U.S. Bank National Association.
10.54 (9) Lease Termination Agreement made as of the 13th day of April
1998, by and between Ronald Gordon, Trustee of A.E.P. Realty
Trust, as Landlord, and Private Eyes Sunglass Corporation, as
Tenant.
10.55 (9) Seventh Amendment to First Amended and Restated Credit Agreement
dated April 30, 1998 by and between U.S. Bank National
Association, successor by merger to U.S. Bank of Washington,
National Association, and Gargoyles, Inc.
10.56 (10) Lease Agreement dated June 8, 1998, by and between South Valley
Associates, as Landlord, and Gargoyles, Inc., as Tenant.
10.57 (10) Eighth Amendment to First Amended and Restated Credit Agreement
dated April 30, 1998 by and between U.S. Bank National
Association, successor by merger to U.S. Bank of Washington,
National Association, and Gargoyles, Inc.
10.58 (11) Ninth Amendment to First Amended and Restated Credit Agreement
dated September 17, 1998, by and between U.S. Bank National
Association, successor by merger to U.S. Bank of Washington
National Association, and Gargoyles, Inc.
10.59 (11) Tenth Amendment to First Amended and Restated Credit Agreement
dated November 2, 1998, by and between U.S. Bank National
Association, successor by merger to U.S. Bank of Washington
National Association, and Gargoyles, Inc.
10.60 (13) Eleventh Amendment to First Amended and Restated Credit
Agreement dated December 21, 1998, by and between U.S. Bank
National Association, successor by merger to U.S. Bank of
Washington National Association, and Gargoyles, Inc.
10.61 (13) Twelfth Amendment to First Amended and Restated Credit Agreement
dated March 5, 1999, by and between U.S. Bank National
Association, successor by merger to U.S. Bank of Washington
National Association, and Gargoyles, Inc.
10.62 (11) License Agreement dated October 20, 1998, between Gargoyles,
Inc. and Aearo Company.
10.63 (11) Termination and Release dated September 8, 1998, by and among
The Timberland Company, Gargoyles, Inc. and the kindling
company.
10.64 (12) Asset Purchase Agreement among Adventure Optics, LLC, the
kindling company, Douglas Lauer and Gargoyles, Inc. dated
September 15, 1998.
10.65 (11) Letter Agreement dated September 8, 1998, between Ellen Tracy,
Inc. and Gargoyles, Inc., on behalf of itself and its wholly-
owned subsidiary, Gargoyles Acquisition Corporation II, now
known as Private Eyes Sunglass Corporation.
10.66 (11) Guaranty dated September 8, 1998, made by Gargoyles, Inc. in
favor of Ellen Tracy, Inc.
21.1 (13) Subsidiaries of the registrant.
23.1 (14) Consent of Ernst & Young LLP, Independent Accountants.
23.2 (14) Consent of BDO Seidman, LLP, Independent Accountants.
27.1 (14) Financial Data Schedule.
- -------------------
* Confidential Treatment Requested
+ Executive Compensation Plan and Arrangements
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1 (Registration No. 333-07573).
(2) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the Quarterly Period Ended September 30, 1996.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K
for the Fiscal Year ended December 31, 1996.
(4) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the Quarterly Period Ended March 31, 1997.
(5) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the Quarterly Period Ended June 30, 1997.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the Fiscal Year ended December 31, 1997.
(7) Incorporated by reference to the Company's Report on Form 8-K filed
April 28, 1997.
(8) Incorporated by reference to the Company's Report on From 8-K filed
May 29, 1997.
(9) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the Quarterly Period Ended March 31, 1998.
(10) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the Quarterly Period Ended June 30, 1998.
(11) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the Quarterly Period Ended September 30, 1998.
(12) Incorporated by reference to the Company's Report on Form 8-K filed
September 29, 1998.
(13) Filed herewith.
(14) To be filed by amendment.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 30th day of
March, 1999.
GARGOYLES, INC.
/s/ LEO ROSENBERGER
By:________________________________________________
Leo Rosenberger
Chief Executive Officer and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the
Registrant and in the capacities indicated below on the 30th day of March,
1999.
SIGNATURE TITLE
--------- ------
/s/ LEO ROSENBERGER Chief Executive Officer and Chief Financial
- -------------------------- Officer (Principle Executive Officer)
Leo Rosenberger
/s/ CHERYL BECKMAN Corporate Comptroller
- -------------------------- (Principle Accounting Officer)
Cheryl Beckman
/s/ ROBERT G. WOLFE Chairman of the Board
- --------------------------
Robert G. Wolfe
/s/ TIMOTHY C. POTTS Director
- --------------------------
Timothy C. Potts
/s/ WILLIAM D. RUCKELSHAUS Director
- --------------------------
William D. Ruckelshaus
/s/ PAUL S. SHIPMAN Director
- --------------------------
Paul S. Shipman
/s/ WALTER F. WALKER Director
- --------------------------
Walter F. Walker
<PAGE>
EXHIBITS
--------
<TABLE>
<S> <C>
3.1 (1) Form of Amended and Restated Articles of Incorporation of the
registrant currently in effect.
3.2 (1) Bylaws of the registrant currently in effect.
10.1 (1) Stock Purchase Agreement, dated as of March 14, 1995, among
Gargoyles and certain other parties.
10.2 (1) Nondisclosure, Noncompetition and Indemnity Agreement, dated as
of March 22, 1995, among Gargoyles, Inc., Conquest Sports, Inc.,
Antone Manufacturing, Inc. and the Founder.
10.3 (1) Stock Purchase Agreement, dated as of January 25, 1996, among
Gargoyles, Inc., H.S.C., Inc., Douglas B. Hauff, H.S.I., a
California corporation, dba Hobie Sunglasses and the Sellers
listed therein.
10.4 (1) Industrial Real Estate Lease (Single Tenant Facility), dated
December 16, 1993, between Gargoyles, Inc. and DB&D Partnership.
10.5 (1) Lease Amendment, dated as of March 17, 1995, between Gargoyles,
Inc. and DB&D Partnership.
10.6 (1) + Gargoyles, Inc. Common Stock Purchase Warrant, dated January
1996, between Gargoyles, Inc. and Wally Walker.
10.7 (1) + Form of Indemnity Agreement between Gargoyles, Inc. and each of
its directors.
10.8 (1) + 1995 Stock Incentive Compensation Plan.
10.9 (1) Amended and Restated Agreement Regarding Claim Rights, dated
July 3, 1996, by and between the Founder, Gargoyles, Inc. and
Conquest Sports, Inc.
10.10*(1) Ratification of Settlement Agreement and General Release, dated
April 12, 1995.
10.11*(1) Trademark License Agreement dated as of April 12, 1995.
10.12*(1) License Agreement, effective January 1, 1989, between Hobie
Designs, Inc. and H.S.I.
10.13*(1) License Agreement, dated as of May 31, 1996, among Ixela, Inc.,
Alexi Lalas and Gargoyles, Inc.
10.14 (2) Indemnity Agreement, dated September 26, 1996, by Trillium
Corporation and Douglas B. Hauff in favor of Gargoyles.
10.15 (3) Agreement, dated January 9, 1997, between Gargoyles and
International Speedway Corporation.
10.16 (3) Registration Rights Agreement, dated February 20, 1997, between
Gargoyles and Douglas B. Hauff.
10.17 (3) Registration Rights Agreement, dated February 20, 1997, between
Gargoyles and Trillium Investors II.
10.18 (4) First Amended and Restated Credit Agreement, dated April 7,
1997, between U.S. Bank of Washington, National Association and
Gargoyles, Inc.
10.19 (5) Second Amendment to First Amended and Restated Credit Agreement,
dated July 15, 1997, between U.S. Bank of Washington, National
Association, and Gargoyles, Inc.
10.20 (6) Third Amendment to First Amended and Restated Credit Agreement,
dated January 15, 1998, between U.S. Bank of Washington,
National Association, and Gargoyles, Inc.
10.21 (6) Fourth Amendment to First Amended and Restated Credit Agreement,
dated January 30, 1998, between U.S. Bank of Washington,
National Association, and Gargoyles, Inc.
10.22 (6) Fifth Amendment to First Amended and Restated Credit Agreement,
dated March 17, 1998, between U.S. Bank of Washington, National
Association, and Gargoyles, Inc.
10.23 (6) Promissory Note, dated April 9, 1997, between Douglas B. Hauff
in favor of Gargoyles, Inc.
10.24 (7) Asset Purchase and Sales Agreement, dated as of April 10, 1997,
between Sungold Enterprises, Ltd., Sheldon Goldman, Lionel
Goldman and Lionel Goldman, Trustee of The Lionel Goldman Family
Trust u/a, dated September 30, 1994, and Gargoyles Acquisition
Corporation (n/k/a Sungold Eyewear, Inc.).
10.25 (6) + Employment Agreement, dated as of April 10, 1997, between
Gargoyles Acquisition Corporation (n/k/a Sungold Eyewear, Inc.)
and Sheldon Goldman.
10.26 (6) Royalty Agreement, dated April 10, 1997, between Gargoyles
Acquisition Corporation (n/k/a Sungold Eyewear, Inc.) and
Sungold Enterprises, Ltd.
10.27 (6) Nondisclosure and Noncompetition Agreement dated as of April 10,
1997, between Gargoyles Acquisition Corporation (n/k/a Sungold
Eyewear, Inc.) and Lionel Goldman.
10.28*(6) Amended and Restated License Agreement dated April 10, 1997,
between Stussy, Inc. and Sungold Enterprises, Ltd.
10.29 (8) Asset Purchase and Sale Agreement, dated as of May 5, 1997,
between The Private Eyes Sunglass Corporation, Richard W.
Hammel, Sr., Patricia Lynch, Annette Hammel, Robert Hammel and
Ronald Hammel and Gargoyles Acquisition Corporation II (n/k/a
Private Eyes Sunglass Corporation).
10.30 (6) Contingent Price Agreement, dated as of May 14, 1997, between
Gargoyles Acquisition Corporation II (n/k/a Private Eyes
Sunglass Corporation) and The Private Eyes Sunglass Corporation.
10.31*(6) Exclusive Distributorship Agreement, dated October 25, 1997,
between Cebe International S.A. and Private Eyes Sunglass
Corporation.
10.32 (6) Settlement Agreement, dated as of May 30, 1997, between
Gargoyles, Inc. and Peter G. and Sandra L. LaHaye, LaHaye
Laboratories, Inc. and Neoptx, Inc.
10.33 (6) License Agreement, dated as of June 30, 1997, between Neoptx,
Inc. and Gargoyles, Inc.
10.34 (6) Settlement Agreement and Mutual Release, dated as of July 14,
1997, between Adidas America, Inc., Gargoyles, Inc., Conquest
Sports, Inc., Axcent Sports, Inc., Sports Performance Products,
Inc., Douglas Hauff, and Trillium Corporation.
10.35 (6) + Separation and Release Agreement, dated January 30, 1998,
between Steven R. Kingma and Gargoyles, Inc.
10.36 (6) + Separation and Release Agreement, dated January 30, 1998,
between G. Travis Worth and Gargoyles, Inc.
10.37 (6) + Separation and Release Agreement, dated February 2, 1998,
between David Jobe and Gargoyles, Inc.
10.38 (6) + Separation and Release Agreement, dated March 11, 1998, between
Douglas B. Hauff and Gargoyles, Inc.
10.39 (6) + Mutual General Release and Payment Agreement, dated as of March
2, 1998, between HXPE, Inc., f/k/a/ The Private Eyes Sunglass
Corporation, Richard Hammel, Sr., Patricia Lynch, Gargoyles,
Inc. and Gargoyles Acquisition Corporation II, a/k/a/ Private
Eyes Sunglas Corporation.
10.40 (6) + Employment Agreement, dated as of February 1, 1998, between
Gargoyles, Inc. and Leo Rosenberger.
10.41 (6) Lease Agreement, dated November 27, 1996, between Leonard
Delalio and Robert P. Delalio and Sungold Enterprises Limited.
10.42 (6) $14,000,000 Renewal Revolving Note, dated January 15, 1998, by
Gargoyles, Inc. in favor of U.S. Bank National Association.
10.43 (6) $3,650,000 Renewal Equipment Note, dated January 15, 1998, by
Gargoyles, Inc. in favor of U.S. Bank National Association.
10.44 (6) $250,000 Renewal Equipment Note, dated January 15, 1998, by
Gargoyles, Inc. in favor of U.S. Bank National Association.
10.45 (6) Security Agreement, dated January 15, 1998, between Sungold
Eyewear, Inc. and U.S. Bank National Association.
10.46 (6) Security Agreement, dated January 15, 1998, between Private Eyes
Sunglass Corp. and U.S. Bank National Association.
10.47*(13) License Agreement dated October 23, 1998, by and between Dale
Earnhardt and Gargoyles, Inc.
10.48*(13) License Agreement dated October 23, 1998, by and between Dale
Earnhardt, Jr. and Gargoyles, Inc.
10.49 (13) Agreement dated January 8, 1999 between Golden Bear Golf, Inc.
and Gargoyles, Inc.
10.50 (13) Agreement Regarding Hauff Notes dated February 2, 1999 by and
between Gargoyles, Inc. and Douglas B. Hauff.
10.51 (13) Letter Agreement between the Susan G. Komen Breast Cancer
Foundation and the Private Eyes Sunglass Corporation.
10.52 (11) Renewal Term Note I dated September 17, 1998, made by
Gargoyles, Inc. in favor of the U.S. Bank National Association.
10.53 (11) Renewal Term Note II dated September 17, 1998, made by
Gargoyles, Inc. in favor of the U.S. Bank National Association.
10.54 (9) Lease Termination Agreement made as of the 13th day of April
1998, by and between Ronald Gordon, Trustee of A.E.P. Realty
Trust, as Landlord, and Private Eyes Sunglass Corporation, as
Tenant.
10.55 (9) Seventh Amendment to First Amended and Restated Credit Agreement
dated April 30, 1998 by and between U.S. Bank National
Association, successor by merger to U.S. Bank of Washington,
National Association, and Gargoyles, Inc.
10.56 (10) Lease Agreement dated June 8, 1998, by and between South Valley
Associates, as Landlord, and Gargoyles, Inc., as Tenant.
10.57 (10) Eighth Amendment to First Amended and Restated Credit Agreement
dated April 30, 1998 by and between U.S. Bank National
Association, successor by merger to U.S. Bank of Washington,
National Association, and Gargoyles, Inc.
10.58 (11) Ninth Amendment to First Amended and Restated Credit Agreement
dated September 17, 1998, by and between U.S. Bank National
Association, successor by merger to U.S. Bank of Washington
National Association, and Gargoyles, Inc.
10.59 (11) Tenth Amendment to First Amended and Restated Credit Agreement
dated November 2, 1998, by and between U.S. Bank National
Association, successor by merger to U.S. Bank of Washington
National Association, and Gargoyles, Inc.
10.60 (13) Eleventh Amendment to First Amended and Restated Credit
Agreement dated December 21, 1998, by and between U.S. Bank
National Association, successor by merger to U.S. Bank of
Washington National Association, and Gargoyles, Inc.
10.61 (13) Twelfth Amendment to First Amended and Restated Credit Agreement
dated March 5, 1999, by and between U.S. Bank National
Association, successor by merger to U.S. Bank of Washington
National Association, and Gargoyles, Inc.
10.62 (11) License Agreement dated October 20, 1998, between Gargoyles,
Inc. and Aearo Company.
10.63 (11) Termination and Release dated September 8, 1998, by and among
The Timberland Company, Gargoyles, Inc. and the kindling
company.
10.64 (12) Asset Purchase Agreement among Adventure Optics, LLC, the
kindling company, Douglas Lauer and Gargoyles, Inc. dated
September 15, 1998.
10.65 (11) Letter Agreement dated September 8, 1998, between Ellen Tracy,
Inc. and Gargoyles, Inc., on behalf of itself and its wholly-
owned subsidiary, Gargoyles Acquisition Corporation II, now
known as Private Eyes Sunglass Corporation.
10.66 (11) Guaranty dated September 8, 1998, made by Gargoyles, Inc. in
favor of Ellen Tracy, Inc.
21.1 (13) Subsidiaries of the registrant.
23.1 (14) Consent of Ernst & Young LLP, Independent Accountants.
23.2 (14) Consent of BDO Seidman, LLP, Independent Accountants.
27.1 (14) Financial Data Schedule.
- -------------------
* Confidential Treatment Requested
+ Executive Compensation Plan and Arrangements
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1 (Registration No. 333-07573).
(2) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the Quarterly Period Ended September 30, 1996.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K
for the Fiscal Year ended December 31, 1996.
(4) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the Quarterly Period Ended March 31, 1997.
(5) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the Quarterly Period Ended June 30, 1997.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the Fiscal Year ended December 31, 1997.
(7) Incorporated by reference to the Company's Report on Form 8-K filed
April 28, 1997.
(8) Incorporated by reference to the Company's Report on From 8-K filed
May 29, 1997.
(9) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the Quarterly Period Ended March 31, 1998.
(10) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the Quarterly Period Ended June 30, 1998.
(11) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the Quarterly Period Ended September 30, 1998.
(12) Incorporated by reference to the Company's Report on Form 8-K filed
September 29, 1998.
(13) Filed herewith.
(14) To be filed by amendment.
</TABLE>
<PAGE>
EXHIBIT 10.47
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "Agreement") is made as of the 23rd day of
October, 1998, by and between DALE EARNHARDT ("Earnhardt"), and GARGOYLES,
INC., a Washington corporation ("Gargoyles").
RECITALS
A. Gargoyles designs, assembles, markets and distributes a broad range of
sunglasses and eyewear products.
B. Earnhardt is a world-class driver and NASCAR professional.
C. Subject to the terms and conditions of this Agreement, Gargoyles desires
to obtain the services of Earnhardt in connection with the marketing and sale
of its products, and Earnhardt desires to assist Gargoyles in such efforts.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto hereby agree as follows:
1. Product Description.
-------------------
The products that are the subject of this Agreement include GARGOYLES
PERFORMANCE EYEWEAR brand sunglasses and related products (the "Products").
2. License.
-------
Subject to the terms and conditions of this Agreement, Earnhardt hereby
grants to Gargoyles an exclusive worldwide license to adapt, distribute,
perform, reproduce and use Earnhardt's name, likeness, autograph and voice on
the Products and/or in advertisements, commercials, packaging, signs and other
advertising and promotional formats, materials or media to advertise, market,
promote and sell the Products throughout the world. Earnhardt will not
endorse, wear, or support, or authorize or permit any third party to use his
name, likeness, autograph or voice in connection with any other sunglasses
anywhere in the world during the term of this Agreement. Notwithstanding the
foregoing, Gargoyles acknowledges that Earnhardt does not wear a Gargoyles
Product while driving during racing events, and Gargoyles agrees that
Earnhardt's use of another product during races is not a violation by Earnhardt
of this Agreement.
3. Term; Termination of Prior Agreement.
------------------------------------
Subject to earlier termination as described herein, the term of this
Agreement shall commence on January 1, 1999 and shall expire on December 31,
2001. Upon the execution of this Agreement by Gargoyles and Earnhardt, that
certain License Agreement dated as of August 14, 1996 by and between Earnhardt
and Gargoyles shall terminate as of December 31, 1998 and shall be of no
further force or effect and shall be replaced in its entirety by this Agreement
effective as of January 1, 1999.
4. Advertising Materials.
---------------------
Gargoyles shall be responsible for producing the advertising and
promotional materials in any form or medium (e.g. publicity photographs,
advertisements, commercials, contests, film or video footage, etc.) deemed
necessary in connection with the marketing of the Products. Prior to
commercial production and distribution of any such materials using the name,
likeness, autograph or voice of Earnhardt, Gargoyles shall submit to Dale
Earnhardt, Inc. for its review and written approval on behalf of Earnhardt the
form of each item containing any such name, likeness, autograph or voice of
Earnhardt. Dale Earnhardt, Inc. shall not withhold its approval unreasonably
and shall use its best efforts to notify Gargoyles of its approval or
objections within 14 business days of receipt of such promotional materials.
Any approved materials may also be used by Gargoyles in company literature,
annual reports or other investor-related information.
5. Consideration.
-------------
As consideration for the grant of the license, Gargoyles shall pay to
Earnhardt certain fees and royalties as set forth below:
5.1 Annual License Fee.
------------------
Gargoyles shall pay Earnhardt an annual license fee of *** Dollars
($***) payable in two equal installments of $*** on each January 1 and July 1
during the term of this Agreement.
5.2 Royalties.
---------
Gargoyles will pay Earnhardt a royalty on sales of Earnhardt
signature series sunglasses, namely the EARNHARDT GOLD MEDALIST CLASSIC and
`85's, and the EARNHARDT BLACK/BLACK ICE CLASSIC AND 85'S, in accordance with
the following schedule:
***% of net sales on first 20,000 units sold;
***% of net sales on units 20,001 to 30,000;
***% on units sold over 30,000.
For purposes of this paragraph 5.2, "net sales" is defined as Gargoyles' list
wholesale price for the Products less dealer discounts and adjustments for
Product returns.
5.3 Payment of Royalties and Accounting.
-----------------------------------
Royalty payments shall be calculated quarterly and paid within 30
days after the end of each calendar quarter. With each royalty payment made to
Earnhardt, Gargoyles shall submit a full and accurate statement showing the sku
number of the Products sold, the quantity sold, the price charged, and the
corresponding royalty amount. Royalty payments made more than ten days after
the due date shall bear interest at the rate of twelve percent (12%) per annum.
6. Photographic Sessions; Personal Appearances.
--------------------------------------------
During each year of this Agreement, Earnhardt shall be available for at
least one (1) day as mutually scheduled by the parties for filming,
photographic, and recording sessions as may be reasonably necessary to produce
promotional materials. Each year Earnhardt also will use his best efforts to
sign approximately 100 promotional items furnished by Gargoyles. Gargoyles
acknowledges and agrees with Earnhardt that any autographed items and other
results of such filming, photographic or recording sessions are not for resale
and may be used by Gargoyles for promotional purposes only. In addition,
Earnhardt will make one (1) personal appearance (of approximately four hours
duration) in each calendar year during the term of this Agreement. Such
personal appearance will be in a limited, controlled access and secure area at
such promotional events as may be mutually agreed upon by Earnhardt and
Gargoyles to assist Gargoyles in promoting Products at such event.
7. Promotional Efforts of Gargoyles and Earnhardt.
-----------------------------------------------
Throughout the term of this Agreement, Gargoyles agrees to aggressively
promote and market Earnhardt and his image in connection with the marketing of
its Products. In addition, Gargoyles agrees to participate with other
Earnhardt licensees in cross-promotional efforts related to the Products.
Throughout the term of this Agreement Earnhardt will exert his best efforts to
promote and publicize the Products. Earnhardt will not disparage or criticize
the Products. Earnhardt will wear the Products at all times when it is
convenient and appropriate for him to do so, and Earnhardt will not publicly
wear any sunglass products that have not been manufactured by Gargoyles (except
during races as described in paragraph 2 hereof).
8. Personal Sunglasses.
-------------------
Gargoyles will make available to Earnhardt and his immediate family, at no
charge, a reasonable number of Products for personal use during the term of
this Agreement.
9. Press Release.
-------------
Upon the signing of this Agreement, Gargoyles will issue a press release
announcing this Agreement and Gargoyles and Earnhardt's continuing
relationship. Gargoyles will provide Earnhardt with a copy of the press
release for his review and approval before it is issued.
10. Representations And Warranties.
------------------------------
Earnhardt represents to Gargoyles that: (i) he has full capacity, right
and authority to enter into this Agreement and to be legally bound hereby; and
(ii) there are no other agreements to which he is a party or is bound that
conflict with this Agreement or with his ability to perform his obligations
under this Agreement. Gargoyles represents that it has: (i) the staff,
knowledge and experience to market the Products in a suitable commercial
manner; and (ii) the right and authority to enter into this Agreement and to be
legally bound hereby.
11. Confirmation of Authority.
-------------------------
If any manufacturer, advertiser or other person or entity questions the
authority of Gargoyles to use Earnhardt's name, likeness, autograph or voice as
authorized under this Agreement, upon Gargoyles' request, Earnhardt promptly
will execute such additional documents or make such communications as may be
reasonably necessary to confirm Gargoyles' authority.
12. Ownership.
---------
Earnhardt acknowledges that the Products are being developed and
customized as Gargoyles' eyewear products. Except for Earnhardt's rights in
and to his name, likeness, autograph, and voice as used on a Product or related
materials, Gargoyles retains ownership of, and Earnhardt has not rights in and
to, any patent, copyright, trademark, trade secret or other intellectual
property rights in or used in connection with the manufacture, sale or use of
the Products or any related materials. Any contribution made by Earnhardt with
respect to any Product or related materials to the extent permitted by law
shall constitute "works made for hire". Earnhardt will assign, and does hereby
assign to Gargoyles, any and all right, title and interest he may have in the
Products and such related materials not deemed to be "works made for hire".
Earnhardt will cooperate with Gargoyles in the transferring to Gargoyles and
registering of all such right, title and interest in such intellectual property
rights and to execute and deliver any necessary documents to effect the same.
13. Default and Termination
-----------------------
13.1 Events of Default.
-----------------
Either party may, in its discretion, terminate this Agreement and/or
exercise any other right or remedy available to it under applicable law,
including, without limitation, the right to recover damages if the other party
breaches or is in default under any provision of this Agreement, and such
breach or default is not cured within ten (10) days after written notice
thereof shall have been given to such defaulting party by the other party,
which notice shall specify the event or events constituting the default or
breach hereof.
13.2 Death; Disability; Retire from Racing.
-------------------------------------
Gargoyles may terminate this Agreement by written notice to Earnhardt
upon the occurrence of any of the following events: (i) the death or permanent
disability of Earnhardt, (ii) Earnhardt shall make his best efforts to continue
to endorse Gargoyles as a car owner should he decide to retire prior to the
term of this Agreement, or (iii) Earnhardt becomes the subject of any
significant adverse publicity, including, but not limited to, publicity
relating to a felony criminal conviction or moral turpitude, such that
Earnhardt's name and persona, in the reasonable discretion of Gargoyles, are no
longer conducive to the promotion of the Products.
13.3 Post Termination.
----------------
Upon the expiration or termination of this Agreement, the license set
forth in paragraph 2 hereof shall automatically terminate and, except as
expressly provided herein, neither party shall have any further obligation,
both in terms of payments (other than amounts earned hereunder before such
termination) or performance, whatsoever under this Agreement. Notwithstanding
the foregoing, if this Agreement expires or is terminated for any reason other
than a breach or default of this Agreement by Gargoyles, Gargoyles and its
resellers may for a period not to exceed six (6) months continue to promote,
distribute, use and sell any Products and Product promotional material prepared
before such expiration or termination, provided Gargoyles continues to pay
Earnhardt royalties for such Product sales as provided in paragraph 5.2 hereof.
14. Right of First Approval.
-----------------------
At least sixty (60) days before the expiration of the term of this
Agreement, Gargoyles and Earnhardt shall begin discussions for a renewal of
this Agreement for an additional period. If the parties are unable to reach
agreement, Earnhardt may negotiate an endorsement agreement with other sunglass
manufacturers but shall not enter into an agreement with any third party during
the three (3) month period after the expiration of the term of this Agreement
without first providing Gargoyles the right to match the terms of such
agreement. If Gargoyles elects to match such terms, Gargoyles and Earnhardt
shall promptly enter into such agreement in lieu of Earnhardt entering into the
agreement with such other manufacturer.
15. Miscellaneous.
-------------
15.1 Relationship of the Parties.
---------------------------
The relationship of Earnhardt to Gargoyles shall be that of an
independent contractor, and all acts performed by Earnhardt pursuant to this
Agreement during its term shall be deemed to be performed in his individual
capacity as an independent contractor and not as an agent or employee of
Gargoyles.
15.2 Notices.
-------
All notices required or permitted hereunder shall be given in writing
and shall be delivered by (i) hand delivery, (ii) overnight receipted courier
service, (iii) registered or certified mail, postage prepaid, or (iv)
telephonically confirmed facsimile transmission to the addresses or facsimile
numbers set forth below or to such other addresses or facsimile numbers as
either party shall designate in writing. Notices given in accordance with this
paragraph shall be effective upon receipt or when receipt is refused.
If to Earnhardt: Dale Earnhardt, Inc.
1675 Coddle Creek Hwy.
Mooresville, NC 28115
Attn: Don Hawk
Tel: 704-662-8000
Fax: 704-663-7945
If to Gargoyles: Gargoyles, Inc.
5866 S. 194th Street
Kent, Washington 98032
Attn: General Counsel
Tel: 800-426-6396
Fax: 253-872-3317
15.3 No Waiver.
---------
The failure of either party hereto to insist at any time upon the
strict observance or performance of any of the provisions of this Agreement or
to exercise any right or remedy as provided in this Agreement shall not impair
any such right or remedy or be construed as a waiver or relinquishment thereof
with respect to subsequent defaults. Every right and remedy given by this
Agreement to the parties hereto may be exercised from time to time and as often
as may be deemed expedient by the parties hereto, as the case may be.
15.4 Entire Agreement.
----------------
This Agreement contains the entire agreement between the parties, and
supersedes all prior understandings, agreements or arrangements, oral or
written, between the parties, with respect to the subject matter hereof,
including that certain License Agreement by and between Gargoyles and Earnhardt
dated August 14, 1996, which, upon the commencement of the term of this
Agreement, shall terminate and shall be of no further force or effect. This
Agreement shall not be modified or amended except by written instrument signed
by both parties. This Agreement shall be binding upon and shall inure to the
benefit of the heirs, personal representatives, estates, successors and assigns
of the parties hereto.
15.5 Governing Law.
-------------
This Agreement shall be governed by the laws of the state of
Washington without reference to its choice of law rules.
15.6 Attorneys' Fees.
---------------
If either party brings an action to enforce this Agreement, the
prevailing party in such action shall be entitled to recover from the other all
costs and disbursements incurred in connection therewith, including reasonable
attorneys' fees.
15.7 Approvals.
---------
All approvals and consents required under this Agreement shall not be
unreasonably withheld and must be requested and responded to in writing.
15.8 Counterparts.
------------
This Agreement may be executed in counterparts, each of which shall
be an original, but all of which together shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this License Agreement to be
executed and delivered as of the date and year first above written.
/s/ Don Hawk, President of Dale Earnhardt, Inc.
and attorney-in-fact for Dale Earnhardt
- ------------------------------------------------
DALE EARNHARDT
GARGOYLES, INC., a Washington corporation
By /s/ Leo Rosenberger
-------------------------------------------
Leo Rosenberger, CEO and CFO
<PAGE>
EXHIBIT 10.48
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "Agreement") is made as of the 23rd day of
October, 1998, by and between DALE EARNHARDT, JR. ("Earnhardt, Jr."), and
GARGOYLES, INC., a Washington corporation("Gargoyles").
RECITALS
A. Gargoyles designs, assembles, markets and distributes a broad range of
sunglasses and eyewear products.
B. Earnhardt, Jr. is a NASCAR Winston Cup Series driver.
C. Subject to the terms and conditions of this Agreement, Gargoyles desires
to obtain the services of Earnhardt, Jr. in connection with the marketing and
sale of its products, and Earnhardt, Jr. desires to assist Gargoyles in such
efforts.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto hereby agree as follows:
1. Product Description.
-------------------
The products that are the subject of this Agreement include GARGOYLES
PERFORMANCE EYEWEAR brand sunglasses and related products (the "Products").
2. License.
-------
Subject to the terms and conditions of this Agreement, Earnhardt, Jr.
hereby grants to Gargoyles an exclusive worldwide license to adapt, distribute,
perform, reproduce and use Earnhardt, Jr.'s name, likeness, autograph and voice
on the Products and/or in advertisements, commercials, packaging, signs and
other advertising and promotional formats, materials or media to advertise,
market, promote and sell the Products throughout the world. Earnhardt, Jr.
will not endorse, wear, or support, or authorize or permit any third party to
use his name, likeness, autograph or voice in connection with any other
sunglasses anywhere in the world during the term of this Agreement.
3. Term; Termination of Prior Agreement.
------------------------------------
Subject to earlier termination as described herein, the term of this
Agreement shall commence on October 23, 1998 and shall expire on October 22,
2001.
4. Advertising Materials.
---------------------
Gargoyles shall be responsible for producing the advertising and
promotional materials in any form or medium (e.g. publicity photographs,
advertisements, commercials, contests, film or video footage, etc.) deemed
necessary in connection with the marketing of the Products. Prior to
commercial production and distribution of any such materials using the name,
likeness, autograph or voice of Earnhardt, Jr., Gargoyles shall submit to Dale
Earnhardt, Inc. for its review and written approval on behalf of Earnhardt, Jr.
the form of each item containing any such name, likeness, autograph or voice of
Earnhardt, Jr.. Dale Earnhardt, Inc. shall not withhold its approval
unreasonably and shall use its best efforts to notify Gargoyles of its approval
or objections within 14 business days of receipt of such materials. Any
approved materials may also be used by Gargoyles in company literature, annual
reports or other investor-related information.
5. Consideration.
-------------
As consideration for the grant of the license, Gargoyles shall pay to
Earnhardt, Jr. certain fees and royalties as set forth below:
5.1 Annual License Fee.
------------------
Gargoyles shall pay Earnhardt, Jr. an annual license fee of ***
Dollars ($***) payable in two equal installments of $*** on each January 1 and
July 1 during the term of this Agreement.
5.2 Royalties.
---------
Gargoyles agrees to work with Earnhardt, Jr. to develop a signature
series sunglass to be endorsed by Earnhardt, Jr. Gargoyles shall pay
Earnhardt, Jr. an amount equal to *** ($***) for each unit of such signature
series sunglasses sold during the term of this Agreement. Earnhardt, Jr.
acknowledges that a certain quantity of Earnhardt, Jr. signature series
Products may be given away at no charge to customers as samples, for
promotional and display purposes, and as sales samples. No Royalty shall be
payable on any such promotional or sample products.
5.3 Payment of Royalties and Accounting.
-----------------------------------
Royalty payments shall be calculated quarterly and paid within 30
days after the end of each calendar quarter. With each royalty payment made to
Earnhardt, Jr., Gargoyles shall submit a full and accurate statement showing
the number of the Earnhardt, Jr. signature series Products sold during the
previous quarter.
6. Photographic Sessions; Personal Appearances.
-------------------------------------------
During each year of this Agreement, Earnhardt, Jr. shall be available for
at least one (1) day as mutually scheduled by the parties for filming,
photographic, and recording sessions as may be reasonably necessary to produce
promotional materials. Each year Earnhardt, Jr. also will use his best efforts
to sign approximately 100 promotional items furnished by Gargoyles. Gargoyles
acknowledges and agrees with Earnhardt, Jr. that any autographed items and
other results of such filming, photographic or recording sessions are not for
resale and may be used by Gargoyles for promotional purposes only. In
addition, Earnhardt, Jr. will make one (1) personal appearance (of
approximately four hours duration) in each calendar year during the term of
this Agreement. Such personal appearance will be in a limited, controlled
access and secure area at such promotional events as may be mutually agreed
upon by Earnhardt, Jr. and Gargoyles to assist Gargoyles in promoting Products
at such event.
7. Promotional Efforts of Gargoyles and Earnhardt, Jr.
--------------------------------------------------
Throughout the term of this Agreement, Gargoyles agrees to aggressively
promote and market Earnhardt, Jr. and his image in connection with the
marketing of its Products. In addition, Gargoyles agrees to participate with
other Earnhardt, Jr. licensees in cross-promotional efforts related to the
Products. Throughout the term of this Agreement Earnhardt, Jr. will exert his
best efforts to promote and publicize the Products. Earnhardt, Jr. will not
disparage or criticize the Products. Earnhardt, Jr. will wear the Products at
all times when it is convenient and appropriate for him to do so, and
Earnhardt, Jr. will not publicly wear any sunglass products that have not been
manufactured by Gargoyles.
8. Personal Sunglasses.
-------------------
Gargoyles will make available to Earnhardt, Jr. and his immediate family,
at no charge, a reasonable number of Products for personal use during the term
of this Agreement.
9. Press Release.
-------------
Upon the signing of this Agreement, Gargoyles will issue a press release
announcing this Agreement and Gargoyles and Earnhardt, Jr.'s continuing
relationship. Gargoyles will provide Earnhardt, Jr. with a copy of the press
release for his review and approval before it is issued.
10. Representations And Warranties.
------------------------------
Earnhardt, Jr. represents to Gargoyles that: (i) he has full capacity,
right and authority to enter into this Agreement and to be legally bound
hereby; and (ii) there are no other agreements to which he is a party or is
bound that conflict with this Agreement or with his ability to perform his
obligations under this Agreement. Gargoyles represents that it has: (i) the
staff, knowledge and experience to market the Products in a suitable commercial
manner; and (ii) the right and authority to enter into this Agreement and to be
legally bound hereby.
11. Confirmation of Authority.
-------------------------
If any manufacturer, advertiser or other person or entity questions the
authority of Gargoyles to use Earnhardt, Jr.'s name, likeness, autograph or
voice as authorized under this Agreement, upon Gargoyles' request, Earnhardt,
Jr. promptly will execute such additional documents or make such communications
as may be reasonably necessary to confirm Gargoyles' authority.
12. Ownership.
---------
Earnhardt, Jr. acknowledges that the Products are being developed and
customized as Gargoyles' eyewear products. Except for Earnhardt, Jr.'s rights
in and to his name, likeness, autograph, and voice as used on a Product or
related materials, Gargoyles retains ownership of, and Earnhardt, Jr. has not
rights in and to, any patent, copyright, trademark, trade secret or other
intellectual property rights in or used in connection with the manufacture,
sale or use of the Products or any related materials. Any contribution made by
Earnhardt, Jr. with respect to any Product or related materials to the extent
permitted by law shall constitute "works made for hire". Earnhardt, Jr. will
assign, and does hereby assign to Gargoyles, any and all right title and
interest he may have in the Products and such related materials not deemed to
be "works made for hire". Earnhardt, Jr. will cooperate with Gargoyles in the
transferring to Gargoyles and registering of all such right, title and interest
in such intellectual property rights and to execute and deliver any necessary
documents to effect the same.
13. Default and Termination
-----------------------
13.1 Events of Default.
-----------------
Either party may, in its discretion, terminate this Agreement and/or
exercise any other right or remedy available to it under applicable law,
including, without limitation, the right to recover damages if the other party
breaches or is in default under any provision of this Agreement, and such
breach or default is not cured within ten (10) days after written notice
thereof shall have been given to such defaulting party by the other party,
which notice shall specify the event or events constituting the default or
breach hereof.
13.2 Death; Disability; Stops Racing.
-------------------------------
Gargoyles may terminate this Agreement by written notice to
Earnhardt, Jr. upon the occurrence of any of the following events: (i) the
death or permanent disability of Earnhardt, Jr., (ii) Earnhardt, Jr. ceases to
be a NASCAR driver, or (iii) Earnhardt, Jr. becomes the subject of any
significant adverse publicity, including, but not limited to, publicity
relating to a felony criminal conviction or moral turpitude, such that
Earnhardt, Jr.'s name and persona, in the reasonable discretion of Gargoyles,
are no longer conducive to the promotion of the Products.
13.3 Post Termination.
----------------
Upon the expiration or termination of this Agreement, the license set
forth in paragraph 2 hereof shall automatically terminate and, except as
expressly provided herein, neither party shall have any further obligation,
both in terms of payments (other than amounts earned hereunder before such
termination) or performance, whatsoever under this Agreement. Notwithstanding
the foregoing, if this Agreement expires or is terminated for any reason other
than a breach or default of this Agreement by Gargoyles, Gargoyles and its
resellers may for a period not to exceed six (6) months continue to promote,
distribute, use and sell any Products and Product promotional material prepared
before such expiration or termination.
14. Right of First Approval.
-----------------------
At least sixty (60) days before the expiration of the term of this
Agreement, Gargoyles and Earnhardt, Jr. shall begin discussions for a renewal
of this Agreement for an additional period. If the parties are unable to reach
agreement, Earnhardt, Jr. may negotiate an endorsement agreement with other
sunglass manufacturers but shall not enter into an agreement with any third
party during the three (3) month period after the expiration of the term of
this Agreement without first providing Gargoyles the right to match the terms
of such agreement. If Gargoyles elects to match such terms, Gargoyles and
Earnhardt, Jr. shall promptly enter into such agreement in lieu of Earnhardt,
Jr. entering into the agreement with such other manufacturer.
15. Miscellaneous.
-------------
15.1 Relationship of the Parties.
---------------------------
The relationship of Earnhardt, Jr. to Gargoyles shall be that of an
independent contractor, and all acts performed by Earnhardt, Jr. pursuant to
this Agreement during its term shall be deemed to be performed in his
individual capacity as an independent contractor and not as an agent or
employee of Gargoyles.
15.2 Notices.
-------
All notices required or permitted hereunder shall be given in writing
and shall be delivered by (i) hand delivery, (ii) overnight receipted courier
service, (iii) registered or certified mail, postage prepaid, or (iv)
telephonically confirmed facsimile transmission to the addresses or facsimile
numbers set forth below or to such other addresses or facsimile numbers as
either party shall designate in writing. Notices given in accordance with this
paragraph shall be effective upon receipt or when receipt is refused.
If to Earnhardt, Jr.: Dale Earnhardt, Jr., Inc.
1675 Coddle Creek Hwy.
Mooresville, NC 28115
Attn: Don Hawk
Tel: 704-662-8000
Fax: 704-663-7945
If to Gargoyles: Gargoyles, Inc.
5866 S. 194th Street
Kent, Washington 98032
Attn: General Counsel
Tel: 800-426-6396
Fax: 253-872-3317
15.3 No Waiver.
---------
The failure of either party hereto to insist at any time upon the
strict observance or performance of any of the provisions of this Agreement or
to exercise any right or remedy as provided in this Agreement shall not impair
any such right or remedy or be construed as a waiver or relinquishment thereof
with respect to subsequent defaults. Every right and remedy given by this
Agreement to the parties hereto may be exercised from time to time and as often
as may be deemed expedient by the parties hereto, as the case may be.
15.4 Entire Agreement.
----------------
This Agreement contains the entire agreement between the parties, and
supersedes all prior understandings, agreements or arrangements, oral or
written, between the parties, with respect to the subject matter hereof. This
Agreement shall not be modified or amended except by written instrument signed
by both parties. This Agreement shall be binding upon and shall inure to the
benefit of the heirs, personal representatives, estates, successors and assigns
of the parties hereto.
15.5 Governing Law.
-------------
This Agreement shall be governed by the laws of the state of
Washington without reference to its choice of law rules.
15.6 Attorneys' Fees.
---------------
If either party brings an action to enforce this Agreement, the
prevailing party in such action shall be entitled to recover from the other all
costs and disbursements incurred in connection therewith, including reasonable
attorneys' fees.
15.7 Approvals.
---------
All approvals and consents required under this Agreement shall not be
unreasonably withheld and must be requested and responded to in writing.
15.8 Counterparts.
------------
This Agreement may be executed in counterparts, each of which shall
be an original, but all of which together shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this License Agreement to be
executed and delivered as of the date and year first above written.
/s/ Don Hawk, President of Dale Earnhardt, Inc.
and attorney-in-fact for Dale Earnhardt
- -----------------------------------------------
DALE EARNHARDT, JR.
GARGOYLES, INC.,
a Washington corporation
By /s/ Leo Rosenberger
------------------------------------------
Leo Rosenberger, CEO and CFO
<PAGE>
EXHIBIT 10.49
AGREEMENT
THIS AGREEMENT is entered into as of this 8th day of January, 1999 by and
between Golden Bear Golf, Inc. ("GBG") and Gargoyles, Inc. ("Gargoyles").
WHEREAS, GBG and Gargoyles entered into a Product Development and
Licensing Agreement dated as of January 1, 1998 (the "License Agreement");
WHEREAS, Gargoyles is in default of its payment obligations under the
License Agreement;
WHEREAS, GBG has agreed that upon payment in full of the amounts due under
the Promissory Note (as hereinafter defined), GBG shall release Gargoyles from
any further payments or obligations under the License Agreement.
NOW THEREFORE, for good and valuable consideration, the parties agree as
follows:
1. Upon execution of this Agreement, Gargoyles shall execute and deliver
the Promissory Note attached hereto as Exhibit 1.
2. Upon payment in full of the amounts due under the Promissory Note,
the License Agreement shall be considered terminated and null and void;
PROVIDED, HOWEVER, that any of the parties obligations under the License
Agreement, which, by its terms, survive termination of the License Agreement,
shall so survive.
3. If Gargoyles defaults under the Promissory Note, then such default
shall be considered a default hereunder, which default shall permit GBG to seek
to enforce all of GBG's rights under the License Agreement, including without
limitation, the right to receive payment of all Consulting Fees and the Annual
Retainer due thereunder.
4. Upon payment in full of the Promissory Note, the parties hereto shall
have each been deemed to have released, the other, their respective officers,
directors, shareholders, successors and assigns, from any and all liability or
obligations, arising from, or in connection with, the License Agreement.
5. This Agreement may be executed in one or more counterparts which,
when taken together, shall constitute one agreement.
6. Any capitalized terms not defined herein, have the meaning set forth
in the License Agreement.
IN WITNESS WHEREOF, the parties have set their hand and seals as of this
8th day of January, 1999.
GOLDEN BEAR GOLF, INC. GARGOYLES, INC.
By: /s/ By: /s/
--------------------------- ---------------------------
Name: Stephan S. Winslott Name: Leo Rosenberger
Its: Senior Vice President Its: CEO & CFO
<PAGE>
PROMISSORY NOTE
$142,500.00 US DOLLARS January 8, 1999
FOR VALUE RECEIVED, and in consideration of the termination of that certain
Product Development and Licensing Agreement dated January 1, 1997 between the
parties, the undersigned Gargoyles, Inc., a Washington corporation
("Gargoyles"), does hereby promise to pay to the order of Golden Bear Golf,
Inc., a Florida corporation ("Golden Bear"), the principal sum of One-Hundred
Forty-two Thousand Five Hundred Dollars ($142,500.00), together with interest
thereon until paid in full as stated herein.
1. Interest Rate.
-------------
The outstanding principal balance of this Note shall bear interest at
the rate of 8.25 percent per annum.
2. Periodic Payments.
-----------------
On each of February 12, 1999 and February 19, 1999, Gargoyles shall
pay to Golden Bear a principal payment in the amount of Eleven Thousand Eight
Hundred Seventy-Five Dollars ($11,875) plus all interest accrued thereon
through such date. Beginning March 5, 1999 and on the 5th day of each month
thereafter until this note is paid in full, Gargoyles shall pay to Golden Bear
a principal payment in the amount of Eleven Thousand Eight Hundred Seventy-Five
Dollars ($11,875) plus all interest accrued thereon through such date.
3. Maturity.
--------
The entire principal balance of this Note, plus all accrued and
unpaid interest shall be due and payable in full on December 5, 1999.
4. Application of Payments; Prepayment.
-----------------------------------
Each payment hereunder shall be applied first to the payment of
interest then accrued on the unpaid balance of this Note and second to the
reduction of principal. This Note may be prepaid in whole or in part at any
time or times with no prepayment penalty or additional cost of any kind. Upon
payment in full of the principal and accrued interest thereon, this Note shall
be canceled, shall be of no further force or effect, and shall be returned to
Gargoyles.
5. Default; Default Interest Rate.
------------------------------
This Note shall be in default if Gargoyles fails to timely make
monthly payments under this Note.. If a default occurs, the holder of this
Note shall be entitled to declare the entire unpaid principal balance and all
accrued and unpaid interest thereon immediately due and payable and may proceed
to protect and enforce its rights either by suit in equity and/or law or any
other appropriate proceedings, whether for the specific performance of any
covenant or agreement contained in this Note. This Note shall also be in
default if Gargoyles is declared insolvent or files for relief under the United
State Bankruptcy Code or other similar federal or state law, or if a trustee or
receiver is appointed for the property of Gargoyles. After any such default
the principal balance shall bear interest at a rate per annum of twelve percent
(12%) until the default is cured.
6. Attorneys' Fees and Costs.
-------------------------
If a default occurs hereunder and this Note is placed in the hands of
an attorney for collection of any amount called for herein, Gargoyles shall be
liable for all costs of collection, including, without limitation, reasonable
attorneys fees and costs.
7. Applicable Law.
--------------
This Note shall be construed according to the laws of the state of
Florida. Gargoyles hereby waives its right to a jury trial in any action
brought to enforce payment of this Note.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed as
of the date first written above.
Gargoyles, Inc.,
a Washington corporation
/s/ Leo Rosenberger
- ------------------------
Leo Rosenberger
CEO and CFO
<PAGE>
GOLDEN BEAR
Amortization Schedule - DRAFT
<TABLE>
<CAPTION>
Beginning 0.0825 Ending
Payment Balance Interest Principal Balance
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
02/12/99 12,266.88 142,500.00 391.88 11,875.00 130,625.00
02/19/99 12,773.05 130,625.00 898.05 11,875.00 118,750.00
03/05/99 12,691.41 118,750.00 816.41 11,875.00 106,875.00
04/05/99 12,609.77 106,875.00 734.77 11,875.00 95,000.00
05/05/99 12,528.13 95,000.00 653.13 11,875.00 83,125.00
06/05/99 12,446.48 83,125.00 571.48 11,875.00 71,250.00
07/05/99 12,364.84 71,250.00 489.84 11,875.00 59,375.00
08/05/99 12,283.20 59,375.00 408.20 11,875.00 47,500.00
09/05/99 12,201.56 47,500.00 326.56 11,875.00 35,625.00
10/05/99 12,119.92 35,625.00 244.92 11,875.00 23,750.00
11/05/99 12,038.28 23,750.00 163.28 11,875.00 11,875.00
12/05/99 11,956.64 11,875.00 81.64 11,875.00 -
</TABLE>
14
<PAGE>
EXHIBIT 10.50
AGREEMENT REGARDING HAUFF NOTES
THIS AGREEMENT REGARDING HAUFF NOTES (this "Agreement") is dated this 2nd
day of February 1999, by and between GARGOYLES, INC., a Washington corporation
("Gargoyles"), and DOUGLAS B. HAUFF ("Hauff").
RECITALS
A. On April 9, 1997, Hauff executed a Promissory Note in favor of
Gargoyles in original principal amount of $531,299.00 together with interest
thereon at the rate of 5.75% per annum, and on March 11, 1998, Hauff executed a
second Promissory Note in favor of Gargoyles in original principal amount of
$56,307.15 together with interest thereon at the rate of 5.75% per annum
(together the "Hauff Notes").
B. The Hauff Notes are due and payable in full on February 15, 1999.
C. As of January 29, 1998, total principal and accrued interest
outstanding under the Hauff Notes is $615,179.85.
D. Pursuant to that certain Separation and Release Agreement between
Gargoyles and Hauff dated March 11, 1998, among other things, Gargoyles agreed
to reimburse Hauff in an amount equal to the cost of three month's COBRA
medical and dental insurance continuation coverage for Hauff and his family.
The COBRA cost for such benefits for a three month period totals $1329.69 (the
"Hauff COBRA Costs"). As of the date of this Agreement, Gargoyles has not paid
the Hauff COBRA Costs to Hauff.
E. On August 14, 1998, Trillium Corporation executed a promissory note
in favor of Hauff, Tracy Hauff and The Hauff Family Partnership in original
principal amount of $95,000, which note is due and payable on the second
anniversary thereof (the "Trillium Note").
F. Gargoyles is a party to a License Agreement dated October 30, 1995
with Ken Griffey, Jr. which, in accordance with its terms, expired on December
31, 1998 (the "Griffey Agreement"). As of the date of this agreement, certain
personal service fees and royalty fees due under the Griffey Agreement have not
been paid and remain outstanding.
G. In late 1997, Gargoyles and Griffey, through his agent Brian
Goldberg, began negotiations with respect to the renewal of the Griffey
Agreement and drafts of a new Griffey license agreement were exchanged between
Gargoyles and Mr. Goldberg (the "Draft Griffey Agreement"). A dispute has
arisen between Gargoyles and Mr. Griffey with respect to the Griffey Agreement
and the enforceability of the Draft Griffey Agreement.
H. Subject to the terms and conditions set forth in this Agreement,
Hauff has requested certain accommodations from Gargoyles with respect to
payment of the Hauff Notes, and Gargoyles is willing to make such
accommodations to Hauff.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
of the parties set forth herein, the parties hereto hereby agree as follows:
1. Covenants of Hauff.
------------------
Upon and together with the execution of this Agreement by Hauff:
(a) Cash Payment.
------------
Hauff shall pay to Gargoyles cash in the amount of One Hundred
Eighty-Five Thousand Dollars by wire transfer of immediately available funds to
the account as set forth on the attached EXHIBIT A;
(b) Assignment of Trillium Note.
---------------------------
Hauff shall fully assign, and shall cause his marital community
and The Hauff Family Partnership, to assign, the Trillium Note together with
all proceeds thereof to Gargoyles by executing the Assignment of Trillium Note
attached hereto as EXHIBIT B and shall deliver the original Trillium Note to
Gargoyles. Hauff represents and warrants to Gargoyles that he, together with
his marital community and the Hauff Family Partnership, is the true owner of
the Trillium Note, free and clear of any lien, or encumbrance, or restriction
on transfer of any kind, and Hauff shall indemnify Gargoyles for any losses
related to a breach by Hauff of the representations and warranties set forth in
this Section 1(b);
(c) Assumption of Obligations to Griffey.
------------------------------------
Hauff shall assume the obligations of Gargoyles to Griffey under
the terms of the Griffey Agreement and the Draft Griffey Agreement.
(d) Waiver of COBRA Costs.
---------------------
Hauff hereby waives all right to collect any of the Hauff COBRA
Costs from Gargoyles; and
(e) New Note.
--------
Hauff shall execute and deliver to Gargoyles a promissory note
in original principal amount of $32,500.00 in the form of the attached EXHIBIT
C.
2. Covenants of Gargoyles.
----------------------
Upon and together with the execution of this Agreement by Gargoyles,
Gargoyles shall cancel the Hauff Notes and return the original Hauff Notes to
Hauff.
3. Conditions to Gargoyles Obligations.
-----------------------------------
Gargoyles' obligation to cancel the Hauff Notes is conditioned upon
(i) receipt from Hauff of the consideration and fully executed documents and
instruments as set forth in Section 1 hereof, and (ii) receipt from Ken
Griffey, Jr. of the Consent and Settlement and Release Agreement in the form of
the attached EXHIBIT D.
4. Attorneys Fees.
--------------
If it is necessary for either party hereto to enforce his or its
rights pursuant to this Agreement due to a default by the other, the defaulting
party shall reimburse the other for reasonable attorneys' fees and expenses.
5. Amendment and Modification.
--------------------------
This Agreement may be amended, modified or supplemented, or any
provision waived, only by written agreement executed by the parties hereto.
6. Governing Law.
-------------
This Agreement shall be governed by the laws of the state of
Washington.
7. Counterparts.
------------
This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
8. Exhibits.
--------
The exhibits attached hereto are incorporated herein by reference as
if fully set forth herein.
IN WITNESS WHEREOF, Gargoyles and Hauff have executed this Agreement as of
the date set forth above.
GARGOYLES, INC.,
a Washington corporation
By: /s/ Leo Rosenberger /s/ Douglas B. Hauff
---------------------------- ----------------------------
Leo Rosenberger, CFO and CEO DOUGLAS B. HAUFF
AGREED AND CONSENTED:
/s/ Tracy Hauff
----------------------------
TRACY HAUFF
THE HAUFF FAMILY PARTNERSHIP
By: /s/ Douglas B. Hauff
------------------------
Its President
<PAGE>
EXHIBIT A
WIRE TRANSFER INSTRUCTIONS
U.S. Bank.
DATE: August 27, 1998
TO: CHERYL BECKMAN
GARGOYLES, INC.
5866 South 194th Street
Kent, Washington 98032
(253) 872-3317
FROM: JOCELYN KILPATRICK
U.S. BANK - SPECIAL ASSETS
(612) 973-2127
(612) 973-2148 FAX
RE: WIRING INSTRUCTIONS
Gargoyles
WIRING INSTRUCTIONS
- -------------------
U.S. BANK NATIONAL ASSOCIATION
601 Second Avenue S.
MPFP2516 - U.S. Bank Place
Minneapolis, MN 55402
ABA #091000022
CREDIT: SPECIAL ASSETS WIRE CLEARING ACCOUNT
1602-3452-8703
ATTN: Diane Athmann
RE: Gargoyles
If you have any questions, please call me at (612) 973-2127.
601 Second Avenue South, MPFP2516
Minneapolis, Minnesota 55402
<PAGE>
EXHIBIT B
ASSIGNMENT OF TRILLIUM NOTE
IN CONSIDERATION OF THE COVENANTS of the parties set forth in that certain
Agreement Regarding Hauff Notes of even date herewith by and between Gargoyles,
Inc., a Washington corporation ("Gargoyles"), and Douglas B. Hauff and Tracy
Hauff (the "Hauffs"), and for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Hauffs and The Hauff Family
Partnership do hereby assign, without recourse, to Gargoyles all of their
right, title and interest in and to that certain Promissory Note dated August
14, 1998 in original principal amount of $95,000, together with all proceeds
thereof.
Executed this 2nd day of February, 1999.
/s/ Douglas B. Hauff
----------------------------
DOUGLAS B. HAUFF
/s/ Tracy Hauff
----------------------------
TRACY HAUFF
THE HAUFF FAMILY PARTNERSHIP
By: /s/ Douglas B. Hauff
-----------------------
Its President
<PAGE>
UNSECURED PROMISSORY NOTE
-------------------------
$95,000.00 August 14, 1998
Bellingham, WA
FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to the order of
DOUGLAS B. HAUFF AND TRACY L. HAUFF, husband and wife, and the HAUFF FAMILY
PARTNERSHIP, a Washington limited partnership, or their assigns ("Holder"), the
principal sum of Ninety-Five Thousand Dollars ($95,000.00), all as hereinafter
provided and upon the following agreements, terms and conditions:
1. Interest.
--------
This Note shall be non-interest bearing; provided, that in the event
of any default as hereinafter defined, all sums then and thereafter owing
hereon at the option of Holder shall bear interest at a rate which shall be
equal to the lesser of twelve percent (12%) per annum or the highest rate then
permitted by applicable law ("Default Rate").
2. Payment.
-------
Except as provided below, this Note shall be due and payable as
follows:
$95,000 due and payable on August 14, 2000.
Payment shall be made to Holder hereof at 6925 N. Ryley Lane, Otis Orchards, WA
99027 or such other place as Holder may specify in writing from time to time.
3. Late Charge.
-----------
If any payment on this Note is not paid when due and remains unpaid
for a period of ten (10) days inclusive after Holder provides notice to Maker
in accordance with the notice provisions of this Note, Maker will pay Holder a
late charge equal to five percent (5%) of the amount of the delinquent payment.
4. Prepayment.
----------
This Note may be prepaid at any time without penalty.
5. Acceleration.
------------
In the event any payments required by this Promissory Note are not
paid when due, and remain unpaid after a date specified by a notice to Maker,
and such default remains uncured after a date specified by a notice to Maker,
then the whole sum of principal shall become due and payable at once without
further notice at the option of the Holder hereof. The date specified shall
not be less than ten (10) days (for non-payment) or thirty (30) days (for any
other default) from the date notice is given to Maker in accordance with the
notice provisions of this Note. This note will be automatically accelerated in
the event of insolvency or the commencement of an insolvency or bankruptcy
proceeding by or against Maker. All rights and remedies of Holder are
cumulative and not exclusive and the commencement or partial exercise of any
such right or remedy shall not preclude Holder from the exercise of any other
right or remedy until the debts evidenced by this note are paid in full.
6. Costs and Attorneys' Fees.
-------------------------
Maker agrees to pay all costs and expenses which Holder may incur by
reason of any default, including without limitation Holder's reasonable
attorneys' fees with regard to legal services relating to any default and to a
determination of any of Holder's rights or remedies under this Note, and
reasonable attorneys' fees relating to any actions or proceedings which Holder
may institute to protect its interest under the terms of this Note. Any
judgment recovered by Holder shall bear interest at the Default Rate, not to
exceed, however, the highest rate then permitted by law, from the date of the
judgment.
7. Nonwaiver of Holder.
-------------------
Holder's failure to exercise its option to accelerate this Note upon
a default or to exercise any other rights to which Holder may be entitled in
the event of a default, shall not constitute a waiver of the right to exercise
such option or any other rights in the event of any subsequent default, whether
of the same or a different nature.
8. Waiver of Maker.
---------------
Maker waives presentment, protest and demand, notice of protest,
demand or dishonor and nonpayment of this Note.
9. Maximum Interest.
----------------
Notwithstanding any other provision of this Note, interest, fees and
charges payable by reason of the indebtedness evidenced hereby shall not exceed
the maximum, if any, permitted by applicable law and, if by virtue of
applicable law, sums in excess of such maximum would otherwise be payable
hereon, then such excess shall be treated as having been immediately applied by
Holder to principal when received.
10. Applicable Law.
--------------
This Note shall be governed by and construed and enforced in
accordance with the laws of the State of Washington.
11. Notice.
------
Except as otherwise provided in this Note, all notices and consents
required or permitted under this Note shall be in writing and may be telexed,
facsimilied, cabled, delivered by hand, or mailed by first class registered or
certified mail, return receipt requested, postage prepaid, and addressed as
follows:
Holder: Douglas and Tracy Hauff
6925 N. Ryley Lane
Otis Orchards, WA 99027
Maker: Trillium Corporation
4350 Cordata Parkway
Bellingham, WA 98226
Attn: Timothy C. Potts
Tel.: (360) 676-9400
Fax: (360) 738-2910
Changes in the respective addresses to which such notices may be directed may
be made from time to time by either party by notice to the other party.
Notices and consents given by mail in accordance with this Section 11 shall be
deemed to have been given three (3) days after the date of dispatch; notices
and consents given by other means shall be deemed to have been given when
received.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
Maker:
TRILLIUM CORPORATION, a
Washington corporation
By: /s/ Timothy C. Potts
--------------------
Sr. Vice President
<PAGE>
EXHIBIT C
PROMISSORY NOTE
$32,500.00 February 2, 1999
FOR VALUE RECEIVED, the undersigned DOUGLAS B. HAUFF AND TRACY HAUFF (the
"Hauffs"), do hereby promise to pay to the order of GARGOYLES, INC., a
Washington corporation ("Gargoyles"), in lawful money of the United States of
America, the principal sum of Thirty-Two Thousand Five Hundred Dollars
($32,500.00), together with interest thereon until paid in full as stated
herein.
1. Interest Rate.
-------------
The outstanding principal balance of this Note shall bear interest at
the rate of 8 percent per annum.
2. Periodic Payments.
-----------------
On August 31, 1999, the Hauffs shall pay to Gargoyles the principal
sum of $10,000 plus all interest accrued on the outstanding balance of this
note through such date. On August 31, 2000, the Hauffs shall pay to Gargoyles
the principal sum of $12,500 plus all interest accrued on the outstanding
balance of this note through such date. On August 31, 2001, the Hauffs shall
pay to Gargoyles the principal sum of $10,000 plus all interest accrued on the
outstanding balance of this note through such date.
3. Maturity.
--------
The entire principal balance of this Note, plus all accrued and
unpaid interest shall be due and payable in full on August 31, 2001.
4. Application of Payments; Prepayment.
-----------------------------------
Each payment hereunder shall be applied first to the payment of
interest then accrued on the unpaid balance of this Note and second to the
reduction of principal. This Note may be prepaid in whole or in part at any
time or times with no prepayment penalty or additional cost of any kind. Upon
payment in full of the principal and accrued interest thereon, this Note shall
be canceled, shall be of no further force or effect, and shall be returned to
Hauff.
5. Default; Default Interest Rate.
------------------------------
This Note shall be in default if the Hauffs fail to make a payment
under this note when due. If a default occurs, the holder of this Note shall
be entitled to declare the entire unpaid principal balance and all accrued and
unpaid interest thereon immediately due and payable and may proceed to protect
and enforce its rights either by suit in equity and/or law or any other
appropriate proceedings, whether for the specific performance of any covenant
or agreement contained in this Note. After such default the principal balance
shall bear interest at a rate per annum of twelve percent (12%) until the
default is cured.
6. Attorneys' Fees and Costs.
-------------------------
If a default occurs hereunder and this Note is placed in the hands of
an attorney for collection of any amount called for herein, the Hauffs shall be
liable for all costs of collection, including without limitation reasonable
attorneys fees and costs.
7. Applicable Law.
--------------
This Note shall be construed according to the laws of the state of
Washington.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed as
of the date first written above.
/s/ Douglas B. Hauff
- --------------------
DOUGLAS B. HAUFF
/s/ Tracy Hauff
- --------------------
TRACY HAUFF
<PAGE>
EXHIBIT D
CONSENT
AND
SETTLEMENT AND RELEASE AGREEMENT
THIS CONSENT AND SETTLEMENT AND RELEASE AGREEMENT (this "Agreement") is
entered into as of this 2nd day of February 1999 by and between KEN GRIFFEY,
JR. ("Griffey") and GARGOYLES, INC., a Washington corporation ("Gargoyles").
RECITALS
A. Griffey and Gargoyles are parties to that certain License Agreement
dated October 30, 1995 (the "Griffey Agreement").
B. A dispute currently exists between Griffey and Gargoyles with respect
to the renewal of the Griffey Agreement and the enforceability of certain draft
documents circulated by Griffey and Gargoyles (the "Draft Griffey Agreement").
C. Pursuant to the terms of that certain Agreement Regarding Hauff
Notes, Douglas B. Hauff, former President and CEO of Gargoyles ("Hauff"), has
agreed to assume the obligations of Gargoyles under the Griffey Agreement and
the Draft Griffey Agreement.
D. Gargoyles desires Griffey to consent to the assumption by Hauff of
Gargoyles' obligations under the terms of the Griffey Agreement and Gargoyles'
obligations, if any, under the Draft Griffey Agreement as set forth in the
Agreement Regarding Hauff Notes, and Griffey and Gargoyles desire to settle all
disputes between with respect to the Griffey Agreement and the Draft Griffey
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Consent to Assumption of Gargoyles' Obligations.
------------------------------------------------
Griffey hereby consents to the assumption by Hauff of the obligations
of Gargoyles under the Griffey Agreement and any obligations Gargoyles may have
under the Draft Griffey Agreement in accordance with the terms of the Agreement
Regarding Hauff Notes, a copy of which is attached hereto as EXHIBIT A.
2. Payment to Griffey.
------------------
Upon the execution of this Agreement, Gargoyles shall pay to Griffey
the sum of Ten Thousand Dollars ($10,000).
3. Mutual Release.
--------------
In consideration of the assumption by Hauff of the obligations of
Gargoyles under the Griffey Agreement and the Draft Griffey Agreement, the cash
payment set forth in section 2 hereof, and to avoid the expense and uncertainty
of litigation or other resolution of the dispute between Gargoyles and Griffey,
each of Griffey and Gargoyles, for themselves and for their respective agents,
officers, directors, employees, representatives, affiliates, executors, heirs,
successors and assigns, hereby release the other and their respective agents,
officers, directors, employees, representatives, affiliates, executors, heirs,
successors and assigns, from any and all claims and disputes that may exist
between them, whether known or unknown, arising out of the Griffey Agreement
and the Draft Griffey Agreement.
4. No Admission of Liability.
-------------------------
The parties understand, agree and acknowledge that this Agreement is
in compromise of disputed claims and that the agreements hereunder are not to
be construed as admissions of liability. The parties acknowledge that this
Agreement is a fair and equitable settlement of each parties' claims.
5. Authority.
---------
The parties to this Agreement represent that they have the power and
authority to execute and deliver this Agreement, and to perform all terms and
conditions hereof to be performed by them.
6. Binding on Successors and Assigns.
---------------------------------
All of the covenants, agreements, conditions and terms contained in
this Agreement shall be binding upon and inure to the benefit of the successors
and assigns of the respective parties.
7. Attorneys' Fees.
---------------
If it shall be necessary for either party to employ an attorney to
enforce its rights or benefits pursuant to this Agreement, any judgment shall
award to the prevailing party all costs thereof, including but not limited to,
reasonable attorneys' fees and expenses.
8. Counterparts.
------------
This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which taken together shall constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the date first written above.
GARGOYLES, INC., KEN GRIFFEY, JR.
a Washington corporation
By: /s/ Leo Rosenberger By: /s/ Brian Goldberg
---------------------------- ----------------------------
Leo Rosenberger, CEO and CFO Brian Goldberg, attorney-in-
fact for Ken Griffey, Jr.
<PAGE>
EXHIBIT 10.51
The Susan G. Komen Breast Cancer Foundation
December 21, 1998
Ms. Nancy Parker
Private Eyes
780 Ninth Street
Boulder, Colorado 80302
Dear Ms. Parker:
The Susan G. Komen Breast Cancer Foundation ("Komen") is honored to have
been chosen as the beneficiary of Private Eyes' charitable program to support
the fight against breast cancer (the "Program"). We are pleased that Private
Eyes shares our commitment to the advancement of breast cancer research,
education, screening and treatment.
To this end, this letter will serve to confirm and memorialize our
understanding of the terms and conditions of the Program (the "Agreement").
The term of the Agreement will be for a period of one (1) year, commencing on
January 1, 1999, and ending on December 31, 1999.
Private Eyes will contribute to Komen, two percent (2%) of its net sales of the
Tomichi Studio line for the year 1999, with a guaranteed minimum donation of
ten thousand dollars ($10,000.00).
Payment of the contribution generated by the Program will be made by Private
Eyes quarterly, to Komen, at its National Headquarters, P.O. Box 97100, Dallas,
Texas 75397, attention Lindsay Orr. Concurrent with payment of said
contribution, Private Eyes will provide to Komen a written accounting of all
quarterly sales transactions creating the contribution.
Private eyes will promote the Program vis-a-vis hang tangs, in-store signage,
point-of-sale displays, print ads and promotional brochures, during the tenure
of the Program.
Komen will provide Private Eyes with camera-ready artwork of Komen's name and
cameo logo ("Licensed Marks"), said Licensed Marks to be used by Private Eyes
solely in connection with and support of the Program. It is agreed and
understood that Komen retains all right, title and interest in said Licensed
Marks, all of which shall remain the exclusive property of Komen.
Private Eyes will present to Komen for approval, prior to printing,
distribution, publication, display, or use, any and all promotional materials
and scripts of all statements, oral or written, to be made by Private Eyes, its
agents or spokespersons, which use or refer to said Licensed Marks. Such
materials or statements must be of a high quality consistent with both parties'
outstanding public image.
All promotional sales materials advertising the Program must state that a
percentage of net sales of the Tomichi Studio line will be donated to Komen, as
set forth herein, in clear, unambiguous and readily-identifiable fashion.
It is understood that the Race for the Cure(-Registered Mark-) name and/or Logo
are not part of the Program and are not considered Licensed Marks for the
purpose of this Agreement.
Each party agrees to indemnify and hold the other harmless, including their
respective employees and agents, from and against any and all costs, losses or
expenses, including reasonable attorneys' fees, that either party may incur by
reason of any third-party claim or suit arising out of or in connection with
the other party's performance or failure to perform pursuant to this Agreement,
or due to the breach of any representations and warranties contained herein.
We trust that the foregoing accurately reflects our mutual intent and
agreement with regard to the Private Eyes Program. We would, therefore,
respectfully request that you indicate your agreement by authorized signature
on the line provided. We look forward to a successful and mutually prosperous
relationship as we work together to eradicate breast cancer as a life-
threatening disease. If you have any questions or comments, please do not
hesitate to contact us.
Very truly yours,
/s/
Cindy Schneible
Vice President
The Susan G. Komen
Breast Cancer Foundation
CS/ps
AGREED AND ACCEPTED
For Private Eyes Sunglass Corporation
By: /s/ Nancy Parker 1/4//98
-------------------------------- --------------
Nancy Parker, General Manager (Date)
<PAGE>
EXHIBIT 10.60
ELEVENTH AMENDMENT TO FIRST AMENDED
AND RESTATED CREDIT AGREEMENT
This eleventh amendment to first amended and restated credit agreement
("Amendment") is made and entered into as of December 21, 1998, by and between
U. S. BANK NATIONAL ASSOCIATION, successor by merger to U. S. Bank of
Washington, National Association ("U. S. Bank"), and GARGOYLES, INC., a
Washington corporation ("Borrower").
R E C I T A L S:
A. On or about April 7, 1997, U. S. Bank and Borrower entered into that
certain first amended and restated credit agreement (together with all
amendments, supplements, exhibits, and modifications thereto, the "Credit
Agreement") whereby U. S. Bank agreed to extend certain credit facilities to
Borrower. U. S. Bank and Borrower have entered into ten previous amendments to
the Credit Agreement.
B. The purpose of this Amendment is to set forth the terms and
conditions upon which U. S. Bank will grant Borrower's request to (i) defer the
filing of a registration statement with respect to the shares of stock of
Borrower issued to U. S. Bank pursuant to the Credit Agreement and (ii) defer
certain principal payments under the Equipment Loans, Term Loan I and Term Loan
II.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the parties agree as follows:
ARTICLE I. AMENDMENT; DEFINITIONS
1.1 Amendment
---------
The Credit Agreement and each of the other Loan Documents are hereby
amended as set forth herein. Except as specifically provided for herein, all
of the terms and conditions of the Credit Agreement and each of the other Loan
Documents shall remain in full force and effect throughout the terms of the
Loans, as well as any extensions or renewals thereof.
1.2 Definitions
-----------
As used herein, capitalized terms shall have the meanings given to them in
the Credit Agreement, except as otherwise defined herein, or as the context
otherwise requires.
ARTICLE II. PAYMENT DEFERRAL
2.1 Term Loans
----------
(a) Sections 3.5(b) and (c) of the Credit Agreement are hereby deleted in
their entirety and Section 3.5(c) is replaced with the following:
(c) BORROWER SHALL PAY U. S. BANK ALL OUTSTANDING PRINCIPAL,
ACCRUED INTEREST AND OTHER CHARGES WITH RESPECT TO TERM
LOAN II ON THE EARLIER OF (I) APRIL 30, 1999, (II) THE DATE
THAT R & R CAPITAL PARTNERS I, INC. CONFIRMS IN WRITING TO
U. S. BANK THAT IT IS NO LONGER PURSUING AN EQUITY INVESTMENT
IN BORROWER IN ACCORDANCE WITH THE PROVISIONS OF THAT CERTAIN
LETTER OF UNDERSTANDING DATED OCTOBER 22, 1998, BETWEEN BORROWER
AND R & R CAPITAL PARTNERS I, INC. ("LETTER OF UNDERSTANDING"),
OR (III) THE DATE THAT THE TRANSACTION CONTEMPLATED BY THE
LETTER OF UNDERSTANDING CLOSES.
(b) Renewal Term Note II executed and delivered by Borrower, delivered to
U. S. Bank and dated as of September 17, 1998, is hereby amended to reflect the
extension of the maturity date of Term Loan II in accordance with Section
2.1(a) of this Amendment.
2.2 Equipment Loans
---------------
Section 4.5(b) and (c) of the Credit Agreement are hereby deleted in
their entirety and Section 4.5(c) is replaced with the following:
(c) BORROWER SHALL PAY U. S. BANK ALL OUTSTANDING PRINCIPAL,
ACCRUED INTEREST AND OTHER CHARGES WITH RESPECT TO EACH
EQUIPMENT LOAN ON THE EARLIER OF (I) APRIL 30, 1999, (II)
THE DATE THAT R & R CAPITAL PARTNERS I, INC. CONFIRMS IN
WRITING TO U. S. BANK THAT IT IS NO LONGER PURSUING AN
EQUITY INVESTMENT IN BORROWER IN ACCORDANCE WITH THE
PROVISIONS OF THE LETTER OF UNDERSTANDING, OR (III) THE
DATE THAT THE TRANSACTION CONTEMPLATED BY THE LETTER OF
UNDERSTANDING CLOSES.
ARTICLE III. REGISTRATION OF SHARES
The first sentence of Section 7.2(a) of the Third Amendment to First
Amended and Restated Credit Agreement dated January 15, 1998, is hereby deleted
in its entirety and replaced with the following:
BORROWER SHALL TAKE ALL STEPS TO COMPLETE AND FILE A REGISTRATION
STATEMENT FOR THE REGISTRATION OF THE SHARES ON OR BEFORE APRIL 30,
1999, AND SHALL USE ITS BEST EFFORTS TO CAUSE THE REGISTRATION TO
BECOME EFFECTIVE AS SOON AFTER THE FILING OF THE REGISTRATION
STATEMENT AS POSSIBLE.
ARTICLE IV. CONDITIONS PRECEDENT
The modifications set forth in this Amendment shall not be effective
unless and until the following conditions have been fulfilled to U. S. Bank's
satisfaction:
(a) U. S. Bank shall have received this Amendment, duly executed and
delivered by Borrower, H.S.C., Inc., Sungold Eyewear, Inc. and Private Eyes
Sunglass Corporation.
(b) There shall not exist any Default or Event of Default.
(c) All representations and warranties of Borrower contained in the
Credit Agreement or otherwise made in writing in connection therewith or
herewith shall be true and correct and in all material respects have the same
effect as though such representations and warranties had been made on and as of
the date of this Amendment.
(d) U. S. Bank shall have received a certified resolution of the board of
directors of Borrower and each of the undersigned guarantors in a form
acceptable to U. S. Bank.
ARTICLE V. GENERAL PROVISIONS
5.1 Representations and Warranties
------------------------------
Borrower hereby represents and warrants to U. S. Bank that as of the date
of this Amendment and after having given effect to any waivers and
modifications to definitions set forth in this Amendment, there exists no
Default or Event of Default. All representations and warranties of Borrower
contained in the Credit Agreement and the Loan Documents, or otherwise made in
writing in connection therewith, are true and correct as of the date of this
Amendment. Borrower acknowledges and agrees that all of Borrower's
Indebtedness to U. S. Bank is payable without offset, defense, or counterclaim.
5.2 Security
--------
All Loan Documents evidencing U. S. Bank's security interest in the
Collateral shall remain in full force and effect, and shall continue to secure,
without change in priority, the payment and performance of the Loans, as
amended herein, and any other Indebtedness owing from Borrower to U. S. Bank.
5.3 Guaranties
----------
The parties hereto agree that the Guaranties shall remain in full force
and effect and continue to guarantee the repayment of the Loans to U. S. Bank
as set forth in such Guaranties.
5.4 Payment of Expenses
-------------------
Borrower shall pay on demand all costs and expenses of U. S. Bank incurred
in connection with the preparation, negotiation, execution, and delivery of
this Amendment and the exhibits hereto, including, without limitation,
attorneys' fees incurred by U. S. Bank.
5.5 Survival of Credit Agreement
----------------------------
The terms and conditions of the Credit Agreement and each of the other
Loan Documents shall survive until all of Borrower's obligations under the
Credit Agreement have been satisfied in full.
5.6 Release of Claims
-----------------
IN CONSIDERATION FOR U. S. BANK'S AGREEMENT TO ENTER INTO THIS AMENDMENT,
BORROWER, H.S.C., INC., SUNGOLD EYEWEAR, INC., AND PRIVATE EYES SUNGLASS
CORPORATION EACH HEREBY RELEASES AND FOREVER DISCHARGES U. S. BANK, ITS
PREDECESSORS AND SUCCESSORS-IN-INTEREST, AND THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, REPRESENTATIVES AND AGENTS FROM ANY AND ALL CLAIMS,
DEMANDS, DAMAGES, LIABILITIES, CHARGES, ACTIONS, LOSSES, CAUSES OF ACTION,
COSTS, EXPENSES, COMPENSATION, AND SUITS OF ANY KIND, PAST, PRESENT OR FUTURE,
ARISING FROM OR ALLEGED TO ARISE FROM THEIR BUSINESS RELATIONSHIP, INCLUDING
THE RELATIONSHIP PROVIDED FOR IN THE CREDIT AGREEMENT THROUGH THE DATE OF THIS
AMENDMENT, WHETHER KNOWN OR UNKNOWN. THIS RELEASE IS INTENDED TO BE COMPLETE
AND COMPREHENSIVE WITH RESPECT TO ALL SUCH CLAIMS. THIS RELEASE OF CLAIMS HAS
BEEN COMPLETELY READ AND FULLY UNDERSTOOD AND VOLUNTARILY ACCEPTED FOR THE
PURPOSE OF MAKING A FULL AND FINAL COMPROMISE AND SETTLEMENT WITH RESPECT TO
ALL CLAIMS, DISPUTED OR OTHERWISE.
5.7 Counterparts
------------
This Amendment may be executed in one or more counterparts, each of which
shall constitute an original agreement, but all of which together shall
constitute one and the same agreement.
5.8 Statutory Notice
----------------
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
IN WITNESS WHEREOF, U. S. Bank and Borrower have caused this Amendment to
be duly executed by their respective duly authorized signatories as of the date
first above written.
GARGOYLES, INC., a Washington
corporation
By: /s/ Leo Rosenberger
---------------------------------
Title: CEO and CFO
U. S. BANK NATIONAL ASSOCIATION
By: /s/ David C. Larsen
---------------------------------
David C. Larsen, Vice President
<PAGE>
Each of the undersigned Guarantors hereby (i) reaffirms its Guaranty and its
Security Agreement, (ii) agrees that its Guaranty guarantees the repayment of
the Loans, as amended herein, (iii) agrees that its respective Security
Agreement and related collateral documents secures the payment and performance
of the Secured Obligations described in such Security Agreement, (iv)
acknowledges that its obligations pursuant to its Guaranty and Security
Agreement are enforceable without defense, offset, or counterclaim, and (v)
agrees to the release of claims set forth in Section 5.6 of this Amendment.
H.S.C., Inc., a Washington corporation
By: /s/ Leo Rosenberger
---------------------------------
Title: President and CFO
SUNGOLD EYEWEAR, INC., a Washington
corporation
By: /s/ Leo Rosenberger
---------------------------------
Title: CEO and CFO
PRIVATE EYES SUNGLASS CORPORATION,
a Washington corporation
By: /s/ Leo Rosenberger
---------------------------------
Title: President and CFO
<PAGE>
EXHIBIT 10.61
TWELFTH AMENDMENT TO FIRST AMENDED AND
ESTATED CREDIT AGREEMENT
This twelfth amendment to first amended and restated credit agreement
("Amendment") is made and entered into as of March 5, 1999, by and between U.
S. BANK NATIONAL ASSOCIATION, successor by merger to U. S. Bank of Washington,
National Association ("U. S. Bank"), and GARGOYLES, INC., a Washington
corporation ("Borrower").
R E C I T A L S:
A. On or about April 7, 1997, U. S. Bank and Borrower entered into that
certain first amended and restated credit agreement (together with all
amendments, supplements, exhibits, and modifications thereto, the "Credit
Agreement") whereby U. S. Bank agreed to extend certain credit facilities to
Borrower. U. S. Bank and Borrower have entered into 11 previous amendments to
the Credit Agreement.
B. The purpose of this Amendment is to set forth the terms and
conditions upon which U. S. Bank will grant Borrower's request to modify the
Borrowing Base.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the parties agree as follows:
ARTICLE I. AMENDMENT; DEFINITIONS
1.1 Amendment
---------
The Credit Agreement and each of the other Loan Documents are hereby
amended as set forth herein. Except as specifically provided for herein, all
of the terms and conditions of the Credit Agreement and each of the other Loan
Documents shall remain in full force and effect throughout the terms of the
Loans, as well as any extensions or renewals thereof.
1.2 Definitions
-----------
As used herein, capitalized terms shall have the meanings given to them in
the Credit Agreement, except as otherwise defined herein, or as the context
otherwise requires.
ARTICLE II. MODIFICATION OF BORROWING BASE
Section 2.8(a) of the Credit Agreement is hereby deleted in its entirety
and replaced with the following:
(a) The outstanding balance of principal and interest on the Revolving
Loan (including outstanding Letters of Credit) shall at no time exceed an
amount equal to:
(i) 80 percent of Eligible Accounts Receivable, plus
(ii) 65 percent of Eligible Foreign Accounts Receivable; provided
that the maximum advance based upon Eligible Foreign Accounts Receivable is
limited to $1,000,000, plus
(iii) 65 percent of Eligible Inventory; provided that the maximum
advance based upon Eligible Inventory is limited to $8,000,000, plus
(iv) (i) during the period from March 4, 1999, through March 9,
1999, $750,000, (ii) during the period from March 10, 1999, through March 16,
1999, $1,250,000, and (iii) during the period from March 17, 1999, through
April 30, 1999, $1,750,000
("Borrowing Base").
ARTICLE III. CONDITIONS PRECEDENT
The modifications set forth in this Amendment shall not be effective
unless and until the following conditions have been fulfilled to U. S. Bank's
satisfaction:
(a) U. S. Bank shall have received this Amendment, duly executed and
delivered by Borrower, H.S.C., Inc., Sungold Eyewear, Inc. and Private Eyes
Sunglass Corporation.
(b) There shall not exist any Default or Event of Default.
(c) All representations and warranties of Borrower contained in the
Credit Agreement or otherwise made in writing in connection therewith or
herewith shall be true and correct and in all material respects have the same
effect as though such representations and warranties had been made on and as of
the date of this Amendment.
(d) U. S. Bank shall have received a certified resolution of the board of
directors of Borrower and each of the undersigned guarantors in a form
acceptable to U. S. Bank.
ARTICLE IV. GENERAL PROVISIONS
4.1 Representations and Warranties
------------------------------
Borrower hereby represents and warrants to U. S. Bank that as of the date
of this Amendment and after having given effect to any waivers and
modifications to definitions set forth in this Amendment, there exists no
Default or Event of Default. All representations and warranties of Borrower
contained in the Credit Agreement and the Loan Documents, or otherwise made in
writing in connection therewith, are true and correct as of the date of this
Amendment. Borrower acknowledges and agrees that all of Borrower's
Indebtedness to U. S. Bank is payable without offset, defense, or counterclaim.
4.2 Security
--------
All Loan Documents evidencing U. S. Bank's security interest in the
Collateral shall remain in full force and effect, and shall continue to secure,
without change in priority, the payment and performance of the Loans, as
amended herein, and any other Indebtedness owing from Borrower to U. S. Bank.
4.3 Guaranties
----------
The parties hereto agree that the Guaranties shall remain in full force
and effect and continue to guarantee the repayment of the Loans to U. S. Bank
as set forth in such Guaranties.
4.4 Payment of Expenses
-------------------
Borrower shall pay on demand all costs and expenses of U. S. Bank incurred
in connection with the preparation, negotiation, execution, and delivery of
this Amendment and the exhibits hereto, including, without limitation,
attorneys' fees incurred by U. S. Bank.
4.5 Survival of Credit Agreement
----------------------------
The terms and conditions of the Credit Agreement and each of the other
Loan Documents shall survive until all of Borrower's obligations under the
Credit Agreement have been satisfied in full.
4.6 Release of Claims
-----------------
IN CONSIDERATION FOR U. S. BANK'S AGREEMENT TO ENTER INTO THIS AMENDMENT,
BORROWER, H.S.C., INC., SUNGOLD EYEWEAR, INC., AND PRIVATE EYES SUNGLASS
CORPORATION EACH HEREBY RELEASES AND FOREVER DISCHARGES U. S. BANK, ITS
PREDECESSORS AND SUCCESSORS-IN-INTEREST, AND THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, REPRESENTATIVES AND AGENTS FROM ANY AND ALL CLAIMS,
DEMANDS, DAMAGES, LIABILITIES, CHARGES, ACTIONS, LOSSES, CAUSES OF ACTION,
COSTS, EXPENSES, COMPENSATION, AND SUITS OF ANY KIND, PAST, PRESENT OR FUTURE,
ARISING FROM OR ALLEGED TO ARISE FROM THEIR BUSINESS RELATIONSHIP, INCLUDING
THE RELATIONSHIP PROVIDED FOR IN THE CREDIT AGREEMENT THROUGH THE DATE OF THIS
AMENDMENT, WHETHER KNOWN OR UNKNOWN. THIS RELEASE IS INTENDED TO BE COMPLETE
AND COMPREHENSIVE WITH RESPECT TO ALL SUCH CLAIMS. THIS RELEASE OF CLAIMS HAS
BEEN COMPLETELY READ AND FULLY UNDERSTOOD AND VOLUNTARILY ACCEPTED FOR THE
PURPOSE OF MAKING A FULL AND FINAL COMPROMISE AND SETTLEMENT WITH RESPECT TO
ALL CLAIMS, DISPUTED OR OTHERWISE.
4.7 Counterparts
------------
This Amendment may be executed in one or more counterparts, each of which
shall constitute an original agreement, but all of which together shall
constitute one and the same agreement.
4.8 Statutory Notice
----------------
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
IN WITNESS WHEREOF, U. S. Bank and Borrower have caused this Amendment to
be duly executed by their respective duly authorized signatories as of the date
first above written.
GARGOYLES, INC., a Washington
corporation
By: /s/ Leo Rosenberger
-------------------------------
Title: CEO and CFO
U. S. BANK NATIONAL ASSOCIATION
By: /s/ David C. Larsen
-------------------------------
David C. Larsen, Vice President
<PAGE>
Each of the undersigned Guarantors hereby (i) reaffirms its Guaranty and its
Security Agreement, (ii) agrees that its Guaranty guarantees the repayment of
the Loans, as amended herein, (iii) agrees that its respective Security
Agreement and related collateral documents secures the payment and performance
of the Secured Obligations described in such Security Agreement, (iv)
acknowledges that its obligations pursuant to its Guaranty and Security
Agreement are enforceable without defense, offset, or counterclaim, and (v)
agrees to the release of claims set forth in Section 4.6 of this Amendment.
H.S.C., Inc., a Washington corporation
By: /s/ Leo Rosenberger
-------------------------------
Title: President and CFO
SUNGOLD EYEWEAR, INC., a Washington
corporation
By: /s/ Leo Rosenberger
-------------------------------
Title: CEO and CFO
PRIVATE EYES SUNGLASS CORPORATION, a
Washington corporation
By: /s/ Leo Rosenberger
-------------------------------
Title: President and CFO
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
------------------------------
Subsidiary State of Incorporation
---------- ----------------------
H.S.C., Inc. Washington
Sungold Eyewear, Inc. Washington
Private Eyes Sunglass Corporation Washington
